UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 2, 2015
City Office REIT, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Maryland | 001-36409 | 98-1141883 | ||
|
(State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
||
|
1075 West Georgia Street, Suite 2600, Vancouver, British Columbia, |
V6E 3C9 | |||
| (Address of principal executive offices) | (Zip Code) | |||
(604) 806-3366
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Explanatory Note
This Form 8-K/A amends and supplements the Form 8-K filed by City Office REIT, Inc. (the “Company”) on September 9, 2015 (the “Original Filing”) reporting the acquisition of the properties known as 190 Office Center, a 302,829 square foot Class A multi-tenant office property in a suburb of Dallas, Texas (“190 Office Center”), and Intellicenter, a 203,509 square foot multi-tenant Class A property in Tampa, Florida (“Intellicenter”) to include the historical financial statements and pro forma information required by Item 9.01(a) and (b) of Form 8-K. The Company originally referred to 190 Office Center as “Granite 190” in its public disclosures, but has chosen to refer to the property as 190 Office Center on a going forward basis. This Form 8-K/A should be read in conjunction with the Original Filing.
| Item 9.01 | Financial Statements and Exhibits. |
(a) Financial Statements of Property Acquired—190 Office Center
The following Statements of Revenues and Certain Expenses for 190 Office Center are set forth in Exhibit 99.1, which is incorporated herein by reference.
Report of Independent Auditors.
Statements of Revenues and Certain Expenses for the six months ended June 30, 2015 and the year ended December 31, 2014.
Notes to Statements of Revenues and Certain Expenses for the six months ended June 30, 2015 and the year ended December 31, 2014.
(a) Financial Statements of Property Acquired—Intellicenter
The following Statements of Revenues and Certain Expenses for Intellicenter are set forth in Exhibit 99.2, which is incorporated herein by reference.
Report of Independent Auditors.
Statements of Revenues and Certain Expenses for the six months ended June 30, 2015 and the year ended December 31, 2014.
Notes to Statements of Revenues and Certain Expenses for the six months ended June 30, 2015 and the year ended December 31, 2014.
(b) Pro Forma Financial Information
The following pro forma financial statements for the Company are set forth in Exhibit 99.3, which is incorporated herein by reference.
Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2015.
Unaudited Pro Forma Consolidated and Combined Statement of Operations for the six months ended June 30, 2015 and the year ended December 31, 2014.
Notes to Unaudited Pro Forma Consolidated and Combined Financial Statements.
(c) Not applicable.
(d) Exhibits:
|
Exhibit Number |
Description |
|
| 99.1 | Statements of Revenues and Certain Expenses for 190 Office Center for the six months ended June 30, 2015 and the year ended December 31, 2014. | |
| 99.2 | Statements of Revenues and Certain Expenses for Intellicenter for the six months ended June 30, 2015 and the year ended December 31, 2014. | |
| 99.3 | Unaudited Pro Forma Financial Information for the Company. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CITY OFFICE REIT, INC. | ||||
| Date: November 3, 2015 | By: |
/s/ James Farrar |
||
| Name: | James Farrar | |||
| Title: | Chief Executive Officer | |||
EXHIBIT INDEX
|
Exhibit Number |
Description |
|
| 99.1 | Statements of Revenues and Certain Expenses for 190 Office Center for the six months ended June 30, 2015 and the year ended December 31, 2014. | |
| 99.2 | Statements of Revenues and Certain Expenses for Intellicenter for the six months ended June 30, 2015 and the year ended December 31, 2014. | |
| 99.3 | Unaudited Pro Forma Financial Information for the Company. | |
Exhibit 99.1
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and the Stockholders of City Office REIT, Inc.
We have audited the accompanying statement of revenues and certain expenses of 190 Office Center (the Property) for the year ended December 31, 2014, and the related notes to the financial statement.
Management’s Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of the statement of revenues and certain expenses in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statement of revenue and certain expenses that are free of material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statement of revenues and certain expenses. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the statement of revenues and certain expenses, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Property’s preparation and fair presentation of the statement of revenues and certain expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses, as described in note 2, for the year ended December 31, 2014 in conformity with U.S. generally accepted accounting principles.
1
Basis of Accounting
As described in note 2 to the financial statement, the statement of revenues and certain expenses has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Form 8-K of City Office REIT, Inc., and is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified in this respect.
/s/ KPMG LLP
Vancouver, Canada
October 30, 2015
2
190 OFFICE CENTER
STATEMENT OF REVENUES AND CERTAIN EXPENSES
(in thousands)
|
Year Ended
December 31, 2014 |
Six Months Ended
June 30, 2015 (unaudited) |
|||||||
|
Revenues: |
||||||||
|
Rental revenue |
$ | 5,789 | $ | 2,930 | ||||
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|
|
|||||
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Total Revenues |
5,789 | 2,930 | ||||||
|
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|
|||||
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Certain Expenses: |
||||||||
|
Property operating expenses |
1,923 | 921 | ||||||
|
Insurance |
27 | 17 | ||||||
|
Property taxes |
1,075 | 506 | ||||||
|
Management fees |
263 | 135 | ||||||
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|
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|
|||||
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Total Certain Expenses |
3,288 | 1,579 | ||||||
|
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|
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Revenues in Excess of Certain Expenses |
$ | 2,501 | $ | 1,351 | ||||
|
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|
|||||
See accompanying notes to statement of revenues and certain expenses.
3
190 OFFICE CENTER
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Organization
The accompanying statement of revenues and certain expenses include the operations of 190 Office Center (the “Property”) which consists of two three-story office buildings plus surrounding parking. The Property is located in the Richardson submarket of Dallas, Texas.
2. Basis of Presentation and Significant Accounting Policies
The accompanying statement of revenues and certain expenses (the “statement”) has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. The statement is not intended to be a complete presentation of the revenues and expenses of the Property. Accordingly, the statement excludes expenses not directly related to the future operations of the Property such as depreciation and amortization, amortization of intangible assets and liabilities, asset management fees, finance costs, and other costs not directly related to the proposed future operations of the property.
Revenue Recognition
Minimum rental revenue is recognized on a straight-line basis over the term of the leases. The leases provide for the reimbursement by the tenants of real estate taxes, insurance and certain property operating expenses to the owner of the Property. These reimbursements are recognized as revenue in the period the expenses are incurred.
The Property decreased rental income by $1,654,300 and $859,506 to record revenue on a straight-line basis during the year ended December 31, 2014 and six months ended June 30, 2015, respectively.
Use of Estimates
The preparation of the statement in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the statement and accompanying notes. Actual results could differ from those estimates.
3. Rental Revenue
The Property is leased to tenants under operating leases with expiration dates ranging from 2015 to 2023. One tenant accounted for approximately 70.1% of rental revenue at December 31, 2014. The minimum rental amounts due under the leases are subject to scheduled fixed increases.
4
190 OFFICE CENTER
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
Future minimum rents to be received over each of the next five years and thereafter under the non-cancelable operating leases in effect at December 31, 2014 are as follows (in thousands):
| Year ending December 31, | ||||
|
2015 |
$ | 6,603 | ||
|
2016 |
5,007 | |||
|
2017 |
5,157 | |||
|
2018 |
4,978 | |||
|
2019 |
5,033 | |||
|
Thereafter |
17,915 | |||
|
|
|
|||
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Total |
$ | 44,693 | ||
|
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|
|||
Leases generally require reimbursement of the tenant’s proportional share of common area, real estate taxes and other operating expenses which are in excess of a base year operating expense amount. These reimbursements are excluded from the amounts above.
4. Subsequent Events
The Property has evaluated subsequent events through to October 30, 2015. The Property was acquired by City Office REIT, Inc. on September 3, 2015 from a non-affiliated third party for approximately $54.35 million.
5
Exhibit 99.2
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and the Stockholders of City Office REIT, Inc.
We have audited the accompanying statement of revenues and certain expenses of Intellicenter (the Property) for the year ended December 31, 2014, and the related notes to the financial statement.
Management’s Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of the statement of revenues and certain expenses in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statement of revenue and certain expenses that are free of material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statement of revenues and certain expenses. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the statement of revenues and certain expenses, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Property’s preparation and fair presentation of the statement of revenues and certain expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses, as described in note 2, for the year ended December 31, 2014 in conformity with U.S. generally accepted accounting principles.
1
Basis of Accounting
As described in note 2 to the financial statement, the statement of revenues and certain expenses has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Form 8-K of City Office REIT, Inc., and is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified in this respect.
/s/ KPMG LLP
Vancouver, Canada
October 30, 2015
2
INTELLICENTER
STATEMENT OF REVENUES AND CERTAIN EXPENSES
(in thousands)
|
Year Ended
December 31, 2014 |
Six Months Ended
June 30, 2015 (unaudited) |
|||||||
|
Revenues: |
||||||||
|
Rental revenue |
$ | 4,210 | $ | 2,411 | ||||
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|
|||||
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Total Revenues |
4,210 | 2,411 | ||||||
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Certain Expenses: |
||||||||
|
Property operating expenses |
940 | 580 | ||||||
|
Insurance |
116 | 53 | ||||||
|
Property taxes |
409 | 213 | ||||||
|
Management fees |
77 | 40 | ||||||
|
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|||||
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Total Certain Expenses |
1,542 | 886 | ||||||
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Revenues in Excess of Certain Expenses |
$ | 2,668 | $ | 1,525 | ||||
|
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|
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|||||
See accompanying notes to statement of revenues and certain expenses.
3
INTELLICENTER
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. Organization
The accompanying statement of revenues and certain expenses include the operations of Intellicenter (the “Property”) which consists of a four-storey office building and surrounding surface parking. The Property is located in the Tampa Telecom Park section of the I-75 corridor submarket of Tampa, Florida.
2. Basis of Presentation and Significant Accounting Policies
The accompanying statement of revenues and certain expenses (the “statement”) has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. The statement is not intended to be a complete presentation of the revenues and expenses of the Property. Accordingly, the statement excludes expenses not directly related to the future operations of the Property such as depreciation and amortization, amortization of intangible assets and liabilities, asset management fees, finance costs, and other costs not directly related to the proposed future operations of the property.
Revenue Recognition
Minimum rental revenue is recognized on a straight-line basis over the term of the leases. The leases provide for the reimbursement by the tenants of real estate taxes, insurance and certain property operating expenses to the owner of the Property. These reimbursements are recognized as revenue in the period the expenses are incurred.
The Property increased rental income by $368,507 and $76,515 to record revenue on a straight-line basis during the year ended December 31, 2014 and six months ended June 30, 2015, respectively.
Use of Estimates
The preparation of the statement in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the statement and accompanying notes. Actual results could differ from those estimates.
3. Rental Revenue
The Property is leased to tenants under operating leases with expiration dates ranging from 2019 to 2027. One tenant accounted for approximately 76% of rental revenue at December 31, 2014. The minimum rental amounts due under the leases are subject to scheduled fixed increases.
4
INTELLICENTER
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
Future minimum rents to be received over each of the next five years and thereafter under the non-cancelable operating leases in effect at December 31, 2014 are as follows (in thousands):
|
Year ending December 31, |
||||
|
2015 |
$ | 4,313 | ||
|
2016 |
4,517 | |||
|
2017 |
4,626 | |||
|
2018 |
4,735 | |||
|
2019 |
4,414 | |||
|
Thereafter |
31,501 | |||
|
|
|
|||
|
Total |
$ | 54,106 | ||
|
|
|
Leases generally require reimbursement of the tenant’s proportional share of common area, real estate taxes and other operating expenses which are in excess of a base year operating expense amount. These reimbursements are excluded from the amounts above.
4. Subsequent Events
The Property has evaluated subsequent events through to October 30, 2015. The Property was acquired by City Office REIT, Inc. on September 3, 2015 from a non-affiliated third party for approximately $46.6 million.
5
Exhibit 99.3
City Office REIT, Inc.
Pro Forma Consolidated Financial Statements
(Unaudited)
City Office REIT, Inc. (“Company,” “we,” “our” or “us”) was organized in the state of Maryland on November 26, 2013. On April 21, 2014, the Company completed its initial public offering (“IPO”) of shares of the Company’s common stock. The Company contributed the net proceeds of the IPO to City Office REIT Operating Partnership, L.P., a Maryland limited partnership (the “Operating Partnership”), in exchange for common units in our Operating Partnership. Both the Company and the Operating Partnership commenced operations upon completion of the IPO and certain related formation transactions (the “Formation Transactions”).
Neither the Company nor the Operating Partnership had any business activity prior to completion of the IPO and related Formation Transactions on April 21, 2014. Since completion of the IPO and the related Formation Transactions, the Company, through the Operating Partnership and its subsidiaries, has completed the acquisition of three properties during the year ended December 31, 2014 —the Plaza 25 property purchased on June 4, 2014, the Lake Vista Pointe property purchased on July 18, 2014, and the Florida Research Park property purchased on November 18, 2014. During the first quarter of 2015, the Company also acquired the Logan Tower property on February 4, 2015 and in the second quarter of 2015, the Company acquired Superior Pointe on June 17, 2015 and DTC Crossroads on June 30, 2015.
The Company announced on September 3, 2015 that it had closed on the acquisition of the 190 Office Center property in Dallas, Texas for $54.35 million and the Intellicenter property in Tampa, Florida for a purchase price of $44.6 million. The Company does not have a material relationship with the seller of the Property and the acquisition is not an affiliated transaction.
The accompanying unaudited Pro Forma Consolidated Balance Sheet and Consolidated Statement of Operations are presented to reflect the historical consolidated balance sheet of the Company as of June 30, 2015 and the historical consolidated statement of operations for the six months ended June 30, 2015 which includes the acquisition of Logan Tower, Superior Pointe, DTC Crossroads, 190 Office Center and Intellicenter as if the acquisitions had been completed on January 1, 2014. The accompanying unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2014 reflects the historical operations of the Predecessor for the period from January 1, 2014 through April 20, 2014 and the historical results of operations of the Company for the period from April 21, 2014 through December 31, 2014 and are presented as if the IPO and related Formation Transactions, and the acquisitions of Plaza 25, Lake Vista Pointe, Florida Research Park, Logan Tower, Superior Pointe, DTC Crossroads, 190 Office Center and Intellicenter were completed on January 1, 2014.
Pro forma information is intended to provide investors with information about the impact of transactions by showing how specific transactions might have affected historical financial statements, illustrating the scope of the change in the historical financial position and results of operations. The adjustments made to historical financial information give effect to events that are directly attributable to the acquisition of the property and are factually supportable. The unaudited Pro Forma Consolidated Financial Statements are prepared in accordance with Article 11 of Regulation S-X.
The unaudited Pro Forma Consolidated Financial Statements set forth below are not fact and there can be no assurance that the Company’s results would not have differed significantly from those set forth below if the acquisition had actually occurred on January 1, 2014. Accordingly, the unaudited Pro Forma Consolidated
Financial Statements are presented for illustrative purposes only and do not purport to represent, and are not necessarily indicative of, what our actual financial position and results of operations would have been had the acquisition of the property occurred on the dates indicated, nor are they indicative of our future financial position or results of operations. Readers are cautioned not to place undue reliance on such information and the Company makes no representations regarding the information set forth below or its ultimate performance compared to it. The unaudited Pro Forma Consolidated Financial Statements exclude any non-recurring charges or credits directly attributable to the acquisition.
City Office REIT, Inc.
Pro Forma Consolidated Balance Sheet
As of June 30, 2015
(Unaudited)
(In thousands, except share and per share data)
|
City Office
REIT, Inc. |
Intellicenter
(A) |
190 Office
Center (B) |
Company
Pro Forma |
|||||||||||||
|
Assets |
||||||||||||||||
|
Real estate properties, net |
$ | 271,689 | $ | 39,522 | $ | 46,851 | $ | 358,062 | ||||||||
|
Cash and cash equivalents |
11,293 | — | — | 11,293 | ||||||||||||
|
Restricted cash |
10,114 | — | — | 10,114 | ||||||||||||
|
Rents receivable, net |
11,635 | — | — | 11,635 | ||||||||||||
|
Deferred financing costs, net of accumulated amortization |
2,801 | — | — | 2,801 | ||||||||||||
|
Deferred leasing costs, net of accumulated amortization |
4,711 | — | — | 4,711 | ||||||||||||
|
Acquired lease intangibles assets, net |
33,583 | 7,742 | 5,673 | 46,998 | ||||||||||||
|
Prepaid expenses and other assets |
1,251 | — | — | 1,251 | ||||||||||||
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|||||||||
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Total Assets |
$ | 347,077 | $ | 47,264 | $ | 52,524 | $ | 446,865 | ||||||||
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|||||||||
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Liabilities and Equity |
||||||||||||||||
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Liabilities: |
||||||||||||||||
|
Debt |
$ | 241,095 | $ | 46,279 | $ | 51,000 | $ | 338,374 | ||||||||
|
Accounts payable and accrued liabilities |
7,423 | 319 | 680 | 8,422 | ||||||||||||
|
Deferred rent |
1,197 | — | — | 1,197 | ||||||||||||
|
Tenant rent deposits |
2,078 | 2 | 39 | 2,119 | ||||||||||||
|
Acquired lease intangibles liability, net |
1,193 | 664 | 805 | 2,662 | ||||||||||||
|
Dividends payable |
3,601 | — | — | 3,601 | ||||||||||||
|
Earn-out liability |
8,600 | — | — | 8,600 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total Liabilities |
265,187 | 47,264 | 52,524 | 364,975 | ||||||||||||
|
Equity |
||||||||||||||||
|
Stockholders’ Equity: |
||||||||||||||||
|
Common stock, $0.01 par value, 100,000,000 shares authorized, 12,365,240 shares issued and outstanding |
124 | — | — | 124 | ||||||||||||
|
Additional paid in capital |
92,270 | — | — | 92,270 | ||||||||||||
|
Accumulated deficit |
(19,664 | ) | — | — | (19,664 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total Stockholders’ Equity |
72,730 | — | — | 72,730 | ||||||||||||
|
Operating Partnership noncontrolling interests |
9,866 | — | — | 9,866 | ||||||||||||
|
Noncontrolling interests in properties |
(706 | ) | — | — | (706 | ) | ||||||||||
|
|
|
|
|
|
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|
|||||||||
|
Total Equity |
81,890 | — | — | 81,890 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total Liabilities and Stockholder Equity |
$ | 347,077 | $ | 47,264 | $ | 52,524 | $ | 446,865 | ||||||||
|
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|
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|
|
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City Office REIT, Inc.
Pro Forma Consolidated Statement of Operations
For the Six Months Ended June 30, 2015
(Unaudited)
(In thousands, except share and per share data)
|
City Office
REIT, Inc. |
Intellicenter
Acquisition (AA) |
190 Office
Center (BB) |
DTC
Crossroads Acquisition (CC) |
Superior
Pointe Acquisition (DD) |
Logan Tower
Acquisition (EE) |
Company Pro
Forma |
||||||||||||||||||||||
|
Revenue: |
||||||||||||||||||||||||||||
|
Rental income |
$ | 20,237 | $ | 2,183 | $ | 2,439 | $ | 1,904 | $ | 1,666 | $ | 129 | $ | 28,558 | ||||||||||||||
|
Expense reimbursement |
2,036 | 226 | 486 | — | — | — | 2,748 | |||||||||||||||||||||
|
Other |
621 | 2 | 5 | — | — | 19 | 647 | |||||||||||||||||||||
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|
|||||||||||||||
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Total Revenues |
22,894 | 2,411 | 2,930 | 1,904 | 1,666 | 148 | 31,953 | |||||||||||||||||||||
|
Operating Expenses: |
||||||||||||||||||||||||||||
|
Property operating expenses |
8,243 | 886 | 1,579 | 885 | 667 | 57 | 12,317 | |||||||||||||||||||||
|
Acquisition costs |
1,091 | — | — | (85 | ) | (136 | ) | (99 | ) | 771 | ||||||||||||||||||
|
Stock based compensation |
916 | — | — | — | — | — | 916 | |||||||||||||||||||||
|
General and administrative |
902 | — | — | — | — | — | 902 | |||||||||||||||||||||
|
Base management fee |
659 | — | — | — | — | — | 659 | |||||||||||||||||||||
|
Depreciation and amortization |
8,900 | 869 | 1,499 | 984 | 982 | 64 | 13,298 | |||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total Operating Expenses |
20,711 | 1,755 | 3,078 | 1,784 | 1,513 | 22 | 28,863 | |||||||||||||||||||||
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|||||||||||||||
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Operating Income/ (loss) |
2,183 | 656 | (148 | ) | 120 | 153 | 126 | 3,090 | ||||||||||||||||||||
|
Interest Expense: |
||||||||||||||||||||||||||||
|
Contractual interest expense |
(4,112 | ) | (1,212 | ) | (1,147 | ) | (424 | ) | (23 | ) | — | (6,918 | ) | |||||||||||||||
|
Amortization of deferred financing costs |
(354 | ) | (82 | ) | (11 | ) | — | — | — | (447 | ) | |||||||||||||||||
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| (4,466 | ) | (1,294 | ) | (1,158 | ) | (424 | ) | (23 | ) | — | (7,365 | ) | ||||||||||||||||
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Change in fair value of earn-out |
(600 | ) | — | — | — | — | — | (600 | ) | |||||||||||||||||||
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Gain on equity investment |
— | — | — | — | — | — | — | |||||||||||||||||||||
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Net income/(loss) |
(2,883 | ) | (638 | ) | (1,306 | ) | (304 | ) | 130 | 126 | (4,875 | ) | ||||||||||||||||
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Less: |
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Net income/(loss) attributable to non-controlling interests in properties |
(255 | ) | — | — | — | — | — | (255 | ) | |||||||||||||||||||
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Net income/(loss) attributable to Operating Partnership unitholders’ noncontrolling interests |
598 | 122 | 249 | 58 | (25 | ) | (24 | ) | 978 | |||||||||||||||||||
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Net income/(loss) attributable to stockholders |
$ | (2,540 | ) | $ | (516 | ) | $ | (1,057 | ) | $ | (246 | ) | $ | 105 | $ | 102 | (4,152 | ) | ||||||||||
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Pro forma weighted average common shares outstanding - basic and diluted |
12,365,240 | |||||||||||||||||||||||||||
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Pro forma basic and diluted loss per share |
(0.34 | ) | ||||||||||||||||||||||||||
City Office REIT, Inc.
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2014
(Unaudited)
(In thousands, except share and per share data)
|
City Office
REIT, Inc. |
Intellicenter
(AA) |
190 Office
Center (BB) |
DTC
Crossroads Acquisition (CC) |
Superior
Pointe Acquisition (DD) |
Logan Tower
Acquisition (EE) |
Impact of 2014
Acquisitions (FF) |
Other Pro
Forma Adjustments |
Company Pro
Forma |
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Revenue: |
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|
Rental income |
$ | 33,236 | $ | 3,771 | $ | 4,858 | $ | 3,399 | $ | 1,819 | $ | 1,383 | $ | 4,585 | $ | — | $ | 53,051 | ||||||||||||||||||||
|
Expense reimbursement |
2,869 | 436 | 924 | 86 | 1,359 | — | 983 | — | 6,657 | |||||||||||||||||||||||||||||
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Other |
791 | 3 | 7 | 69 | — | 203 | 6 | — | 1,079 | |||||||||||||||||||||||||||||
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Total Revenues |
36,896 | 4,210 | 5,789 | 3,554 | 3,178 | 1,586 | 5,574 | — | 60,787 | |||||||||||||||||||||||||||||
|
Operating Expenses: |
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|
Property operating expenses |
14,332 | 1,542 | 3,288 | 1,728 | 1,574 | 611 | 1,773 | — | 24,848 | |||||||||||||||||||||||||||||
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Acquisition costs |
2,133 | 819 | 993 | 85 | 136 | 99 | 290 | — | 4,555 | |||||||||||||||||||||||||||||
|
Stock based compensation |
1,091 | — | — | — | — | — | — | 442 | (GG) | 1,533 | ||||||||||||||||||||||||||||
|
General and administrative |
1,314 | — | — | — | — | — | — | 476 | (HH) | 1,790 | ||||||||||||||||||||||||||||
|
Base management fee |
682 | — | — | — | — | — | — | 297 | (II) | 979 | ||||||||||||||||||||||||||||
|
Depreciation and amortization |
14,729 | 1,821 | 3,038 | 1,928 | 1,874 | 877 | 2,776 | — | 27,043 | |||||||||||||||||||||||||||||
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Total Operating Expenses |
34,281 | 4,182 | 7,319 | 3,741 | 3,584 | 1,587 | 4,839 | 1,215 | 60,748 | |||||||||||||||||||||||||||||
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Operating Income/ (loss) |
2,615 | 28 | (1,530 | ) | (187 | ) | (406 | ) | (1 | ) | 735 | (1,215 | ) | 39 | ||||||||||||||||||||||||
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Interest Expense: |
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|
Contractual interest expense |
(7,854 | ) | (2,426 | ) | (2,294 | ) | (1,050 | ) | (90 | ) | — | — | (254 | ) | (JJ) | (13,968 | ) | |||||||||||||||||||||
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Amortization of deferred financing costs |
(1,443 | ) | (164 | ) | (22 | ) | — | — | — | — | 765 | (JJ) | (864 | ) | ||||||||||||||||||||||||
|
Loss on early extinguishment of Predecessor debt |
(1,655 | ) | — | — | — | — | — | — | 1,655 | (JJ) | — | |||||||||||||||||||||||||||
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| (10,952 | ) | (2,590 | ) | (2,316 | ) | (1,050 | ) | (90 | ) | — | — | 2,166 | (14,832 | ) | ||||||||||||||||||||||||
|
Change in fair value of earn-out |
(1,048 | ) | — | — | — | — | — | — | — | (1,048 | ) | |||||||||||||||||||||||||||
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Gain on equity investment |
4,475 | — | — | — | — | — | — | (4,475 | ) | (KK) | — | |||||||||||||||||||||||||||
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Net (loss)/income |
(4,910 | ) | (2,562 | ) | (3,846 | ) | (1,237 | ) | (496 | ) | (1 | ) | 735 | (3,524 | ) | (15,841 | ) | |||||||||||||||||||||
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Less: |
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|
Net (income)/loss attributable to non-controlling interests in properties |
(82 | ) | — | — | — | — | — | — | — | (82 | ) | |||||||||||||||||||||||||||
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Net income attributable to Predecessor |
(1,973 | ) | — | — | — | — | — | — | 1,973 | (LL) | — | |||||||||||||||||||||||||||
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Net loss attributable to Operating Partnership unitholders’ noncontrolling interests |
1,955 | — | — | — | — | — | — | 2,517 | 4,472 | |||||||||||||||||||||||||||||
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Net (loss)/income attributable to stockholders |
$ | (5,010 | ) | $ | (2,562 | ) | $ | (3,846 | ) | $ | (1,237 | ) | $ | (496 | ) | $ | (1 | ) | 735 | 966 | (11,451 | ) | ||||||||||||||||
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Pro forma weighted average common shares outstanding - basic and diluted |
8,475,697 | |||||||||||||||||||||||||||||||||||||
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Pro forma basic and diluted loss per share |
(1.35 | ) | ||||||||||||||||||||||||||||||||||||
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City Office REIT, Inc.
Notes and Management’s Assumption to Unaudited Pro Forma Consolidated Financial Statements
1. Notes to the Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2015
(A) The acquisition of Intellicenter was accounted for using preliminary estimates of the fair value of tangible and intangible assets to be acquired and liabilities to be assumed in connection with the acquisition and are therefore subject to change. The Pro Forma adjustment includes the estimated cash borrowings and mortgage loan established upon the acquisition of Intellicenter.
(B) The acquisition of 190 Office Center was accounted for using preliminary estimates of the fair value of tangible and intangible assets to be acquired and liabilities to be assumed in connection with the acquisition and are therefore subject to change. The Pro Forma adjustment includes the estimated cash borrowings and mortgage loan established upon the acquisition of 190 Office Center.
2. Notes to the Unaudited Pro Forma Consolidated Statement of Operations for the six months ended June 30, 2015 and the year ended December 31, 2014
(AA) Revenue and property expenses for the Intellicenter acquisition are based on the historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation expense and interest expense. Depreciation expense is based on the preliminary estimates of fair value for the tangible and intangible assets acquired and is therefore subject to change. Interest expense related to the Company’s borrowings under the mortgage loan is at a fixed rate of 4.65% and borrowings under the term loan is at a variable rate of LIBOR plus 6%.
(BB) Revenue and property expenses for the 190 Office Center acquisition are based on the historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation expense and interest expense. Depreciation expense is based on the preliminary estimates of fair value for the tangible and intangible assets acquired and is therefore subject to change. Interest expense related to the Company’s borrowings under the mortgage loan is at a fixed rate of 4.79% and borrowings under the Secured Credit Facility is at a variable rate of LIBOR plus 2.25%.
(CC) Financial results for DTC Crossroads are based on historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation expense. Depreciation expense is based on the preliminary estimates of fair value for the tangible and intangible assets acquired and is therefore subject to change.
(DD) Financial results for Superior Pointe are based on historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation expense. Depreciation expense is based on the preliminary estimates of fair value for the tangible and intangible assets acquired and is therefore subject to change.
(EE) Financial results for Logan Tower are based on historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation expense. Depreciation expense is based on the preliminary estimates of fair value for the tangible and intangible assets acquired and is therefore subject to change.
(FF) During the year ended December 31, 2014, the Company acquired Plaza 25, Lake Vista Pointe and Florida Research Park. The impact of these acquisitions on revenue and expenses has been presented as if they occurred on January 1, 2014. Revenue and property expenses prior to the acquisition of the Plaza 25 property purchased on June 4, 2014, the Lake Vista Pointe property purchased on July 18, 2014, and the Florida Research Park property purchased on November 18, 2014, are based on the historical operations under the previous owners’ ownership. Pro Forma adjustments include estimated depreciation expense and interest expense.
(GG) Reflects a pro rata portion of the expense of stock-based compensation to be granted to the Advisor as part of the formation transactions for the periods presented. The expense will be amortized over the vesting period.
(HH) Reflects the estimated costs to operate the entity as a public company comprised of insurance, directors, public reporting and other miscellaneous costs.
(II) City Office will pay the advisor an advisory fee in accordance with the advisory agreement. The adjustment reflects the pro-forma impact as the IPO and related Formation Transactions are presented as if they occurred on January 1, 2014.
(JJ) Reflects the reduction of interest expense from the repayment of mortgage debt upon consummation of the IPO. Additionally, reflects the increase in interest expense for the periods presented on the $95 million and $23.5 million mortgage loans to be guaranteed by the OP as to certain “non-recourse covenants” and secured by a mortgage on the fee simple interest in the Cherry Creek Corporate Campus, City Center and Corporate Parkway properties and the AmberGlen properties. A secured revolving credit facility of $30 million authorized and available was obtained following the formation. Pro forma reflects the amortization of the associated financing costs on the mortgage loans and the secured revolving credit facility for the periods presented. Pro forma also reflects the increase in interest expense relating to presenting the acquisitions of Plaza 25, Lake Vista Pointe and Florida Research Park as if they occurred on January 1, 2014.
In connection with the prepayment of the mortgage loan secured by Cherry Creek Corporate Campus, City Centre, Corporate Parkway and Central Fairwinds, $1.1 million of deferred financing costs were written-off. Additionally prepayment costs of approximately $1.7 million were incurred.
(KK) Reflects reversal of gain on equity investment as the acquisition of the remaining 57.7% interest in Cherry Creek are presented as if it occurred on January 1, 2014.
(LL) Reflects reversal of net income attributable to the Predecessor as the IPO and related Formation Transactions are presented as if they occurred on January 1, 2014.