Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8-K/A - City Office REIT, Inc. | d829535d8ka.htm |
| EX-99.1 - EX-99.1 - City Office REIT, Inc. | d829535dex991.htm |
Exhibit 99.2
City Office REIT, Inc.
Pro Forma Consolidated Financial Statements
(Unaudited)
As previously announced, on November 18, 2014, City Office REIT, Inc. closed on the acquisition of a two-storey, 124,500 square foot office building in the University / Research Park submarket of Orlando, Florida (“Florida Research Park”). The contract purchase price for the two-storey building office property was $26.5 million, exclusive of closing costs. The acquisition was financed with a $17.0 million mortgage that has been fixed at a 4.44% interest rate for 10 years. The remainder of the acquisition was financed through cash on hand and borrowings from the Secured Credit Facility.
The accompanying unaudited Pro Forma Consolidated Balance Sheet is presented to reflect the historical consolidated balance sheet of the Company at September 30, 2014 (which includes the acquisition of Plaza 25 and Lake Vista Pointe properties), and the acquisition of the Florida Research Park property as if they had all been completed on September 30, 2014. Since the Company had no operations prior to completion of the IPO and related Formation Transactions on April 21, 2014, the accompanying unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2013 is presented to reflect the historical results of operations of the Company’s predecessor for the year ended December 31, 2013 and the IPO, the related Formation Transactions (derived from the unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2013, included in the Company’s Prospectus filing on Form 424B4 filed with the SEC on April 16, 2014), and the acquisitions of Plaza 25, Lake Vista Pointe and Florida Research Park properties as if they had all been completed on January 1, 2013. The accompanying unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 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 September 30, 2014 and are presented as if the IPO and related Formation Transactions, and the acquisitions of Plaza 25, Lake Vista Pointe and Florida Research Park properties were completed on January 1, 2013.
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, 2013. 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 September 30, 2014
(Unaudited)
| City Office | ||||||||||||||
| REIT, Inc. | Florida | Pro Forma | ||||||||||||
| Prior to | Research Park | Refelecting | ||||||||||||
| Acquisition | Acquisition | Acquisition | ||||||||||||
| Assets |
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| Real estate properties, net |
189,813,558 | 21,036,983 | (A) | 210,850,541 | ||||||||||
| Cash and cash equivalents |
8,855,196 | (1,113,608 | ) | (C) | 7,741,588 | |||||||||
| Restricted cash |
13,184,871 | 13,184,871 | ||||||||||||
| Rents receivable, net |
7,372,062 | 7,372,062 | ||||||||||||
| Deferred financing costs, net of accumulated amortization |
2,919,700 | 88,807 | (C) | 3,008,507 | ||||||||||
| Deferred leasing costs, net of accumulated amortization |
2,478,801 | 2,478,801 | ||||||||||||
| Acquired lease intangibles assets, net |
26,995,279 | 5,463,017 | (A) | 32,458,296 | ||||||||||
| Prepaid expenses and other assets |
546,298 | 63,412 | (B) | 609,710 | ||||||||||
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| Total Assets |
252,165,765 | 25,538,611 | 277,704,376 | |||||||||||
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| Liabilities and Equity |
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| Liabilities: |
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| Debt |
179,604,305 | 25,500,000 | (C) | 205,104,305 | ||||||||||
| Accounts payable and accrued liabilities |
4,201,127 | 38,611 | (B) | 4,239,738 | ||||||||||
| Deferred rent |
2,648,850 | 2,648,850 | ||||||||||||
| Tenant rent deposits |
1,842,820 | 1,842,820 | ||||||||||||
| Acquired lease intangibles liability, net |
649,234 | 649,234 | ||||||||||||
| Dividends payable |
2,689,532 | 2,689,532 | ||||||||||||
| Earn-out liability |
8,000,000 | 8,000,000 | ||||||||||||
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| Total Liabilities |
199,635,868 | 25,538,611 | 225,174,479 | |||||||||||
| Commitments and Contingencies |
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| Equity |
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| Stockholders’ Equity: |
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| Common stock, $0.01 par value, 100,000,000 shares authorized, 8,192,915 shares issued and outstanding |
81,929 | — | 81,929 | |||||||||||
| Additional paid in capital |
45,503,697 | — | 45,503,697 | |||||||||||
| Accumulated deficit |
(7,136,038 | ) | — | (7,136,038 | ) | |||||||||
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| Total Stockholders’ and Predecessor Equity |
38,449,588 | — | 38,449,588 | |||||||||||
| Operating Partnership noncontrolling interests |
14,816,720 | — | 14,816,720 | |||||||||||
| Noncontrolling interests in properties |
(736,411 | ) | — | (736,411 | ) | |||||||||
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| Total Equity |
52,529,897 | — | 52,529,897 | |||||||||||
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| Total Liabilities and Stockholder Equity |
252,165,765 | 25,538,611 | 277,704,376 | |||||||||||
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City Office REIT, Inc.
Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 2014
(Unaudited)
| City Office REIT, Inc. Prior to Acquisitions |
Florida Research Park Acquisition (Note 2) |
Third Quarter Acquisition - Lake Vista Pointe Acquisition (Note 3) |
Second Quarter Acquisition - Plaza 25 (Note 4) |
Other Pro Forma Adjustments (Note 5) |
Pro Forma Reflecting Acquisitions |
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| Revenue: |
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| Rental income |
$ | 23,987,891 | $ | 1,842,335 | $ | 855,463 | $ | 1,522,682 | $ | — | $ | 28,208,371 | ||||||||||||||||
| Expense reimbursement |
1,796,567 | 348,323 | 488,932 | 87,631 | — | 2,721,453 | ||||||||||||||||||||||
| Other |
589,631 | 681 | — | 3,551 | — | 593,863 | ||||||||||||||||||||||
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| Total Revenues |
26,374,089 | 2,191,339 | 1,344,395 | 1,613,864 | — | 31,523,687 | ||||||||||||||||||||||
| Operating Expenses: |
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| Property operating expenses |
7,304,371 | 75,509 | 277,417 | 558,365 | — | 8,215,662 | ||||||||||||||||||||||
| Insurance |
489,471 | 36,507 | 21,539 | 14,912 | — | 562,429 | ||||||||||||||||||||||
| Property taxes |
1,775,641 | 231,863 | 202,453 | 231,003 | — | 2,440,960 | ||||||||||||||||||||||
| Property management fees |
619,497 | — | 24,632 | 29,943 | — | 674,072 | ||||||||||||||||||||||
| Acquisition costs |
1,551,347 | 10,650 | — | — | — | 1,561,997 | ||||||||||||||||||||||
| Base management fee |
411,471 | — | — | — | 326,973 | (AA | ) | 738,444 | ||||||||||||||||||||
| Stock based compensation |
667,347 | — | — | 543,216 | (BB | ) | 1,210,563 | |||||||||||||||||||||
| General and administrative |
821,379 | — | — | — | 521,121 | (CC | ) | 1,342,500 | ||||||||||||||||||||
| Depreciation and amortization |
10,633,593 | 1,064,704 | 680,983 | 878,554 | — | 13,257,834 | ||||||||||||||||||||||
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| Total Operating Expenses |
24,274,117 | 1,419,233 | 1,207,024 | 1,712,777 | 1,391,310 | 30,004,461 | ||||||||||||||||||||||
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| Operating Income |
2,099,972 | 772,106 | 137,371 | (98,913 | ) | (1,391,310 | ) | 1,519,226 | ||||||||||||||||||||
| Interest Expense: |
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| Contractual interest expense |
(5,821,533 | ) | (750,975 | ) | (573,530 | ) | — | 740,995 | (DD | ) | (6,405,043 | ) | ||||||||||||||||
| Amortization of deferred financing costs |
(1,288,714 | ) | (6,626 | ) | — | — | 823,401 | (DD | ) | (471,939 | ) | |||||||||||||||||
| Loss on early extinguishment of Predecessor debt |
(1,654,828 | ) | — | — | — | 1,654,828 | (DD | ) | — | |||||||||||||||||||
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| (8,765,075 | ) | (757,601 | ) | (573,530 | ) | — | 3,219,224 | (6,876,982 | ) | |||||||||||||||||||
| Change in fair value of earn-out |
(1,047,515 | ) | — | — | — | — | (1,047,515 | ) | ||||||||||||||||||||
| Gain on equity investment |
4,474,644 | — | — | — | (4,474,644 | ) | (EE | ) | — | |||||||||||||||||||
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| Net (loss)/income |
(3,237,974 | ) | 14,505 | (436,159 | ) | (98,913 | ) | (2,646,730 | ) | (6,405,271 | ) | |||||||||||||||||
| Less: |
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| Net loss attributable to noncontrolling interests in properties |
(8,326 | ) | — | — | — | — | (8,326 | ) | ||||||||||||||||||||
| Net income attributable to Predecessor |
(1,973,197 | ) | — | — | — | 1,973,197 | (FF | ) | — | |||||||||||||||||||
| Net loss attributable to Operating Partnership unitholders’ noncontrolling interests |
1,508,097 | — | — | — | 314,247 | 1,822,344 | ||||||||||||||||||||||
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| Net (loss)/income attributable to stockholders |
(3,711,400 | ) | 14,505 | (436,159 | ) | (98,913 | ) | (359,286 | ) | (4,591,253 | ) | |||||||||||||||||
| Pro forma weighted average common shares outstanding - basic and diluted |
8,133,940 | |||||||||||||||||||||||||||
| Pro forma basic and diluted loss per share |
(0.56 | ) | ||||||||||||||||||||||||||
City Office REIT, Inc.
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2013
(Unaudited)
| Pro Forma | ||||||||||||||||||||
| City Office | Florida | Lake Vista | Pro | |||||||||||||||||
| REIT Inc. | Research Park | Pointe | Plaza 25 | Forma | ||||||||||||||||
| Prior to | Acquisition | Acquisition | Acquisition | Reflecting | ||||||||||||||||
| Acquisitions | (Note 2) | (Note 3) | (Note 4) | Acquisitions | ||||||||||||||||
| Revenue: |
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| Rental income |
29,598,376 | 2,456,447 | 1,178,787 | 3,000,086 | 36,233,696 | |||||||||||||||
| Expense reimbursement |
2,185,817 | 404,736 | 796,694 | 184,733 | 3,571,980 | |||||||||||||||
| Other |
785,162 | 2,497 | — | 4,841 | 792,500 | |||||||||||||||
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| Total Revenues |
32,569,355 | 2,863,680 | 1,975,481 | 3,189,660 | 40,598,176 | |||||||||||||||
| Operating Expenses: |
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| Property operating expenses |
8,873,869 | 73,805 | 520,172 | 1,136,854 | 10,604,700 | |||||||||||||||
| Insurance |
610,906 | 49,704 | 39,851 | 34,131 | 734,592 | |||||||||||||||
| Property taxes |
1,805,440 | 272,430 | 368,526 | 543,211 | 2,989,607 | |||||||||||||||
| Property acquisition costs |
1,479,292 | — | — | — | 1,479,292 | |||||||||||||||
| Base management fee |
951,365 | — | — | — | 951,365 | |||||||||||||||
| General and administrative |
1,477,000 | — | — | — | 1,477,000 | |||||||||||||||
| Property management fees |
665,325 | 15,225 | 79,696 | 63,914 | 824,160 | |||||||||||||||
| Stock based compensation |
1,467,792 | — | — | — | 1,467,792 | |||||||||||||||
| Depreciation and amortization |
13,065,765 | 1,424,473 | 1,248,073 | 2,124,311 | 17,862,622 | |||||||||||||||
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| Total Operating Expenses |
30,396,754 | 1,835,637 | 2,256,318 | 3,902,421 | 38,391,130 | |||||||||||||||
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| Operating Income |
2,172,601 | 1,028,043 | (280,837 | ) | (712,761 | ) | 2,207,046 | |||||||||||||
| Aborted transaction cost |
(1,983,195 | ) | — | — | — | (1,983,195 | ) | |||||||||||||
| Interest expense, net |
(7,197,139 | ) | (1,010,135 | ) | (975,688 | ) | — | (9,182,962 | ) | |||||||||||
| Equity in (loss) / income of unconsolidated entity |
— | — | — | — | ||||||||||||||||
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| Net (loss) / income |
(7,007,733 | ) | 17,908 | (1,256,525 | ) | (712,761 | ) | (8,959,111 | ) | |||||||||||
| Net income attributable to properties |
(190,624 | ) | — | — | — | (190,624 | ) | |||||||||||||
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| (7,198,357 | ) | 17,908 | (1,256,525 | ) | (712,761 | ) | (9,149,735 | ) | ||||||||||||
| Net loss attributable to Operating Partnership unitholders’ noncontrolling interests |
2,358,069 | — | — | — | 2,358,069 | |||||||||||||||
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| Net (loss) / income attributable to City Office REIT, Inc. |
(4,840,288 | ) | 17,908 | (1,256,525 | ) | (712,761 | ) | (6,791,666 | ) | |||||||||||
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| Pro forma weighted average common shares outstanding - basic and diluted |
8,133,940 | |||||||||||||||||||
| Pro forma basic earnings per share |
(0.83 | ) | ||||||||||||||||||
City Office REIT, Inc.
Notes and Management’s Assumption to Unaudited Pro Forma Consolidated
Financial Statements
Basis of Pro Forma Presentation
1. Notes to the Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2014
(A) The acquisition of the Florida Research Park was accounted for using preliminary estimates of the fair value of the tangible and intangible assets acquired and liabilities assumed in connection with the acquisition and are therefore subject to change.
(B) Reflects the working capital acquired and assumed through the Florida Research Park acquisition.
(C) Reflects the cash paid, mortgage loan, borrowings under the Secured Credit Facility and related deferred financing costs established upon the acquisition of Florida Research Park.
2. Notes to the Unaudited Pro Forma Consolidated Statements of Operations for the nine month period ended September 30, 2014 and the year ended December 31, 2013
Revenues and property expenses for the Florida Research Park 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 expenses related to the Company borrowings, under the mortgage loan, are at a fixed rate of 4.44%.
3. Third Quarter Acquisition – Lake Vista Pointe
During the third quarter of 2014, the Company acquired the Lake Vista Pointe property. Financial results for the year ended December 31, 2013 and other information relating to the Lake Vista Pointe acquisition was included in a previously filed form 8-K/A, filed on October 2, 2014. Financial results for the nine months ended September 30, 2014 and the year ended December 31, 2013, related to the Lake Vista Pointe property prior to its acquisition on July 18, 2014, represents the results of operations under the previous owners on a Pro Forma basis, with the exception of depreciation expense which has been based on the preliminary estimates of fair value for the tangible and intangible assets acquired. Financial results since the acquisition are included in the Company’s historical consolidated results of the operations for the nine months ended September 30, 2014.
4. Second Quarter Acquisition – Plaza 25
During the second quarter of 2014, the Company acquired the Plaza 25 property. Financial results for the year ended December 31, 2013 and other information relating to the Plaza 25 acquisition was included in a previously filed form 8-K/A, filed on August 8, 2014. Financial results for the nine months ended September 30, 2014 and the year ended December 31, 2013, related to the Plaza 25 property prior to its acquisition on June 4, 2014, represents the results of operations under the previous owners on a Pro Forma basis, with the exception of depreciation expense which has been based on the preliminary estimates of fair value for the tangible and intangible assets acquired. Financial results since the acquisition are included in the Company’s historical consolidated results of the operations for the nine months ended September 30, 2014.
5. Other Pro Forma Adjustments
(AA) 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.
(BB) 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.
(CC) Reflects the estimated costs to operate the entity as a public company comprised of insurance, directors, public reporting and other miscellaneous costs.
(DD) 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 Operating Partnership 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 with $26.4 million available immediately, was obtained following the formation. Pro forma also reflects the amortization of the associated financing costs on the mortgage loans and the secured revolving credit facility for the periods presented.
In connection with the prepayment of the mortgage loan secured by Cherry Creek Corporate Campus, City Center, 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.
(EE) Reflects reversal of gain on equity investment as the acquisition of the remaining 57.7% interest in Cherry Creek is presented as if it occurred on January 1, 2014.
(FF) 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.