EX-99.2 3 a10-17605_2ex99d2.htm EX-99.2

Exhibit 99.2

 

 

GOVERNMENT PROPERTIES

INCOME TRUST

 

Third Quarter 2010

 

Supplemental Operating and Financial Data

 

All amounts in this report are unaudited.

 


 

TABLE OF CONTENTS

 

 

Page

 

 

CORPORATE INFORMATION

 

 

 

Company Profile

5

Investor Information

6

Research Coverage

7

 

 

FINANCIAL INFORMATION

 

 

 

Key Financial Data

9

Consolidated Balance Sheets

10

Consolidated Statements of Income

11

Consolidated Statements of Cash Flows

12

Same Property Results

13

Debt Summary

14

Debt Maturity Schedule

15

Leverage Ratios and Coverage Ratios

16

Tenant Improvements, Leasing Costs and Capital Improvements

17

2010 Acquisitions Information

18

 

 

PROPERTY AND LEASING INFORMATION

 

 

 

Property Schedule

20

Tenant List

21

Occupancy and Leasing Summary

22

Lease Expiration Schedule

23

 

 

EXHIBITS

 

 

 

Calculation of EBITDA

A

Calculation and Reconciliation of Property Net Operating Income (NOI)

B

Calculation of Funds from Operations (FFO)

C

 


 

WARNING CONCERNING

FORWARD LOOKING STATEMENTS

 

THIS SUPPLEMENTAL OPERATING AND FINANCIAL DATA CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS.  WHENEVER WE USE WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”, “ESTIMATE” OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS.  THESE FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS AND THEIR IMPLICATIONS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR.  FORWARD LOOKING STATEMENTS IN THIS REPORT RELATE TO VARIOUS ASPECTS OF OUR BUSINESS, INCLUDING:

 

·       OUR ABILITY TO PAY DISTRIBUTIONS IN THE FUTURE AND THE EXPECTED AMOUNTS THEREOF,

 

·       OUR ACQUISITIONS AND SALES OF PROPERTIES,

 

·       THE CREDIT QUALITY OF OUR TENANTS,

 

·       THE LIKELIHOOD THAT OUR TENANTS WILL PAY RENT, RENEW LEASES, SIGN NEW LEASES OR BE AFFECTED BY CYCLICAL ECONOMIC CONDITIONS,

 

·       OUR ABILITY TO PAY INTEREST ON AND PRINCIPAL OF OUR DEBT,

 

·       OUR POLICIES AND PLANS REGARDING INVESTMENTS AND FINANCINGS,

 

·       THE FUTURE AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY,

 

·       OUR ABILITY TO COMPETE FOR ACQUISITIONS AND TENANCIES EFFECTIVELY,

 

·       OUR TAX STATUS AS A REAL ESTATE INVESTMENT TRUST, OR REIT,

 

·       OUR ABILITY TO RAISE EQUITY OR DEBT CAPITAL, AND

 

·       OTHER MATTERS.

 

OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.  FACTORS THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FORWARD LOOKING STATEMENTS AND UPON OUR BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITION, FUNDS FROM OPERATIONS, CASH AVAILABLE FOR DISTRIBUTION, CASH FLOWS, LIQUIDITY AND PROSPECTS INCLUDE, BUT ARE NOT LIMITED TO:

 

·                     THE IMPACT OF CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS,

 

·                     COMPETITION WITHIN THE REAL ESTATE INDUSTRY,

 

·                     ACTUAL AND POTENTIAL CONFLICTS OF INTEREST WITH OUR MANAGING TRUSTEES, COMMONWEALTH REIT, OR CWH, AND REIT MANAGEMENT & RESEARCH LLC, OR RMR, AND THEIR AFFILIATES,

 

·                     COMPLIANCE WITH, AND CHANGES TO, FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS, ACCOUNTING RULES, TAX LAWS AND SIMILAR MATTERS, AND

 

·                     LIMITATIONS IMPOSED ON OUR BUSINESS AND OUR ABILITY TO SATISFY COMPLEX RULES IN ORDER FOR US TO QUALIFY AS A REIT FOR U.S. FEDERAL INCOME TAX PURPOSES.

 

2


 

FOR EXAMPLE:

 

·       CONTINGENCIES IN OUR ACQUISITIONS MAY CAUSE THESE TRANSACTIONS NOT TO OCCUR OR TO BE DELAYED,

 

·                     SOME OF OUR TENANTS MAY NOT RENEW EXPIRING LEASES, AND WE MAY BE UNABLE TO LOCATE NEW TENANTS TO MAINTAIN THE HISTORICAL OCCUPANCY RATES OF, OR RENTS FROM, OUR PROPERTIES,

 

·                     RENTS THAT WE CAN CHARGE AT OUR PROPERTIES MAY DECLINE,

 

·                     OUR ABILITY TO MAKE FUTURE DISTRIBUTIONS DEPENDS UPON A NUMBER OF FACTORS, INCLUDING OUR FUTURE EARNINGS; WE MAY BE UNABLE TO MAINTAIN OUR CURRENT RATE OF DISTRIBUTIONS AND FUTURE DISTRIBUTIONS MAY BE SUSPENDED OR PAID AT A LESSER RATE THAN THE DISTRIBUTIONS WE NOW PAY,

 

·                     IF THE AVAILABILITY OF DEBT CAPITAL BECOMES RESTRICTED, WE MAY BE UNABLE TO REFINANCE OR REPAY OUR DEBT OBLIGATIONS WHEN THEY BECOME DUE OR TO REFINANCE ON TERMS WHICH ARE AS FAVORABLE AS WE NOW HAVE, AND,

 

·                     OUR ABILITY TO GROW OUR BUSINESS AND INCREASE OUR DISTRIBUTIONS DEPENDS IN LARGE PART UPON OUR ABILITY TO BUY PROPERTIES AND LEASE THEM FOR RENTS, LESS PROPERTY OPERATING EXPENSES, WHICH EXCEED OUR CAPITAL COSTS; WE MAY BE UNABLE TO IDENTIFY PROPERTIES THAT WE WANT TO ACQUIRE OR TO NEGOTIATE ACCEPTABLE PURCHASE PRICES, ACQUISITION FINANCING OR LEASE TERMS FOR NEW PROPERTIES.

 

THESE RESULTS COULD OCCUR DUE TO MANY DIFFERENT CIRCUMSTANCES, SOME OF WHICH ARE BEYOND OUR CONTROL, SUCH AS GOVERNMENT TENANTS’ NEEDS FOR LEASED SPACE OR CHANGES IN THE CAPITAL MARKETS OR THE ECONOMY GENERALLY.

 

THE INFORMATION CONTAINED ELSEWERE IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2009, OR OUR ANNUAL REPORT AND SUBSEQUENT DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, OR SEC, IDENTIFIES OTHER FACTORS THAT COULD CAUSE DIFFERENCES FROM OUR FORWARD LOOKING STATEMENTS.  ALSO, OTHER FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN OUR FORWARD LOOKING STATEMENTS ARE DESCRIBED MORE FULLY UNDER “RISK FACTORS” IN OUR ANNUAL REPORT AND IN OUR QUATERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2010.

 

YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS.

 

EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

 

3


 

CORPORATE INFORMATION

 


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

COMPANY PROFILE

 

The Company:

 

Government Properties Income Trust, or GOV, we or us, is a real estate investment trust, or REIT, which owns buildings majority leased to government tenants located throughout the United States.  The majority of our properties are commercial office buildings.  As of September 30, 2010, we owned 53 properties with approximately 6.5 million square feet.  Forty three properties are primarily leased to the U.S. Government and ten are primarily leased to the state governments of California, Maryland, Massachusetts, Minnesota and South Carolina.  GOV was formed in February 2009 and became a public company on June 8, 2009.  We are included in the Russell 2000® stock index and the MSCI US REIT index.

 

Strategy:

 

Our primary business strategy is to maintain our properties, seek to renew our leases as they expire, selectively acquire additional properties that are majority leased to government tenants and to pay distributions to shareholders.  As current leases expire, we will attempt to renew our leases with our existing tenants or enter into leases with new tenants, in both circumstances at rents which are equal to or greater than the rents we now receive.  Our ability to renew leases with our existing tenants or to enter into new leases with new tenants and the rents we are able to charge will be dependent in large part upon market conditions which are generally beyond our control.  Although we sometimes may sell properties, we generally consider ourselves to be a long term investor and are more interested in the long term earnings potential of our properties than selling properties for short term gains.  We currently do not have any real estate investments in off balance sheet entities. 

 

Management:

 

GOV is managed by Reit Management & Research LLC, or RMR. RMR is a real estate management company which was founded in 1986 to manage public investments in real estate. As of September 30, 2010, RMR manages one of the largest portfolios of publicly owned real estate in the North America, including 1,380 properties, located in 46 states, Washington, DC, Puerto Rico and Ontario, Canada.  RMR has over 620 employees in its headquarters and regional offices located throughout the country. In addition to managing GOV, RMR also manages CommonWealth REIT, or CWH, a publicly traded REIT that owns office and industrial properties, Hospitality Properties Trust, or HPT, a publicly traded REIT that owns hotels and travel centers, and Senior Housing Properties Trust, or SNH, a publicly traded REIT that primarily owns healthcare properties. RMR also provides management services to Five Star Quality Care, Inc., a healthcare services company which is a tenant of SNH, and to TravelCenters of America LLC, an operator of travel centers, which is a tenant of HPT. An affiliate of RMR, RMR Advisors, Inc., is the investment manager of publicly offered mutual funds, which principally invests in securities of unaffiliated real estate companies. The public companies managed by RMR and its affiliates had combined total gross assets of approximately $17.6 billion as of September 30, 2010. We believe that being managed by RMR is a competitive advantage for GOV because RMR provides us with a depth and quality of management and experience which may be unequaled in the real estate industry. We also believe RMR provides management services to GOV at costs that are lower than we would have to pay for similar quality services.

 

Corporate Headquarters:

 

400 Centre Street

Newton, MA  02458

(t)  (617) 219-1440

(f)  (617) 796-8267

 

Stock Exchange Listing:

 

New York Stock Exchange

 

Trading Symbol:

 

Common Shares — GOV

 

Issuer Ratings:

Moody’s — Baa3

Standard & Poor’s — BBB-

 

Portfolio Data (as of 9/30/10):

 

Total properties

 

53

 

Total sq. ft. (000s)

 

6,469

 

Percent leased

 

96.0

%

 

5


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

INVESTOR INFORMATION

 

Board of Trustees

 

Barry M. Portnoy

Adam D. Portnoy

Managing Trustee

Managing Trustee

 

 

John L. Harrington

Jeffrey P. Somers

Independent Trustee

Independent Trustee

 

 

Barbara D. Gilmore

 

Independent Trustee

 

 

Senior Management

 

Adam D. Portnoy

David M. Blackman

President

Treasurer & Chief Financial Officer

 

Contact Information

 

Investor Relations

Inquiries

Government Properties Income Trust

400 Centre Street

Newton, MA 02458

(t) (617) 219-1440

(f) (617) 796-8267

(e-mail) info@govreit.com

(website) www.govreit.com

Financial inquiries should be directed to David M. Blackman, Treasurer and Chief Financial Officer, at (617) 219-1440 or dblackman@govreit.com.

 

Investor and media inquiries should be directed to Timothy A. Bonang, Vice President, Investor Relations, at (617) 796-8222 or tbonang@govreit.com, or Elisabeth Heiss, Manager, Investor Relations, at (617) 796-8222 or eheiss@govreit.com.

 

6


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

RESEARCH COVERAGE

 

Equity Research Coverage

 

Banc of America Merrill Lynch Research

Janney Capital Markets

James Feldman

Daniel P. Donlan

(212) 449-6255

(215) 665-6476

 

 

Jefferies & Company, Inc.

Morgan Keegan

Omotayo Okusanya

Stephen Swett

(212) 336-7076

(212) 508-7585

 

 

RBC Capital Markets

Wells Fargo Securities

David Rodgers

Brendan Maiorana

(440) 715-2647

(443) 263-6516

 

Rating Agencies

 

Moody’s Investors Service

Standard and Poor’s

Lori D. Marks

Susan Madison

(212) 553-0376

(212) 438-4516

 

GOV is followed by the analysts and its credit is rated by the rating agencies listed above.  Please note that any opinions, estimates or forecasts regarding GOV’s performance made by these analysts or agencies do not represent opinions, forecasts or predictions of GOV or its management.  GOV does not by its reference above imply its endorsement of or concurrence with any information, conclusions or recommendations provided by any of these analysts or agencies.

 

7


 

FINANCIAL INFORMATION

 


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

KEY FINANCIAL DATA

(amounts in thousands, except per share data)

 

 

 

As of and for the Three Months Ended

 

 

 

9/30/2010

 

6/30/2010

 

3/31/2010

 

12/31/2009

 

9/30/2009

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares Outstanding:

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding (at end of period)

 

40,501

 

31,264

 

31,256

 

21,481

 

21,481

 

Weighted average common shares outstanding

 

36,369

 

31,261

 

29,084

 

21,481

 

21,455

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Share Data:

 

 

 

 

 

 

 

 

 

 

 

Price at end of period

 

$

26.70

 

$

25.52

 

$

26.01

 

$

22.98

 

$

24.01

 

High during period

 

$

28.53

 

$

28.40

 

$

26.01

 

$

25.50

 

$

24.35

 

Low during period

 

$

24.65

 

$

23.95

 

$

21.64

 

$

21.79

 

$

18.76

 

 

 

 

 

 

 

 

 

 

 

 

 

Selected Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

898,581

 

$

686,278

 

$

606,549

 

$

514,813

 

$

438,867

 

Total liabilities

 

$

131,113

 

$

132,898

 

$

48,385

 

$

162,763

 

$

72,895

 

Gross book value of real estate assets (1)

 

$

1,012,141

 

$

806,584

 

$

668,806

 

$

595,281

 

$

521,480

 

Total debt / gross book value of real estate (1)

 

9.8

%

14.6

%

5.4

%

24.3

%

12.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Book Capitalization:

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

$

98,760

 

$

117,944

 

$

36,126

 

$

144,375

 

$

65,375

 

Plus: total stockholders’ equity

 

767,468

 

553,380

 

558,164

 

352,050

 

365,972

 

Total book capitalization

 

$

866,228

 

$

671,324

 

$

594,290

 

$

496,425

 

$

431,347

 

Total debt / total book capitalization

 

11.4

%

17.6

%

6.1

%

29.1

%

15.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Market Capitalization:

 

 

 

 

 

 

 

 

 

 

 

Total debt (book value)

 

$

98,760

 

$

117,944

 

$

36,126

 

$

144,375

 

$

65,375

 

Plus: market value of common shares (at end of period)

 

1,081,377

 

797,857

 

812,969

 

493,633

 

515,759

 

Total market capitalization

 

$

1,180,137

 

$

915,801

 

$

849,095

 

$

638,008

 

$

581,134

 

Total debt / total market capitalization

 

8.4

%

12.9

%

4.3

%

22.6

%

11.2

%

 

 

 

 

 

 

 

 

 

 

 

 

Selected Income Statement Data:

 

 

 

 

 

 

 

 

 

 

 

Rental income

 

$

30,746

 

$

25,940

 

$

23,355

 

$

20,654

 

$

19,656

 

EBITDA (2)

 

$

14,998

 

$

14,839

 

$

13,279

 

$

11,122

 

$

11,485

 

Property net operating income (NOI) (3)

 

$

19,471

 

$

17,480

 

$

15,553

 

$

13,243

 

$

12,937

 

NOI margin (4)

 

63.3

%

67.4

%

66.6

%

64.1

%

65.8

%

Net income

 

$

6,669

 

$

7,735

 

$

6,851

 

$

5,415

 

$

6,185

 

Funds from operations (FFO) (5)

 

$

15,677

 

$

14,147

 

$

12,575

 

$

10,223

 

$

10,220

 

 

 

 

 

 

 

 

 

 

 

 

 

Per Share Data :

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

0.18

 

$

0.25

 

$

0.24

 

$

0.25

 

$

0.29

 

FFO (5)

 

$

0.43

 

$

0.45

 

$

0.43

 

$

0.48

 

$

0.48

 

 

 

 

 

 

 

 

 

 

 

 

 

Coverage Ratios:

 

 

 

 

 

 

 

 

 

 

 

EBITDA (2) / interest expense

 

7.6

x

8.8

x

8.7

x

6.5

x

7.8

x

 

(1)

Gross book value of real estate assets is real estate properties at cost, plus acquisition costs, before purchase price allocations and less impairment writedowns, if any.

(2)

See Exhibit A for calculation of EBITDA.

(3)

Property net operating income, or NOI, is defined as rental income from real estate less property operating expenses. See Exhibit B for calculation of NOI and reconciliation of NOI to net income.

(4)

NOI margin is defined as NOI as a percentage of rental income. See Exhibit B for more information.

(5)

See Exhibit C for calculation of funds from operations, or FFO, and FFO per share.

 

9


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

 

 

 

As of

 

As of

 

 

 

9/30/2010

 

12/31/2009

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Real estate properties:

 

 

 

 

 

Land

 

$

137,674

 

$

74,009

 

Buildings and improvements

 

781,185

 

502,748

 

 

 

918,859

 

576,757

 

Accumulated depreciation

 

(125,479

)

(113,027

)

 

 

793,380

 

463,730

 

 

 

 

 

 

 

Acquired real estate leases, net

 

55,129

 

15,310

 

Cash and cash equivalents

 

2,314

 

1,478

 

Restricted cash

 

860

 

—

 

Rents receivable, net

 

21,052

 

13,544

 

Deferred leasing costs, net

 

1,085

 

1,330

 

Deferred financing costs, net

 

4,383

 

5,204

 

Due from affiliates

 

895

 

103

 

Other assets, net

 

19,483

 

14,114

 

Total assets

 

$

898,581

 

$

514,813

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Mortgage notes payable

 

$

35,760

 

$

—

 

Revolving credit facility

 

63,000

 

144,375

 

Accounts payable and accrued expenses

 

17,467

 

13,985

 

Due to affiliates

 

3,467

 

837

 

Acquired real estate lease obligations, net

 

11,419

 

3,566

 

Total liabilities

 

131,113

 

162,763

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Common shares of beneficial interest, $0.01 par value:
40,500,800 and 21,481,350 shares issued and outstanding, respectively

 

405

 

215

 

Additional paid in capital

 

776,922

 

357,627

 

Cumulative net income

 

34,795

 

13,541

 

Cumulative common distributions

 

(44,654

)

(19,333

)

Total shareholders’ equity

 

767,468

 

352,050

 

Total liabilities and shareholders’ equity

 

$

898,581

 

$

514,813

 

 

10


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

 

9/30/2010

 

9/30/2009

 

9/30/2010

 

9/30/2009

 

 

 

 

 

 

 

 

 

 

 

Rental income (1)

 

$

30,746

 

$

19,656

 

$

80,040

 

$

58,304

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Real estate taxes

 

3,292

 

2,031

 

8,624

 

6,250

 

Utility expenses

 

2,836

 

1,799

 

6,246

 

4,843

 

Other operating expenses

 

5,147

 

2,889

 

12,667

 

8,600

 

Depreciation and amortization

 

6,321

 

3,828

 

16,602

 

11,189

 

Acquisition related costs

 

2,687

 

207

 

4,542

 

207

 

General and administrative

 

1,833

 

1,216

 

4,909

 

2,829

 

Total expenses

 

22,116

 

11,970

 

53,590

 

33,918

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

8,630

 

7,686

 

26,450

 

24,386

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

12

 

1

 

80

 

45

 

Interest expense (including net amortization of debt premiums and deferred financing fees of $635, $562, $1,791 and $989, respectively)

 

(1,973

)

(1,472

)

(5,182

)

(3,832

)

Equity in earnings (losses) of an investee

 

35

 

—

 

(17

)

—

 

 

 

 

 

 

 

 

 

 

 

Income before income tax expense

 

6,704

 

6,215

 

21,331

 

20,599

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(35

)

(30

)

(77

)

(30

)

Net income

 

$

6,669

 

$

6,185

 

$

21,254

 

$

20,569

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (2)

 

36,369

 

21,455

 

32,265

 

12,852

 

 

 

 

 

 

 

 

 

 

 

Net income per common share (2)

 

$

0.18

 

$

0.29

 

$

0.66

 

$

1.60

 

 

 

 

 

 

 

 

 

 

 

Additional Data:

 

 

 

 

 

 

 

 

 

General and administrative expenses / rental income

 

5.96

%

6.19

%

6.13

%

4.85

%

General and administrative expenses / total assets (at end of period)

 

0.20

%

0.30

%

0.55

%

0.69

%

 

 

 

 

 

 

 

 

 

 

Non cash straight line rent adjustments (1)

 

$

49

 

$

(172

)

$

(75

)

$

(397

)

Lease value amortization (1)

 

$

(128

)

$

70

 

$

(80

)

$

240

 

Lease termination fees included in rental income

 

$

—

 

$

—

 

$

57

 

$

—

 

Capitalized interest expense

 

$

—

 

$

—

 

$

—

 

$

—

 

 

(1)

We report rental income on a straight line basis over the terms of the respective leases; accordingly, rental income includes non-cash straight line rent adjustments. Rental income also includes reimbursements, tax escalations, parking revenues, service income and other fixed and variable obligations of our tenants, as well as the net effect of non-cash amortization of intangible lease assets and liabilities.

(2)

Prior to completion of its IPO on June 8, 2009, GOV did not have any publicly traded outstanding common shares. If the IPO had been completed on January 1, 2009, GOV’s weighted average common shares outstanding for the nine months ended September 30, 2009 would have been 21,469.

 

11


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

 

 

 

For the Nine Months Ended

 

 

 

9/30/2010

 

9/30/2009

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

21,254

 

$

20,569

 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

Depreciation

 

13,612

 

10,018

 

Net amortization of debt premium and deferred financing fees

 

1,791

 

989

 

Amortization of acquired real estate leases

 

2,715

 

603

 

Other amortization

 

354

 

326

 

Share based compensation expense

 

546

 

249

 

Equity in losses of an investee

 

18

 

—

 

Change in assets and liabilities:

 

 

 

 

 

(Increase) decrease in restricted cash

 

(860

)

1,334

 

(Increase) decrease in deferred leasing costs

 

(109

)

(1

)

(Increase) decrease in rents receivable

 

(7,508

)

(4,101

)

(Increase) decrease in due from affiliates

 

(792

)

(5,109

)

(Increase) decrease in other assets

 

(2,253

)

172

 

Increase (decrease) in accounts payable and accrued expenses

 

12,320

 

402

 

Increase (decrease) in due to affiliates

 

2,630

 

1,820

 

Cash provided by operating activities

 

43,718

 

27,271

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Real estate acquisitions and improvements

 

(344,481

)

(23,308

)

Investment in Affiliates Insurance Company

 

(76

)

—

 

Cash used in investing activities

 

(344,557

)

(23,308

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common stock, net

 

418,431

 

205,511

 

Repayment of mortgage loans

 

(391

)

(134

)

Borrowings on revolving credit facility

 

217,000

 

293,500

 

Payments on revolving credit facility

 

(298,375

)

(228,125

)

Financing fees

 

(1,076

)

(6,755

)

Distributions to common shareholders

 

(33,914

)

—

 

Equity distributions

 

—

 

(265,763

)

Cash provided by (used in) financing activities

 

301,675

 

(1,766

)

 

 

 

 

 

 

(Decrease) increase in cash and cash equivalents

 

836

 

2,197

 

Cash and cash equivalents at beginning of period

 

1,478

 

97

 

Cash and cash equivalents at end of period

 

$

2,314

 

$

2,294

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid

 

$

3,208

 

$

2,728

 

Taxes paid

 

137

 

—

 

 

 

 

 

 

 

Non-cash operating activities

 

 

 

 

 

Equity distributions

 

$

—

 

$

8,047

 

 

 

 

 

 

 

Non-cash investing activities

 

 

 

 

 

Assumption of mortgage debt in connection with real estate acquisitions

 

$

(35,196

)

$

—

 

 

 

 

 

 

 

Non-cash financing activities

 

 

 

 

 

Mortgage debt assumed

 

$

35,196

 

$

—

 

Issuance of common shares pursuant to our equity compensation plan

 

(546

)

(250

)

 

12


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

SAME PROPERTY RESULTS

(dollars and sq. ft. in thousands)

 

 

 

For the Three Months Ended (1)

 

For the Nine Months Ended (2)

 

 

 

9/30/2010

 

9/30/2009

 

9/30/2010

 

9/30/2009

 

 

 

 

 

 

 

 

 

 

 

Properties

 

29

 

29

 

29

 

29

 

Total sq. ft.

 

3,304

 

3,304

 

3,304

 

3,304

 

Percent leased (3)

 

100.0

%

99.6

%

100.0

%

99.6

%

Rental income (4)

 

$

18,940

 

$

19,441

 

$

57,110

 

$

58,088

 

Property net operating income (NOI) (5)

 

$

11,981

 

$

12,760

 

$

37,039

 

$

38,433

 

NOI % growth

 

-6.1

%

 

 

-3.6

%

 

 

 

(1)          Based on properties owned continuously since 7/1/2009 by us.

(2)          Based on properties owned continuously since 1/1/2009 by us or our predecessor.

(3)          Percent leased includes (i) space being fitted out for occupancy pursuant to signed leases, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants.

(4)          We report rental income on a straight line basis over the terms of the respective leases; accordingly, rental income includes non-cash straight line rent expense adjustments and non-cash amortization of intangible lease assets and liabilities.  Rental income also includes reimbursements, tax escalations, parking revenues, service income and other fixed and variable payments received by us from of our tenants.

(5)          Property net operating income, or NOI, is defined as property rental income less property operating expenses. See Exhibit B for NOI and reconciliation of NOI to net income.

 

13


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

DEBT SUMMARY

(dollars in thousands)

 

 

 

Coupon

 

Interest

 

Principal

 

Maturity

 

Due at

 

Years to

 

 

 

Rate

 

Rate (1)

 

Balance (1)

 

Date

 

Maturity

 

Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured Fixed Rate Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured debt - One property in Landover, MD

 

6.21

%

6.21

%

$

24,800

 

8/1/2016

 

$

15,168

 

5.8

 

Secured debt - One property in Lakewood, CO

 

8.15

%

6.15

%

10,960

 

3/1/2021

 

—

 

10.4

 

Total / weighted average secured fixed rate debt

 

6.80

%

6.19

%

$

35,760

 

 

 

$

15,168

 

7.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured Floating Rate Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

$250 million secured revolving credit facility (2)

 

3.26

%

3.26

%

$

63,000

 

4/24/2012

 

$

63,000

 

1.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Summary Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total / weighted average secured fixed rate debt

 

6.80

%

6.19

%

$

35,760

 

 

 

$

15,168

 

7.2

 

Total / weighted average floating rate debt

 

3.26

%

3.26

%

63,000

 

 

 

63,000

 

1.6

 

Total / weighted average debt

 

4.54

%

4.32

%

$

98,760

 

 

 

$

15,168

 

3.6

 

 

(1)   Includes the effect of mark to market accounting at the assumption of the mortgages.  Excludes effects of offering and transaction costs.

(2)   Interest is generally set at LIBOR plus a spread which varies based upon our leverage; the coupon rate and interest rate listed above is as of September 30, 2010.   Effective 10/28/2010, this facility was replaced with a $500 million unsecured floating rate facility that matures 10/27/2013. Subject to meeting certain conditions and payment of a fee, GOV may extend the maturity date to 10/27/2014. If this new facility had been in effect on 9/30/2010, the coupon rate for the revolving credit facility would have been 2.56%.

 

14


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

DEBT MATURITY SCHEDULE

(dollars in thousands)

 

 

 

Secured

 

Secured

 

 

 

 

 

Fixed Rate

 

Floating

 

 

 

Year

 

Debt

 

Rate Debt (1)

 

Total (2)

 

 

 

 

 

 

 

 

 

2010

 

$

152

 

$

—

 

$

152

 

2011

 

729

 

—

 

729

 

2012

 

968

 

63,000

 

63,968

 

2013

 

1,049

 

—

 

1,049

 

2014

 

1,132

 

—

 

1,132

 

2015

 

1,222

 

—

 

1,222

 

2016

 

24,463

 

—

 

24,463

 

2017

 

1,045

 

—

 

1,045

 

2018

 

1,133

 

—

 

1,133

 

2019 and thereafter

 

2,911

 

—

 

2,911

 

Total

 

$

34,804

 

$

63,000

 

$

97,804

 

 

 

 

 

 

 

 

 

Percent

 

35.6

%

64.4

%

100.0

%

 

(1)          Represents amounts outstanding on GOV's $250 million secured revolving credit facility at 9/30/2010.  Effective 10/28/2010, this facility was replaced with an unsecured floating rate facility that matures 10/27/2013.  Subject to meeting certain conditions and payment of a fee, GOV may extend the maturity date to 10/27/2014.

(2)          The total debt as of 9/30/2010, including unamortized premiums, was $98,760.

 

15


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

LEVERAGE RATIOS AND COVERAGE RATIOS

 

 

 

As of and for the Three Months Ended

 

 

 

9/30/2010

 

6/30/2010

 

3/31/2010

 

12/31/2009

 

9/30/2009

 

Leverage Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt / total assets(1)

 

11.0

%

17.2

%

6.0

%

28.0

%

14.9

%

Total debt / gross book value of real estate assets (2)

 

9.8

%

14.6

%

5.4

%

24.3

%

12.5

%

Total debt / total market capitalization(1)

 

8.4

%

12.9

%

4.3

%

22.6

%

11.2

%

Total debt / total book capitalization(1)

 

11.4

%

17.6

%

6.1

%

29.1

%

15.2

%

Secured debt / total assets

 

11.0

%

17.2

%

6.0

%

28.0

%

14.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Coverage Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA (3) / interest expense (4)

 

7.6x

 

8.8x

 

8.7x

 

6.5x

 

7.8x

 

 

(1)          Debt includes the effect of mark to market accounting for mortgage debts assumed at the time of certain real estate acquisitions.

(2)          Gross book value of real estate assets is real estate properties, at cost, including purchase price allocations less impairment writedowns, if any.

(3)          See Exhibit A for calculation of EBITDA.

(4)          Interest expense includes the net amortization of debt premiums and deferred financing fees.

 

16


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

TENANT IMPROVEMENTS, LEASING COSTS AND CAPITAL IMPROVEMENTS

(dollars and sq. ft. in thousands, except per sq. ft. data)

 

 

 

For the Three Months Ended

 

 

 

9/30/2010

 

6/30/2010

 

3/31/2010

 

12/31/2009

 

9/30/2009

 

Tenant improvements (TI)

 

$

648

 

$

87

 

$

209

 

$

438

 

$

224

 

Leasing costs (LC)

 

62

 

22

 

25

 

8

 

1

 

Total TI and LC

 

710

 

109

 

234

 

446

 

225

 

 

 

 

 

 

 

 

 

 

 

 

 

Building improvements (1)

 

369

 

200

 

33

 

868

 

154

 

Development, redevelopment and other activities (2)

 

251

 

212

 

13

 

516

 

—

 

Total capital improvements, including TI and LC

 

$

1,330

 

$

521

 

$

280

 

$

1,830

 

$

379

 

 

 

 

 

 

 

 

 

 

 

 

 

Sq. ft. beginning of period

 

4,905

 

4,390

 

3,957

 

3,304

 

3,304

 

Sq. ft. end of period

 

6,471

 

4,905

 

4,390

 

3,957

 

3,626

 

Average sq. ft. during period

 

5,688

 

4,648

 

4,174

 

3,631

 

3,465

 

 

 

 

 

 

 

 

 

 

 

 

 

Building improvements per average sq. ft. during period

 

$

0.06

 

$

0.04

 

$

0.01

 

$

0.24

 

$

0.04

 

 

(1)   Building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets.

(2)   Development, redevelopment and other activities generally include non-recurring expenditures or expenditures that we believe increase the value of our existing properties.

 

17


 

Government Properties Income Trust

Supplemental Operating and Financial Data

 

2010 ACQUISITIONS INFORMATION

(dollars and sq. ft. in thousands, except per sq. ft. amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase

 

 

 

Remaining

 

 

 

 

 

Date

 

 

 

Number of

 

 

 

Purchase

 

Price (1) /

 

Cap

 

Lease

 

Percent

 

 

 

Acquired

 

 

 

Properties

 

Sq. Ft.

 

Price (1)

 

Sq. Ft.

 

Rate (2)

 

Term (3)

 

Leased (4)

 

Major Tenant - Occupant

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jan-10

 

12795 West Alameda Parkway, Lakewood, CO

 

1

 

167

 

$

28,710

 

$

171.92

 

10.2

%

9.7

 

100.0

%

U.S. Government - National Parks Service

 

Feb-10

 

3300 75th Avenue, Landover, MD

 

1

 

266

 

43,650

 

164.10

 

9.0

%

9.5

 

100.0

%

U.S. Government - Defense Intelligence Agency

 

Apr-10

 

65 Bowdoin Street, Burlington, VT

 

1

 

27

 

9,700

 

359.26

 

8.6

%

14.3

 

100.0

%

U.S. Government - Office of Security and Integrity

 

Apr-10

 

11411 Jefferson Avenue, Detroit, MI

 

1

 

56

 

21,300

 

380.36

 

8.7

%

12.8

 

100.0

%

U.S. Government - U.S. Citizenship & Immigration Services

 

May-10

 

75 Pleasant Street, Malden, MA

 

1

 

126

 

40,500

 

321.43

 

9.1

%

8.6

 

100.0

%

Commonwealth of Massachusetts - Department of Education

 

Jun-10

 

One Montvale Avenue, Stoneham, MA

 

1

 

98

 

14,709

 

150.09

 

8.9

%(5)

8.9

 

92.7

%

U.S. Government - Various federal agencies

 

Jun-10

 

400 State Avenue, Kansas City, KS

 

1

 

171

 

13,112

 

76.68

 

8.9

%(5)

5.4

 

95.5

%

U.S. Government - Various federal agencies

 

Jun-10

 

711 14th Avenue, Safford, AZ

 

1

 

38

 

12,559

 

330.50

 

8.9

%(5)

13.9

 

100.0

%

U.S. Government - Bureau of Land Management

 

Jul-10

 

3285 E. Hemisphere Loop, Tucson, AZ

 

1

 

35

 

2,884

 

82.40

 

8.9

%(5)

1.6

 

100.0

%

U.S. Government - Drug Enforcement Agency

 

Jul-10

 

4181 Ruffin Road, San Diego, CA

 

1

 

142

 

16,482

 

116.07

 

8.9

%(5)

7.8

 

50.0

%

U.S. Government - Various federal agencies

 

Jul-10

 

220 E. Bryan Street, Savannah, GA

 

1

 

36

 

3,348

 

93.00

 

8.9

%(5)

0.9

 

100.0

%

U.S. Government - Federal Bureau of Investigation

 

Jul-10

 

330 South Second Avenue, Minneapolis, MN

 

1

 

200

 

23,231

 

116.16

 

8.9

%(5)

3.8

 

53.8

%

U.S. Government - Various federal agencies

 

Jul-10

 

435 Montano Boulevard, Albuquerque, NM

 

1

 

29

 

2,394

 

82.55

 

8.9

%(5)

1.3

 

100.0

%

U.S. Government - Bureau of Land Management

 

Aug-10

 

625 Indiana Avenue, NW, Washington, DC

 

1

 

155

 

51,503

 

332.28

 

8.9

%(5)

4.3

 

100.0

%

U.S. Government - Defense Nuclear Facilities Safety Board

 

Aug-10

 

251 Causeway Street, Boston, MA

 

1

 

133

 

23,813

 

179.05

 

8.9

%(5)

2.8

 

98.8

%

Commonwealth of Massachusetts - Dept. of Environmental Affairs

 

Sep-10

 

4700 River Road, Riverdale, MD

 

1

 

338

 

41,731

 

123.46

 

8.9

%(5)

4.5

 

100.0

%

U.S. Government - Department of Agriculture

 

Sep-10

 

55 North Robinson Avenue, Oklahoma City, OK

 

1

 

186

 

8,302

 

44.63

 

8.9

%(5)

2.4

 

89.6

%

U.S. Government - Internal Revenue Service

 

Sep-10

 

101 Executive Center Drive, Columbia, SC

 

1

 

51

 

3,927

 

77.00

 

8.9

%(5)

1.8

 

73.8

%

State of South Carolina - Public Service Commission

 

Sep-10

 

111 Executive Center Drive, Columbia, SC

 

1

 

58

 

3,190

 

55.00

 

8.9

%(5)

4.3

 

84.7

%

State of South Carolina - Technical College System

 

Sep-10

 

200 Jefferson Avenue, Memphis, TN

 

1

 

205

 

9,815

 

47.88

 

8.9

%(5)

4.8

 

83.6

%

U.S. Government - Bankruptcy Courts

 

Oct-10

 

9800 Grand Oak Circle, Tampa, FL

 

1

 

68

 

13,500

 

198.77

 

9.0

%

7.5

 

100.0

%

U.S. Government - Department of Veterans Affairs

 

 

 

Total / Weighted Average

 

21

 

2,585

 

$

388,360

 

$

150.24

 

9.0

%

7.0

 

93.6

%

 

 

 

(1)          Represents the gross contract purchase price and excludes acquisition costs, amounts necessary to adjust assumed liabilities to their fair values and purchase price allocations to intangibles.

(2)          Represents the ratio of the estimated current GAAP based annual rental income less property operating expenses to the purchase price on the date of acquisition.

(3)          Average remaining lease term based on rental income as of the date of acquisition.

(4)          Percent leased as of the date of acquisition.

(5)          In June 2010, GOV entered a series of agreements to acquire 15 properties for an aggregate purchase price of $231 million, excluding acquisition costs.  The cap rate presented for these properties is the expected cap rate for the 15 properties combined.

 

18


 

PROPERTY AND LEASING INFORMATION

 


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

PROPERTY SCHEDULE

 

 

 

 

 

 

 

 

 

 

 

% NOI

 

 

 

 

 

 

 

 

 

 

 

Three Months

 

 

 

Location

 

Sq. Ft.

 

% Sq. Ft.

 

% Rental Income(1)

 

ended 9/30/10 (2)

 

  1

 

20 Massachusetts Avenue, Washington DC

 

339,541

 

5.30

%

9.7

%

11.6

%

  2

 

5045 East Butler Avenue, Fresno CA

 

531,976

 

8.20

%

6.2

%

9.8

%

  3

 

3300 75th Avenue, Landover MD

 

266,000

 

4.10

%

3.4

%

5.2

%

  4

 

1401 Rockville Pike, Rockville MD

 

188,444

 

2.90

%

4.5

%

4.1

%

  5

 

75 Pleasant Street, Malden MA

 

125,521

 

1.90

%

3.5

%

4.0

%

  6

 

915 L Street, Sacramento CA

 

163,840

 

2.50

%

3.7

%

4.0

%

  7

 

12795 W. Alameda Parkway, Lakewood CO

 

166,745

 

2.60

%

3.0

%

3.9

%

  8

 

4560 Viewridge Road, San Diego CA

 

147,955

 

2.30

%

2.2

%

3.0

%

  9

 

12 Executive Park Drive, Atlanta GA

 

128,390

 

2.00

%

2.2

%

2.9

%

10

 

201 Indianola Avenue, Phoenix AZ

 

97,145

 

1.50

%

2.5

%

2.8

%

11

 

8 Corporate Boulevard, Atlanta GA

 

151,252

 

2.30

%

2.5

%

2.8

%

12

 

5600 Columbia Pike, Falls Church VA

 

164,746

 

2.50

%

2.4

%

2.8

%

13

 

11411 Jefferson Avenue, Detroit MI

 

55,966

 

0.90

%

1.7

%

2.4

%

14

 

10-12 Celina Drive, Nashua NH

 

321,800

 

5.00

%

1.8

%

2.4

%

15

 

130-138 Delaware Avenue, Buffalo NY

 

124,647

 

1.90

%

2.0

%

2.0

%

16

 

625 Indiana Avenue, NW, Washington, DC

 

154,530

 

2.40

%

4.6

%

2.0

%

17

 

9800 Goethe Road, Sacramento CA

 

110,500

 

1.70

%

1.4

%

1.8

%

18

 

2420 Stevens Center Place, Richland WA

 

92,914

 

1.40

%

1.3

%

1.7

%

19

 

2020 S. Arlington Heights Road, Arlington Heights IL

 

57,770

 

0.90

%

1.3

%

1.6

%

20

 

One Montvale Avenue, Stoneham MA

 

97,777

 

1.50

%

1.6

%

1.6

%

21

 

400 State Avenue, Kansas City KS

 

170,817

 

2.60

%

1.8

%

1.5

%

22

 

7401 West Mansfield, Lakewood CO

 

70,884

 

1.10

%

1.3

%

1.4

%

23

 

16194 West 45th Street, Golden CO

 

43,232

 

0.70

%

1.1

%

1.3

%

24

 

701 Clay Road, Waco TX

 

137,782

 

2.10

%

1.5

%

1.3

%

25

 

65 Bowdoin Street, Burlington VT

 

26,609

 

0.40

%

0.7

%

1.2

%

26

 

7301 West Mansfield, Lakewood CO

 

70,904

 

1.10

%

1.1

%

1.2

%

27

 

9797 Aero Drive, San Diego CA

 

94,272

 

1.50

%

1.3

%

1.2

%

28

 

4241 & 4300 NE 34th Street, Kansas City MO

 

98,073

 

1.50

%

1.1

%

1.2

%

29

 

12 Corporate Boulevard, Atlanta GA

 

99,084

 

1.50

%

1.0

%

1.2

%

30

 

251 Causeway Street, Boston MA

 

132,876

 

2.10

%

2.7

%

1.2

%

31

 

7201 West Mansfield, Lakewood CO

 

71,208

 

1.10

%

1.1

%

1.1

%

32

 

5353 Yellowstone Road, Cheyenne WY

 

122,647

 

1.90

%

1.0

%

1.1

%

33

 

4181 Ruffin Road, San Diego CA

 

141,634

 

2.20

%

1.7

%

1.1

%

34

 

4700 River Road, Riverdale MD

 

337,500

 

5.20

%

6.5

%

1.1

%

35

 

711 14th Avenue, Safford AZ

 

36,139

 

0.60

%

0.7

%

1.0

%

36

 

9174 Sky Park Centre, San Diego CA

 

43,918

 

0.70

%

0.7

%

1.0

%

37

 

4201 Patterson Avenue, Baltimore MD

 

84,674

 

1.30

%

0.9

%

1.0

%

38

 

330 South Second Avenue, Minneapolis MN

 

200,346

 

3.10

%

1.8

%

1.0

%

39

 

2430 Stevens Center Place, Richland WA

 

47,238

 

0.70

%

0.7

%

0.9

%

40

 

20400 Century Boulevard, Germantown MD

 

80,550

 

1.30

%

1.1

%

0.9

%

41

 

2645 and 2655 Long Lake Road, Roseville MN

 

61,426

 

0.90

%

0.7

%

0.8

%

42

 

110 Centerview Drive, Columbia SC

 

71,580

 

1.10

%

0.8

%

0.8

%

43

 

1 Corporate Boulevard, Atlanta GA

 

37,554

 

0.60

%

0.5

%

0.6

%

44

 

11 Corporate Boulevard, Atlanta GA

 

32,158

 

0.50

%

0.3

%

0.4

%

45

 

10 Corporate Boulevard, Atlanta GA

 

32,828

 

0.50

%

0.3

%

0.4

%

46

 

3285 E. Hemisphere Loop, Tucson AZ

 

34,500

 

0.50

%

0.6

%

0.4

%

47

 

220 E. Bryan Street, Savannah GA

 

35,759

 

0.60

%

0.4

%

0.3

%

48

 

200 Jefferson Avenue, Memphis TN

 

204,694

 

3.20

%

2.4

%

0.3

%

49

 

435 Montano Boulevard, Albuquerque NM

 

29,045

 

0.40

%

0.3

%

0.2

%

50

 

882 TJ Jackson Drive, Falling Waters WV

 

36,818

 

0.60

%

0.5

%

0.2

%

51

 

101 Executive Center Drive, Columbia SC

 

50,947

 

0.80

%

0.4

%

0.1

%

52

 

111 Executive Center Drive, Columbia SC

 

58,085

 

0.90

%

0.5

%

0.1

%

53

 

55 North Robinson Avenue, Oklahoma City OK

 

185,881

 

2.90

%

1.0

%

0.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,469,121

 

100.0

%

100.0

%

100.0

%

 

(1)          Percentage of rental income is calculated using the annualized rent from tenants pursuant to signed leases as of 9/30/2010, plus estimated expense reimbursements; and excludes lease value amortization.

(2)          Percentage of NOI is calculated using the net operating income and is defined as property rental income less property operating expenses. See Exhibit B for the calculation and reconciliation of NOI to net income.

 

20


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

TENANT LIST

(sq. ft. in thousands)

 

 

 

 

 

% of Total

 

% of Rental

 

 

 

Tenant

 

Sq. Ft. (1)

 

Sq. Ft. (1)

 

Income (2)

 

 

 

US Government:

 

 

 

 

 

 

 

  1

 

U.S. Citizenship & Immigration Service

 

334,750

 

5.2

%

8.3

%

  2

 

Internal Revenue Service

 

734,649

 

11.3

%

7.9

%

  3

 

Centers for Disease Control

 

481,266

 

7.4

%

6.8

%

  4

 

Department of Agriculture

 

337,500

 

5.2

%

6.5

%

  5

 

Department of Justice

 

248,215

 

3.8

%

6.4

%

  6

 

Federal Bureau of Investigation

 

270,387

 

4.2

%

5.1

%

  7

 

Department of Veterans Affairs

 

246,331

 

3.8

%

4.2

%

  8

 

National Business Center

 

212,996

 

3.3

%

3.4

%

  9

 

Defense Intelligence Agency

 

266,000

 

4.1

%

3.4

%

10

 

Drug Enforcement Agency

 

197,339

 

3.1

%

3.1

%

11

 

Department of Energy

 

220,702

 

3.4

%

3.1

%

12

 

National Park Service

 

166,745

 

2.6

%

3.0

%

13

 

Food and Drug Administration

 

133,920

 

2.1

%

3.0

%

14

 

U.S. Courts

 

102,608

 

1.6

%

2.4

%

15

 

Defense Information Systems

 

163,407

 

2.5

%

2.4

%

16

 

Bureau of Land Management

 

183,325

 

2.8

%

1.9

%

17

 

U.S. Postal Service

 

321,800

 

5.0

%

1.8

%

18

 

Defense Nuclear Facilities Safety Board

 

58,931

 

0.9

%

1.4

%

19

 

Occupational Health and Safety Administration

 

57,770

 

0.9

%

1.3

%

20

 

Department of Housing and Urban Development

 

89,376

 

1.4

%

1.1

%

21

 

Environmental Protection Agency

 

43,232

 

0.7

%

1.1

%

22

 

Financial Management Service

 

98,073

 

1.5

%

1.1

%

23

 

Military Entrance Processing Station

 

27,634

 

0.4

%

0.8

%

24

 

Bureau of Prisons

 

51,138

 

0.8

%

0.6

%

25

 

Equal Employment Opportunity Commission

 

19,409

 

0.3

%

0.3

%

26

 

National Labor Relations Board

 

10,615

 

0.2

%

0.2

%

27

 

Department of Homeland Security

 

6,419

 

0.1

%

0.1

%

28

 

State Department

 

5,928

 

0.1

%

0.1

%

29

 

Executive Office for Immigration Review

 

5,500

 

0.1

%

0.1

%

30

 

Department of Labor

 

6,459

 

0.1

%

0.1

%

 

 

 

 

 

 

 

 

 

 

 

 

State Government:

 

 

 

 

 

 

 

  1

 

State of Massachusetts - two agency occupants

 

223,744

 

3.5

%

5.2

%

  2

 

State of California - four agency occupants

 

264,001

 

4.1

%

4.3

%

  3

 

State of South Carolina - five agency occupants

 

137,897

 

2.1

%

1.4

%

  4

 

State of Maryland - three agency occupants

 

84,674

 

1.3

%

0.9

%

  5

 

State of Minnesota - Lottery

 

71,821

 

1.1

%

0.8

%

 

 

 

 

 

 

 

 

 

 

 

 

91 Non government Tenants

 

323,561

 

5.0

%

6.4

%

 

 

 

 

 

 

 

 

 

 

 

 

  Subtotal Leased Square Feet

 

6,208,122

 

96.0

%

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Available for Lease

 

260,999

 

4.0

%

—

 

 

 

 

 

 

 

 

 

 

 

 

 

  Total Square Feet

 

6,469,121

 

100.0

%

100.0

%

 

(1)          Sq. ft. is pursuant to signed leases as of 9/30/2010, and includes (i) space being fitted out for occupancy and (ii) space which is leased, but is not occupied or is being offered for sublease, if any.

(2)          Percentage of rental income is calculated using annualized rent from tenants pursuant to signed leases as of 9/30/2010, plus estimated expense reimbursements; and excludes lease value amortization.

 

21


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

OCCUPANCY AND LEASING SUMMARY

(dollars and sq. ft. in thousands, except per sq. ft. data)

 

 

 

As of and for the Three Months Ended

 

 

 

9/30/2010

 

6/30/2010

 

3/31/2010

 

12/31/2009

 

9/30/2009

 

Properties

 

53

 

41

 

35

 

33

 

30

 

Total sq. ft. (1)

 

6,469

 

4,905

 

4,390

 

3,957

 

3,626

 

Percentage leased

 

96.0

%

99.7

%

100.0

%

99.9

%

99.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Leasing Activity (sq. ft.):

 

 

 

 

 

 

 

 

 

 

 

New leases

 

5

 

2

 

3

 

14

 

10

 

Renewals

 

71

 

11

 

1

 

—

 

—

 

Total

 

76

 

5

 

4

 

14

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Commitments (2):

 

 

 

 

 

 

 

 

 

 

 

New leases

 

$

18

 

$

44

 

$

8

 

$

188

 

$

2

 

Renewals

 

13

 

90

 

16

 

—

 

—

 

Total

 

$

31

 

$

134

 

$

24

 

$

188

 

$

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Commitments per Sq. Ft. (2):

 

 

 

 

 

 

 

 

 

 

 

New leases

 

$

3.82

 

$

21.25

 

$

2.39

 

$

13.05

 

$

0.15

 

Renewals

 

$

0.18

 

$

8.60

 

$

15.87

 

$

—

 

$

—

 

Total

 

$

0.40

 

$

10.68

 

$

5.46

 

$

13.05

 

$

0.15

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Lease Term by Sq. Ft. (years):

 

 

 

 

 

 

 

 

 

 

 

New leases

 

1.8

 

5.3

 

1.1

 

5.4

 

6.3

 

Renewals

 

5.2

 

3.7

 

5.8

 

—

 

—

 

Total

 

5.0

 

4.0

 

2.2

 

5.4

 

6.3

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Commitments per Sq. Ft. per Year:

 

 

 

 

 

 

 

 

 

 

 

New leases

 

$

2.09

 

$

4.03

 

$

2.13

 

$

2.42

 

$

0.02

 

Renewals

 

$

0.03

 

$

2.32

 

$

2.72

 

$

—

 

$

—

 

Total

 

$

0.08

 

$

2.70

 

$

2.43

 

$

2.42

 

$

0.02

 

 

(1)          Sq. ft. measurements are subject to modest changes when space is remeasured or reconfigured for new tenants.

(2)          Represents commitments to tenant improvements and leasing costs.

 

The above leasing summary is based on leases executed during the periods indicated.

 

22


 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

LEASE EXPIRATION SCHEDULE

(dollars and sq. ft. in thousands)

 

 

 

Sq. Ft.
Expiring (1)

 

% of Sq. Ft.
Expiring

 

Cumulative %
of Sq. Ft.
Expiring

 

Rental Income
Expiring (2)

 

% of Rental
Income Expiring

 

Cumulative % of
Rental Income
Expiring

 

2010

 

128

 

2.1

%

2.1

%

$

5,432

 

3.8

%

3.8

%

2011

 

765

 

12.3

%

14.4

%

15,228

 

10.6

%

14.4

%

2012

 

1,003

 

16.2

%

30.6

%

27,626

 

19.3

%

33.7

%

2013

 

1,017

 

16.4

%

47.0

%

16,824

 

11.7

%

45.4

%

2014

 

346

 

5.6

%

52.6

%

6,959

 

4.9

%

50.3

%

2015

 

1,023

 

16.5

%

69.1

%

22,711

 

15.9

%

66.2

%

2016

 

287

 

4.6

%

73.7

%

7,196

 

5.0

%

71.2

%

2017

 

498

 

8.0

%

81.7

%

9,778

 

6.8

%

78.0

%

2018

 

280

 

4.5

%

86.2

%

9,503

 

6.6

%

84.6

%

2019 and thereafter

 

861

 

13.8

%

100.0

%

21,964

 

15.4

%

100.0

%

Total

 

6,208

 

100.0

%

 

 

$

143,221

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average remaining lease term (in years)

 

4.4

 

 

 

 

 

4.5

 

 

 

 

 

 

(1)          Sq. ft. is pursuant to signed leases as of 9/30/2010, and includes (i) space being fitted out for occupancy and (ii) space which is leased, but is not occupied or is being offered for sublease, if any.

(2)          Rental income is annualized rent from tenants pursuant to signed leases as of 9/30/2010, plus estimated expense reimbursements; and excludes lease value amortization.

 

23


 

EXHIBITS

 


 

EXHIBIT A

 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

CALCULATION OF EBITDA

(amounts in thousands)

 

 

 

 For the Three Months Ended 

 

 For the Nine Months Ended

 

 

 

9/30/2010

 

9/30/2009

 

9/30/2010

 

9/30/2009

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,669

 

$

6,185

 

$

21,254

 

$

20,569

 

Plus:   interest expense

 

1,973

 

1,472

 

5,182

 

3,832

 

Plus:   income tax expense

 

35

 

30

 

77

 

30

 

Plus:   depreciation and amortization

 

6,321

 

3,828

 

16,602

 

11,189

 

EBITDA

 

$

14,998

 

$

11,515

 

$

43,115

 

$

35,620

 

 

We compute EBITDA, or earnings before interest, taxes, depreciation and amortization, as net income plus interest expense, income tax expense, if any, and depreciation and amortization.  We consider EBITDA to be an appropriate measure of our performance, along with net income and cash flow from operating, investing and financing activities.  We believe EBITDA provides useful information to investors because by excluding the effects of certain historical costs, such as interest expense and depreciation and amortization expense, EBITDA can facilitate a comparison of our current operating performance with our past operating performance and of operating performances among REITs.  EBITDA does not represent cash generated by operating activities in accordance with U.S. generally accepted accounting principles, or GAAP, and should not be considered an alternative to net income or cash flow from operating activities as a measure of financial performance or liquidity.  Also, other companies may calculate EBITDA differently than us.

 


 

EXHIBIT B

 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

CALCULATION AND RECONCILIATION OF PROPERTY NET OPERATING INCOME (NOI)

(amounts in thousands)

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

 

9/30/2010

 

9/30/2009

 

9/30/2010

 

9/30/2009

 

 

 

 

 

 

 

 

 

 

 

Calculation of NOI:

 

 

 

 

 

 

 

 

 

Rental income (1)

 

$

30,746

 

$

19,656

 

$

80,040

 

$

58,304

 

Operating expenses

 

(11,275

)

(6,719

)

(27,537

)

(19,693

)

Property net operating income (NOI)

 

$

19,471

 

$

12,937

 

$

52,503

 

$

38,611

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of NOI to Net Income:

 

 

 

 

 

 

 

 

 

Property net operating income (NOI)

 

$

19,471

 

$

12,937

 

$

52,503

 

$

38,611

 

Depreciation and amortization

 

(6,321

)

(3,828

)

(16,602

)

(11,189

)

Acquisition related costs

 

(2,687

)

(207

)

(4,542

)

(207

)

General and administrative

 

(1,833

)

(1,216

)

(4,909

)

(2,829

)

Operating income

 

8,630

 

7,686

 

26,450

 

24,386

 

 

 

 

 

 

 

 

 

 

 

Interest and other income (expense), net

 

12

 

1

 

80

 

45

 

Interest expense

 

(1,973

)

(1,472

)

(5,182

)

(3,832

)

Income tax expense

 

(35

)

(30

)

(77

)

(30

)

Equity in earnings (losses) of an investee

 

35

 

—

 

(17

)

—

 

Net income

 

$

6,669

 

$

6,185

 

$

21,254

 

$

20,569

 

 

(1)   We report rental income on a straight line basis over the terms of the respective leases; as a result, rental income includes non-cash straight line rent adjustments of approximately $49 and ($172) for the three months ended September 30, 2010 and 2009, respectively, and ($75) and ($397) for the nine months ended September 30, 2010 and 2009, respectively.  Rental income includes non-cash amortization of intangible lease assets and liabilities of approximately ($127) and $40 for the three months ended September 30, 2010 and 2009, respectively, and ($70) and $240 for the nine months ended September 30, 2010 and 2009, respectively.  Rental income also includes reimbursements, tax escalations, parking revenues, service income and other fixed and variable payments received by us from our tenants.

 

We compute NOI as shown above.  We consider NOI to be an appropriate supplemental measure of our operating performance because we believe it helps both investors and management understand the operations of our properties.  We believe NOI provides useful information to investors regarding our results of operations because it reflects only those income and expense items that are incurred at the property level and may facilitate comparisons of our operating performance between periods and among REITs.  Our management uses NOI to evaluate individual and company wide property level performance.  The calculation of NOI excludes depreciation and amortization, acquisition related costs, and general and administrative expenses from the calculation of net income in order to provide results that are more closely related to our properties' results of operations.  NOI does not represent cash generated by operating activities in accordance with GAAP, and should not be considered an alternative to net income, net income available or cash flow from operating activities as a measure of financial performance.  Also, some REITs may calculate NOI differently than us.

 


 

EXHIBIT C

 

Government Properties Income Trust

Supplemental Operating and Financial Data

September 30, 2010

 

CALCULATION OF FUNDS FROM OPERATIONS (FFO)

(amounts in thousands, except per share data)

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

 

9/30/2010

 

9/30/2009

 

9/30/2010

 

9/30/2009

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

6,669

 

$

6,185

 

$

21,254

 

$

20,569

 

Plus: depreciation and amortization

 

6,321

 

3,828

 

16,602

 

11,189

 

Plus: acquisition related costs

 

2,687

 

207

 

4,542

 

207

 

FFO

 

$

15,677

 

$

10,220

 

$

42,398

 

$

31,965

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (1)

 

36,369

 

21,455

 

32,265

 

12,852

 

 

 

 

 

 

 

 

 

 

 

FFO per share (1)

 

$

0.43

 

$

0.48

 

$

1.31

 

$

2.49

 

 

(1)          Prior to completion of its IPO on June 8, 2009, GOV did not have any publicly traded outstanding common shares. If the IPO had been completed on January 1, 2009, GOV’s weighted average common shares outstanding for the nine months ended September 30, 2009 would have been 21,469.

 

We compute FFO as shown above.  Our calculations of FFO differ from the National Association of Real Estate Investment Trusts, or NAREIT, definition because we exclude acquisition related costs from the determination of FFO.  We consider FFO to be an appropriate measure of performance for a REIT, along with net income and cash flow from operating, investing and financing activities. We believe that FFO provides useful information to investors because by excluding the effects of certain historical amounts, such as acquisition related costs and depreciation expense, FFO can facilitate a comparison of operating performances by a REIT over time and among REITs.  FFO does not represent cash generated by operating activities in accordance with GAAP, and should not be considered an alternative to net income or cash flow from operating activities as a measure of financial performance or liquidity.  FFO is one important factor considered by our Board of Trustees in determining the amount of distributions to shareholders.  Other important factors include, but are not limited to, requirements to maintain our status as a REIT, limitations in our revolving credit facility, the availability of debt and equity capital to us and our expectations of future capital requirements and operating performance.  Other REITs may calculate FFO differently than us.