VANCOUVER, May 3, 2024 — City Office REIT, Inc. (NYSE: CIO) (the “Company,” “City Office,” “we” or “our”) today announced its results for the quarter ended March 31, 2024.
First Quarter Highlights
Rental and other revenues were $44.5 million. GAAP net loss attributable to common stockholders was approximately $2.4 million, or ($0.06) per fully diluted share;
Core FFO was approximately $13.5 million, or $0.33 per fully diluted share;
AFFO was approximately $9.1 million, or $0.22 per fully diluted share;
In-place occupancy was 83.0% as of quarter end, or 86.0% including signed leases not yet occupied;
Executed approximately 191,000 square feet of new and renewal leases during the quarter;
Declared a first quarter dividend of $0.10 per share of common stock, paid on April 24, 2024; and
Declared a first quarter dividend of $0.4140625 per share of Series A Preferred Stock, paid on April 24, 2024.
“The first quarter’s results tracked our expectations and we progressed renovations at several of our properties to drive incremental value,” commented James Farrar, the Company’s Chief Executive Officer. “As far as the leasing marketplace, we continue to see the return of larger tenant prospects. During the first quarter, we executed two sizable new leases, including a 29,000 square foot 11-year lease with a financial tenant at Bloc 83 in Raleigh and a 43,000 square foot 10.5-year lease with a healthcare tenant at FRP Ingenuity Drive in Orlando. The completion of these leases resulted in all full-floor availabilities at Bloc 83 now being leased and 100% occupancy at FRP Ingenuity Drive.”
“Our guidance outlook has been updated to reflect our latest expectations for our co-working tenant WeWork at two of our properties. While we have not finalized lease amendments, we have updated our expectations to reflect taking back one floor at each of the Terraces building located in the premium Preston Center submarket of Dallas and at Bloc 83 in Raleigh. Both of these top tier assets have no full-floor vacancies remaining today and these spaces are highly desirable. We believe this outcome will position us to further diversify each property with high-quality and long-term tenancy and ultimately enhance value.”
A reconciliation of certain non-GAAP financial measures, including FFO, Core FFO, AFFO, NOI, Same Store NOI, Same Store Cash NOI and their equivalent per share measures, to the most directly comparable financial measure under U.S. generally accepted accounting principles (“GAAP”) can be found at the end of this release.
Portfolio Operations
The Company reported that its total portfolio as of March 31, 2024 contained 5.7 million net rentable square feet and was 83.0% occupied, or 86.0% including signed leases not yet occupied.
Net Operating Income was approximately $26.7 million and Adjusted Cash NOI (CIO share) was approximately $26.0 million for the first quarter of 2024. Net Operating Income benefited from $0.9 million of termination fee income recognized in the quarter.
Same Store Cash NOI decreased 1.0% for the three months ended March 31, 2024 as compared to the same period in the prior year.
Leasing Activity
The Company’s total leasing activity during the first quarter of 2024 was approximately 191,000 square feet, which included 110,000 square feet of new leasing and 81,000 square feet of renewals. Approximately 184,000 square feet of leases signed within the quarter are expected to commence subsequent to quarter end.
New Leasing – New leases were signed with a weighted average lease term of 9.1 years at a weighted average annual rent of $33.33 per square foot and at a weighted average cost of $9.86 per square foot per year.
Renewal Leasing – Renewal leases were signed with a weighted average lease term of 4.2 years at a weighted average annual rent of $32.50 per square foot and at a weighted average cost of $3.28 per square foot per year.
Capital Structure
As of March 31, 2024, the Company had total principal outstanding debt of approximately $671.2 million. Approximately 91.1% of the Company’s debt was fixed rate or effectively fixed rate due to interest rate swaps. City Office’s total principal outstanding debt had a weighted average maturity of approximately 2.3 years and a weighted average interest rate of 4.8%.
Dividends
On March 15, 2024, the Company’s Board of Directors approved and the Company declared a cash dividend of $0.10 per share of the Company’s common stock for the three months ended March 31, 2024. The dividend was paid on April 24, 2024 to common stockholders and unitholders of record as of April 10, 2024.
On March 15, 2024, the Company’s Board of Directors approved and the Company declared a cash dividend of $0.4140625 per share of the Company’s 6.625% Series A Preferred Stock for the three months ended March 31, 2024. The dividend was paid on April 24, 2024 to preferred stockholders of record as of April 10, 2024.
2024 Outlook
Following City Office’s performance for the first quarter of 2024, the Company’s outlook for full year 2024 guidance remains unchanged except for the expectation that the Company will take back portions of WeWork leased spaces at the Terraces property in Dallas and the Bloc 83 property in Raleigh, as described above. The impact of these pending lease modifications, assuming they are completed, are expected to reduce Core FFO in 2024 by $1.8 million or $0.04 per fully diluted share. Approximately $0.02 of this expected reduction relates to the non-cash write-off of this tenant’s straight line rent.
The outlook includes the following assumptions: