CITY OFFICE REIT, INC.
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
June 30,
2022
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission File Number:
001-36409
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction
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(I.R.S. Employer
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of incorporation or organization)
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Identification No.)
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(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (
604
)
806-3366
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Trading Symbol(s)
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Name of each Exchange on Which Registered
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“
“
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒ ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
Yes
No ☐
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
| Large accelerated filer | ☐ |
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☒ | |||
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Non-accelerated
filer
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☐ | Smaller reporting company |
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| Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
☒
No
12b-2
of the Exchange Act). Yes ☐
The number of shares of Common Stock, $0.01 par value, of the registrant outstanding at August
41,572,870
2
, 2022 was
.
City Office REIT, Inc.
Quarterly Report on Form
10-Q
For the Quarter Ended June 30, 2022
Table of Contents
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1
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16
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26
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26
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27
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27
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27
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28
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28
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28
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29
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30
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
City Office REIT, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except par value and share data)
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June 30,
2022
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December 31,
2021 |
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Assets
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Real estate properties
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Land
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$ |
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$ |
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Building and improvement
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Tenant improvement
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Furniture, fixtures and equipment
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Accumulated depreciation
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Cash and cash equivalents
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Restricted cash
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Rents receivable, net
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Deferred leasing costs, net
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Acquired lease intangible assets, net
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Other assets
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Total Assets
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$ |
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$ |
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Liabilities and Equity
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Liabilities:
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Debt
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$ |
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$ |
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Accounts payable and accrued liabilities
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Deferred rent
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Tenant rent deposits
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Acquired lease intangible liabilities, net
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Other liabilities
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Total Liabilities
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Commitments and Contingencies (Note 9)
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Equity:
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Common stock, $
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Additional
paid-in
capital
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Retained earnings
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Accumulated other comprehensive income/(loss)
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(
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Total Stockholders’ Equity
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Non-controlling
interests in properties
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Total Equity
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Total Liabilities and Equity
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$ |
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$ |
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Subsequent Events (Note 11)
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
City Office REIT, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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2022
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2021
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2022
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2021
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Rental and other revenues
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$ |
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$ |
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$ |
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$ |
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Operating expenses:
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Property operating expenses
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General and administrative
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Depreciation and amortization
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Total operating expenses
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Operating income
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Interest expense:
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Contractual interest expense
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(
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(
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(
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(
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Amortization of deferred financing costs and debt fair value
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(
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(
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(
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(
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(
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(
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(
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(
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Net gain on sale of real estate property
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Net income
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Less:
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Net income attributable to
non-controlling
interests in properties
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(
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(
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(
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(
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Net income attributable to the Company
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Preferred stock distributions
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(
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(
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(
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(
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Net income/(loss) attributable to common stockholders
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$ |
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$ |
(
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$ |
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Net
income/(loss) per
common share:
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Basic
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$ |
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$ |
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$ |
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$ |
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Diluted
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$ |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding:
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Basic
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Diluted
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Dividend distributions declared per common share
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
City Office REIT, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(In thousands)
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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2022
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2021
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2022
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2021
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Net income
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income:
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Unrealized cash flow hedge gain/(loss)
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(
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Amounts reclassified to interest expense
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Other comprehensive income
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Comprehensive income
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Less:
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Comprehensive income attributable to
non-controlling
interests in properties
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(
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(
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(
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(
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Comprehensive income attributable to the Company
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
City Office REIT, Inc.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
(In thousands)
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Number
of shares of preferred stock |
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Preferred
stock
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Number
of
shares of
common stock |
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Common
stock
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Additional
paid-in
capital
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Retained
earnings |
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Accumulated
other
comprehensive (loss)/income |
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Total
stockholders’
equity
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Non-controlling
interests in
properties
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Total
equity
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Balance—December 31, 2021
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$ |
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$ |
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$ |
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$ |
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$ |
(
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) | $ |
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$ |
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$ |
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Restricted stock award grants and vesting
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— | — | — | — |
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(
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) | — |
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— |
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Common stock dividend distribution declared
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— | — | — | — | — |
(
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) | — |
(
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) | — |
(
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) | |||||||||||||||||||||||||||
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Preferred stock dividend distribution declared
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— | — | — | — | — |
(
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) | — |
(
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) | — |
(
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) | |||||||||||||||||||||||||||
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Contributions
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— | — | — | — | — | — | — | — |
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Distributions
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— | — | — | — | — | — | — | — |
(
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) |
(
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Net income
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— | — | — | — | — |
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— |
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Other comprehensive income
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— | — | — | — | — | — |
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— |
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Balance—March 31, 2022
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Restricted stock award grants and vesting
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— | — |
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(
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) | — |
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— |
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Common stock repurchased
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— | — |
(
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) |
(
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) |
(
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) | — | — |
(
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) | — |
(
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) | |||||||||||||||||||||||||
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Common stock dividend distribution declared
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— | — | — | — | — |
(
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) | — |
(
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) | — |
(
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) | |||||||||||||||||||||||||||
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Preferred stock dividend distribution declared
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— | — | — | — | — |
(
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) | — |
(
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) | — |
(
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) | |||||||||||||||||||||||||||
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Distributions
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— | — | — | — | — | — | — | — |
(
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) |
(
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) | ||||||||||||||||||||||||||||
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Net income
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— | — | — | — | — |
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— |
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Other comprehensive income
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— | — | — | — | — | — |
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— |
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Balance—June 30, 2022
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Number
of shares of preferred stock |
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Preferred
stock
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Number
of
shares of
common stock |
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Common
stock
|
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Additional
paid-in
capital
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Accumulated
deficit
|
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Accumulated
other
comprehensive loss |
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Total
stockholders’
equity
|
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Non-controlling
interests in
properties
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Total
equity
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||||||||||
|
Balance—December 31, 2020
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$ |
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$ |
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$ |
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$ |
(
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) | $ |
(
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) | $ |
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$ |
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$ |
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Restricted stock award grants and vesting
|
— | — | — | — |
|
(
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) | — |
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— |
|
|||||||||||||||||||||||||||||
|
Common stock dividend distribution declared
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— | — | — | — | — |
(
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) | — |
(
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) | — |
(
|
) | |||||||||||||||||||||||||||
|
Preferred stock dividend distribution declared
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— | — | — | — | — |
(
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) | — |
(
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) | — |
(
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) | |||||||||||||||||||||||||||
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Distributions
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— | — | — | — | — | — | — | — |
(
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) |
(
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) | ||||||||||||||||||||||||||||
|
Net income
|
— | — | — | — | — |
|
— |
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|
Other comprehensive income
|
— | — | — | — | — | — |
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— |
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Balance—March 31, 2021
|
|
$ |
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$ |
|
$ |
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$
|
(
|
) | $ |
(
|
) | $ |
|
$ |
|
$ |
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Restricted stock award grants and vesting
|
— | — |
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|
|
(
|
) | — |
|
— |
|
|||||||||||||||||||||||||||||
|
Common stock dividend distribution declared
|
— | — | — | — | — |
(
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) | — |
(
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) | — |
(
|
) | |||||||||||||||||||||||||||
|
Preferred stock dividend distribution declared
|
— | — | — | — | — |
(
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) | — |
(
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) | — |
(
|
) | |||||||||||||||||||||||||||
|
Contributions
|
— | — | — | — | — | — | — | — |
|
|
||||||||||||||||||||||||||||||
|
Distributions
|
— | — | — | — | — | — | — | — |
(
|
) |
(
|
) | ||||||||||||||||||||||||||||
|
Net income
|
— | — | — | — | — |
|
— |
|
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|
||||||||||||||||||||||||||||||
|
Other comprehensive income
|
— | — | — | — | — | — |
|
|
— |
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Balance—June 30, 2021
|
|
$ |
|
|
$ |
|
$ |
|
$
|
(
|
) | $ |
(
|
) | $ |
|
$ |
|
$ |
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
4
City Office REIT, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
Six Months Ended
June 30,
|
||||||||
|
2022
|
2021
|
|||||||
|
Cash Flows from Operating Activities:
|
||||||||
|
Net income
|
$ |
|
$ |
|
||||
|
Adjustments to reconcile net 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 gain on sale of real estate property
|
(
|
) |
(
|
) | ||||
|
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)/from Investing Activities:
|
||||||||
|
Additions to real estate properties
|
(
|
) |
(
|
) | ||||
|
Acquisition of real estate
|
|
(
|
) | |||||
|
Net proceeds from sale of real estate
|
|
|
||||||
|
Deferred leasing costs
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Net Cash (Used In)/Provided By Investing Activities
|
(
|
) |
|
|||||
|
|
|
|
|
|||||
|
Cash Flows to Financing Activities:
|
||||||||
|
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 Increase/(Decrease) 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
|
$ |
|
$ |
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements
5
City Office REIT, Inc.
Notes to the Condensed Consolidated Financial Statements
1. Organization and Description of Business
City Office REIT, Inc. (the “Company”) was organized in the state of Maryland on
November 26, 2013
. On
April 21, 2014
, the Company completed its initial public offering (“IPO”) of shares of the Company’s common stock. The Company contributed the net proceeds of the IPO to City Office REIT Operating Partnership, L.P., a Maryland limited partnership (the “Operating Partnership”), in exchange for common units of limited partnership interest in the Operating Partnership (“common units”).
The Company’s interest in the Operating Partnership entitles the Company to share in distributions from, and allocations of profits and losses of, the Operating Partnership in proportion to the Company’s percentage ownership of common units. As the sole general partner of the Operating Partnership, the Company has the exclusive power under the Operating Partnership’s
partnership agreement
to manage and conduct the Operating Partnership’s business, subject to limited approval and voting rights of the limited partners.
The Company has elected to be taxed and will continue to operate in a manner that will allow it to continue to qualify as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). Subject to qualification as a REIT, the Company will be permitted to deduct dividend distributions paid to its stockholders, eliminating the U.S. federal taxation of income represented by such distributions at the Company level. REITs are subject to a number of organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal and state income tax on its taxable income at regular corporate tax rates and, for tax years beginning before 2018, any applicable alternative minimum tax.
2. Summary of Significant Accounting Policies
Basis of Preparation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with Securities and Exchange Commission (“SEC”) rules and regulations and generally accepted accounting principles in the United States of America (“US GAAP”) and in the opinion of management contain all adjustments (including normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form
10-K
for the year ended December 31, 2021.
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (the “FASB”) established Topic 848, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, by issuing Accounting Standards Update (“ASU”)
ASU
No. 2020-04
(“ASU
2020-04”).
ASU
2020-04
provides companies with optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. For contracts affected by reference rate reform, if certain criteria are met, companies can elect to not remeasure contracts at the modification date or reassess a previous accounting conclusion. Companies can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met. Further, in January 2021, the FASB issued ASU
No. 2021-01,
Reference Rate Reform (Topic 848) (“ASU
2021-01”).
ASU
2021-01
clarifies the scope of Topic 848 so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848.
2020-04
and ASU
2021-01
can be applied as of the beginning of the interim period that includes March 12, 2020, however, the guidance will only be available for optional use through December 31, 2022. The new standard applies prospectively to contract modifications and hedging relationships and may be elected over time as reference rate reform activities occur. The Company has not yet adopted the standard and continues to evaluate the impact of ASU
2020-04
and ASU
2021-01
on its consolidated financial statements and may elect optional expedients in future periods as reference rate reform activities occur.
6
In July 2021, the FASB issued ASU
No. 2021-05
(“ASU
2021-05”),
Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. ASU
2021-05
requires lessors to classify a lease with variable lease payments that do not depend on an index or rate as an operating lease if the lease would have been classified as a sales-type lease or a direct financing lease under the
pre-ASU
classification criteria, and sales-type or direct financing classification would result in a Day 1 loss. The ASU is effective for fiscal years beginning after December 15, 2021. The ASU may be early adopted and can be applied either retrospectively to leases that commenced or were modified on or after the adoption of ASU
No. 2016-02
or prospectively to leases that commence or are modified on or after the date that an entity first applies the amendments. The Company adopted ASU
2021-05
prospectively on January 1, 2022. The adoption of ASU
2021-05
did not have a material impact on the Company’s consolidated financial statements.
3. Real Estate Investments
Acquisitions
During the six months ended June 30, 2022 and 2021 the Company acquired the following properties:
|
Property
|
|
Date Acquired
|
|
|
Percentage Owned
|
|
||
|
5910 Pacific Center and 9985 Pacific Heights
|
|
|
% | |||||
The foregoing acquisition was accounted for as an asset acquisition.
The following table summarizes the Company’s allocation of the purchase price of assets acquired and liabilities assumed during the six months ended June 30, 2021 (in thousands):
|
|
|
5910 Pacific
Center and 9985 Pacific Heights |
|
|
|
Land
|
$ |
|
||
|
Building and improvement
|
|
|||
|
Tenant improvement
|
|
|||
|
Lease intangible assets
|
|
|||
|
Other assets
|
|
|||
|
Accounts payable and other liabilities
|
(
|
) | ||
|
Lease intangible liabilities
|
(
|
) | ||
|
|
|
|||
|
Net assets acquired
|
$ |
|
||
|
|
|
|||
Sale of Real Estate Property
During the first quarter of 2022, the sole tenant at the Lake Vista Pointe property exercised its lease option to purchase the building and the Company signed a purchase and sale agreement with the tenant. At the time the tenant exercised the option, the Company reassessed the lease classification of the lease, in accordance with ASC 842 – Leases, and determined that the lease should be reclassified from an operating lease to a sales-type lease. This reclassification resulted in a gain on sale of
million net of disposal related costs. On June 15, 2022, the Company sold the Lake Vista Pointe property in Dallas, Texas for a gross sales price of
million.
On February 10
operations.
7
4. Lease Intangibles
Lease intangibles and the value of assumed lease obligations as of June 30, 2022 and December 31, 2021 were comprised of the following (in thousands):
|
|
|
Lease Intangible Assets
|
|
|
Lease Intangible Liabilities
|
|
||||||||||||||||||||||
|
June 30, 2022
|
|
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, 2021
|
|
Above
Market
Leases
|
|
|
In Place
Leases
|
|
|
Leasing
Commissions
|
|
|
Total
|
|
|
Below
Market
Leases
|
|
|
Below
Market
Ground
Lease |
|
|
Total
|
|
|||||||
|
Cost
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
(
|
) | |||||||||||
|
Accumulated amortization
|
(
|
) |
(
|
) |
(
|
) |
(
|
) |
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
(
|
) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
The estimated aggregate amortization expense for lease intangibles for the next five years and in the aggregate are as follows (in thousands):
|
2022
|
$ |
|
||
|
2023
|
|
|||
|
2024
|
|
|||
|
2025
|
|
|||
|
2026
|
|
|||
|
Thereafter
|
|
|||
|
|
|
|||
| $ |
|
|||
|
|
|
5. Debt
The following table summarizes the indebtedness as of June 30, 2022 and December 31, 2021 (dollars in thousands):
|
Property
|
|
June 30,
2022
|
|
|
December 31,
2021
|
|
|
Interest Rate as
of June 30,
2022
(1)
|
|
|
Maturity
|
|||
|
Unsecured Credit Facility
(3)(4)
|
$ |
|
$ |
|
|
%
(2)
|
|
|||||||
|
Term Loan
(3)
|
|
|
|
%
(2)
|
|
|||||||||
|
Mission City
|
|
|
|
% |
|
|||||||||
|
Canyon Park
(5)
|
|
|
|
% |
|
|||||||||
|
Circle Point
|
|
|
|
% |
|
|||||||||
|
190 Office Center
|
|
|
|
% |
|
|||||||||
|
SanTan
|
|
|
|
% |
|
|||||||||
|
Intellicenter
|
|
|
|
% |
|
|||||||||
|
The Quad
|
|
|
|
% |
|
|||||||||
|
FRP Collection
|
|
|
|
% |
|
|||||||||
|
2525 McKinnon
|
|
|
|
% |
|
|||||||||
|
Greenwood Blvd
|
|
|
|
% |
|
|||||||||
|
Cascade Station
|
|
|
|
% |
|
|||||||||
|
5090 N. 40
th
|
|
|
|
% |
|
|||||||||
|
AmberGlen
|
|
|
|
% |
|
|||||||||
8
|
Property
|
|
June 30,
2022
|
|
|
December 31,
2021
|
|
|
Interest Rate as
of June 30,
2022
(1)
|
|
|
Maturity
|
|||
|
Central Fairwinds
|
|
|
|
% |
|
|||||||||
|
FRP Ingenuity Drive
|
|
|
|
% |
|
|||||||||
|
Carillon Point
|
|
|
|
% |
|
|||||||||
|
Lake Vista Pointe
(6)
|
|
|
— | — | ||||||||||
|
|
|
|
|
|||||||||||
|
Total Principal
|
|
|
||||||||||||
|
Deferred financing costs, net
|
(
|
) |
(
|
) | ||||||||||
|
Unamortized fair value adjustments
|
|
|
||||||||||||
|
|
|
|
|
|||||||||||
|
Total
|
$ |
|
$ |
|
||||||||||
|
|
|
|
|
|||||||||||
| (1) |
All interest rates are fixed interest rates with the exception of the Unsecured Credit Facility (the “Unsecured Credit Facility”) and the Term Loan (as defined herein), as explained in footnotes 3 and 4 below.
|
| (2) |
As of June 30, 2022, the
one-month
LIBOR rate was
|
| (3) |
In September 2019, the Company entered into a five-year $
30-day
LIBOR payments.
|
| (4) |
In March 2018, the Company entered into the
Credit Agreement
for the Unsecured Credit Facility that provides for commitments of up to $
June 30
, 2022, the Unsecured Credit Facility had $
|
| (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
basis points or (ii) the yield on the five year “on the run” treasury reported by Bloomberg market data service plus
basis points.
|
| (6) |
In June 2022, the loan balance of $
|
|
|
The scheduled principal repayments of debt as of June 30, 2022 are as follows (in thousands):
|
2022
|
$ |
|
||
|
2023
|
|
|||
|
2024
|
|
|||
|
2025
|
|
|||
|
2026
|
|
|||
|
Thereafter
|
|
|||
|
|
|
|||
| $ |
|
|||
|
|
|
6. Fair Value of Financial Instruments
Fair value measurements are based on assumptions that market participants would use in pricing an asset or a liability. The hierarchy for inputs used in measuring fair value is as follows:
Level 1 Inputs – quoted prices in active markets for identical assets or liabilities
Level 2 Inputs – observable inputs other than quoted prices in active markets for identical assets and liabilities
Level 3 Inputs – unobservable inputs
In September 2019
30-day
LIBOR payments. Accordingly, the fair value of the Interest Rate Swap has been classified as a Level 2 fair value
measurement.
9
The Interest
As of June 30, 2022, the Interest Rate Swap was reported as a
1.9
million, which is included in other assets on the Company’s condensed consolidated balance sheet. For the six months ended June 30, 2022, approximately $
0.2
million of realized losses were reclassified to interest expense due to payments made to the swap counterparty. For the six months ended June 30, 2021, approximately $
0.3
million of realized losses were reclassified to interest expense due to payments made to the swap counterparty.
n
asset at its fair value of approximately $
As of December 31, 2021, the Interest Rate Swap was reported as a liability at its fair value of approximately $
0.4
million, which is included in other liabilities on the Company’s condensed consolidated balance sheet.
Cash, Cash Equivalents, Restricted Cash, Rents Receivable, Accounts Payable and Accrued Liabilities
The Company estimates that the fair value approximates carrying value due to the relatively short-term nature of these instruments.
Fair Value of Financial Instruments Not Carried at Fair Value
With the exception of fixed rate mortgage loans payable, the carrying amounts of the Company’s financial instruments approximate their fair value. The Company determines the fair value of its fixed rate mortgage loan payable based on a discounted cash flow analysis using a discount rate that approximates the current borrowing rates for instruments of similar maturities. Based on this, the Company has determined that the fair value of these instruments was $
436.7
million and $
478.1
million (compared to a carrying value of $
446.6
million and $
466.5
million) as of June 30, 2022, and December 31, 2021, respectively. Accordingly, the fair value of mortgage loans payable have been classified as Level 3 fair value measurements.
7. Related Party Transactions
Administrative Services Agreement
For the six months ended June 30, 2022 and 2021, the Company earned $
0.3
million and $
0.3
million, respectively, in administrative services performed for Second City Real Estate II Corporation (“Second City”), Clarity Real Estate Ventures GP, Limited Partnership (“Clarity”) and their affiliates.
8. Leases
Lessor Accounting
The Company is focused on acquiring, owning and operating high-quality office properties for lease to a stable and diverse tenant base. Our properties have both full-service gross and net leases which are generally classified as operating leases. Rental income related to such leases is recognized on a straight-line basis over the remaining lease term. The Company’s total revenue includes fixed base rental payments provided under the lease and variable payments which principally consist of tenant expense reimbursements for certain property operating expenses.
The Company recognized fixed and variable lease payments for operating leases for the three and six months ended June 30, 2022 and the three and six months ended June 30, 2021 as follows (in thousands):
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
||||||||||
|
|
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
|
||||
|
Fixed payments
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
Variable payments
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ |
|
$ |
|
$ |
|
$ |
|
|||||||||
|
|
|
|
|
|
|
|
|
|||||||||
10
The Company recognized interest income of
million and variable lease payments of $
0.2
million for the sales-type lease at the Lake Vista Pointe property for the three a
n
d six months ended June 30, 2022.
Future minimum lease payments to be received by the Company as of June 30, 2022 under
non-cancellable
operating leases for the next five years and thereafter are as follows (in thousands):
|
2022
|
$ |
|
||
|
2023
|
|
|||
|
2024
|
|
|||
|
2025
|
|
|||
|
2026
|
|
|||
|
Thereafter
|
|
|||
|
|
|
|||
| $ |
|
|||
|
|
|
The Company’s leases may include various provisions such as scheduled rent increases, renewal options and termination options. The majority of the Company’s leases include defined rent increase rather than variable payments based on an index or unknown rate.
Lessee Accounting
As a lessee, the Company has ground and office leases which are classified as operating and financing leases. As of June 30, 2022, these leases had remaining terms of under
one year
to
66
years and a weighted average remaining lease term of
50
years.
Right-of-use assets and lease liabilities have been included within other assets and other liabilities on the Company’s condensed consolidated balance sheet as follows (in thousands):
|
|
|
June 30, 2022
|
|
|
December 31, 2021
|
|
||
|
Right-of-use
|
$ |
|
$ |
|
||||
|
Lease liability – operating leases
|
$ |
|
$ |
|
||||
|
Right-of-use
|
$ |
|
$ |
|
||||
|
Lease liability – financing leases
|
$ |
|
$ |
|
||||
Lease liabilities are measured at the commencement date based on the present value of future lease payments. One of the Company’s operating ground leases includes rental payment increases over the lease term based on increases in the Consumer Price Index (“CPI”). Changes in the CPI were not estimated as part of the measurement of the operating lease liability. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The Company used a weighted average discount rate of
6.2
% in determining its lease liabilities. The discount rates were derived from the Company’s assessment of the credit quality of the Company and adjusted to reflect secured borrowing, estimated yield curves and long-term spread adjustments.
Right-of-use
11
Operating lease
Future minimum lease payments to be paid by the Company as a lessee for operating and financing leases as of June 30, 2022 for the next five years and thereafter are as follows (in thousands):
|
|
|
Operating
Leases |
|
|
Financing
Leases
|
|
||
|
2022
|
$ |
|
$ |
|
||||
|
2023
|
|
|
||||||
|
2024
|
|
|
||||||
|
2025
|
|
|
||||||
|
2026
|
|
|
||||||
|
Thereafter
|
|
|
||||||
|
|
|
|
|
|||||
|
Total future minimum lease payments
|
|
|
||||||
|
Discount
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Total
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
9. Commitments and Contingencies
The Company is obligated under certain tenant leases to fund tenant improvements and the expansion of the underlying leased properties.
Under various federal, state and local laws, ordinances and regulations relating to the protection of the environment, a current or previous owner or operator of real estate may be liable for the cost of removal or remediation of certain hazardous or toxic substances disposed, stored, generated, released, manufactured or discharged from, on, at, under, or in a property. As such, the Company may be potentially liable for costs associated with any potential environmental remediation at any of its formerly or currently owned properties.
The Company believes that it is in compliance in all material respects with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. Management is not aware of any environmental liability that it believes would have a material adverse impact on the Company’s financial position or results of operations. Management is unaware of any instances in which the Company would incur significant environmental costs if any or all properties were sold, disposed of or abandoned. However, there can be no assurance that any such
non-compliance,
liability, claim or expenditure will not arise in the future.
The Company is involved from time to time in lawsuits and other disputes which arise in the ordinary course of business. As of June 30, 2022, management believes that these matters will not have a material adverse effect, individually or in the aggregate, on the Company’s financial position or results of operations.
10. Stockholders’ Equity
Share Repurchase Plan
On March 9, 2020, the Company’s Board of Directors approved a share repurchase plan authorizing the Company to repurchase up to $
100
million of its outstanding shares of common stock. In July 2020, the Company completed the full March 2020 share repurchase plan. On August 5, 2020, the Company’s Board of Directors approved an additional share repurchase plan authorizing the Company to repurchase up to an additional aggregate amount of $
50
million of its outstanding shares of common stock. Under the share repurchase programs, the shares may be repurchased from time to time using a variety of methods, which may include open market transactions, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal
requirements.
12
Repurchased
paid-in
capital by the amount that the purchase price for the shares of common stock repurchased exceed the par value.
During the six months ended June 30, 2022, the Company completed the repurchase of
394,833
shares of its common stock for approximately $
5.0
million. There were
no
shares repurchased during the six months ended June 30, 2021.
Common Stock and Common Unit Distributions
On
June 16, 2022
, the Company’s Board of Directors approved and the Company declared a cash dividend distribution of $
0.20
per common share for the quarterly period ended June 30, 2022. The dividend was paid subsequent to quarter end on
July 22, 2022
to common stockholders and common unitholders of record as of the close of business on
July 8, 2022
, resulting in an aggregate payment of $
8.6
million.
Preferred Stock Distributions
On
June 16, 2022
, the Company’s Board of Directors approved and the Company declared a cash dividend distribution of $
0.4140625
per share of the Company’s
6.625
% Series A Preferred Stock (“Series A Preferred Stock”) for an aggregate amount of $
1.9
million for the quarterly period ended June 30, 2022. The dividend was paid subsequent to quarter end on
July 22, 2022
to the holders of record of Series A Preferred Stock as of the close of business on
July 8, 2022
.
Equity Incentive Plan
The Company has an
equity incentive plan
(“Equity Incentive Plan”) for executive officers, directors and certain
2,263,580
shares to
3,763,580
shares. To the extent an award granted under the Equity Incentive Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards.
non-executive
employees, and with approval of the Board of Directors, for subsidiaries and their respective affiliates. The Equity Incentive Plan provides for grants of restricted common stock, restricted stock units, phantom shares, stock options, dividend equivalent rights and other equity-based awards (including LTIP Units), subject to the total number of shares available for issuance under the plan. The Equity Incentive Plan is administered by the compensation committee of the Board of Directors (the “Plan Administrator”). On May 4, 2022, the Company’s stockholders approved an amendment to the Equity Incentive Plan increasing the maximum number of shares of common stock that may be issued under the Equity Incentive Plan from
On January
13
The following table summarizes the activity of the awards under the Equity Incentive Plan for the three and six months ended June 30, 2022:
|
|
|
Number
of RSUs |
|
|
Number of
Performance RSUs |
|
||
|
Outstanding at December 31, 2021
|
|
|
||||||
|
Granted
|
|
|
||||||
|
Issuance of dividend equivalents
|
|
|
||||||
|
Vested
|
|
|
||||||
|
Forfeited
|
|
|
||||||
|
|
|
|
|
|||||
|
Outstanding at March 31, 2022
|
|
|
||||||
|
Granted
|
|
|
||||||
|
Issuance of dividend equivalents
|
|
|
||||||
|
Vested
|
(
|
) |
|
|||||
|
Forfeited
|
|
|
||||||
|
|
|
|
|
|||||
|
Outstanding at June 30, 2022
|
|
|
||||||
The following table summarizes the activity of the awards under the Equity Incentive Plan for the three and six months ended June 30, 2021:
|
|
|
Number
of RSUs |
|
|
Number of
Performance RSUs |
|
||
|
Outstanding at December 31, 2020
|
|
|
||||||
|
Granted
|
|
|
||||||
|
Issuance of dividend equivalents
|
|
|
||||||
|
Vested
|
|
|
||||||
|
Forfeited
|
|
|
||||||
|
|
|
|
|
|||||
|
Outstanding at March 31, 2021
|
|
|
||||||
|
Granted
|
|
|
||||||
|
Issuance of dividend equivalents
|
|
|
||||||
|
Vested
|
(
|
) |
|
|||||
|
Forfeited
|
|
|
||||||
|
|
|
|
|
|||||
|
Outstanding at June 30, 2021
|
|
|
||||||
During the six months ended June 30, 2022 and June 30, 2021, the Company granted the following restricted stock units (“RSUs”) and Performance RSU Awards to directors, executive officers and certain
non-executive
employees:
|
|
|
Units Granted
|
|
|
Fair Value
(in thousands) |
|
|
Weighted Average
Grant Fair Value Per Share |
|
|||||||
|
|
|
RSUs
|
|
|
Performance
RSUs |
|
||||||||||
|
2021
|
|
|
$ |
|
$ |
|
||||||||||
|
2022
|
|
|
|
|
||||||||||||
14
The
During the three months ended June 30, 2022 and June 30, 2021, the Company recognized net compensation expense for the RSUs and Performance RSU Awards as follows (in thousands):
|
|
|
RSUs
|
|
|
Performance
RSUs |
|
|
Total
|
|
|||
|
2021
|
$ |
|
$ |
|
$ |
|
||||||
|
2022
|
|
|
|
|||||||||
During the six months ended June 30, 2022 and June 30, 2021, the Company recognized net compensation expense for the RSUs and Performance RSU Awards as follows (in thousands):
|
|
|
RSUs
|
|
|
Performance
RSUs |
|
|
Total
|
|
|||
|
2021
|
$ |
|
$ |
|
$ |
|
||||||
|
2022
|
|
|
|
|||||||||
11. Subsequent Events
Subsequent to quarter end through August 2, 2022, the Com
p
any completed the
repurchase of an additional
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is based on, and should be read in conjunction with, the condensed consolidated financial statements and the related notes thereto of the City Office REIT, Inc. contained in this Quarterly Report on Form
10-Q
(this “Report”).
As used in this section, unless the context otherwise requires, references to “we,” “our,” “us,” and “our company” refer to City Office REIT, Inc., a Maryland corporation, together with our consolidated subsidiaries, including City Office REIT Operating Partnership L.P., a Maryland limited partnership, of which we are the sole general partner and which we refer to in this section as our Operating Partnership, except where it is clear from the context that the term only means City Office REIT, Inc.
Cautionary Statement Regarding Forward-Looking Statements
This Report, including “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains both historical and forward-looking statements. All statements, other than statements of historical fact are, or may be deemed to be, forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have used the words “approximately,” “anticipate,” “assume,” “believe,” “budget,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and similar terms and phrases to identify forward-looking statements in this Report. All of our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we are expecting, including:
| • |
adverse economic or real estate developments in the office sector or the markets in which we operate;
|
| • |
changes in local, regional, national and international economic conditions, including as a result of the ongoing coronavirus disease
(“COVID-19”)
pandemic;
|
| • |
requests from tenants for rent deferrals, rent abatement or relief from other contractual obligations, or a failure to pay rent, as a result of changes in business behavior stemming from the ongoing
COVID-19
pandemic or the availability of government assistance programs;
|
| • |
our inability to compete effectively;
|
| • |
our inability to collect rent from tenants or renew tenants’ leases on attractive terms if at all;
|
| • |
demand for and market acceptance of our properties for rental purposes, 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;
|
| • |
defaults on or
non-renewal
of leases by tenants, including as a result of the ongoing
COVID-19
pandemic;
|
| • |
increased interest rates, any resulting increase in financing or operating costs and the impact of inflation;
|
| • |
decreased rental rates or increased vacancy rates, including as a result of the ongoing
COVID-19
pandemic;
|
| • |
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;
|
16
| • |
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 REIT for U.S. federal income tax purposes;
|
| • |
government approvals, actions and initiatives, including the need for compliance with environmental requirements, vaccine mandates or actions in response to the
COVID-19
pandemic;
|
| • |
outcome of claims and litigation involving or affecting us;
|
| • |
financial market fluctuations;
|
| • |
changes in real estate, taxation and zoning laws and other legislation and government activity and changes to real property tax rates and the taxation of REITs in general; and
|
| • |
other factors described in our news releases and filings with the SEC, including but not limited to those described in our Annual Report on Form
10-K
for the year ended December 31, 2021 under the sections captioned “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” and in our subsequent reports filed with the SEC.
|
The forward-looking statements contained in this Report are based on historical performance and management’s current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to the factors, risks and uncertainties described above, changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors described in our news releases and filings with the SEC, including but not limited to those described in our Annual Report on Form
10-K
for the year ended December 31, 2021 under the heading “Risk Factors” and in our subsequent reports filed with the SEC, many of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this Report speaks only as of the date of this Report. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.
Overview
Company
We were formed as a Maryland corporation on November 26, 2013. On April 21, 2014, we completed our IPO of shares of common stock. We contributed the net proceeds of the IPO to our Operating Partnership in exchange for common units in our Operating Partnership. Both we and our Operating Partnership commenced operations upon completion of the IPO and certain related formation transactions.
Revenue Base
As of June 30, 2022, we owned 25 properties comprised of 60 office buildings with a total of approximately 6.0 million square feet of net rentable area (“NRA”). As of June 30, 2022, our properties were approximately 86.9% leased.
17
Office Leases
Historically, most leases for our properties have been on a full-service gross or net lease basis, and we expect to continue to use such leases in the future. A full-service gross lease generally has a base year expense “stop”, whereby we pay a stated amount of expenses as part of the rent payment while future increases (above the base year stop) in property operating expenses are billed to the tenant based on such tenant’s proportionate square footage in the property. The property operating expenses are reflected in operating expenses; however, only the increased property operating expenses above the base year stop recovered from tenants are reflected as tenant recoveries in our statements of operations. In a triple net lease, the tenant is typically responsible for all property taxes and operating expenses. As such, the base rent payment does not include any operating expenses, but rather all such expenses are billed to or paid by the tenant. The full amount of the expenses for this lease type is reflected in operating expenses, and the reimbursement is reflected in tenant recoveries. All tenants in Canyon Park, Superior Pointe, The Terraces and 2525 McKinnon properties have triple net leases. Certain tenants at AmberGlen, Block 23, Bloc 83, Florida Research Park, Circle Point, The Quad, Cascade Station and Denver Tech have leases on a triple net basis. We are also a lessor for a fee simple ground lease at the AmberGlen property. All of our remaining leases are predominately full-service gross leases.
Factors That May Influence Our Operating Results and Financial Condition
COVID-19
During the first quarter of 2020, the World Health Organization declared the
COVID-19
outbreak a pandemic. There have been mandates from international, federal, state and local authorities requiring forced closures of businesses and other facilities, and most of the markets in which our buildings are located have been or are subject to some form of pandemic-related restrictions. These forced closures and restrictions have had a volatile adverse effect on the global economy and the regional U.S. economies in which we operate, including negatively impacting some of our tenants’ ability to pay their rent.
All of our buildings are open and continue to operate. We have adopted new policies and procedures to incorporate best practices for the safety of our tenants, our vendors and our employees. However, the usage of our assets in the second quarter 2022 was significantly lower than
pre-pandemic
usage. Usage of our assets in the near future depends on the duration of the pandemic, the continued implementation and effectiveness of
COVID-19
vaccines and other therapeutics and corporate and individual decisions regarding return to usage of office space, which is impossible to estimate.
We continue to closely monitor the impact of the
COVID-19
pandemic on all aspects of our business and geographies. While we did not experience any significant disruptions during the three months ended June 30, 2022, as a result of
COVID-19
or governmental or tenant actions in response thereto, the long-term impact of the pandemic on our tenants and the world-wide economy is uncertain and impossible to estimate, and will depend on the scope, severity and duration of the pandemic.
Leasing activity has been impacted by the
COVID-19
pandemic. We have experienced and we expect that we will continue to experience slower new leasing and there remains uncertainty over existing tenants’ long-term space requirements. Overall, this could reduce our anticipated rental revenues. In addition, certain tenants in our markets have and may explore opportunities to sublease all or a portion of their leased square footage to other tenants or third parties. While subleasing generally does not impact the ability to collect payment from the original lessee and will not result in any decrease in the rental revenues expected to be received from the primary tenant, this trend could reduce our ability to lease incremental square footage to new tenants, could increase the square footage of our properties that “goes dark,” could reduce anticipated rental revenue should tenants determine their long-term needs for square footage are lower than originally anticipated and could impact the pricing and competitiveness for leasing office space in our markets.
18
We believe economic conditions, leasing activity and acquisition prospects have improved substantially since the initial onset of the
COVID-19
pandemic and we will continue to actively evaluate business operations and strategies to optimally position ourselves.
Business and Strategy
We focus on owning and acquiring office properties in our footprint of growth markets predominantly in the Sun Belt. Our markets generally possess growing populations with above-average employment growth forecasts, a large number of government offices, large international, national and regional employers across diversified industries, generally
low-cost
centers for business operations and a high quality of life. We believe these characteristics have made our markets desirable, as evidenced by domestic net migration generally towards our geographic footprint. We utilize our management’s market-specific knowledge and relationships as well as the expertise of local real estate property and leasing managers to identify acquisition opportunities that we believe will offer cash flow stability and long-term value appreciation.
Rental Revenue and Tenant Recoveries
The amount of net rental revenue generated by our properties will depend principally on our ability to maintain the occupancy rates of currently leased space and to lease currently available space and space that becomes available from lease terminations. The amount of rental revenue generated also depends on our ability to maintain or increase rental rates at our properties. We believe that the average rental rates for our portfolio of properties are generally
in-line
or slightly below the current average quoted market rates. Negative trends in one or more of these factors could adversely affect our rental revenue in future periods. Future economic downturns or regional downturns affecting our markets or submarkets or downturns in our tenants’ industries, including as a result of the
COVID-19
pandemic, that impair our ability to renew or
re-let
space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our properties. In addition, growth in rental revenue will also partially depend on our ability to acquire additional properties that meet our investment criteria.
19
Our Properties
As of June 30, 2022, we owned 25 properties comprised of 60 office buildings with a total of approximately 6.0 million square feet of NRA in the metropolitan areas of Dallas, Denver, Orlando, Phoenix, Portland, Raleigh, San Diego, Seattle and Tampa. The following table presents an overview of our portfolio as of June 30, 2022.
|
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
|
Block 23 | 100.0 | % | 307 | 94.0 | % | $ | 29.63 | $ | 31.88 | $ | 8,552 | ||||||||||||||
| Pima Center | 100.0 | % | 272 | 63.9 | % | $ | 28.63 | $ | 28.63 | $ | 4,976 | |||||||||||||||
| SanTan | 100.0 | % | 267 | 96.5 | % | $ | 30.10 | $ | 30.10 | $ | 7,746 | |||||||||||||||
|
5090 N. 40
th
St
|
100.0 | % | 176 | 95.4 | % | $ | 31.88 | $ | 31.88 | $ | 5,335 | |||||||||||||||
| Camelback Square | 100.0 | % | 172 | 69.9 | % | $ | 33.56 | $ | 33.56 | $ | 4,026 | |||||||||||||||
| The Quad | 100.0 | % | 163 | 100.0 | % | $ | 31.15 | $ | 31.46 | $ | 5,078 | |||||||||||||||
| Papago Tech | 100.0 | % | 163 | 86.1 | % | $ | 23.39 | $ | 23.39 | $ | 3,277 | |||||||||||||||
|
Tampa, FL
|
Park Tower | 94.8 | % | 478 | 86.4 | % | $ | 27.27 | $ | 27.27 | $ | 11,253 | ||||||||||||||
| City Center | 95.0 | % | 245 | 85.0 | % | $ | 27.84 | $ | 27.84 | $ | 5,791 | |||||||||||||||
| Intellicenter | 100.0 | % | 204 | 100.0 | % | $ | 25.64 | $ | 25.64 | $ | 5,219 | |||||||||||||||
| Carillon Point | 100.0 | % | 124 | 100.0 | % | $ | 29.52 | $ | 29.52 | $ | 3,666 | |||||||||||||||
|
Denver, CO
|
Denver Tech | 100.0 | % | 381 | 93.2 | % | $ | 23.98 | $ | 28.08 | $ | 8,425 | ||||||||||||||
| Circle Point | 100.0 | % | 272 | 75.4 | % | $ | 19.42 | $ | 33.28 | $ | 3,984 | |||||||||||||||
| Superior Pointe | 100.0 | % | 152 | 91.3 | % | $ | 18.77 | $ | 31.77 | $ | 2,609 | |||||||||||||||
|
Orlando, FL
|
Florida Research Park | 96.5 | % | 393 | 80.7 | % | $ | 25.37 | $ | 27.34 | $ | 7,973 | ||||||||||||||
| Central Fairwinds | 97.0 | % | 168 | 94.6 | % | $ | 27.26 | $ | 27.26 | $ | 4,337 | |||||||||||||||
| Greenwood Blvd | 100.0 | % | 155 | 100.0 | % | $ | 24.25 | $ | 24.25 | $ | 3,760 | |||||||||||||||
|
Dallas, TX
|
190 Office Center | 100.0 | % | 303 | 75.5 | % | $ | 27.11 | $ | 27.11 | $ | 6,210 | ||||||||||||||
| The Terraces | 100.0 | % | 173 | 95.9 | % | $ | 37.99 | $ | 57.99 | $ | 6,290 | |||||||||||||||
| 2525 McKinnon | 100.0 | % | 111 | 93.0 | % | $ | 27.05 | $ | 46.05 | $ | 2,801 | |||||||||||||||
|
Portland, OR
|
AmberGlen | 76.0 | % | 203 | 98.4 | % | $ | 23.55 | $ | 26.45 | $ | 4,695 | ||||||||||||||
| Cascade Station | 100.0 | % | 128 | 100.0 | % | $ | 28.77 | $ | 30.68 | $ | 3,685 | |||||||||||||||
|
San Diego, CA
|
Mission City | 100.0 | % | 281 | 88.0 | % | $ | 38.24 | $ | 38.24 | $ | 9,466 | ||||||||||||||
|
Seattle, WA
|
Canyon Park | 100.0 | % | 207 | 100.0 | % | $ | 23.17 | $ | 27.17 | $ | 4,791 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total / Weighted Average – Excluding Acquisitions in
Lease-Up
(3)
|
|
|
5,498
|
|
|
88.6
|
%
|
$
|
27.54
|
|
$
|
30.49
|
|
$
|
133,945
|
|
||||||||||
|
Raleigh, NC
(8.3%) |
Bloc 83 | 100.0 | % | 495 | 68.3 | % | $ | 37.03 | $ | 37.12 | $ | 12,527 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Total / Weighted Average – June 30, 2022
|
|
|
5,993
|
|
|
86.9
|
%
|
$
|
28.16
|
|
$
|
30.92
|
|
$
|
146,472
|
|
||||||||||
|
|
|
|
|
|||||||||||||||||||||||
| (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 June 30, 2022 by (ii) 12.
|
| (3) |
Averages weighted based on the property’s NRA, adjusted for occupancy. Including contracted leases, occupancy was 85.2% at Bloc 83 as of June 30, 2022.
|
20
Operating Expenses
Our operating expenses generally consist of utilities, property and ad valorem taxes, insurance and site maintenance costs. Increases in these expenses over tenants’ base years (until the base year is reset at expiration) are generally passed along to tenants in our full-service gross leased properties and are generally paid in full by tenants in our net leased properties.
Conditions in Our Markets
Positive or negative changes in economic or other conditions in the markets we operate in, including state budgetary shortfalls, employment rates, natural hazards and other factors, may impact our overall performance. While we generally expect the trend of positive population and economic growth in our cities to continue, there is no way for us to predict whether these trends will continue, especially in light of the potential changes in tax policy, fiscal policy and monetary policy. In addition, it is uncertain and impossible to estimate the potential impact that the
COVID-19
pandemic will have on the short- and long-term demand for office space in our markets.
Critical Accounting Policies and Estimates
The interim condensed consolidated financial statements follow the same policies and procedures as outlined in the audited consolidated financial statements for the year ended December 31, 2021 included in our Annual Report on Form
10-K
for the year ended December 31, 2021.
Results of Operations
Comparison of Three Months Ended June 30, 2022 to Three Months Ended June 30, 2021
Rental and Other Revenues.
Operating Expenses
Total Operating Expenses.
Property Operating Expenses.
re-leasing
costs. Property operating expenses increased by $2.6 million, or 19%, to $16.8 million for the three months ended June 30, 2022, from $14.2 million for the three months ended June 30, 2021. Of this increase, the acquisitions of Block 23, The Terraces and Bloc 83 in December 2021 contributed increases of $0.7 million, $0.9 million and $0.7 million, respectively. An increase of $0.2 million was attributable to the Ingenuity Drive property within the Florida Research Park portfolio as that property was converted from a single tenant property where the tenant paid for its own operating expenses into a multi-tenant property where expenses are paid by the landlord and reimbursements are charged to the tenants. Offsetting these increases, the disposition of Sorrento Mesa resulted in a $0.6 million decrease in property operating expenses. The remaining properties’ expenses increased a combined $0.7 million.
21
General and Administrative.
non-cash
stock-based compensation expenses. General and administrative expenses increased $0.5 million, or 18%, to $3.6 million for the three months ended June 30, 2022, from $3.1 million for the three months ended June 30, 2021. General and administrative expenses increased primarily due to higher stock-based compensation expense and higher professional fees.
Depreciation and Amortization.
Other Expense (Income)
Interest Expense.
Comparison of Six Months Ended June 30, 2022 to Six Months Ended June 30, 2021
Rental and Other Revenues.
Operating Expenses
Total Operating Expenses.
22
Property Operating Expenses.
re-leasing
costs. Property operating expenses increased by $5.0 million, or 18%, to $33.3 million for the six months ended June 30, 2022, from $28.3 million for the six months ended June 30, 2021. Of this increase, the acquisitions of Block 23, The Terraces and Bloc 83 in December 2021 contributed increases of $1.3 million, $1.6 million and $1.6 million, respectively. An increase of $0.4 million was attributable to the Ingenuity Drive property within the Florida Research Park portfolio as that property was converted from a single tenant property where the tenant paid for its own operating expenses into a multi-tenant property where expenses are paid by the landlord and reimbursements are charged to the tenants. Offsetting these increases, the disposition of Cherry Creek resulted in a $0.3 million decrease and the disposition of Sorrento Mesa resulted in a $1.1 million decrease in property operating expenses. The remaining properties’ expenses increased a combined $1.5 million.
General and Administrative.
non-cash
stock-based compensation expenses. General and administrative expenses increased $1.2 million, or 20%, to $7.1 million for the six months ended June 30, 2022, from $5.9 million reported for the same period in 2021. General and administrative expenses increased primarily due to higher stock-based compensation expense and higher professional fees.
Depreciation and Amortization.
Other Expense (Income)
Interest Expense.
Net Gain on the Sale of Real Estate Property.
Cash Flows
Comparison of Six Months Ended June 30, 2022 to Six Months Ended June 30, 2021
Cash, cash equivalents and restricted cash were $69.4 million and $36.3 million as of June 30, 2022 and June 30, 2021, respectively.
Cash flow from operating activities.
Cash flow to investing activities.
23
Cash flow to financing activities.
Liquidity and Capital Resources
Analysis of Liquidity and Capital Resources
We had approximately $26.4 million of cash and cash equivalents and $43.0 million of restricted cash as of June 30, 2022.
On March 15, 2018, the Company entered into a
credit agreement
for the Unsecured Credit Facility that provided for commitments of up to $250 million, which included an accordion feature that allowed the Company to borrow up to $500 million, subject to customary terms and conditions. On November 16, 2021, the Company entered into an
Amended and Restated Credit Agreement
(the “Amended and Restated Credit Agreement”) that provides for commitments of up to $300 million on the Unsecured Credit Facility. Our Unsecured Credit Facility matures in November 2025 and may be extended 12 months at the Company’s option upon meeting certain conditions. Borrowings under our Unsecured Credit Facility bear an interest at a rate equal to the LIBOR rate plus a margin of between 125 to 225 basis points depending upon the Company’s consolidated leverage ratio. Combined with the Term Loan, the total authorized borrowings increased from $300 million to $350 million. As of June 30, 2022, we had approximately $162.0 million outstanding under our Unsecured Credit Facility and a $4.2 million letter of credit to satisfy escrow requirements for a mortgage lender.
On September 27, 2019, the Company entered into the five-year $50 million Term Loan, increasing its authorized borrowings under the Company’s Unsecured Credit Facility from $250 million to $300 million. Borrowings under the Term Loan bear interest at a rate equal to the LIBOR rate plus a margin between 125 to 215 basis points depending upon the Company’s consolidated leverage ratio. In conjunction with the Term Loan, the Company also entered into the Interest Rate Swap. Pursuant to the Interest Rate Swap, the Company will pay a fixed rate of approximately 1.27% of the notional amount annually, payable monthly, and receive floating rate
30-day
LIBOR payments.
On February 26, 2020, the Company and the Operating Partnership entered into
equity distribution agreements
(collectively, the “Agreements”) with each of KeyBanc Capital Markets Inc., Raymond James & Associates, Inc., BMO Capital Markets Corp., RBC Capital Markets, LLC, B. Riley FBR, Inc., D.A. Davidson & Co. and Janney Montgomery Scott LLC (the “Sales Agents”) pursuant to which the Company may issue and sell from time to time up to 15,000,000 shares of common stock and up to 1,000,000 shares of Series A Preferred Stock through the Sales Agents, acting as agents or principals (the “ATM Program”). On May 7, 2021 the Company delivered to D.A. Davidson & Co. a notice of termination of the Agreement, effective May 7, 2021. The Company did not issue any shares of common stock or Series A Preferred Stock under the ATM Program during the six months ended June 30, 2022.
Our short-term liquidity requirements primarily consist of operating expenses and other expenditures associated with our properties, distributions to our limited partners and distributions to our stockholders required to qualify for REIT status, capital expenditures and, potentially, acquisitions. We expect to meet our short-term liquidity requirements through net cash provided by operations and reserves established from existing cash. We have further sources such as proceeds from our public offerings, including under our at the market issuance program, and borrowings under our mortgage loans and our Unsecured Credit Facility.
Our long-term liquidity needs consist primarily of funds necessary for the repayment of debt at maturity, property acquisitions and
non-recurring
capital improvements. We expect to meet our long-term liquidity requirements with net cash from operations, long-term secured and unsecured indebtedness and the issuance of equity and debt securities. We also may fund property acquisitions and
non-recurring
capital improvements using our Unsecured Credit Facility pending longer term financing.
24
We believe we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional debt and the issuance of additional equity securities. However, we cannot assure you that this is or will continue to be the case. Our ability to incur additional debt is dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. Our ability to access the equity capital markets is dependent on a number of factors as well, including general market conditions for REITs and market perceptions about us.
Contractual Obligations and Other Long-Term Liabilities
The following table provides information with respect to our commitments as of June 30, 2022, including any guaranteed or minimum commitments under contractual obligations. The table does not reflect available debt extension options.
|
Payments Due by Period
|
||||||||||||||||||||
|
Contractual Obligations
|
Total
|
2022
|
2023-2024
|
2025-2026
|
More than
5 years
|
|||||||||||||||
|
Principal payments on mortgage loans
|
$ | 658,605 | $ | 3,141 | $ | 156,628 | $ | 258,533 | $ | 240,303 | ||||||||||
|
Interest payments
(1)
|
94,099 | 12,307 | 45,770 | 28,211 | 7,811 | |||||||||||||||
|
Tenant-related commitments
|
23,620 | 23,620 | — | — | — | |||||||||||||||
|
Lease obligations
|
37,539 | 307 | 1,625 | 1,510 | 34,097 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total
|
$ | 813,863 | $ | 39,375 | $ | 204,023 | $ | 288,254 | $ | 282,211 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) |
Contracted interest on the floating rate borrowings under our Unsecured Credit Facility was calculated based on the balance and interest rate at June 30, 2022. Contracted interest on the Term Loan was calculated based on the Interest Rate Swap rate fixing the LIBOR component of the borrowing rate to approximately 1.27%.
|
Inflation
Substantially all of our office leases provide for real estate tax and operating expense escalations. In addition, most of the leases provide for fixed annual rent increases. We believe that inflationary increases may be at least partially offset by these contractual rent increases and expense escalations. However, a longer period of inflation could affect our cash flows or earnings, or impact our borrowings, as discussed elsewhere in this Report.
25
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. We use derivative financial instruments to manage or hedge interest rate risks related to borrowings. We do not use derivatives for trading or speculative purposes and only enter into contracts with major financial institutions based upon their credit rating and other factors. We have entered, and we will only enter into, contracts with major financial institutions based on their credit rating and other factors. See Note 6 to our condensed consolidated financial statements in Item 1 of this Report for more information regarding our derivatives.
The primary market risk to which we are exposed is interest rate risk. Our primary interest rate exposure is LIBOR. We primarily use fixed interest rate financing to manage our exposure to fluctuations in interest rates. The Financial Conduct Authority (the authority that regulates LIBOR) has announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR by June 30, 2023. The Alternative Reference Rates Committee (“AARC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to LIBOR for future use in derivatives and other financial contracts that are currently indexed to LIBOR. ARRC has proposed a paced market transition plan to SOFR from LIBOR and organizations are currently working on industry-wide and company specific transition plans as it relates to derivatives and cash markets exposed to LIBOR. We currently consider our interest rate exposure to be moderate because as of June 30, 2022, approximately $446.6 million, or 67.8%, of our debt had fixed interest rates and approximately $212.0 million, or 32.2%, had variable interest rates. Of the $212.0 million variable rate debt, $50.0 million relates to the Term Loan against which we have applied the Interest Rate Swap. The Interest Rate Swap effectively fixes the
30-day
LIBOR rate at approximately 1.27% until maturity of the Term Loan. When factoring in the Term Loan as fixed rate debt through the Interest Rate Swap, approximately 75.4% of our debt was fixed rate debt and 24.6% was variable rate debt as of June 30, 2022. An increase of 1% in LIBOR would result in a $1.6 million increase to our annual interest costs on debt outstanding as of June 30, 2022 and would decrease the fair value of our outstanding debt, as well as increase interest costs associated with future debt issuances or borrowings under our Unsecured Credit Facility. A 1% decrease in LIBOR, assuming a rate floor of 0%, would result in a $1.6 million decrease to our annual interest costs on debt outstanding as of June 30, 2022 and would increase the fair value of our outstanding debt, as well as decrease interest costs associated with future debt issuances or borrowings under our Unsecured Credit Facility.
Interest risk amounts are our management’s estimates based on our Company’s capital structure and were determined by considering the effect of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur in that environment. We may take actions to further mitigate our exposure to changes in interest rates. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our Company’s financial structure.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on the most recent evaluation, the Company’s Chief Executive Officer and Chief Financial Officer determined that the Company’s disclosure controls and procedures (as defined in Rules
13a-15(e)
and
15d-15(e)
under the Securities and Exchange Act of 1934, as amended) were effective as of June 30, 2022.
Management’s Report on Internal Control Over Financial Reporting
There have been no changes to our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We and our subsidiaries are, from time to time, parties to litigation arising from the ordinary course of business. As of June 30, 2022, management does not believe that any such litigation will have a material adverse effect, individually or in the aggregate, on our financial position or results of operations.
Item 1A. Risk Factors
The following risk factor supplements the risk factors disclosed in the section entitled “Risk Factors” of our Annual Report on Form
10-K
for the year ended December 31, 2021. Except as presented below or in the section titled “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report, there have been no material changes from the risk factors set forth in such Annual Report.
Inflation and price volatility in the global economy could negatively impact our tenants and our results of operations
.
Inflation in the United States has risen to levels not experienced in recent decades, including rising energy prices, prices for consumer goods, interest rates, wages and currency volatility. These increases and any fiscal or other policy interventions by the U.S. government in reaction to such events could negatively impact our results of operations, and could also negatively impact our tenants’ businesses. While our leases generally provide for fixed annual rent increases, high levels of inflation could outpace our contractual rent increases. The leases at our properties are either full-service gross or net lease basis. Our full-service gross leases generally have a base year expense “stop”, whereby we pay a stated amount of expenses as part of the rent payment while future increases (above the base year stop) in property operating expenses are billed to the tenant based on such tenant’s proportionate square footage in the property. Additionally, our
triple-net
leases require the lessee to pay all property operating expenses. Therefore, increases in property-level expenses resulting from inflation could have an adverse impact on our lessees if increases in their operating expenses exceed increases in their revenue, which may adversely affect our lessees’ ability to pay rent or other obligations owed to us. An increase in our lessees’ expenses and a failure of their revenues to increase at least with inflation could adversely affect our lessees’ and our financial condition and our results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On March 9, 2020, the Company’s Board of Directors approved a share repurchase plan authorizing the Company to repurchase up to $100 million of its outstanding shares of common stock. In July 2020, the Company completed the full March 2020 share repurchase program. On August 5, 2020, the Company’s Board of Directors approved an additional share repurchase plan authorizing the Company to repurchase up to an additional aggregate amount of $50 million of its outstanding shares of common stock. Under the share repurchase programs, the shares may be repurchased from time to time using a variety of methods, which may include open market transactions, privately negotiated transactions or otherwise, all in accordance with the rules of the SEC and other applicable legal requirements.
Repurchased shares of common stock will be classified as authorized and unissued shares. The Company recognizes the cost of shares of common stock it repurchases, including direct costs incurred, as a reduction in stockholders’ equity. Such reductions of stockholders equity due to the repurchases of shares of common stock repurchased will be applied first, to reduce common stock in the amount of the par value associated with the shares of common stock repurchased and second, to reduce additional
paid-in
capital by the amount that the purchase price for the shares of common stock repurchased exceed the par value.
27
Share repurchase activity under our share repurchase plans, on a trade date basis, for the three months ended June 30, 2022, was as follows:
|
Issuer Purchases of Equity Securities
(1)
|
||||||||||||||||
|
Period
|
Total
Number of
Shares of Common
Stock
Purchased
|
Average
Price Paid
per Share of
Common Stock
Repurchased |
Total Number of
Shares of Common
Stock Purchased
as Part of Share
Repurchase Plans |
Approximate Dollar
Value of Shares of
Common Stock that
May Yet Be
Purchased
Under the
Share Repurchase
Plans
(2)
(thousands)
|
||||||||||||
|
April 1 – 30, 2022
|
— | $ | — | — | $ | 50,000 | ||||||||||
|
May 1 – 31, 2022
|
— | — | — | 50,000 | ||||||||||||
|
June 1 – 30, 2022
|
394,833 | 12.64 | 394,833 | 45,008 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total
|
394,833 | $ | 12.64 | 394,833 | $ | 45,008 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1) |
The share repurchase plan was announced on August 5, 2020, approving the Company to repurchase an aggregate amount of $50 million of its outstanding shares of common stock. The share repurchase plan does not have an expiration date.
|
| (2) |
Represents approximate dollar value of shares that could have been purchased under the plans in effect at the end of the month.
|
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
28
Item 6. Exhibits
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CITY OFFICE REIT, INC.
| Date: August 4, 2022 | ||||||
| By: |
/s/ James Farrar
|
|||||
| James Farrar | ||||||
|
Chief Executive Officer and Director
(Principal Executive Officer)
|
||||||
| Date: August 4, 2022 | ||||||
| By: |
/s/ Anthony Maretic
|
|||||
| Anthony Maretic | ||||||
|
Chief Financial Officer, Secretary and Treasurer
(Principal Financial Officer and Principal Accounting Officer) |
||||||
30
TABLE OF CONTENTS
Part I. Financial InformationItem 1. Financial StatementsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits