☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2021
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Title of Each Class | Trading Symbol(s) | Name of each Exchange on Which Registered | ||
Common Stock, $0.01 par value 6.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share | “CIO” “CIO.PrA” | New York Stock Exchange New York Stock Exchange |
Large accelerated | ☐ | Accelerated | ☒ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging Growth Company | ☐ |
2021
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ITEM 1. | BUSINESS |
Company in 2021 has enhanced the scale and quality of our holdings and expanded our market footprint to add Raleigh to our portfolio.
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income as well as an ability to pass through cost escalations to our tenants.
As
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us achieve our business objective and continue to distinguish us from other owners and operators of office properties in our markets:
Acquire Properties in Our Target Markets:We seek to expand our portfolio through acquisitions of office properties primarily located in our target18-hour cities. We believe that current economic conditions and relatively low levels of competition from institutional buyers in our typical transaction size have created attractive investment opportunities for the acquisition of office propertiesin our target markets. We also use our management team’s market-specific knowledge as well as the expertise of our local real estate operators and our investment partners to identify acquisitions that we believe offer cash flow stability and value enhancement.
Lease Currently Vacant Space:As of December 31, 2019, our portfolio was approximately 91.9% occupied, and we believe that there is potential to generate additional rental income by leasing space in these properties that is currently unoccupied. We have been successful in enhancing the appeal of vacant spaces by completing improvements to vacancies, creating or improving building amenities and renovating common areas.
2019 Highlights
Disposed of three assets for an aggregate sale price of $47 million, selectively enhancing
Completed 692,000 square feet of new and renewal leasing, increasing portfolio occupancyfourth quarter dividend 33.3% from 90.4%$0.15 to 91.9%;
Issued an aggregate 14,900,000 shares$0.20 per share of common stock pursuant tostock;
Upsized our unsecured credit facility (the “Unsecured Credit Facility”) from $250$300 million to $300 million;
Modified loan agreements at four of our properties, generating significant interest savings;
Achieved inclusion to the MSCI US REIT Index (RMZ); and
Declared and paid an aggregate of $0.94 of dividends per share of common stock.
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Competition
We compete with other REITs (both public and private), public and private real estate companies, private real estate investors and lenders, both domestic and foreign, in acquiring properties. We also face competition in leasing or subleasing available properties to prospective tenants.
Operations” in this Annual Report on Form
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ITEM 1A. | RISK FACTORS |
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events may occur, could result in a general decline in rents or an increased incidence of defaults among our
In addition, the ongoing
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significantly weaken their financial condition, whether as a result of general economic conditions, changes in the severity or duration of the
operations, cash flows, or the market price of our common stock or preferred stock.
flows, or the market price of our common stock or preferred stock.
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and leasing costs), from operating cash flow. Consequently, we may rely on third-party sources to fund our capital needs. We may not be able to obtain the necessary financing on favorable terms, in the time period that we desire or at all. Any additional debt we incur will increase our leverage, expose us to the risk of default and may impose operating restrictions on us, and any additional equity we raise could be dilutive to existing stockholders. Our access to third-party sources of capital depends, in part, on:
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common stock or preferred stock.
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condition. No hedging activity can completely insulate us from the risks associated with changes in interest rates. Moreover, interest rate hedging could fail to protect us or adversely affect us because, among other things:
We have been incorporating LIBOR transition language in our existing floating rate instruments, including the Interest Rate Swap, when they are extended or refinanced.
Annual Report on Form
The
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institutions, is considering replacing U.S. dollar LIBOR with the Secured Overnight Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements, backed by Treasury securities. The Federal Reserve Bank of New York began publishing SOFR rates in April 2018. The market transition away from LIBOR and towards SOFR is expected to be gradual and complicated. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate andwhile SOFR is a secured lending rate, and SOFR is an overnight rate andwhile LIBOR reflects term rates at different maturities. Although there have been some issuances utilizingIf our LIBOR-based borrowings are converted to SOFR, it is unknown whether this alternative reference rate will attain market acceptance as a replacement for LIBOR. These and otherthe differences create the potential for basis risk between the two rates. The impact of any basis risk between LIBOR and SOFR, may negatively affect our operating results. In addition, there is currently no definitive information regardingplus the future utilization of LIBOR or of any particular replacement rate. Any of these alternative methods mayrecommended spread adjustment, could result in interest ratescosts that are higher than if LIBOR wereremained available, in its current form, which could have a material adverse effect on our results. AsAlthough SOFR is the ARRC’s recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher borrowing costs for us. It is not yet possible to predict the magnitude of LIBOR’s end on our borrowing costs given the uncertainty about which rates will replace LIBOR and the timing of actual replacement.
less willing to extend credit secured by assets that do not include robust fallbacks.
financial condition, results of operations and cash flow.
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We may incur significant costs complying with various federal, state and local laws, regulations and covenants that are applicable to our properties, which could have an adverse impact on our financial condition, results of operations, cash flows and market price of our common stock.
The properties in our portfolio are subject to various covenants and federal, state and local laws and regulatory requirements, including permitting and licensing requirements. Local regulations, including municipal or local ordinances, zoning restrictions and restrictive covenants imposed by community developers may restrict our use of our properties and may require us to obtain approval or waivers from local officials or restrict our use of our properties and may require us to obtain approval from local officials of community standards organizations at any time with respect to our properties, including prior to acquiring a property or when undertaking renovations of any of our existing properties. Among other things, these restrictions may relate to fire and safety, seismic or hazardous material abatement requirements. There can be no assurance that existing or future laws and regulatory policies, including federal laws or executive actions affecting the markets in which we operate, will not adversely affect us or the timing or cost of any future acquisitions or renovations, or that additional regulations will not be adopted that could increase such delays or result in additional costs. Our growth strategy may be affected by our ability to obtain permits, licenses and zoning relief. Our failure to obtain such permits, licenses and zoning relief or to comply with applicable laws could have an adverse effect on our financial condition, results of operations, cash flow and per share market price of our common stock or preferred stock.
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Liabilities associated with environmental conditions may be significant and can sometimes exceed the value of the affected property. The presence of hazardous substances on a property may adversely affect our ability to sell or rent that property or to borrow using that property as collateral.
our common stock or preferred stock.
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common stock or preferred stock.
Climate change may adversely affect our business.
Toflows, or the extent that climate change does occur, we may experience extreme weather and changes in precipitation and temperature, all of which may result in physical damage or a decrease in demand for our properties located in the areas affected by these conditions. Should the impact of climate change be material in nature or occur for lengthy periods of time, our financial condition or results of operations would be adversely affected. In addition, changes in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiencymarket price of our existing properties in order to comply with such regulations.
common stock or preferred stock.
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bankruptcy filing would impose an automatic stay barring all efforts by us to collectstockholders.
common stock or preferred stock.
our common stock or preferred stock.
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of December 31, 2019,2021, may, under certain circumstances, vacate the leased premises before the stated terms of the leases expire with little or no liability to us. There can be no assurance that tenants will continue their activities and continue occupancy of the premises. Any cessation of occupancy by tenants may have an adverse effect on our operations.
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Litigation may result in unfavorable outcomes.
Like many real estate operators, we may be involved in lawsuits involving premises liability claims and alleged violations of landlord-tenant laws, which may give rise to class action litigation or governmental investigations. Any material litigation not covered by insurance, such as a class action, could result in us incurring substantial costs and harm our financial condition, results of operations, cash flows and ability to pay distributions to you.
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Our business could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting.
The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations. While management will continue to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including any material weakness, in our internal control over financial reporting that may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, or otherwise adversely impact our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
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we could also be subject to the U.S. federal alternative minimum tax for taxable years prior to 2018 and possibly increased state and local taxes; and
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effective maximum U.S. federal income tax rate of 29.6% on such income. Although the reduced U.S. federal income tax rate applicable to qualified dividend income does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends and the reduced corporate tax rate could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of
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outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of any qualified REIT subsidiary or TRS of ours and securities that are qualified real estate assets) may consist of the securities of any one issuer. No more than 20% of the value of our total assets can be represented by securities of one or more TRSs, and no more than 25% of our assets can be represented by debt of “publicly offered” REITs (i.e., REITs that are required to file annual and periodic reports with the SEC under the Exchange Act) that is not secured by real property or interests in real property. If we fail to comply with these requirements at the end of any calendar quarter, we must remedy the failure within 30 days or qualify for certain limited statutory relief provisions to avoid losing status as a REIT. As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.
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reasonable cause to believe that the act or omission was unlawful. We are not aware of any reported decision of a Maryland appellate court that has interpreted provisions similar to the provisions of the partnership agreement of our Operating Partnership that modify and reduce our fiduciary duties or obligations as the general partner or reduce or eliminate our liability for money damages to our Operating Partnership and its partners, and we have not obtained an opinion of counsel as to the enforceability of the provisions set forth in the partnership agreement that purport to modify or reduce the fiduciary duties that would be in effect were it not for the partnership agreement.
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We may be unable to renew expiring leases orre-lease vacant space on a timely basis or on attractive terms, which could have a material adverse effect on our results of operations and cash flow.
At December 31, 2019, approximately 8.1%, 15.3% and 14.4% of our annualized base rent is scheduled to expire in 2020, 2021, and 2022, respectively, excludingmonth-to-month leases. Current tenants may not renew their leases upon the expiration of their terms and may attempt to terminate their leases prior to the expiration of their current terms. Ifnon-renewals or terminations occur, we may not be able to locate qualified replacement tenants and, as a result, we could lose a significant source of revenue while remaining responsible for the payment of our financial obligations. Moreover, the terms of a renewal or new lease, including the amount of rent, may be less favorable to us than the current lease terms, or we may be forced to provide tenant improvements at our expense or provide other concessions or additional services to maintain or attract tenants. Any of these factors could cause a decline in lease revenue or an increase in operating expenses, which would have a material adverse effect on our results of operations and cash flow.
Our business and operations would suffer in the event of system failures.
Despite system redundancy and the implementation of security measures for our IT networks and related systems, our systems are vulnerable to damages from any number of sources, including computer viruses, energy blackouts, natural disasters, terrorism, war, and telecommunication failures. We rely on our IT networks and related systems, including the Internet, to process, transmit and store electronic information and to manage or support a variety of our business processes, including financial transactions and keeping of records, which may include personal identifying information of tenants and lease data. We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmitting and storing confidential tenant information, such as individually identifiable information relating to financial accounts. Any failure to maintain proper function, security and availability of our IT networks and related systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and could have a material adverse effect on our operations. As such, any of the foregoing events could have a material adverse effect on our results of operations.
We face risks associated with security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.
We face risks associated with security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachments toe-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to performday-to-day operations (including managing our building systems), and, in some cases, may be critical to the operations of certain of our tenants. There can be no assurance that our efforts to maintain the security and integrity of these types of IT networks and related systems will be effective or that attempted security breaches or disruptions would not be successful or damaging. A security breach or other significant disruption involving our IT networks and related systems could, among other things:
result in unauthorized access to, destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, including personally
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result in unauthorized access to or changes to our financial accounting and reporting systems and related data;
result in our inability to maintain building systems relied on by our tenants;
require significant management attention and resources to remedy any damage that results;
subject us to regulatory penalties or claims for breach of contract, damages, credits, penalties or terminations of leases or other agreements; or
damage our reputation among our tenants and investors.
These events could have an adverse impact on our financial condition, results of operations, cash flows, the quoted trading price of our securities, and our ability to satisfy our debt service obligations and to pay dividends and distributions to our security holders.
We face risks associated with our tenants being designated “Prohibited Persons” by the Office of Foreign Assets Control.
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number (whichever is more restrictive) of the outstanding shares of our common stock. Our board of directors may not grant such an exemption to any proposed transferee whose ownership in excess of 9.8% of the foregoing
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cash flows, or the market price of our common stock or preferred stock.
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
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ITEM 2. | PROPERTIES |
Metropolitan Area | Property | Economic Interest | NRA (000s Square Feet) | In Place Occupancy | Annualized Base Rent per Square Foot | Annualized Gross Rent per Square Foot(1) | Annualized Base Rent(2) ($000s) | |||||||||||||||||||
Phoenix, AZ (20.8% of NRA) | Pima Center | 100.0 | % | 272 | 87.0 | % | $ | 27.19 | $ | 27.19 | $ | 6,431 | ||||||||||||||
SanTan | 100.0 | % | 267 | 91.7 | % | $ | 28.05 | $ | 28.05 | $ | 6,855 | |||||||||||||||
5090 N 40th St | 100.0 | % | 174 | 100.0 | % | $ | 29.28 | $ | 29.28 | $ | 5,108 | |||||||||||||||
Camelback Square | 100.0 | % | 174 | 78.8 | % | $ | 30.92 | $ | 30.92 | $ | 4,237 | |||||||||||||||
The Quad | 100.0 | % | 163 | 100.0 | % | $ | 28.85 | $ | 29.17 | $ | 4,703 | |||||||||||||||
Papago Tech | 100.0 | % | 163 | 86.7 | % | $ | 21.88 | $ | 21.88 | $ | 3,087 | |||||||||||||||
Denver, CO (19.9%) | Cherry Creek | 100.0 | % | 356 | 100.0 | % | $ | 18.59 | $ | 19.31 | $ | 6,612 | ||||||||||||||
Circle Point | 100.0 | % | 272 | 94.3 | % | $ | 17.84 | $ | 31.72 | $ | 4,573 | |||||||||||||||
Denver Tech(4) | 100.0 | % | 381 | 62.7 | % | $ | 22.98 | $ | 27.80 | $ | 5,264 | |||||||||||||||
Superior Pointe | 100.0 | % | 151 | 96.5 | % | $ | 17.81 | $ | 30.29 | $ | 2,602 | |||||||||||||||
Tampa, FL (17.9%) | Park Tower | 94.8 | % | 471 | 92.4 | % | $ | 24.66 | $ | 24.66 | $ | 10,732 | ||||||||||||||
City Center | 95.0 | % | 242 | 93.1 | % | $ | 25.66 | $ | 25.66 | $ | 5,774 | |||||||||||||||
Intellicenter | 100.0 | % | 204 | 100.0 | % | $ | 23.99 | $ | 23.99 | $ | 4,881 | |||||||||||||||
Carillon Point | 100.0 | % | 124 | 100.0 | % | $ | 28.23 | $ | 28.23 | $ | 3,505 | |||||||||||||||
Orlando, FL (12.4%) | Florida Research Park (5) | 96.6 | % | 397 | 92.9 | % | $ | 23.97 | $ | 27.51 | $ | 8,794 | ||||||||||||||
Central Fairwinds | 97.0 | % | 168 | 93.7 | % | $ | 25.50 | $ | 25.50 | $ | 4,019 | |||||||||||||||
Greenwood Blvd | 100.0 | % | 155 | 100.0 | % | $ | 22.75 | $ | 22.75 | $ | 3,527 | |||||||||||||||
San Diego, CA (10.0%) | Sorrento Mesa | 100.0 | % | 296 | 85.3 | % | $ | 25.36 | $ | 33.36 | $ | 6,402 | ||||||||||||||
Mission City | 100.0 | % | 286 | 96.9 | % | $ | 35.53 | $ | 35.53 | $ | 9,845 | |||||||||||||||
Dallas, TX (9.9%) | 190 Office Center | 100.0 | % | 303 | 89.5 | % | $ | 25.67 | $ | 25.67 | $ | 6,970 | ||||||||||||||
Lake Vista Pointe | 100.0 | % | 163 | 100.0 | % | $ | 16.00 | $ | 25.00 | $ | 2,613 | |||||||||||||||
2525 McKinnon | 100.0 | % | 111 | 92.5 | % | $ | 28.15 | $ | 45.15 | $ | 2,899 | |||||||||||||||
Portland, OR (5.6%) | AmberGlen | 76.0 | % | 201 | 96.9 | % | $ | 21.69 | $ | 24.28 | $ | 4,227 | ||||||||||||||
Cascade Station | 100.0 | % | 128 | 100.0 | % | $ | 26.61 | $ | 27.98 | $ | 3,393 | |||||||||||||||
Seattle, WA (3.5%) | Canyon Park | 100.0 | % | 207 | 100.0 | % | $ | 21.20 | $ | 29.20 | $ | 4,384 | ||||||||||||||
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Total / Weighted Average—December 31, 2019(3) |
| 5,829 | 91.9 | % | $ | 24.60 | $ | 27.54 | $ | 131,437 | ||||||||||||||||
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Metropolitan Area | Property | Economic Interest | NRA (000s Square Feet) | In Place Occupancy | Annualized Base Rent per Square Foot | Annualized Gross Rent per Square Foot (1) | Annualized Base Rent (2) ($000s) | |||||||||||||||||||
Phoenix, AZ (19.6% of NRA) | Pima Center | 100.0 | % | 272 | 68.0 | % | $ | 28.21 | $ | 28.21 | $ | 5,214 | ||||||||||||||
SanTan | 100.0 | % | 267 | 97.5 | % | $ | 29.73 | $ | 29.73 | $ | 7,727 | |||||||||||||||
5090 N. 40 th St | 100.0 | % | 176 | 91.1 | % | $ | 30.76 | $ | 30.76 | $ | 4,921 | |||||||||||||||
Camelback Square | 100.0 | % | 172 | 81.3 | % | $ | 32.68 | $ | 32.68 | $ | 4,562 | |||||||||||||||
The Quad | 100.0 | % | 163 | 97.4 | % | $ | 30.65 | $ | 30.97 | $ | 4,866 | |||||||||||||||
Papago Tech | 100.0 | % | 163 | 96.3 | % | $ | 23.55 | $ | 23.55 | $ | 3,690 | |||||||||||||||
Tampa, FL (17.0%) | Park Tower | 94.8 | % | 472 | 74.5 | % | $ | 26.95 | $ | 26.95 | $ | 9,487 | ||||||||||||||
City Center | 95.0 | % | 243 | 83.6 | % | $ | 27.61 | $ | 27.61 | $ | 5,605 | |||||||||||||||
Intellicenter | 100.0 | % | 204 | 100.0 | % | $ | 25.09 | $ | 25.09 | $ | 5,105 | |||||||||||||||
Carillon Point | 100.0 | % | 124 | 88.0 | % | $ | 29.33 | $ | 29.33 | $ | 3,207 | |||||||||||||||
Denver, CO (13.1%) | Denver Tech | 100.0 | % | 381 | 93.2 | % | $ | 23.58 | $ | 27.69 | $ | 8,280 | ||||||||||||||
Circle Point | 100.0 | % | 272 | 74.6 | % | $ | 19.22 | $ | 33.08 | $ | 3,899 | |||||||||||||||
Superior Pointe | 100.0 | % | 152 | 86.9 | % | $ | 18.29 | $ | 31.29 | $ | 2,410 | |||||||||||||||
Dallas, TX (12.2%) | 190 Office Center | 100.0 | % | 303 | 76.1 | % | $ | 26.64 | $ | 26.64 | $ | 6,148 | ||||||||||||||
The Terraces | 100.0 | % | 173 | 95.9 | % | $ | 37.70 | $ | 57.70 | $ | 6,241 | |||||||||||||||
Lake Vista Pointe | 100.0 | % | 163 | 100.0 | % | $ | 17.00 | $ | 26.00 | $ | 2,777 | |||||||||||||||
2525 McKinnon | 100.0 | % | 111 | 93.0 | % | $ | 28.91 | $ | 47.91 | $ | 2,994 | |||||||||||||||
Orlando, FL (11.7%) | Florida Research Park | 96.6 | % | 397 | 91.5 | % | $ | 23.71 | $ | 27.79 | $ | 8,589 | ||||||||||||||
Central Fairwinds | 97.0 | % | 168 | 90.3 | % | $ | 26.00 | $ | 26.00 | $ | 3,949 | |||||||||||||||
Greenwood Blvd | 100.0 | % | 155 | 100.0 | % | $ | 23.75 | $ | 23.75 | $ | 3,682 | |||||||||||||||
Portland, OR (5.4%) | AmberGlen | 76.0 | % | 203 | 98.4 | % | $ | 22.90 | $ | 25.80 | $ | 4,564 | ||||||||||||||
Cascade Station | 100.0 | % | 128 | 95.5 | % | $ | 28.12 | $ | 30.13 | $ | 3,424 | |||||||||||||||
San Diego, CA (4.6%) | Mission City | 100.0 | % | 281 | 88.1 | % | $ | 37.52 | $ | 37.52 | $ | 9,300 | ||||||||||||||
Seattle, WA (3.3%) | Canyon Park | 100.0 | % | 207 | 100.0 | % | $ | 22.49 | $ | 26.49 | $ | 4,650 | ||||||||||||||
Total / Weighted Average—Excluding Recent Acquisitions in Lease-Up (3) | 5,350 | 88.4 | % | $ | 26.53 | $ | 29.90 | $ | 125,291 | |||||||||||||||||
Raleigh, NC (8.1%) | Bloc 83 | 100.0 | % | 495 | 62.3 | % | $ | 36.13 | $ | 36.89 | $ | 11,133 | ||||||||||||||
Phoenix, AZ (5.0%) | Block 23 | 100.0 | % | 307 | 62.0 | % | $ | 21.12 | $ | 29.79 | $ | 4,022 | ||||||||||||||
Total / Weighted Average—December 31, 2021 (3) | 6,152 | 84.9 | % | $ | 26.93 | $ | 30.34 | $ | 140,446 | |||||||||||||||||
(1) | Annualized gross rent per square foot includes adjustment for estimated expense reimbursements of triple net leases for the year ended December 31, |
(2) | Annualized base rent is calculated by multiplying (i) rental payments (defined as cash rents before abatements) for the month ended December 31, |
(3) | Averages weighted based on the property’s NRA, adjusted for occupancy. Including contracted leases, occupancy was 80.7% at Bloc 83 and 94.5% at Block 23 as of December 31, 2021. |
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(1) | Percentage represents the NRA of the leases divided by the total NRA of the portfolio, as of December 31, |
(2) |
6.0% represents the leases under contract but not yet in occupancy as of December 31, |
Year of Lease Expiration | Number of Leases Expiring | NRA of Expiring Leases (000s) | Percentage of NRA | Annualized Base Rent(1) (000s) | Percentage of Total Properties Rent | Annualized Base Rent per Leased Square Foot Expiring(2) | Annualized Base Rent (including Rent Abatement at Dec 31, 2019) | Annualized Base Rent per Leased Square Foot Expiring (Including Rent Abatement at Dec 31, 2019) | ||||||||||||||||||||||||
Vacant | — | 367 | 6.3 | % | — | — | — | — | — | |||||||||||||||||||||||
Contracted | — | 102 | 1.8 | % | — | — | — | — | — | |||||||||||||||||||||||
2020 | 51 | 420 | 7.2 | % | 10,589 | 8.1 | % | 25.21 | 10,540 | 25.10 | ||||||||||||||||||||||
2021 | 68 | 819 | 14.1 | % | 20,051 | 15.3 | % | 24.48 | 19,753 | 24.12 | ||||||||||||||||||||||
2022 | 54 | 730 | 12.5 | % | 18,979 | 14.4 | % | 26.00 | 18,877 | 25.86 | ||||||||||||||||||||||
2023 | 57 | 752 | 12.9 | % | 20,155 | 15.3 | % | 26.80 | 19,951 | 26.53 | ||||||||||||||||||||||
2024 | 51 | 575 | 9.9 | % | 14,591 | 11.1 | % | 25.38 | 14,371 | 24.99 | ||||||||||||||||||||||
2025 | 26 | 397 | 6.8 | % | 10,118 | 7.7 | % | 25.49 | 9,170 | 23.10 | ||||||||||||||||||||||
2026 | 13 | 700 | 12.0 | % | 15,157 | 11.5 | % | 21.65 | 15,157 | 21.65 | ||||||||||||||||||||||
2027 | 5 | 348 | 6.0 | % | 7,778 | 5.9 | % | 22.35 | 7,211 | 20.72 | ||||||||||||||||||||||
2028 | 11 | 259 | 4.4 | % | 5,892 | 4.5 | % | 22.75 | 5,745 | 22.18 | ||||||||||||||||||||||
2029 & Thereafter | 5 | 360 | 6.1 | % | 8,127 | 6.2 | % | 22.58 | 5,782 | 16.06 | ||||||||||||||||||||||
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Total/Weighted Average | 341 | 5,829 | 100.0 | % | $ | 131,437 | 100.0 | % | $ | 24.60 | $ | 126,557 | $ | 23.61 | ||||||||||||||||||
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Year of Lease Expiration | Number of Leases Expiring | NRA of Expiring Leases (000s) | Percentage of NRA | Annualized Base Rent (1 ) (000s) | Percentage of Total Properties Rent | Annualized Base Rent per Leased Square Foot Expiring (2) | Annualized Base Rent (including Rent Abatement at Dec 31, 2021) | Annualized Base Rent per Leased Square Foot Expiring (Including Rent Abatement at Dec 31, 2021) | ||||||||||||||||||||||||
Vacant | — | 556 | 9.1 | % | — | — | — | — | — | |||||||||||||||||||||||
Contracted | — | 369 | 6.0 | % | — | — | — | — | — | |||||||||||||||||||||||
2022 | 56 | 702 | 11.4 | % | 20,561 | 14.6 | % | 29.29 | 20,561 | 29.29 | ||||||||||||||||||||||
2023 | 67 | 828 | 13.5 | % | 22,368 | 15.9 | % | 27.01 | 22,233 | 26.85 | ||||||||||||||||||||||
2024 | 61 | 477 | 7.8 | % | 12,835 | 9.1 | % | 26.91 | 12,749 | 26.73 | ||||||||||||||||||||||
2025 | 39 | 450 | 7.3 | % | 11,789 | 8.4 | % | 26.20 | 11,590 | 25.76 | ||||||||||||||||||||||
2026 | 27 | 429 | 7.0 | % | 10,946 | 7.8 | % | 25.52 | 10,777 | 25.12 | ||||||||||||||||||||||
2027 | 27 | 647 | 10.5 | % | 16,486 | 11.7 | % | 25.48 | 15,400 | 23.80 | ||||||||||||||||||||||
2028 | 17 | 339 | 5.5 | % | 8,095 | 5.8 | % | 23.88 | 8,095 | 23.88 | ||||||||||||||||||||||
2029 | 14 | 501 | 8.1 | % | 14,376 | 10.2 | % | 28.69 | 14,376 | 28.69 | ||||||||||||||||||||||
2030 | 8 | 91 | 1.5 | % | 2,959 | 2.1 | % | 32.52 | 2,777 | 30.52 | ||||||||||||||||||||||
2031 & Thereafter | 10 | 763 | 12.3 | % | 20,031 | 14.4 | % | 26.25 | 17,926 | 23.49 | ||||||||||||||||||||||
Total / Weighted Average | 326 | 6,152 | 100.0 | % | $ | 140,446 | 100.0 | % | $ | 26.93 | $ | 136,484 | $ | 26.11 | ||||||||||||||||||
(1) | Annualized base rent is calculated by multiplying (i) rental payments (defined as cash rents before abatements) for the month of December 31, |
(2) | Annualized rent per leased square foot expiring reflects rental payments for the month of December 31, |
31
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 4. | MINE SAFETY DISCLOSURES |
32
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
distributions, if any. From time to time, our board of directors may approve the repurchase of our shares of common stock or Series A Preferred Stock, par value $0.01 per share, through open market purchases or otherwise.
33
Issuer Purchases of Equity Securities | ||||||||||||||||
Period | Total Number of Shares of Common Stock Purchased | Average Price Paid per Share of Common Stock Repurchased | Total Number of Shares of Common Stock Purchased as Part of Share Repurchase Plans | Approximate Dollar Value of Shares of Common Stock that May Yet Be Purchased Under the Share Repurchase Plans (1) (thousands) | ||||||||||||
October 1 – 31, 2021 | — | $ | — | — | $ | 50,000 | ||||||||||
November 1 – 30, 2021 | — | — | — | 50,000 | ||||||||||||
December 1 – 31, 2021 | — | — | — | 50,000 | ||||||||||||
Total | — | $ | — | — | $ | 50,000 | ||||||||||
(1) | Represents approximate dollar value of shares that could have been purchased under the plans in effect at the end of the month. |
The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis[RESERVED]
City Office REIT, Inc.
(In thousands, except per share data)
Years Ended December 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
Statement of Operations Data | ||||||||||||||||||||
Rental and other revenues | $ | 156,297 | $ | 129,484 | $ | 106,487 | $ | 72,461 | $ | 55,052 | ||||||||||
Operating expenses: | ||||||||||||||||||||
Property operating expenses | 57,316 | 49,872 | 42,886 | 28,305 | 20,420 | |||||||||||||||
General and administrative | 11,066 | 8,137 | 6,792 | 6,429 | 3,728 | |||||||||||||||
Depreciation and amortization | 59,159 | 52,352 | 41,594 | 30,178 | 21,624 | |||||||||||||||
Impairment of real estate | — | 3,497 | — | — | — | |||||||||||||||
Acquisition costs | — | — | — | 692 | 2,959 | |||||||||||||||
Base management fee | — | — | — | 109 | 1,302 | |||||||||||||||
External advisor acquisition | — | — | — | 7,045 | 492 | |||||||||||||||
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Total operating expenses | 127,541 | 113,858 | 91,272 | 72,758 | 50,525 | |||||||||||||||
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Operating income/(loss) | 28,756 | 15,626 | 15,215 | (297 | ) | 4,527 | ||||||||||||||
Interest expense, net | (29,726 | ) | (23,937 | ) | (20,173 | ) | (14,761 | ) | (11,353 | ) | ||||||||||
Net gain on sale of real estate property | 3,412 | 46,980 | 12,116 | 15,934 | — | |||||||||||||||
Change in fair value of contingent consideration | — | — | 2,000 | — | — | |||||||||||||||
Change in fair value ofearn-out | — | — | — | (500 | ) | (841 | ) | |||||||||||||
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Net income/(loss) | 2,442 | 38,669 | 9,158 | 376 | (7,667 | ) | ||||||||||||||
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Less: | ||||||||||||||||||||
Net income attributable tonon-controlling interests in properties | (644 | ) | (501 | ) | (3,402 | ) | (354 | ) | (500 | ) | ||||||||||
Net (income)/loss attributable to Operating Partnership unitholders’non-controlling interests | — | — | — | (865 | ) | 1,576 | ||||||||||||||
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Net income/(loss) attributable to the Company | 1,798 | 38,168 | 5,756 | (843 | ) | (6,591 | ) | |||||||||||||
Preferred stock distributions | (7,420 | ) | (7,420 | ) | (7,411 | ) | (1,781 | ) | — | |||||||||||
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Net (loss)/income attributable to common stockholders | $ | (5,622 | ) | $ | 30,748 | $ | (1,655) | $ | (2,624) | $ | (6,591) | |||||||||
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Net (loss)/income per common share—basic and diluted | $ | (0.13) | $ | 0.82 | $ | (0.05) | $ | (0.13) | $ | (0.53) | ||||||||||
Dividend distributions declared per common share | $ | 0.94 | $ | 0.94 | $ | 0.94 | $ | 0.94 | $ | 0.94 | ||||||||||
Balance Sheet Data (as of end of period): | ||||||||||||||||||||
Real estate properties, net of accumulated depreciation | $ | 1,007,338 | $ | 935,163 | $ | 728,067 | $ | 550,324 | $ | 354,880 | ||||||||||
Total assets | 1,228,474 | 1,100,431 | 896,489 | 661,494 | 440,207 | |||||||||||||||
Debt | 607,250 | 645,354 | 489,509 | 370,057 | 341,278 | |||||||||||||||
Total liabilities | 679,342 | 702,054 | 536,657 | 405,435 | 366,487 | |||||||||||||||
Total stockholders’ equity | 548,008 | 397,413 | 359,624 | 254,202 | 65,845 | |||||||||||||||
Non-controlling interests in properties | 1,124 | 964 | 208 | 1,749 | (675 | ) | ||||||||||||||
Operating Partnership unitholders’non-controlling interests | — | — | — | 108 | 8,550 | |||||||||||||||
Total equity | 549,132 | 398,377 | 359,832 | 256,059 | 73,720 | |||||||||||||||
Other Data | ||||||||||||||||||||
Cash flows from/(to) | ||||||||||||||||||||
Operating activities | $ | 49,499 | $ | 42,187 | $ | 36,553 | $ | 19,147 | $ | 14,163 | ||||||||||
Investing activities | (81,922 | ) | (197,309 | ) | (243,298 | ) | (216,235 | ) | (175,471 | ) | ||||||||||
Financing activities | 86,801 | 153,253 | 212,108 | 203,425 | 138,667 |
35
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2020.20192021 and December 31, 2018.
Annual Report on Form
25, 2021.
36
On February 25, 2019, the Company, through a wholly owned subsidiary of the Operating Partnership, closed on the acquisition of Canyon Park, a 206,771 square foot property in Seattle, Washington, for $63.0 million.
On May 7, 2019, the Company sold the 10455 Pacific Center building of the Sorrento Mesa property in San Diego, California for $16.5$95.0 million, resulting in an aggregate gain of $0.5$47.4 million net of disposal-related costs, which has been classified as net gain on sale of real estate property in the consolidated statements of operations.
the consolidated statements of operations.
On December 12, 2019, the Company sold the Logan TowerBloc 83, a 495,010 square foot property in Denver, ColoradoRaleigh, North Carolina, for $12.6 million, resulting in an aggregate gain of $2.9 million net of disposal-related costs, which has been classified as net gain on sale of real estate property in the consolidated statements of operations.
During the year ended December 31, 2019, the Company issued 8,000,000 shares of common stock under itsat-the-market offering program (the “ATM Program”). The Company raised $106.5 million in aggregate gross proceeds, resulting in aggregate net proceeds to the Company of approximately $104.8 million after deducting sales commissions and offering expenses.
$330.0 million.
On June 13, 2019, the Company assumed a $22.5 million loan secured by a first mortgage lien on the Cascade Station property in Portland, Oregon. The mortgage loan matures in May 2024. Interest is payable at a fixed rate of 4.55% per annum.
On August 30, 2019, the Company closed on a loan modification agreement reducing the interest rate from 4.60% to 3.15% per annum on the Greenwood Blvd property in Orlando, Florida. The modification has the same maturity of December 2025 and loan amount of $22.4 million as the original agreement.
On August 30, 2019, the Company closed on a loan modification agreement reducing the interest rate from 3.85% to 3.10% per annum on the FRP Collection property in Orlando, Florida. The modification has the same maturity of September 2023 and loan amount of $30.9 million as the original agreement.
On August 30, 2019, the Company closed on a loan modification agreement reducing the interest rate from 3.50% to 3.10% per annum on the Carillon property in Tampa, Florida. The modification has the same maturity of October 2023 and loan amount of $17.1 million as the original agreement.
On September 24, 2019, the Company closed on a loan modification agreement reducing the interest rate from 4.00% to 3.15% per annum on the Central Fairwinds property in Orlando, Florida. The modification has the same maturity of June 2024 and loan amount of $18.0 million as the original agreement.
37
On September 27, 2019,November 16, 2021, the Company entered into aan Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”) that provides for commitments of up to $300 million on the Unsecured Credit Facility and extends the term to November 2025. Combined with the Company’s existing five-year $50 million term loan (the “Term Loan”), increasing itsthe total authorized borrowings increased from $300 million to $350 million.
For additional information regarding these mortgage loans, the Unsecured Credit Facility, the Term Loan and the Interest Rate Swap,, please refer to “Liquidity and Capital Resources” below.
38
to maintain or increase rental rates at our properties. We believe that the average rental rates for our portfolio of properties are generally
The
Summary of Significant In addition, it is uncertain and impossible to estimate the potential impact that the
and Estimates
39
case on their fair values. For acquisitions that do not meet the business combination accounting criteria, these are accounted for as asset acquisitions. The Company allocates the cost of the acquisition, which includes any associated acquisition costs to individual assets and liabilities assumed on a relative fair value basis. Also,
40
Adopted in the Current Year
Effective
Transition method practical expedient – permits the Company2021-05
Package of practical expedients – permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. This allowed the Company to continue classifying its leases at transition in substantially the same manner.
Single component practical expedient – permits the Company to not separate lease andnon-lease components of leases. Upon transition, rental income, expense reimbursement, and other were aggregated into a single line within rental and other revenuesmaterial impact on theour consolidated statement of operations.
Land easement practical expedient – permits the Company not to reassess under the new standard its prior conclusions about land easements.
41
Short-term lease practical expedient – permits the Company not to recognize leases with a term equal to or less than 12 months.
Lessor Accounting
The accounting for lessors under the new standard remained relatively unchanged with a few targeted updates impacting the Company, which included: (i) narrower definition of initial direct costs that requires certain costs to be expensed rather than capitalized, and (ii) provisions for uncollectible rents to be recorded as a reduction in revenue rather than as bad debt expense.
Lessee Accounting
The new standard requires lessees to recognize aright-of-use asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating at inception, with classification affecting the pattern and recording of expenses in the statement of operations. Upon transition, the Company recognizedright-of use assets and lease liabilities principally for its ground and office leases.
2020
period.
42
or 12%1%, to $127.5$130.8 million for the year ended December 31, 2019,2021, from $113.9$129.4 million for the year ended December 31, 2018, primarily due to the acquisitions described above. Total operating expenses increased by $1.7 million, $4.1 million, $2.1 million, $2.9 million, $4.2 million, $2.4 million, $1.5 million and $1.3 million, respectively, from the acquisitions of Pima Center, Circle Point, The Quad, Greenwood Blvd, Camelback Square, Canyon Park, Cascade Station and 7601 Tech properties. Park Tower operating expenses also increased by $0.8 million due to the higher occupancy at that property. Washington Group Plaza operating expenses decreased by $0.8 million due to its sale in March 2018 and Plaza 25 operating expenses decreased by $6.4 million due to its sale in February 2019. Sorrento Mesa decreased by $3.0 million due to the sale of the 10455 Pacific Center building of the Sorrento Mesa property in May 2019.2020. General and administrative expenses increased by approximately $2.7$4.8 million over the prior year primarily
prior year.
prior period resulting in a total increase of $0.9 million.
Depreciation and Amortization. Depreciation and amortization increased $6.8prior year.
Impairment of Real Estate. Impairment of real estate was nil for the year ended December 31, 2019 compared to $3.5 million in the prior year.acquire Block 23, The impairment estimate was related to the write down of the book value of Plaza 25, which was held for sale as of December 31, 2018, to its expected sale price. In February 2019, the Company completed the sale of the Plaza 25 property.
43
Other Expense (Income)
Interest Expense. Interest expense increased $5.8 million, or 24%, to $29.7 million for the year ended December 31, 2019, from $23.9 million for the year ended December 31, 2018. The increase was primarily due toTerraces and Bloc 83 and thus did not have a significant impact on interest expense related to acquisitions. Interest expense for the Circle Point, The Quad, Greenwood Blvd, Canyon Park and Cascade Station property level debt increased by $1.2 million, $0.9 million, $1.0 million, $1.5 million and $0.5 million, respectively, and the interest on our Unsecured Credit Facility increased by $2.1 million as a result of acquisitions funded by borrowings thereunder, net of the repayments resulting from the proceeds of the equity raises during the year. These increases were partially offset by decreases of $0.2 million and $0.7 million, of debt of the Washington Group Plaza and Plaza 25, respectively, as a result of the sale of those properties and the extinguishment of its property level debt.
expense.
July 2020.
2020
capital due to the sale of the Sorrento Mesa portfolio and Cherry Creek.
Cash flow from financing activities.Net cash provided by financing activities decreased by $66.5 million to $86.8$27.8 million for the year ended December 31, 2019 compared to $153.3 million provided by the same period2020. The decrease in 2018. The decreasecash used in investing activities was primarily due to lower net proceeds from borrowings,acquisitions of real estate for the year ended December 31, 2021 compared to none for the year ended December 31, 2020, partially offset by higher proceeds from the sale of real estate in 2021 compared to 2020. The decrease was also due to lower additions to real estate properties in 2021 compared to 2020.
no repurchases of our common stock for the year ended December 31, 2021, partially offset by higher net proceeds from borrowings in 2020 compared to 2021.
2021.
44
Company’s consolidated leverage ratio. Combined with the Company’s five-year term loan, described further below (the “Term Loan”), the total authorized borrowings increased from $300 million to $350 million. As of December 31, 2019,2021, we had no amountsapproximately $142.0 million outstanding under our Unsecured Credit Facility and approximately $7.0$4.2 million of letters of credit to satisfy escrow requirements for mortgage lenders.
On October 7, 2019, the Company completed a public offering pursuant to which the Company sold 6,900,000 shares of its common stock, inclusive of the overallotment option. The Company raised $95.6 million in aggregate gross proceeds, resulting in aggregate net proceeds to the Company of approximately $94.1 million after deducting underwriting discounts and offering expenses.
2021.
45
equity and debt securities. We also may fund property acquisitions and
2021
Property | December 31, 2019 | Interest Rate as of December 31, 2019(1) | Maturity | |||||||||
Unsecured Credit Facility(3)(4) | $ | — | LIBOR +1.40%(2) | March 2022 | ||||||||
Term Loan(4) | 50,000 | LIBOR +1.25%(2) | September 2024 | |||||||||
Midland Life Insurance(5) | 85,293 | 4.34 | May 2021 | |||||||||
Mission City | 47,000 | 3.78 | November 2027 | |||||||||
Canyon Park(6) | 40,950 | 4.30 | March 2027 | |||||||||
190 Office Center | 40,854 | 4.79 | October 2025 | |||||||||
Circle Point | 39,650 | 4.49 | September 2028 | |||||||||
SanTan | 34,053 | 4.56 | March 2027 | |||||||||
Intellicenter | 32,971 | 4.65 | October 2025 | |||||||||
The Quad | 30,600 | 4.20 | September 2028 | |||||||||
FRP Collection(7) | 28,969 | 3.10 | September 2023 | |||||||||
2525 McKinnon | 27,000 | 4.24 | April 2027 | |||||||||
Greenwood Blvd(7) | 22,425 | 3.15 | December 2025 | |||||||||
Cascade Station | 22,304 | 4.55 | May 2024 | |||||||||
5090 N 40th St | 22,000 | 3.92 | January 2027 | |||||||||
AmberGlen | 20,000 | 3.69 | May 2027 | |||||||||
Lake Vista Pointe | 17,717 | 4.28 | August 2024 | |||||||||
Central Fairwinds(8) | 17,534 | 3.15 | June 2024 | |||||||||
FRP Ingenuity Drive | 17,000 | 4.44 | December 2024 | |||||||||
Carillon Point(7) | 15,972 | 3.10 | October 2023 | |||||||||
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| |||||||||||
Total principal | 612,292 | |||||||||||
Deferred financing costs, net | (5,660 | ) | ||||||||||
Unamortized fair value adjustments | 618 | |||||||||||
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Total | $ | 607,250 | ||||||||||
|
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Property | December 31, 2021 | Interest Rate as of December 31, 2021 (1) | Maturity | |||||||||
Unsecured Credit Facility (3)(4) | $ | 142,000 | LIBOR +1.30% (2) | November 2025 | ||||||||
Term Loan (3) | 50,000 | LIBOR +1.25% (2) | September 2024 | |||||||||
Mission City | 47,000 | 3.78% | November 2027 | |||||||||
Canyon Park (5) | 40,381 | 4.30% | March 2027 | |||||||||
Circle Point | 39,650 | 4.49% | September 2028 | |||||||||
190 Office Center | 39,581 | 4.79% | October 2025 | |||||||||
SanTan | 32,807 | 4.56% | March 2027 | |||||||||
Intellicenter | 31,883 | 4.65% | October 2025 | |||||||||
The Quad | 30,600 | 4.20% | September 2028 | |||||||||
FRP Collection | 27,535 | 3.10% | September 2023 | |||||||||
2525 McKinnon | 27,000 | 4.24% | April 2027 | |||||||||
Greenwood Blvd | 21,920 | 3.15% | December 2025 | |||||||||
Cascade Station | 21,581 | 4.55% | May 2024 | |||||||||
5090 N. 40 th St | 21,233 | 3.92% | January 2027 | |||||||||
AmberGlen | 20,000 | 3.69% | May 2027 | |||||||||
Lake Vista Pointe | 17,018 | 4.28% | August 2024 | |||||||||
Central Fairwinds | 16,707 | 3.15% | June 2024 | |||||||||
FRP Ingenuity Drive | 16,457 | 4.44% | December 2024 | |||||||||
Carillon Point | 15,185 | 3.10% | October 2023 | |||||||||
Total Principal | 658,538 | |||||||||||
Deferred financing costs, net | (5,223 | ) | ||||||||||
Unamortized fair value adjustments | 333 | |||||||||||
Total | $ | 653,648 | ||||||||||
(1) | All interest rates are fixed interest rates with the exception of the Unsecured Credit Facility (“Unsecured Credit Facility”) and the Term Loan (as defined herein), as explained in footnotes 3 and 4 below. |
(2) | As of December 31, one-month LIBOR rate was |
(3) |
|
46
In September 2019, the Company entered into a five-year $50 million Term Loan (the “Term Loan”) increasing its authorized borrowings under the Unsecured Credit Facility from $250 million to $300 million. Borrowings under the Term Loan bear interest at a rate equal to the LIBOR rate plus a margin between 125 to 215 basis points depending upon the Company’s consolidated leverage ratio. In conjunction with the Term Loan, the Company also entered into |
(4) | In March 2018, the Company entered into theCredit Agreementfor the Unsecured Credit Facility that provides for commitments of up to $250 million, which includes an accordion feature that allows the Company to borrow up to $500 million, subject to customary terms and conditions. On November 16, 2021, the Company entered into anAmended and Restated Credit Agreementfor the Unsecured Credit Facility that provides for commitments of up to $300 million. Combined with the Company’s existing five-year Term Loan, the total authorized borrowings increased from $300 million to $350 million. The Unsecured Credit Facility matures in November 2025 and may be extended 12 months at the Company’s option upon meeting certain conditions. Borrowings under the Unsecured Credit Facility bear interest at a rate equal to the LIBOR rate plus a margin of between 125 to 225 basis points depending upon the Company’s consolidated leverage ratio. As of December 31, 2021, the Unsecured Credit Facility had $142.0 million drawn and $4.2 million of letters of credit to satisfy escrow requirements for mortgage lenders. The Unsecured Credit Facility requires the Company to maintain a fixed charge coverage ratio of no less than 1.50x. |
(5) |
|
The mortgage loan anticipated repayment date (“ARD”) is March 1, 2027. The final scheduled maturity date can be extended up to 5 years beyond the ARD. If the loan is not paid off at ARD, loan’s interest rate shall be adjusted to the greater of (i) the initial interest rate plus 200 basis points or (ii) the yield on the five year “on the run” treasury reported by Bloomberg market data service plus 450 basis points. |
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Payments Due by Period(in thousands) | ||||||||||||||||||||
Contractual Obligations | Total | 2020 | 2021-2022 | 2023-2024 | More than 5 years | |||||||||||||||
Principal payments on mortgage loans | $ | 612,292 | $ | 6,279 | $ | 95,885 | $ | 173,253 | $ | 336,875 | ||||||||||
Interest payments(1) | 135,458 | 24,525 | 42,527 | 36,958 | 31,448 | |||||||||||||||
Tenant-related commitments | 10,509 | 9,140 | 1,369 | — | — | |||||||||||||||
Lease obligations | 30,173 | 560 | 1,669 | 1,264 | 26,680 | |||||||||||||||
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Total | $ | 788,432 | $ | 40,504 | $ | 141,450 | $ | 211,475 | $ | 395,003 | ||||||||||
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Payments Due by Period | ||||||||||||||||||||
Contractual Obligations | Total | 2022 | 2023-2024 | 2025-2026 | More than 5 years | |||||||||||||||
Principal payments on mortgage loans | $ | 658,538 | $ | 6,427 | $ | 173,275 | $ | 238,533 | $ | 240,303 | ||||||||||
Interest payments (1) | 96,544 | 22,368 | 40,914 | 25,451 | 7,811 | |||||||||||||||
Tenant-related commitments | 30,100 | 30,100 | — | — | — | |||||||||||||||
Lease obligations | 37,972 | 740 | 1,625 | 1,510 | 34,097 | |||||||||||||||
Total | $ | 823,154 | $ | 59,635 | $ | 215,814 | $ | 265,494 | $ | 282,211 | ||||||||||
(1) | Contracted interest on the floating rate |
Off-Balance Sheet Arrangements
As of December 31, 2019, we did not have anyoff-balance sheet arrangements.
Substantially all of our office leases provide for separate real estate tax and operating expense escalations. In addition, most of the leases provide for fixed rent increases. We believe that inflationary increases may be at least partially offset by the contractual rent increases and expense reimbursements described above.
47
48
the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
2021.
2021.
|
On June 16, 2017, the Company and the Operating Partnership previously entered into the equity distribution agreements (collectively, the “Original Agreements”) with each of KeyBanc Capital Markets Inc., Raymond James & Associates, Inc. and BMO Capital Markets Corp., (collectively, the “Sales Agents”), pursuant to which the Company may issue and sell from time to time shares of common stock and the Company’s 6.625% Series A Preferred Stock through the Sales Agents, acting as agents or principals (the “ATM Program”). On November 1, 2018, the Company and the Operating Partnership entered into amendments (the “Amendments”) to
49
the Original Agreements (as amended by the Amendments, the “EDAs”) with each of the Sales Agents to increase the number of shares of common stock issuable under the ATM Program. During the year ended December 31, 2019, the Company issued 8,000,000 shares of common stock under the ATM Program. The Company raised $106.5 million in aggregate gross proceeds, resulting in aggregate net proceeds to the Company of approximately $104.8 million after deducting sales commissions and offering expenses. During the year ended December 31, 2018, the Company issued 3,410,802 shares of common stock under the ATM Program pursuant to the Original Agreements. The Company raised $43.6 million in gross proceeds, resulting in net proceeds to us of approximately $42.9 million after deducting sales commissions and offering expenses. The Company terminated the EDAs effective February 25, 2020.
50
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
Page | ||||
52
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has adopted ASC 842, Leases, using the effective date method, under which the cumulative effect of initial application was recognized in retained earnings at January 1, 2019, the date of initial application.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
53
54
55
December 31, | ||||||||
2019 | 2018 | |||||||
Assets | ||||||||
Real estate properties | ||||||||
Land | $ | 230,034 | $ | 223,789 | ||||
Building and improvement | 784,636 | 704,113 | ||||||
Tenant improvement | 94,218 | 77,426 | ||||||
Furniture, fixtures and equipment | 285 | 319 | ||||||
|
|
|
| |||||
1,109,173 | 1,005,647 | |||||||
Accumulated depreciation | (101,835 | ) | (70,484 | ) | ||||
|
|
|
| |||||
1,007,338 | 935,163 | |||||||
|
|
|
| |||||
Cash and cash equivalents | 70,129 | 16,138 | ||||||
Restricted cash | 17,394 | 17,007 | ||||||
Rents receivable, net | 32,112 | 26,095 | ||||||
Deferred leasing costs, net | 12,393 | 10,402 | ||||||
Acquired lease intangible assets, net | 67,533 | 75,501 | ||||||
Other assets | 17,061 | 2,755 | ||||||
Assets held for sale | 4,514 | 17,370 | ||||||
|
|
|
| |||||
Total Assets | $ | 1,228,474 | $ | 1,100,431 | ||||
|
|
|
| |||||
Liabilities and Equity | ||||||||
Liabilities: | ||||||||
Debt | $ | 607,250 | $ | 645,354 | ||||
Accounts payable and accrued liabilities | 28,786 | 25,892 | ||||||
Deferred rent | 6,593 | 5,331 | ||||||
Tenant rent deposits | 5,658 | 4,564 | ||||||
Acquired lease intangible liabilities, net | 8,194 | 8,887 | ||||||
Other liabilities | 22,794 | 11,148 | ||||||
Liabilities related to assets held for sale | 67 | 878 | ||||||
|
|
|
| |||||
Total Liabilities | 679,342 | 702,054 | ||||||
|
|
|
| |||||
Commitments and Contingencies (Note 10) | ||||||||
Equity: | ||||||||
6.625% Series A Preferred stock, $0.01 par value per share, 5,600,000 shares authorized, 4,480,000 issued and outstanding as of December 31, 2019 and 2018 respectively | 112,000 | 112,000 | ||||||
Common stock, $0.01 par value, 100,000,000 shares authorized, 54,591,047 and 39,544,073 shares issued and outstanding as of December 31, 2019 and 2018 respectively | 545 | 395 | ||||||
Additionalpaid-in capital | 577,131 | 377,126 | ||||||
Accumulated deficit | (142,383 | ) | (92,108 | ) | ||||
Accumulated other comprehensive income | 715 | — | ||||||
|
|
|
| |||||
Total Stockholders’ Equity | 548,008 | 397,413 | ||||||
Non-controlling interests in properties | 1,124 | 964 | ||||||
|
|
|
| |||||
Total Equity | 549,132 | 398,377 | ||||||
|
|
|
| |||||
Total Liabilities and Equity | $ | 1,228,474 | $ | 1,100,431 | ||||
|
|
|
|
December 31, 2021 | December 31, 2020 | |||||||
Assets | ||||||||
Real estate properties | ||||||||
Land | $ | 204,801 | $ | 204,289 | ||||
Building and improvement | 1,244,177 | 777,184 | ||||||
Tenant improvement | 119,011 | 104,694 | ||||||
Furniture, fixtures and equipment | 664 | 642 | ||||||
1,568,653 | 1,086,809 | |||||||
Accumulated depreciation | (157,356 | ) | (131,220 | ) | ||||
1,411,297 | 955,589 | |||||||
Cash and cash equivalents | 21,321 | 25,305 | ||||||
Restricted cash | 20,945 | 20,646 | ||||||
Rents receivable, net | 30,415 | 32,968 | ||||||
Deferred leasing costs, net | 20,327 | 16,829 | ||||||
Acquired lease intangible assets, net | 68,925 | 44,143 | ||||||
Other assets | 28,283 | 15,758 | ||||||
Assets held for sale | 0 | 46,054 | ||||||
Total Assets | $ | 1,601,513 | $ | 1,157,292 | ||||
Liabilities and Equity | ||||||||
Liabilities: | ||||||||
Debt | $ | 653,648 | $ | 677,242 | ||||
Accounts payable and accrued liabilities | 27,101 | 25,414 | ||||||
Deferred rent | 11,600 | 7,295 | ||||||
Tenant rent deposits | 6,165 | 4,801 | ||||||
Acquired lease intangible liabilities, net | 10,872 | 6,035 | ||||||
Other liabilities | 21,532 | 18,099 | ||||||
Liabilities related to assets held for sale | 0 | 531 | ||||||
Total Liabilities | 730,918 | 739,417 | ||||||
Commitments and Contingencies (Note 10) | 0 | 0 | ||||||
Equity: | ||||||||
6.625% Series A Preferred stock, $0.01 par value per share, 5,600,000 shares authorized, 4,480,000 issued and outstanding as of December 31, 2021 and 2020 | 112,000 | 112,000 | ||||||
Common stock, $0.01 par value, 100,000,000 shares authorized, 43,554,375 and 43,397,117 shares issued and outstanding as of December 31, 2021 and 2020 respectively | 435 | 433 | ||||||
Additional paid-in capital | 482,061 | 479,411 | ||||||
Retained earnings/(accumulated deficit ) | 275,502 | (172,958 | ) | |||||
Accumulated other comprehensive loss | (382 | ) | (1,960 | ) | ||||
Total Stockholders’ Equity | 869,616 | 416,926 | ||||||
Non-controlling interests in properties | 979 | 949 | ||||||
Total Equity | 870,595 | 417,875 | ||||||
Total Liabilities and Equity | $ | 1,601,513 | $ | 1,157,292 | ||||
56
Years Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Rental and other revenues | $ | 156,297 | $ | 129,484 | $ | 106,487 | ||||||
Operating expenses: | ||||||||||||
Property operating expenses | 57,316 | 49,872 | 42,886 | |||||||||
General and administrative | 11,066 | 8,137 | 6,792 | |||||||||
Depreciation and amortization | 59,159 | 52,352 | 41,594 | |||||||||
Impairment of real estate | — | 3,497 | — | |||||||||
|
|
|
|
|
| |||||||
Total operating expenses | 127,541 | 113,858 | 91,272 | |||||||||
|
|
|
|
|
| |||||||
Operating income | 28,756 | 15,626 | 15,215 | |||||||||
Interest expense: | ||||||||||||
Contractual interest expense | (28,401 | ) | (22,316 | ) | (18,721 | ) | ||||||
Amortization of deferred financing costs and debt fair value | (1,325 | ) | (1,621 | ) | (1,452 | ) | ||||||
|
|
|
|
|
| |||||||
(29,726 | ) | (23,937 | ) | (20,173 | ) | |||||||
Net gain on sale of real estate property | 3,412 | 46,980 | 12,116 | |||||||||
Change in fair value of contingent consideration | — | — | 2,000 | |||||||||
|
|
|
|
|
| |||||||
Net income | 2,442 | 38,669 | 9,158 | |||||||||
Less: | ||||||||||||
Net income attributable tonon-controlling interests in properties | (644 | ) | (501 | ) | (3,402 | ) | ||||||
|
|
|
|
|
| |||||||
Net income attributable to the Company | 1,798 | 38,168 | 5,756 | |||||||||
Preferred stock distributions | (7,420 | ) | (7,420 | ) | (7,411 | ) | ||||||
|
|
|
|
|
| |||||||
Net (loss)/income attributable to common stockholders | $ | (5,622 | ) | $ | 30,748 | $ | (1,655 | ) | ||||
|
|
|
|
|
| |||||||
Net (loss)/income per common share: | ||||||||||||
Basic | $ | (0.13 | ) | $ | 0.82 | $ | (0.05 | ) | ||||
|
|
|
|
|
| |||||||
Diluted | $ | (0.13 | ) | $ | 0.82 | $ | (0.05 | ) | ||||
|
|
|
|
|
| |||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 43,997 | 37,321 | 30,198 | |||||||||
|
|
|
|
|
| |||||||
Diluted | 43,997 | 37,670 | 30,198 | |||||||||
|
|
|
|
|
| |||||||
Dividend distributions declared per common share | $ | 0.940 | $ | 0.940 | $ | 0.940 | ||||||
|
|
|
|
|
|
Years Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Rental and other revenues | $ | 164,041 | $ | 160,840 | $ | 156,297 | ||||||
Operating expenses: | ||||||||||||
Property operating expenses | 58,005 | 58,312 | 57,316 | |||||||||
General and administrative | 15,489 | 10,690 | 11,066 | |||||||||
Depreciation and amortization | 57,317 | 60,367 | 59,159 | |||||||||
Total operating expenses | 130,811 | 129,369 | 127,541 | |||||||||
Operating income | 33,230 | 31,471 | 28,756 | |||||||||
Interest expense: | ||||||||||||
Contractual interest expense | (23,268 | ) | (26,363 | ) | (28,401 | ) | ||||||
Amortization of deferred financing costs and debt fair value | (1,332 | ) | (1,326 | ) | (1,325 | ) | ||||||
(24,600 | ) | (27,689 | ) | (29,726 | ) | |||||||
Net gain on sale of real estate property | 476,651 | 1,347 | 3,412 | |||||||||
Net income | 485,281 | 5,129 | 2,442 | |||||||||
Less: | ||||||||||||
Net income attributable to non-controlling interests in properties | (886 | ) | (602 | ) | (644 | ) | ||||||
Net income attributable to the Company | 484,395 | 4,527 | 1,798 | |||||||||
Preferred stock distributions | (7,420 | ) | (7,420 | ) | (7,420 | ) | ||||||
Net income/(loss) attributable to common stockholders | $ | 476,975 | $ | (2,893 | ) | $ | (5,622 | ) | ||||
Net income/(loss) per common share: | ||||||||||||
Basic | $ | 10.97 | $ | (0.06 | ) | $ | (0.13 | ) | ||||
Diluted | $ | 10.80 | $ | (0.06 | ) | $ | (0.13 | ) | ||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 43,498 | 47,223 | 43,997 | |||||||||
Diluted | 44,145 | 47,223 | 43,997 | |||||||||
Dividend distributions declared per common share | $ | 0.65 | $ | 0.60 | $ | 0.94 | ||||||
57
Years Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net income | $ | 2,442 | $ | 38,669 | $ | 9,158 | ||||||
Unrealized cash flow hedge gains | 821 | — | — | |||||||||
Amounts reclassed from accumulated other comprehensive income to interest expense | (106 | ) | — | — | ||||||||
|
|
|
|
|
| |||||||
Comprehensive income | 3,157 | 38,669 | 9,158 | |||||||||
Less: | ||||||||||||
Comprehensive income attributable tonon-controlling interests in properties | (644 | ) | (501 | ) | (3,402 | ) | ||||||
|
|
|
|
|
| |||||||
Comprehensive income attributable to the Company | 2,513 | 38,168 | 5,756 | |||||||||
Preferred stock distributions | (7,420 | ) | (7,420 | ) | (7,411 | ) | ||||||
|
|
|
|
|
| |||||||
Comprehensive (loss)/income attributable to common stockholders | $ | (4,907 | ) | $ | 30,748 | $ | (1,655) | |||||
|
|
|
|
|
|
Years Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Net income | $ | 485,281 | $ | 5,129 | $ | 2,442 | ||||||
Other comprehensive income/(loss): | ||||||||||||
Unrealized cash flow hedge gain/(loss) | 989 | (3,003 | ) | 821 | ||||||||
Amounts reclassified to interest expense | 589 | 328 | (106 | ) | ||||||||
Other comprehensive income/(loss) | 1,578 | (2,675 | ) | 715 | ||||||||
Comprehensive income | 486,859 | 2,454 | 3,157 | |||||||||
Less: | ||||||||||||
Comprehensive income attributable to non-controlling interests in pro perties | (886 | ) | (602 | ) | (644 | ) | ||||||
Comprehensive income attributable to the Company | $ | 485,973 | $ | 1,852 | $ | 2,513 | ||||||
58
Number of shares of preferred stock | Preferred stock | Number of shares of common stock | Common stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive income | Total stockholders’ equity | Operating Partnership unitholders’ non- controlling interests | Non- controlling interests in properties | Total equity | ||||||||||||||||||||||||||||||||||
Balance—January 1, 2017 | 4,480 | 112,000 | 24,382 | 244 | 195,566 | (53,608 | ) | — | 254,202 | 108 | 1,749 | 256,059 | ||||||||||||||||||||||||||||||||
Conversion of OP units to shares | �� | — | 40 | — | 108 | — | — | 108 | (108 | ) | — | — | ||||||||||||||||||||||||||||||||
Restricted stock award grants and vesting | — | — | 90 | 1 | 1,741 | (71 | ) | — | 1,671 | — | — | 1,671 | ||||||||||||||||||||||||||||||||
Net proceeds from sale of common stock | — | — | 11,500 | 115 | 136,826 | — | — | 136,941 | — | — | 136,941 | |||||||||||||||||||||||||||||||||
Common stock dividend distributions declared | — | — | — | — | — | (31,148 | ) | — | (31,148 | ) | — | — | (31,148 | ) | ||||||||||||||||||||||||||||||
Preferred stock dividend distributions declared | — | — | — | — | — | (7,906 | ) | — | (7,906 | ) | — | — | (7,906 | ) | ||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | — | (4,943 | ) | (4,943 | ) | |||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 5,756 | — | 5,756 | — | 3,402 | 9,158 | |||||||||||||||||||||||||||||||||
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|
|
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|
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|
|
|
|
|
|
| |||||||||||||||||||||||
Balance—December 31, 2017 | 4,480 | 112,000 | 36,012 | 360 | 334,241 | (86,977 | ) | — | 359,624 | — | 208 | 359,832 | ||||||||||||||||||||||||||||||||
Restricted stock award grants and vesting | — | — | 121 | 1 | 1,641 | (312 | ) | — | 1,330 | — | — | 1,330 | ||||||||||||||||||||||||||||||||
Net proceeds from sale of common stock | — | — | 3,411 | 34 | 42,868 | — | — | 42,902 | — | — | 42,902 | |||||||||||||||||||||||||||||||||
Common stock dividend distributions declared | — | — | — | — | — | (35,567 | ) | — | (35,567 | ) | — | — | (35,567 | ) | ||||||||||||||||||||||||||||||
Preferred stock dividend distributions declared | — | — | — | — | — | (7,420 | ) | — | (7,420 | ) | — | — | (7,420 | ) | ||||||||||||||||||||||||||||||
Minority interest buyout | — | — | — | — | (1,624 | ) | — | — | (1,624 | ) | — | 485 | (1,139 | ) | ||||||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | — | 297 | 297 | |||||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | — | (527 | ) | (527 | ) | |||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 38,168 | — | 38,168 | — | 501 | 38,669 | |||||||||||||||||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Balance—December 31, 2018 | 4,480 | 112,000 | 39,544 | 395 | 377,126 | (92,108 | ) | — | 397,413 | — | 964 | 398,377 | ||||||||||||||||||||||||||||||||
Restricted stock award grants and vesting | — | — | 147 | 1 | 1,280 | (374 | ) | — | 907 | — | — | 907 | ||||||||||||||||||||||||||||||||
Net proceeds from sale of common stock | — | — | 14,900 | 149 | 198,725 | — | — | 198,874 | — | — | 198,874 | |||||||||||||||||||||||||||||||||
Common stock dividend distributions declared | — | — | — | — | — | (44,279 | ) | — | (44,279 | ) | — | — | (44,279 | ) | ||||||||||||||||||||||||||||||
Preferred stock dividend distributions declared | — | — | — | — | — | (7,420 | ) | — | (7,420 | ) | — | — | (7,420 | ) | ||||||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | — | 112 | 112 | |||||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | — | (596 | ) | (596 | ) | |||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,798 | — | 1,798 | — | 644 | 2,442 | |||||||||||||||||||||||||||||||||
Unrealized cash flow hedge gains | — | — | — | — | — | — | 715 | 715 | — | — | 715 | |||||||||||||||||||||||||||||||||
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|
|
|
|
|
| |||||||||||||||||||||||
Balance—December 31, 2019 | 4,480 | $ | 112,000 | 54,591 | $ | 545 | $ | 577,131 | $ | (142,383 | ) | $ | 715 | $ | 548,008 | $ | — | $ | 1,124 | $ | 549,132 | |||||||||||||||||||||||
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|
|
|
|
|
Number of shares of preferred stock | Preferred stock | Number of shares of common stock | Common stock | Additional paid-in capital | Retained earnings/ (accumulated deficit) | Accumulated other comprehensive income/(loss) | Total stockholders’ equity | Non-controlling interests in properties | Total equity | |||||||||||||||||||||||||||||||
Balance—January 1, 2019 | 4,480 | $ | 112,000 | 39,544 | $ | 395 | $ | 377,126 | $ | (92,108 | ) | $ | 0 | $ | 397,413 | $ | 964 | $ | 398,377 | |||||||||||||||||||||
Restricted stock award grants and vesting | — | — | 147 | 1 | 1,280 | (374 | ) | — | 907 | — | 907 | |||||||||||||||||||||||||||||
Net proceeds from sale of common stock | — | — | 14,900 | 149 | 198,725 | — | — | 198,874 | — | 198,874 | ||||||||||||||||||||||||||||||
Common stock dividend distribution declared | — | — | — | — | — | (44,279 | ) | — | (44,279 | ) | — | (44,279 | ) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared | — | — | — | — | — | (7,420 | ) | — | (7,420 | ) | — | (7,420 | ) | |||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | 112 | 112 | ||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | (596 | ) | (596 | ) | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,798 | — | 1,798 | 644 | 2,442 | ||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 715 | 715 | — | 715 | ||||||||||||||||||||||||||||||
Balance—December 31, 2019 | 4,480 | $ | 112,000 | 54,591 | $ | 545 | $ | 577,131 | $ | (142,383) | $ | 715 | $ | 548,008 | $ | 1,124 | $ | 549,132 | ||||||||||||||||||||||
Restricted stock award grants and vesting | — | — | 170 | 2 | 2,531 | (243 | ) | — | 2,290 | — | 2,290 | |||||||||||||||||||||||||||||
Common stock repurchased | — | — | (11,364 | ) | (114 | ) | (100,251 | ) | — | — | (100,365 | ) | — | (100,365 | ) | |||||||||||||||||||||||||
Common stock dividend distribution declared | — | — | — | — | — | (27,439 | ) | — | (27,439 | ) | — | (27,439 | ) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared | — | — | — | — | — | (7,420 | ) | — | (7,420 | ) | — | (7,420 | ) | |||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | 52 | 52 | ||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | (829 | ) | (829 | ) | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 4,527 | — | 4,527 | 602 | 5,129 | ||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (2,675 | ) | (2,675 | ) | — | (2,675 | ) | |||||||||||||||||||||||||||
Balance—December 31, 2020 | 4,480 | $ | 112,000 | 43,397 | $ | 433 | $ | 479,411 | $ | (172,958) | $ | (1,960 | ) | $ | 416,926 | $ | 949 | $ | 417,875 | |||||||||||||||||||||
Restricted stock award grants and vesting | — | — | 157 | 2 | 2,650 | (228 | ) | — | 2,424 | — | 2,424 | |||||||||||||||||||||||||||||
Common stock dividend distribution declared | — | — | — | — | — | (28,287 | ) | — | (28,287 | ) | — | (28,287 | ) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared | — | — | — | — | — | (7,420 | ) | — | (7,420 | ) | — | (7,420 | ) | |||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | 286 | 286 | ||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | (1,142 | ) | (1,142 | ) | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 484,395 | — | 484,395 | 886 | 485,281 | ||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 1,578 | 1,578 | — | 1,578 | ||||||||||||||||||||||||||||||
Balance—December 31, 2021 | 4,480 | $ | 112,000 | 43,554 | $ | 435 | $ | 482,061 | $ | 275,502 | $ | (382 | ) | $ | 869,616 | $ | 979 | $ | 870,595 | |||||||||||||||||||||
Years Ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net income | $ | 485,281 | $ | 5,129 | $ | 2,442 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 57,317 | 60,367 | 59,159 | |||||||||
Amortization of deferred financing costs and debt fair value | 1,332 | 1,326 | 1,325 | |||||||||
Amortization of above and below market leases | 343 | (17 | ) | (27 | ) | |||||||
Straight-line rent/expense | (566 | ) | (3,389 | ) | (5,233 | ) | ||||||
Non-cash stock compensation | 2,641 | 2,332 | 1,742 | |||||||||
Net gain on sale of real estate property | (476,651 | ) | (1,347 | ) | (3,412 | ) | ||||||
Changes in non-cash working capital: | ||||||||||||
Rents receivable, net | (654 | ) | (182 | ) | (1,061 | ) | ||||||
Other assets | (345 | ) | 53 | (330 | ) | |||||||
Accounts payable and accrued liabilities | 451 | (4,194 | ) | (5,538 | ) | |||||||
Deferred rent | 3,653 | 702 | 1,022 | |||||||||
Tenant rent deposits | 420 | (857 | ) | (590 | ) | |||||||
Net Cash Provided By Operating Activities | 73,222 | 59,923 | 49,499 | |||||||||
Cash Flows to Investing Activities: | ||||||||||||
Additions to real estate properties | (17,869 | ) | (26,352 | ) | (16,002 | ) | ||||||
Acquisition of real estate | (632,317 | ) | 0 | (108,358 | ) | |||||||
Net proceeds from sale of real estate. | 640,995 | 6,340 | 46,364 | |||||||||
Deferred leasing costs | (8,190 | ) | (7,791 | ) | (3,926 | ) | ||||||
Net Cash Used In Investing Activities | (17,381 | ) | (27,803 | ) | (81,922 | ) | ||||||
Cash Flows (to)/from Financing Activities: | ||||||||||||
Proceeds from sale of common stock | 0 | 0 | 198,874 | |||||||||
Debt issuance and extinguishment costs | (2,506 | ) | 0 | (1,008 | ) | |||||||
Proceeds from borrowings | 180,000 | 130,000 | 154,750 | |||||||||
Repayment of borrowings | (202,442 | ) | (61,330 | ) | (216,336 | ) | ||||||
Dividend distributions paid to stockh o lders | (33,506 | ) | (41,178 | ) | (48,163 | ) | ||||||
Distributions to non-controlling interests in properties | (1,142 | ) | (829 | ) | (596 | ) | ||||||
Shares withheld for payment of taxes on restricted stock unit vesting | (216 | ) | (42 | ) | (832 | ) | ||||||
Contributions from non-controlling interests in properties . | 286 | 52 | 112 | |||||||||
Repurchases of common stock | 0 | (100,365 | ) | 0 | ||||||||
Net Cash (Used In)/Provided By Financing Activities | (59,526 | ) | (73,692 | ) | 86,801 | |||||||
Net (Decrease)/Increase in Cash, Cash Equivalents and Restricted Cash | (3,685 | ) | (41,572 | ) | 54,378 | |||||||
Cash, Cash Equivalents and Restricted Cash, Beginning of Period | 45,951 | 87,523 | 33,145 | |||||||||
Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 42,266 | $ | 45,951 | $ | 87,523 | ||||||
Reconciliation of Cash, Cash Equivalents and Restricted Cash: | ||||||||||||
Cash and Cash Equivalents, End of Period | 21,321 | 25,305 | 70,129 | |||||||||
Restricted Cash, End of Period | 20,945 | 20,646 | 17,394 | |||||||||
Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 42,266 | $ | 45,951 | $ | 87,523 | ||||||
Supplemental Disclosures of Cash Flow Information: | ||||||||||||
Cash paid for interest | $ | 23,344 | $ | 26,454 | $ | 28,479 | ||||||
Purchase of additions in real estate properties included in accounts payable | $ | 5,815 | $ | 7,640 | $ | 6,489 | ||||||
Purchase of deferred leasing costs included in accounts payable | $ | 2,790 | $ | 289 | $ | 603 | ||||||
Debt assumed on acquisition of real estate | $ | 0 | $ | 0 | $ | 22,473 |
59
Consolidated Statements of Cash Flows
(In thousands)
Years Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net income | $ | 2,442 | $ | 38,669 | $ | 9,158 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 59,159 | 52,352 | 41,594 | |||||||||
Amortization of deferred financing costs and debt fair value | 1,325 | 1,621 | 1,452 | |||||||||
Amortization of above/below market leases | (27 | ) | (182 | ) | (337 | ) | ||||||
Increase in straight-line rent/expense | (5,233 | ) | (4,703 | ) | (2,820 | ) | ||||||
Non-cash stock compensation | 1,742 | 1,416 | 1,671 | |||||||||
Earn-out termination payment | — | — | (2,400 | ) | ||||||||
Net gain on sale of real estate property | (3,412 | ) | (46,980 | ) | (12,116 | ) | ||||||
Impairment of real estate | — | 3,497 | — | |||||||||
Changes innon-cash working capital: | ||||||||||||
Rents receivable, net | (1,061 | ) | (1,602 | ) | (1,647 | ) | ||||||
Other assets | (330 | ) | (353 | ) | 349 | |||||||
Accounts payable and accrued liabilities | (5,538 | ) | (910 | ) | 670 | |||||||
Deferred rent | 1,022 | (834 | ) | 324 | ||||||||
Tenant rent deposits | (590 | ) | 196 | 655 | ||||||||
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Net Cash Provided By Operating Activities | 49,499 | 42,187 | 36,553 | |||||||||
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Cash Flows to Investing Activities: | ||||||||||||
Additions to real estate properties | (16,002 | ) | (23,586 | ) | (8,189 | ) | ||||||
Acquisition of real estate | (108,358 | ) | (254,514 | ) | (249,299 | ) | ||||||
Net proceeds from sale of real estate | 46,364 | 84,839 | 18,479 | |||||||||
Deferred leasing costs | (3,926 | ) | (4,048 | ) | (4,289 | ) | ||||||
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Net Cash Used In Investing Activities | (81,922 | ) | (197,309 | ) | (243,298 | ) | ||||||
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Cash Flows from Financing Activities: | ||||||||||||
Net proceeds from sale of common stock | 198,874 | 42,902 | 136,941 | |||||||||
Debt issuance and extinguishment costs | (1,008 | ) | (2,963 | ) | (3,202 | ) | ||||||
Proceeds from borrowings | 154,750 | 398,749 | 392,340 | |||||||||
Repayment of borrowings | (216,336 | ) | (241,820 | ) | (272,772 | ) | ||||||
Shares withheld for payment of taxes on restricted stock unit vesting | (832 | ) | (87 | ) | — | |||||||
Minority interest buyout | — | (1,140 | ) | — | ||||||||
Contributions fromnon-controlling interests in properties | 112 | 297 | — | |||||||||
Distributions tonon-controlling interests in properties | (596 | ) | (527 | ) | (4,943 | ) | ||||||
Dividend distributions paid to stockholders and Operating Partnership unitholders | (48,163 | ) | (42,158 | ) | (36,256 | ) | ||||||
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Net Cash Provided By Financing Activities | 86,801 | 153,253 | 212,108 | |||||||||
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Net Increase/(Decrease) in Cash, Cash Equivalents and Restricted Cash | 54,378 | (1,869 | ) | 5,363 | ||||||||
Cash, Cash Equivalents and Restricted Cash, Beginning of Period | 33,145 | 35,014 | 29,651 | |||||||||
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Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 87,523 | $ | 33,145 | $ | 35,014 | ||||||
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Years Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Reconciliation of Cash, Cash Equivalents and Restricted Cash: | ||||||||||||
Cash and Cash Equivalents, End of Period | 70,129 | 16,138 | 12,301 | |||||||||
Restricted Cash, End of Period | 17,394 | 17,007 | 22,713 | |||||||||
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Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 87,523 | $ | 33,145 | $ | 35,014 | ||||||
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Supplemental Disclosures of Cash Flow Information: | ||||||||||||
Cash paid for interest | $ | 28,479 | $ | 22,131 | $ | 18,408 | ||||||
Purchases of additions in real estate properties included in accounts payable | $ | 6,489 | $ | 6,791 | $ | 2,616 | ||||||
Purchases of deferred leasing costs included in accounts payable | $ | 603 | $ | 654 | $ | 815 | ||||||
Debt assumed on acquisition of real estate | $ | 22,473 | $ | — | $ | — |
The accompanying notes are an integral part of these consolidated financial statements.
61
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Years | ||||
Buildings | ||||
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Furniture, fixtures and equipment | 4-10 |
64
cost or fair value less the estimated cost to sell. The Company reviews its real estate properties for impairment when there is an event or a change in circumstances that indicates that the carrying amount may not be recoverable. The Company measures and records impairment losses and reduces the carrying value of properties when indicators of impairment are present and the expected undiscounted cash flows related to those properties are less than their carrying amounts. In cases where the Company does not expect to recover its carrying costs on properties held for use, the Company reduces its carrying costs to fair value.
Variable Interest Entities
The Company consolidates variable interest entities (“VIE”) if the Company determines that it is the primary beneficiary of the entity. When evaluating the accounting for a VIE, the Company considers the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and our decision-making role, if any, in those activities that significantly determine the entity’s economic performance relative to other economic interest holders. The Company determines the rights, if any, to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE by considering the economic interest in the entity, regardless of form, which may include debt, equity, management and servicing fees, or other contractual arrangements. The Company considers other relevant factors including each entity’s capital structure, contractual rights to earnings (losses), subordination of the Company’s interests relative to those of other investors, contingent payments, and other contractual arrangements that may be economically significant.
From time to time, the Company has elected to treat certain subsidiaries as TRSs. A TRS is treated as a regular corporation and is subject to federal income tax and applicable state income and franchise taxes at regular corporate rates.
65
New
Adopted in the Current Year
66
Effectiveprospectively on January 1, 2019,2022. Historically the Company’s leases in which the Company adopted FASBis the lessor have been operating leases, therefore the adoption of ASU2016-02, Leases (ASC 842) and elected the effective date method for the transition. The Company elected the following practical expedients:
Transition method practical expedient – permits the Company2021-05
Package of practical expedients – permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. This allowed the Company to continue classifying its leases at transition in substantially the same manner.
Single component practical expedient – permits the Company to not separate lease andnon-lease components of leases. Upon transition, rental income, expense reimbursement, and other were aggregated into a single line within rental and other revenuesmaterial impact on the Company’s consolidated statement of operations.
Land easement practical expedient – permits the Company not to reassess under the new standard its prior conclusions about land easements.
Short-term lease practical expedient – permits the Company not to recognize leases with a term equal to or less than 12 months.
Lessor Accounting
The accounting for lessors under the new standard remained relatively unchanged with a few targeted updates impacting the Company, which included: (i) narrower definition of initial direct costs that requires certain costs to be expensed rather than capitalized, and (ii) provisions for uncollectible rents to be recorded as a reduction in revenue rather than as bad debt expense.
Lessee Accounting
The new standard requires lessees to recognize aright-of-use asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating at inception, with classification affecting the pattern and recording of expenses in the statement of operations. Upon transition the Company recognizedright-of use assets and lease liabilities principally for its ground and office leases.
December 31, 2019 | December 31, 2018 | |||||||
Billed receivables | $ | 2,880 | $ | 2,383 | ||||
Straight-line receivables | 29,232 | 23,712 | ||||||
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Total rents receivable | $ | 32,112 | $ | 26,095 | ||||
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December 31, 2021 | December 31, 2020 | |||||||
Billed receivables | $ | 2,820 | $ | 2,239 | ||||
Straight-line receivables | 27,595 | 30,729 | ||||||
Total rents receivable | $ | 30,415 | $ | 32,968 | ||||
67
Property | Date Acquired | Percentage Owned | ||||||
Bloc 83 | December 2021 | 100% | ||||||
The Terraces | December 2021 | 100% | ||||||
Block 23 | December 2021 | 100% | ||||||
5910 Pacific Center and 9985 Pacific Heights (1) | May 2021 | 100% | ||||||
7601 Tech (2) | September 2019 | |||||||
Cascade Station | June 2019 | |||||||
Canyon Park | February 2019 | |||||||
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(1) | 5910 Pacific Center and 9985 Pacific Heights were added to the existing Sorrento Mesa portfolio of properties (collectively “Sorrento Mesa”). The Sorrento Mesa portfolio was subsequently sold in December 2021. |
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Denver Tech is comprised of 7601 Tech |
5910 Pacific Center and 9985 Pacific Heights | Block 23 | The Terraces | Bloc 83 | December 31, 2021 | ||||||||||||||||
Land | $ | 37,294 | $ | — | $ | 15,861 | $ | 18,956 | $ | 72,111 | ||||||||||
Building and improvements | 2,979 | 115,747 | 101,455 | 280,313 | 500,494 | |||||||||||||||
Tenant improvements | 917 | 2,375 | 6,431 | 5,075 | 14,798 | |||||||||||||||
Lease intangible assets | 2,469 | 11,306 | 11,074 | 19,560 | 44,409 | |||||||||||||||
Other assets | 19 | 10,627 | 15 | 291 | 10,952 | |||||||||||||||
Accounts payable and other liabilities | (319 | ) | (1,914 | ) | (319 | ) | (463 | ) | (3,015 | ) | ||||||||||
Lease intangible liabilities | (103 | ) | (2,197 | ) | (2,118 | ) | (3,014 | ) | (7,432 | ) | ||||||||||
Net assets acquired | $ | 43,256 | $ | 135,944 | $ | 132,399 | $ | 320,718 | $ | 632,317 | ||||||||||
Canyon Park | Cascade Station | 7601 Tech | Total December 31, 2019 | |||||||||||||
Land | $ | 7,098 | $ | — | $ | 10,865 | $ | 17,963 | ||||||||
Buildings and improvements | 36,619 | 25,141 | 25,677 | 87,437 | ||||||||||||
Tenant improvements | 1,797 | 2,080 | 3,858 | 7,735 | ||||||||||||
Lease intangible assets | 8,109 | 3,134 | 7,401 | 18,644 | ||||||||||||
Other assets | 10 | 3,164 | 293 | 3,467 | ||||||||||||
Debt | — | (697 | ) | — | (697 | ) | ||||||||||
Accounts payable and other liabilities | (1,266 | ) | (186 | ) | (668 | ) | (2,120 | ) | ||||||||
Lease intangible liabilities | (1,297 | ) | (220 | ) | (79 | ) | (1,596 | ) | ||||||||
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Net assets acquired | $ | 51,070 | $ | 32,416 | $ | 47,347 | $ | 130,833 | ||||||||
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Canyon Park | Cascade Station | 7601 Tech | December 31, 2019 | |||||||||||||
Land | $ | 7,098 | $ | — | $ | 10,865 | $ | 17,963 | ||||||||
Building and improvements | 36,619 | 25,141 | 25,677 | 87,437 | ||||||||||||
Tenant improvements | 1,797 | 2,080 | 3,858 | 7,735 | ||||||||||||
Lease intangible assets | 8,109 | 3,134 | 7,401 | 18,644 | ||||||||||||
Other assets | 10 | 3,164 | 293 | 3,467 | ||||||||||||
Debt | — | (697 | ) | — | (697 | ) | ||||||||||
Accounts payable and other liabilities | (1,266 | ) | (186 | ) | (668 | ) | (2,120 | ) | ||||||||
Lease intangible liabilities | (1,297 | ) | (220 | ) | (79 | ) | (1,596 | ) | ||||||||
Net assets acquired | $ | 51,070 | $ | 32,416 | $ | 47,347 | $ | 130,833 | ||||||||
68
The following table summarizes the Company’s allocations of the purchase price of assets acquired and liabilities assumed during the year ended December 31, 2018 (in thousands):
Pima Center | Circle Point | The Quad | Circle Point Land | Greenwood Blvd | Camelback Square | Total December 31, 2018 | ||||||||||||||||||||||
Land | $ | — | $ | 8,744 | $ | 8,079 | $ | 4,937 | $ | 3,945 | $ | 11,738 | $ | 37,443 | ||||||||||||||
Buildings and improvements | 42,235 | 33,708 | 38,060 | — | 23,741 | 35,532 | 173,276 | |||||||||||||||||||||
Tenant improvements | 2,898 | 5,393 | 1,798 | — | 2,278 | 2,390 | 14,757 | |||||||||||||||||||||
Lease intangible assets | 10,691 | 10,299 | 4,209 | — | 4,578 | 4,304 | 34,081 | |||||||||||||||||||||
Other assets | 95 | 25 | 15 | — | 15 | 10 | 160 | |||||||||||||||||||||
Accounts payable and other liabilities | (337 | ) | (1,157 | ) | (527 | ) | (72 | ) | (96 | ) | (421 | ) | (2,610 | ) | ||||||||||||||
Lease intangible liabilities | (129 | ) | (390 | ) | (1,247 | ) | — | — | (827 | ) | (2,593 | ) | ||||||||||||||||
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Net assets acquired | $ | 55,453 | $ | 56,622 | $ | 50,387 | $ | 4,865 | $ | 34,461 | $ | 52,726 | $ | 254,514 | ||||||||||||||
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The following table summarizes the Company’s allocations of the purchase price of assets acquired and liabilities assumed during the year ended December 31, 2017 (in thousands):
2525 McKinnon | Mission City and Sorrento Mesa | Papago Tech | Total December 31, 2017 | |||||||||||||
Land | $ | 10,629 | $ | 66,097 | $ | 10,746 | $ | 87,472 | ||||||||
Buildings and improvements | 33,357 | 78,072 | 17,469 | 128,898 | ||||||||||||
Tenant improvements | 1,158 | 8,393 | 2,293 | 11,844 | ||||||||||||
Lease intangible assets | 3,267 | 22,846 | 2,816 | 28,929 | ||||||||||||
Other assets | — | 140 | 10 | 150 | ||||||||||||
Accounts payable and other liabilities | (190 | ) | (1,507 | ) | (246 | ) | (1,943 | ) | ||||||||
Lease intangible liabilities | (2,186 | ) | (3,766 | ) | (99 | ) | (6,051 | ) | ||||||||
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Net assets acquired | $ | 46,035 | $ | 170,275 | $ | 32,989 | $ | 249,299 | ||||||||
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costs.
costs.
On March 8, 2018, the Company sold the Washington Group Plaza property in Boise, Idaho for $86.5 million, resulting in an aggregate net gain of $47.0 million, net of $1.7 million in costs, which has been classified as net gain on sale of real estate property in the consolidated statements of operations.
On May 2, 2017, the Company sold the 1400 and 1600 buildings at the AmberGlen property in Portland, Oregon, and its related assets and liabilities, for a sales price of $18.9 million, resulting in an aggregate net gain
69
of $12.1 million, net of $2.0 million in costs, which has been classified as net gain on sale of real estate property in the consolidated statements of operations.
December 31, 2019 Real estate properties, net Assets held for sale Accounts payable, accrued expenses, deferred rent and tenant rent deposits Liabilities related to assets held for sale On May 10, 2019, the Company entered into a purchase and sale agreement to sell a land parcel at the Circle Point property for $6.5 million. The Company determined that the land parcel met the criteria for classification as held for sale as of December 31, 2019. The transaction is anticipated to close in the first half of 2020, subject to customary closing conditions. As of December 31, 2019, the Company has received a $0.5 millionnon-refundable deposit.The property has been classified as held for sale as of December 31, 2019 (in thousands): Circle Point
Land $ 4,514 $ 4,514 (67) $ (67)
December 31, 2018 | Plaza 25 | |||
Real estate properties, net | $ | 16,149 | ||
Deferred leasing costs, net | 419 | |||
Acquired lease intangible assets, net | 11 | |||
Rents receivable, prepaid expenses and other assets | 791 | |||
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Assets held for sale | $ | 17,370 | ||
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Accounts payable, accrued expenses, deferred rent and tenant rent deposits | (878 | ) | ||
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Liabilities related to assets held for sale | $ (878) | |||
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Variable Interest Entities
As
Cherry Creek | December 31, 2020 | |||
Real estate properties, net | $ | 40,849 | ||
Deferred leasing costs, net | 150 | |||
Acquired lease intangible assets, net | 2,256 | |||
Rents receivable, prepaid expenses and other assets | 2,799 | |||
Assets held for sale | $ | 46,054 | ||
Accounts payable, accrued expenses, deferred rent and tenant rent deposits | $ | (531) | ||
Liabilities related to assets held for sale | $ | (531) | ||
completion of the 1031 Exchanges. As such, Mission City, Sorrento Mesa and Papago Tech are included in the Consolidated Balance Sheets and Consolidated Statements of Operations as a VIE. As of December 31, 2019 and December 31, 2018 the Company did not have any variable interest entities.
Lease Intangible Assets | Lease Intangible Liabilities | |||||||||||||||||||||||||||||||
December 31, 2019 | Above Market Leases | Below Market Ground Lease(1) | In Place Leases | Leasing Commissions | Total | Below Market Leases | Below Market Ground Lease(1) | Total | ||||||||||||||||||||||||
Cost | $ | 15,242 | $ | — | $ | 87,320 | $ | 36,048 | $ | 138,610 | $ | (13,878) | $ | (138) | $ | (14,016) | ||||||||||||||||
Accumulated amortization | (6,704 | ) | — | (48,229 | ) | (16,144 | ) | (71,077 | ) | 5,782 | 40 | 5,822 | ||||||||||||||||||||
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$ | 8,538 | $ | — | $ | 39,091 | $ | 19,904 | $ | 67,533 | $ | (8,096) | $ | (98) | $ | (8,194) | |||||||||||||||||
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December 31, 2018 | Above Market Leases | Below Market Ground Lease(1) | In Place Leases | Leasing Commissions | Total | Below Market Leases | Below Market Ground Lease(1) | Total | ||||||||||||||||||||||||
Cost | $ | 10,595 | $ | 1,855 | $ | 82,474 | $ | 31,706 | $ | 126,630 | $ | (12,925) | $ | (138) | $ | (13,063) | ||||||||||||||||
Accumulated amortization | (4,800 | ) | (19 | ) | (34,273 | ) | (12,037 | ) | (51,129 | ) | 4,140 | 36 | 4,176 | |||||||||||||||||||
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$ | 5,795 | $ | 1,836 | $ | 48,201 | $ | 19,669 | $ | 75,501 | $ | (8,785) | $ | (102) | $ | (8,887) | |||||||||||||||||
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Lease Intangible Assets | Lease Intangible Liabilities | |||||||||||||||||||||||||||
December 31, 2021 | Above Market Leases | In Place Leases | Leasing Commissions | Total | Below Market Leases | Below Market Ground Lease | Total | |||||||||||||||||||||
Cost | $ | 21,147 | $ | 93,761 | $ | 39,345 | $ | 154,253 | $ | (16,743) | $ | (138) | $ | (16,881) | ||||||||||||||
Accumulated amortization | (9,627 | ) | (56,987 | ) | (18,714 | ) | (85,328 | ) | 5,961 | 48 | 6,009 | |||||||||||||||||
$ | 11,520 | $ | 36,774 | $ | 20,631 | $ | 68,925 | $ | (10,782) | $ | (90) | $ | (10,872) | |||||||||||||||
Lease Intangible Assets | Lease Intangible Liabilities | |||||||||||||||||||||||||||
December 31, 2020 | Above Market Leases | In Place Leases | Leasing Commissions | Total | Below Market Leases | Below Market Ground Lease | Total | |||||||||||||||||||||
Cost | $ | 14,894 | $ | 80,259 | $ | 30,284 | $ | 125,437 | $ | (13,093) | $ | (138) | $ | (13,231) | ||||||||||||||
Accumulated amortization | (8,497 | ) | (55,636 | ) | (17,161 | ) | (81,294 | ) | 7,152 | 44 | 7,196 | |||||||||||||||||
$ | 6,397 | $ | 24,623 | $ | 13,123 | $ | 44,143 | $ | (5,941) | $ | (94) | $ | (6,035) | |||||||||||||||
2020 | $ | 18,987 | ||
2021 | 15,894 | |||
2022 | 8,217 | |||
2023 | 5,358 | |||
2024 | 3,190 | |||
Thereafter | 7,693 | |||
|
| |||
$ | 59,339 | |||
|
|
71
2022 | $ | 10,541 | ||
2023 | 9,278 | |||
2024 | 6,821 | |||
2025 | 6,548 | |||
2026 | 6,561 | |||
Thereafter | 18,304 | |||
$ | 58,053 | |||
Property | December 31, 2019 | December 31, 2018 | Interest Rate as of December 31, 2019(1) | Maturity | ||||||||||||
Unsecured Credit Facility(3)(4) | $ | — | $ | 147,500 | LIBOR +1.40 | %(2) | March 2022 | |||||||||
Term Loan(4) | 50,000 | — | LIBOR +1.25 | %(2) | September 2024 | |||||||||||
Midland Life Insurance(5) | 85,293 | 86,973 | 4.34 | May 2021 | ||||||||||||
Mission City | 47,000 | 47,000 | 3.78 | November 2027 | ||||||||||||
Canyon Park(6) | 40,950 | — | 4.30 | March 2027 | ||||||||||||
190 Office Center | 40,854 | 41,250 | 4.79 | October 2025 | ||||||||||||
Circle Point | 39,650 | 39,650 | 4.49 | September 2028 | ||||||||||||
SanTan | 34,053 | 34,682 | 4.56 | March 2027 | ||||||||||||
Intellicenter | 32,971 | 33,481 | 4.65 | October 2025 | ||||||||||||
The Quad | 30,600 | 30,600 | 4.20 | September 2028 | ||||||||||||
FRP Collection(7) | 28,969 | 29,589 | 3.10 | September 2023 | ||||||||||||
2525 McKinnon | 27,000 | 27,000 | 4.24 | April 2027 | ||||||||||||
Greenwood Blvd(7) | 22,425 | 22,425 | 3.15 | December 2025 | ||||||||||||
Cascade Station | 22,304 | — | 4.55 | May 2024 | ||||||||||||
5090 N 40th St | 22,000 | 22,000 | 3.92 | January 2027 | ||||||||||||
AmberGlen | 20,000 | 20,000 | 3.69 | May 2027 | ||||||||||||
Lake Vista Pointe | 17,717 | 18,044 | 4.28 | August 2024 | ||||||||||||
Central Fairwinds(8) | 17,534 | 17,882 | 3.15 | June 2024 | ||||||||||||
FRP Ingenuity Drive | 17,000 | 17,000 | 4.44 | December 2024 | ||||||||||||
Carillon Point(7) | 15,972 | 16,330 | 3.10 | October 2023 | ||||||||||||
|
|
|
| |||||||||||||
Total Principal | 612,292 | 651,406 | ||||||||||||||
Deferred financing costs, net | (5,660 | ) | (6,052 | ) | ||||||||||||
Unamortized fair value adjustments | 618 | — | ||||||||||||||
|
|
|
| |||||||||||||
Total | $ | 607,250 | $ | 645,354 | ||||||||||||
|
|
|
|
Property | December 31, 2021 | December 31, 2020 | Interest Rate as of December 31, 2021 (1) | Maturity | ||||||||||||
Unsecured Credit Facility (3)(4) | $ | 142,000 | $ | 75,000 | LIBOR +1.30 | % (2) | November 2025 | |||||||||
Term Loan (3) | 50,000 | 50,000 | LIBOR +1.25 | % (2) | September 2024 | |||||||||||
Mission City | 47,000 | 47,000 | 3.78 | % | November 2027 | |||||||||||
Canyon Park (6) | 40,381 | 40,950 | 4.30 | % | March 2027 | |||||||||||
Circle Point | 39,650 | 39,650 | 4.49 | % | September 2028 | |||||||||||
190 Office Center | 39,581 | 40,236 | 4.79 | % | October 2025 | |||||||||||
SanTan | 32,807 | 33,444 | 4.56 | % | March 2027 | |||||||||||
Intellicenter | 31,883 | 32,442 | 4.65 | % | October 2025 | |||||||||||
The Quad | 30,600 | 30,600 | 4.20 | % | September 2028 | |||||||||||
FRP Collection | 27,535 | 28,263 | 3.10 | % | September 2023 | |||||||||||
2525 McKinnon | 27,000 | 27,000 | 4.24 | % | April 2027 | |||||||||||
Greenwood Blvd | 21,920 | 22,425 | 3.15 | % | December 2025 | |||||||||||
Cascade Station | 21,581 | 21,952 | 4.55 | % | May 2024 | |||||||||||
5090 N. 40th St | 21,233 | 21,640 | 3.92 | % | January 2027 | |||||||||||
AmberGlen | 20,000 | 20,000 | 3.69 | % | May 2027 | |||||||||||
Lake Vista Pointe | 17,018 | 17,375 | 4.28 | % | August 2024 | |||||||||||
Central Fairwinds | 16,707 | 17,127 | 3.15 | % | June 2024 | |||||||||||
FRP Ingenuity Drive | 16,457 | 16,736 | 4.44 | % | December 2024 | |||||||||||
Carillon Point | 15,185 | 15,585 | 3.10 | % | October 2023 | |||||||||||
Midland Life Insurance (5) | — | 83,537 | — | — | ||||||||||||
Total Principal | 658,538 | 680,962 | ||||||||||||||
Deferred financing costs, net | (5,223 | ) | (4,195 | ) | ||||||||||||
Unamortized fair value adjustments | 333 | 475 | ||||||||||||||
Total | $ | 653,648 | $ | 677,242 | ||||||||||||
(1) | All interest rates are fixed interest rates with the exception of the |
(2) | As of December 31, one-month LIBOR rate was |
(3) |
|
In September 2019, the Company entered into a five-year $50 million Term Loan (the “Term Loan”) increasing its authorized borrowings under the Unsecured Credit Facility from 250 million to $300 million. Borrowings under the Term Loan bear interest at a rate equal to the LIBOR rate plus a margin between 125 to 215 basis points depending upon the Company’s consolidatedleverage ratio. In conjunction with the Term Loan, the Company also entered into a five-year interest rate swap for a notional amount of $50 million (the “Interest Rate Swap”). Pursuant to the Interest Rate Swap, the Company will pay a fixed rate of approximately 1.27% of the notional amount annually, payable monthly, and receive floating rate30-day LIBOR payments. |
(4) | In March 2018, the Company entered into the Credit Agreement for the Unsecured Credit Facility that provides for commitments of up to $250 million, which includes an accordion feature that allows the Company to borrow up to $500million, subject to customary terms and conditions. On November 16, 2021, the Company entered into an Amended and Restated Credit Agreement for the Unsecured Credit Facility that provides for commitments of up to $300 million. Combined with the Company’s existing five-year Term Loan, the total authorized borrowings increased from $300 million to $350 million. The Unsecured Credit Facility matures in November 2025 and may be extended 12 months at the Company’s option upon meeting certain conditions. Borrowings under the Unsecured Credit Facility bear interest at a rate equal to the LIBOR rate plus a margin of between 125 to 225 basis points depending upon the Company’s consolidated leverage ratio. As of December 31, 2021, the Unsecured Credit Facility had $142.0 million drawn and $4.2 million of letters of credit to satisfy escrow requirements for mortgage lenders. The Unsecured Credit Facility requires the Company to maintain a fixed charge coverage ratio of no less than 1.50x. |
(5) | The mortgage loan is cross-collateralized by Cherry Creek, City Center and 7595 Tech (formerly “DTC Crossroads”). |
72
(6) | The mortgage loan anticipated repayment date (“ARD”) is March 1, 2027. The final scheduled maturity date can be extended up to 5 years beyond the ARD. If the loan is not paid off at ARD, loan’s interest rate shall be adjusted to the greater of (i) the initial interest rate plus 200 basis points or (ii) the yield on the five year “on the run” treasury reported by Bloomberg market data service plus 450 basis points. |
|
|
2020 | $ | 6,279 | ||
2021 | 89,355 | |||
2022 | 6,529 | |||
2023 | 48,529 | |||
2024 | 124,725 | |||
Thereafter | 336,875 | |||
|
| |||
$ | 612,292 | |||
|
|
2022 | $ | 6,427 | ||
2023 | 48,539 | |||
2024 | 124,736 | |||
2025 | 233,997 | |||
2026 | 4,536 | |||
Thereafter | 240,303 | |||
$ | 658,538 | |||
As of approximately $
swap counterparty.
73
Earn-Out Payment
On February 15, 2017, the Company entered into a Termination and Mutual Release Agreement with Second City that terminated our obligation to make any futureearn-out payments associated with the Central Fairwinds property in exchange for a cash payment of $2.4 million, which was made to Second City on February 21, 2017.
Minority Interest Buy Out
On August 1, 2018, the Company signed an agreement with Second City Capital Partners II, Limited Partnership (“SCCP”) whereby SCCP agreed to sell its seven percent minority interest in Central Fairwinds Limited Partnership to the Company for $1.1 million. As a result of the agreement, the Company’s ownership percentage in Central Fairwinds Limited Partnership is 97%.
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For
Year ended December 31, 2019 | ||||
Fixed payments | $ | 132,540 | ||
Variable payments | 20,990 | |||
|
| |||
$ | 153,530 | |||
|
|
Years Ended December 31, | ||||||||
2021 | 2020 | |||||||
Fixed payments | $ | 141,138 | $ | 137,247 | ||||
Variable payments | 22,718 | 23,502 | ||||||
$ | 163,856 | $ | 160,749 | |||||
2020 | $ | 116,513 | ||
2021 | 110,491 | |||
2022 | 94,800 | |||
2023 | 73,959 | |||
2024 | 53,905 | |||
Thereafter | 113,580 | |||
|
| |||
$ | 563,248 | |||
|
|
The above minimum lease payments to be received do not include reimbursements from tenants for certain operating expenses and real estate taxes and do not include early termination payments provided for in certain leases.
2022 | $ | 123,086 | ||
2023 | 105,638 | |||
2024 | 89,426 | |||
2025 | 78,624 | |||
2026 | 70,929 | |||
Thereafter | 213,071 | |||
$ | 680,774 | |||
75
right-of-use assets and lease liabilities is mainly due to the reclassification of the below market ground lease intangible asset, which was included within theright-of-use assets recognized upon transition. As of December 31, 2019,2021, these leases had remaining terms
As of December 31, 2019 | ||||
Right-of-use asset – operating leases | $ | 13,130 | ||
Lease liability – operating leases | $ | 8,033 | ||
Right-of-use asset – financing leases | $ | 79 | ||
Lease liability – financing leases | $ | 79 |
December 31, 2021 | December 31, 2020 | |||||||
Right-of-use | $ | 14,114 | $ | 12,739 | ||||
Lease liability – operating leases | $ | 9,160 | $ | 7,719 | ||||
Right-of-use | $ | 10,308 | $ | 55 | ||||
Lease liability – financing leases | $ | 1,425 | $ | 55 |
Operating Leases | Financing Leases | |||||||
2020 | $ | 533 | $ | 27 | ||||
2021 | 817 | 27 | ||||||
2022 | 798 | 27 | ||||||
2023 | 663 | 4 | ||||||
2024 | 597 | — | ||||||
Thereafter | 26,680 | — | ||||||
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|
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| |||||
Total future minimum lease payments | 30,088 | 85 | ||||||
Discount | (22,055 | ) | (6 | ) | ||||
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| |||||
Total | $ | 8,033 | $ | 79 | ||||
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Operating Leases | Financing Leases | |||||||
2022 | $ | 706 | $ | 34 | ||||
2023 | 836 | 12 | ||||||
2024 | 770 | 7 | ||||||
2025 | 770 | 8 | ||||||
2026 | 724 | 8 | ||||||
Thereafter | 27,151 | 6,946 | ||||||
Total future minimum lease payments | 30,957 | 7,015 | ||||||
Discount | (21,797 | ) | (5,590 | ) | ||||
Total | $ | 9,160 | $ | 1,425 | ||||
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Year ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net income | $ | 2,442 | $ | 38,669 | $ | 9,158 | ||||||
Less: Net income attributable to noncontrolling interests in properties | (644 | ) | (501 | ) | (3,402 | ) | ||||||
Less: Net income attributable to Preferred stockholders | (7,420 | ) | (7,420 | ) | (7,411 | ) | ||||||
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| |||||||
Numerator for basic and diluted EPS | $ | (5,622 | ) | $ | 30,748 | $ | (1,655) | |||||
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| |||||||
Denominator for basic EPS | 43,997 | 37,321 | 30,198 | |||||||||
Dilutive effect of RSUs | — | 349 | — | |||||||||
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| |||||||
Denominator for dilutive EPS | 43,997 | 37,670 | 30,198 | |||||||||
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| |||||||
Net (loss)/income per common share: | ||||||||||||
Basic | $ | (0.13 | ) | $ | 0.82 | $ | (0.05 | ) | ||||
Dilutive | $ | (0.13 | ) | $ | 0.82 | $ | (0.05 | ) |
Years ended December 31, | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Net income | $ | 485,281 | $ | 5,129 | $ | 2,442 | ||||||
Less: Net income attributable to non-controlling interests in properties | (886 | ) | (602 | ) | (644 | ) | ||||||
Less: Net income attributable to preferred stockholders | (7,420 | ) | (7,420 | ) | (7,420 | ) | ||||||
Numerator for basic and diluted EPS | $ | 476,975 | $ | (2,893 | ) | $ | (5,622 | ) | ||||
Denominator for basic EPS | 43,498 | 47,223 | 43,997 | |||||||||
Dilutive effect of RSUs and PSUs | 647 | 0 | 0 | |||||||||
Denominator for dilutive EPS | 44,145 | 47,223 | 43,997 | |||||||||
Net income/(loss) per common share: | ||||||||||||
Basic | $ | 10.97 | $ | (0.06 | ) | $ | (0.13 | ) | ||||
Dilutive | $ | 10.80 | $ | (0.06 | ) | $ | (0.13 | ) |
77
other than on an exchange or, with the prior consent of the Company, in privately negotiated transactions. The Sales Agents will be entitled to compensation of up to 2.0% of the gross proceeds of shares sold through the Sales Agents from time to time under the EDAs. The Company has no obligation to sell any of the shares under the EDAs and may at any time suspend solicitations and offers under, or terminate, the EDAs. During the year ended December 31, 2019, the Company issued 8,000,000 shares of common stock under the ATM Program. The Company raised $106.5 million in aggregate gross proceeds, resulting in aggregate net proceeds to the Company of approximately $104.8 million after deducting sales commissions and offering expenses. During the year ended December 31, 2018, the Company issued 3,410,802 shares of common stock under the ATM Program pursuant to the Original Agreements. The Company raised $43.6 million in gross proceeds, resulting in net proceeds to us of approximately $42.9 million
The Company did not issue any shares of common stock or Series A Preferred Stock under the Prior ATM Program for the period beginning on January 1, 2020 through the date the Prior EDAs were terminated.
Non-controlling Interests
December 31, 2019 | December 31, 2018 | |||||||
City Center | $ | (147 | ) | $ | (183 | ) | ||
Central Fairwinds | (314 | ) | (304 | ) | ||||
AmberGlen | (1,141 | ) | (1,272 | ) | ||||
FRP Collection | 851 | 791 | ||||||
Park Tower | 1,875 | 1,932 | ||||||
�� |
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| ||||
$ | 1,124 | $ | 964 | |||||
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Common Stock and Common Unit Distributions
2021. During the year ended December 31, 2019,2020, the Company completed the repurchase of 11,363,851 shares of its common stock for approximately $100.0 million. There were 0shares repurchased during the year ended December 31, 2019.
2021.
Period | Distribution per Common Share/Unit | Declaration Date | Record Date | Payment Date | ||||||||||||
January 1, 2019 – March 31, 2019 | $ | 0.235 | March 15, 2019 | April 11, 2019 | April 25, 2019 | |||||||||||
April 1, 2019 – June 30, 2019 | 0.235 | June 14, 2019 | July 11, 2019 | July 25, 2019 | ||||||||||||
July 1, 2019 – September 30, 2019 | 0.235 | September 16, 2019 | October 11, 2019 | October 25, 2019 | ||||||||||||
October 1, 2019 – December 31, 2019 | 0.235 | December 13, 2019 | January 10, 2020 | January 24, 2020 | ||||||||||||
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| |||||||||||||||
Total | $ | 0.940 | ||||||||||||||
|
|
Period | Distribution per Common Share/Unit | Declaration Date | Record Date | Payment Date | ||||||||||||
January 1, 2021 – March 31, 2021 | $ | 0.15 | March 23, 2021 | April 9, 2021 | April 23, 2021 | |||||||||||
April 1, 2021 – June 30, 2021 | 0.15 | June 15, 2021 | July 9, 2021 | July 23, 2021 | ||||||||||||
July 1, 2021 – September 30, 2021 | 0.15 | September 16, 2021 | October 8, 2021 | October 22, 2021 | ||||||||||||
October 1, 2021 – December 31, 2021 | 0.20 | December 17, 2021 | January 11, 2022 | January 25, 2022 | ||||||||||||
Total | $ | 0.65 | ||||||||||||||
78
Restricted Stock Units
During the year ended December 31, 2019, 162,500
During the year ended December 31, 2018, 156,375 RSUs were granted to directors, executive officers andnon-executive employees with a fair value of $1.9 million. The awards will vest in three equal, annual installments on each of the first three anniversaries of the date of grant.
During the year ended December 31, 2017, 117,478 RSUs were granted to directors, executive officers andnon-executive employees with a fair value of $1.5 million. The awards will vest in three equal, annual installments on each of the first three anniversaries of the date of grant.
For the year ended December 31, 2019, December 31, 2018 and December 31, 2017, the Company recognized net compensation expense of $1.7 million, $1.4 million and $1.7 million respectively related to the RSUs.
A RSU award represents the right to receive shares of the Company’s common stock in the future, after the applicable vesting criteria, determined by the plan administrator, has been satisfied. The holder of an award of RSU has no rights as a stockholder until shares of common stock are issued in settlement of vested restricted stock units. The plan administrator may provide for a grant of dividend equivalent rights in connection with the grant of RSU; provided, however, that if the restricted stock units do not vest solely upon satisfaction of continued employment or service, any payment in respect to the related dividend equivalent rights will be held by the Company and paid when, and only to the extent that, the related RSU vest.
79
13. Quarterly Financial Information (unaudited):
Number of RSUs | Number of Performance RSUs | |||||||
Outstanding at December 31, 2018 | 354,323 | 0 | ||||||
Granted | 162,500 | 0 | ||||||
Issuance of dividend equivalents | 31,145 | 0 | ||||||
Vested | (212,553 | ) | 0 | |||||
Forfeited | 0 | 0 | ||||||
Outstanding at December 31, 2019 | 335,415 | 0 | ||||||
Granted | 147,050 | 97,500 | ||||||
Issuance of dividend equivalents | 25,727 | 0 | ||||||
Vested | (175,757 | ) | 0 | |||||
Forfeited | 0 | 0 | ||||||
Outstanding at December 31, 2020 | 332,435 | 97,500 | ||||||
Granted | 169,500 | 120,000 | ||||||
Issuance of dividend equivalents | 18,665 | 0 | ||||||
Vested | (177,038 | ) | 0 | |||||
Forfeited | (1,403 | ) | 0 | |||||
Outstanding at December 31, 2021 | 342,159 | 217,500 |
Units Granted | Fair Value (in thousands) | Weighted Average Grant Fair Value Per Share | ||||||||||||||
RSUs | Performance RSUs | |||||||||||||||
2019 | 162,500 | 0 | $ | 1,825 | $ | 11.23 | ||||||||||
2020 | 147,050 | 97,500 | 3,355 | 13.72 | ||||||||||||
2021 | 169,500 | 120,000 | 2,808 | 9.70 |
2019 Quarters | ||||||||||||||||
Fourth | Third | Second | First | |||||||||||||
Revenue | $ | 39,060 | $ | 38,946 | $ | 41,171 | $ | 37,120 | ||||||||
Net income/(loss) | 2,988 | (947 | ) | 1,321 | (920 | ) | ||||||||||
Net income/(loss) attributable to common stockholders | 987 | (2,966 | ) | (699 | ) | (2,944 | ) | |||||||||
Net income/(loss) per share | 0.02 | (0.07 | ) | (0.02 | ) | (0.07 | ) | |||||||||
2018 Quarters | ||||||||||||||||
Fourth | Third | Second | First | |||||||||||||
Revenue | $ | 34,167 | $ | 33,547 | $ | 30,236 | $ | 31,534 | ||||||||
Net (loss)/income | (6,684 | ) | (1,161 | ) | (684 | ) | 47,198 | |||||||||
Net (loss)/income attributable to common stockholders | (8,656 | ) | (3,151 | ) | (2,653 | ) | 45,208 | |||||||||
Net (loss)/income per share | (0.22 | ) | (0.08 | ) | (0.07 | ) | 1.25 |
80
RSUs | Performance RSUs | Total | ||||||||||
2019 | $ | 1,742 | $ | 0 | $ | 1,742 | ||||||
2020 | 1,919 | 414 | 2,333 | |||||||||
2021 | 1,833 | 808 | 2,641 |
2021
Encumbrances(2) | Intial Costs to Company | Costs Capitalized Subsequent to Acquisition |
| Gross Amount at Which Carried as of December 31, 2019(1) | Accumulated Amortization | Year of Construction | Year Acquired | |||||||||||||||||||||||||||||||||
Description | Land | Buildings and Improvements | Improvements | Land | Building and Improvements | Total(3) | ||||||||||||||||||||||||||||||||||
AmberGlen | $ | 20,000 | $ | 6,546 | $ | 3,490 | $ | 2,578 | $ | 6,546 | $ | 6,068 | $ | 12,614 | $ | 2,898 | 1984-1998 | 2009 | ||||||||||||||||||||||
City Center | 22,965 | 3,123 | 10,656 | 9,790 | 3,123 | 20,446 | 23,569 | 7,484 | 1984 | 2010 | ||||||||||||||||||||||||||||||
Central Fairwinds | 17,534 | 1,747 | 9,751 | 6,927 | 1,747 | 16,678 | 18,425 | 4,471 | 1982 | 2012 | ||||||||||||||||||||||||||||||
Cherry Creek | 46,867 | 25,745 | 20,144 | 1,837 | 25,745 | 21,981 | 47,726 | 6,590 | 1962-1980 | 2014 | ||||||||||||||||||||||||||||||
Lake Vista Pointe | 17,717 | 4,115 | 20,600 | 178 | 4,115 | 20,778 | 24,893 | 5,171 | 2007 | 2014 | ||||||||||||||||||||||||||||||
Florida Research Park(4) | 45,969 | 11,446 | 56,475 | 3,228 | 11,446 | 59,703 | 71,149 | 9,100 | 1999 | 2014; 2016 | ||||||||||||||||||||||||||||||
Superior Pointe | — | 3,153 | 19,834 | 1,810 | 3,153 | 21,644 | 24,797 | 3,452 | 2000 | 2015 | ||||||||||||||||||||||||||||||
Denver Tech(5) | 15,461 | 18,002 | 52,719 | 1,679 | 18,002 | 54,398 | 72,400 | 4,314 | 1999; 1997 | 2015; 2019 | ||||||||||||||||||||||||||||||
190 Office Center | 40,854 | 7,162 | 39,690 | 1,596 | 7,162 | 41,286 | 48,448 | 5,110 | 2001 | 2015 | ||||||||||||||||||||||||||||||
Intellicenter | 32,971 | 5,244 | 34,278 | 69 | 5,244 | 34,347 | 39,591 | 4,726 | 2008 | 2015 | ||||||||||||||||||||||||||||||
Carillon Point | 15,972 | 5,172 | 17,316 | 213 | 5,172 | 17,529 | 22,701 | 3,160 | 2007 | 2016 | ||||||||||||||||||||||||||||||
Park Tower | — | 3,479 | 68,656 | 15,513 | 3,479 | 84,169 | 87,648 | 9,617 | 1973 | 2016 | ||||||||||||||||||||||||||||||
5090 N 40th St | 22,000 | 6,696 | 32,123 | 1,633 | 6,696 | 33,756 | 40,452 | 3,018 | 1988 | 2016 | ||||||||||||||||||||||||||||||
SanTan | 34,053 | 6,803 | 37,187 | 4,556 | 6,803 | 41,743 | 48,546 | 5,180 | 2000-2003 | 2016 | ||||||||||||||||||||||||||||||
2525 McKinnon | 27,000 | 10,629 | 34,515 | 1,778 | 10,629 | 36,293 | 46,922 | 2,846 | 2003 | 2017 | ||||||||||||||||||||||||||||||
Mission City | 47,000 | 25,741 | 41,474 | 6,337 | 25,741 | 47,811 | 73,552 | 6,066 | 1990-2007 | 2017 | ||||||||||||||||||||||||||||||
Sorrento Mesa | — | 34,305 | 36,726 | 2,445 | 34,305 | 39,171 | 73,476 | 4,093 | 1985-2001 | 2017 | ||||||||||||||||||||||||||||||
Papago Tech | — | 10,746 | 19,762 | 709 | 10,746 | 20,471 | 31,217 | 2,169 | 1993-1995 | 2017 | ||||||||||||||||||||||||||||||
Pima Center | — | — | 45,133 | 1,030 | — | 46,163 | 46,163 | 3,345 | 2006-2008 | 2018 | ||||||||||||||||||||||||||||||
Circle Point | 39,650 | 9,320 | 39,101 | 1,581 | 9,320 | 40,682 | 50,002 | 3,036 | 2001 | 2018 | ||||||||||||||||||||||||||||||
The Quad | 30,600 | 8,079 | 39,858 | 93 | 8,079 | 39,951 | 48,030 | 2,103 | 1982 | 2018 | ||||||||||||||||||||||||||||||
Greenwood Blvd | 22,425 | 3,945 | 26,019 | 500 | 3,945 | 26,519 | 30,464 | 915 | 1997 | 2018 | ||||||||||||||||||||||||||||||
Camelback Square | — | 11,738 | 37,922 | 1,267 | 11,738 | 39,189 | 50,927 | 1,325 | 1978 | 2018 | ||||||||||||||||||||||||||||||
Canyon Park | 40,950 | 7,098 | 38,416 | 2,691 | 7,098 | 41,107 | 48,205 | 1,046 | 1993; 1999 | 2019 | ||||||||||||||||||||||||||||||
Cascade Station | 22,304 | — | 27,220 | 36 | — | 27,256 | 27,256 | 600 | 2008-2009 | 2019 | ||||||||||||||||||||||||||||||
Corporate | 50,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
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Total | $ | 612,292 | $ | 230,034 | $ | 809,065 | $ | 70,074 | $ | 230,034 | $ | 879,139 | $ | 1,109,173 | $ | 101,835 | ||||||||||||||||||||||||
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Initial Costs to Company | Costs Capitalized Subsequent to Acquisition | Gross Amount at Which Carried as of December 31, 2021 (1) | Accumulated Amortization | Year of Construction | Year Acquired | |||||||||||||||||||||||||||||||||||
Description | Encumbrances (2) | Land | Buildings and Improvements | Improvements | Land | Building and Improvements | Total | |||||||||||||||||||||||||||||||||
AmberGlen | $ | 20,000 | $ | 6,546 | $ | 3,490 | $ | 2,566 | $ | 6,546 | $ | 6,056 | $ | 12,602 | $ | 3,275 | 1984 -1998 | 2009 | ||||||||||||||||||||||
City Center | 0 | 3,123 | 10,656 | 9,883 | 3,123 | 20,539 | 23,662 | 8,677 | 1984 | 2010 | ||||||||||||||||||||||||||||||
Central Fairwinds | 16,707 | 1,747 | 9,751 | 7,124 | 1,747 | 16,875 | 18,622 | 5,606 | 1982 | 2012 | ||||||||||||||||||||||||||||||
Lake Vista Point | 17,018 | 4,115 | 20,600 | 196 | 4,115 | 20,796 | 24,911 | 6,768 | 2007 | 2014 | ||||||||||||||||||||||||||||||
Florida Research Park | 43,992 | 11,446 | 56,475 | 5,241 | 11,446 | 61,716 | 73,162 | 13,969 | 1999 | 2014 ; 2016 | ||||||||||||||||||||||||||||||
Superior Pointe | 0 | 3,153 | 19,834 | 2,442 | 3,153 | 22,276 | 25,429 | 5,156 | 2000 | 2015 | ||||||||||||||||||||||||||||||
Denver Tech | 0 | 18,002 | 52,719 | 8,704 | 18,002 | 61,423 | 79,425 | 9,763 | 1999 ; 1997 | 2015; 2019 | ||||||||||||||||||||||||||||||
190 Office Center | 39,581 | 7,162 | 39,690 | 2,319 | 7,162 | 42,009 | 49,171 | 7,546 | 2001 | 2015 | ||||||||||||||||||||||||||||||
Intellicenter | 31,883 | 5,244 | 34,278 | 137 | 5,244 | 34,415 | 39,659 | 6,744 | 2008 | 2015 | ||||||||||||||||||||||||||||||
Carillon Point | 15,185 | 5,172 | 17,316 | 1,492 | 5,172 | 18,808 | 23,980 | 4,631 | 2007 | 2016 | ||||||||||||||||||||||||||||||
Park Tower | 0 | 3,479 | 68,656 | 17,262 | 3,479 | 85,918 | 89,397 | 16,982 | 1973 | 2016 | ||||||||||||||||||||||||||||||
5090 N 40 th St | 21,233 | 6,696 | 32,123 | 3,346 | 6,696 | 35,469 | 42,165 | 5,408 | 1988 | 2016 | ||||||||||||||||||||||||||||||
SanTan | 32,807 | 6,803 | 37,187 | 5,982 | 6,803 | 43,169 | 49,972 | 10,107 | 2000 -2003 | 2016 | ||||||||||||||||||||||||||||||
2525 McKinnon | 27,000 | 10,629 | 34,515 | 2,529 | 10,629 | 37,044 | 47,673 | 5,075 | 2003 | 2017 | ||||||||||||||||||||||||||||||
Mission City | 47,000 | 25,741 | 41,474 | 10,274 | 25,741 | 51,748 | 77,489 | 11,311 | 1990 -2007 | 2017 | ||||||||||||||||||||||||||||||
Papago Tech | 0 | 10,746 | 19,762 | 1,351 | 10,746 | 21,113 | 31,859 | 4,234 | 1993 -1995 | 2017 | ||||||||||||||||||||||||||||||
Pima Center | 0 | 0 | 45,133 | 3,369 | 0 | 48,502 | 48,502 | 6,776 | 2006 -2008 | 2018 | ||||||||||||||||||||||||||||||
Circle Point | 39,650 | 9,320 | 39,101 | 2,788 | 9,320 | 41,889 | 51,209 | 5,999 | 2001 | 2018 | ||||||||||||||||||||||||||||||
The Quad | 30,600 | 8,079 | 39,858 | 243 | 8,079 | 40,101 | 48,180 | 4,859 | 1982 | 2018 | ||||||||||||||||||||||||||||||
Greenwood Blvd | 21,920 | 3,945 | 26,019 | 1,224 | 3,945 | 27,243 | 31,188 | 2,855 | 1997 | 2018 | ||||||||||||||||||||||||||||||
Camelback Square | 0 | 11,738 | 37,922 | 6,411 | 11,738 | 44,333 | 56,071 | 4,390 | 1978 | 2018 | ||||||||||||||||||||||||||||||
Canyon Park | 40,381 | 7,098 | 38,416 | 5,044 | 7,098 | 43,460 | 50,558 | 4,255 | 1993; 1999 | 2019 | ||||||||||||||||||||||||||||||
Cascade Station | 21,581 | 0 | 27,220 | 334 | 0 | 27,554 | 27,554 | 2,632 | 2008 - 2009 | 2019 | ||||||||||||||||||||||||||||||
Block 23 | 0 | 0 | 115,747 | 2,375 | 0 | 118,122 | 118,122 | 168 | 2019 | 2021 | ||||||||||||||||||||||||||||||
The Terraces | 0 | 15,861 | 101,455 | 6,431 | 15,861 | 107,886 | 123,747 | 156 | 2017 | 2021 | ||||||||||||||||||||||||||||||
Bloc 83 | 0 | 18,956 | 280,313 | 5,075 | 18,956 | 285,388 | 304,344 | 14 | 2019 ; 2021 | 2021 | ||||||||||||||||||||||||||||||
Corporate | 192,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||
Total | $ | 658,538 | $ | 204,801 | $ | 1,249,710 | $ | 114,142 | $ | 204,801 | $ | 1,363,852 | $ | 1,568,653 | $ | 157,356 | ||||||||||||||||||||||||
(1) | The aggregate cost for federal tax purposes as of December 31, |
(2) | Encumbrances exclude net deferred financing costs of |
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81
2019 | 2018 | |||||||
Real Estate Properties | ||||||||
Balance, beginning of year | $ | 1,005,647 | $ | 776,301 | ||||
Acquisitions | 113,134 | 225,476 | ||||||
Dispositions and impairments | (27,585 | ) | (5,715 | ) | ||||
Capital improvements | 22,491 | 30,378 | ||||||
Assets held for sale | (4,514 | ) | (20,793 | ) | ||||
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Balance, end of year | $ | 1,109,173 | $ | 1,005,647 | ||||
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Accumulated Depreciation | ||||||||
Balance, beginning of year | $ | 70,484 | $ | 48,234 | ||||
Depreciation | 35,531 | 29,196 | ||||||
Dispositions | (4,180 | ) | (2,301 | ) | ||||
Depreciation on assets held for sale | — | (4,645 | ) | |||||
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Balance, end of year | $ | 101,835 | $ | 70,484 | ||||
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82
2021 | 2020 | 2019 | ||||||||||
Real Estate Properties | ||||||||||||
Balance, beginning of year | $ | 1,086,809 | $ | 1,109,173 | $ | 1,005,647 | ||||||
Acquisitions | 587,403 | 0 | 113,134 | |||||||||
Dispositions | (121,602 | ) | (1,993 | ) | (27,585 | ) | ||||||
Capital improvements | 16,043 | 27,503 | 22,491 | |||||||||
Assets held for sale | 0 | (47,874 | ) | (4,514 | ) | |||||||
Balance, end of year | $ | 1,568,653 | $ | 1,086,809 | $ | 1,109,173 | ||||||
Accumulated Depreciation | ||||||||||||
Balance, beginning of year | $ | 131,220 | $ | 101,835 | $ | 70,484 | ||||||
Depreciation | 39,106 | 38,372 | 35,531 | |||||||||
Dispositions | (12,970 | ) | (1,962 | ) | (4,180 | ) | ||||||
Depreciation on assets held for sale | 0 | (7,025 | ) | 0 | ||||||||
Balance, end of year | $ | 157,356 | $ | 131,220 | $ | 101,835 | ||||||
Exhibit Number | Description | |
101.INS | INSTANCE DOCUMENT** | |
101.SCH | SCHEMA DOCUMENT** |
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| |
101.CAL | CALCULATION LINKBASE DOCUMENT** | |
101.LAB | LABELS LINKBASE DOCUMENT** | |
101.PRE | PRESENTATION LINKBASE DOCUMENT** | |
101.DEF | DEFINITION LINKBASE DOCUMENT** | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)* |
† | Filed herewith. |
* | Compensatory Plan or arrangement |
** | Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements. |
CITY OFFICE REIT, INC. | ||||||
Date: February | By: | /s/ James Farrar | ||||
James Farrar | ||||||
Chief Executive Officer and Director |
Name | Title | Date | ||
/s/ James Farrar James Farrar | Chief Executive Officer and Director (Principal Executive Officer) | February | ||
/s/ Anthony Maretic Anthony Maretic | Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer) | February | ||
/s/ John McLernon John McLernon | Independent Director, Chairman of Board of Directors | February | ||
/s/ Mark Murski Mark Murski | Independent Director | February | ||
/s/ William Flatt William Flatt | Independent Director | February | ||
/s/ John Sweet John Sweet | Independent Director | February | ||
/s/ Sabah Mirza Sabah Mirza | Independent Director | February |