ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction |
(IRS Employer | |
of incorporation or organization) |
Identification No.) |
Title of Each Class |
Trading Symbol(s) |
Name of each Exchange on Which Registered | ||
“ “ |
Large accelerated filer | ☐ | ☒ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
Emerging Growth Company |
• | adverse economic or real estate developments in the office sector or the markets in which we operate; |
• | increased interest rates, any resulting increase in financing or operating costs, the impact of inflation and a stall in economic growth or an economic recession; |
• | changes in local, regional, national and international economic conditions, including as a result of recent pandemics or any future epidemics or pandemics; |
• | the extent to which “work-from-home” and hybrid work policies continue; |
• | our inability to compete effectively; |
• | our inability to collect rent from tenants or renew tenants’ leases on attractive terms if at all; |
• | our dependence upon significant tenants, bankruptcy or insolvency of a major tenant or a significant number of small tenants or borrowers, or defaults on or non-renewal of leases by tenants; |
• | demand for and market acceptance of our properties for rental purposes, including as a result of near-term market fluctuations or long-term trends that result in an overall decrease in the demand for office space; |
• | 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 maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes; |
• | government approvals, actions and initiatives, including the need for compliance with environmental requirements; |
• | 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 |
• | additional factors discussed under the sections captioned “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” |
• | Completed approximately 599,000 square feet of new and renewal leasing; |
• | Increased the total authorized borrowings of the unsecured credit facility (the “Unsecured Credit Facility”) from $350 million to $375 million; |
• | Completed loan renewals on two property loans, extending each maturity date by five years; |
• | Continued construction and leasing of high-quality spec suites and successfully executed numerous renovation projects; and |
• | Actively positioned Company properties to maximize overall corporate value. |
• | There are inherent risks associated with real estate investments and with the real estate industry, each of which could have an adverse impact on our financial performance and the value of our properties. |
• | Significant competition may decrease or prevent increases in our properties’ occupancy and rental rates and may reduce our investment opportunities. |
• | We may be unable to renew expiring leases or re-lease vacant space on a timely basis or on attractive terms. |
• | We are dependent on our key personnel and the loss of such key personnel could materially adversely affect our business. |
• | A decrease in demand for office space in our markets may have a material adverse effect on our financial condition and results of operations. |
• | Failure by any major tenant to make rental payments to us, because of a deterioration of its financial condition, a termination of its lease, a non-renewal of its lease or otherwise, could have a material adverse effect on our results of operations. |
• | Systemic changes in the demand for office real estate are the result of many factors, including historical or possible future public health events. The change in tenant behavior resulting from the work-from-home trend may be significant, and a future pandemic or epidemic outbreak could materially and adversely affect our financial condition, results of operations, cash flow, liquidity and performance and that of our tenants. |
• | We may be unable to secure funds for future tenant or other capital improvements or payment of leasing commissions. |
• | We may be required to make rent or other concessions and significant capital expenditures to improve our properties in order to retain and attract tenants. |
• | We depend on external sources of capital that are outside of our control, which may affect our ability to seize strategic opportunities, satisfy our debt obligations and make distributions to our stockholders. |
• | We have a substantial amount of indebtedness outstanding which may affect our ability to pay distributions to our stockholders, may expose us to interest rate fluctuation risk and may expose us to the risk of default under our debt obligations. |
• | Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders. |
• | The impacts of the Russian invasion of Ukraine and the conflict in Israel and the Middle East on the global economy are uncertain. |
• | Failure of the U.S. federal government to manage its fiscal matters or to raise or further suspend the debt ceiling, and changes in the amount of federal debt, may negatively impact the economic environment and adversely impact our results of operations. |
• | We may engage in hedging transactions, which can limit our gains and increase exposure to losses. |
• | Economic conditions may adversely affect the real estate market and our financial condition, results of operations and cash flow. |
• | Inflation and price volatility in the global economy could negatively impact our tenants and our results of operations. |
• | Our joint venture investments could be adversely affected by the capital markets, our lack of sole decision-making authority, our reliance on joint venture partners’ financial condition and any disputes that may arise between us and our joint venture partners. |
• | We could incur significant costs related to government regulation and private litigation over environmental matters involving the presence, discharge or threat of discharge of hazardous or toxic substances. |
• | Existing conditions at some of our properties may expose us to liability related to environmental matters. |
• | Our properties may contain asbestos or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem. |
• | Potential losses, including from adverse weather conditions, natural disasters, climate change and title claims, may not be covered by insurance. |
• | We may be limited in our ability to diversify our investments making us more vulnerable economically than if our investments were diversified. |
• | Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition. |
• | If we sell properties by providing financing to purchasers, we will bear the risk of default by the purchaser. |
• | If a tenant defaults or declares bankruptcy, we may be unable to collect balances due under relevant leases and may become subject to uncertainty and increased expenses, which could have a material adverse effect on our financial condition and ability to pay distributions. |
• | We may face additional risks and costs associated with owning properties occupied by government tenants. |
• | Some of the leases at our properties contain “early termination” provisions which, if triggered, may allow tenants to terminate their leases without further payment to us. |
• | The federal government’s “green lease” policies may adversely affect us. |
• | We may be unable to complete acquisitions and dispositions, and even if acquisitions are completed, we may fail to successfully operate acquired properties. |
• | Acquired properties may be located in new markets where we may face risks associated with investing in an unfamiliar market. |
• | Adverse market and economic conditions could cause us to recognize impairment charges or otherwise impact our performance. |
• | Our property taxes could increase due to property tax rate changes or reassessment or inability to use any tax assets, which may adversely impact our cash flows. |
• | Our commitments 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”), and their respective affiliates may give rise to various conflicts of interest. |
• | Our failure to maintain our qualification as a REIT would result in significant adverse tax consequences to us and would adversely affect our business and the value of our stock. |
• | To maintain our qualification as a REIT, we may be forced to borrow funds during unfavorable market conditions to make distributions to our stockholders. |
• | Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends. |
• | The tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions which would be treated as sales for U.S. federal income tax purposes. |
• | We may face risks in connection with like-kind exchanges pursuant to section 1031 of the Code (“Section 1031 Exchanges”). |
• | To maintain our qualification as a REIT, we may be forced to forego otherwise attractive opportunities. |
• | We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility and reduce the market price of our shares of capital stock. |
• | Conflicts of interest exist or could arise in the future between the interests of our stockholders and the interests of holders of units in City Office REIT Operating Partnership, L.P. (our “Operating Partnership”), which may impede business decisions that could benefit our stockholders. |
• | The consideration that we pay for the properties and assets we own may exceed their aggregate fair market value. |
• | We are a holding company with no direct operations and, as such, we rely on funds received from our Operating Partnership to pay liabilities, and the interests of our stockholders are structurally subordinated to all liabilities and obligations of our Operating Partnership and its subsidiaries. |
• | We may have assumed unknown liabilities in connection with our acquisition of properties and any properties we may acquire in the future may expose us to unknown liabilities. |
• | Our charter, our amended and restated bylaws and Maryland law contain provisions that may delay, defer or prevent a change of control transaction and may prevent our stockholders from receiving a premium for their shares. |
• | The ability of our Board of Directors to revoke our REIT status without stockholder approval may cause adverse consequences to our stockholders. |
• | Our Board of Directors may amend our investing and financing guidelines without stockholder approval, and, accordingly, you would have limited control over changes in our policies that could increase the risk that we default under our debt obligations. |
• | Our rights and the rights of our stockholders to take action against our directors and officers are limited. |
• | We may incur significant costs complying with various federal, state and local laws, regulations and covenants that are applicable to our properties. |
• | Climate change may adversely affect our business. |
• | Litigation may result in unfavorable outcomes. |
• | Our business could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting. |
• | Our business and operations would suffer in the event of system failures. |
• | We face risks associated with security breaches through cyber-attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (“IT”) networks and related systems. |
• | adverse changes in financial conditions of buyers, sellers and tenants of our properties, including bankruptcies, financial difficulties or lease defaults by our tenants; |
• | the national, regional and local economy, which may be negatively impacted by concerns about inflation, government deficits or government budgets, unemployment rates, decreased consumer confidence, industry slowdowns, reduced corporate profits, liquidity concerns in our markets and other adverse business concerns; |
• | local real estate conditions, such as an oversupply of, or a reduction in, demand for office space and the availability and creditworthiness of current and prospective tenants; |
• | longevity of general real estate trends, such as the curtailment in demand for office space and the increased flexibility for tenants to relocate to other states, to the extent they continue to maintain a physical office at all; |
• | vacancies or ability to rent space on favorable terms, including possible market pressures to offer tenants rent abatements, tenant improvements, early termination rights or below-market renewal options; |
• | changes in operating costs and expenses, including, without limitation, increasing labor and material costs, insurance costs, energy prices, water and sewer costs, environmental restrictions, real estate taxes and costs of compliance with laws, regulations and government policies, which we may be restricted from passing on to our tenants; |
• | fluctuations in interest rates, which could adversely affect our ability, or the ability of buyers and tenants of our properties, to obtain financing on favorable terms or at all, or impact the market price of our properties we own or target for investment; |
• | competition from other real estate investors with significant capital, including other real estate operating companies, other publicly traded REITs and institutional investment funds; |
• | inability to refinance our indebtedness or secure financing on terms favorable to us, which could result in a default on our obligation and trigger cross default provisions that could result in a default on other indebtedness; |
• | the convenience and quality of competing office properties; |
• | inability to collect rent from tenants; |
• | our ability to secure adequate insurance; |
• | our ability to secure adequate management services and to maintain our properties; |
• | changes in, and changes in enforcement of, laws, regulations and governmental policies, including, without limitation, health, safety, environmental, zoning, immigration and tax laws, government fiscal, monetary and trade policies and the Americans with Disabilities Act of 1990 (the “ADA”); and |
• | civil unrest, acts of war, cyber-attacks, terrorist attacks and natural disasters, including earthquakes, wind damage and floods, which may result in uninsured and underinsured losses. |
• | a decrease in the usage of our properties or the demand for office space as a result of our tenants’ implementation of full or partial “work-from-home” or other remote work policies during or after a pandemic ends, or the Company’s ability to maintain or increase rents, which may have an adverse effect on our financial condition, results of operations and cash flow than if we owned a more diversified real estate portfolio; |
• | difficulty accessing sources of capital on attractive terms, or at all, impacts to our credit ratings, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to debt or equity capital necessary to fund future capital needs (including redevelopment, acquisition, expansion and renovation activities, payments of principal and interest on and the refinancing of our existing debt, tenant improvements and leasing costs, and our operations) or refinancings on a timely basis and our tenants’ ability to fund their business operations and meet their obligations to us; |
• | a reduction in economic activity that 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; |
• | the financial impact of the work-from-home trend could negatively impact our future compliance with financial covenants of our unsecured credit facility (“Unsecured Credit Facility”), including the Company’s term loans thereunder, and other debt agreements, including mortgage debt, 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, or foreclosure on one or more our properties secured by mortgage debt; |
• | any impairment in value of our tangible or intangible assets which could be recorded as a result of weaker economic conditions or resulting from an impairment evaluation; |
• | 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; and |
• | 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. |
• | general market conditions and interest rates; |
• | the market’s view of the quality of our assets and our leasing activity; |
• | the market’s perception of our growth potential; |
• | our current debt levels; |
• | our current and expected future earnings; |
• | our cash flow and cash distributions; and |
• | the market price of securities we may issue from time to time. |
• | our cash flow may be insufficient to meet our required principal and interest payments; |
• | we may be unable to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to capitalize upon emerging acquisition opportunities or meet operational needs; |
• | we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; |
• | we may be forced to dispose of one or more of our properties, possibly on disadvantageous terms, or terminate pending acquisitions that may require us to forfeit amounts paid into escrow or pay termination fees; |
• | we may be forced to enter into financing arrangements with particularly burdensome collateral requirements or restrictive covenants; |
• | we may violate restrictive covenants in our loan documents, which would entitle the lenders to accelerate our debt obligations or require us to retain cash for reserves; |
• | we may be unable to hedge floating rate debt, counterparties may fail to honor their obligations under our hedge agreements or these agreements may not effectively hedge interest rate fluctuation risk; |
• | we may default on our obligations and the lenders or mortgagees may foreclose on our properties that secure their loans; |
• | our default under any of our indebtedness with cross default provisions could result in a default on other indebtedness; and |
• | cross default provisions on properties with minority parties could trigger indemnity obligations. |
• | available interest rate hedging may not correspond directly with the interest rate risk for which we seek protection; |
• | the duration of the hedge may not match the duration of the related liability; |
• | the party owing money in the hedging transaction may default on its obligation to pay; |
• | the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; and |
• | the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value, such as downward adjustments, or “mark-to-market |
• | may require the removal or upgrade of underground storage tanks; |
• | regulate the discharge of storm water, wastewater and other pollutants; |
• | regulate air pollutant emissions, including greenhouse gas emissions; |
• | regulate hazardous materials’ generation, management and disposal; and |
• | regulate workplace health and safety. |
• | we may be unable to acquire a desired property because of competition from other real estate investors with substantial capital, including from other REITs and institutional investment funds; |
• | even if we are able to acquire a desired property, competition from other potential acquirers may significantly increase the purchase price; |
• | even if we enter into agreements for the acquisition of properties, these agreements are subject to customary conditions to closing, including completion of due diligence investigations to our satisfaction; |
• | we may incur significant costs in connection with evaluation and negotiation of potential acquisitions, including acquisitions that we are subsequently unable to complete; |
• | we may acquire properties that are not initially accretive to our results upon acquisition, and we may not successfully lease those properties to meet our expectations; |
• | we may be unable to finance the acquisition on favorable terms in the time period we desire, or at all; |
• | even if we are able to finance the acquisition, our cash flows may be insufficient to meet our required principal and interest payments; |
• | we may spend more than budgeted to make necessary improvements or renovations to acquired properties; |
• | we may be unable to quickly and efficiently integrate new acquisitions, particularly the acquisition of portfolios of properties, into our existing operations; |
• | market conditions may result in higher than expected vacancy rates and lower than expected rental rates; and |
• | we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities for clean-up of undisclosed environmental contamination, claims by tenants or other persons dealing with former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties. |
• | might become bankrupt or fail to fund their share of required capital contributions; |
• | may have economic or other business interests or goals that are inconsistent with our business interests or goals; and |
• | may be in a position to take actions contrary to our policies or objectives or exercise rights to buy or sell at an inopportune time for us. |
• | we structure a joint venture or conduct business in a manner that is deemed to be a general partnership with a third party; |
• | third-party managers incur debt or other liabilities on behalf of a joint venture which the joint venture is unable to pay, and the joint venture agreement provides for capital calls, in which case we could be liable to make contributions as set forth in any such joint venture agreement or suffer adverse consequences for a failure to contribute; or |
• | we agree to cross default provisions or to cross-collateralize our properties with the properties in a joint venture, in which case we could face liability if there is a default relating to those properties in the joint venture or the obligations relating to those properties. |
• | we would not be allowed to deduct distributions to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates; and |
• | unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year in which we were disqualified. |
• | differences in timing between the actual receipt of cash and inclusion of income for U.S. federal income tax purposes; |
• | the effect of nondeductible capital expenditures; |
• | the creation of reserves; or |
• | required debt or amortization payments. |
• | liabilities for clean-up of undisclosed or undiscovered environmental contamination; |
• | claims by tenants, vendors or other persons against the former owners of the properties; |
• | liabilities incurred in the ordinary course of business; and |
• | claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties. |
• | “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” for certain periods. An “interested stockholder” is generally any person who beneficially owns 10% or more of the voting power of our shares or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then-outstanding voting stock. A person is not an interested stockholder under the statute if our Board of Directors approved in advance the transaction by which he otherwise would have become an interested stockholder. Business combinations with an interested stockholder are prohibited for five years after the most recent date on which the stockholder becomes an interested stockholder. After that period, the MGCL imposes two super-majority voting requirements on such combinations; and |
• | “control share” provisions that provide that holders of “control shares” of our Company acquired in a “control share acquisition” have no voting rights with respect to the control shares unless holders of |
two-thirds of our voting stock (excluding interested shares) consent. “Control shares” are shares that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors. A “control share acquisition” is the direct or indirect acquisition of ownership or control of “control shares” from a party other than the issuer. |
• | actual receipt of an improper benefit or profit in money, property or services; or |
• | active and deliberate dishonesty established by a final judgment and which is material to the cause of action. |
• | result in unauthorized access to, destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, including personally identifiable and account information that could be used to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; |
• | result in unauthorized access to or changes to our financial accounting and reporting systems and related data; |
• | result in our inability to maintain building systems relied on by our tenants; |
• | require significant management attention and resources to remedy any damage that results; |
• | subject us to regulatory penalties or claims for breach of contract, damages, credits, penalties or terminations of leases or other agreements; or |
• | damage our reputation among our tenants and investors. |
• | Current cybersecurity landscape and emerging threats; |
• | Status of ongoing cybersecurity initiatives and strategies; |
• | Incident reports and learnings from any cybersecurity events; and |
• | Compliance with regulatory requirements and industry standards. |
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 (26.7% of NRA) |
Block 23 |
100.0 | % | 307 | 94.5 | % | $ | 30.24 | $ | 33.29 | $ | 8,771 | ||||||||||||||
Pima Center |
100.0 | % | 272 | 56.9 | % | $ | 29.74 | $ | 29.74 | $ | 4,596 | |||||||||||||||
SanTan |
100.0 | % | 267 | 49.1 | % | $ | 32.28 | $ | 32.28 | $ | 4,224 | |||||||||||||||
5090 N. 40 th St |
100.0 | % | 175 | 69.3 | % | $ | 34.73 | $ | 34.73 | $ | 4,215 | |||||||||||||||
Camelback Square |
100.0 | % | 172 | 85.9 | % | $ | 34.97 | $ | 34.97 | $ | 5,179 | |||||||||||||||
The Quad |
100.0 | % | 163 | 94.8 | % | $ | 33.81 | $ | 34.18 | $ | 5,223 | |||||||||||||||
Papago Tech |
100.0 | % | 163 | 67.8 | % | $ | 25.87 | $ | 25.87 | $ | 2,856 | |||||||||||||||
Tampa, FL (18.5%) |
Park Tower |
94.8 | % | 480 | 90.0 | % | $ | 28.65 | $ | 28.65 | $ | 12,389 | ||||||||||||||
City Center |
95.0 | % | 244 | 88.6 | % | $ | 30.75 | $ | 30.75 | $ | 6,647 | |||||||||||||||
Intellicenter |
100.0 | % | 204 | 100.0 | % | $ | 26.21 | $ | 26.21 | $ | 5,333 | |||||||||||||||
Carillon Point |
100.0 | % | 124 | 100.0 | % | $ | 30.86 | $ | 30.86 | $ | 3,833 | |||||||||||||||
Denver, CO (14.1%) |
Denver Tech |
100.0 | % | 381 | 85.6 | % | $ | 24.66 | $ | 29.11 | $ | 7,848 | ||||||||||||||
Circle Point |
100.0 | % | 272 | 90.6 | % | $ | 20.07 | $ | 35.94 | $ | 4,948 | |||||||||||||||
Superior Pointe |
100.0 | % | 152 | 71.7 | % | $ | 18.79 | $ | 32.79 | $ | 2,051 | |||||||||||||||
Orlando, FL (12.7%) |
Florida Research Park |
96.6 | % | 397 | 87.2 | % | $ | 26.28 | $ | 28.23 | $ | 9,002 | ||||||||||||||
Central Fairwinds |
97.0 | % | 168 | 90.7 | % | $ | 28.62 | $ | 28.62 | $ | 4,365 | |||||||||||||||
Greenwood Blvd |
100.0 | % | 155 | 100.0 | % | $ | 24.75 | $ | 24.75 | $ | 3,837 | |||||||||||||||
Raleigh, NC (8.7%) |
Bloc 83 |
100.0 | % | 495 | 83.6 | % | $ | 38.41 | $ | 38.81 | $ | 15,896 | ||||||||||||||
Portland, OR (5.8%) |
AmberGlen |
76.0 | % | 203 | 90.1 | % | $ | 23.75 | $ | 27.30 | $ | 4,356 | ||||||||||||||
Cascade Station |
100.0 | % | 128 | 61.4 | % | $ | 27.92 | $ | 31.48 | $ | 2,196 | |||||||||||||||
Dallas, TX (5.0%) |
The Terraces |
100.0 | % | 173 | 100.0 | % | $ | 39.53 | $ | 60.53 | $ | 6,824 | ||||||||||||||
2525 McKinnon |
100.0 | % | 111 | 97.8 | % | $ | 30.84 | $ | 50.84 | $ | 3,360 | |||||||||||||||
San Diego, CA (4.9%) |
Mission City |
100.0 | % | 281 | 80.9 | % | $ | 39.87 | $ | 39.87 | $ | 9,070 | ||||||||||||||
Seattle, WA (3.6%) |
Canyon Park |
100.0 | % | 207 | 100.0 | % | $ | 23.86 | $ | 29.86 | $ | 4,934 | ||||||||||||||
Total / Weighted Average—December 31, 2023 (3) |
5,694 |
84.5 |
% |
$ |
29.55 |
$ |
33.01 |
$ |
141,953 |
|||||||||||||||||
(1) | Annualized gross rent per square foot includes adjustment for estimated expense reimbursements of triple net leases. |
(2) | Annualized base rent is calculated by multiplying (i) rental payments (defined as cash rents before abatements) for the month ended December 31, 2023 by (ii) 12. |
(3) | Averages weighted based on the property’s NRA, adjusted for occupancy. |
(1) | Percentage represents the NRA of the leases divided by the total NRA of the portfolio, as of December 31, 2023. |
(2) | 2.0% represents the leases under contract but not yet in occupancy as of December 31, 2023. |
Year of Lease Expiration |
Number of Leases Expiring |
NRA of Expiring Leases (000s) |
Percentage of NRA |
Annualized Base Rent (1) (000s) |
Percentage of Total Properties Rent |
Annualized Base Rent per Leased Square Foot Expiring (2) |
Annualized Base Rent (including Rent Abatement at Dec 31, 2023) |
Annualized Base Rent per Leased Square Foot Expiring (Including Rent Abatement at Dec 31, 2023) |
||||||||||||||||||||||||
Vacant |
— | 767 | 13.5 | % | — | — | — | — | — | |||||||||||||||||||||||
Contracted |
— | 114 | 2.0 | % | — | — | — | — | — | |||||||||||||||||||||||
2024 |
62 | 551 | 9.7 | % | 15,629 | 11.0 | % | 28.36 | 15,629 | 28.36 | ||||||||||||||||||||||
2025 |
57 | 499 | 8.8 | % | 15,060 | 10.6 | % | 30.18 | 15,060 | 30.18 | ||||||||||||||||||||||
2026 |
41 | 510 | 9.0 | % | 14,034 | 9.9 | % | 27.52 | 13,312 | 26.10 | ||||||||||||||||||||||
2027 |
43 | 717 | 12.6 | % | 20,102 | 14.2 | % | 28.04 | 20,102 | 28.04 | ||||||||||||||||||||||
2028 |
57 | 641 | 11.3 | % | 17,682 | 12.5 | % | 27.59 | 16,138 | 25.18 | ||||||||||||||||||||||
2029 |
31 | 605 | 10.6 | % | 18,319 | 12.9 | % | 30.28 | 17,302 | 28.60 | ||||||||||||||||||||||
2030 |
19 | 333 | 5.8 | % | 11,746 | 8.3 | % | 35.27 | 9,791 | 29.40 | ||||||||||||||||||||||
2031 |
10 | 239 | 4.2 | % | 6,242 | 4.4 | % | 26.12 | 3,396 | 14.21 | ||||||||||||||||||||||
2032 |
9 | 231 | 4.1 | % | 8,418 | 5.9 | % | 36.44 | 7,395 | 32.01 | ||||||||||||||||||||||
2033 & Thereafter |
17 | 487 | 8.4 | % | 14,721 | 10.3 | % | 30.23 | 12,477 | 25.62 | ||||||||||||||||||||||
Total / Weighted Average |
346 |
5,694 |
100.0 |
% |
$ |
141,953 |
100.0 |
% |
$ |
29.55 |
$ |
130,602 |
$ |
27.14 |
||||||||||||||||||
(1) | Annualized base rent is calculated by multiplying (i) rental payments (defined as cash rents before abatements) for the month of December 31, 2023, by (ii) 12. |
(2) | Annualized rent per leased square foot expiring reflects rental payments for the month of December 31, 2023, multiplied by 12 and divided by the NRA of expiring lease. |
• | business leaders may generally become more reticent to make large capital allocation decisions, such as entry into a new lease, given the uncertain economic environment; |
• | our cost of capital has increased due to higher interest rates and credit spreads, and private market debt financing is significantly more challenging to arrange; and |
• | retaining and attracting new tenants has become increasingly challenging due to potential business layoffs, downsizing and industry slowdowns. |
Property |
December 31, 2023 |
Interest Rate as of December 31, 2023 (1) |
Maturity |
|||||||||
Unsecured Credit Facility (2)(4) |
$ | 200,000 | SOFR +1.50% (1)(2) |
November 2025 | ||||||||
Term Loan (3) |
50,000 | SOFR +1.35% (1)(3) |
September 2024 | |||||||||
Term Loan (4) |
25,000 | 6.00% (4) |
January 2026 | |||||||||
Mission City |
45,994 | 3.78% | November 2027 | |||||||||
Canyon Park (5) |
38,932 | 4.30% | March 2027 | |||||||||
Circle Point |
38,789 | 4.49% | September 2028 | |||||||||
SanTan (6) |
31,501 | 4.56% | March 2027 | |||||||||
Intellicenter |
30,682 | 4.65% | October 2025 | |||||||||
The Quad |
30,600 | 4.20% | September 2028 | |||||||||
2525 McKinnon |
27,000 | 4.24% | April 2027 | |||||||||
FRP Collection (7) |
26,139 | 7.05% (7) |
August 2028 | |||||||||
Greenwood Blvd |
20,856 | 3.15% | December 2025 | |||||||||
Cascade Station (8) |
20,752 | 4.55% | May 2024 | |||||||||
5090 N. 40th St |
20,370 | 3.92% | January 2027 | |||||||||
AmberGlen |
20,000 | 3.69% | May 2027 | |||||||||
FRP Ingenuity Drive (9) |
15,860 | 4.44% | December 2024 | |||||||||
Central Fairwinds |
15,826 | 3.15% | June 2024 | |||||||||
Carillon Point (7) |
14,419 | 7.05% (7) |
August 2028 | |||||||||
190 Office Center (10) |
— | — | — | |||||||||
Total Principal |
672,720 | |||||||||||
Deferred financing costs, net |
(3,258 | ) | ||||||||||
Unamortized fair value adjustments |
48 | |||||||||||
Total |
$ | 669,510 | ||||||||||
(1) | As of December 31, 2023, the daily-simple SOFR rate was 5.38%. |
(2) | Borrowings under the Unsecured Credit Facility bear interest at a rate equal to the daily-simple SOFR rate plus a margin of between 135 to 235 basis points depending upon the Company’s consolidated leverage ratio. On February 9, 2023, the Company entered into a three-year interest rate swap for a notional amount of $140 million, effective March 8, 2023, effectively fixing the SOFR component of the borrowing rate for $140 million of the Unsecured Credit Facility at 4.19%. As of December 31, 2023, the Unsecured Credit Facility had $200.0 million drawn and a $4.2 million letter of credit to satisfy escrow requirements for a mortgage lender. The Unsecured Credit Facility matures in November 2025 and may be extended 12 months at the Company’s option upon meeting certain conditions. The Unsecured Credit Facility requires the Company to maintain a fixed charge coverage ratio of no less than 1.50x. |
(3) | Borrowings under the $50 million term loan bear interest at a rate equal to the daily-simple SOFR rate plus a margin of between 135 to 225 basis points depending upon the Company’s consolidated leverage ratio. The SOFR component of the borrowing rate is effectively fixed for the remainder of the five-year term by a $50 million interest rate swap at 1.17%. |
(4) | On January 5, 2023, the Company entered into a second amendment to its amended and restated credit agreement, dated November 16, 2021 for the Unsecured Credit Facility and entered into a three-year $25 million term loan, increasing its total authorized borrowings from $350 million to $375 million. Borrowings under the $25 million term loan bear interest at a rate equal to the daily-simple SOFR rate plus a margin of 210 basis points. In conjunction with the term loan, the Company also entered into a three-year interest rate swap for a notional amount of $25 million, effectively fixing the SOFR component of the borrowing rate of the term loan at 3.90%. |
(5) | The mortgage loan anticipated repayment date (“ARD”) is March 1, 2027. The final scheduled maturity date can be extended up to 5 years beyond the ARD. If the loan is not paid off at ARD, the 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. |
(6) | In the second quarter of 2023, the Debt Service Coverage Ratio (“DSCR”) and debt yield covenants for SanTan were not met, which triggered a ‘cash-sweep period’ that began in the second quarter of 2023. As of December 31, 2023, the DSCR and debt yield covenants were still not met. As of December 31, 2023, total restricted cash for the property was $4.1 million. |
(7) | On August 16, 2023, the Company entered into two amended and restated loan agreements for FRP Collection and Carillon Point, which among other things, extended the term for an additional five years and amended the interest rates from fixed to floating. The loans bear interest at a rate equal to the daily-simple SOFR rate plus a margin of 275 basis points. In conjunction with the amended and restated loan agreements, the Company also entered into two five-year interest rate swap agreements, effectively fixing the SOFR component of the borrowing rate of the loans at 4.30%. |
(8) | In the first quarter of 2023, a ‘cash-sweep period’ began for the Cascade Station loan due to the non-renewal of a major tenant’s leased space in the building. As of December 31, 2023, total restricted cash for the property was $2.0 million. |
(9) | In the third quarter of 2022, the DSCR covenant for FRP Ingenuity Drive was not met, which triggered a ‘cash-sweep period’ that began in the fourth quarter of 2022. As of December 31, 2023, the DSCR was still not met. As of December 31, 2023 and December 31, 2022, total restricted cash for the property was $3.2 million and $2.6 million, respectively. |
(10) | In the second quarter of 2023, the non-recourse debt associated with the 190 Office Center property was deconsolidated as a result of the appointment of a receiver to assume possession and control of the property. The loan balance as of the date of deconsolidation was $38.6 million. |
Payments Due by Period |
||||||||||||||||||||
Contractual Obligations |
Total |
2024 |
2025-2026 |
2027-2028 |
More than 5 years |
|||||||||||||||
Principal payments on mortgage loans |
$ | 672,720 | $ | 107,675 | $ | 284,260 | $ | 280,785 | $ | — | ||||||||||
Interest payments (1) |
83,938 | 31,323 | 40,103 | 12,512 | — | |||||||||||||||
Tenant-related commitments |
12,104 | 12,104 | — | — | — | |||||||||||||||
Lease obligations |
36,264 | 658 | 1,510 | 1,190 | 32,906 | |||||||||||||||
Total |
$ | 805,026 | $ | 151,760 | $ | 325,873 | $ | 294,487 | $ | 32,906 | ||||||||||
(1) | Contracted interest on the floating rate borrowings under our Unsecured Credit Facility was calculated based on the balance and interest rate at December 31, 2023. Contracted interest on our term loans, part of the Unsecured Credit Facility, the FRP Collection loan and the Carillon Point loan were calculated based on the interest rate swap rates fixing the SOFR component of the borrowing rates. |
Page | ||||
64 |
||||
68 |
||||
69 |
||||
70 |
||||
71 |
||||
72 |
||||
73 |
||||
91 |
December 31, 2023 |
December 31, 2022 |
|||||||
Assets |
||||||||
Real estate properties |
||||||||
Land |
$ | $ | ||||||
Building and improvement |
||||||||
Tenant improvement |
||||||||
Furniture, fixtures and equipment |
||||||||
Accumulated depreciation |
( |
) | ( |
) | ||||
Cash and cash equivalents |
||||||||
Restricted cash |
||||||||
Rents receivable, net |
||||||||
Deferred leasing costs, net |
||||||||
Acquired lease intangible assets, net |
||||||||
Other assets |
||||||||
Total Assets |
$ | $ | ||||||
Liabilities and Equity |
||||||||
Liabilities: |
||||||||
Debt |
$ | $ | ||||||
Accounts payable and accrued liabilities |
||||||||
Deferred rent |
||||||||
Tenant rent deposits |
||||||||
Acquired lease intangible liabilities, net |
||||||||
Other liabilities |
||||||||
Total Liabilities |
||||||||
Commitments and Contingencies (Note 10) |
||||||||
Equity: |
||||||||
Common stock, $ shares issued and outstanding as of December 31, 2023 and 2022 |
||||||||
Additional paid-in capital |
||||||||
Retained earnings |
||||||||
Accumulated other comprehensive (loss)/income |
( |
) | ||||||
Total Stockholders’ Equity |
||||||||
Non-controlling interests in properties |
||||||||
Total Equity |
||||||||
Total Liabilities and Equity |
$ | $ | ||||||
Years Ended December 31, |
||||||||||||
2023 |
2022 |
2021 |
||||||||||
Rental and other revenues |
$ | $ | $ | |||||||||
Operating expenses: |
||||||||||||
Property operating expenses |
||||||||||||
General and administrative |
||||||||||||
Depreciation and amortization |
||||||||||||
Impairment of real estate |
||||||||||||
|
|
|
|
|
|
|||||||
Total operating expenses |
||||||||||||
|
|
|
|
|
|
|||||||
Operating income |
||||||||||||
Interest expense: |
||||||||||||
Contractual interest expense |
( |
) | ( |
) | ( |
) | ||||||
Amortization of deferred financing costs and debt fair value |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
( |
) | ( |
) | ( |
) | |||||||
Net (loss)/gain on disposition of real estate property |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Net (loss)/income |
( |
) | ||||||||||
Less: |
||||||||||||
Net income attributable to non-controlling interests in properties |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Net (loss)/income attributable to the Company |
( |
) | ||||||||||
Preferred stock distributions |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Net (loss)/income attributable to common stockholders |
$ | ( |
) | $ | $ | |||||||
|
|
|
|
|
|
|||||||
Net (loss)/income per common share: |
||||||||||||
Basic |
$ | ( |
) | $ | $ | |||||||
|
|
|
|
|
|
|||||||
Diluted |
$ | ( |
) | $ | $ | |||||||
|
|
|
|
|
|
|||||||
Weighted average common shares outstanding: |
||||||||||||
Basic |
||||||||||||
|
|
|
|
|
|
|||||||
Diluted |
||||||||||||
|
|
|
|
|
|
|||||||
Dividend distributions declared per common share |
$ | $ | $ | |||||||||
|
|
|
|
|
|
Years Ended December 31, |
||||||||||||
2023 |
2022 |
2021 |
||||||||||
Net (loss)/income |
$ | ( |
) | $ | $ | |||||||
Other comprehensive (loss)/income: |
||||||||||||
Unrealized cash flow hedge gain |
||||||||||||
Amounts reclassified to interest expense |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Other comprehensive (loss)/income |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Comprehensive (loss)/income |
( |
) | ||||||||||
Less: |
||||||||||||
Comprehensive income attributable to non-controlling interests in properties |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Comprehensive (loss)/income attributable to the Company |
$ | ( |
) | $ | $ | |||||||
|
|
|
|
|
|
Number of shares of preferred stock |
Preferred stock |
Number of shares of common stock |
Common stock |
Additional paid-in capital |
(Accumulated deficit)/ retained earnings |
Accumulated other comprehensive (loss)/income |
Total stockholders’ equity |
Non-controlling interests in properties |
Total equity |
|||||||||||||||||||||||||||||||
Balance—January 1, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||
Restricted stock award grants and vesting |
— | — | ( |
) | — | — | ||||||||||||||||||||||||||||||||||
Common stock dividend distribution declared |
— | — | — | — | — | ( |
) | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared |
— | — | — | — | — | ( |
) | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||
Contributions |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Distributions |
— | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
Net income |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other comprehensive income |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance—December 31, 2021 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Restricted stock award grants and vesting |
— | — | ( |
) | — | — | ||||||||||||||||||||||||||||||||||
Common stock repurchased |
— | — | ( |
) | ( |
) | ( |
) | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||
Common stock dividend distribution declared |
— | — | — | — | — | ( |
) | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared |
— | — | — | — | — | ( |
) | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||
Contributions |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Distributions |
— | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
Net income |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Other comprehensive income |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance—December 31, 2022 |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Restricted stock award grants and vesting |
— | — | ( |
) | — | — | ||||||||||||||||||||||||||||||||||
Common stock dividend distribution declared |
— | — | — | — | — | ( |
) | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared |
— | — | — | — | — | ( |
) | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||
Contributions |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Distributions |
— | — | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
Net (loss)/income |
— | — | — | — | — | ( |
) | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | — | — | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Balance—December 31, 2023 |
$ | $ | $ | $ | $ | ( |
) | $ | $ | $ | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
||||||||||||
2023 |
2022 |
2021 |
||||||||||
Cash Flows from Operating Activities: |
||||||||||||
Net (loss)/income |
$ | ( |
) | $ | $ | |||||||
Adjustments to reconcile net (loss)/income to net cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
||||||||||||
Amortization of deferred financing costs and debt fair value |
||||||||||||
Amortization of above and below market leases |
||||||||||||
Straight-line rent/expense |
( |
) | ( |
) | ( |
) | ||||||
Non-cash stock compensation |
||||||||||||
Receipts from sales-type lease |
||||||||||||
Net loss/(gain) on disposition of real estate property |
( |
) | ( |
) | ||||||||
Impairment of real estate |
||||||||||||
Changes in non-cash working capital: |
||||||||||||
Rents receivable, net |
( |
) | ( |
) | ( |
) | ||||||
Other assets |
( |
) | ( |
) | ( |
) | ||||||
Accounts payable and accrued liabilities |
||||||||||||
Deferred rent |
( |
) | ( |
) | ||||||||
Tenant rent deposits |
||||||||||||
Net Cash Provided By Operating Activities |
||||||||||||
Cash Flows to Investing Activities: |
||||||||||||
Additions to real estate properties |
( |
) | ( |
) | ( |
) | ||||||
Acquisition of real estate |
( |
) | ||||||||||
Net proceeds from sale of real estate |
||||||||||||
Reduction of cash on disposition of real estate property |
( |
) | ||||||||||
Deferred leasing costs |
( |
) | ( |
) | ( |
) | ||||||
Net Cash Used In Investing Activities |
( |
) | ( |
) | ( |
) | ||||||
Cash Flows to Financing Activities: |
||||||||||||
Debt issuance and extinguishment costs |
( |
) | ( |
) | ||||||||
Proceeds from borrowings |
||||||||||||
Repayment of borrowings |
( |
) | ( |
) | ( |
) | ||||||
Dividend distributions paid to stockholders |
( |
) | ( |
) | ( |
) | ||||||
Repurchases of common stock |
( |
) | ||||||||||
Distributions to non-controlling interests in properties |
( |
) | ( |
) | ( |
) | ||||||
Shares withheld for payment of taxes on restricted stock unit vesting |
( |
) | ( |
) | ( |
) | ||||||
Contributions from non-controlling interests in properties |
||||||||||||
Net Cash Used In Financing Activities |
( |
) | ( |
) | ( |
) | ||||||
Net (Decrease)/Increase in Cash, Cash Equivalents and Restricted Cash |
( |
) | ( |
) | ||||||||
Cash, Cash Equivalents and Restricted Cash, Beginning of Period |
||||||||||||
Cash, Cash Equivalents and Restricted Cash, End of Period |
$ | $ | $ | |||||||||
Reconciliation of Cash, Cash Equivalents and Restricted Cash: |
||||||||||||
Cash and Cash Equivalents, End of Period |
||||||||||||
Restricted Cash, End of Period |
||||||||||||
Cash, Cash Equivalents and Restricted Cash, End of Period |
$ | $ | $ | |||||||||
Supplemental Disclosures of Cash Flow Information: |
||||||||||||
Cash paid for interest |
$ | $ | $ | |||||||||
Purchase of additions in real estate properties included in accounts payable |
$ | $ | $ | |||||||||
Purchase of deferred leasing costs included in accounts payable |
$ | $ | $ |
Years |
||||
Buildings |
||||
Furniture, fixtures and equipment |
December 31, 2023 |
December 31, 2022 |
|||||||
Billed receivables |
$ | $ | ||||||
Straight-line receivables (unbilled receivables) |
||||||||
Total rents receivable |
$ | $ | ||||||
Property |
Date Acquired |
Percentage Owned |
||||||
Bloc 83 |
||||||||
The Terraces |
||||||||
Block 23 |
||||||||
5910 Pacific Center and 9985 Pacific Heights (1) |
(1) |
5910 Pacific Center and 9985 Pacific Heights were added to the existing Sorrento Mesa portfolio of properties (collectively “Sorrento Mesa”). The Sorrento Mesa portfolio was subsequently sold in December 2021. |
5910 Pacific Center and 9985 Pacific Heights |
Block 23 |
The Terraces |
Bloc 83 |
December 31, 2021 |
||||||||||||||||
Land |
$ | $ | — | $ | $ | $ | ||||||||||||||
Building and improvements |
||||||||||||||||||||
Tenant improvements |
||||||||||||||||||||
Lease intangible assets |
||||||||||||||||||||
Other assets |
||||||||||||||||||||
Accounts payable and other liabilities |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Lease intangible liabilities |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Net assets acquired |
$ | $ | $ | $ | $ | |||||||||||||||
Lease Intangible Assets |
Lease Intangible Liabilities |
|||||||||||||||||||||||||||
December 31, 2023 |
Above Market Leases |
In Place Leases |
Leasing Commissions |
Total |
Below Market Leases |
Below Market Ground Lease |
Total |
|||||||||||||||||||||
Cost |
$ | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
||||||||||||||||||
Accumulated amortization |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
$ | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Intangible Assets |
Lease Intangible Liabilities |
|||||||||||||||||||||||||||
December 31, 2022 |
Above Market Leases |
In Place Leases |
Leasing Commissions |
Total |
Below Market Leases |
Below Market Ground Lease |
Total |
|||||||||||||||||||||
Cost |
$ | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
||||||||||||||||||
Accumulated amortization |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
$ | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 |
$ | |||
2025 |
||||
2026 |
||||
2027 |
||||
2028 |
||||
Thereafter |
||||
|
|
|||
$ | ||||
|
|
Property |
December 31, 2023 |
December 31, 2022 |
Interest Rate as of December 31, 2023 |
Maturity |
||||||||||||
Unsecured Credit Facility (2)(4) |
$ | $ | SOFR + |
% (1)(2) |
||||||||||||
Term Loan (3) |
SOFR + |
% (1)(3) |
||||||||||||||
Term Loan (4) |
% (4) |
|||||||||||||||
Mission City |
% | |||||||||||||||
Canyon Park (5) |
% | |||||||||||||||
Circle Point |
% | |||||||||||||||
SanTan (6) |
% | |||||||||||||||
Intellicenter |
% | |||||||||||||||
The Quad |
% | |||||||||||||||
2525 McKinnon |
% | |||||||||||||||
FRP Collection (7) |
% (7) |
|||||||||||||||
Greenwood Blvd |
% | |||||||||||||||
Cascade Station (8) |
% | |||||||||||||||
5090 N. 40th St |
% | |||||||||||||||
AmberGlen |
% | |||||||||||||||
FRP Ingenuity Drive (9) |
% | |||||||||||||||
Central Fairwinds |
% | |||||||||||||||
Carillon Point (7) |
% (7) |
|||||||||||||||
190 Office Center (10) |
— | |||||||||||||||
|
|
|
|
|||||||||||||
Total Principal |
||||||||||||||||
Deferred financing costs, net |
( |
) | ( |
) | ||||||||||||
Unamortized fair value |
||||||||||||||||
|
|
|
|
|||||||||||||
Total |
$ | $ | ||||||||||||||
|
|
|
|
(1) | As of December 31, 2023, the daily-simple SOFR rate was |
(2) |
Borrowings under the Unsecured Credit Facility bear interest at a rate equal to the daily-simple SOFR rate plus a margin of between |
component of the borrowing rate for $ |
(3) | Borrowings under the $ for the remainder of the five-year term by a $ |
(4) | On January 5, 2023, the Company entered into a second amendment to its amended and restated credit agreement, dated November 16, 2021 for the Unsecured Credit Facility and entered into a three-year $ million term loan, increasing its total authorized borrowings from $ million to $ million. Borrowings under the $ million term loan bear interest at a rate equal to the daily-simple SOFR rate plus a margin of basis points. In conjunction with the term loan, the Company also entered into a three-year interest rate swap for a notional amount of $ million, effectively fixing the SOFR component of the borrowing rate of the term loan at %. |
(5) | The mortgage loan anticipated repayment date (“ARD”) is March 1, 2027. The final scheduled maturity date can be extended up to 5 years beyond the ARD. If the loan is not paid off at ARD, the loan’s interest rate shall be adjusted to the greater of (i) the initial interest rate plus |
(6) | In the second quarter of 2023, the Debt Service Coverage Ratio (“DSCR”) and debt yield covenants for SanTan were not met, which triggered a ‘cash-sweep period’ that began in the second quarter of 2023. As of December 31, 2023, the DSCR and debt yield covenants were still not met. As of December 31, 2023, total restricted cash for the property was $ |
(7) |
On August 16, 2023, the Company entered into two amended and restated loan agreements for FRP Collection and Carillon Point, which among other things, extended the term for an additional five years and amended the interest rates from fixed to floating. The loans bear interest at a rate equal to the daily-simple SOFR rate plus a margin of |
(8) | In the first quarter of 2023, a ‘cash-sweep period’ began for the Cascade Station loan due to the non-renewal of a major tenant’s leased space in the building. As of December 31, 2023, total restricted cash for the property was $ |
(9) | In the third quarter of 2022, the DSCR covenant for FRP Ingenuity Drive was not met, which triggered a ‘cash-sweep period’ that began in the fourth quarter of 2022. As of December 31, 2023, the DSCR was still not met. As of December 31, 2023 and December 31, 2022, total restricted cash for the property was $ |
(10) | In the second quarter of 2023, the non-recourse debt associated with the 190 Office Center property was deconsolidated as a result of the appointment of a receiver to assume possession and control of the property. The loan balance as of the date of deconsolidation was $million. |
2024 |
$ | |||
2025 |
||||
2026 |
||||
2027 |
||||
2028 |
||||
Thereafter |
||||
$ | ||||
Notional Value December 31, 2023 |
Effective Date |
Maturity Date |
Fair Value Assets/(Liabilities) |
|||||||||||||||||
December 31, 2023 |
December 31, 2022 |
|||||||||||||||||||
Interest Rate Swap |
$ | September 2019 | September 2024 | $ | $ | |||||||||||||||
Interest Rate Swap |
January 2023 | January 2026 | ||||||||||||||||||
Interest Rate Swap |
March 2023 | November 2025 | ( |
) | ||||||||||||||||
Interest Rate Swap |
August 2023 | August 2028 | ( |
) | ||||||||||||||||
Interest Rate Swap |
August 2023 | August 2028 | ( |
) | ||||||||||||||||
$ | $ | ( |
) | $ | ||||||||||||||||
Years Ended December 31, |
||||||||
2023 |
2022 |
|||||||
|
$ | $ | ||||||
|
||||||||
|
|
|
|
|||||
$ | $ | |||||||
|
|
|
|
2024 |
$ | |||
2025 |
||||
2026 |
||||
2027 |
||||
2028 |
||||
Thereafter |
||||
|
|
|||
$ | ||||
|
|
December 31, 2023 |
December 31, 2022 |
|||||||
-of-use |
$ | $ | ||||||
iability – |
$ | $ | ||||||
-of-use |
$ | $ | ||||||
liability – leases |
$ | $ |
Operating Leases |
Financing Leases |
|||||||
2024 |
$ | $ | ||||||
2025 |
||||||||
2026 |
||||||||
2027 |
||||||||
2028 |
||||||||
Thereafter |
||||||||
|
|
|
|
|||||
Total future minimum lease payments |
||||||||
Discount |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total |
$ | $ | ||||||
|
|
|
|
Years ended December 31, |
||||||||||||
2023 |
2022 |
2021 |
||||||||||
Net (loss)/income |
$ | ( |
) | $ | $ | |||||||
Less: Net income attributable to non-controlling interests in properties |
( |
) | ( |
) | ( |
) | ||||||
Less: Net income attributable to preferred stockholders |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Numerator for basic and diluted EPS |
$ | ( |
) | $ | $ | |||||||
|
|
|
|
|
|
|||||||
Denominator for basic EPS |
||||||||||||
Dilutive effect of RSUs and PSUs |
||||||||||||
|
|
|
|
|
|
|||||||
Denominator for dilutive EPS |
||||||||||||
|
|
|
|
|
|
|||||||
Net (loss)/income per common share: |
||||||||||||
Basic |
$ | ( |
) | $ | $ | |||||||
Diluted |
$ | ( |
) | $ | $ |
Period |
Distribution per Common Share/Unit |
Declaration Date |
Record Date |
Payment Date |
||||||||||||
January 1, 2023 – March 31, 2023 |
$ | |||||||||||||||
April 1, 2023 – June 30, 2023 |
||||||||||||||||
July 1, 2023 – September 30, 2023 |
||||||||||||||||
October 1, 2023 – December 31, 2023 |
||||||||||||||||
|
|
|||||||||||||||
Total |
$ | |||||||||||||||
|
|
Number of RSUs |
Number of Performance RSUs |
|||||||
Outstanding at December 31, 2020 |
||||||||
Granted |
||||||||
Issuance of dividend equivalents |
||||||||
Vested |
( |
) | ||||||
Forfeited |
( |
) | ||||||
|
|
|
|
|||||
Outstanding at December 31, 2021 |
||||||||
Granted |
||||||||
Issuance of dividend equivalents |
||||||||
Vested |
( |
) | ||||||
|
|
|
|
|||||
Outstanding at December 31, 2022 |
||||||||
Granted |
||||||||
Issuance of dividend equivalents |
||||||||
Vested |
( |
) | ( |
) | ||||
Forfeited |
( |
) | ||||||
|
|
|
|
|||||
Outstanding at December 31, 2023 |
Units Granted |
Fair Value (in thousands) |
Weighted Average Grant Fair Value Per Share |
||||||||||||||
RSUs |
Performance RSUs |
|||||||||||||||
2023 |
$ | $ | ||||||||||||||
2022 |
||||||||||||||||
2021 |
RSUs |
Performance RSUs |
Total |
||||||||||
2023 |
$ | |
$ | |
$ | |
||||||
2022 |
||||||||||||
2021 |
Initial Costs to Company |
Costs Capitalized Subsequent to Acquisition |
Gross Amount at Which Carried as of December 31, 2023 (1) |
||||||||||||||||||||||||||||||||||||||
Description |
Encumbrances (2) |
Land |
Buildings and Improvements |
Improvements (3) |
Land |
Building and Improvements |
Total |
Accumulated Amortization |
Year of Construction |
Year Acquired |
||||||||||||||||||||||||||||||
AmberGlen |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
City Center |
||||||||||||||||||||||||||||||||||||||||
Central Fairwinds |
||||||||||||||||||||||||||||||||||||||||
Florida Research Park |
||||||||||||||||||||||||||||||||||||||||
Superior Pointe |
||||||||||||||||||||||||||||||||||||||||
Denver Tech |
||||||||||||||||||||||||||||||||||||||||
Intellicenter |
||||||||||||||||||||||||||||||||||||||||
Carillon Point |
||||||||||||||||||||||||||||||||||||||||
Park Tower |
||||||||||||||||||||||||||||||||||||||||
5090 N 40 th St |
||||||||||||||||||||||||||||||||||||||||
SanTan |
||||||||||||||||||||||||||||||||||||||||
2525 McKinnon |
||||||||||||||||||||||||||||||||||||||||
Mission City |
||||||||||||||||||||||||||||||||||||||||
Papago Tech |
||||||||||||||||||||||||||||||||||||||||
Pima Center |
||||||||||||||||||||||||||||||||||||||||
Circle Point |
||||||||||||||||||||||||||||||||||||||||
The Quad |
||||||||||||||||||||||||||||||||||||||||
Greenwood Blvd |
||||||||||||||||||||||||||||||||||||||||
Camelback Square |
||||||||||||||||||||||||||||||||||||||||
Canyon Park |
||||||||||||||||||||||||||||||||||||||||
Cascade Station |
( |
) | ||||||||||||||||||||||||||||||||||||||
Block 23 |
||||||||||||||||||||||||||||||||||||||||
The Terraces |
||||||||||||||||||||||||||||||||||||||||
Bloc 83 |
||||||||||||||||||||||||||||||||||||||||
Corporate |
||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total |
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | The aggregate cost for federal tax purposes as of December 31, 2023 of our real estate assets was approximately $ |
(2) | Encumbrances represent total principal debt which excludes net deferred financing costs $ of |
(3) | Includes impairment recorded subsequent to acquisition for Cascade Station. |
2023 |
2022 |
2021 |
||||||||||
Real Estate Properties |
||||||||||||
Balance, beginning of year |
$ | $ | $ | |||||||||
Acquisitions |
||||||||||||
Dispositions and Impairments |
( |
) | ( |
) | ( |
) | ||||||
Capital improvements |
||||||||||||
|
|
|
|
|
|
|||||||
Balance, end of year |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Accumulated Depreciation |
||||||||||||
Balance, beginning of year |
$ | $ | $ | |||||||||
Depreciation |
||||||||||||
Dispositions and Impairments |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Balance, end of year |
$ | $ | $ | |||||||||
|
|
|
|
|
|
† | Filed herewith. |
* | Compensatory Plan or arrangement |
** | Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive (Loss)/Income; (iv) Consolidated Statements of Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements. |
CITY OFFICE REIT, INC. | ||||||
Date: February 22, 2024 | By: | /s/ James Farrar | ||||
James Farrar | ||||||
Chief Executive Officer and Director |
Name |
Title |
Date | ||
/s/ James Farrar James Farrar |
Chief Executive Officer and Director (Principal Executive Officer) |
February 22, 2024 | ||
/s/ Anthony Maretic Anthony Maretic |
Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer) |
February 22, 2024 | ||
/s/ John Sweet John Sweet |
Independent Director, Chairman of Board of Directors |
February 22, 2024 | ||
/s/ Mark Murski Mark Murski |
Independent Director |
February 22, 2024 | ||
/s/ Michael Mazan Michael Mazan |
Independent Director |
February 22, 2024 | ||
/s/ John McLernon John McLernon |
Independent Director |
February 22, 2024 | ||
/s/ Sabah Mirza Sabah Mirza |
Independent Director |
February 22, 2024 |