UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2019~~

2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
to

Commission File Number:

001-36409

CITY OFFICE REIT, INC.

(Exact name of registrant as specified in its charter)


Maryland		98-1141883
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

666 Burrard Street

Suite 3210

Vancouver, BC

V6C 2X8

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (604)

806-3366

~~Former name, former address and former fiscal year, if changed since last report: N/A~~

Securities registered pursuant to Section 12(b) of the Act:


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” “CIO.PrA”	New York Stock Exchange New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T (§

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒

Yes No

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

~~Non-accelerated filer~~	☐
Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☒

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes

☐

☒ No

The number of shares of Common Stock, $0.01 par value, of the registrant outstanding at ~~July 29, 2019~~August

, 2020 was ~~39,647,063.~~

43,397,117.

City Office REIT, Inc.

Quarterly Report on Form

10-Q

For the Quarter Ended June 30, ~~2019~~

2020

Table of Contents


PART I. FINANCIAL INFORMATION		3

Item 1. Financial Statements		3
~~Item 1.~~	~~Financial Statements~~		3

	Condensed Consolidated Balance Sheets as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019		3


	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019		4

Condensed Consolidated Statements of Comprehensive Income/(Loss) for the Three and Six Months Ended June 30, 2020 and 2019		5

Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019		5 6


	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019		6 7


	Notes to Condensed Consolidated Financial Statements		7 8


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16 17


Item 3.	Quantitative and Qualitative Disclosures about Market Risk		24 27


Item 4.	Controls and Procedures		25 27


PART II. OTHER INFORMATION			26 28

Item 1. Legal Proceedings		28
~~Item 1.~~	~~Legal Proceedings~~		26
Item 1A. Risk Factors		28
~~Item 1A.~~	~~Risk Factors~~		26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		26 29


Item 3.	Defaults Upon Senior Securities		26 30


Item 4.	Mine Safety Disclosures		26 30

Item 5. Other Information		30
~~Item 5.~~	~~Other Information~~		26
Item 6. Exhibits		30
~~Item 6.~~	~~Exhibits~~		27

Signatures			29 32

PART I. FINANCIAL INFORMATION

~~Item 1.~~

~~Financial Statements~~

Item 1. Financial Statements

City Office REIT, Inc.

Condensed Consolidated

Balance

Sheets

(Unaudited)

(In thousands, except par value and share data)

   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)

June 30,

2020

December 31,
2019

Assets

Real estate properties

Land
$
230,034
$
230,034

Building and improvement

788,544

784,636

Tenant improvement

104,842

94,218

Furniture, fixtures and equipment

285

285

1,123,705

1,109,173

Accumulated depreciation

(120,298
)
(101,835
)

1,003,407

1,007,338

Cash and cash equivalents

67,039

70,129

Restricted cash

16,104

17,394

Rents receivable, net

33,145

32,112

Deferred leasing costs, net

14,067

12,393

Acquired lease intangible assets, net

56,789

67,533

Other assets

16,817

17,061

Assets held for sale

4,543

4,514

Total Assets
$
1,211,911
$
1,228,474

Liabilities and Equity

Liabilities:

Debt
$
704,797
$
607,250

Accounts payable and accrued liabilities

28,203

28,786

Deferred rent

7,029

6,593

Tenant rent deposits

5,358

5,658

Acquired lease intangible liabilities, net

7,010

8,194

Other liabilities

18,832

22,794

Liabilities related to assets held for sale

27

67

Total Liabilities

771,256

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, 44,511,313 and 54,591,047 shares issued and outstanding

445

545

Additional
paid-in
capital

488,820

577,131

Accumulated deficit

(159,390
)
(142,383
)
Accumulated other comprehensive (loss)/income

(2,324
)
715

Total Stockholders’ Equity

439,551

548,008

Non-controlling
interests in properties

1,104

1,124

Total Equity

440,655

549,132

Total Liabilities and Equity
$
1,211,911
$
1,228,474

Subsequent Events (Note 11)

The accompanying notes are an integral part of these condensed consolidated financial statements.

City Office REIT, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

   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

Three Months Ended

June 30,

Six Months Ended

June 30,


2020

2019

2020

2019

Rental and other revenues
$
39,617
$
41,171
$
79,739
$
78,291

Operating expenses:

Property operating expenses

14,084

14,526

28,780

28,370

General and administrative

2,697

3,362

5,480

5,660

Depreciation and amortization

15,080

14,604

30,032

29,022

Total operating expenses

31,861

32,492

64,292

63,052

Operating income

7,756

8,679

15,447

15,239

Interest expense:

Contractual interest expense

(6,792
)
(7,502
)
(13,153
)
(14,645
)
Amortization of deferred financing costs and debt fair value

(341
)
(334
)
(665
)
(671
)

(7,133
)
(7,836
)
(13,818
)
(15,316
)
Net gain on sale of real estate property
—
478
—
478

Net income

623

1,321

1,629

401

Less:

Net income attributable to
non-controlling
interests in properties

(179
)
(165
)
(361
)
(334
)

Net income attributable to the Company

444

1,156

1,268

67

Preferred stock distributions

(1,855
)
(1,855
)
(3,710
)
(3,710
)

Net loss attributable to common stockholders
$
(1,411
) $
(699
) $
(2,442
) $
(3,643
)

Net loss per common share:

Basic
$
(0.03
) $
(0.02
) $
(0.05
) $
(0.09
)

Diluted
$
(0.03
) $
(0.02
) $
(0.05
) $
(0.09
)

Weighted average common shares outstanding:

Basic

47,542

39,640

50,993

39,603

Diluted

47,542

39,640

50,993

39,603

Dividend distributions declared per common share
$
0.150
$
0.235
$
0.300
$
0.470

The accompanying notes are an integral part of these condensed consolidated financial statements.

City Office REIT, Inc.

Condensed Consolidated Statements of ~~Changes in Equity~~

Comprehensive Income/(Loss)

(Unaudited)

(In thousands)

   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

Three Months Ended

June 30,

Six Months Ended

June 30,


2020

2019

2020

2019

Net income
$
623
$
1,321
$
1,629
$
401

Other comprehensive loss:

Unrealized cash flow hedge loss

(394
)
—

(3,084
)
—

Amounts reclassified to interest expense

96

—

45

—

Other comprehensive loss

(298
)
—

(3,039
)
—

Comprehensive income/(loss)

325

1,321

(1,410
)
401

Less:

Comprehensive income attributable to
non-controlling
interests in properties

(179
)
(165
)
(361
)
(334
)

Comprehensive income/(loss) attributable to the Company

146

1,156

(1,771
)
67

Preferred stock distributions

(1,855
)
(1,855
)
(3,710
)
(3,710
)

Comprehensive loss attributable to common stockholders
$
(1,709
) $
(699
) $
(5,481
) $
(3,643
)

The accompanying notes are an integral part of these condensed consolidated financial statements.

City Office REIT, Inc.

Condensed Consolidated Statements of ~~Cash Flows~~

Changes in Equity

(Unaudited)

(In thousands)

   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 $ —

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

Restricted stock award grants and vesting

—

—

135

2

659

(66
)

—

595

—

595

Common stock repurchased

—

—

(8,799
)

(88
)

(77,961
)

—

—

(78,049
)

—

(78,049
)
Common stock dividend distribution declared

—

—

—

—

—

(6,649
)

—

(6,649
)

—

(6,649
)
Preferred stock dividend distribution declared

—

—

—

—

—

(1,855
)

—

(1,855
)

—

(1,855
)
Distributions

—

—

—

—

—

—

—

—

(184
)

(184
)
Net income

—

—

—

—

—

444

—

444

179

623

Other comprehensive loss

—

—

—

—

—

—

(298
)

(298
)

—

(298
)

Balance—June 30, 2020

4,480

$
112,000

44,511

$
445

$
488,820

$
(159,390
)

$
(2,324
)

$
439,551

$
1,104

$
440,655



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, 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

Restricted stock award grants and vesting

—

—

11

—


509

(99
)

—

410

—

410

Common stock dividend distribution declared

—

—

—

—

—

(9,318
)

—

(9,318
)

—

(9,318
)
Preferred stock dividend distribution 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

The accompanying notes are an integral part of these condensed consolidated financial statements.

City Office REIT, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2020			2019
Cash Flows from Operating Activities:
Net income	$	1,629		$	401
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		30,032			29,022
Amortization of deferred financing costs and debt fair value		665			671
Amortization of above and below market leases		(47	)		(92	)
Increase in straight-line rent/expense		(1,002	)		(3,424	)
Non-cash stock compensation		1,157			879
Net gain on sale of real estate property		—			(478	)
Changes in non-cash working capital:
Rents receivable, net		6			(1,677	)
Other assets		(673	)		(1,082	)
Accounts payable and accrued liabilities		(567	)		(5,241	)
Deferred rent		436			53
Tenant rent deposits		(300	)		(394	)

Net Cash Provided By Operating Activities		31,336			18,638

Cash Flows to Investing Activities:
Additions to real estate properties		(15,140	)		(9,881	)
Acquisition of real estate		—			(61,012	)
Net proceeds from sale of real estate		—			33,941
Deferred leasing costs		(3,056	)		(1,598	)

Net Cash Used In Investing Activities		(18,196	)		(38,550	)

Cash Flows (to)/from Financing Activities:
Repurchases of common stock		(89,671	)		—
Debt issuance and extinguishment costs		—			(648	)
Proceeds from borrowings		130,000			95,950
Repayment of borrowings		(33,116	)		(54,827	)
Shares withheld for payment of taxes on restricted stock unit vesting		(42	)		(246	)
Contributions from non-controlling interests in properties		3			22
Distributions to non-controlling interests in properties		(384	)		(290	)
Dividend distributions paid to stockholders		(24,310	)		(22,318	)

Net Cash (Used In)/Provided By Financing Activities		(17,520	)		17,643

Net Decrease in Cash, Cash Equivalents and Restricted Cash		(4,380	)		(2,269	)
Cash, Cash Equivalents and Restricted Cash, Beginning of Period		87,523			33,145

Cash, Cash Equivalents and Restricted Cash, End of Period	$	83,143		$	30,876

Reconciliation of Cash, Cash Equivalents and Restricted Cash:
Cash and Cash Equivalents, End of Period		67,039			11,581
Restricted Cash, End of Period		16,104			19,295

Cash, Cash Equivalents and Restricted Cash, End of Period	$	83,143		$	30,876

Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	13,393		$	14,696
Purchase of additions in real estate properties included in accounts payable	$	6,487		$	1,411
Purchase of deferred leasing costs included in accounts payable	$	550		$	160
Debt assumed on acquisition of real estate	$	—		$	22,473

The accompanying notes are an integral part of these condensed consolidated financial statements.

City Office REIT, Inc.

Notes to the Condensed Consolidated Financial Statements

1. Organization and Description of Business

City Office REIT, Inc. (the “Company”) was organized in the state of Maryland on November 26, 2013. On April 21, 2014, the Company completed its initial public offering (“IPO”) of shares of the Company’s common stock. The Company contributed the net proceeds of the IPO to City Office REIT Operating Partnership, L.P., a Maryland limited partnership (the “Operating Partnership”), in exchange for common units of limited partnership interest in the Operating Partnership (“common units”).

The Company’s interest in the Operating Partnership entitles the Company to share in distributions from, and allocations of profits and losses of, the Operating Partnership in proportion to the Company’s percentage ownership of common units. As the sole general partner of the Operating Partnership, the Company has the exclusive power under the Operating Partnership’s partnership agreement to manage and conduct the Operating Partnership’s business, subject to limited approval and voting rights of the limited partners.

The Company has elected to be taxed and will continue to operate in a manner that will allow it to continue to qualify as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). Subject to qualification as a REIT, the Company will be permitted to deduct dividend distributions paid to its stockholders, eliminating the U.S. federal taxation of income represented by such distributions at the Company level. REITs are subject to a number of organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal and state income tax on its taxable income at regular corporate tax rates and, for tax years beginning before 2018, any applicable alternative minimum tax.

2. Summary of Significant Accounting Policies

Basis of Preparation and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with Securities and Exchange Commission rules and regulations and generally accepted accounting principles in the United States of America (“US GAAP”) and in the opinion of management contain all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form

10-K

for the year ended December 31, ~~2018.~~

~~New~~2019.

Recent Accounting Pronouncements

~~Adopted in the Current Year~~

In ~~February 2016,~~March 2020, the Financial Accounting Standards Board ~~or FASB,~~ established Topic ~~842, Leases,~~848, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, by issuing Accounting Standards Update (“ASU”)

No. ~~2016-02,~~ ~~which requires lessors to classify leases as a sales-type, direct financing, or operating lease~~2020-04.

ASU

2020-04

provides companies with optional expedients and ~~requires lessees to recognize leaseson-balance~~ ~~sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASUNo. 2018-01,~~ ~~Land Easement Practical Expedient for Transition to Topic 842; ASUNo. 2018-10,~~ ~~Codification Improvements to Topic 842, Leases; and ASUNo. 2018-11,~~ ~~Targeted Improvements.~~

~~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 adjustment~~exceptions to the ~~opening balance of retained earnings. Financial information~~guidance on contract modifications and ~~disclosures for periods before January 1, 2019 were~~hedge 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 practical~~remeasure 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 Company~~that 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~~

~~The~~applying hedge accounting for ~~lessors under~~hedging relationships affected by reference rate reform, if certain criteria are met. ASU

2020-04

can be applied as of the ~~new standard remained relatively unchanged with a few targeted updates impacting~~beginning of the ~~Company, which included: (i) narrower definition of initial direct costs~~interim period that ~~requires certain costs to~~includes March 12, 2020, however, the guidance will only be ~~expensed rather than capitalized, and (ii) provisions~~available for ~~uncollectible rents to be recorded as a reduction in revenue rather than as bad debt expense.~~

~~Lessee Accounting~~

optional use through December 31, 2022. The new standard ~~requires lessees~~applies prospectively to ~~recognize~~contract modifications and hedging relationships and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of ASU

2020-04

on its consolidated financial statements and may elect optional expedients in future periods as reference rate reform activities occur.

On April 10, 2020, the Financial Accounting Standards Board (the “FASB”) issued a~~right-of-use~~ ~~asset~~ Staff Q&A to respond to some frequently asked questions about accounting for rent relief related to the effects of the

COVID-19

pandemic. Consequently, for rent relief related to the effects of the

COVID-19

pandemic, an entity will not be required to analyze each contract to determine whether enforceable rights and ~~lease liability on the balance sheet~~obligations 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~~abatements exist in the ~~statement~~contract and can elect to apply or not apply the lease modification guidance to those contracts. Entities may make the elections for any lessor-provided rent relief related to the effects of ~~operations. Upon transition~~the

COVID-19

pandemic (e.g., deferrals of lease payments, reduced future lease payments, etc.) as long as the rent relief does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. To date, the Company ~~recognizedright-of~~ ~~use assets~~granted rent relief to certain tenants, most often in the form of a rent deferral or rent abatement. For rent relief granted that did not result in a substantial increase in the rights of the lessor or the obligations of the lessee, the Company elected to not apply the lease modification guidance and instead account for the rent relief as though the enforceable rights and obligations for the relief existed in the original contract. For rent relief granted that resulted in a substantial increase in the rights of the lessor or the obligations of the lessee, the Company applied the lease ~~liabilities principally for its ground and office leases.~~

modification guidance to the applicable contracts.

3. Real Estate Investments

Acquisitions

During the six months ended June 30, ~~2019~~2020 and ~~2018~~2019 the Company acquired the following properties:


Property	Date Acquired		Percentage Owned
Cascade Station		June 2019		100	%
Canyon Park		February 2019		100	%
~~Pima Center~~		~~April 2018~~		~~100~~	%

~~Each of the~~

The foregoing acquisitions were accounted for as asset acquisitions.

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, 2019 (in thousands):

   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 Park			Cascade Station			Total June 30, 2019
Land	$	7,098		$	—		$	7,098
Building and improvement		36,619			25,141			61,760
Tenant improvement		1,797			2,080			3,877
Lease 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

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

Sale of Real Estate Property

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.

On February 7, 2019, the Company sold the Plaza 25 property in Denver, Colorado for $17.9 million. No gain or loss was recognized on the sale as the property was carried at fair value less cost to sell on the date of

disposition.

Assets Held for Sale

On ~~March 8, 2018,~~May 10, 2019, the Company ~~sold~~entered into a purchase and sale agreement to sell a land parcel at the ~~Washington Group Plaza~~Circle Point property ~~in Boise, Idaho~~ for ~~$86.5 million, resulting in an aggregate net gain~~$6.5 million. The Company determined that the land parcel met the criteria for classification as held for sale as of ~~$47.0 million, net~~June 30, 2020 and December 31, 2019.

As of ~~$1.7~~ June 30, 2020, the Company had received a $0.8

million ~~in costs, which~~

non-refundable

deposit. On July 23, 2020, the Company completed the sale of the land parcel at the Circle Point property.

The property has been classified as ~~net gain on~~held for sale as of ~~real estate property in the condensed consolidated statements of operations. In connection with the sale of the property, certain debt repayments were made.~~

June 30, 2020 and December 31, 2019 (in thousands):


Circle Point Land	June 30, 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	$	(27	)	$	(67	)

Liabilities related to assets held for sale	$	(27	)	$	(67	)

4. Lease Intangibles

Lease intangibles and the value of assumed lease obligations as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were comprised as follows (in thousands):

   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 )

~~(1)~~

For the below market ground lease asset, the Company is the lessee, whereas, for the below market ground lease liability, the Company is the lessor. Upon the adoption of Topic 842 on January 1, 2019, the Company derecognized the below market ground lease intangible asset related to one of its lessee ground leases and included the net carrying value of the intangible asset within the~~right-of-use~~ ~~asset recognized upon transition to the new standard.~~


	Lease Intangible Assets												Lease Intangible Liabilities
June 30, 2020	Above Market Leases			In Place Leases			Leasing Commissions			Total			Below Market Leases			Below Market Ground Lease			Total
Cost	$	14,870		$	87,163		$	35,949		$	137,982		$	(13,862	)	$	(138	)	$	(14,000	)
Accumulated amortization		(7,469	)		(55,325	)		(18,399	)		(81,193	)		6,948			42			6,990

	$	7,401		$	31,838		$	17,550		$	56,789		$	(6,914	)	$	(96	)	$	(7,010	)


	Lease Intangible Assets												Lease Intangible Liabilities
December 31, 2019	Above Market Leases			In Place Leases			Leasing Commissions			Total			Below Market Leases			Below Market Ground Lease			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	)

The estimated aggregate amortization expense for lease intangibles for the next five years and in the aggregate are as follows (in thousands):

2019
   $ 10,192
2020
   18,332
2021
   15,022
2022
   7,255
2023
   4,393
Thereafter
   7,529


   $ 62,723


2020	$	9,413
2021		15,890
2022		8,229
2023		5,355
2024		3,077
Thereafter		7,815

	$	49,779

5. Debt

The following table summarizes the indebtedness as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 (dollars in thousands):

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 40^th 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	June 30, 2020			December 31, 2019			Interest Rate as of June 30, 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)		84,425			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		40,549			40,854			4.79	%		October 2025
Circle Point		39,650			39,650			4.49	%		September 2028
SanTan		33,752			34,053			4.56	%		March 2027
Intellicenter		32,710			32,971			4.65	%		October 2025
The Quad		30,600			30,600			4.20	%		September 2028
FRP Collection		28,619			28,969			3.10	%		September 2023
2525 McKinnon		27,000			27,000			4.24	%		April 2027
Greenwood Blvd		22,425			22,425			3.15	%		December 2025
Cascade Station		22,130			22,304			4.55	%		May 2024
5090 N 40 th St		21,838			22,000			3.92	%		January 2027

AmberGlen		20,000			20,000			3.69	%		May 2027
Lake Vista Pointe		17,547			17,717			4.28	%		August 2024
Central Fairwinds		17,332			17,534			3.15	%		June 2024
FRP Ingenuity Drive		16,869			17,000			4.44	%		December 2024
Carillon Point		15,780			15,972			3.10	%		October 2023

Total Principal		709,176			612,292
Deferred financing costs, net		(4,926	)		(5,660	)
Unamortized fair value adjustments		547			618

Total	$	704,797		$	607,250

(1)	All interest rates are fixed interest rates with the exception of the ~~unsecured credit facility~~Unsecured Credit Facility (“Unsecured Credit Facility”) and the Term Loan (as defined herein), as explained in ~~footnote 2~~footnotes 3 and 4 below.

(2)	As of June 30, ~~2019,~~2020, the ~~Unsecured Credit Facility had $250 million authorized with $150 million drawn and a $5.3 million letter of credit to satisfy escrow requirements for a mortgage lender. On~~ one-month LIBOR rate was 0.16%.

(3)

In March ~~15,~~ 2018, the Company entered into ~~a $250 million~~the Credit Agreement for the Unsecured Credit Facility that provides for commitments of up to $250 million, which includes an accordion feature that ~~will permit~~allows the Company to borrow up to $500 million, subject to customary terms and conditions. The Unsecured Credit Facility matures in March 2022 ~~which~~ and may be extended to March 2023 at the Company’s option upon meeting certain conditions. Borrowings under the Unsecured Credit Facility ~~will~~ bear interest at a rate equal to the LIBOR rate plus a margin of between 140 to 225 basis points depending upon the Company’s consolidated leverage ratio. As of June 30, 2020, the Unsecured Credit Facility had $100 million drawn and $7.0 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.

~~(3)~~

~~As of June 30, 2019, the one month LIBOR rate was 2.40%.~~

(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 rate

30-day

LIBOR payments.

(5)	The mortgage loan is cross-collateralized by ~~DTC Crossroads,~~ Cherry Creek, City Center and ~~City Center.~~ 7595 Tech (formerly “DTC Crossroads”).

~~(5)~~(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.

The scheduled principal repayments of debt as of June 30, ~~2019~~2020 are as follows (in thousands):

2019
   $ 2,692
2020
   6,186
2021
   89,125
2022
   156,165
2023
   47,822
Thereafter
   413,013


   $ 715,003


2020	$	3,163
2021		89,355
2022		106,529
2023		48,529
2024		124,725
Thereafter		336,875

	$	709,176

6. Fair Value of Financial Instruments

Fair value measurements are based on assumptions that market participants would use in pricing an asset or a liability. The hierarchy for inputs used in measuring fair value is as follows:

Level 1 Inputs – quoted prices in active markets for identical assets or liabilities

Level 2 Inputs – observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3 Inputs – unobservable inputs

In September 2019, the Company entered into a five-year Interest Rate Swap for a notional amount of ~~each~~$50.0 million. 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 rate

30-day

LIBOR payments. Accordingly, the fair value of the Interest Rate Swap has been classified as a Level 2 fair value measurement.

The Interest Rate Swap has been designated and qualifies as a cash flow hedge and has been recognized on the consolidated balance sheets at fair value. Gains and losses resulting from changes in the fair value of derivatives that have been designated and qualify as cash flow hedges are reported as a component of other comprehensive income/(loss) and reclassified into earnings in the periods during which the hedged forecasted transaction affects earnings.

As of June 30, ~~2019 and~~2020, the Interest Rate Swap was reported as a liability at its fair value of approximately $2.3 million, which is included in other liabilities on the Company’s consolidated balance sheet. For the six months ended June 30, 2020 the amount of realized losses reclassified to interest expense due to payments received by the swap counterparty were nominal.

As of December 31, ~~2018,~~2019, the ~~Company did not have any hedges or derivatives.~~

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.

Cash, Cash Equivalents, Restricted Cash, Rents Receivable, Accounts Payable and Accrued Liabilities

The Company estimates that the fair value approximates carrying value due to the relatively short-term nature of these instruments.

Fair Value of Financial Instruments Not Carried at Fair Value

With the exception of fixed rate mortgage loans payable, the carrying amounts of the Company’s financial instruments approximate their fair value. The Company determines the fair value of its fixed rate mortgage loan payable based on a discounted cash flow analysis using a discount rate that approximates the current borrowing rates for instruments of similar maturities. Based on this, the Company has determined that the fair value of these instruments was ~~$580.7~~$582.0 million and ~~$503.3~~$576.9 million as of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Accordingly, the fair value of mortgage loans payable have been classified as Level 3 fair value measurements.

7. Related Party Transactions

Administrative Services Agreement

For the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, the Company earned ~~$0.3~~$0.2 million and ~~$0.4~~ $0.3

million, respectively, in administrative services performed for Second City Real Estate II Corporation and its affiliates ~~(collectively, “Second~~(“Second City”). Also during the six months ended June 30, 2019, the Company was assigned a purchase contract which had been entered into by an entity affiliated with principals of Second City, which principals are also officers

of the Company. The Company subsequently assigned the purchase contract to a third party during the six months ended June 30, 2019. The Company paid no consideration to the related party for the contract other than return of deposits which the Company subsequently recovered from a third party in addition to an assignment fee. The Company recognized income of ~~$2.6~~

2.6

million on the assignment of the purchase contract to the third party, which was recorded in rental and other revenues on the condensed consolidated statement of operations.

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. During the six months ended June 30, 2020, the Company earned $0.1 million in administrative services performed for Clarity.

8. Leases

Lessor Accounting

The Company is focused on acquiring, owning and operating high-quality office properties for lease to a stable and diverse tenant base. Our properties have both full-service gross and net leases which are generally classified as operating leases. Rental income related to such leases is recognized on a straight-line basis over the remaining lease term. The Company’s total revenue includes fixed base rental payments provided under the lease and variable payments which principally consist of tenant expense reimbursements for certain property operating expenses.

The Company ~~elected~~recognized fixed and variable lease payments for the ~~practical expedient to account for its lease~~three and~~non-lease~~ ~~components as a single combined operating lease component under the new leasing standard. As a result, rental income, expense reimbursement,~~ six months ended June 30, 2020 and ~~other were aggregated into a single line within rental and other revenues on the condensed consolidated statement of operations.~~

~~For~~ the three and six months ended June 30, 2019 ~~the Company recognized $38.5 million and $75.6 million, respectively, of rental and other revenue related to its operating leases~~as follows (in thousands):

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 June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Fixed payments	$	33,907	$	32,861	$	67,999	$	65,060
Variable payments		5,697		5,646		11,713		10,526

	$	39,604	$	38,507	$	79,712	$	75,586

Future minimum lease payments to be received by the Company as of June 30, ~~2019~~2020 under

non-cancellable

operating leases for the next five years and thereafter are as follows (in thousands):

2019
   $ 60,208
2020
   113,808
2021
   102,819
2022
   85,402
2023
   67,284
Thereafter
   143,674


   $ 573,195


2020	$	61,615
2021		117,530
2022		98,570
2023		80,442
2024		60,917
Thereafter		118,525

	$	537,599

The Company’s leases may include various provisions such as scheduled rent increases, renewal options and termination options. The majority of the Company’s leases include defined rent increase rather than variable payments based on an index or unknown rate. Seven state government tenants currently have the exercisable right to terminate their leases if the applicable state legislature does not appropriate rent in its annual budget. The Company has determined that the occurrence of any government tenant not being appropriated the rent in the applicable annual budget is a remote contingency and accordingly recognizes lease revenue on a straight-line basis over the respective lease term. These tenants represent approximately 8.2% of the Company’s total future minimum lease payments as of June 30, 2019.

Lessee Accounting

As a lessee, the Company has ground and office leases which are classified as operating ~~leases~~ and ~~one office lease classified as a~~ financing ~~lease. Upon adoption of Topic 842, on January 1, 2019, the Company recognizedright-of-use~~ ~~assets of $9.2 million and lease liabilities of $7.2 million. The difference between the recordedright-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.~~leases. As of June 30, ~~2019,~~2020, these leases had remaining terms of 2 to 7068 years and a weighted average remaining lease term of 56 years. ~~Operating and financing~~

Right-of-use

~~right-of-use~~assets and lease liabilities have been included within other assets and other liabilities on the Company’s condensed consolidated balance sheet as follows (in thousands):

   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 June 30, 2020		As of December 31, 2019
Right-of-use asset – operating leases	$	12,931	$	13,130
Lease liability – operating leases	$	7,937	$	8,033
Right-of-use asset – financing leases	$	67	$	79
Lease liability – financing leases	$	67	$	79

Lease liabilities are measured at the commencement date based on the present value of future lease payments. One of the Company’s operating ground leases includes rental payment increases over the lease term based on increases in the Consumer Price Index (“CPI”). Changes in the CPI were not estimated as part of the measurement of the operating lease liability. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The Company used a weighted average discount rate of ~~6.31%~~6.3% in determining its lease liabilities. The discount rates were derived from the Company’s assessment of the credit quality of the Company and adjusted to reflect secured borrowing, estimated yield curves and long-term spread adjustments.

Right-of-use

assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.

Operating lease expense

for the three and six months ended June 30, 2020

were

$0.2 million and $0.4 million respectively. Operating lease expense

for the three and six months ended June 30, 2019 ~~was $0.2~~

were

$0.2 million and $0.4 million respectively. Financing lease expense

for the

three and

six months ended June 30, 2020 and 2019 ~~was~~

were

nominal.

Future minimum lease payments to be paid by the Company as a lessee for operating and financing leases as of June 30, ~~2019~~2020 for the next five years and thereafter are as follows (in thousands):

   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	$	196		$	13
2021		817			27
2022		798			27
2023		663			4
2024		597			—
Thereafter		26,680			—

Total future minimum lease payments		29,751			71
Discount		(21,814	)		(4	)

Total	$	7,937		$	67

9. Commitments and Contingencies

The Company is obligated under certain tenant leases to fund tenant improvements and the expansion of the underlying leased properties.

Under various federal, state and local laws, ordinances and regulations relating to the protection of the environment, a current or previous owner or operator of real estate may be liable for the cost of removal or remediation of certain hazardous or toxic substances disposed, stored, generated, released, manufactured or discharged from, on, at, under, or in a property. As such, the Company may be potentially liable for costs associated with any potential environmental remediation at any of its formerly or currently owned properties.

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

non-compliance,

liability, claim or expenditure will not arise in the future.

The Company is involved from time to time in lawsuits and other disputes which arise in the ordinary course of business. As of June 30, ~~2019,~~2020, management believes that these matters will not have a material adverse effect, individually or in the aggregate, on the Company’s financial position or results of operations.

10. Stockholders’ Equity

Share Repurchase Plan

On March 9, 2020, the Company’s Board of Directors approved a share repurchase plan authorizing the Company to repurchase up to $100 million of its outstanding shares of common stock. Under the share repurchase program, the shares may be repurchased from time to time using a variety of methods, which may include open market transactions, privately negotiated transactions or otherwise, all in accordance with the rules of the Securities and Exchange Commission and other applicable legal requirements.

Repurchased shares of common stock will be classified as authorized and unissued shares. The Company recognizes the cost of shares of common stock it repurchases, including direct costs incurred, as a reduction in stockholders’ equity. Such reductions of stockholders equity due to the repurchases of shares of common stock will be applied first, to reduce common stock in the amount of the par value associated with the shares of common stock repurchased and second, to reduce additional
paid-in
capital by the amount that the purchase price for the shares of common stock repurchased exceed the par value.

During the six months ended June 30, 2020, the Company completed the repurchase of 10,249,655 shares of its common stock for approximately $89.3 million. There were 0 shares repurchased during the six months ended June 30, 2019.

Common Stock and Common Unit Distributions

On June ~~14, 2019,~~12, 2020, the Company’s Board of Directors approved and the Company declared a cash dividend distribution of ~~$0.235~~$0.15 per common share for the quarterly period ended June 30, ~~2019.~~2020. The dividend was paid subsequent to quarter end on July ~~25, 2019~~24, 2020 to common stockholders and common unitholders of record as of the close of business on July ~~11, 2019,~~10, 2020, resulting in an aggregate payment of ~~$9.3~~$6.6 million.

Preferred Stock Distributions

On June ~~14, 2019,~~12, 2020 the Company’s Board of Directors approved and the Company declared a cash dividend of $0.4140625 per ~~preferred~~ share of the Company’s 6.625% Series A Preferred Stock (“Series A Preferred Stock”) for an aggregate amount of $1.9 million for the quarterly period ended June 30, ~~2019.~~2020. The dividend was paid subsequent to quarter end on July ~~25, 2019~~24, 2020 to ~~preferred stockholders~~the holders of record of Series A Preferred Stock as of the close of business on July ~~11, 2019, resulting in an aggregate payment of $1.9 million.~~

~~Restricted Stock Units~~

10, 2020.

Equity Incentive Plan

The Company has an equity incentive plan (“Equity Incentive Plan”) for executive officers, directors and certain

non-executive

employees, and with approval of the Board of Directors, for subsidiaries and their respective affiliates. The Equity Incentive Plan provides for grants of restricted common stock, restricted stock units, phantom shares, stock options, dividend equivalent rights and other equity-based awards (including LTIP Units), subject to the total number of shares available for issuance under the plan. The Equity Incentive Plan is administered by the compensation committee of the Board of Directors (the “Plan Administrator”).

On May 2, 2019, the Company’s stockholders approved an amendment to the Equity Incentive Plan increasing the maximum number of shares of common stock that may be issued under the Equity Incentive Plan from 1,263,580 shares to 2,263,580 shares. To the extent an award granted under the Equity Incentive Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards.

On January 27, 2020, each of the Board of Directors and the Compensation Committee approved a new form of performance-based restricted unit award agreement (the “Performance RSU Award Agreement”) that will be used to grant performance-based restricted stock unit awards (“Performance RSU Awards”) pursuant to the Equity Incentive Plan. The Performance RSU Awards are based upon the total stockholder return (“TSR”) of the Company’s common stock over a three-year measurement period beginning January 1, 2020 and ending on December 31, 2022 (the “Measurement Period”) relative to the TSR of the companies in the SNL US REIT Office index as of January 2, 2020 (the “2020 RSU Peer Group”). The payouts under the Performance RSU Awards are evaluated on a sliding scale as follows: TSR below the 30th percentile of the 2020 RSU Peer Group would result in a 50% payout; TSR at the 50th percentile of the 2020 RSU Peer Group would result in a 100% payout; and TSR at or above the 75th percentile of the 2020 RSU Peer Group would result in a 150% payout. Payouts are mathematically interpolated between these stated percentile targets, subject to a 150% maximum. To the extent earned, the payouts of the Performance RSU Awards are intended to be settled in the form of shares of the Company’s common stock, pursuant to the Equity Incentive Plan. Upon satisfaction of the vesting conditions, dividend equivalents in an amount equal to all regular and special dividends declared with respect to the Company’s common stock during each annual measurement period during the Measurement Period are determined and paid on a cumulative, reinvested basis over the term of the applicable Performance RSU Award, at the time such award vests and based on the number of shares of the Company’s common stock that are earned.

During the six months ended June 30, ~~2019, 162,500~~2020, 147,050 restricted stock units (“RSUs”) were granted to executive officers, directors and certain

non-executive

employees with a fair value of ~~$1.8~~$2.0 million. The RSU awards will vest in three equal, annual installments on each of the first three anniversaries of the date of grant. For the three and six months ended June 30, 2020, the Company recognized net compensation expense of $0.5 and $1.0 million, respectively, related to the RSUs. For the three and six months ended June 30, 2019, the Company recognized net compensation expense of $0.5 million and $0.9 million, respectively, related to the RSUs.

During the six months ended June 30, 2020, 97,500 Performance RSU Awards were granted to executive officers with a fair value of

$1.3 million. The Performance RSU Awards will vest on the last day of the three-year measurement period of January 1, 2020 through December 31, 2022. For the three and six months ended June 30, ~~2018~~2020, the Company recognized net compensation expense of ~~$0.3~~$0.1 million and ~~$0.7~~$0.2 million, respectively, related to the ~~RSUs.~~

APerformance RSU ~~award represents~~Awards. There was 0 compensation expense related to the ~~right~~Performance RSU Awards for the three and six months ended June 30, 2019.

11. Subsequent Events

Subsequent to ~~receive~~quarter end through August 3, 2020, the Company settled on the repurchase of 1,114,196 shares of ~~the Company’s~~its 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 RSUs. The Plan Administrator may provide for a grant of dividend equivalent rights in connection with the grant of RSU; provided, however, that if the RSUs do not vest solely upon satisfaction of continued employment or service, any payment in respect to the related dividend equivalent rights will be held byapproximately $10.7 million.

On July 23, 2020, the Company ~~and paid when, and only to~~completed the ~~extent that,~~previously announced disposition of a land parcel at the ~~related RSU vests.~~

Circle Point property in Denver, Colorado for

~~11. Subsequent Events~~

~~On July 31, 2019, an indirect, wholly-owned subsidiary~~

6.5

million, resulting in a gain, net 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 principalsdisposal costs, 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.

1.3

million.

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is based on, and should be read in conjunction with, the condensed, consolidated financial statements and the related notes thereto of the City Office REIT, Inc. contained in this Quarterly Report on Form~~10-Q.~~

10-Q

(this “Report”).

As used in this section, unless the context otherwise requires, references to “we,” “our,” “us,” and “our company” refer to City Office REIT, Inc., a Maryland corporation, together with our consolidated subsidiaries, including City Office REIT Operating Partnership L.P., a Maryland limited partnership, of which we are the sole general partner and which we refer to in this section as our Operating Partnership, except where it is clear from the context that the term only means City Office REIT, Inc.

Cautionary Statement Regarding Forward-Looking Statements

This quarterly report on Form

10-Q,

including “Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition,” contains both historical and forward-looking statements. All statements, other than statements of historical fact are, or may be deemed to be, forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward looking statements are not based on historical facts, but rather reflect our current expectations and projections about our future results, performance, prospects and opportunities. These forward looking statements may be identified byWe have used the ~~use of~~ words ~~including~~“approximately,” “anticipate,” “assume,” “believe,” “budget,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” ~~“might,~~“outlook,” “plan,” ~~“estimate,~~“potential,” “predict,” “project,” “seek,” “should,” ~~“will,~~“target,” ~~“result”~~“will” and similar terms and ~~phrases. These forward looking~~phrases to identify forward-looking statements in this Report. All of our forward-looking statements are subject to ~~a number of known~~risks and ~~unknown risks,~~ uncertainties ~~and other factors~~ that ~~are difficult to predict and which could~~may cause ~~our~~ actual ~~future~~ results ~~performance, prospects or opportunities~~ to differ materially from those ~~expressed in, or implied by, these forward looking statements. These risks, uncertainties and other factors include, among others~~:

that we are expecting, including:

adverse economic or real estate developments in the office sector or the markets in which we operate;

changes in local, regional, national and international economic ~~conditions;~~

conditions, including as a result of the ongoing

COVID-19

pandemic;

requests from tenants for rent deferrals, rent abatement or relief from other contractual obligations, or a failure to pay rent, as a result of changes in business behavior stemming from the ongoing

COVID-19

pandemic;

our inability to compete effectively;

our inability to collect rent from tenants or renew tenants’ leases on attractive terms if at all;

demand for and market acceptance of our properties for rental purposes;

defaults on or

non-renewal

of leases by tenants;

increased interest rates and any resulting increase in financing or operating costs;

decreased rental rates or increased vacancy rates;

our failure to obtain necessary financing or access the capital markets on favorable terms or at all;

changes in the availability of acquisition opportunities;

availability of qualified personnel;

our inability to successfully complete real estate acquisitions or dispositions on the terms and timing we expect, or at all;

our failure to successfully operate acquired properties and operations;

changes in our business, financing or investment strategy or the markets in which we operate;

our failure to generate sufficient cash flows to service our outstanding indebtedness;

environmental uncertainties and risks related to adverse weather conditions and natural disasters;

our failure to qualify and maintain our status as a real estate investment trust (“REIT”);

government approvals, actions and initiatives, including the need for compliance with environmental ~~requirements;~~

requirements or actions in response to the

COVID-19

pandemic;

outcome of claims and litigation involving or affecting us;

financial market fluctuations;

changes in real estate, taxation and zoning laws and other legislation and government activity and changes to real property tax rates and the taxation of REITs in general;

and

~~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

other factors described in our news releases and filings with the ~~United States~~ Securities and Exchange Commission (the “SEC”), including but not limited to those described in our Annual Report on Form

10-K

for the year ended December 31, ~~2018~~2019 under the heading “Risk Factors” and in our subsequent reports filed with the SEC.

The ~~forward looking~~forward-looking statements ~~included~~contained in this ~~report~~Report are based on historical performance and management’s current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to the factors, risks and uncertainties described above, changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors described in our news releases and filings with the SEC, including but not limited to those described in our Annual Report on Form

10-K

for the year ended December 31, 2019 under the heading “Risk Factors” and in our subsequent reports filed with the SEC, many of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this Report speaks only as of the date of this ~~report,~~Report. Factors or events that could cause our actual results to differ may emerge from time to time, and ~~except as otherwise required by federal securities law, we do~~it is not ~~have any~~possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or ~~revise any forward looking statements to reflect subsequent events or circumstances.~~

otherwise, except as may be required by applicable securities laws.

Overview

Company

We were formed as a Maryland corporation on November 26, 2013. On ~~April~~ April��21, 2014, we completed our initial public offering (“IPO”) of shares of common stock. We contributed the net proceeds of the IPO to our Operating Partnership in exchange for common units in our Operating Partnership. Both we and our Operating Partnership commenced operations upon completion of the IPO and certain related formation transactions.

Revenue Base

As of June 30, ~~2019,~~2020, we owned 2725 properties comprised of 65 office buildings with a total of approximately ~~5.7~~5.8 million square feet of net rentable area (“NRA”). As of June 30, ~~2019,~~2020, our properties were approximately ~~93.4%~~91.9% leased.

Office Leases

Historically, most leases for our properties were on a full-service gross or net lease basis, and we expect to continue to use such leases in the future. A full-service gross lease generally has a base year expense “stop”, whereby we pay a stated amount of expenses as part of the rent payment while future increases (above the base year stop) in property operating expenses are billed to the tenant based on such tenant’s proportionate square footage in the property. The property operating expenses are reflected in operating expenses; however, only the increased property operating expenses above the base year stop recovered from tenants are reflected as tenant recoveries in our statements of operations. In a triple net lease, the tenant is typically responsible for all property taxes and operating expenses. As such, the base rent payment does not include any operating expenses, but rather all such expenses are

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 ~~our~~the 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.

Factors That May Influence Our Operating Results and Financial Condition

COVID-19

During the first quarter of 2020, the World Health Organization declared the
COVID-19
outbreak a pandemic. There have been mandates from international, federal, state and local authorities requiring forced closures of businesses and other facilities, and most of the markets in which our buildings are located are subject to some form of ongoing pandemic-related restrictions. These forced closures and restrictions have had a material adverse effect on the global economy and the regional U.S. economies in which we operate, including negatively impacting some of our tenants’ ability to pay their rent.

All of our buildings are open and continue to operate. We have adopted new policies and procedures to incorporate best practices for the safety of our tenants, our vendors and our employees. However, the usage of our assets in the second quarter 2020 was significantly lower than normal. Usage of our assets for the remainder of 2020 depends on the duration of the pandemic and pace of economic
re-opening,
which is impossible to estimate.

We continue to closely monitor the impact of the
COVID-19
pandemic on all aspects of our business and geographies. While we did not experience any significant disruptions during the six months ended June 30, 2020, as a result of
COVID-19
or governmental or tenant actions in response thereto, the Company granted rent relief to nine tenants comprising approximately 1.0% of the Company’s NRA, most often in the form of a rent deferral or rent abatement. Subsequent to June 30, 2020, the Company granted rent relief to one additional tenant and also granted additional rent abatements to three tenants who previously received relief, which combined comprises approximately 0.1% of the Company’s NRA. Although the rent deferrals and rent abatements granted to date did not have a material impact on our net rental revenue, the long-term impact of the pandemic on our tenants and the world-wide economy is uncertain and impossible to estimate, and will depend on the scope, severity and duration of the pandemic.

We believe that some of the industries most impacted by
COVID-19
are coworking, retail, restaurant and café, travel and accommodation, live event related and energy. We generally have limited exposure to these industries, with these sectors comprising approximately 3% of our portfolio by square footage. However, the impact of
COVID-19
extends to all sectors of the U.S. economy and as such, we expect that tenants outside of these select industries will also face significant challenges. Rating agencies have downgraded the credit rating and outlook of many businesses, including one of our ten largest tenants.

Through August 3, 2020, we have collected over 99% of contractually required base rents from our tenants for the three months ended June 30, 2020 and granted rent relief for another approximately 0.6% of contractually required base rents from our tenants for the three months ended June 30, 2020. The rate of collections in future months may be lower, as the length of the economic downturn continues to impact tenants. We have developed dedicated teams and processes to evaluate
non-payments
and rent relief requests. We evaluate each

tenant rent relief request on an individual basis, considering a number of factors. Not all tenant requests ultimately result in modification agreements, nor are we foregoing our contractual rights under our lease agreements. We believe many of these requests received were from tenants who had the ability to pay rent at the time and were seeking opportunistic deferral opportunities. We continue to work efficiently to find tailored resolutions in each case where warranted, including potential deferrals of rent, lease term extensions with short term rent relief, temporary percentage rent opportunities, or, in limited circumstances, rent abatement particularly when the tenant is viewed as an amenity to the building. We may incur additional losses in future periods due to tenants that default on their leases, file for bankruptcy and/or otherwise experience significant financial difficulty as a result of the duration of the
COVID-19
pandemic, but the extent of those losses is impossible to predict given the fluidity of the pandemic and its uncertain impact on economic activity.
Leasing activity has been and we believe it will continue to be impacted by
COVID-19.
We expect that we will experience slower than originally anticipated speculative new leasing and there remains uncertainty over existing tenants’ long-term space requirements. Overall, this would reduce our anticipated rental revenues. Because construction activities have generally been classified as essential activities throughout our markets during the pandemic, we do not currently expect meaningful delays in customers taking occupancy under recently signed leases.
Strategically, we have made adjustments to our business operations as a result of
COVID-19.
We have ceased acquisition activities, allocated capital towards our share repurchase program and adjusted our common stock dividend which will allow us to operate with lower leverage and higher levels of liquidity than previously planned. For a discussion of the impact of the
COVID-19
pandemic on our liquidity and balance sheet, see “Liquidity and Capital Resources” below.
The situation surrounding
COVID-19
remains fluid and we will continue to monitor and actively manage our response in collaboration with tenants, government officials and other third parties to optimally position the Company.

Business and Strategy

We focus on owning and acquiring office properties in our target markets. Our target markets generally possess what we believe are favorable economic growth trends, growing populations with above-average employment growth forecasts, a large number of government offices, large international, national and regional employers across diversified industries, are generally

low-cost

centers for business operations, and exhibit favorable occupancy trends. We utilize our management’s market-specific knowledge and relationships as well as the expertise of local real estate operators and our investment partners to identify acquisition opportunities that we believe will offer cash flow stability and long-term value appreciation. Our target markets are attractive, among other reasons, because we believe that ownership is often concentrated among local real estate operators that typically do not benefit from the same access to capital as public REITs and there is a relatively low level of participation of large institutional investors. We believe that these factors result in attractive pricing levels and risk-adjusted returns.

Although there have been higher

COVID-19

cases in some of our markets, particularly in the southern and western United States, the long-term impact of the pandemic on these markets is uncertain and impossible to estimate, and will depend on the scope, severity and duration of the pandemic.

Rental Revenue and Tenant Recoveries

The amount of net rental revenue generated by our properties will depend principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space that becomes available from lease terminations. The amount of rental revenue generated also depends on our ability to maintain or increase rental rates at our properties. We believe that the average rental rates for our portfolio of properties are generally

in-line

or slightly below the current average quoted market rates. Negative trends in one or more of these factors could adversely affect our rental revenue in future periods. Future economic downturns or regional downturns affecting our markets or submarkets or downturns in our tenants’ industries, including as a result of the

COVID-19

pandemic, that impair our ability to renew or

re-let

space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our properties. In addition, growth in rental revenue will also partially depend on our ability to acquire additional properties that meet our investment criteria.

Our Properties

As of June 30, ~~2019,~~2020, we owned ~~27 office complexes~~25 properties comprised of 65 office buildings with a total of approximately ~~5.7~~5.8 million square feet of NRA in the metropolitan areas of Dallas, Denver, Orlando, Phoenix, Portland, San Diego, Seattle and Tampa. The following table presents an overview of our portfolio as of June 30, ~~2019 (properties listed by descending NRA by market).~~

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 40^th 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

2020.


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		85.0	%	$	27.50	$	27.50	$	6,354
	SanTan		100.0	%		267		93.1	%	$	28.73	$	28.73	$	7,128
	5090 N 40 th St		100.0	%		175		89.3	%	$	29.51	$	29.51	$	4,614
	Camelback Square		100.0	%		174		78.8	%	$	29.42	$	29.42	$	4,034
	The Quad		100.0	%		163		100.0	%	$	29.80	$	30.11	$	4,857
	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		93.5	%	$	18.03	$	32.03	$	4,585
	Denver Tech (3)		100.0	%		381		78.0	%	$	23.13	$	27.19	$	6,652
	Superior Pointe		100.0	%		151		96.5	%	$	18.16	$	30.63	$	2,652
Tampa, FL (17.9%)	Park Tower		94.8	%		471		91.5	%	$	26.15	$	26.15	$	11,281
	City Center		95.0	%		242		91.4	%	$	26.05	$	26.05	$	5,769
	Intellicenter		100.0	%		204		100.0	%	$	24.53	$	24.53	$	4,993
	Carillon Point		100.0	%		124		97.2	%	$	28.65	$	28.65	$	3,457
Orlando, FL (12.4%)	Florida Research Park (4)		96.6	%		397		98.5	%	$	23.41	$	26.84	$	9,134
	Central Fairwinds		97.0	%		168		90.5	%	$	25.85	$	25.85	$	3,936
	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	%	$	25.94	$	33.94	$	6,550
	Mission City		100.0	%		286		89.7	%	$	35.95	$	35.95	$	9,214
Dallas, TX (9.9%)	190 Office Center		100.0	%		303		81.2	%	$	25.65	$	25.65	$	6,313
	Lake Vista Pointe		100.0	%		163		100.0	%	$	16.50	$	25.50	$	2,695
	2525 McKinnon		100.0	%		111		88.5	%	$	28.42	$	45.42	$	2,801
Portland, OR (5.6%)	AmberGlen		76.0	%		203		98.4	%	$	22.01	$	24.55	$	4,388
	Cascade Station		100.0	%		128		100.0	%	$	27.04	$	28.41	$	3,448
Seattle, WA (3.5%)	Canyon Park		100.0	%		207		100.0	%	$	21.84	$	29.84	$	4,515

Total / Weighted Average – June 30, 2020 (5)						5,832		91.9	%	$	24.83	$	27.77	$	132,909

(1)

~~For FRP Ingenuity Drive, Lake Vista Pointe, 2525 McKinnon, Sorrento Mesa, and Canyon Park the annualized base~~

Annualized gross rent per square foot ~~on a~~includes adjustment for estimated expense reimbursements of triple net basis was increased by $8, $8, $17, $6, and $8 respectively, to estimate a gross equivalent base rent. AmberGlen has a net lease for one tenant which has been grossed up by $7 on a pro rata basis. Superior Pointe has net leases for ~~eight tenants which have been grossed up by $12 on a pro-rata basis. FRP Collection has net leases for five tenants which have been grossed up by $9 on apro-rata~~ ~~basis. Circle Point has net leases for fourteen tenants which have been grossed up by $13 on apro-rata~~ ~~basis. The Quad has one tenant with a net lease, which has been grossed up by $8 on apro-rata~~ ~~basis. Cascade Station has net leases for six tenants which have been grossed up by $7 on apro-rata~~ ~~basis.~~

the year ended June 30, 2020.

(2)	Annualized base rent is calculated by multiplying (i) rental payments (defined as cash rents before abatements) for the month ended June 30, ~~2019~~2020 by (ii) 12.

(3)	Denver Tech is comprised of 7601 Tech 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 ~~occupancy~~ occupancy.

Operating Expenses

Our operating expenses generally consist of utilities, property and ad valorem taxes, insurance and site maintenance costs. Increases in these expenses over tenants’ base years (until the base year is reset at expiration) are generally passed along to tenants in our full-service gross leased properties and are generally paid in full by tenants in our net leased properties.

Conditions in Our Markets

Positive or negative changes in economic or other conditions in the markets we operate in, including state budgetary shortfalls, employment rates, natural hazards and other factors, may impact our overall performance.

In addition, the recent

COVID-19

pandemic has caused significant disruption in global financial markets and economies. This global disruption could have a material impact on the markets in which we operate, our tenants and our ability to successfully execute our business strategy. The extent to which

COVID-19

will impact the Company is highly uncertain and is not reasonably estimable at this time. Refer to “Item 1A. Risk Factors” in this Report for further information.

Summary of Significant Accounting Policies

The interim condensed consolidated financial statements follow the same policies and procedures as outlined in the audited consolidated financial statements for the year ended December 31, ~~2018~~2019 included in our Annual Report on Form

10-K

for the year ended December 31, ~~2018 except for the adoption of Accounting Standards Update (“ASU”)2016-02,~~ ~~Leases (Topic 842) as outlined in Note 2 of the condensed consolidated financial statements.~~

2019.

Results of Operations

Comparison of Three Months Ended June 30, ~~2019~~2020 to Three Months Ended June 30, ~~2018~~

2019

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 $11.0~~decreased $1.6 million, or ~~36%~~4%, to $39.6 million for the three months ended June 30, 2020 compared to $41.2 million for the three months ended June 30, ~~2019 compared to $30.2 million for~~2019. During the three months ended June 30, 2018. Of this increase, $2.1 million was from the acquisition of Circle Point in July 2018, $1.4 million was from the acquisition of The Quad in July 2018, $1.2 million was from the acquisition of Greenwood Blvd in December 2018, $1.2 million was from the acquisition of Camelback Square in December 2018, $1.4 million was from the acquisition of Canyon Park in February 2019, and $0.2 million was from the acquisition of Cascade Station in June 2019. Revenue from Central Fairwinds, Park Tower, Mission City and FRP Collection also increased by $0.1 million, $0.3 million, $0.3 million and $0.2 million, respectively, as a result of increased average occupancy over the prior-year period. Partially offsetting these increases, Plaza 25 decreased by $0.7 million due to the sale of the property in February 2019. The remaining properties’ revenues were modestly higher in comparison to the prior-year period primarily as a result of modest~~mark-to-market~~ ~~increases in rents upon renewal. Other~~other revenues benefited from a

one-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~~Rental revenue decreased for the three months ended June 30, 2020 as a result of ~~Topic 842, prior year amounts disclosed~~the sale of Logan Tower in December 2019 and the 10455 Pacific Center building in our Sorrento Mesa portfolio in May 2019 which decreased overall revenue by $0.3 million and $0.1 million, respectively. Further rental ~~income, expense reimbursement,~~revenue decreases were a result of lower occupancy at 190 Center, Mission City, City Center and ~~other have been combined into~~Pima properties which resulted in $0.2 million, $0.2 million, $0.1 million and $0.1 million respectively. Offsetting these decreases, a ~~single line~~$0.8 million increase in revenue for the three months ended June 30, 2020 was attributable to ~~conform~~the acquisition of Cascade Station in June 2019 and $1.4 million was attributable to ~~current period presentation.~~

the acquisition of 7601 Tech, part of our Denver Tech property, in September 2019.

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~~decreased by ~~$7.0~~$0.6 million, or ~~27%~~2%, to $31.9 million for the three months ended June 30, 2020, from $32.5 million for the three months ended June 30, 2019. Total operating expenses decreased by $0.4 million and $0.1 million respectively due to the sale of Logan Tower in December 2019 ~~from $25.5~~and the 10455 Pacific Center building in our Sorrento Mesa portfolio in May 2019. Operating expenses at our San Diego properties decreased by a combined $0.3 million due to a property tax refund received during the three months ended June 30, 2020 related to a prior-year appeal. General and administrative expenses were also lower for the three months ended June 30, ~~2018,~~2020 primarily ~~due to~~because in the ~~acquisitions described above. Total operating expenses increased by $1.9 million, $0.9 million, $0.8 million,~~prior-year period, there were $1.1 million ~~$0.7 million and $0.2 million, respectively, from the acquisitions~~ of ~~Circle Point, The Quad, Greenwood Blvd, Camelback Square, Canyon Park and Cascade Station properties. Park Tower operating~~

one-time

expenses also increased by $0.3 million due to the higher occupancy at that property. Plaza 25 operating expenses decreased by $0.8 million due to its sale in February 2019. General and Administrative Expenses increased by approximately $1.4 million, of which $1.1 million was the result of~~one-time~~ ~~expenses and accruals~~ incurred as a result of the assignment fee income earned during the ~~quarter~~prior period. Offsetting these decreases, total operating expenses increased by $0.5 million and $1.0 million, respectively, from the ~~balance related to higher payroll costs.~~acquisitions of Cascade Station and 7601 Tech properties. The remaining ~~operating~~ expenses were ~~modestly higher~~marginally lower in comparison to the ~~prior year primarily~~prior-year period due to ~~higher occupancy at the properties.~~

lower property utilization.

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 and

re-leasing

costs. Property operating expenses ~~increased $2.8~~decreased by $0.4 million, or ~~24%~~3%, to $14.1 million for the three months ended June 30, 2020, from $14.5 million for the three months ended June 30, 2019. Property operating expenses decreased by $0.2 million and $0.1 million respectively due to the sale of the Logan Tower in December 2019 ~~from $11.7~~and the 10455 Pacific Center building in our Sorrento Mesa portfolio in May 2019. Operating expenses at our San Diego properties decreased by a combined $0.3 million ~~for~~due to a property tax refund received during the three months ended June 30, ~~2018. The increase in property~~2020 related to a prior-year appeal. Offsetting these decreases, total operating expenses was primarily due to the acquisitions described above. The acquisition of the Circle Point, The Quad, Greenwood Blvd, Camelback Square, Canyon Park and Cascade Station contributed an additional $0.9 million, $0.3 million, $0.4 million, $0.4 million, $0.2 million and $0.1 million, respectively, in additional property operating expenses. Park Tower operating expenses also increased by $0.2 million ~~due to~~and $0.6 million, respectively, from the ~~higher occupancy at that property. Plaza 25 decreased by $0.4 million due to the sale~~acquisitions of ~~that property in February 2019.~~Cascade Station and 7601 Tech properties. The remaining ~~property operating~~ expenses ~~aggregate to a net $0.7 million increase~~were marginally lower in comparison to the prior-year ~~period.~~

period due to lower property utilization.

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 as

non-cash

stock-based compensation expenses. General and administrative expenses ~~increased $1.4~~decreased $0.7 million, or ~~71%~~20%, to $2.7 million for the three months ended June 30, 2020, from $3.4 million for the three months ended June 30, ~~2019 compared to $2.0 million for~~2019. The decrease was primarily because in the ~~three months ended June 30, 2018. Of this increase,~~prior-year period, there were $1.1 million ~~can be attributed to the~~of

one-time

expenses ~~and accruals~~ incurred as a result of the assignment fee income ~~earned during the quarter as described above and the balance of the increase is primarily attributable to~~partially offset by higher payroll ~~costs.~~

and stock-based compensation costs for the three months ended June 30, 2020.

Depreciation and Amortization.

Depreciation and amortization increased ~~$2.8~~$0.5 million, or ~~24%~~3%, to $15.1 million for the three months ended June 30, 2020, from $14.6 million for the three months ended June 30, 2019, ~~compared~~primarily due to ~~$11.8~~the addition of the Cascade Station and 7601 Tech properties. These increases were partially offset by a decrease at Logan Tower due to the sale of the property.

Other Expense (Income)

Interest Expense.

Interest expense decreased $0.7 million, or 9%, to $7.1 million for the three months ended June 30, 2018, primarily due to the addition of the Circle Point, The Quad, Greenwood Blvd, Camelback Square, Canyon Park and Cascade Station properties partially offset by a decrease at Plaza 25 due to the sale of the property.

~~Other Expense (Income)~~

~~Interest Expense.~~ ~~Interest expense increased $2.4 million, or 44%, to~~2020, from $7.8 million for the three months ended June 30, ~~2019, compared to $5.4 million for the three months ended June 30, 2018.~~2019. The ~~increase~~decrease was primarily ~~due~~attributable to a decrease of 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 $0.5 million, $0.3 million, $0.3 million, $0.4 million and $0.1 million, respectively, and the interest on ~~the line of credit increased by $1.1 million~~our Unsecured Credit Facility (as defined herein) as a result of ~~acquisitions funded by our $250 million Unsecured Credit Facility. These increases were partially offset by a $0.2 million decrease~~repayments using the net proceeds of the equity raises in the ~~Plaza 25 debt as a result~~second half of ~~its sale and the extinguishment of its property level debt.~~

2019.

Comparison of Six Months Ended June 30, ~~2019~~2020 to Six Months Ended June 30, ~~2018~~

2019

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~~$1.4 million, or ~~27%~~2%, to $79.7 million for the six months ended June 30, 2020 compared 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.~~2019. Of this increase, ~~$1.8 million was attributable to~~ the ~~acquisition~~acquisitions of ~~Pima Center in April 2018, $4.1 million from the acquisition~~7601 Tech, Cascade Station and Canyon Park contributed increases 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$1.7 million and ~~$0.3~~$1.0 million ~~respectively, as a result of increased average occupancy over the prior year. Partially offsetting~~respectively. 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’other 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 a

one-time

payment of $2.6 million in the prior-year period received as consideration for the assignment of a purchase contract. The assignment fee originated through our administrative services relationship. ~~Upon adoption~~Rental revenue further decreased for the six months ended June 30, 2020 as a result of ~~Topic 842, prior year amounts disclosed~~the sale of Logan Tower in December 2019, the 10455 Pacific Center building in our Sorrento Mesa portfolio in May 2019 and Plaza 25 in February 2019, which decreased overall revenue by $0.7 million, $0.4 million and $0.2 million, respectively. The remaining properties’ rental ~~income, expense reimbursement,~~ and other ~~have been combined into a single line to conform to current period presentation.~~

revenues were relatively unchanged.

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~~$1.2 million, or ~~24%~~2%, to $64.3 million for the six months ended June 30, 2020, from $63.1 million for the six months ended June 30, ~~2019,~~2019. Total operating expenses increased by $2.1 million, $1.2 million and $0.7 million, respectively, from ~~$51.0~~the acquisitions of 7601 Tech, Cascade Station and Canyon Park properties. Offsetting these increases, total operating

expenses decreased by $0.7 million, ~~for~~$0.4 million and $0.2 million respectively due to the sale of Logan Tower, the 10455 Pacific Center building in our Sorrento Mesa portfolio and Plaza 25. Operating expenses at our San Diego properties decreased by a combined $0.3 million primarily due to a property tax refund received during the six months ended June 30, ~~2018,~~2020 related to a prior-year appeal. General and administrative expenses were also lower in the current year period primarily ~~due to~~because in the ~~acquisitions described above. Total operating~~ prior-year period, there were $1.1 million of

one-time

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~~incurred as a result of 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~~assignment fee income earned during 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.prior-year period. The remaining ~~operating~~ expenses were ~~modestly higher~~marginally lower in comparison to the prior-year period ~~primarily~~ due to ~~higher occupancy at the properties.~~

lower property utilization.

Property Operating Expenses.

re-leasing

costs. Property operating expenses increased ~~$5.0~~by $0.4 million, or ~~21%~~1%, to $28.8 million for the six months ended June 30, 2020, from $28.4 million for the six months ended June 30, ~~2019~~2019. Property operating expenses increased by $1.2 million, $0.5 million and $0.3 million, respectively, from ~~$23.4~~the acquisitions of 7601 Tech, Cascade Station and Canyon Park properties. Offsetting these increases, property operating expenses decreased by $0.4 million, ~~for~~$0.2 million and $0.2 million respectively due to the sale of Logan Tower, the 10455 Pacific Center building in our Sorrento Mesa portfolio and Plaza 25. Operating expenses at our San Diego properties decreased by a combined $0.3 million primarily due to a property tax refund received during the six months ended June 30, ~~2018. The increase in property operating expenses was primarily due~~2020 related 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.a prior-year appeal. The remaining ~~property operating~~ expenses ~~aggregate to an overall $1.1 million increase~~were marginally lower in comparison to the prior-year ~~period.~~

period due to lower property utilization.

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 as

non-cash

stock-based compensation expenses. General and administrative expenses ~~increased $1.8~~decreased $0.2 million, or ~~44%~~3%, to $5.5 million for the six months ended June 30, 2020, from $5.7 million for the six months ended June 30, ~~2019 compared to $3.9 million for~~2019. The decrease was primarily because in the ~~six months ended June 30, 2018. Of this increase,~~prior-year period, there were $1.1 million ~~can be attributed to the~~of

one-time

expenses ~~and accruals~~ incurred as a result of the assignment fee income ~~earned during~~partially offset by higher payroll and stock-based compensation costs for the current period.

Depreciation and Amortization.

Depreciation and amortization increased $1.0 million, or 3%, to $30.0 million for 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~~2020, from $29.0 million for the six months ended June 30, 2019, ~~compared~~primarily due to ~~$23.7~~the addition of the Canyon Park, Cascade Station and 7601 Tech properties. These increases were partially offset by a decrease at Logan Tower and the 10455 Pacific Center building of the Sorrento Mesa portfolio due to the sale of those properties.

Other Expense (Income)

Interest Expense.

Interest expense decreased $1.5 million, or 10%, to $13.8 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~~2020, from $15.3 million for the six months ended June 30, 2019. The decrease was primarily attributable to a decrease of interest expense on our Unsecured Credit Facility (as defined herein) as a result of the repayments using the net proceeds of the equity raises during the second half of 2019.

Cash Flows

Comparison of Six Months Ended June 30, 2020 to Six Months Ended June 30, 2019

Cash, cash equivalents and restricted cash were $83.1 million and $30.9 million as of June 30, 2020 and June 30, 2019, ~~compared~~respectively.

Cash flow from operating activities.

Net cash provided by operating activities increased by $12.7 million to ~~$11.3~~$31.3 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.

~~Cash Flows~~

~~Comparison of Six Months Ended June 30, 2019 to Six Months Ended June 30, 2018~~

~~Cash, cash equivalents and restricted cash were $30.9 million and $32.6 million as of June 30, 2019 and June 30, 2018, respectively.~~

~~Cash flow from operating activities.~~~~Net cash provided by operating activities increased by $7.2 million~~2020 compared to $18.6 million for the ~~six months ended June 30, 2019 compared to $11.4 million for the six months ended June 30, 2018.~~same period in 2019. The increase was primarily attributable to increased operating cash flows from acquired ~~properties.~~

properties, including changes in working capital.

Cash flow to investing activities.

Net cash used in investing activities ~~increased~~decreased by ~~$56.8~~$20.4 million to ~~$38.6~~$18.2 million for the six months ended June 30, ~~2019~~2020 compared to ~~$18.2~~$38.6 million ~~provided by investing activities~~ for the ~~six months ended June 30, 2018.~~same period in 2019. The ~~increase~~decrease in cash used in investing activities was primarily due to ~~the acquisition of Canyon Park and Cascade Station in 2019. Additionally, we realized lower proceeds from the sale~~no acquisitions or dispositions of real estate ~~in 2019~~during the six months ended June 30, 2020 compared to ~~2018, which included proceeds from~~aggregate $61.0 million of acquisitions and aggregate $33.9 million of dispositions for the ~~sale of Washington Group Plaza~~same period in ~~2018.~~

2019.

Cash flow ~~from~~to financing activities.

Net cash ~~provided by~~used in financing activities increased by ~~$49.5~~$35.1 million to ~~$17.6~~$17.5 million for the six months ended June 30, ~~2019~~2020 compared to ~~$31.9~~$17.6 million provided by financing activities for the same period in 2019. Cash flow used in financing activities inincreased primarily due to common stock repurchases for the six months ended June 30, 2018. Cash flow provided by financing activities increased primarily due to higher proceeds from mortgage loans payable compared to 2018 and lower repayments of mortgage loans payable compared to 2018. The increase was2020, partially offset by ~~lower~~higher net proceeds from ~~credit facility in 2019 compared to 2018.~~

our Unsecured Credit Facility borrowings.

Liquidity and Capital Resources

Analysis of Liquidity and Capital Resources

We had approximately ~~$11.6~~$67.0 million of cash and cash equivalents and ~~$19.3~~$16.1 million of restricted cash as of June 30, ~~2019.~~

2020.

On March 15, 2018, the Company entered into a ~~$250 million~~credit agreement for the Unsecured Credit Facility (our “Unsecured Credit Facility”) that provided 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. The Company’s previous secured credit facility was replaced and repaid in full from the proceeds of our Unsecured Credit Facility. Our Unsecured Credit Facility matures in March 2022 and may be extended to March 2023 at the Company’s option upon meeting certain conditions. Borrowings under our Unsecured Credit Facility bear an interest at a rate equal to the LIBOR rate plus a margin of between 140 to 225 basis points depending upon the Company’s consolidated leverage ratio. As of June 30, ~~2019,~~2020, we had approximately ~~$150.0~~$100 million outstanding under our Unsecured Credit Facility and a ~~$5.3~~$7.0 million letter of credit to satisfy escrow requirements for a mortgage lender.

~~The~~

On September 27, 2019, the Company entered into the five-year $50 million Term Loan (the “Term Loan”), increasing its authorized borrowings under the Company’s 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 the 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 rate

30-day

LIBOR payments.

On June 16, 2017, the Company and the Operating Partnership previously entered into ~~the amended~~ equity distribution agreements (collectively, the ~~“EDAs”~~“Initial Agreements”) with ~~the sales agents named therein~~each of KeyBanc Capital Markets Inc., Raymond James & Associates, Inc. and BMO Capital Markets Corp., (collectively, the ~~“Sales~~“Initial 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 (“Series A Preferred Stock”) through the Initial Sales Agents, acting as agents or principals (the “Prior ATM Program”). On November 1, 2018, the Company and the Operating Partnership entered into amendments (the “Initial Amendments”) to the Initial Agreements (as amended by the Amendments, the “Prior EDAs”) with each of the Initial Sales Agents to increase the number of shares of common stock issuable under the Prior ATM Program. The Company terminated the Prior EDAs effective February 25, 2020. 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 or during the six months ended June 30, 2020.

On February 26, 2020, the Company and the Operating Partnership entered into equity distribution agreements (collectively, the “Agreements”) with each of KeyBanc Capital Markets Inc., Raymond James & Associates, Inc., BMO Capital Markets Corp., RBC Capital Markets, LLC, B. Riley FBR, Inc., D.A. Davidson & Co. and Janney Montgomery Scott LLC (the “Sales Agents”) pursuant to which the Company may issue and sell from time to time up to ~~8,000,000~~15,000,000 shares of common stock and up to 1,000,000 ~~shares of~~ Series A Preferred Stock through the Sales Agents, acting as agents or principals. Pursuant to the EDAs, the shares may be offered and sold through the Sales Agents in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act, including sales made directly on the New York Stock Exchange or sales made to or through a market maker 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.principals (the “ATM Program”). The Company did not ~~make~~issue any ~~sales~~shares of ~~securities~~common stock or Series A Preferred Stock under the ~~EDAs~~ATM Program during the six months ended June 30, ~~2019.~~

2020.

Our short-term liquidity requirements primarily consist of operating expenses and other expenditures associated with our properties, distributions to our limited partners and distributions to our stockholders required to qualify for REIT status, capital expenditures and, potentially, acquisitions. We expect to meet our short-term liquidity requirements through net cash provided by operations, reserves established from existing cash, proceeds from our public offerings, including under our at the market issuance program, and borrowings under our mortgage loans and our Unsecured Credit Facility.

Our long-term liquidity needs consist primarily of funds necessary for the repayment of debt at maturity, property acquisitions and

non-recurring

capital improvements. We expect to meet our long-term liquidity requirements with net cash from operations, long-term secured and unsecured indebtedness and the issuance of equity and debt securities. We also may fund property acquisitions and

non-recurring

capital improvements using our Unsecured Credit Facility pending longer term financing.

We believe we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional debt and the issuance of additional equity securities. However, we cannot assure you that this is or will continue to be the case. Our ability to incur additional debt is dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. Our ability to access the equity capital markets is dependent on a number of factors as well, including general market conditions for REITs and market perceptions about us.

Contractual Obligations and Other Long-Term Liabilities

The following table provides information with respect to our commitments as of June 30, ~~2019,~~2020, including any guaranteed or minimum commitments under contractual obligations. The table does not reflect available debt extension options.

   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	$	709,176	$	3,163	$	195,884	$	173,254	$	336,875
Interest payments (1)		126,390		13,098		44,755		37,089		31,448
Tenant-related commitments		7,771		7,148		623		—		—
Lease obligations		29,822		209		1,669		1,264		26,680

Total	$	873,159	$	23,618	$	242,931	$	211,607	$	395,003

(1)

Contracted interest on the floating rate ~~debt~~borrowings under our Unsecured Credit Facility was calculated based on ~~our Unsecured Credit Facility~~the balance and interest rate at June 30, ~~2019.~~

2020. Contracted interest on the Term Loan was calculated based on the Interest Rate Swap rate fixing the LIBOR component of the borrowing rate to approximately 1.27%.

Off-Balance

Sheet Arrangements

As of June 30, ~~2019,~~2020, we had a ~~$5.3~~$7.0 million letter of credit outstanding under our Unsecured Credit Facility to satisfy escrow requirements for a mortgage lender.

Inflation

Substantially all of our office leases provide for real estate tax and operating expense escalations. In addition, most of the leases provide for fixed annual rent increases. We believe that inflationary increases may be at least partially offset by these contractual rent increases and expense escalations.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We have used, and will use, derivative financial instruments to manage or hedge interest rate risks related to borrowings. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based upon their credit rating and other factors. ~~We have entered, and we will only enter into, contracts with major~~See Note 6 to our consolidated financial ~~institutions based on their credit rating and other factors. As~~statements in Item 1 of ~~June 30, 2019,~~this Report for more information regarding our ~~Company did not have any outstanding~~ derivatives.

The primary market risk to which we are exposed is interest rate risk. Our primary interest rate exposure is LIBOR. We primarily use fixed interest rate financing to manage our exposure to fluctuations in interest rates. We consider our interest rate exposure to be minimal, because as of June 30, ~~2019,~~2020, approximately ~~$565.0~~$559.2 million, or ~~79.0%~~78.8%, of our debt had fixed interest rates and approximately ~~$150.0~~$150 million, or ~~21.0%~~21.2%, had variable interest rates. Of the $150 million variable rate debt, $50 million relates to the Term Loan against which we have applied the Interest Rate Swap. The Interest Rate Swap effectively fixes the

30-day

LIBOR rate at approximately 1.27% until maturity of the Term Loan. When factoring in the Term Loan as fixed rate debt through the Interest Rate Swap, approximately 85.9% of our debt was fixed rate debt and 14.1% was variable rate debt as of June 30, 2020. A

10% increase in LIBOR would result in a nominal increase to our annual interest costs ~~by approximately $0.4 million~~ on debt outstanding as of June 30, ~~2019,~~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 result in a nominal decrease to our annual interest costs ~~by approximately $0.4 million~~ on debt outstanding as of June 30, ~~2019,~~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.

Interest ~~rate~~ risk amounts are our management’s estimates based on our Company’s capital structure and were determined by considering the effect of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. We may take actions to further mitigate our exposure to changes in interest rates. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our Company’s financial structure.

In addition, the uncertainty that exists with respect to the economic impact of the

COVID-19

pandemic introduced significant volatility in global financial markets and economies during and subsequent to the six months ended June 30, 2020. The long-term impacts of such volatility on the Company are uncertain and impossible to estimate, and will depend on the scope, severity and duration of the pandemic.

~~Item 4.~~

~~Controls and Procedures~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on the most recent evaluation, the Company’s Chief Executive Officer and Chief Financial Officer determined that the Company’s disclosure controls and procedures (as defined in Rules

13a-15(e)

and

15d-15(e)

under the Securities and Exchange Act of 1934, as amended) were effective as of June 30, ~~2019.~~

2020.

Management’s Report on Internal Control Over Financial Reporting

There have been no changes to our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

Item 1. Legal Proceedings

We and our subsidiaries are, from time to time, parties to litigation arising from the ordinary course of business. As of June 30, ~~2019,~~2020, management does not believe that any such litigation will have a material adverse effect, individually or in the aggregate, on our financial position or results of operations.

~~Item 1A.~~

~~Risk Factors~~

Item 1A. Risk Factors

The following risk factor ~~replaces~~updates the risk factor in Part II, Item 1A of our Quarterly Report on Form

10-Q

for the three months ended March 31, 2020 and supplements the risk factors disclosed ~~under a similar heading~~ in the section entitled “Risk Factors” of our Annual Report onForm

10-K

for the year ended December 31, ~~2018.~~2019. Except as presented below or in the section titled “Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition” in this Quarterly Report on Form

10-Q,

there have been no material changes from the risk factors set forth in such Annual Report.

~~Our commitments~~

The current pandemic of the novel coronavirus

(“COVID-19”),

and the future outbreak of other highly infectious or contagious diseases, could have an adverse effect on our financial condition, results of operations, cash flow, ability to Second City Real Estate II Corporation (“Second City”), Clarity Real Estate III GP, Limited Partnership (“Clarity RE”), Clarity Real Estate Ventures GP, Limited Partnership (together with Clarity RE, “Clarity”),pay dividends and ~~their respective affiliates may give rise to various conflicts of interest.~~

~~We are subject to conflicts of interest arising out~~the per share market price of our ~~relationship~~common stock or preferred stock.

Since being reported in December 2019,

COVID-19

has spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared

COVID-19

a pandemic, and on March 13, 2020, the United States declared a national emergency with ~~Second City~~respect to

COVID-19.

Since that time, the global impact of the outbreak has been rapidly evolving and, ~~Clarity.~~as cases of

COVID-19

have continued to be identified in additional countries, many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel.

The

COVID-19

pandemic has had, and a future outbreak of other highly infectious or contagious diseases could have, repercussions across regional and global financial markets and economies. The outbreak of

COVID-19

in many countries, including the United States, has adversely impacted global economic activity and has contributed to significant volatility in financial markets.

Certain states and cities, including where we own properties and where our principal place of business is located, have also reacted by instituting quarantines, restrictions on travel,

“stay-at-home”

rules and restrictions on the types of businesses that may continue to operate. The Company cannot predict if additional states and cities will implement similar restrictions, whether or how the nature of these restrictions may evolve or when restrictions currently in place or modified restrictions in the future will expire. As a result, the

COVID-19

pandemic is negatively impacting many industries and governmental operations directly or indirectly, including the industries in which the Company and our tenants operate. A number of our tenants have announced temporary closures of their offices and other operations, and requested rent deferral or rent abatements during this pandemic. In addition, many of our employees in our principal offices are currently working remotely. The effects of an extended period of remote work arrangements, could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business. To date, we have provided temporary relief to certain tenants in the form of rent deferral and rent abatements, the financial impacts of which have been immaterial to the Company. However, it is impossible to predict the extent to which future requests from tenants for rent deferrals, rent abatements or relief from other contractual obligations, or a failure to pay rent, as a result of changes in business behavior stemming from the ongoing

COVID-19

pandemic or otherwise, may impact our financial condition, results of operations and cash flow.

The

COVID-19

pandemic, or a future outbreak of other highly infectious or contagious diseases, could also have adverse effects on our financial condition, results of operations, cash flow, ability to pay dividends and the per share market price of our common stock or preferred stock, among other factors:

a complete or partial closure of, decline or cessation in the usage of, or other operational issues at, one or more of our properties resulting from government or tenant action;

the reduced economic activity severely impacts our tenants’ businesses, financial condition, liquidity and creditworthiness, which may cause one or more of our tenants to be unable to meet their obligations to us in full, or at all, seek modifications of such obligations or exercise early termination rights;

a decrease in the usage of our properties or the demand for office space, or the Company’s ability to maintain or increase rents, which may have an adverse effect on our financial condition, results of operations and cash flow than if we owned a more diversified real estate portfolio;

difficulty accessing sources of capital on attractive terms, or at all, impacts to our credit ratings, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to debt or equity capital necessary to fund future capital needs (including redevelopment, acquisition, expansion and renovation activities, payments of principal and interest on and the refinancing of our existing debt, tenant improvements and leasing costs) or refinancings on a timely basis and our tenants’ ability to fund their business operations and meet their obligations to us;

the financial impact of the

COVID-19

pandemic could negatively impact our future compliance with financial covenants of our Unsecured Credit Facility, including the Term Loan, and other debt agreements and result in a default and potentially an acceleration of indebtedness, which

non-compliance

could negatively impact our ability to make additional borrowings and pay dividends on our common stock or preferred stock;

any impairment in value of our tangible or intangible assets which could be recorded as a result of a weaker economic conditions;

a general decline in business activity and demand for real estate transactions could adversely affect our ability or desire to grow our portfolio of properties due to a lack of suitable acquisition opportunities;

a general decline in the attractiveness of our properties due to changes in the demand for office space, which may adversely impact our ability to consummate pending or future dispositions on terms that allow us to recover expected carrying values of a real estate investment; and

the potential negative impact on the health of a significant number of our employees could result in a deterioration in our ability to ensure business continuity or maintain adequate disclosure reporting or internal controls through the duration of this disruption.

The extent to which the

COVID-19

pandemic impacts our financial condition, results of operations and cash flow, and those of our tenants, will depend on future developments, which continue to be highly uncertain and are not reasonably estimable, including the scope, severity and duration of the ~~internalization~~pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. In addition,

non-payment

of rent or early lease terminations by our tenants could reduce our cash flows, which could impact our ability to pay dividends to the holders of our former external advisor on February 1, 2016, we agreed to allow our management to continue to provide services to Second City under the terms of an administrative services agreement. In addition, the terms of the administrative services agreementcommon stock and the employment agreements we entered into with each of our executive officers permit, under certain circumstances and subject to the oversight of our Board of Directors, our executive officers to advise or oversee new or additional funds in the future. On July 31, 2019, we, through an indirect, wholly-owned subsidiary, entered into a separate administrative services agreement with Clarity to provide administrative services to Clarity similar to those provided to Second City. These arrangements with Second City and Clarity may create potential conflicts of interests, including competition for the time and services of personnel that work for us and our affiliates

preferred stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchased shares of common stock will be classified as authorized and unissued shares. The Company recognizes the cost of shares of common stock it repurchases, including direct costs incurred, as a reduction in stockholders’ equity. Such reductions of stockholders equity due to the repurchases of shares of common stock repurchased will be applied first, to reduce common stock in the amount of the par value associated with the shares of common stock repurchased and second, to reduce additional

paid-in

capital by the amount that the purchase price for the shares of common stock repurchased exceed the par value.

Share repurchase activity under our share repurchase plan, on a trade date basis, for the three months ended June 30, 2020, was as follows:


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)
April 1 – 30, 2020		5,065,946		8.07		5,065,946		47,523
May 1 – 31, 2020		2,275,063		9.83		2,275,063		25,151
June 1 – 30, 2020		1,457,397		9.94		1,457,397		10,672

Total		8,798,406	$	8.84		8,798,406	$	10,672

~~Item 2.~~(1)

~~Unregistered Sales~~

Represents approximate dollar value of ~~Equity Securities and Use~~shares that could have been purchased under the plan in effect at the end of ~~Proceeds~~

the month.

~~None.~~

~~Item 3.~~

~~Defaults Upon Senior Securities~~

Item 3. Defaults Upon Senior Securities

None.

~~Item 4.~~

~~Mine Safety Disclosures~~

Item 4. Mine Safety Disclosures

Not applicable.

~~Item 5.~~

~~Other Information~~

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~~August 5, 2020, the Company’s Board of Directors approved a new share repurchase plan authorizing the ~~Company’s entry into~~Company to repurchase up to an additional $50 million of its outstanding shares of common stock. Under the ~~Administrative Services Agreement and~~share repurchase program, the ~~Employment Agreement Amendments. The foregoing descriptions~~shares may be repurchased from time to time using a variety of methods, which may include open market transactions, privately negotiated transactions or otherwise, all in accordance with the rules of the ~~Administrative Services Agreement~~Securities and Exchange Commission and other applicable legal requirements. No shares of common stock have been repurchased under the ~~Employment Agreement Amendments are not complete. Reference is made to the full text~~new share purchase plan as of the ~~Administrative Services Agreement and each~~date 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.

~~Item 6.~~

~~Exhibits~~

Item 6. Exhibits


Exhibit Number		Description

3.1		Articles of Amendment and Restatement of City Office REIT, Inc., as amended and supplemented (incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form10-K filed on March 1, 2018).

3.2		Second Amended and Restated Bylaws of City Office REIT, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form8-K filed on March 14, 2017).

4.1		Certificate of Common Stock of City Office REIT, Inc. (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on FormS-11/A filed with the Commission on February 18, 2014).

4.2		Form of certificate representing the 6.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form8-A filed with the Commission on September 30, 2016).

~~10.1~~		~~Amendment No. 1 to the City Officer REIT, Inc. Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8-K~~ ~~filed on May 6, 2019).~~

~~10.2~~		Administrative Services Agreement, dated July 31, 2019, by and among CIO Administrative Services, LLC, Clarity Real Estate III GP, Limited Partnership and Clarity Real Estate Ventures GP, Limited Partnership. †

~~10.3~~		~~Amendment No. 1 to Executive Employment Agreement, dated as of July 31, 2019, by and between City Office Management Ltd. and James Farrar.* †~~

~~10.4~~		~~Amendment No. 1 to Executive Employment Agreement, dated as of July 31, 2019, by and between City Office Management Ltd. and Gregory Tylee.* †~~

~~10.5~~		~~Amendment No. 1 to Executive Employment Agreement, dated as of July 31, 2019, by and between City Office Management Ltd. and Anthony Maretic.* †~~

31.1		Certification by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. †

31.2		Certification by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. †

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †


32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. †

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.

~~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 Income; (iii) Consolidated Statements of Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CITY OFFICE REIT, INC.

Date: August 6, 2020


~~Date: August 1, 2019~~By:	/s/ James Farrar
		James Farrar

		~~By:~~	~~/s/ James Farrar~~ Chief Executive Officer and Director
			~~James Farrar~~
			~~Chief Executive Officer and Director~~
			(Principal Executive Officer)

Date: August 6, 2020


~~Date: August 1, 2019~~

	By:	/s/ Anthony Maretic
		Anthony Maretic

			Chief Financial Officer, Secretary and Treasurer
				(Principal Financial Officer and Principal Accounting Officer)


	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)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Rental and other revenues	$	39,617		$	41,171		$	79,739		$	78,291
Operating expenses:
Property operating expenses		14,084			14,526			28,780			28,370
General and administrative		2,697			3,362			5,480			5,660
Depreciation and amortization		15,080			14,604			30,032			29,022

Total operating expenses		31,861			32,492			64,292			63,052

Operating income		7,756			8,679			15,447			15,239
Interest expense:
Contractual interest expense		(6,792	)		(7,502	)		(13,153	)		(14,645	)
Amortization of deferred financing costs and debt fair value		(341	)		(334	)		(665	)		(671	)

		(7,133	)		(7,836	)		(13,818	)		(15,316	)
Net gain on sale of real estate property		—			478			—			478

Net income		623			1,321			1,629			401
Less:
Net income attributable to non-controlling interests in properties		(179	)		(165	)		(361	)		(334	)

Net income attributable to the Company		444			1,156			1,268			67
Preferred stock distributions		(1,855	)		(1,855	)		(3,710	)		(3,710	)

Net loss attributable to common stockholders	$	(1,411	)	$	(699	)	$	(2,442	)	$	(3,643	)

Net loss per common share:
Basic	$	(0.03	)	$	(0.02	)	$	(0.05	)	$	(0.09	)

Diluted	$	(0.03	)	$	(0.02	)	$	(0.05	)	$	(0.09	)

Weighted average common shares outstanding:
Basic		47,542			39,640			50,993			39,603

Diluted		47,542			39,640			50,993			39,603

Dividend distributions declared per common share	$	0.150		$	0.235		$	0.300		$	0.470


	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


	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		$	—


	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

Restricted stock award grants and vesting		—		—		135			2			659			(66	)		—			595			—			595
Common stock repurchased		—		—		(8,799	)		(88	)		(77,961	)		—			—			(78,049	)		—			(78,049	)
Common stock dividend distribution declared		—		—		—			—			—			(6,649	)		—			(6,649	)		—			(6,649	)
Preferred stock dividend distribution declared		—		—		—			—			—			(1,855	)		—			(1,855	)		—			(1,855	)
Distributions		—		—		—			—			—			—			—			—			(184	)		(184	)
Net income		—		—		—			—			—			444			—			444			179			623
Other comprehensive loss		—		—		—			—			—			—			(298	)		(298	)		—			(298	)

Balance—June 30, 2020		4,480	$	112,000		44,511		$	445		$	488,820		$	(159,390	)	$	(2,324	)	$	439,551		$	1,104		$	440,655


	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


	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


	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	)


2019	$	10,192
2020		18,332
2021		15,022
2022		7,255
2023		4,393
Thereafter		7,529

	$	62,723


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 40^th 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


2019	$	2,692
2020		6,186
2021		89,125
2022		156,165
2023		47,822
Thereafter		413,013

	$	715,003


	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


2019	$	60,208
2020		113,808
2021		102,819
2022		85,402
2023		67,284
Thereafter		143,674

	$	573,195


	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


	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


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
Phoenix, AZ (21.3% of NRA)	SanTan		100.0	%		267		98.6	%	$	27.67	$	27.67	$	7,272
	5090 N 40^th 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
Denver, CO (18.3%)	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
Tampa, FL (18.2%)	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
Orlando, FL (12.6%)	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
San Diego, CA (10.2%)	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
Dallas, TX (10.1%)	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
Portland, OR (5.8%)	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