10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number:

001-36409

CITY OFFICE REIT, INC.

(Exact name of registrant as specified in its charter)


Maryland		98-1141883
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

666 Burrard Street

Suite 3210

Vancouver,

V6C 2X8

(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:


Title of Each Class	Trading Symbol(s)	Name of each Exchange on Which Registered
Common Stock, $0.01 par value 6.625% Series A Cumulative Redeemable Preferred Stock, $0.01 par value per share	“CIO” “CIO.PrA”	New York Stock Exchange New York Stock Exchange

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

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). ☒ Yes No ☐

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.

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

12b-2

of the Exchange Act). Yes ☐ ☒ No

The number of shares of Common Stock, $0.01 par value, of the registrant outstanding at April 30, 2024 was 40,154,055.

Table of Contents

City Office REIT, Inc.

Quarterly Report on Form

10-Q

For the Quarter Ended March 31, 2024

Table of Contents


PART I. FINANCIAL INFORMATION			1

	Item 1.	Financial Statements	1

		Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	1

		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023	2

		Condensed Consolidated Statements of Comprehensive Income/(Loss) for the Three Months Ended March 31, 2024 and 2023	3

		Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2024 and 2023	4

		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	5

		Notes to the Condensed Consolidated Financial Statements	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24

	Item 4.	Controls and Procedures	25

PART II. OTHER INFORMATION			26

	Item 1.	Legal Proceedings	26

	Item 1A.	Risk Factors	26

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

	Item 3.	Defaults Upon Senior Securities	26

	Item 4.	Mine Safety Disclosures	26

	Item 5.	Other Information	26

	Item 6.	Exhibits	26

	Signatures		28

Table of Contents

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)


	March 31, 2024			December 31, 2023
Assets
Real estate properties
Land	$	193,524		$	193,524
Building and improvement		1,196,003			1,194,819
Tenant improvement		156,625			152,540
Furniture, fixtures and equipment		944			820

		1,547,096			1,541,703
Accumulated depreciation		(229,680	)		(218,628	)

		1,317,416			1,323,075

Cash and cash equivalents		29,533			30,082
Restricted cash		13,831			13,310
Rents receivable, net		53,114			53,454
Deferred leasing costs, net		23,220			21,046
Acquired lease intangible assets, net		40,459			42,434
Other assets		27,954			27,975

Total Assets	$	1,505,527		$	1,511,376

Liabilities and Equity
Liabilities:
Debt	$	668,249		$	669,510
Accounts payable and accrued liabilities		29,908			29,070
Deferred rent		8,040			7,672
Tenant rent deposits		7,853			7,198
Acquired lease intangible liabilities, net		7,393			7,736
Other liabilities		16,431			17,557

Total Liabilities		737,874			738,743

Commitments and Contingencies (Note 8 )
Equity:
6.625% Series A Preferred stock, $0.01 par value per share, 5,600,000 shares authorized, 4,480,000 issued and outstanding as of March 31, 2024 and December 31, 2023		112,000			112,000
Common stock, $0.01 par value, 100,000,000 shares authorized, 40,154,055 and 39,938,451 shares issued and outstanding as of March 31, 2024 and December 31, 2023		401			399
Additional paid-in capital		438,909			438,867
Retained earnings		214,709			221,213
Accumulated other comprehensive income /(loss)		1,515			(248	)

Total Stockholders’ Equity		767,534			772,231
Non-controlling interests in properties		119			402

Total Equity		767,653			772,633

Total Liabilities and Equity	$	1,505,527		$	1,511,376


Subsequent Events (Note 10)

The accompanying notes are an integral part of these condensed consolidated financial statements

Table of Contents

City Office REIT, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)


	Three Months Ended March 31,
	2024			2023
Rental and other revenues	$	44,493		$	45,957

Operating expenses:
Property operating expenses		17,744			17,720
General and administrative		3,711			3,765
Depreciation and amortization		15,075			15,304

Total operating expenses		36,530			36,789

Operating income		7,963			9,168
Interest expense:
Contractual interest expense		(8,098	)		(7,972	)
Amortization of deferred financing costs and debt fair value		(319	)		(323	)

		(8,417	)		(8,295	)

Net (loss)/income		(454	)		873
Less:
Net income attributable to non-controlling interests in properties		(135	)		(169	)

Net (loss)/income attributable to the Company		(589	)		704
Preferred stock distributions		(1,855	)		(1,855	)

Net loss attributable to common stockholders	$	(2,444	)	$	(1,151	)

Net loss per common share:
Basic	$	(0.06	)	$	(0.03	)

Diluted	$	(0.06	)	$	(0.03	)

Weighted average common shares outstanding:
Basic		40,097			39,873

Diluted		40,097			39,873

Dividend distributions declared per common share	$	0.10		$	0.20

The accompanying notes are an integral part of these condensed consolidated financial statements

Table of Contents

City Office REIT, Inc.

Condensed Consolidated Statements of Comprehensive Income/(Loss)

(Unaudited)

(In thousands)


	Three Months Ended March 31,
	2024			2023
Net (loss)/income	$	(454	)	$	873
Other comprehensive income/(loss):
Unrealized cash flow hedge gain/(loss)		2,906			(1,465	)
Amounts reclassified to interest expense		(1,117	)		(477	)

Other comprehensive income/(loss)		1,789			(1,942	)

Comprehensive income/(loss)		1,335			(1,069	)
Less:
Comprehensive income attributable to non-controlling interests in properties		(161	)		(169	)

Comprehensive income/(loss) attributable to the Company	$	1,174		$	(1,238	)

The accompanying notes are an integral part of these condensed consolidated financial statements

Table of Contents

City Office REIT, Inc.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

(In thousands)


	Number of shares of preferred stock		Preferred stock		Number of shares of common stock		Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive income			Total stockholders’ equity			Non- controlling interests in properties			Total equity
Balance—December 31, 2023		4,480	$	112,000		39,938	$	399	$	438,867	$	221,213		$	(248	)	$	772,231		$	402		$	772,633
Restricted stock award grants and vesting		—		—		216		2		42		(45	)		—			(1	)		—			(1	)
Common stock dividend distribution declared		—		—		—		—		—		(4,015	)		—			(4,015	)		—			(4,015	)
Preferred stock dividend distribution declared		—		—		—		—		—		(1,855	)		—			(1,855	)		—			(1,855	)
Distributions		—		—		—		—		—		—			—			—			(444	)		(444	)
Net (loss) / income		—		—		—		—		—		(589	)		—			(589	)		135			(454	)
Other comprehensive income		—		—		—		—		—		—			1,763			1,763			26			1,789

Balance—March 31, 2024		4,480	$	112,000		40,154	$	401	$	438,909	$	214,709		$	1,515		$	767,534		$	119		$	767,653


	Number of shares of preferred stock		Preferred stock		Number of shares of common stock		Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive (loss)/income			Total stockholders’ equity			Non- controlling interests in properties			Total equity
Balance—December 31, 2022		4,480	$	112,000		39,718	$	397	$	436,161		$	251,542		$	2,731		$	802,831		$	343		$	803,174
Restricted stock award grants and vesting		—		—		220		2		(535	)		(85	)		—			(618	)		—			(618	)
Common stock dividend distribution declared		—		—		—		—		—			(7,988	)		—			(7,988	)		—			(7,988	)
Preferred stock dividend distribution declared		—		—		—		—		—			(1,855	)		—			(1,855	)		—			(1,855	)
Contributions		—		—		—		—		—			—			—			—			110			110
Distributions		—		—		—		—		—			—			—			—			(235	)		(235	)
Net income		—		—		—		—		—			704			—			704			169			873
Other comprehensive loss		—		—		—		—		—			—			(1,942	)		(1,942	)		—			(1,942	)

Balance—March 31, 2023		4,480	$	112,000		39,938	$	399	$	435,626		$	242,318		$	789		$	791,132		$	387		$	791,519

The accompanying notes are an integral part of these condensed consolidated financial statements

Table of Contents

City Office REIT, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Three Months Ended March 31,
	2024			2023
Cash Flows from Operating Activities:
Net (loss)/income	$	(454	)	$	873
Adjustments to reconcile net (loss)/ income to net cash provided by operating activities:
Depreciation and amortization		15,075			15,304
Amortization of deferred financing costs and debt fair value		319			323
Amortization of above and below market leases		(27	)		9
Straight-line rent/expense		(454	)		(2,801	)
Non-cash stock compensation		1,070			1,024
Changes in non-cash working capital:
Rents receivable, net		865			539
Other assets		505			(282	)
Accounts payable and accrued liabilities		(1,536	)		(965	)
Deferred rent		368			(278	)
Tenant rent deposits		655			137

Net Cash Provided By Operating Activities		16,386			13,883

Cash Flows to Investing Activities:
Additions to real estate properties		(5,989	)		(11,383	)
Deferred leasing costs		(1,505	)		(1,037	)

Net Cash Used In Investing Activities		(7,494	)		(12,420	)

Cash Flows ( to ) / from Financing Activities:
Debt issuance and extinguishment costs		(26	)		(236	)
Proceeds from borrowings		4,000			25,000
Repayment of borrowings		(5,529	)		(6,683	)
Dividend distributions paid to stockholders		(5,849	)		(9,799	)
Distributions to non-controlling interests in properties