☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
March 31, 2020
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Maryland 98-1141883organization)organi Identification
Former name, former address and former fiscal year, if changed since last report: N/A
Title of Each Class | Trading Symbol(s) | Name of each Exchange on Which Registered | ||
Common Stock, $0.01 par value | “CIO” | New York Stock Exchange | ||
6.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share | “CIO.PrA” | New York Stock Exchange |
Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company |
3 | ||||||
| ||||||
3 | ||||||
3 | ||||||
4 | ||||||
5 | ||||||
6 | ||||||
7 | ||||||
8 | ||||||
| ||||||
17 | ||||||
| ||||||
26 | ||||||
| ||||||
26 | ||||||
27 | ||||||
| ||||||
27 | ||||||
| ||||||
27 | ||||||
28 | ||||||
| ||||||
29 | ||||||
| ||||||
29 | ||||||
| ||||||
29 | ||||||
29 | ||||||
31 |
June 30, | December 31, | |||||||
2019 | 2018 | |||||||
Assets | ||||||||
Real estate properties | ||||||||
Land | $ | 224,837 | $ | 223,789 | ||||
Building and improvement | 762,537 | 704,113 | ||||||
Tenant improvement | 86,374 | 77,426 | ||||||
Furniture, fixtures and equipment | 285 | 319 | ||||||
|
|
|
| |||||
1,074,033 | 1,005,647 | |||||||
Accumulated depreciation | (86,475 | ) | (70,484 | ) | ||||
|
|
|
| |||||
987,558 | 935,163 | |||||||
|
|
|
| |||||
Cash and cash equivalents | 11,581 | 16,138 | ||||||
Restricted cash | 19,295 | 17,007 | ||||||
Rents receivable, net | 31,008 | 26,095 | ||||||
Deferred leasing costs, net | 11,039 | 10,402 | ||||||
Acquired lease intangible assets, net | 71,972 | 75,501 | ||||||
Other assets | 17,141 | 2,755 | ||||||
Assets held for sale | — | 17,370 | ||||||
|
|
|
| |||||
Total Assets | $ | 1,149,594 | $ | 1,100,431 | ||||
|
|
|
| |||||
Liabilities and Equity | ||||||||
Liabilities: | ||||||||
Debt | $ | 709,670 | $ | 645,354 | ||||
Accounts payable and accrued liabilities | 22,960 | 25,892 | ||||||
Deferred rent | 5,625 | 5,331 | ||||||
Tenant rent deposits | 5,780 | 4,564 | ||||||
Acquired lease intangible liabilities, net | 9,249 | 8,887 | ||||||
Other liabilities | 19,512 | 11,148 | ||||||
Liabilities related to assets held for sale | — | 878 | ||||||
|
|
|
| |||||
Total Liabilities | 772,796 | 702,054 | ||||||
|
|
|
| |||||
Commitments and Contingencies (Note 9) | ||||||||
Equity: | ||||||||
6.625% Series A Preferred stock, $0.01 par value per share, 5,600,000 shares authorized, 4,480,000 issued and outstanding | 112,000 | 112,000 | ||||||
Common stock, $0.01 par value, 100,000,000 shares authorized, 39,647,063 and 39,544,073 shares issued and outstanding | 396 | 395 | ||||||
Additionalpaid-in capital | 377,937 | 377,126 | ||||||
Accumulated deficit | (114,565 | ) | (92,108 | ) | ||||
|
|
|
| |||||
Total Stockholders’ Equity | 375,768 | 397,413 | ||||||
Non-controlling interests in properties | 1,030 | 964 | ||||||
|
|
|
| |||||
Total Equity | 376,798 | 398,377 | ||||||
|
|
|
| |||||
Total Liabilities and Equity | $ | 1,149,594 | $ | 1,100,431 | ||||
|
|
|
| |||||
Subsequent Events (Note 11) |
March 31, 2020 | December 31, 2019 | |||||||
Assets | ||||||||
Real estate properties | ||||||||
Land | $ | 230,034 | $ | 230,034 | ||||
Building and improvement | 786,939 | 784,636 | ||||||
Tenant improvement | 97,474 | 94,218 | ||||||
Furniture, fixtures and equipment | 285 | 285 | ||||||
1,114,732 | 1,109,173 | |||||||
Accumulated depreciation | (111,177 | ) | (101,835 | ) | ||||
1,003,555 | 1,007,338 | |||||||
Cash and cash equivalents | 146,509 | 70,129 | ||||||
Restricted cash | 18,328 | 17,394 | ||||||
Rents receivable, net | 32,875 | 32,112 | ||||||
Deferred leasing costs, net | 14,249 | 12,393 | ||||||
Acquired lease intangibles assets, net | 62,104 | 67,533 | ||||||
Other assets | 16,054 | 17,061 | ||||||
Assets held for sale | 4,543 | 4,514 | ||||||
Total Assets | $ | 1,298,217 | $ | 1,228,474 | ||||
Liabilities and Equity | ||||||||
Liabilities: | ||||||||
Debt | $ | 706,031 | $ | 607,250 | ||||
Accounts payable and accrued liabilities | 27,354 | 28,786 | ||||||
Deferred re nt | 5,298 | 6,593 | ||||||
Tenant rent deposits | 5,660 | 5,658 | ||||||
Acquired lease intangible liabilities, net | 7,604 | 8,194 | ||||||
Other liabilities | 19,711 | 22,794 | ||||||
Liabilities related to assets held for sale | 87 | 67 | ||||||
Total Liabilities | 771,745 | 679,342 | ||||||
Commitments and Contingencies (Note 9) | ||||||||
Equity: | ||||||||
6.625% Series A Preferred stock, $0.01 par value per share, 5,600,000 shares authorized, 4,480,000 issued and outstanding | 112,000 | 112,000 | ||||||
Common stock, $0.01 par value, 100,000,000 shares authorized, 53,175,051 and 54,591,047 shares issued and outstanding | 531 | 545 | ||||||
Additional paid-in capital | 566,122 | 577,131 | ||||||
Accumulated deficit | (151,264 | ) | (142,383 | ) | ||||
Accumulated other comprehensive (loss)/ income | (2,026 | ) | 715 | |||||
Total Stockholders’ Equity | 525,363 | 548,008 | ||||||
Non-controlling interests in properties | 1,109 | 1,124 | ||||||
Total Equity | 526,472 | 549,132 | ||||||
Total Liabilities and Equity | $ | 1,298,217 | $ | 1,228,474 | ||||
Subsequent Events (Note 11) |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Rental and other revenues | $ | 40,122 | $ | 37,120 | ||||
Operating expenses: | ||||||||
Property operating expens es | 14,694 | 13,844 | ||||||
General and administrative | 2,783 | 2,299 | ||||||
Depreciation and amortization | 14,953 | 14,417 | ||||||
Total operating expenses | 32,430 | 30,560 | ||||||
Operating income | 7,692 | 6,560 | ||||||
Interest expense: | ||||||||
Contractual interest expense | (6,362 | ) | (7,143 | ) | ||||
Amortization of deferred financing costs and debt fair value | (324 | ) | (337 | ) | ||||
(6,686 | ) | (7,480 | ) | |||||
Net income/(loss) | 1,006 | (920 | ) | |||||
Less: | ||||||||
Net income attributable to non-controlling interests in properties | (182 | ) | (169 | ) | ||||
Net income/(loss) attributable to the Company | 824 | (1,089 | ) | |||||
Preferred stock distributions | (1,855 | ) | (1,855 | ) | ||||
Net loss attributable to common stockholders | $ | (1,031 | ) | $ | (2,944 | ) | ||
Net loss per common share: | ||||||||
Basic | $ | (0.02 | ) | $ | (0.07 | ) | ||
Diluted | $ | (0.02 | ) | $ | (0.07 | ) | ||
Weighted average common shares outstanding: | ||||||||
Basic | 54,458 | 39,565 | ||||||
Diluted | 54,458 | 39,565 | ||||||
Dividends distributions declared per common share | $ | 0.150 | $ | 0.235 | ||||
Comprehensive Income
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Rental and other revenues | $ | 41,171 | $ | 30,236 | 78,291 | 61,770 | ||||||||||
Operating expenses: | ||||||||||||||||
Property operating expenses | 14,526 | 11,748 | 28,370 | 23,374 | ||||||||||||
General and administrative | 3,362 | 1,966 | 5,660 | 3,943 | ||||||||||||
Depreciation and amortization | 14,604 | 11,771 | 29,022 | 23,665 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total operating expenses | 32,492 | 25,485 | 63,052 | 50,982 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income | 8,679 | 4,751 | 15,239 | 10,788 | ||||||||||||
Interest expense: | ||||||||||||||||
Contractual interest expense | (7,502 | ) | (5,081 | ) | (14,645 | ) | (10,269 | ) | ||||||||
Amortization of deferred financing costs and debt fair value | (334 | ) | (354 | ) | (671 | ) | (986 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
(7,836 | ) | (5,435 | ) | (15,316 | ) | (11,255 | ) | |||||||||
Net gain on sale of real estate property | 478 | — | 478 | 46,980 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income/(loss) | 1,321 | (684 | ) | 401 | 46,513 | |||||||||||
Less: | ||||||||||||||||
Net income attributable tonon-controlling interests in properties | (165 | ) | (114 | ) | (334 | ) | (249 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income/(loss) attributable to the Company | 1,156 | (798 | ) | 67 | 46,264 | |||||||||||
Preferred stock distributions | (1,855 | ) | (1,855 | ) | (3,710 | ) | (3,710 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net (loss)/income attributable to common stockholders | $ | (699 | ) | $ | (2,653 | ) | $ | (3,643 | ) | $ | 42,554 | |||||
|
|
|
|
|
|
|
| |||||||||
Net (loss)/income per common share: | ||||||||||||||||
Basic | $ | (0.02 | ) | $ | (0.07 | ) | $ | (0.09 | ) | $ | 1.18 | |||||
|
|
|
|
|
|
|
| |||||||||
Diluted | $ | (0.02 | ) | $ | (0.07 | ) | $ | (0.09 | ) | $ | 1.17 | |||||
|
|
|
|
|
|
|
| |||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 39,640 | 36,132 | 39,603 | 36,103 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted | 39,640 | 36,132 | 39,603 | 36,452 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Dividend distributions declared per common share | $ | 0.235 | $ | 0.235 | $ | 0.470 | $ | 0.470 | ||||||||
|
|
|
|
|
|
|
|
thousands)
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Net income/(loss) | $ | 1,006 | $ | (920 | ) | |||
Other comprehensive loss: | ||||||||
Unrealized cash flow hedge loss | (2,690 | ) | — | |||||
Amounts reclassified to interest expense | (51 | ) | — | |||||
Other comprehensive loss | (2,741 | ) | — | |||||
Comprehensive loss | (1,735 | ) | (920 | ) | ||||
Less: | ||||||||
Comprehensive income attributable to non-controlling interests in properties | (182 | ) | (169 | ) | ||||
Comprehensive loss attributable to the Company | (1,917 | ) | (1,089 | ) | ||||
Preferred stock distributions | (1,855 | ) | (1,855 | ) | ||||
Comprehensive loss attributable to common stockholders | $ | (3,772 | ) | $ | (2,944 | ) | ||
Number of shares of preferred stock | Preferred stock | Number of shares of common stock | Common stock | Additional paid-in capital | Accumulated deficit | Total stockholders’ equity | Non- controlling interests in properties | Total equity | ||||||||||||||||||||||||||||
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 | — | — | 92 | 1 | 302 | (83 | ) | 220 | — | 220 | ||||||||||||||||||||||||||
Common stock dividend distributions declared | — | — | — | — | — | (9,314 | ) | (9,314 | ) | — | (9,314 | ) | ||||||||||||||||||||||||
Preferred stock dividend distributions declared | — | — | — | — | — | (1,855 | ) | (1,855 | ) | — | (1,855 | ) | ||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | 12 | 12 | |||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (134 | ) | (134 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | (1,089 | ) | (1,089 | ) | 169 | (920 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance - March 31, 2019 | 4,480 | $ | 112,000 | 39,636 | $ | 396 | $ | 377,428 | $ | (104,449 | ) | $ | 385,375 | $ | 1,011 | $ | 386,386 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Restricted stock award grants and vesting | — | — | 11 | — | 509 | (99 | ) | 410 | — | 410 | ||||||||||||||||||||||||||
Common stock dividend distributions declared | — | — | — | — | — | (9,318 | ) | (9,318 | ) | — | (9,318 | ) | ||||||||||||||||||||||||
Preferred stock dividend distributions declared | — | — | — | — | — | (1,855 | ) | (1,855 | ) | — | (1,855 | ) | ||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | 10 | 10 | |||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (156 | ) | (156 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,156 | 1,156 | 165 | 1,321 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance - June 30, 2019 | 4,480 | $ | 112,000 | 39,647 | $ | 396 | $ | 377,937 | $ | (114,565 | ) | $ | 375,768 | $ | 1,030 | $ | 376,798 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Number of shares of preferred stock | Preferred stock | Number of shares of common stock | Common stock | Additional paid-in capital | Accumulated deficit | Total stockholders’ equity | Non- controlling interests in properties | Total equity | ||||||||||||||||||||||||||||
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 | — | — | 120 | 1 | 356 | (72 | ) | 285 | — | 285 | ||||||||||||||||||||||||||
Common stock dividend distributions declared | — | — | — | — | — | (8,491 | ) | (8,491 | ) | — | (8,491 | ) | ||||||||||||||||||||||||
Preferred stock dividend distributions declared | — | — | — | — | — | (1,855 | ) | (1,855 | ) | — | (1,855 | ) | ||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (29 | ) | (29 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | 47,063 | 47,063 | 135 | 47,198 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance – March 31, 2018 | 4,480 | $ | 112,000 | 36,132 | $ | 361 | $ | 334,597 | $ | (50,332 | ) | $ | 396,626 | $ | 314 | $ | 396,940 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Restricted stock award grants and vesting | — | — | 1 | — | 412 | (80 | ) | 332 | — | 332 | ||||||||||||||||||||||||||
Common stock dividend distributions declared | — | — | — | — | — | (8,491 | ) | (8,491 | ) | — | (8,491 | ) | ||||||||||||||||||||||||
Preferred stock dividend distributions declared | — | — | — | — | — | (1,855 | ) | (1,855 | ) | — | (1,855 | ) | ||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | 43 | 43 | |||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (135 | ) | (135 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | (798 | ) | (798 | ) | 114 | (684 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance - June 30, 2018 | 4,480 | $ | 112,000 | 36,133 | $ | 361 | $ | 335,009 | $ | (61,556 | ) | $ | 385,814 | $ | 336 | $ | 386,150 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (loss)/income | Total stockholders’ equity | Non- controlling interests in properties | Total equity | |||||||||||||||||||||||||||||||
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 | — | — | 35 | — | 599 | (79 | ) | — | 520 | — | 520 | |||||||||||||||||||||||||||||
Common stock repurchased | — | — | (1,451 | ) | (14 | ) | (11,608 | ) | — | — | (11,622 | ) | — | (11,622 | ) | |||||||||||||||||||||||||
Common stock dividend distribution declared | — | — | — | — | — | (7,771 | ) | — | (7,771 | ) | — | (7,771 | ) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared | — | — | — | — | — | (1,855 | ) | — | (1,855 | ) | — | (1,855 | ) | |||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | 3 | 3 | ||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | (200 | ) | (200 | ) | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 824 | — | 824 | 182 | 1,006 | ||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | (2,741 | ) | (2,741 | ) | — | (2,741 | ) | |||||||||||||||||||||||||||
Balance—March 31, 2020 | 4,480 | $ | 112,000 | 53,175 | $ | 531 | $ | 566,122 | $ | (151,264 | ) | $ | (2,026 | ) | $ | 525,363 | $ | 1,109 | $ | 526,472 | ||||||||||||||||||||
Nu mber shares of preferred | Preferred stock | Number of shares o common | Common stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive (loss)/income | Total stockholders’ equity | Non - controlling interests properties | Total equity | |||||||||||||||||||||||||||||||
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 | — | — | 92 | 1 | 302 | (83 | ) | — | 220 | — | 220 | |||||||||||||||||||||||||||||
Common stock dividend distribution declared | — | — | — | — | — | (9,314 | ) | — | (9,314 | ) | — | (9,314 | ) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared | — | — | — | — | — | (1,855 | ) | — | (1,855 | ) | — | (1,855 | ) | |||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | 12 | 12 | ||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | (134 | ) | (134 | ) | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | (1,089 | ) | — | (1,089 | ) | 169 | (920 | ) | |||||||||||||||||||||||||||
Balance—March 31, 2019 | 4,480 | $ | 112,000 | 39,636 | $ | 396 | $ | 377,428 | $ | (104,449 | ) | $ | — | $ | 385,375 | $ | 1,011 | $ | 386,386 | |||||||||||||||||||||
Six Months Ended June 30, | ||||||||
2019 | 2018 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 401 | $ | 46,513 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 29,022 | 23,665 | ||||||
Amortization of deferred financing costs and debt fair value | 671 | 986 | ||||||
Amortization of above/below market leases | (92 | ) | (140 | ) | ||||
Increase in straight-line rent/expense | (3,424 | ) | (1,842 | ) | ||||
Non-cash stock compensation | 879 | 705 | ||||||
Net gain on sale of real estate property | (478 | ) | (46,980 | ) | ||||
Changes innon-cash working capital: | ||||||||
Rents receivable, net | (1,677 | ) | (93 | ) | ||||
Other assets | (1,082 | ) | (3,034 | ) | ||||
Accounts payable and accrued liabilities | (5,241 | ) | (6,467 | ) | ||||
Deferred rent | 53 | (2,042 | ) | |||||
Tenant rent deposits | (394 | ) | 89 | |||||
|
|
|
| |||||
Net Cash Provided By Operating Activities | 18,638 | 11,360 | ||||||
|
|
|
| |||||
Cash Flows (to)/from Investing Activities: | ||||||||
Additions to real estate properties | (9,881 | ) | (9,156 | ) | ||||
Acquisition of real estate | (61,012 | ) | (55,453 | ) | ||||
Net proceeds from sale of real estate | 33,941 | 84,839 | ||||||
Deferred leasing costs | (1,598 | ) | (2,057 | ) | ||||
|
|
|
| |||||
Net Cash (Used In)/Provided By Investing Activities | (38,550 | ) | 18,173 | |||||
|
|
|
| |||||
Cash Flows from/(to) Financing Activities: | ||||||||
Debt issuance and extinguishment costs | (648 | ) | (1,942 | ) | ||||
Proceeds from mortgage loans payable | 40,950 | — | ||||||
Repayment of mortgage loans payable | (2,327 | ) | (34,121 | ) | ||||
Proceeds from credit facility | 55,000 | 82,000 | ||||||
Repayment of credit facility | (52,500 | ) | (57,000 | ) | ||||
Shares withheld for payment of taxes on restricted stock unit vesting | (246 | ) | (86 | ) | ||||
Contributions fromnon-controlling interests in properties | 22 | 43 | ||||||
Distributions tonon-controlling interests in properties | (290 | ) | (165 | ) | ||||
Dividend distributions paid to stockholders and Operating Partnership unitholders | (22,318 | ) | (20,664 | ) | ||||
|
|
|
| |||||
Net Cash Provided By/(Used In) Financing Activities | 17,643 | (31,935 | ) | |||||
|
|
|
| |||||
Net Decrease in Cash, Cash Equivalents and Restricted Cash | (2,269 | ) | (2,402 | ) | ||||
Cash, Cash Equivalents and Restricted Cash, Beginning of Period | 33,145 | 35,014 | ||||||
|
|
|
| |||||
Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 30,876 | $ | 32,612 | ||||
|
|
|
| |||||
Reconciliation of Cash, Cash Equivalents and Restricted Cash: | ||||||||
Cash and Cash Equivalents, End of Period | $ | 11,581 | $ | 14,655 | ||||
Restricted Cash, End of Period | 19,295 | 17,957 | ||||||
|
|
|
| |||||
Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 30,876 | $ | 32,612 | ||||
|
|
|
| |||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid for interest | $ | 14,696 | $ | 9,962 | ||||
Purchases of additions in real estate properties included in accounts payable | $ | 1,411 | $ | 3,380 | ||||
Purchases of deferred leasing costs included in accounts payable | $ | 160 | $ | 158 | ||||
Debt assumed on acquisition of real estate | $ | 22,473 | $ | — |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income/(loss) | $ | 1,006 | $ | (920 | ) | |||
Adjustments to reconcile net income/(loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 14,953 | 14,417 | ||||||
Amortization of deferred financing costs and debt fair value | 324 | 337 | ||||||
Amortization of above/below market leases | 14 | (27 | ) | |||||
Increase in straight-line rent/expense | (704 | ) | (1,454 | ) | ||||
Non-cash stock compensation | 569 | 444 | ||||||
Changes in non-cash working capital: | ||||||||
Rents receivable, net | (38 | ) | (225 | ) | ||||
Other assets | 190 | (1,710 | ) | |||||
Accounts payable and | (4,282 | ) | (7,506 | ) | ||||
Deferred rent | (1,295 | ) | (485 | ) | ||||
Tenant rent deposits | 2 | (45 | ) | |||||
Net Cash Provided By Operating Activities | 10,739 | 2,826 | ||||||
Cash Flows to Investing Activities: | ||||||||
Additions to real estate properties | (3,137 | ) | (2,292 | ) | ||||
Acquisition of real estate | — | (51,070 | ) | |||||
Net proceeds from sale of real estate | — | 17,426 | ||||||
Deferred leasing costs | (2,195 | ) | (811 | ) | ||||
Net Cash Used In Investing Activities | (5,332 | ) | (36,747 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Repurchases of common stock | (11,622 | ) | — | |||||
Debt issuance and extinguishment costs | — | (516 | ) | |||||
Proceeds from borrowings | 100,000 | 75,950 | ||||||
Repayment of borrowings | (1,541 | ) | (26,137 | ) | ||||
Shares withheld for payment of taxes on restricted stock unit vesting | (49 | ) | (224 | ) | ||||
Contributions from non-controlling interests in properties | 3 | 12 | ||||||
Distributions to non-controlling interests in properties | (200 | ) | (134 | ) | ||||
Dividend distributions paid to stockholders | (14,684 | ) | (11,148 | ) | ||||
Net Cash Provided By Financing Activities | 71,907 | 37,803 | ||||||
Net Increase in Cash, Cash Equivalents and Restricted Cash | 77,314 | 3,882 | ||||||
Cash, Cash Equivalents and Restricted Cash, Beginning of Period | 87,523 | 33,145 | ||||||
Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 164,837 | $ | 37,027 | ||||
Reconciliation of Cash, Cash Equivalents and Restricted Cash: | ||||||||
Cash and Cash Equivalents, End of Period | 146,509 | 15,314 | ||||||
Restricted Cash, End of Period | 18,328 | 21,713 | ||||||
Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 164,837 | $ | 37,027 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid for interest | $ | 6,111 | $ | 6,679 | ||||
Purchase of additions in real estate properties included in accounts payable | $ | 2,587 | $ | 4,161 | ||||
Purchase of deferred leasing costs included in accounts payable | $ | 284 | $ | 192 |
New2019.
Adopted in the Current Year
The Company adopted the new standard effective January 1, 2019 and elected the effective date method for the transition. The Company elected the following practical expedients:
Transition method practical expedient – permits the Company to use the effective date as the date of initial application. Upon adoption, the Company did not have a cumulative-effect adjustmentexceptions to the opening balance of retained earnings. Financial informationguidance on contract modifications and disclosures for periods before January 1, 2019 werehedge accounting to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. For contracts affected by reference rate reform, if certain criteria are met, companies can elect to not updated.
Package of practicalremeasure contracts at the modification date or reassess a previous accounting conclusion. Companies can also elect various optional 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 Companythat would allow them 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 revenues on the condensed 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
Theapplying hedge accounting for lessors underhedging relationships affected by reference rate reform, if certain criteria are met. ASU
Lessee Accounting
optional use through December 31, 2022. The new standard requires lesseesapplies prospectively to recognize aright-of-use assetcontract modifications and lease liability hedging relationships and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of ASU
reference rate reform activities occur.
| ||||||||
| ||||||||
Property | Date Acquired | Percentage Owned | ||||||
Canyon Park | February 2019 | 100 | % | |||||
| ||||||||
|
Each of the
acquisition.
Canyon Park | Cascade Station | Total June 30, 2019 | ||||||||||
Land | $ | 7,098 | $ | — | $ | 7,098 | ||||||
Buildings and improvements | 36,619 | 25,141 | 61,760 | |||||||||
Tenant improvements | 1,797 | 2,080 | 3,877 | |||||||||
Acquired intangible assets | 8,109 | 3,134 | 11,243 | |||||||||
Other assets | 10 | 3,164 | 3,174 | |||||||||
Debt | — | (697 | ) | (697 | ) | |||||||
Accounts payable and other liabilities | (1,266 | ) | (186 | ) | (1,452 | ) | ||||||
Lease intangible liabilities | (1,297 | ) | (220 | ) | (1,517 | ) | ||||||
|
|
|
|
|
| |||||||
Net assets acquired | $ | 51,070 | $ | 32,416 | $ | 83,486 | ||||||
|
|
|
|
|
|
Canyon | ||||
Land | $ | 7,098 | ||
Buildings and improvements | 36,619 | |||
Tenant improvements | 1,797 | |||
Lease intangible assets | 8,109 | |||
Other assets | 10 | |||
Accounts payable and other liabilities | (1,266 | ) | ||
Lease intangible liabilities | (1,297 | ) | ||
Net assets acquired | $ | 51,070 | ||
The acquisition of the Cascade Station property was partially funded through an assumption of debt in the amount of $22.5 million.
The following table summarizes the Company’s allocation of the purchase price of assets acquired and liabilities assumed during the six months ended June 30, 2018 (in thousands):
Pima Center | ||||
Buildings and improvements | $ | 42,235 | ||
Tenant improvements | 2,898 | |||
Acquired intangible assets | 10,691 | |||
Other assets | 95 | |||
Accounts payable and other liabilities | (337 | ) | ||
Lease intangible liabilities | (129 | ) | ||
|
| |||
Net assets acquired | $ | 55,453 | ||
|
|
On May 7, 2019, the Company sold the 10455 Pacific Center building of the Sorrento Mesa property in San Diego, California for $16.5 million, resulting in an aggregate gain of $0.5 million net of disposal-related costs, which has been classified as net gain on sale of real estate property in the condensed consolidated statements of operations.
March 31, 2020 and December 31, 2019 (in thousands):
Circle Point Land | March 31, 2020 | December 31, 2019 | ||||||
Real estate properties, net | $ | 4,543 | $ | 4,514 | ||||
Assets held for sale | $ | 4,543 | $ | 4,514 | ||||
Accounts payable, accrued expenses, deferred rent and tenant rent deposits | $ | (87 | ) | $ | (67 | ) | ||
Liabilities related to assets held for sale | $ | (87 | ) | $ | (67 | ) | ||
Lease Intangible Assets | Lease Intangible Liabilities | |||||||||||||||||||||||||||||||
June 30, 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 | $ | 11,924 | $ | — | $ | 86,640 | $ | 35,126 | $ | 133,690 | $ | (14,359 | ) | $ | (138 | ) | $ | (14,497 | ) | |||||||||||||
Accumulated amortization | (5,784 | ) | — | (41,672 | ) | (14,262 | ) | (61,718 | ) | 5,210 | 38 | 5,248 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
$ | 6,140 | $ | — | $ | 44,968 | $ | 20,864 | $ | 71,972 | $ | (9,149 | ) | $ | (100 | ) | $ | (9,249 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Lease Intangible Assets | Lease Intangible Liabilities | |||||||||||||||||||||||||||||||
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 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
$ | 5,795 | $ | 1,836 | $ | 48,201 | $ | 19,669 | $ | 75,501 | $ | (8,785 | ) | $ | (102 | ) | $ | (8,887 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Intangible Assets | Lease Intangible Liabilities | |||||||||||||||||||||||||||
March 31, 2020 | Above Market Leases | In Place Leases | Leasing Commissions | Total | Below Market Leases | Below Ground | Total | |||||||||||||||||||||
Cost | $ | 14,985 | $ | 87,320 | $ | 35,988 | $ | 138,293 | $ | (13,878 | ) | $ | (138 | ) | $ | (14,016 | ) | |||||||||||
Accumulated amortization | (7,051 | ) | (51,847 | ) | (17,291 | ) | (76,189 | ) | 6,371 | 41 | 6,412 | |||||||||||||||||
$ | 7,934 | $ | 35,473 | $ | 18,697 | $ | 62,104 | $ | (7,507 | ) | $ | (97 | ) | $ | (7,604 | ) | ||||||||||||
Lease Intangible Assets | Lease Intangible Liabilities | |||||||||||||||||||||||||||
December 31, 2019 | Above Market Leases | In Place Leases | Leasing Commissions | Total | Below Market Leases | Below Ground | 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 | |||||||||||||||||
$ | 8,538 | $ | 39,091 | $ | 19,904 | $ | 67,533 | $ | (8,096 | ) | $ | (98 | ) | $ | (8,194 | ) | ||||||||||||
2019 | $ | 10,192 | ||
2020 | 18,332 | |||
2021 | 15,022 | |||
2022 | 7,255 | |||
2023 | 4,393 | |||
Thereafter | 7,529 | |||
|
| |||
$ | 62,723 | |||
|
|
2020 | $ | 14,129 | ||
2021 | 15,894 | |||
2022 | 8,233 | |||
2023 | 5,359 | |||
2024 | 3,191 | |||
Thereafter | 7,694 | |||
$ | 54,500 | |||
Property | June 30, 2019 | December 31, 2018 | Interest Rate as of June 30, 2019 (1) | Maturity | ||||||||||
Unsecured Credit Facility (2) | $ | 150,000 | $ | 147,500 | LIBOR +1.60 | %(3) | March 2022 | |||||||
Midland Life Insurance (4) | 86,142 | 86,973 | 4.34 | May 2021 | ||||||||||
Mission City | 47,000 | 47,000 | 3.78 | November 2027 | ||||||||||
190 Office Center | 41,152 | 41,250 | 4.79 | October 2025 | ||||||||||
Canyon Park(5) | 40,950 | — | 4.30 | March 2027 | ||||||||||
Circle Point | 39,650 | 39,650 | 4.49 | September 2028 | ||||||||||
SanTan | 34,347 | 34,682 | 4.56 | March 2027 | ||||||||||
Intellicenter | 33,227 | 33,481 | 4.65 | October 2025 | ||||||||||
The Quad | 30,600 | 30,600 | 4.20 | September 2028 | ||||||||||
FRP Collection | 29,288 | 29,589 | 3.85 | September 2023 | ||||||||||
2525 McKinnon | 27,000 | 27,000 | 4.24 | April 2027 | ||||||||||
Cascade Station | 22,474 | — | 4.55 | May 2024 | ||||||||||
Greenwood Blvd | 22,425 | 22,425 | 4.60 | December 2025 | ||||||||||
5090 N 40th St | 22,000 | 22,000 | 3.92 | January 2027 | ||||||||||
AmberGlen | 20,000 | 20,000 | 3.69 | May 2027 | ||||||||||
Lake Vista Pointe | 17,882 | 18,044 | 4.28 | August 2024 | ||||||||||
Central Fairwinds | 17,712 | 17,882 | 4.00 | June 2024 | ||||||||||
FRP Ingenuity Drive | 17,000 | 17,000 | 4.44 | December 2024 | ||||||||||
Carillon Point | 16,154 | 16,330 | 3.50 | October 2023 | ||||||||||
|
|
|
| |||||||||||
Total Principal | 715,003 | 651,406 | ||||||||||||
Deferred financing costs, net | (6,030 | ) | (6,052 | ) | ||||||||||
Unamortized fair value adjustments | 697 | — | ||||||||||||
|
|
|
| |||||||||||
Total | $ | 709,670 | $ | 645,354 | ||||||||||
|
|
|
|
Property | March 31, 2020 | December 31, 2019 | Interest Rate as of March 31, 2020 (1) | Maturity | ||||||||||||
Unsecured Credit Facility (3)(4) | $ | 100,000 | $ | — | LIBOR +1.50 | % (2) | March 2022 | |||||||||
Term Loan (4) | 50,000 | 50,000 | LIBOR +1.40 | % (2) | September 2024 | |||||||||||
Midland Life Insurance (5) | 84,861 | 85,293 | 4.34 | May 2021 | ||||||||||||
Mission City | 47,000 | 47,000 | 3.78 | November 2027 | ||||||||||||
Canyon Park (6) | 40,950 | 40,950 | 4.30 | March 2027 | ||||||||||||
190 Office Center | 40,700 | 40,854 | 4.79 | October 2025 | ||||||||||||
Circle Point | 39,650 | 39,650 | 4.49 | September 2028 | ||||||||||||
SanTan | 33,903 | 34,053 | 4.56 | March 2027 | ||||||||||||
Intellicenter | 32,839 | 32,971 | 4.65 | October 2025 | ||||||||||||
The Quad | 30,600 | 30,600 | 4.20 | September 2028 | ||||||||||||
FRP Collection | 28,795 | 28,969 | 3.10 | September 2023 | ||||||||||||
2525 McKinnon | 27,000 | 27,000 | 4.24 | April 2027 |
Property | March 31, 2020 | December 31, 2019 | Interest Rate as of March 31, 2020 (1) | Maturity | ||||||||||||
Greenwood Blvd | 22,425 | 22,425 | 3.15 | December 2025 | ||||||||||||
Cascade Station | 22,216 | 22,304 | 4.55 | May 2024 | ||||||||||||
5090 N 40 th St | 21,936 | 22,000 | 3.92 | January 2027 | ||||||||||||
AmberGlen | 20,000 | 20,000 | 3.69 | May 2027 | ||||||||||||
Lake Vista Pointe | 17,632 | 17,717 | 4.28 | August 2024 | ||||||||||||
Central Fairwinds | 17,433 | 17,534 | 3.15 | June 2024 | ||||||||||||
FRP Ingenuity Drive | 16,934 | 17,000 | 4.44 | December 2024 | ||||||||||||
Carillon Point | 15,877 | 15,972 | 3.10 | October 2023 | ||||||||||||
Total Principal | 710,751 | 612,292 | ||||||||||||||
Deferred financing costs, net | (5,302 | ) | (5,660 | ) | ||||||||||||
Unamortized fair value adjustments | 582 | 618 | ||||||||||||||
Total | $ | 706,031 | $ | 607,250 |
(1 ) |
ll interest rates are fixed interest rates with the exception of the U nsecuredC reditF acility (“Unsecured Credit Facility”) and the Term Loan (as defined herein), as explained in and 4 below. |
(2) | As of - month LIBOR rate was 0.99%. |
(3) | In March the Credit Agreementfor the Unsecured Credit Facility that provides for commitments of up to $250 million, which includes an accordion feature that During the three months ended March 31, 2020, The Unsecured Credit Facility requires the Company to maintain a fixed charge coverage ratio of no less than 1.50x.the Company drew approximately $100 million under the Unsecured Credit Facility. As of March 31, 2020, the Unsecured Credit Facility had $100 million drawn and $7.0 million of letters of credit to satisfy escrow requirements for mortgage lenders. |
|
(4) | 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 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. |
(5) | The mortgage loan is cross-collateralized by |
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. |
2019 | $ | 2,692 | ||
2020 | 6,186 | |||
2021 | 89,125 | |||
2022 | 156,165 | |||
2023 | 47,822 | |||
Thereafter | 413,013 | |||
|
| |||
$ | 715,003 | |||
|
|
2020 | $ | 4,738 | ||
2021 | 89,355 | |||
2022 | 106,529 | |||
2023 | 48,529 | |||
2024 | 124,725 | |||
Thereafter | 336,875 | |||
$ | 710,751 | |||
Interest Rate Swap was reported as an asset at its fair value of approximately $0.7 million, which is included in other assets on the Company’s consolidated balance sheet.
Three months ended June 30, 2019 | Six months ended June 30, 2019 | |||||||||
Fixed payments | $ | 32,861 | $ | 65,060 | ||||||
Variable payments | 5,646 | 10,526 | ||||||||
|
|
|
| |||||||
$ | 38,507 | $ | 75,586 | |||||||
|
|
|
|
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Fixed payments | $ | 34,092 | $ | 32,199 | ||||
Variable payments | 6,016 | 4,880 | ||||||
$ | 40,108 | $ | 37,079 | |||||
2019 | $ | 60,208 | ||
2020 | 113,808 | |||
2021 | 102,819 | |||
2022 | 85,402 | |||
2023 | 67,284 | |||
Thereafter | 143,674 | |||
|
| |||
$ | 573,195 | |||
|
|
2020 | $ | 90,339 | ||
2021 | 113,927 | |||
2022 | 95,518 | |||
2023 | 77,243 | |||
2024 | 57,558 | |||
Thereafter | 115,327 | |||
$ | 549,912 | |||
March 31, 2020.
right-of-useR
As of June 30, 2019 | ||||
Right-of-use asset – operating leases | $ | 13,215 | ||
Lease liability – operating leases | $ | 8,250 | ||
Right-of-use asset – financing leases | $ | 91 | ||
Lease liability – financing leases | $ | 90 |
As of March 31, 2020 | As of December 31, 2019 | |||||||
Right-of-use asset – operating leases | $ | 13,031 | $ | 13,130 | ||||
Lease liability – operating leases | $ | 7,985 | $ | 8,033 | ||||
Right-of-use asset – financing leases | $ | 73 | $ | 79 | ||||
Lease liability – financing leases | $ | 73 | $ | 79 |
The Company did not have any financing leases as of the three months ended March 31, 2019.
Operating Leases | Financing Leases | |||||||
2019 | $ | 303 | $ | 13 | ||||
2020 | 782 | 27 | ||||||
2021 | 781 | 27 | ||||||
2022 | 741 | 27 | ||||||
2023 | 659 | 4 | ||||||
Thereafter | 27,277 | — | ||||||
|
|
|
| |||||
Total future minimum lease payments | 30,543 | 98 | ||||||
Discount | (22,293 | ) | (8 | ) | ||||
|
|
|
| |||||
Total | $ | 8,250 | $ | 90 | ||||
|
|
|
|
Operating Leases | Financing Leases | |||||||
2020 | $ | 364 | $ | 20 | ||||
2021 | 817 | 27 | ||||||
2022 | 798 | 27 | ||||||
2023 | 663 | 4 | ||||||
2024 | 597 | — | ||||||
Thereafter | 26,680 | — | ||||||
Total future minimum lease payments | 29,919 | 78 | ||||||
Discount | (21,934 | ) | (5 | ) | ||||
Total | $ | 7,985 | $ | 73 | ||||
The Company believes that it is in compliance in all material respects with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. Management is not aware of any environmental liability that it believes would have a material adverse impact on the Company’s financial position or results of operations. Management is unaware of any instances in which the Company would incur significant environmental costs if any or all properties were sold, disposed of or abandoned. However, there can be no assurance that any such
Restricted Stock Units
A
11. Subsequent Events
On July 31, 2019, an indirect, wholly-owned subsidiary of the Company entered into an Administrative Services Agreement (the “Administrative Services Agreement”) with Clarity Real Estate III GP, Limited Partnership and Clarity Real Estate Ventures GP, Limited Partnership (together, “Clarity”), entities affiliated with principals of Second City and officers of the Company. Pursuant to the Administrative Services Agreement, the Company will provide various administrative services and support to the related entities managing the Clarity funds.
uncertaintly regarding the Company’s obligations under its floating rate debt instruments upon discontinuation of LIBOR;
a material increase in institutional ownership of real estate in secondary markets that could result in, among others, compression of cap rates and fewer acquisition opportunities being available to the Company; and
otherwise, except as may be required by applicable securities laws.
billed to or paid by the tenant. The full amount of the expenses for this lease type is reflected in operating expenses, and the reimbursement is reflected in tenant recoveries. All tenants in ourthe Lake Vista Pointe, FRP Ingenuity Drive,2525 McKinnon, Sorrento Mesa and Canyon Park properties have triple net leases. Certain tenants at AmberGlen, Cherry Creek, Superior Pointe, FRP Collection, 2525 McKinnon,Florida Research Park, Circle Point, The Quad, and Cascade Station and Denver Tech have leases on a triple net basis. We are also a lessor for a fee simple ground lease at the AmberGlen property. All of our remaining leases are full-service gross leases.
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 (21.3% of NRA) | Pima Center | 100.0 | % | 272 | 96.5 | % | $ | 27.15 | $ | 27.15 | $ | 7,122 | ||||||||||||||
SanTan | 100.0 | % | 267 | 98.6 | % | $ | 27.67 | $ | 27.67 | $ | 7,272 | |||||||||||||||
5090 N 40th St | 100.0 | % | 175 | 95.8 | % | $ | 28.96 | $ | 28.96 | $ | 4,848 | |||||||||||||||
Camelback Square | 100.0 | % | 173 | 80.8 | % | $ | 29.24 | $ | 29.24 | $ | 4,092 | |||||||||||||||
The Quad | 100.0 | % | 163 | 100.0 | % | $ | 28.14 | $ | 28.39 | $ | 4,587 | |||||||||||||||
Papago Tech | 100.0 | % | 163 | 100.0 | % | $ | 21.85 | $ | 21.85 | $ | 3,556 | |||||||||||||||
Denver, CO (18.3%) | Cherry Creek | 100.0 | % | 356 | 100.0 | % | $ | 18.53 | $ | 18.53 | $ | 6,591 | ||||||||||||||
Circle Point | 100.0 | % | 272 | 98.8 | % | $ | 17.46 | $ | 30.36 | $ | 4,692 | |||||||||||||||
DTC Crossroads | 100.0 | % | 189 | 53.7 | % | $ | 26.24 | $ | 26.24 | $ | 2,665 | |||||||||||||||
Superior Pointe | 100.0 | % | 151 | 96.5 | % | $ | 17.66 | $ | 29.17 | $ | 2,579 | |||||||||||||||
Logan Tower | 100.0 | % | 72 | 73.3 | % | $ | 21.62 | $ | 21.62 | $ | 1,139 | |||||||||||||||
Tampa, FL (18.2%) | Park Tower | 94.8 | % | 471 | 93.5 | % | $ | 24.45 | $ | 24.45 | $ | 10,761 | ||||||||||||||
City Center | 95.0 | % | 241 | 94.7 | % | $ | 25.40 | $ | 25.40 | $ | 5,807 | |||||||||||||||
Intellicenter | 100.0 | % | 204 | 100.0 | % | $ | 23.99 | $ | 23.99 | $ | 4,881 | |||||||||||||||
Carillon Point | 100.0 | % | 124 | 100.0 | % | $ | 28.06 | $ | 28.06 | $ | 3,485 | |||||||||||||||
Orlando, FL (12.6%) | FRP Collection | 95.0 | % | 272 | 84.5 | % | $ | 24.29 | $ | 26.17 | $ | 5,575 | ||||||||||||||
Central Fairwinds | 97.0 | % | 168 | 89.5 | % | $ | 24.49 | $ | 24.49 | $ | 3,685 | |||||||||||||||
Greenwood Blvd | 100.0 | % | 155 | 100.0 | % | $ | 22.75 | $ | 22.75 | $ | 3,527 | |||||||||||||||
FRP Ingenuity Drive | 100.0 | % | 125 | 100.0 | % | $ | 21.50 | $ | 29.50 | $ | 2,677 | |||||||||||||||
San Diego, CA (10.2%) | Sorrento Mesa | 100.0 | % | 296 | 85.3 | % | $ | 25.19 | $ | 31.19 | $ | 6,360 | ||||||||||||||
Mission City | 100.0 | % | 286 | 95.6 | % | $ | 35.14 | $ | 35.14 | $ | 9,603 | |||||||||||||||
Dallas, TX (10.1%) | 190 Office Center | 100.0 | % | 303 | 89.5 | % | $ | 25.64 | $ | 25.64 | $ | 6,960 | ||||||||||||||
Lake Vista Pointe | 100.0 | % | 163 | 100.0 | % | $ | 16.00 | $ | 24.00 | $ | 2,613 | |||||||||||||||
2525 McKinnon | 100.0 | % | 111 | 90.4 | % | $ | 28.04 | $ | 45.04 | $ | 2,822 | |||||||||||||||
Portland, OR (5.8%) | AmberGlen | 76.0 | % | 201 | 96.9 | % | $ | 21.30 | $ | 23.89 | $ | 4,151 | ||||||||||||||
Cascade Station | 100.0 | % | 128 | 100.0 | % | $ | 26.37 | $ | 32.38 | $ | 3,363 | |||||||||||||||
Seattle, WA (3.5%) | Canyon Park | 100.0 | % | 207 | 100.0 | % | $ | 21.20 | $ | 29.20 | $ | 4,384 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total / Weighted Average – June 30, 2019(3) | 5,708 | 93.4 | % | $ | 24.36 | $ | 27.00 | $ | 129,797 | |||||||||||||||||
|
|
|
|
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 | % | $ | 27.44 | $ | 27.44 | $ | 6,491 | ||||||||||||||
SanTan | 100.0 | % | 267 | 91.7 | % | $ | 28.11 | $ | 28.11 | $ | 6,868 | |||||||||||||||
5090 N 40 th St | 100.0 | % | 174 | 94.6 | % | $ | 28.58 | $ | 28.58 | $ | 4,714 | |||||||||||||||
Camelback Square | 100.0 | % | 174 | 78.8 | % | $ | 31.25 | $ | 31.25 | $ | 4,284 | |||||||||||||||
The Quad | 100.0 | % | 163 | 100.0 | % | $ | 29.20 | $ | 29.51 | $ | 4,759 | |||||||||||||||
Papago Tech | 100.0 | % | 163 | 90.9 | % | $ | 22.46 | $ | 22.46 | $ | 3,322 | |||||||||||||||
Denver, CO (19.9%) | Cherry Creek | 100.0 | % | 356 | 100.0 | % | $ | 18.59 | $ | 19.31 | $ | 6,612 | ||||||||||||||
Circle Point | 100.0 | % | 272 | 94.3 | % | $ | 17.88 | $ | 31.76 | $ | 4,583 | |||||||||||||||
Denver Tech (3) | 100.0 | % | 381 | 78.0 | % | $ | 22.96 | $ | 27.02 | $ | 6,591 | |||||||||||||||
Superior Pointe | 100.0 | % | 151 | 96.5 | % | $ | 18.08 | $ | 30.55 | $ | 2,641 | |||||||||||||||
Tampa, FL (17.9%) | Park Tower | 94.8 | % | 471 | 89.8 | % | $ | 25.58 | $ | 25.58 | $ | 10,820 | ||||||||||||||
City Center | 95.0 | % | 242 | 93.1 | % | $ | 25.83 | $ | 25.83 | $ | 5,814 | |||||||||||||||
Intellicenter | 100.0 | % | 204 | 100.0 | % | $ | 23.99 | $ | 23.99 | $ | 4,881 | |||||||||||||||
Carillon Point | 100.0 | % | 124 | 100.0 | % | $ | 28.36 | $ | 28.36 | $ | 3,522 | |||||||||||||||
Orlando, FL (12.4%) | Florida Research Park (4) | 96.6 | % | 397 | 96.9 | % | $ | 23.93 | $ | 27.39 | $ | 9,171 | ||||||||||||||
Central Fairwinds | 97.0 | % | 168 | 93.7 | % | $ | 25.10 | $ | 25.10 | $ | 3,956 | |||||||||||||||
Greenwood Blvd | 100.0 | % | 155 | 100.0 | % | $ | 23.25 | $ | 23.25 | $ | 3,605 | |||||||||||||||
San Diego, CA (10.0%) | Sorrento Mesa | 100.0 | % | 296 | 85.3 | % | $ | 25.77 | $ | 33.77 | $ | 6,507 | ||||||||||||||
Mission City | 100.0 | % | 286 | 91.6 | % | $ | 35.43 | $ | 35.43 | $ | 9,276 | |||||||||||||||
Dallas, TX (9.9%) | 190 Office Center | 100.0 | % | 303 | 81.2 | % | $ | 25.55 | $ | 25.55 | $ | 6,288 | ||||||||||||||
Lake Vista Pointe | 100.0 | % | 163 | 100.0 | % | $ | 16.00 | $ | 25.00 | $ | 2,613 | |||||||||||||||
2525 McKinnon | 100.0 | % | 111 | 88.5 | % | $ | 28.23 | $ | 45.23 | $ | 2,782 | |||||||||||||||
Portland, OR (5.6%) | AmberGlen | 76.0 | % | 203 | 98.4 | % | $ | 21.78 | $ | 24.32 | $ | 4,342 | ||||||||||||||
Cascade Station | 100.0 | % | 128 | 100.0 | % | $ | 26.69 | $ | 28.06 | $ | 3,403 | |||||||||||||||
Seattle, WA (3.5%) | Canyon Park | 100.0 | % | 207 | 100.0 | % | $ | 21.84 | $ | 29.84 | $ | 4,515 | ||||||||||||||
Total / Weighted Average – March 31, 2020 (5) | 5,831 | 92.2 | % | $ | 24.66 | $ | 27.58 | $ | 132,360 | |||||||||||||||||
(1) |
|
(2) | Annualized base rent is calculated by multiplying (i) rental payments (defined as cash rents before abatements) for the month ended |
(3) | Denver Tech is comprised of 7601 Tech, which was acquired during the third quarter of 2019, and 7595 Tech (formerly “DTC Crossroads”). |
(4) | Florida Research Park is comprised of FRP Collection and FRP Ingenuity Drive. |
(5) | Averages weighted based on the property’s NRA, adjusted for |
In addition, the recent
2019.
March 31, 2019
year.
those properties.
Comparison of Six Months Ended June 30, 2019 to Six Months Ended June 30, 2018
Rental and Other Revenues. Revenue includes net rental income, including parking, signage and other income, as well as the recovery of operating costs and property taxes from tenants. Rental and other revenues increased $16.5 million, or 27%, to $78.3 million for the six months ended June 30, 2019 compared to $61.8 million for the six months ended June 30, 2018. Of this increase, $1.8 million was attributable to the acquisition of Pima Center in April 2018, $4.1 million from the acquisition of Circle Point in July 2018, $2.8 million from the acquisition of The Quad in July 2018, $2.3 million from the acquisition of Greenwood Blvd in December 2018, $2.4 million from the acquisition of Camelback Square in December 2018, $2.0 million from the acquisition of Canyon Park in February 2019 and $0.2 million from the acquisition of Cascade Station in June 2019. Revenue from Central Fairwinds, Park Tower, Mission City and FRP Collection also increased by $0.4 million, $0.7 million, $0.4 million and $0.3 million, respectively, as a result of increased average occupancy over the prior year. Partially offsetting these increases, Washington Group Plaza decreased by $1.7 million due to the sale of the property in March 2018 and Plaza 25 decreased by $1.0 million due to the sale of the property in February 2019. Revenue from DTC Crossroads decreased $0.4 million as a result of decreased occupancy over the prior year and Sorrento Mesa also decreased by $1.2 million as a result of the termination fee payment received in the prior year. The remaining properties’ revenues were modestly higher in comparison to the prior year primarily as a result of modestmark-to-market increases in rents upon renewal. Other Revenues benefited from aone-time payment of $2.6 million received as consideration for the assignment of a purchase contract. The assignment fee originated through our administrative services relationship. Upon adoption of Topic 842, prior year amounts disclosed in rental income, expense reimbursement, and other have been combined into a single line to conform to current period presentation.
Operating Expenses
Total Operating Expenses. Total operating expenses consist of property operating expenses, general and administrative expenses and depreciation and amortization. Total operating expenses increased by $12.1 million, or 24%, to $63.1 million for the six months ended June 30, 2019, from $51.0 million for the six months ended June 30, 2018, primarily due to the acquisitions described above. Total operating expenses increased by $1.8 million, $4.0 million, $1.9 million, $1.5 million, $2.1 million, $1.0 million, and $0.2 million, respectively, from the acquisitions of Pima Center, Circle Point, The Quad, Greenwood Blvd, Camelback Square, Canyon Park and Cascade Station properties. Park Tower operating expenses also increased by $0.5 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 $1.3 million due to its sale in February 2019. The remaining operating expenses were modestly higher in comparison to the prior-year period primarily due to higher occupancy at the properties.
Property Operating Expenses. Property operating expenses are comprised mainly of building common area and maintenance expenses, insurance, property taxes, property management fees, as well as certain expenses that are not recoverable from tenants, the majority of which are related to costs necessary to maintain the appearance and marketability of vacant space. In the normal course of business, property expenses fluctuate and are impacted by various factors including, but not limited to, occupancy levels, weather, utility costs, repairs, maintenance andre-leasing costs. Property operating expenses increased $5.0 million, or 21%, to $28.4 million for the six months ended June 30, 2019 from $23.4 million for the six months ended June 30, 2018. The increase in property operating expenses was primarily due to the acquisitions described above. The acquisition of the Pima Center, Circle Point, The Quad, Greenwood Blvd, Camelback Square, Canyon Park and Cascade Station contributed an additional $0.6 million, $2.0 million, $0.7 million, $0.8 million, $0.7 million, $0.3 million and $0.1 million, respectively, in additional property operating expenses. Park Tower operating expenses also increased by $0.2 million due to the higher occupancy at that property. Washington Group Plaza decreased by $0.8 million due to the sale of that property in March 2018 and Plaza 25 decreased by $0.7 million due to the sale of that property in February 2019. The remaining property operating expenses aggregate to an overall $1.1 million increase in comparison to the prior-year period.
General and Administrative. General and administrative expenses are comprised of public company reporting costs and the compensation of our management team and board of directors as well asnon-cash stock-based compensation expenses. General and administrative expenses increased $1.8 million, or 44%, to $5.7 million for the six months ended June 30, 2019 compared to $3.9 million for the six months ended June 30, 2018. Of this increase, $1.1 million can be attributed to theone-time expenses and accruals incurred as a result of the assignment fee income earned during the six months ended June 30, 2019 as described above and the balance of the increase was primarily attributable to higher payroll costs.
Depreciation and Amortization. Depreciation and amortization increased $5.3 million, or 23%, to $29.0 million for the six months ended June 30, 2019 compared to $23.7 million for the six months ended June 30, 2018, primarily due to the addition of the Papago Tech, Pima Center, Circle Point, The Quad, Greenwood Blvd, Camelback Square, Canyon Park and Cascade Station properties and partially offset by a decrease at Washington Group Plaza and Plaza 25 due to the sale of those properties.
Other Expense (Income)
Interest Expense. Interest expense increased $4.0 million, or 36%, to $15.3 million for the six months ended June 30, 2019, compared to $11.3 million for the six months ended June 30, 2018. The increase was primarily due to 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 $0.9 million, $0.6 million, $0.5 million, $0.6 million and $0.1 million, respectively, and the interest on the line of credit increased by $2.0 million as a result of acquisitions funded by our $250 million Unsecured Credit Facility. These increases were partially offset by a $0.2 million and $0.4 million, respective decrease in the Washington Group Plaza and Plaza 25 debt as a result of the sale of those properties and the extinguishment of its property level debt.
March 31, 2019
properties, including changes in working capital.
2019.
common stock repurchases during the three months ended March 31, 2020.
March 31, 2020.
The
March 31, 2020.
Our long-term liquidity needs consist primarily of funds necessary for the repayment of debt at maturity, property acquisitions and
Payments Due by Period(in thousands) | ||||||||||||||||||||
Contractual Obligations | Total | 2019 | 2020-2021 | 2022-2023 | More than 5 years | |||||||||||||||
Principal payments on mortgage loans | $ | 715,003 | $ | 2,692 | $ | 95,311 | $ | 203,987 | $ | 413,013 | ||||||||||
Interest payments(1) | 162,109 | 15,110 | 57,650 | 40,589 | 48,760 | |||||||||||||||
Tenant-related commitments | 10,907 | 5,890 | 4,418 | 599 | — | |||||||||||||||
Operating and financing lease obligations | 30,641 | 316 | 1,617 | 1,431 | 27,277 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 918,660 | $ | 24,008 | $ | 158,996 | $ | 246,606 | $ | 489,050 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Payments Due by Period (in thousands) | ||||||||||||||||||||
Contractual Obligations | Total | 2020 | 2021-2022 | 2023-2024 | More than 5 years | |||||||||||||||
Principal payments on mortgage loans | $ | 710,751 | $ | 4,738 | $ | 195,884 | $ | 173,254 | $ | 336,875 | ||||||||||
Interest payments (1) | 134,628 | 20,302 | 45,789 | 37,089 | 31,448 | |||||||||||||||
Tenant-related commitments | 12,530 | 11,904 | 626 | — | — | |||||||||||||||
Lease obligations | 29,997 | 384 | 1,669 | 1,264 | 26,680 | |||||||||||||||
Total | $ | 887,906 | $ | 37,328 | $ | 243,968 | $ | 211,607 | $ | 395,003 | ||||||||||
(1) | Contracted interest on the floating rate |
June 30, 2019,March 31, 2020, we had a $5.3$7 million letter of credit outstanding under our Unsecured Credit Facility to satisfy escrow requirements for a mortgage lender.
10% increase in LIBOR would increase our annual interest costs by approximately $0.4$0.1 million on debt outstanding as of June 30, 2019,March 31, 2020, and would decrease the fair value of our outstanding debt, as well as increase interest costs associated with future debt issuances or borrowings under our Unsecured Credit Facility. A 10% decrease in LIBOR would decrease our annual interest costs by approximately $0.4$0.1 million on debt outstanding as of June 30, 2019,March 31, 2020 and would increase the fair value of our outstanding debt, as well as decrease interest costs associated with future debt issuances or borrowings under our Unsecured Credit Facility.
March 31, 2020.
Our commitments
We are subject to conflicts of interest arising outthe per share market price of our relationshipcommon stock or preferred stock.
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 Plan | Approximate Dollar Value of Shares of Common Stock that May Yet Be Purchased Under the Share Repurchase Plan (1) (thousands) | ||||||||||||
January 1 – 31, 2020 | — | $ | — | — | $ | — | (2) | |||||||||
February 1 – 29, 2020 | — | — | — | — | (2) | |||||||||||
March 1 – 31, 2020 | 1,451,249 | 7.99 | 1,451,249 | 88,406 | ||||||||||||
Total | 1,451,249 | $ | 7.99 | 1,451,249 | $ | 88,406 | ||||||||||
|
None.
(2) | The share repurchase plan was approved by the Company’s Board of Directors on March 9, 2020. Therefore, no purchases were authorized or made during this period. |
Item 5. Other Information |
On July 31, 2019, CIO Administrative Services, LLC (the “Service Provider”), an indirect, wholly-owned subsidiary of the Company, entered into an Administrative Services Agreement (the “Administrative Services Agreement”) with Clarity Real Estate III GP, Limited Partnership and Clarity Real Estate Ventures GP, Limited Partnership (collectively with their affiliates, “Clarity”), entities affiliated with the Company. James Farrar, the Company’s Chief Executive Officer, and Gregory Tylee, the Company’s President and Chief Operating Officer, are officers of the general partners of the Clarity funds and own equity interests in the Clarity funds. Pursuant to the Administrative Services Agreement, the Service Provider will provide various administrative services and support to Clarity as set forth in the Administrative Services Agreement. The annual payments made by Clarity to the Service Provider for these services under the Administrative Services Agreement will be a percentage of the management fees received by Clarity from Clarity’s managed funds and affiliates under Clarity’s governance documents according to a formula set forth in the Administrative Services Agreement.
In conjunction with the Company’s entry into the Administrative Services Agreement, on July 31, 2019, the Company, through a wholly-owned subsidiary, entered into an amendment to the Company’s employment agreements (collectively, the “Employment Agreement Amendments”) with each of James Farrar, the Company’s
Chief Executive Officer, Greg Tylee, the Company’s President and Chief Operating Officer, and Anthony Maretic, the Company’s Chief Financial Officer, Secretary and Treasurer. The Employment Agreement Amendments clarify that the Company’s executive officers may participate in the organization and administration of Clarity.
A committee consisting solely of the independent members of the Company’s Board of Directors approved the Company’s entry into the Administrative Services Agreement and the Employment Agreement Amendments. The foregoing descriptions of the Administrative Services Agreement and the Employment Agreement Amendments are not complete. Reference is made to the full text of the Administrative Services Agreement and each of the Employment Agreement Amendments filed as Exhibit 10.2, Exhibit 10.3, Exhibit 10.4, and Exhibit 10.5, respectively, to this Quarterly Report onForm 10-Q.
|
|
| |||
Exhibit Number | Description | |||
| ||||
1.1 | ||||
1.2 | ||||
1.3 | ||||
1.4 | ||||
1.5 | ||||
1.6 |
1.7 | ||||
3.1 | ||||
| ||||
3.2 | ||||
| ||||
4.1 | ||||
| ||||
4.2 | ||||
| ||||
10.1 | ||||
| ||||
10.2 | ||||
| ||||
| 31.1 | |||
| ||||
31.2 | ||||
| ||||
32.1 | ||||
| ||||
32.2 | ||||
101.INS | INSTANCE DOCUMENT* | |||
101.SCH | SCHEMA DOCUMENT* | |||
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. |
|
* | 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 Income; (iii) Consolidated Statements of Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements. | |||
** | Compensatory Plan or arrangement |
By: | ||||||
/s/ James Farrar | ||||||
James Farrar | ||||||
| ||||||
Chief Executive Officer and Director | ||||||
(Principal Executive Officer) |
By: |
/s/ Anthony Maretic | |||||
Anthony Maretic | ||||||
| ||||||
| ||||||
(Principal Financial Officer and Principal Accounting Officer) |
28