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 ~~September 30, 2019~~

March 31, 2020

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

For the transition period from

Commission File Number:

001-36409

CITY OFFICE REIT, INC.

(Exact name of registrant as specified in its charter)


~~Maryland~~
Maryland	98-1141883
(State or other jurisdiction of incorporation or ~~organization)~~ organi z ation )		(I.R.S. Employer ~~Identification~~ Identificatio n 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 ☒

☐

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~~	☒
		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

☐

☒

The number of shares of Common Stock, $0.01 par value, of the registrant outstanding at ~~October 29, 2019~~May 4, 2020 was ~~54,547,063.~~

47,571,517.

City Office REIT, Inc.

Quarterly Report on Form

10-Q

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

March 31, 2020

Table of Contents


~~PART I.FINANCIAL INFORMATION~~			3

~~Item 1.~~	~~Financial Statements~~PART I. FINANCIAL INFORMATION		3


Item 1. Financial Statements		3

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


Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~		4


Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~		5


Condensed Consolidated Statements of Changes in Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~		6


Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~		8 7


Notes to Condensed Consolidated Financial Statements		9 8

~~Item 2.~~
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20 17

~~Item 3.~~
Item 3. Quantitative and Qualitative Disclosures about Market Risk		29 26

~~Item 4.~~	~~Controls and Procedures~~		29

~~PART II.~~ ~~OTHER INFORMATION~~Item 4. Controls and Procedures			30 26

~~Item 1.~~	~~Legal Proceedings~~		30

~~Item 1A.~~	~~Risk Factors~~PART II. OTHER INFORMATION		30 27

~~Item 2.~~
Item 1. Legal Proceedings		27

Item 1A. Risk Factors		27

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30 28

~~Item 3.~~
Item 3. Defaults Upon Senior Securities		30 29

~~Item 4.~~	~~Mine Safety Disclosures~~		30

Item 5.	~~Other Information~~4. Mine Safety Disclosures		30 29

~~Item 6.~~	~~Exhibits~~		30

~~Signatures~~Item 5. Other Information			32 29

Item 6. Exhibits		29

Signatures		31

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

City Office REIT, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, ~~except~~ex
c
ept par value and share data)

   September 30,
2019 December 31,
2018
Assets

Real estate properties

Land
   $ 230,034 $ 223,789
Building and improvement
   782,576 704,113
Tenant improvement
   91,016 77,426
Furniture, fixtures and equipment
   285 319


   1,103,911 1,005,647
Accumulated depreciation
   (93,623 ) (70,484 )


   1,010,288 935,163


Cash and cash equivalents
   12,281 16,138
Restricted cash
   20,240 17,007
Rents receivable, net
   31,844 26,095
Deferred leasing costs, net
   11,235 10,402
Acquired lease intangible assets, net
   73,394 75,501
Other assets
   16,830 2,755
Assets held for sale
   13,905 17,370


Total Assets
   $ 1,190,017 $ 1,100,431


Liabilities and Equity

Liabilities:

Debt
   $ 651,693 $ 645,354
Accounts payable and accrued liabilities
   28,431 25,892
Deferred rent
   5,574 5,331
Tenant rent deposits
   5,691 4,564
Acquired lease intangible liabilities, net
   8,763 8,887
Other liabilities
   21,349 11,148
Liabilities related to assets held for sale
   356 878


Total Liabilities
   721,857 702,054


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, 47,647,063 and 39,544,073 shares issued and outstanding
   476 395
Additionalpaid-in capital
   483,200 377,126
Accumulated deficit
   (128,823 ) (92,108 )
Accumulated other comprehensive income
   247 —


Total Stockholders’ Equity
   467,100 397,413
Non-controlling interests in properties
   1,060 964


Total Equity
   468,160 398,377


Total Liabilities and Equity
   $ 1,190,017 $ 1,100,431


Subsequent Events (Note 11)

March 31,
2020

December 31,
2019

Assets

Real estate properties

Land
$
230,034
$
230,034

Building and improvement

786,939

784,636

Tenant improvement

97,474

94,218

Furniture, fixtures and equipment

285

285

1,114,732

1,109,173

Accumulated depreciation

(111,177
)
(101,835
)

1,003,555

1,007,338

Cash and cash equivalents

146,509

70,129

Restricted cash

18,328

17,394

Rents receivable, net

32,875

32,112

Deferred leasing costs, net

14,249

12,393

Acquired lease intangibles assets, net

62,104

67,533

Other assets

16,054

17,061

Assets held for sale

4,543

4,514

Total Assets
$
1,298,217
$
1,228,474

Liabilities and Equity

Liabilities:

Debt
$
706,031
$
607,250

Accounts payable and accrued liabilities

27,354

28,786

Deferred re
nt

5,298

6,593

Tenant rent deposits

5,660

5,658

Acquired lease intangible liabilities, net

7,604

8,194

Other liabilities

19,711

22,794

Liabilities related to assets held for sale

87

67

Total Liabilities

771,745

679,342

Commitments and Contingencies (Note 9)

Equity:

6.625% Series A Preferred stock, $0.01 par value per share, 5,600,000 shares authorized, 4,480,000 issued and outstanding

112,000

112,000

Common stock, $0.01 par value, 100,000,000 shares authorized, 53,175,051 and 54,591,047 shares issued and outstanding

531

545

Additional
paid-in
capital

566,122

577,131

Accumulated deficit

(151,264
)
(142,383
)
Accumulated other comprehensive
(loss)/
income

(2,026
)
715

Total Stockholders’ Equity

525,363

548,008

Non-controlling
interests in properties

1,109

1,124

Total Equity

526,472

549,132

Total Liabilities and Equity
$
1,298,217
$
1,228,474

Subsequent Events (Note 11)

The accompanying notes are an integral part of these condensed consolidated financial statement
s
.
3

City Office REIT, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)

Three Months Ended
March 31,

2020

2019

Rental and other revenues
$
40,122
$
37,120

Operating expenses:

Property operating expens
es

14,694

13,844

General and administrative

2,783

2,299

Depreciation and amortization

14,953

14,417

Total operating expenses

32,430

30,560

Operating income

7,692

6,560

Interest expense:

Contractual interest expense

(6,362
)
(7,143
)
Amortization of deferred financing costs and debt fair value

(324
)
(337
)

(6,686
)
(7,480
)

Net income/(loss)

1,006

(920
)
Less:

Net income attributable to
non-controlling
interests in properties

(182
)
(169
)

Net income/(loss) attributable to the Company

824

(1,089
)
Preferred stock distributions

(1,855
)
(1,855
)

Net loss attributable to common stockholders
$
(1,031
) $
(2,944
)

Net loss per common share:

Basic
$
(0.02
) $
(0.07
)

Diluted
$
(0.02
) $
(0.07
)

Weighted average common shares outstanding:

Basic

54,458

39,565

Diluted

54,458

39,565

Dividends distributions declared per common share
$
0.150
$
0.235

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

City Office REIT, Inc.

Condensed Consolidated Statements of ~~Operations~~

Comprehensive Income

(Unaudited)

(In ~~thousands, except per share data)~~

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2019 2018 2019 2018

Rental and other revenues
   $ 38,946 $ 33,547 $ 117,236 $ 95,317
Operating expenses:

Property operating expenses
   14,384 13,253 42,754 36,627
General and administrative
   2,775 1,850 8,435 5,793
Depreciation and amortization
   15,035 13,379 44,057 37,044


Total operating expenses
   32,194 28,482 95,246 79,464


Operating income
   6,752 5,065 21,990 15,853
Interest expense:

Contractual interest expense
   (7,378 ) (5,915 ) (22,022 ) (16,184 )
Amortization of deferred financing costs and debt fair value
   (321 ) (311 ) (992 ) (1,297 )


   (7,699 ) (6,226 ) (23,014 ) (17,481 )
Net gain on sale of real estate property
   —   —   478 46,980


Net (loss)/income
   (947 ) (1,161 ) (546 ) 45,352
Less:

Net income attributable tonon-controlling interests in properties
   (164 ) (135 ) (498 ) (384 )


Net (loss)/income attributable to the Company
   (1,111 ) (1,296 ) (1,044 ) 44,968
Preferred stock distributions
   (1,855 ) (1,855 ) (5,565 ) (5,565 )


Net (loss)/income attributable to common stockholders
   $ (2,966 ) $ (3,151 ) $ (6,609 ) $ 39,403


Net (loss)/income per common share:

Basic
   $ (0.07 ) $ (0.08 ) $ (0.16 ) $ 1.08


Diluted
   $ (0.07 ) $ (0.08 ) $ (0.16 ) $ 1.07


Weighted average common shares outstanding:

Basic
   42,591 37,494 40,610 36,572


Diluted
   42,591 37,494 40,610 36,920


Dividend distributions declared per common share
   $ 0.235 $ 0.235 $ 0.705 $ 0.705

thousands)

Three Months

Ended
March 31,

2020

2019

Net income/(loss)
$
1,006
$
(920
)
Other comprehensive loss:
Unrealized cash flow hedge loss

(2,690
)
—

Amounts reclassified to interest expense

(51
)
—

Other comprehensive loss (2,741 ) —

Comprehensive loss

(1,735
)
(920
)
Less:

Comprehensive income attributable to
non-controlling
interests in properties

(182
)
(169
)

Comprehensive loss attributable to the Company

(1,917
)
(1,089
)
Preferred stock distributions

(1,855
)
(1,855
)

Comprehensive loss attributable to common stockholders
$
(3,772
) $
(2,944
)

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

City Office REIT, Inc.

~~Condensed Consolidated Statements of Comprehensive Income~~

~~(Unaudited)~~

~~(In thousands)~~

   Three Months Ended
September 30, Nine Months Ended
September 30,
   2019 2018 2019 2018

Net (loss)/income
   $ (947 ) $ (1,161 ) $ (546 ) $ 45,352
Unrealized cash flow hedge gains
   247 —   247 —


Comprehensive (loss)/income
   (700 ) (1,161 ) (299 ) 45,352
Less:

Comprehensive income attributable tonon-controlling interests in properties
   (164 ) (135 ) (498 ) (384 )


Comprehensive (loss)/income attributable to the Company
   (864 ) (1,296 ) (797 ) 44,968
Preferred stock distributions
   (1,855 ) (1,855 ) (5,565 ) (5,565 )


Comprehensive (loss)/income attributable to common stockholders
   $ (2,719 ) $ (3,151 ) $ (6,362 ) $ 39,403

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

~~City Office REIT, Inc.~~

Condensed Consolidated Statements of Changes in Equity

(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 Accumulated
other
comprehensive
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 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

Restricted stock award grants and vesting
—   —   —   —   527 (95 ) —   432 —   432
Net proceeds from sale of common stock
—   —   8,000 80 104,736 —   —   104,816 —   104,816
Common stock dividend distributions declared
—   —   —   —   —   (11,197 ) —   (11,197 ) —   (11,197 )
Preferred stock dividend distributions declared
—   —   —   —   —   (1,855 ) —   (1,855 ) —   (1,855 )
Contributions
—   —   —   —   —   —   —   —   46 46
Distributions
—   —   —   —   —   —   —   —   (180 ) (180 )
Net income
—   —   —   —   —   (1,111 ) —   (1,111 ) 164 (947 )
Unrealized cash flow hedge gains
—   —   —   —   —   —   247 247 —   247

Balance – September 30, 2019
4,480 $ 112,000 47,647 $ 476 $ 483,200 $ (128,823 ) $ 247 $ 467,100 $ 1,060 $ 468,160

Number of
shares of
preferred
stock Preferred
stock Number of
shares of
common stock Common
stock Additional
paid-in capital Accumulated
deficit Accumulated
other
comprehensive
income Total
stockholders’
equity 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

Restricted stock award grants and vesting
—   —   —   —   436 (79 ) —   357 —   357
Net proceeds from sale of common stock
—   —   3,411 34 42,868 —   —   42,902 —   42,902
Common stock dividend distributions declared
—   —   —   —   —   (9,293 ) —   (9,293 ) —   (9,293 )
Preferred stock dividend distributions declared
—   —   —   —   —   (1,855 ) —   (1,855 ) —   (1,855 )
Minority interest buyout
—   —   —   —   (1,624 ) —   —   (1,624 ) 485 (1,139 )
Distributions
—   —   —   —   —   —   —   —   (210 ) (210 )
Net income
—   —   —   —   —   (1,296 ) —   (1,296 ) 135 (1,161 )

Balance—September 30, 2018
4,480 $ 112,000 39,544 $ 395 $ 376,689 $ (74,079 ) $ —   $ 415,005 $ 746 $ 415,751

Number of
shares of
preferred stock

Preferred
stock

Number
of
shares of
common stock

Common
stock

Additional
paid-in

capital

Accumulated
deficit

Accumulated
other
comprehensive
(loss)/income

Total
stockholders’
equity

Non-
controlling
interests in
properties

Total
equity

Balance—December 31, 2019

4,480

$
112,000

54,591

$
545

$
577,131

$
(142,383
)

$
715

$
548,008

$
1,124

$

549,132

Restricted stock award grants and vesting

—

—

35

—

599

(79
)

—

520

—

520

Common stock repurchased

—

—

(1,451
)

(14
)

(11,608
)

—

—

(11,622
)

—

(11,622
)
Common stock dividend distribution declared

—

—

—

—

—

(7,771
)

—

(7,771
)

—

(7,771
)
Preferred stock dividend distribution declared

—

—

—

—

—

(1,855
)

—

(1,855
)

—

(1,855
)
Contributions

—

—

—

—

—

—

—

—

3

3

Distributions

—

—

—

—

—

—

—

—

(200
)

(200
)
Net income

—

—

—

—

—

824

—

824

182

1,006

Other comprehensive loss

—

—

—

—

—

—

(2,741
)

(2,741
)

—

(2,741
)

Balance—March 31, 2020

4,480
$
112,000

53,175
$
531
$
566,122
$
(151,264
) $
(2,026
) $
525,363
$
1,109
$
526,472

Nu
mber

of
shares of
preferred

stock

Preferred
stock

Number
of
shares

o
f
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

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)

   Nine Months Ended September 30,
           2019                 2018
Cash Flows from Operating Activities:

Net (loss)/income
   $ (546 ) $ 45,352
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:

Depreciation and amortization
   44,057 37,044
Amortization of deferred financing costs and debt fair value
   992 1,297
Amortization of above/below market leases
   (67 ) (143 )
Increase in straight-line rent/expense
   (4,591 ) (3,491 )
Non-cash stock compensation
   1,310 1,061
Net gain on sale of real estate property
   (478 ) (46,980 )
Changes innon-cash working capital:

Rents receivable, net
   (1,512 ) (1,177 )
Other assets
   (337 ) (162 )
Accounts payable and accrued liabilities
   (1,217 ) (1,434 )
Deferred rent
   73 (1,428 )
Tenant rent deposits
   (421 ) 140


Net Cash Provided By Operating Activities
   37,263 30,079


Cash Flows to Investing Activities:

Additions to real estate properties
   (13,855 ) (15,785 )
Acquisition of real estate
   (108,358 ) (162,462 )
Net proceeds from sale of real estate
   33,941 84,839
Deferred leasing costs
   (2,474 ) (3,222 )


Net Cash Used In Investing Activities
   (90,746 ) (96,630 )


Cash Flows from Financing Activities:

Proceeds from sale of common stock
   104,816 42,902
Debt issuance and extinguishment costs
   (995 ) (2,662 )
Proceeds from borrowings
   154,750 269,824
Repayment of borrowings
   (171,575 ) (212,128 )
Shares withheld for payment of taxes on restricted stock unit vesting
   (246 ) (87 )
Minority interest buyout
   —   (1,139 )
Contributions fromnon-controlling interests in properties
   68 43
Distributions tonon-controlling interests in properties
   (470 ) (374 )
Dividend distributions paid to stockholders and Operating Partnership unitholders
   (33,489 ) (31,010 )


Net Cash Provided By Financing Activities
   52,859 65,369


Net Decrease in Cash, Cash Equivalents and Restricted Cash
   (624 ) (1,182 )
Cash, Cash Equivalents and Restricted Cash, Beginning of Period
   33,145 35,014


Cash, Cash Equivalents and Restricted Cash, End of Period
   $ 32,521 $ 33,832


Reconciliation of Cash, Cash Equivalents and Restricted Cash:

Cash and Cash Equivalents, End of Period
   $ 12,281 $ 13,696
Restricted Cash, End of Period
   20,240 20,136


Cash, Cash Equivalents and Restricted Cash, End of Period
   $ 32,521 $ 33,832


Supplemental Disclosures of Cash Flow Information:

Cash paid for interest
   $ 22,262 $ 15,967
Purchases of additions in real estate properties included in accounts payable
   $ 2,264 $ 4,379
Purchases of deferred leasing costs included in accounts payable
   $ 298 $ 430
Unrealized cash flow hedge gains
   $ 247 $ —
Debt assumed on acquisition of real estate
   $ 22,473 $ —

Three Months Ended
March 31,

2020

2019

Cash Flows from Operating Activities:

Net income/(loss)
$
1,006
$
(920
)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

Depreciation and amortization

14,953

14,417

Amortization of deferred financing costs and debt fair value

324

337

Amortization of above/below market leases

14

(27
)
Increase in straight-line rent/expense

(704
)
(1,454
)
Non-cash
stock compensation

569

444

Changes in
non-cash
working capital:

Rents receivable, net

(38
)
(225
)
Other assets

190

(1,710
)
Accounts payable

and
accrued liabilities

(4,282
)
(7,506
)
Deferred rent

(1,295
)
(485
)
Tenant rent deposits

2

(45
)

Net Cash Provided By Operating Activities

10,739

2,826

Cash Flows to Investing Activities:

Additions to real estate properties

(3,137
)
(2,292
)
Acquisition of real estate

—

(51,070
)
Net proceeds from sale of real estate

—

17,426

Deferred leasing costs

(2,195
)
(811
)

Net Cash Used In Investing Activities

(5,332
)
(36,747
)

Cash Flows from Financing Activities:

Repurchases of common stock

(11,622
)
—

Debt issuance and extinguishment costs

—

(516
)
Proceeds from borrowings

100,000

75,950

Repayment of borrowings

(1,541
)
(26,137
)
Shares withheld for payment of taxes on restricted stock unit vesting

(49
)
(224
)
Contributions from
non-controlling
interests in properties

3

12

Distributions to
non-controlling
interests in properties

(200
)
(134
)
Dividend distributions paid to stockholders

(14,684
)
(11,148
)

Net Cash Provided By Financing Activities

71,907

37,803

Net Increase in Cash, Cash Equivalents and Restricted Cash

77,314

3,882

Cash, Cash Equivalents and Restricted Cash, Beginning of Period

87,523

33,145

Cash, Cash Equivalents and Restricted Cash, End of Period
$
164,837
$
37,027

Reconciliation of Cash, Cash Equivalents and Restricted Cash:

Cash and Cash Equivalents, End of Period

146,509

15,314

Restricted Cash, End of Period

18,328

21,713

Cash, Cash Equivalents and Restricted Cash, End of Period
$
164,837
$
37,027

Supplemental Disclosures of Cash Flow Information:

Cash paid for interest
$
6,111
$
6,679

Purchase of additions in real estate properties included in accounts payable
$
2,587
$
4,161

Purchase of deferred leasing costs included in accounts payable
$
284
$
192

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.~~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~~, as amended,~~

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 aright-of-use~~ ~~asset~~contract modifications and ~~lease liability~~ hedging relationships and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of ASU

2020-04

on ~~the balance sheet for all leases with a term longer than 12 months. Leases are classified~~its consolidated financial statements and may elect optional expedients in future periods as ~~finance or operating at inception, with classification affecting the pattern and recording of expenses in the statement of operations. Upon transition the Company recognizedright-of~~ ~~use assets and lease liabilities principally for its ground and office leases.~~

reference rate reform activities occur.

3. Real Estate Investments

Acquisitions

During the ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~ the Company acquired the following properties:


~~Property~~	~~Date Acquired~~		~~Percentage Owned~~
~~7601 Tech~~		~~September~~
Property	Date Acquired		Percentage Owned
Canyon Park		February 2019		100	%
~~Cascade Station~~		~~June 2019~~		~~100~~	%
~~Canyon Park~~		~~February 2019~~		~~100~~	%
~~The Quad~~		~~July 2018~~		~~100~~	%
~~Circle Point~~		~~July 2018~~		~~100~~	%
~~Pima Center~~		~~April 2018~~		~~100~~	%

~~Each of the~~

The foregoing ~~acquisitions were~~acquisition was accounted ~~for~~ fo

asset ~~acquisitions.~~

acquisition.

The following table summarizes the Company’s allocation of the purchase price of assets acquired and liabilities assumed during the ~~nine~~three months ended ~~September 30,~~March 31, 2019 (in thousands):

   7601 Tech    Canyon Park    Cascade Station    Total Sept. 30,
2019
Land
   $ 10,865    $ 7,098    $ —      $ 17,963
Buildings and improvements
   25,677    36,619    25,141    87,437
Tenant improvements
   3,858    1,797    2,080    7,735
Lease intangible assets
   7,401    8,109    3,134    18,644
Other assets
   293    10    3,164    3,467
Debt
   —      —      (697 )    (697 )
Accounts payable and other liabilities
   (668 )    (1,266 )    (186 )    (2,120 )
Lease intangible liabilities
   (79 )    (1,297 )    (220 )    (1,596 )








Net assets acquired
   $ 47,347    $ 51,070    $ 32,416    $ 130,833

~~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 nine months ended September 30, 2018 (in thousands):~~

   The Quad    Circle Point    Pima Center    Total Sept. 30,
2018
Land
   $ 8,079    $ 8,744    $ —      $ 16,823
Buildings and improvements
   38,060    33,708    42,235    114,003
Tenant improvements
   1,798    5,393    2,898    10,089
Lease intangible assets
   4,209    10,299    10,691    25,199
Other assets
   15    25    95    135
Accounts payable and other liabilities
   (527 )    (1,157 )    (337 )    (2,021 )
Lease intangible liabilities
   (1,247 )    (390 )    (129 )    (1,766 )








Net assets acquired
   $ 50,387    $ 56,622    $ 55,453    $ 162,462

Canyon

Park

Land
$
7,098

Buildings and improvements

36,619

Tenant improvements

1,797

Lease intangible assets

8,109

Other assets

10

Accounts payable and other liabilities

(1,266
)
Lease intangible liabilities

(1,297
)

Net assets acquired
$
51,070

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.

On March 8, 2018, the Company sold the Washington Group Plaza property in Boise, Idaho for $86.5 million, resulting in an aggregate net gain of $47.0 million, net of $1.7 million in costs, which has been classified as net gain on sale of real estate property in the condensed consolidated statements of operations. In connection with the sale of the property, certain debt repayments were made.

Assets Held for Sale

On May 10, 2019, the Company entered into a ~~Purchase~~purchase and ~~Sale~~sale agreement to sell a land parcel at the Circle Point property for $6.5 million. The Company determined that the land parcel met the criteria for classification as held for sale as of ~~September 30,~~March 31, 2020 and December 31, 2019. The transaction is anticipated to close in the ~~first~~third quarter of 2020, subject to customary closing conditions. As of ~~September 30, 2019,~~March 31, 2020, the Company has received a $0.5 million

non-refundable

deposit.

~~As of September 30, 2019 the Company determined that the Logan Tower~~

The property ~~met the criteria for classification as held for sale.~~

~~These properties have~~has been classified as held for sale as of ~~September 30,~~March 31, 2020 and December 31, 2019 (in thousands):

September 30, 2019
   Logan Tower Circle Point
Land Total
Real estate properties, net
   $ 9,034 $ 4,441 $ 13,475
Deferred leasing costs, net
   239 —   239
Acquired lease intangible assets, net
   2 —   2
Rents receivable, prepaid expenses and other assets
   189 —   189


Assets held for sale
   $ 9,464 $ 4,441 $ 13,905


Acquired lease intangible liabilities, net
   (10 ) —   (10 )
Accounts payable, accrued expenses, deferred rent and tenant rent deposits
   (296 ) (50 ) (346 )


Liabilities related to assets held for sale
   $ (306 ) $ (50 ) $ (356 )

On November 30, 2018, the Company entered into a Purchase and Sale agreement to sell the Plaza 25 property for $17.9 million. The transaction closed in February 2019. The property was presented as held for sale as of December 31, 2018 (in thousands):

December 31, 2018
   Plaza 25
Real estate properties, net
   $ 16,149
Deferred leasing costs, net
   419
Acquired lease intangible assets, net
   11
Rents receivable, prepaid expenses and other assets
   791


Assets held for sale
   $ 17,370


Accounts payable, accrued expenses, deferred rent and tenant rent deposits
   (878 )


Liabilities related to assets held for sale
   $ (878 )


Circle Point Land	March 31, 2020			December 31, 2019
Real estate properties, net	$	4,543		$	4,514

Assets held for sale	$	4,543		$	4,514

Accounts payable, accrued expenses, deferred rent and tenant rent deposits	$	(87	)	$	(67	)

Liabilities related to assets held for sale	$	(87	)	$	(67	)

4. Lease Intangibles

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

   Lease Intangible Assets Lease Intangible Liabilities
September 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
   $ 15,510 $ —      $ 87,957 $ 36,523 $ 139,990 $ (14,181 ) $ (138 ) $ (14,319 )
Accumulated amortization
   (6,363 ) —      (44,822 ) (15,411 ) (66,596 ) 5,517 39 5,556




   $ 9,147 $ —      $ 43,135 $ 21,112 $ 73,394 $ (8,664 ) $ (99 ) $ (8,763 )


	Lease Intangible Assets												Lease Intangible Liabilities
March 31, 2020	Above Market Leases			In Place Leases			Leasing Commissions			Total			Below Market Leases			Below Market Ground Lease			Total
Cost	$	14,985		$	87,320		$	35,988		$	138,293		$	(13,878	)	$	(138	)	$	(14,016	)
Accumulated amortization		(7,051	)		(51,847	)		(17,291	)		(76,189	)		6,371			41			6,412

	$	7,934		$	35,473		$	18,697		$	62,104		$	(7,507	)	$	(97	)	$	(7,604	)

   Lease Intangible Assets Lease Intangible Liabilities
December 31, 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
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
   $ 5,098
2020
   19,302
2021
   15,990
2022
   8,223
2023
   5,361
Thereafter
   10,657


   $ 64,631


2020	$	14,129
2021		15,894
2022		8,233
2023		5,359
2024		3,191
Thereafter		7,694

	$	54,500

5. Debt

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

Property
   September 30,
2019    December 31,
2018    Interest Rate as
of September 30,
2019⁽¹⁾ Maturity
Unsecured Credit Facility ⁽³⁾
   $ 43,325    $ 147,500    LIBOR +1.50 %⁽²⁾ March 2022
Term Loan ⁽⁴⁾
   50,000    —      LIBOR +1.40 ⁽²⁾ September 2024
Midland Life Insurance ⁽⁵⁾
   85,720    86,973    4.34 May 2021
Mission City
   47,000    47,000    3.78 November 2027
190 Office Center
   41,007    41,250    4.79 October 2025
Canyon Park⁽⁶⁾
   40,950    —      4.30 March 2027
Circle Point
   39,650    39,650    4.49 September 2028
SanTan
   34,250    34,682    4.56 March 2027
Intellicenter
   33,102    33,481    4.65 October 2025
The Quad
   30,600    30,600    4.20 September 2028
FRP Collection ⁽⁷⁾
   29,142    29,589    3.10 September 2023
2525 McKinnon
   27,000    27,000    4.24 April 2027
Cascade Station
   22,390    —      4.55 May 2024
Greenwood Blvd ⁽⁷⁾
   22,425    22,425    3.15 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
   17,800    18,044    4.28 August 2024
Central Fairwinds ⁽⁸⁾
   17,626    17,882    3.15 September 2024
FRP Ingenuity Drive
   17,000    17,000    4.44 December 2024
Carillon Point ⁽⁷⁾
   16,067    16,330    3.10 October 2023





Total Principal
   657,054    651,406
Deferred financing costs, net
   (6,058 )    (6,052 )
Unamortized fair value adjustments
   697    —





Total
   $ 651,693    $ 645,354


Property	March 31, 2020		December 31, 2019		Interest Rate as of March 31, 2020 (1)			Maturity
Unsecured Credit Facility (3)(4)	$	100,000	$	—		LIBOR +1.50	% (2)		March 2022
Term Loan (4)		50,000		50,000		LIBOR +1.40	% (2)		September 2024
Midland Life Insurance (5)		84,861		85,293		4.34			May 2021
Mission City		47,000		47,000		3.78			November 2027
Canyon Park (6)		40,950		40,950		4.30			March 2027
190 Office Center		40,700		40,854		4.79			October 2025
Circle Point		39,650		39,650		4.49			September 2028
SanTan		33,903		34,053		4.56			March 2027
Intellicenter		32,839		32,971		4.65			October 2025
The Quad		30,600		30,600		4.20			September 2028
FRP Collection		28,795		28,969		3.10			September 2023
2525 McKinnon		27,000		27,000		4.24			April 2027


Property	March 31, 2020			December 31, 2019			Interest Rate as of March 31, 2020 (1)		Maturity
Greenwood Blvd		22,425			22,425			3.15		December 2025
Cascade Station		22,216			22,304			4.55		May 2024
5090 N 40 th St		21,936			22,000			3.92		January 2027
AmberGlen		20,000			20,000			3.69		May 2027
Lake Vista Pointe		17,632			17,717			4.28		August 2024
Central Fairwinds		17,433			17,534			3.15		June 2024
FRP Ingenuity Drive		16,934			17,000			4.44		December 2024
Carillon Point		15,877			15,972			3.10		October 2023
Total Principal		710,751			612,292
Deferred financing costs, net		(5,302	)		(5,660	)
Unamortized fair value adjustments		582			618
Total	$	706,031		$	607,250

~~(1)~~

)

~~All~~A

ll interest rates are fixed interest rates with the exception of the ~~unsecured credit facility~~

nsecured

redit

acility (“Unsecured Credit Facility”) and the ~~term loan (“~~Term ~~Loan”)~~Loan (as defined herein), as explained in footnotes 3

and 4

below.

(2)	As of ~~September 30, 2019,~~March 31, 2020, the one - month LIBOR rate was ~~2.09%~~0.99%.

(3)

OnIn 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. ~~As of September 30, 2019, the Unsecured Credit Facility had $43.3 million drawn and $7.0 million of letters of credit to satisfy escrow requirements for mortgage lenders.~~ 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.

During the three months ended March 31, 2020,

the Company

drew approximately $100 million under the Unsecured Credit Facility. As of March 31, 2020, the Unsecured Credit Facility had $100 million drawn and $7.0 million of letters of credit to satisfy escrow requirements for mortgage lenders.

The Unsecured Credit Facility requires the Company to maintain a fixed charge coverage ratio of no less than 1.50x.

(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 ~~will~~ 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~~pay-fixed~~ ~~receive-variable~~ five-year interest rate swap ~~with~~for a ~~five year term, effectively fixing the LIBOR component~~notional amount of ~~the Term Loan at approximately 1.27%~~$50 million (the “Interest Rate Swap”). ~~See Note 6 – Fair Value~~Pursuant to the Interest Rate Swap, the Company will pay a fixed rate of ~~Financial Measurements.~~

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 Cherry Creek, City Center and 7595 Tech (formerly “DTC ~~crossroads”~~Crossroads”).

(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.

~~(7)~~

In August 2019, the Company entered into loan modification agreements for FRP Collection, Carillon Point and Greendwood Blvd reducing the interest rates from 3.85% to 3.1%, 3.5% to 3.1% and 4.6% to 3.15% respectively.

~~(8)~~

~~In September 2019, the Company entered into a loan modification agreement for Central Fairwinds reducing the interest rate from 4.0% to 3.15%.~~

The scheduled principal repayments of debt as of ~~September 30, 2019~~March 31, 2020 are as follows (in thousands):

2019
   $ 1,400
2020
   6,328
2021
   89,314
2022
   49,853
2023
   48,528
Thereafter
   461,631


   $ 657,054


2020	$	4,738
2021		89,355
2022		106,529
2023		48,529
2024		124,725
Thereafter		336,875

	$	710,751

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

~~During the three months ended~~

In September ~~30,~~ 2019, the Company entered into ~~an interest rate swap agreement~~

five-year Interest Rate Swap for a notional amount of $50.0 ~~million, which became effective September 2019. The five-year swap agreement terminates in September 2024.~~million. Pursuant to the ~~agreement,~~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 ~~September 30,~~March 31, 2020, the Interest Rate Swap was reported as a liability at its fair value of approximately $2.0 million, which is included in other liabilities on the Company’s consolidated balance sheet. For the three months ended March 31, 2020 the amount of realized losses reclassified to interest expense due to payments received by the swap counterparty were nominal.

As of December 31, 2019, the Interest Rate Swap was reported as an asset at its fair value of approximately ~~$0.2~~$0.7 million, which is included in other assets on the Company’s ~~condensed~~ consolidated balance sheet. For the nine months ended September 30, 2019 the amount of realized gains reclassified to interest expense due to payments received by the swap counterparty were nominal. Accordingly, the fair value of the Interest Rate Swap has been classified as a Level 2 fair value measurement.

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

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 ~~$586.1~~$610.3 million and ~~$503.3~~$576.9 million as of ~~September 30, 2019~~March 31, 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 ~~nine~~three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the Company earned ~~$0.4~~$0.1 million and ~~$0.5~~$0.1 million, respectively, in administrative services performed for Second City Real Estate II Corporation and its affiliates ~~(collectively, “Second~~(“Second City”). Also during the nine months ended September 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 nine months ended September 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 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.

~~During the three months ended September 30,~~

On July 31, 2019, an indirect, wholly-owned subsidiary of the Company entered into an

Administrative Services Agreement ~~(the“Administrative~~

(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 three months ended ~~September 30, 2019~~March 31, 2020, the amounts earned by the Company for the administrative services performed for Clarity were nominal.

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 the practical expedient to account for its lease andnon-lease~~ components as a single combined operating lease component under the new leasing standard. As a result, rental income, expense reimbursement, and other were aggregated into a single line within rental and other revenues on the condensed consolidated statement of operations.

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and March 31, 2019, the Company recognized ~~$38.9~~$40.1 million and ~~$114.5~~$37.1 million, respectively, of rental and other revenue related to its operating leases (in thousands):

   Three months ended
September 30, 2019    Nine months ended
September 30, 2019
Fixed payments
         $ 33,495    $ 98,555
Variable payments
         5,441    15,967




         $ 38,936    $ 114,522


	Three Months Ended March 31,
	2020		2019
Fixed payments	$	34,092	$	32,199
Variable payments		6,016		4,880

	$	40,108	$	37,079

Future minimum lease payments to be received by the Company as of ~~September 30, 2019~~March 31, 2020 under

non-cancellable

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

2019
   $ 31,253
2020
   116,812
2021
   106,709
2022
   89,349
2023
   71,209
Thereafter
   161,614


   $ 576,946


2020	$	90,339
2021		113,927
2022		95,518
2023		77,243
2024		57,558
Thereafter		115,327

	$	549,912

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~~One state government ~~tenants~~tenant currently ~~have~~has the exercisable right to terminate their ~~leases~~lease 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~~This tenant represents approximately ~~7.9%~~7.2% of the Company’s total future minimum lease payments as of ~~September 30, 2019.~~

March 31, 2020.

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 ~~September 30, 2019,~~March

2020

, these leases had remaining terms of

to 69

years and a weighted average remaining lease term of

years. ~~Operating and financingright-of-use~~

ight-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
September 30,
2019
Right-of-use asset – operating leases
   $ 13,125
Lease liability – operating leases
   $ 8,213
Right-of-use asset – financing leases
   $ 85
Lease liability – financing leases
   $ 84


	As of March 31, 2020		As of December 31, 2019
Right-of-use asset – operating leases	$	13,031	$	13,130
Lease liability – operating leases	$	7,985	$	8,033
Right-of-use asset – financing leases	$	73	$	79
Lease liability – financing leases	$	73	$	79

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 each of the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 and March 31, 2019 was $0.2 ~~million and $0.6 million, respectively.~~million. Financing lease expense for the three ~~and nine~~ months ended ~~September 30, 2019~~March 31, 2020 was nominal.

The Company did not have any financing leases as of the three months ended March 31, 2019.

Future minimum lease payments to be paid by the Company as a lessee for operating and financing leases as of ~~September 30, 2019~~March 31, 2020 for the next five years and thereafter are as follows (in thousands):

   Operating
Leases    Financing
Leases
2019
   $ 144    $ 6
2020
   782    27
2021
   781    27
2022
   741    27
2023
   659    4
Thereafter
   27,277    —




Total future minimum lease payments
   30,384    91
Discount
   (22,170 )    (7 )




Total
   $ 8,214    $ 84


	Operating Leases			Financing Leases
2020	$	364		$	20
2021		817			27
2022		798			27
2023		663			4
2024		597			—
Thereafter		26,680			—

Total future minimum lease payments		29,919			78
Discount		(21,934	)		(5	)

Total	$	7,985		$	73

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 ~~September 30, 2019,~~ March 31, 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

~~The Company and~~

Share Repurchase Plan

On March

, 2020, the ~~Operating Partnership previously entered into theamended equity distribution agreements~~ ~~(collectively, the “EDAs”) with the sales agents named therein (collectively, the “Sales Agents”), pursuant to which~~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 ~~issue and sell~~be repurchased from time to time ~~up to 8,000,000~~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 ~~and~~

up to 1,000,000 shares of Series A Preferred Stock through the Sales Agents, acting as agents or principals (the “ATM Program”). 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.~~classified as authorized and unissued shares. The Company ~~has no obligation to sell any~~recognizes the cost of ~~the shares under the EDAs and may at any time suspend solicitations and offers under, or terminate, the EDAs. During the nine month period ended September 30, 2019, the Company issued 8,000,000~~ shares of common stock ~~under the ATM Program. The Company raised $106.5 million~~it repurchases, including direct costs incurred, as a reduction in ~~aggregate gross proceeds, resulting in aggregate net proceeds~~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 three months ended March 31, 2020, the Company completed the repurchase of 1,451,249 shares of its common stock for approximately ~~$104.8 million after deducting sales commissions and offering expenses.~~

$11.6 million. There were 0 shares repurchased during the three months ended March 31, 2019.

Common Stock and Common Unit Distributions

On ~~September 16, 2019,~~March 25, 2020, the Company’s Board of Directors approved and the Company declared a cash dividend distribution of ~~$0.235~~$0.15 per ~~common~~

comm

share for the quarterly period ended ~~September 30, 2019.~~March 31, 2020. The dividend was paid subsequent to quarter end on ~~October 25, 2019~~April 24, 2020 to common stockholders and common unitholders of record as of the close of business on ~~October 11, 2019,~~April 9, 2020, resulting in an aggregate payment of ~~$11.2~~$7.8 million.

Preferred Stock Distributions

On ~~September 16, 2019,~~March 25, 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 ~~September 30, 2019.~~March 31, 2020. The dividend was paid subsequent to quarter end on ~~October 25, 2019~~ April 24, 2020

to ~~preferred stockholders~~the holders of record of Series A Preferred Stock as of the close of business on ~~October 11, 2019, resulting in an aggregate payment of $1.9 million.~~

~~Restricted Stock Units~~

April 9, 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 ~~nine~~three months ended ~~September 30, 2019, 162,500~~March 31, 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 nine~~ months ended ~~September 30,~~March 31, 2020

the Company recognized net compensation expense of $0.5 million related to the RSUs. For the three months ended March 31, 2019, the Company recognized net compensation expense of $0.4 million ~~and $1.3 million, respectively,~~ related to the RSUs.

During the three months ended March 31, 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 nine~~ months ended ~~September 30, 2018~~March 31, 2020, the Company recognized net compensation expense of ~~$0.4~~$0.1 million ~~and $1.1 million, respectively,~~ related to the ~~RSUs.~~

APerformance RSU award represents the right to receive shares of the Company’s common stock in the future, after the applicable vesting criteria, determined by the Plan Administrator, has been satisfied. The holder of an award of RSU has no rights as a stockholder until shares of common stock are issued in settlement of vested 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 respectAwards. There was

compensation expense related to the ~~related dividend equivalent rights will be held by~~Performance RSU Awards for the three months ended March 31, 2019.

11. Subsequent Events

Subsequent to quarter end through May 5, 2020, the Company ~~and paid when, and only to~~settled on the ~~extent that, the related RSU vests.~~

~~11. Subsequent Events~~

~~On October 7, 2019, the Company completed a public offering pursuant to which the Company sold 6,900,000~~repurchase of 5,872,328 shares of its common stock ~~inclusive~~for approximately $48.9 million.

COVID-19

The recent

COVID-19

pandemic has caused significant disruption in global financial markets and economies. The Company is closely monitoring the impact of the ~~overallotment option, for aggregate gross proceeds~~recent

COVID-19

pandemic on all aspects of ~~$95.6 million.~~

its business and geographies, including government actions in response to the outbreak and the impact on its tenants. While the Company did not experience any significant disruptions during the three months ended March 31, 2020, as a result of the

COVID-19

pandemic or governmental or tenant actions in response thereto, the extent to which

COVID-19

will impact the Company is highly uncertain and cannot be predicted with confidence at this time.

Since March 2020, the Company received certain rent relief requests, most often in the form of rent deferral requests, as a result of

COVID-19.

The Company is evaluating each tenant rent relief request on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modification agreements, nor is the Company forgoing its contractual rights under its lease agreements.

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 recent

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 recent global

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

~~uncertainty 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 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 ~~September 30, 2019,~~March 31, 2020, we owned 2825 properties comprised of 6665 office buildings with a total of approximately ~~5.9~~5.8 million square feet of net rentable area (“NRA”). As of ~~September 30, 2019,~~March 31, 2020, our properties were approximately ~~91.2%~~92.2% 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, 2525 McKinnon, Sorrento Mesa and Canyon Park properties have triple net leases. Certain tenants at AmberGlen, Cherry Creek, Superior Pointe, Florida Research Park, Circle Point, The Quad, 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 quarantine or
shelter-in-place
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.

It is still too early to predict the extent and timing of the full impact on businesses from the severe dislocations caused by the effective shutdown of large segments of our economy. While the
COVID-19
pandemic did not have a meaningful impact on our financial results for the first quarter of 2020, we believe it is likely our future financial results will be adversely impacted by the
COVID-19
pandemic. Given the fluidity of the pandemic and its uncertain impact on economic activity, losses related to tenant financial difficulties are difficult to predict.

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 March and April of 2020 was significantly lower than normal due to the
COVID-19
pandemic. Usage of our assets for the remainder of 2020, however, depends on the duration of the
COVID-19
pandemic, which is difficult to estimate.

We believe that some of the industries that will be 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 two of our ten largest tenants.

Through May 4, 2020, we have collected approximately 98% of our contractually required base rents from our tenants for the month of April 2020. We expect that the rate of collections in May 2020 and future months may be lower, as the length of the economic downturn continues to impact tenants. We have received rent relief requests from certain tenants, and we have developed dedicated teams and processes to evaluate
non-payments
and rent relief requests. We believe many of these requests received were from tenants who have the ability to pay rent and were seeking opportunistic deferral opportunities. We are working efficiently to find tailored resolutions in each case where warranted, including potential deferrals of rent, lease term extensions in lieu of short term rent relief, temporary percentage rent opportunities for hospitality entities, or, in limited circumstances, rent abatement particularly when the tenant is viewed as an amenity to the building. We assume we will incur losses due to tenants that default on their leases, file for bankruptcy and/or otherwise experience significant financial difficulty as a result of the
COVID-19
pandemic, but the extent of those losses is difficult to predict.

We also believe that leasing activity has been and will continue to be impacted by
COVID-19.
We expect that we will experience slower than originally anticipated speculative new leasing, which we expect will be partially offset by higher renewal activity. Overall, this would reduce our anticipated rental revenues. Because construction activities have generally been classified as essential activities throughout our markets during the
COVID-19
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, adjusted our common stock dividend and are operating with lower leverage and higher levels of liquidity. 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.

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 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 ~~September 30, 2019,~~March 31, 2020, we owned ~~28 office complexes~~25 properties comprised of 6665 office buildings with a total of approximately ~~5.9~~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 ~~September 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
(20.6% of NRA)

Pima Center
100.0 % 272 87.0 % $ 27.19 $ 27.19 $ 6,431

SanTan
100.0 % 267 91.7 % $ 27.85 $ 27.85 $ 6,807

5090 N 40^th St
100.0 % 175 95.8 % $ 29.03 $ 29.03 $ 4,861

Camelback Square
100.0 % 173 67.1 % $ 29.89 $ 29.89 $ 3,472

The Quad
100.0 % 163 100.0 % $ 28.66 $ 28.91 $ 4,672

Papago Tech
100.0 % 163 86.7 % $ 21.78 $ 21.78 $ 3,072
Denver, CO
(19.7%)

Cherry Creek
100.0 % 356 100.0 % $ 18.59 $ 18.59 $ 6,612

Circle Point
100.0 % 272 94.3 % $ 17.58 $ 30.47 $ 4,506

Denver Tech⁽⁴⁾
100.0 % 380 66.9 % $ 22.86 $ 27.69 $ 5,646

Superior Pointe
100.0 % 151 96.5 % $ 17.66 $ 29.17 $ 2,579
Tampa, FL
(17.6%)

Park Tower
94.8 % 471 92.4 % $ 24.58 $ 24.58 $ 10,696

City Center
95.0 % 241 91.8 % $ 25.49 $ 25.49 $ 5,652

Intellicenter
100.0 % 204 100.0 % $ 23.99 $ 23.99 $ 4,881

Carillon Point
100.0 % 124 100.0 % $ 28.16 $ 28.16 $ 3,498
Orlando, FL
(12.2%)

Florida Research Park⁽⁵⁾
96.6 % 397 89.4 % $ 23.44 $ 27.25 $ 8,262

Central Fairwinds
97.0 % 168 92.1 % $ 25.32 $ 25.32 $ 3,921

Greenwood Blvd
100.0 % 155 100.0 % $ 22.75 $ 22.75 $ 3,527
San Diego, CA
(9.9%)

Sorrento Mesa
100.0 % 296 85.3 % $ 25.27 $ 31.27 $ 6,380

Mission City
100.0 % 286 96.9 % $ 35.01 $ 35.01 $ 9,703
Dallas, TX
(9.8%)

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 92.5 % $ 27.41 $ 44.41 $ 2,823
Portland, OR
(5.6%)

AmberGlen
76.0 % 201 96.9 % $ 21.30 $ 23.89 $ 4,151

Cascade Station
100.0 % 128 100.0 % $ 26.45 $ 32.45 $ 3,372
Seattle, WA
(3.4%)

Canyon Park
100.0 % 207 100.0 % $ 21.20 $ 29.20 $ 4,384

Total / Weighted Average – Excluding Assets Held For Sale⁽³⁾

5,827 91.4 % $ 24.35 $ 27.18 $ 129,481
Denver, CO
(1.2%)

Logan Tower
100.0 % 72 69.8 % $ 21.60 $ 21.60 $ 1,084

Total / Weighted Average – September 30, 2019⁽³⁾

5,899 91.2 % $ 24.32 $ 27.13 $ 130,565

March 31, 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		87.0	%	$	27.44	$	27.44	$	6,491
	SanTan		100.0	%		267		91.7	%	$	28.11	$	28.11	$	6,868
	5090 N 40 th St		100.0	%		174		94.6	%	$	28.58	$	28.58	$	4,714
	Camelback Square		100.0	%		174		78.8	%	$	31.25	$	31.25	$	4,284
	The Quad		100.0	%		163		100.0	%	$	29.20	$	29.51	$	4,759
	Papago Tech		100.0	%		163		90.9	%	$	22.46	$	22.46	$	3,322
Denver, CO (19.9%)	Cherry Creek		100.0	%		356		100.0	%	$	18.59	$	19.31	$	6,612
	Circle Point		100.0	%		272		94.3	%	$	17.88	$	31.76	$	4,583
	Denver Tech (3)		100.0	%		381		78.0	%	$	22.96	$	27.02	$	6,591
	Superior Pointe		100.0	%		151		96.5	%	$	18.08	$	30.55	$	2,641
Tampa, FL (17.9%)	Park Tower		94.8	%		471		89.8	%	$	25.58	$	25.58	$	10,820
	City Center		95.0	%		242		93.1	%	$	25.83	$	25.83	$	5,814
	Intellicenter		100.0	%		204		100.0	%	$	23.99	$	23.99	$	4,881
	Carillon Point		100.0	%		124		100.0	%	$	28.36	$	28.36	$	3,522
Orlando, FL (12.4%)	Florida Research Park (4)		96.6	%		397		96.9	%	$	23.93	$	27.39	$	9,171
	Central Fairwinds		97.0	%		168		93.7	%	$	25.10	$	25.10	$	3,956
	Greenwood Blvd		100.0	%		155		100.0	%	$	23.25	$	23.25	$	3,605
San Diego, CA (10.0%)	Sorrento Mesa		100.0	%		296		85.3	%	$	25.77	$	33.77	$	6,507
	Mission City		100.0	%		286		91.6	%	$	35.43	$	35.43	$	9,276
Dallas, TX (9.9%)	190 Office Center		100.0	%		303		81.2	%	$	25.55	$	25.55	$	6,288
	Lake Vista Pointe		100.0	%		163		100.0	%	$	16.00	$	25.00	$	2,613
	2525 McKinnon		100.0	%		111		88.5	%	$	28.23	$	45.23	$	2,782
Portland, OR (5.6%)	AmberGlen		76.0	%		203		98.4	%	$	21.78	$	24.32	$	4,342
	Cascade Station		100.0	%		128		100.0	%	$	26.69	$	28.06	$	3,403
Seattle, WA (3.5%)	Canyon Park		100.0	%		207		100.0	%	$	21.84	$	29.84	$	4,515

Total / Weighted Average – March 31, 2020 (5)						5,831		92.2	%	$	24.66	$	27.58	$	132,360

(1)

~~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, $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 apro-rata~~ ~~basis. Florida Research Park has net leases for six tenants which have been grossed up by $8 on apro-rata~~ ~~basis. Circle Point has net leases for twelve 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. Denver Tech has a net lease for one tenant which has been grossed up by $12 on apro-rata~~ ~~basis.~~

the year ended March 31, 2020.

(2)	Annualized base rent is calculated by multiplying (i) rental payments (defined as cash rents before abatements) for the month ended ~~September 30, 2019~~March 31, 2020 by (ii) 12.

(3)	~~Averages weighted based on the property’s NRA, adjusted for occupancy~~

~~(4)~~

Denver Tech ~~comprises~~is comprised of 7601 Tech, which was acquired during the third quarter of 2019, and 7595 Tech (formerly “DTC Crossroads”).

~~(5)~~(4)

Florida Research Park ~~comprises~~is comprised of FRP Collection and FRP Ingenuity Drive.

(5)	Averages weighted based on the property’s NRA, adjusted for 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 cannot be predicted with confidence 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 ~~September 30, 2019~~March 31, 2020 to Three Months Ended ~~September 30, 2018~~

March 31, 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 ~~$5.4~~$3.0 million, or ~~16%~~8%, to ~~$38.9~~$40.1 million for the three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$33.5~~$37.1 million for the three months ended ~~September 30, 2018.~~March 31, 2019. Of this increase, ~~$0.4~~$0.9 million was from the acquisition of Circle Point in July 2018, $0.6 million was from the acquisition of The Quad in July 2018, $1.1 million was from the acquisition of Greenwood Blvd in December 2018, $1.1 million was from the acquisition of Camelback Square in December 2018, $1.3 million was fromattributable to the acquisition of Canyon Park in February 2019, $0.9 million was ~~from~~attributable to the acquisition of Cascade Station in June 2019 and ~~$0.3~~$1.4 million was ~~from~~attributable to the acquisition of 7601 Tech, part of our Denver Tech property, in September 2019. Revenue from Park Tower ~~Mission City and FRP Collection also~~ increased by $0.2 million ~~$0.2 million, and $0.2 million, respectively,~~ as a result of increased average occupancy over the ~~prior-year period.~~prior year and 190 Office Center increased by $0.3 million, primarily as a result of a termination fee received in the current year. Partially offsetting these increases, Plaza 25 decreased overall revenue by ~~$0.7~~$0.2 million due to the sale of the property in February 2019 and Logan Tower decreased overall revenue by $0.3 million due to the sale of the property in December 2019. In addition, revenue from the Sorrento Mesa portfolio decreased by $0.2 million as a result of the sale of the 10455 Pacific Center building in May 2019. The remaining properties’ revenues were ~~relatively unchanged~~flat in comparison to the ~~prior-year period.~~

prior year.

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 ~~$3.7~~$1.8 million, or ~~13%~~6%, to ~~$32.2~~$32.4 million for the three months ended ~~September 30, 2019,~~March 31, 2020, from ~~$28.5~~$30.6 million for the three months ended ~~September 30, 2018,~~March 31, 2019, primarily due to the acquisitions described above. Total operating expenses increased by ~~$0.2~~$0.6 million, $0.7 million ~~$1.3 million, $0.6 million, $0.6 million~~ and ~~$0.3~~$1.1 million, respectively, from the acquisitions of ~~The Quad, Greenwood Blvd, Camelback Square,~~ Canyon Park, Cascade Station and 7601 Tech properties. Plaza 25 operating expenses decreased by ~~$0.8~~$0.2 million due to its sale in February 2019 and Logan Tower operating expenses decreased by $0.3 million due to its sale in December 2019. Operating expenses for the Sorrento Mesa portfolio decreased by $0.3 million due to the sale of the 10455 Pacific Center building in May 2019. General and ~~Administrative Expenses~~administrative expenses increased by approximately ~~$0.8~~$0.5 million, ~~related~~primarily attributable to higher payroll costs. The remaining operating expenses were ~~relatively unchanged~~marginally lower in comparison to the prior-year period.

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 ~~$1.1~~by $0.9 million, or 9%6%, to ~~$14.4~~$14.7 million for the three months ended ~~September 30, 2019~~March 31, 2020, from ~~$13.3~~$13.8 million for the three months ended ~~September 30, 2018.~~March 31, 2019. The increase in

property operating expenses was primarily due to the acquisitions described above. The acquisition of the ~~The Quad, Greenwood Blvd, Camelback Square,~~ Canyon Park, Cascade Station and 7601 Tech properties contributed an additional $0.2 million, $0.3 million, ~~$0.4 million, $0.4 million, $0.1 million, $0.2 million~~ and ~~$0.1~~$0.6 million, respectively, in additional property operating expenses. Partially offsetting these increases, Plaza 25 decreased by ~~$0.5~~$0.2 million due to the sale of that property in February 2019, the Sorrento Mesa portfolio decreased by $0.1 million due to the sale of the 10455 Pacific Center building in May 2019, and Logan Tower decreased by $0.2 million due to the sale of that property in December 2019. The remaining property operating expenses aggregate to ~~a net $0.1~~an increase of $0.3 million ~~increase~~ in comparison to the prior-year period.

General and Administrative.

General and administrative expenses are comprised of public company reporting costs and the compensation of our management team and board of directors, as well as

non-cash

stock-based compensation expenses. General and administrative expenses increased ~~$0.9~~$0.5 million, or ~~50%~~21%, to $2.8 million for the three months ended ~~September 30, 2019 compared to $1.9~~March 31, 2020, from $2.3 million for the three months ended ~~September 30, 2018.~~March 31, 2019. The increase iswas primarily attributable to higher payroll costs.

Depreciation and Amortization.

Depreciation and amortization increased ~~$1.6~~$0.6 million, or ~~12%~~4%, to $15.0 million for the three months ended ~~September 30, 2019 compared to $13.4~~March 31, 2020, from $14.4 million for the three months ended ~~September 30, 2018,~~March 31, 2019, primarily due to the addition of the ~~The Quad, Greenwood Blvd, Camelback Square, Canyon Park, Cascade Station and 7601 Tech properties partially offset by a decrease at Plaza 25 due to the sale of the property.~~

~~Other Expense (Income)~~

~~Interest Expense.~~ Interest expense increased $1.5 million, or 24%, to $7.7 million for the three months ended September 30, 2019, compared to $6.2 million for the three months ended September 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 $0.2 million, $0.2 million, $0.2 million, $0.5 million and $0.2 million, respectively, and the interest on the line of credit increased by $0.3 million as a result of acquisitions funded by our $250 million Unsecured Credit Facility (as defined below). These increases were partially offset by a $0.2 million decrease in the Plaza 25 debt as a result of its sale and the extinguishment of its property level debt.

~~Comparison of Nine Months Ended September 30, 2019 to Nine Months Ended September 30, 2018~~

~~Rental and Other Revenues.~~ Revenue includes net rental income, including parking, signage and other income, as well as the recovery of operating costs and property taxes from tenants. Rental and other revenues increased $21.9 million, or 23%, to $117.2 million for the nine months ended September 30, 2019 compared to $95.3 million for the nine months ended September 30, 2018. Of this increase, $1.8 million was attributable to the acquisition of Pima Center in April 2018, $4.5 million from the acquisition of Circle Point in July 2018, $3.3 million from the acquisition of The Quad in July 2018, $3.4 million from the acquisition of Greenwood Blvd in December 2018, $3.5 million from the acquisition of Camelback Square in December 2018, $3.3 million from the acquisition of Canyon Park in February 2019, $1.1 million from the acquisition of Cascade Station in June 2019 and $0.3 million from the acquisition of 7601 Tech in September 2019. Revenue from Central Fairwinds, Park Tower, Mission City and FRP Collection also increased by $0.4 million, $0.8 million, $0.6 million and $0.5 million, respectively, as a result of increased average occupancy over the prior year. Partially offsetting these increases, Washington Group Plaza decreased by $1.7 million due to the sale of the property in March 2018 and Plaza 25 decreased by $1.7 million due to the sale of the property in February 2019. Revenue from 7595 Tech (formerly “DTC Crossroads”) decreased $0.6 million as a result of decreased occupancy over the prior year and Sorrento Mesa also decreased by $1.3 million as a result of the termination fee payment received in the prior year. The remaining properties’ revenues were modestly higher in comparison to the prior year primarily as a result of modest~~mark-to-market~~ ~~increases in rents upon renewal. Other Revenues benefited from aone-time~~ payment of $2.6 million received as consideration for the assignment of a purchase contract. The assignment fee originated through our administrative services relationship. Upon adoption of Topic 842, prior year amounts disclosed in rental income, expense reimbursement, and other have been combined into a single line to conform to current period presentation.

~~Operating Expenses~~

~~Total Operating Expenses.~~ ~~Total operating expenses consist of property operating expenses, general and administrative expenses and depreciation and amortization. Total operating expenses increased by $15.7 million, or~~

20%, to $95.2 million for the nine months ended September 30, 2019, from $79.5 million for the nine months ended September 30, 2018, primarily due to the acquisitions described above. Total operating expenses increased by $1.8 million, $4.0 million, $2.1 million, $2.2 million, $3.4 million, $1.6 million, $0.8 million and $0.3 million, respectively, from the acquisitions of Pima Center, Circle Point, The Quad, Greenwood Blvd, Camelback Square, Canyon Park, Cascade Station and 7601 Tech properties. Park Tower operating expenses also increased by $0.6 million due to the higher occupancy at that property. Washington Group Plaza operating expenses decreased by $0.8 million due to its sale in March 2018 and Plaza 25 operating expenses decreased by $2.1 million due to its sale in February 2019. Sorrento Mesa decreased by $1.5 million due to the sale of the 10455 Pacific Center building of the Sorrento Mesa property in May 2019. General and Administrative Expenses increased by approximately $2.4 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 nine months ended September 30, 2019 and the balance related to higher payroll costs. The remaining operating expenses were modestly higher in comparison to the prior-year period primarily due to higher occupancy at the properties.

~~Property Operating Expenses.~~ Property operating expenses are comprised mainly of building common area and maintenance expenses, insurance, property taxes, property management fees, as well as certain expenses that are not recoverable from tenants, the majority of which are related to costs necessary to maintain the appearance and marketability of vacant space. In the normal course of business, property expenses fluctuate and are impacted by various factors including, but not limited to, occupancy levels, weather, utility costs, repairs, maintenance and~~re-leasing~~ costs. Property operating expenses increased $6.2 million, or 17%, to $42.8 million for the nine months ended September 30, 2019 from $36.6 million for the nine months ended September 30, 2018. The increase in property operating expenses was primarily due to the acquisitions described above. The acquisition of the Pima Center, Circle Point, The Quad, Greenwood Blvd, Camelback Square, Canyon Park, Cascade Station and 7601 Tech contributed an additional $0.7 million, $2.0 million, $1.0 million, $1.2 million, $1.1 million, $0.4 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 $1.1 million due to the sale of that property in February 2019. The remaining property operating expenses aggregate to an overall $1.1 million increase in comparison to the prior-year period.

~~General and Administrative.~~ ~~General and administrative expenses are comprised of public company reporting costs and the compensation of our management team and board of directors as well asnon-cash~~ stock-based compensation expenses. General and administrative expenses increased $2.6 million, or 46%, to $8.4 million for the nine months ended September 30, 2019 compared to $5.8 million for the nine months ended September 30, 2018. Of this increase, $1.1 million can be attributed to the~~one-time~~ expenses and accruals incurred as a result of the assignment fee income earned during the nine months ended September 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 $7.1 million, or 19%, to $44.1 million for the nine months ended September 30, 2019 compared to $37.0 million for the nine months ended September 30, 2018, primarily due to the addition of the Pima Center, Circle Point, The Quad, Greenwood Blvd, Camelback Square, Canyon Park, Cascade Station and 7601 Tech properties. These increases were partially offset by a decrease at ~~Washington Group Plaza,~~ Plaza 25, Logan Tower and the 10455 Pacific Center building of the Sorrento Mesa property due to the sale of those properties.

Other Expense (Income)

Interest Expense.

Interest expense ~~increased $5.5~~decreased $0.8 million, or ~~32%~~11%, to ~~$23.0~~$6.7 million for the ~~nine~~three months ended ~~September 30, 2019, compared to $17.5~~March 31, 2020, from $7.5 million for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. The ~~increase~~decrease was primarily attributable to a decrease of $1.1 million 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 year. Interest expense also decreased by $0.2 million due to the negotiated reduction in interest ~~expense related to acquisitions. Interest~~rate on four mortgages in the second half of 2019. Partially offsetting these decreases, interest expense for the ~~Circle Point, The Quad, Greenwood Blvd,~~ Canyon Park and Cascade Station property level debt increased by ~~$1.2 million, $0.9 million, $0.8 million, $1.0~~$0.3 million, and ~~$0.3~~$0.2 million, respectively, ~~and~~due to the ~~interest on the line of credit increased by $2.3 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 $0.5 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.~~

in 2019.

Cash Flows

Comparison of ~~Nine~~Three Months Ended ~~September 30, 2019~~March 31, 2020 to ~~Nine~~Three Months Ended ~~September 30, 2018~~

March 31, 2019

Cash, cash equivalents and restricted cash were ~~$32.5~~$164.8 million and ~~$33.8~~$37.0 million as of ~~September 30,~~March 31, 2020 and March 31, 2019, ~~and September 30, 2018,~~ respectively.

Cash flow from operating activities.

Net cash provided by operating activities increased by ~~$7.2~~$7.9 million to ~~$37.3~~$10.7 million for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$30.1~~$2.8 million for the ~~nine months ended September 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 decreased by ~~$5.9~~$31.4 million to ~~$90.7~~$5.3 million for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$96.6~~$36.7 million ~~used in investing activities~~ for the ~~nine months ended September 30, 2018.~~same period in 2019. The decrease in cash used in investing activities was primarily due to ~~lower cost of~~no acquisitions or dispositions of real estate ~~in 2019~~during the three months ended March 31, 2020 compared to ~~2018. Additionally, we realized lower proceeds from~~aggregate $51.1 million of acquisitions and aggregate $17.4 million of dispositions for the ~~sale of real estate~~same period in ~~2019 compared to 2018 which included proceeds from the sale of Washington Group Plaza in 2018.~~

2019.

Cash flow from financing activities.

Net cash provided by financing activities ~~decreased~~increased by ~~$12.5~~$34.1 million to ~~$52.9~~$71.9 million for the ~~nine~~three months ended ~~September 30, 2019~~March 31, 2020 compared to ~~$65.4~~$37.8 million ~~used~~for the same period in ~~financing activities in the nine months ended September 30, 2018.~~2019. Cash flow provided by financing activities ~~decreased~~increased primarily due to ~~lower~~higher net proceeds from our Unsecured Credit Facility borrowings for the three months ended March 31, 2020 compared to ~~2018. The decrease was~~the same period in 2019, partially offset by ~~higher proceeds from sales of~~ common stock ~~in 2019 compared to 2018.~~

repurchases during the three months ended March 31, 2020.

Liquidity and Capital Resources

Analysis of Liquidity and Capital Resources

We had approximately ~~$12.3~~$146.5 million of cash and cash equivalents and ~~$20.2~~$18.3 million of restricted cash as of ~~September 30, 2019.~~

March 31, 2020.

On March 15, 2018, the Company entered into a credit agreement for the Unsecured Credit Facility (our “Unsecured Credit Facility”) that provided for commitments of up to $250 million, ~~unsecured credit facility,~~ which includes an accordion feature that allows the Company to borrow up to $500 million, subject to customary terms and ~~conditions (the “Unsecured Credit Facility”).~~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 September 30, 2019,~~During the three months ended March 31, 2020, we drew approximately $100 million under the Unsecured Credit Facility. At March 31, 2020, we had approximately ~~$43.3~~$100 million outstanding under our Unsecured Credit Facility and a $7.0 million ~~of letters~~letter of credit to satisfy escrow requirements for a mortgage ~~lenders.~~

Inlender.

On September 27, 2019, the Company ~~executed a third amendment to~~entered into the five-year $50 million Term Loan (the “Term Loan”), increasing its authorized borrowings under the Company’s Unsecured Credit ~~Facility. The amendment increased the commitment under the facility~~Facility from $250 million to $300 ~~million by issuing a new tranche of term loan commitments in~~million. Borrowings under the ~~principal amount of $50 million (the “Term Loan”). The five-year~~ Term Loan ~~bears~~bear interest at a rate ofequal to the LIBOR rate plus a ~~spread of~~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~~pay-fixed~~ ~~receive-variable~~the five-year interest rate swap ~~with~~for a notional amount of $50 million ~~effectively fixing the LIBOR component of the borrowing rate at approximately 1.27%~~ (the “Interest Rate Swap”). ~~Both~~Pursuant to the ~~Term Loan and~~ Interest Rate Swap, ~~mature in September 2024.~~

~~The~~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 ~~theamended~~ 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 three months ended March 31, 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 (the “ATM Program”). 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~~did not issue any ~~of the shares under the EDAs and may at any time suspend solicitations and offers under, or terminate, the EDAs. During the nine month period ended September 30, 2019, the Company issued 8,000,000~~ shares of common stock or Series A Preferred Stock under the ATM ~~Program. The Company raised $106.5 million in aggregate gross proceeds, resulting in aggregate net proceeds to~~Program during the ~~Company of approximately $104.8 million after deducting sales commissions and offering expenses.~~

three months ended March 31, 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 ~~September 30, 2019,~~March 31, 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
   $ 657,054    $ 1,400    $ 95,642    $ 98,381    $ 461,631
Interest payments⁽¹⁾
   146,206    6,567    49,921    40,737    48,981
Tenant-related commitments
   11,885    6,304    4,982    599    —
Operating and financing lease obligations
   30,475    150    1,617    1,431    27,277










Total
   $ 845,620    $ 14,421    $ 152,162    $ 141,148    $ 537,889


	Payments Due by Period (in thousands)
Contractual Obligations	Total		2020		2021-2022		2023-2024		More than 5 years
Principal payments on mortgage loans	$	710,751	$	4,738	$	195,884	$	173,254	$	336,875
Interest payments (1)		134,628		20,302		45,789		37,089		31,448
Tenant-related commitments		12,530		11,904		626		—		—
Lease obligations		29,997		384		1,669		1,264		26,680

Total	$	887,906	$	37,328	$	243,968	$	211,607	$	395,003

(1)

Contracted interest on the floating rate borrowings under our Unsecured Credit Facility was calculated based on the balance and interest rate at ~~September 30, 2019.~~March 31, 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 ~~September 30, 2019,~~March 31, 2020, we had ~~$7.0~~a $7 million ~~of letters~~letter of credit outstanding under our Unsecured Credit Facility to satisfy escrow requirements for a mortgage ~~lenders.~~

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

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 financial institutions based on their credit rating and other factors.~~ See Note 6 to our consolidated financial statements in Item 1 of this Report for more information regarding our 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 ~~September 30, 2019,~~March 31, 2020, approximately ~~$563.7~~$560.8 million, or ~~85.8%~~78.9%, of our debt had fixed interest rates and approximately ~~$93.3~~$150 million, or ~~14.2%~~21.1%, had variable interest rates. Of the ~~$93.3~~$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~~

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 ~~93.4%~~85.9% of our debt ~~had~~was fixed rate debt and ~~6.6% had~~14.1% was variable rate debt as of ~~September 30, 2019.~~March 31, 2020. A 10% increase in LIBOR would increase our annual interest costs by approximately ~~$0.2~~$0.1 million on debt outstanding as of ~~September 30, 2019,~~March 31, 2020, and would decrease the fair value of our outstanding debt, as well as increase interest costs associated with future debt issuances or borrowings under our Unsecured Credit Facility. A 10% decrease in LIBOR would decrease our annual interest costs by approximately ~~$0.2~~$0.1 million on debt outstanding as of ~~September 30, 2019~~March 31, 2020 and would increase the fair value of our outstanding debt, as well as decrease interest costs associated with future debt issuances or borrowings under our Unsecured Credit Facility.

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 recent

COVID-19

pandemic has introduced significant volatility in global financial markets and economies subsequent to the three months ended March 31, 2020. The impacts of such volatility on the Company cannot be predicted with confidence or reasonably estimated at this time.

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 ~~September 30, 2019.~~

March 31, 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

We and our subsidiaries are, from time to time, parties to litigation arising from the ordinary course of business. As of ~~September 30, 2019,~~March 31, 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

The following risk factor ~~replaces~~supplements the risk ~~factor~~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 abatement 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.

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, 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 demand for office space, 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 are highly uncertain and cannot be predicted with confidence, 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 anadministrative services agreement. In addition, the terms of the administrative services agreement~~common 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

~~None.~~

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 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 March 31, 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)
January 1 – 31, 2020		—	$	—		—	$	—	(2)
February 1 – 29, 2020		—		—		—		—	(2)
March 1 – 31, 2020		1,451,249		7.99		1,451,249		88,406

Total		1,451,249	$	7.99		1,451,249	$	88,406

(1)	Represents approximate dollar value of shares that could have been purchased under the plan in effect at the end of the month.

(2)	The share repurchase plan was approved by the Company’s Board of Directors on March 9, 2020. Therefore, no purchases were authorized or made during this period.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits


~~Exhibit~~ ~~Number~~		~~Description~~
Exhibit Number			Description
~~3.1~~
	1.1		Equity Distribution Agreement, dated February 26, 2020, by and among City Office REIT, Inc., City Office Operating Partnership, L.P. and KeyBanc Capital Markets Inc. (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the Commission on February 26, 2020).

	1.2		Equity Distribution Agreement, dated February 26, 2020, by and among City Office REIT, Inc., City Office Operating Partnership, L.P. and Raymond James & Associates, Inc. (incorporated by reference to Exhibit 1.2 to the Company’s Current Report on Form 8-K filed with the Commission on February 26, 2020).

	1.3		Equity Distribution Agreement, dated February 26, 2020, by and among City Office REIT, Inc., City Office Operating Partnership, L.P. and BMO Capital Markets Corp. (incorporated by reference to Exhibit 1.3 to the Company’s Current Report on Form 8-K filed with the Commission on February 26, 2020).

	1.4		Equity Distribution Agreement, dated February 26, 2020, by and among City Office REIT, Inc., City Office Operating Partnership, L.P. and RBC Capital Markets, LLC (incorporated by reference to Exhibit 1.4 to the Company’s Current Report on Form 8-K filed with the Commission on February 26, 2020).

	1.5		Equity Distribution Agreement, dated February 26, 2020, by and among City Office REIT, Inc., City Office Operating Partnership, L.P. and B. Riley FBR, Inc. (incorporated by reference to Exhibit 1.5 to the Company’s Current Report on Form 8-K filed with the Commission on February 26, 2020).

	1.6		Equity Distribution Agreement, dated February 26, 2020, by and among City Office REIT, Inc., City Office Operating Partnership, L.P. and D.A. Davidson & Co. (incorporated by reference to Exhibit 1.6 to the Company’s Current Report on Form 8-K filed with the Commission on February 26, 2020).



	1.7	Equity Distribution Agreement, dated February 26, 2020, by and among City Office REIT, Inc., City Office Operating Partnership, L.P. and Janney Montgomery Scott LLC (incorporated by reference to Exhibit 1.7 to the Company’s Current Report on Form 8-K filed with the Commission on February 26, 2020).

	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~~
	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~~
	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).


~~Exhibit~~ ~~Number~~		~~Description~~

	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~~
	10.1			~~Amendment No. 1 to the City Officer REIT, Inc. Equity Incentive Plan~~Form of Performance Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form8-K filed with the Commission on ~~May 6, 2019)~~January 28, 2020). **

~~10.2~~
	10.2			~~Administrative Services~~Fourth Amendment to the Amended and Restated Agreement ~~dated July 31, 2019, by and among CIO Administrative Services, LLC, Clarity Real Estate III GP,~~of Limited Partnership ~~and Clarity Real Estate Ventures GP, Limited Partnership. (Incorporated~~of City Office REIT Operating Partnership, L.P. (incorporated by reference to Exhibit ~~10.2~~10.1 to the Company’s ~~Quarterly~~Current Report on Form~~10-Q~~ 8-K filed with the Commission on ~~August 1, 2019)~~February 26, 2020).

~~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.* (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form~~10-Q~~ ~~filed on August 1, 2019).~~

~~10.4~~	31.1		Amendment No. 1 to Executive Employment Agreement, dated as of July 31, 2019, by and between City Office Management Ltd. and Gregory Tylee.* (Incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form~~10-Q~~ ~~filed on August 1, 2019).~~

~~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.* (Incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form~~10-Q~~ ~~filed on August 1, 2019).~~

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

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

~~32.1~~
	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~~
	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~~ 101.INS			INSTANCE DOCUMENT*

	101.SCH			SCHEMA DOCUMENT*

	101.CAL			CALCULATION LINKBASE DOCUMENT**

~~101.LAB~~
	101.LAB			LABELS LINKBASE DOCUMENT**

~~101.PRE~~
	101.PRE			PRESENTATION LINKBASE DOCUMENT**

~~101.DEF~~
	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.

	**	Compensatory Plan or arrangement

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: May 7, 2020


~~Date: November 1, 2019~~
By:		/s/ James Farrar
	James Farrar
	~~By:~~	~~/s/ James Farrar~~
				~~James Farrar~~
			Chief Executive Officer and Director
	(Principal Executive Officer)

Date: May 7, 2020


By:	~~Chief Executive Officer and Director~~ /s/ Anthony Maretic
	Anthony Maretic
		~~(Principal Executive Officer)~~

~~Date: November 1, 2019~~
		~~By:~~	~~/s/ Anthony Maretic~~
			~~Anthony Maretic~~

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


	September 30, 2019			December 31, 2018
Assets
Real estate properties
Land	$	230,034		$	223,789
Building and improvement		782,576			704,113
Tenant improvement		91,016			77,426
Furniture, fixtures and equipment		285			319

		1,103,911			1,005,647
Accumulated depreciation		(93,623	)		(70,484	)

		1,010,288			935,163

Cash and cash equivalents		12,281			16,138
Restricted cash		20,240			17,007
Rents receivable, net		31,844			26,095
Deferred leasing costs, net		11,235			10,402
Acquired lease intangible assets, net		73,394			75,501
Other assets		16,830			2,755
Assets held for sale		13,905			17,370

Total Assets	$	1,190,017		$	1,100,431

Liabilities and Equity
Liabilities:
Debt	$	651,693		$	645,354
Accounts payable and accrued liabilities		28,431			25,892
Deferred rent		5,574			5,331
Tenant rent deposits		5,691			4,564
Acquired lease intangible liabilities, net		8,763			8,887
Other liabilities		21,349			11,148
Liabilities related to assets held for sale		356			878

Total Liabilities		721,857			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, 47,647,063 and 39,544,073 shares issued and outstanding		476			395
Additionalpaid-in capital		483,200			377,126
Accumulated deficit		(128,823	)		(92,108	)
Accumulated other comprehensive income		247			—

Total Stockholders’ Equity		467,100			397,413
Non-controlling interests in properties		1,060			964

Total Equity		468,160			398,377

Total Liabilities and Equity	$	1,190,017		$	1,100,431

Subsequent Events (Note 11)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018

Rental and other revenues	$	38,946		$	33,547		$	117,236		$	95,317

Operating expenses:
Property operating expenses		14,384			13,253			42,754			36,627
General and administrative		2,775			1,850			8,435			5,793
Depreciation and amortization		15,035			13,379			44,057			37,044

Total operating expenses		32,194			28,482			95,246			79,464

Operating income		6,752			5,065			21,990			15,853

Interest expense:
Contractual interest expense		(7,378	)		(5,915	)		(22,022	)		(16,184	)
Amortization of deferred financing costs and debt fair value		(321	)		(311	)		(992	)		(1,297	)

		(7,699	)		(6,226	)		(23,014	)		(17,481	)
Net gain on sale of real estate property		—			—			478			46,980

Net (loss)/income		(947	)		(1,161	)		(546	)		45,352
Less:
Net income attributable tonon-controlling interests in properties		(164	)		(135	)		(498	)		(384	)

Net (loss)/income attributable to the Company		(1,111	)		(1,296	)		(1,044	)		44,968
Preferred stock distributions		(1,855	)		(1,855	)		(5,565	)		(5,565	)

Net (loss)/income attributable to common stockholders	$	(2,966	)	$	(3,151	)	$	(6,609	)	$	39,403

Net (loss)/income per common share:
Basic	$	(0.07	)	$	(0.08	)	$	(0.16	)	$	1.08

Diluted	$	(0.07	)	$	(0.08	)	$	(0.16	)	$	1.07

Weighted average common shares outstanding:
Basic		42,591			37,494			40,610			36,572

Diluted		42,591			37,494			40,610			36,920

Dividend distributions declared per common share	$	0.235		$	0.235		$	0.705		$	0.705


	Three Months Ended March 31,
	2020			2019
Net income/(loss)	$	1,006		$	(920	)
Other comprehensive loss:
Unrealized cash flow hedge loss		(2,690	)		—
Amounts reclassified to interest expense		(51	)		—

Other comprehensive loss		(2,741	)		—

Comprehensive loss		(1,735	)		(920	)
Less:
Comprehensive income attributable to non-controlling interests in properties		(182	)		(169	)

Comprehensive loss attributable to the Company		(1,917	)		(1,089	)
Preferred stock distributions		(1,855	)		(1,855	)

Comprehensive loss attributable to common stockholders	$	(3,772	)	$	(2,944	)


	Number of shares of preferred stock		Preferred stock		Number of shares of common stock		Common stock		Additional paid-in capital		Accumulated deficit			Accumulated other comprehensive 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 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

Restricted stock award grants and vesting		—		—		—		—		527		(95	)		—		432			—			432
Net proceeds from sale of common stock		—		—		8,000		80		104,736		—			—		104,816			—			104,816
Common stock dividend distributions declared		—		—		—		—		—		(11,197	)		—		(11,197	)		—			(11,197	)
Preferred stock dividend distributions declared		—		—		—		—		—		(1,855	)		—		(1,855	)		—			(1,855	)
Contributions		—		—		—		—		—		—			—		—			46			46
Distributions		—		—		—		—		—		—			—		—			(180	)		(180	)
Net income		—		—		—		—		—		(1,111	)		—		(1,111	)		164			(947	)
Unrealized cash flow hedge gains		—		—		—		—		—		—			247		247			—			247

Balance – September 30, 2019		4,480	$	112,000		47,647	$	476	$	483,200	$	(128,823	)	$	247	$	467,100		$	1,060		$	468,160

	Number of shares of preferred stock		Preferred stock		Number of shares of common stock			Common stock			Additional paid-in capital			Accumulated deficit			Accumulated other comprehensive (loss)/income			Total stockholders’ equity			Non- controlling interests in properties			Total equity
Balance—December 31, 2019		4,480	$	112,000		54,591		$	545		$	577,131		$	(142,383	)	$	715		$	548,008		$	1,124		$	549,132
Restricted stock award grants and vesting		—		—		35			—			599			(79	)		—			520			—			520
Common stock repurchased		—		—		(1,451	)		(14	)		(11,608	)		—			—			(11,622	)		—			(11,622	)
Common stock dividend distribution declared		—		—		—			—			—			(7,771	)		—			(7,771	)		—			(7,771	)
Preferred stock dividend distribution declared		—		—		—			—			—			(1,855	)		—			(1,855	)		—			(1,855	)
Contributions		—		—		—			—			—			—			—			—			3			3
Distributions		—		—		—			—			—			—			—			—			(200	)		(200	)
Net income		—		—		—			—			—			824			—			824			182			1,006
Other comprehensive loss		—		—		—			—			—			—			(2,741	)		(2,741	)		—			(2,741	)

Balance—March 31, 2020		4,480	$	112,000		53,175		$	531		$	566,122		$	(151,264	)	$	(2,026	)	$	525,363		$	1,109		$	526,472

	Nu mber of shares of preferred stock		Preferred stock		Number of shares o f 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


	Nine Months Ended September 30,
	2019			2018
Cash Flows from Operating Activities:
Net (loss)/income	$	(546	)	$	45,352
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
Depreciation and amortization		44,057			37,044
Amortization of deferred financing costs and debt fair value		992			1,297
Amortization of above/below market leases		(67	)		(143	)
Increase in straight-line rent/expense		(4,591	)		(3,491	)
Non-cash stock compensation		1,310			1,061
Net gain on sale of real estate property		(478	)		(46,980	)
Changes innon-cash working capital:
Rents receivable, net		(1,512	)		(1,177	)
Other assets		(337	)		(162	)
Accounts payable and accrued liabilities		(1,217	)		(1,434	)
Deferred rent		73			(1,428	)
Tenant rent deposits		(421	)		140

Net Cash Provided By Operating Activities		37,263			30,079

Cash Flows to Investing Activities:
Additions to real estate properties		(13,855	)		(15,785	)
Acquisition of real estate		(108,358	)		(162,462	)
Net proceeds from sale of real estate		33,941			84,839
Deferred leasing costs		(2,474	)		(3,222	)

Net Cash Used In Investing Activities		(90,746	)		(96,630	)

Cash Flows from Financing Activities:
Proceeds from sale of common stock		104,816			42,902
Debt issuance and extinguishment costs		(995	)		(2,662	)
Proceeds from borrowings		154,750			269,824
Repayment of borrowings		(171,575	)		(212,128	)
Shares withheld for payment of taxes on restricted stock unit vesting		(246	)		(87	)
Minority interest buyout		—			(1,139	)
Contributions fromnon-controlling interests in properties		68			43
Distributions tonon-controlling interests in properties		(470	)		(374	)
Dividend distributions paid to stockholders and Operating Partnership unitholders		(33,489	)		(31,010	)

Net Cash Provided By Financing Activities		52,859			65,369

Net Decrease in Cash, Cash Equivalents and Restricted Cash		(624	)		(1,182	)
Cash, Cash Equivalents and Restricted Cash, Beginning of Period		33,145			35,014

Cash, Cash Equivalents and Restricted Cash, End of Period	$	32,521		$	33,832

Reconciliation of Cash, Cash Equivalents and Restricted Cash:
Cash and Cash Equivalents, End of Period	$	12,281		$	13,696
Restricted Cash, End of Period		20,240			20,136

Cash, Cash Equivalents and Restricted Cash, End of Period	$	32,521		$	33,832

Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	22,262		$	15,967
Purchases of additions in real estate properties included in accounts payable	$	2,264		$	4,379
Purchases of deferred leasing costs included in accounts payable	$	298		$	430
Unrealized cash flow hedge gains	$	247		$	—
Debt assumed on acquisition of real estate	$	22,473		$	—


	7601 Tech			Canyon Park			Cascade Station			Total Sept. 30, 2019
Land	$	10,865		$	7,098		$	—		$	17,963
Buildings and improvements		25,677			36,619			25,141			87,437
Tenant improvements		3,858			1,797			2,080			7,735
Lease intangible assets		7,401			8,109			3,134			18,644
Other assets		293			10			3,164			3,467
Debt		—			—			(697	)		(697	)
Accounts payable and other liabilities		(668	)		(1,266	)		(186	)		(2,120	)
Lease intangible liabilities		(79	)		(1,297	)		(220	)		(1,596	)

Net assets acquired	$	47,347		$	51,070		$	32,416		$	130,833


	Canyon Park
Land	$	7,098
Buildings and improvements		36,619
Tenant improvements		1,797
Lease intangible assets		8,109
Other assets		10
Accounts payable and other liabilities		(1,266	)
Lease intangible liabilities		(1,297	)

Net assets acquired	$	51,070


September 30, 2019	Logan Tower			Circle Point Land			Total
Real estate properties, net	$	9,034		$	4,441		$	13,475
Deferred leasing costs, net		239			—			239
Acquired lease intangible assets, net		2			—			2
Rents receivable, prepaid expenses and other assets		189			—			189

Assets held for sale	$	9,464		$	4,441		$	13,905

Acquired lease intangible liabilities, net		(10	)		—			(10	)
Accounts payable, accrued expenses, deferred rent and tenant rent deposits		(296	)		(50	)		(346	)

Liabilities related to assets held for sale	$	(306	)	$	(50	)	$	(356	)


December 31, 2018	Plaza 25
Real estate properties, net	$	16,149
Deferred leasing costs, net		419
Acquired lease intangible assets, net		11
Rents receivable, prepaid expenses and other assets		791

Assets held for sale	$	17,370

Accounts payable, accrued expenses, deferred rent and tenant rent deposits		(878	)

Liabilities related to assets held for sale	$	(878	)


2019	$	5,098
2020		19,302
2021		15,990
2022		8,223
2023		5,361
Thereafter		10,657

	$	64,631


2019	$	1,400
2020		6,328
2021		89,314
2022		49,853
2023		48,528
Thereafter		461,631

	$	657,054


	Three months ended September 30, 2019		Nine months ended September 30, 2019
Fixed payments	$	33,495	$	98,555
Variable payments		5,441		15,967

	$	38,936	$	114,522


2019	$	31,253
2020		116,812
2021		106,709
2022		89,349
2023		71,209
Thereafter		161,614

	$	576,946


	As of September 30, 2019
Right-of-use asset – operating leases	$	13,125
Lease liability – operating leases	$	8,213
Right-of-use asset – financing leases	$	85
Lease liability – financing leases	$	84