Since January 1, 2019, Have Sold or Currently Have Under Agreement to Sell 60 Properties for $731.5 Million
Third Quarter Net Loss Available for Common Shareholders of $3.9 Million, or $0.08 Per Share
Third Quarter Normalized FFO Available for Common Shareholders of $69.7 Million, or$1.45 Per Share
Occupancy Increased 170 Basis Points in the Third Quarter to 93.3%
Completed 759,000 Square Feet of Leasing in the Third Quarter
NEWTON, Mass.--(BUSINESS WIRE)-- Office Properties Income Trust (Nasdaq: OPI) today announced its financial results for the quarter and nine months ended September 30, 2019.
David Blackman, President and Chief Executive Officer of OPI, made the following statement:
"Since the end of the second quarter we continued to make steady progress on our disposition plan, selling 12 properties for a total of $298.1 million. The 60 properties we have sold or have under agreement to sell for $731.5 million since January 1, 2019 are at an average cap rate of 5.6% and have an average age of 22 years, an average occupancy of 71% and a weighted average lease term of 4.5 years. As previously announced, we also sold our 2.8 million shares of The RMR Group Inc. for net proceeds of $104.7 million. With the proceeds of these asset sales, we have reduced our leverage below the midpoint of our targeted leverage range. Our third quarter operating activity also generated continued leasing momentum as we entered new and renewal leases for 759,000 square feet and our consolidated occupancy increased to 93.3% from 91.6% last quarter."
Results for the Quarter Ended September 30, 2019:
Net loss available for common shareholders for the quarter ended September 30, 2019 was $3.9 million, or $0.08 per diluted share, compared to net loss available for common shareholders of $0.4 million, or $0.02 per diluted share, for the quarter ended September 30, 2018. Net loss available for common shareholders for the quarter ended September 30, 2019 includes an $8.5 million, or $0.18 per diluted share, loss on impairment of real estate, partially offset by an $11.5 million, or $0.24 per diluted share, gain on sale of real estate. Net loss available for common shareholders for the quarter ended September 30, 2018 includes a $17.4 million, or $0.70 per diluted share, unrealized gain on equity securities related to OPI's investment in The RMR Group Inc., or RMR Inc., which was sold on July 1, 2019, and $16.2 million, or $0.66 per diluted share, of estimated business management incentive fee expense. The weighted average number of diluted common shares outstanding was 48.1 million for the quarter ended September 30, 2019 and 24.8 million for the quarter ended September 30, 2018.
Normalized funds from operations, or Normalized FFO, available for common shareholders for the quarter ended September 30, 2019 were $69.7 million, or $1.45 per diluted share, compared to Normalized FFO available for common shareholders for the quarter ended September 30, 2018 of $53.0 million, or $2.14 per diluted share.
Reconciliations of net income (loss) available for common shareholders determined in accordance with U.S. generally accepted accounting principles, or GAAP, to funds from operations, or FFO, available for common shareholders and Normalized FFO available for common shareholders for the quarters ended September 30, 2019 and 2018 appear later in this press release.
Results for the Nine Months Ended September 30, 2019:
Net loss available for common shareholders for the nine months ended September 30, 2019 was $34.7 million, or $0.72 per diluted share, compared to net income available for common shareholders of $35.4 million, or $1.43 per diluted share, for the nine months ended September 30, 2018. Net loss available for common shareholders for the nine months ended September 30, 2019 includes a $44.0 million, or $0.92 per diluted share, realized loss on equity securities related to the sale of OPI's investment in RMR Inc. on July 1, 2019 and a $14.1 million, or $0.29 per diluted share, loss on impairment of real estate, partially offset by a $33.5 million, or $0.70 per diluted share, gain on sale of real estate and certain net revenue events during the second quarter of 2019 totaling $8.2 million, or $0.17 per diluted share, including a $7.4 million early termination fee, net of expenses, related to a single tenant property located in San Jose, CA. Net income available for common shareholders for the nine months ended September 30, 2018 includes a $40.7 million, or $1.64 per diluted share, unrealized gain on equity securities and a $17.3 million, or $0.70 per diluted share, net gain on sale of real estate, partially offset by $17.0 million, or $0.69 per diluted share, of estimated business management incentive fee expense and a $5.8 million, or $0.23 per diluted share, loss on impairment of real estate. The weighted average number of diluted common shares outstanding was 48.1 million for the nine months ended September 30, 2019 and 24.8 million for the nine months ended September 30, 2018.
Normalized FFO available for common shareholders for the nine months ended September 30, 2019 were $222.3 million, or $4.63 per diluted share, compared to Normalized FFO available for common shareholders for the nine months ended September 30, 2018 of $158.4 million, or $6.39 per diluted share.
Reconciliations of net income (loss) available for common shareholders determined in accordance with GAAP to FFO available for common shareholders and Normalized FFO available for common shareholders for the nine months ended September 30, 2019 and 2018 appear later in this press release.
Leasing and Occupancy Results:
During the quarter ended September 30, 2019, OPI entered new and renewal leases for an aggregate of 759,000 rentable square feet at weighted (by rentable square feet) average rents that were 5.0% above prior rents for the same space. The weighted (by rentable square feet) average lease term for these leases was 12.7 years and leasing concessions and capital commitments for these leases were $17.6 million, or $1.82 per square foot, per lease year.
As of September 30, 2019, 93.3% of OPI’s total rentable square feet was leased, compared to 91.6% as of June 30, 2019 and 93.3% as of September 30, 2018.
Pro Forma Same Property Results:
Pro forma results combine the results of OPI and Select Income REIT, or SIR, for the quarters ended September 30, 2019 and 2018 as if the merger of SIR with OPI that closed on December 31, 2018, or the Merger, had occurred on January 1, 2018. Pro forma same property occupancy was 93.3% as of September 30, 2019, compared to 95.8% as of September 30, 2018. Pro Forma Same Property Cash Basis net operating income, or NOI, was $99.3 million for the quarter ended September 30, 2019, which was a 7.1% decrease compared to the same period in 2018.
Reconciliations of net income (loss) available for common shareholders determined in accordance with GAAP to Property NOI and Property Cash Basis NOI for the quarters ended September 30, 2019 and 2018 and a calculation of Pro Forma Same Property NOI and Same Property Cash Basis NOI for the quarter ended September 30, 2019 appear later in this press release.
Recent Property Disposition Activities:
Since July 1, 2019, OPI sold the following 12 properties containing a combined 2.2 million rentable square feet for an aggregate sales price of $298.1 million, excluding closing costs:
Date Sold | Location | Number of Properties | Square Feet | Gross Sales Price (1) | ||||
July 2019 | San Jose, CA | 1 |
| 71,750 | $ | 14,000,000 |
| |
July 2019 | Nashua, NH | 1 |
| 321,800 | 25,000,000 |
| ||
August 2019 | Arlington, TX | 1 |
| 182,630 | 14,900,000 |
| ||
August 2019 | Rochester, NY | 1 |
| 94,800 | 4,765,000 |
| ||
August 2019 | Hanover, PA | 1 |
| 502,300 | 5,500,000 |
| ||
August 2019 | San Antonio, TX | 1 |
| 618,017 | 198,000,000 |
| ||
September 2019 | Topeka, KS | 1 |
| 143,934 | 15,600,000 |
| ||
September 2019 | Falling Waters, WV | 1 |
| 40,348 | 650,000 |
| ||
September 2019 | San Diego, CA | 1 |
| 43,918 | 8,950,000 |
| ||
October 2019 | Columbia, SC | 3 |
| 180,703 | 10,750,000 |
| ||
|
| 12 |
| 2,200,200 | $ | 298,115,000 |
|
As of October 31, 2019, OPI has entered into six agreements to sell the following 10 properties containing a combined 0.9 million rentable square feet for an aggregate sales price of $135.9 million, excluding closing costs:
Agreement Date | Location | Number of Properties | Square Feet | Gross Sales Price (1) | ||||
September 2019 | DC Metro - MD | 4 |
| 457,279 | $ | 66,600,000 |
| |
October 2019 | San Jose, CA | 1 |
| 75,621 | 13,000,000 |
| ||
October 2019 | Windsor, CT | 1 |
| 97,256 | 7,000,000 |
| ||
October 2019 | Kansas City, KS | 1 |
| 170,817 | 11,700,000 |
| ||
October 2019 | Fairfax, VA | 1 |
| 83,130 | 23,000,000 |
| ||
October 2019 | Stafford, VA | 2 |
| 64,656 | 14,563,000 |
| ||
|
| 10 |
| 948,759 | $ | 135,863,000 |
|
Recent Investment Activities:
As previously announced, on July 1, 2019, OPI completed the sale of all of its 2,801,060 shares of class A common stock of RMR Inc., or RMR Inc. common stock, in an underwritten public offering at a price to the public of $40.00 per common share. OPI received $104.7 million in net proceeds, after deducting underwriting fees and other offering expenses, that it used to repay debt.
As previously announced, in July 2019, OPI entered into an agreement to acquire a land parcel near one of its properties located in Boston, MA for $2.9 million, excluding acquisition related costs.
Recent Financing Activities:
During the quarter ended September 30, 2019, OPI repaid the $170.0 million remaining principal balance outstanding under its $300.0 million unsecured term loan due 2020 with cash on hand, proceeds from its property dispositions and proceeds from the sale of its shares of RMR Inc. common stock.
As previously announced, on July 15, 2019, OPI redeemed, at par plus accrued interest, all $350.0 million of its 3.75% senior notes due 2019 using cash on hand and borrowings under its revolving credit facility.
Conference Call:
At 10:00 a.m. Eastern Time this morning, President and Chief Executive Officer, David Blackman, Chief Financial Officer and Treasurer, Matthew Brown, and Vice President, Christopher Bilotto, will host a conference call to discuss OPI’s third quarter 2019 financial results.
The conference call telephone number is (877) 328-1172. Participants calling from outside the United States and Canada should dial (412) 317-5418. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. on Friday, November 8, 2019. To access the replay, dial (412) 317-0088. The replay pass code is 10134914.
A live audio webcast of the conference call will also be available in a listen only mode on OPI’s website, at www.opireit.com. Participants wanting to access the webcast should visit OPI’s website about five minutes before the call. The archived webcast will be available for replay on OPI’s website following the call for about one week. The transcription, recording and retransmission in any way of OPI’s third quarter conference call are strictly prohibited without the prior written consent of OPI.
Supplemental Data:
A copy of OPI’s Third Quarter 2019 Supplemental Operating and Financial Data is available for download at OPI’s website, www.opireit.com. OPI’s website is not incorporated as part of this press release.
Non-GAAP Financial Measures:
OPI presents certain “non-GAAP financial measures” within the meaning of applicable rules of the Securities and Exchange Commission, or SEC, including FFO available for common shareholders, Normalized FFO available for common shareholders, Property NOI, Property Cash Basis NOI, Same Property NOI, Same Property Cash Basis NOI, Pro Forma Same Property NOI and Pro Forma Same Property Cash Basis NOI. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to income (loss) from continuing operations, net income (loss) and net income (loss) available for common shareholders as indicators of OPI’s operating performance or as measures of OPI’s liquidity. These measures should be considered in conjunction with income (loss) from continuing operations, net income (loss) and net income (loss) available for common shareholders as presented in OPI's condensed consolidated statements of income (loss). OPI considers these non-GAAP measures to be appropriate supplemental measures of operating performance for a real estate investment trust, or REIT, along with income (loss) from continuing operations, net income (loss) and net income (loss) available for common shareholders. OPI believes these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of OPI’s operating performance between periods and with other REITs and, in the case of Property NOI, Property Cash Basis NOI, Same Property NOI, Same Property Cash Basis NOI, Pro Forma Same Property NOI and Pro Forma Same Property Cash Basis NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations at OPI's properties.
Please see the pages attached hereto for a more detailed statement of OPI’s operating results and financial condition and for an explanation of OPI’s calculation of FFO available for common shareholders, Normalized FFO available for common shareholders, Property NOI, Property Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI and a reconciliation of those amounts to amounts determined in accordance with GAAP. OPI’s Pro Forma Same Property Cash Basis NOI as if the Merger had occurred on January 1, 2018 also are provided in the pages attached hereto. Such pro forma financial information is not necessarily indicative of OPI’s expected financial position or results of operations for any future period. Differences could result from numerous factors, including future changes in OPI’s portfolio of investments, OPI’s capital structure, OPI's property level operating expenses and revenues, including rents expected to be received pursuant to OPI’s existing leases or leases OPI may enter into, changes in interest rates and other reasons. Actual future results are likely to be different from amounts presented in the pro forma financial information and such differences could be significant.
OPI is a REIT focused on owning, operating and leasing properties primarily leased to single tenants and those with high credit quality characteristics such as government entities. OPI is managed by the operating subsidiary of RMR Inc. (Nasdaq: RMR), an alternative asset management company that is headquartered in Newton, Massachusetts.
Office Properties Income Trust Condensed Consolidated Statements of Income (Loss) (amounts in thousands, except per share data) (unaudited) | ||||||||||||||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||||||
Rental income |
| $ | 167,411 |
|
| $ | 106,102 |
|
| $ | 518,220 |
|
| $ | 322,904 |
|
|
|
|
|
|
|
|
|
| ||||||||
Expenses: |
|
|
|
|
|
|
|
| ||||||||
Real estate taxes |
| 18,824 |
|
| 12,072 |
|
| 55,363 |
|
| 37,402 |
| ||||
Utility expenses |
| 9,518 |
|
| 7,783 |
|
| 26,369 |
|
| 20,490 |
| ||||
Other operating expenses |
| 30,376 |
|
| 21,785 |
|
| 90,204 |
|
| 66,221 |
| ||||
Depreciation and amortization |
| 74,939 |
|
| 42,569 |
|
| 226,373 |
|
| 129,444 |
| ||||
Loss on impairment of real estate (1) |
| 8,521 |
|
| — |
|
| 14,105 |
|
| 5,800 |
| ||||
Acquisition and transaction related costs (2) |
| — |
|
| 3,813 |
|
| 682 |
|
| 3,813 |
| ||||
General and administrative (3) |
| 7,990 |
|
| 22,383 |
|
| 25,457 |
|
| 36,438 |
| ||||
Total expenses |
| 150,168 |
|
| 110,405 |
|
| 438,553 |
|
| 299,608 |
| ||||
|
|
|
|
|
|
|
|
| ||||||||
Gain on sale of real estate (4) |
| 11,463 |
|
| — |
|
| 33,538 |
|
| 17,329 |
| ||||
Dividend income |
| — |
|
| 304 |
|
| 1,960 |
|
| 912 |
| ||||
Gain (loss) on equity securities, net (5) |
| — |
|
| 17,425 |
|
| (44,007 | ) |
| 40,677 |
| ||||
Interest income |
| 358 |
|
| 140 |
|
| 847 |
|
| 405 |
| ||||
Interest expense (including amortization of debt premiums, discounts and issuance costs of $2,560, $893, $8,264 and $2,749, respectively) |
| (32,367 | ) |
| (23,374 | ) |
| (104,848 | ) |
| (69,444 | ) | ||||
Loss on early extinguishment of debt (6) |
| (284 | ) |
| — |
|
| (769 | ) |
| — |
| ||||
Income (loss) from continuing operations before income tax expense and equity in net income (loss) of investees |
| (3,587 | ) |
| (9,808 | ) |
| (33,612 | ) |
| 13,175 |
| ||||
Income tax expense |
| (156 | ) |
| (9 | ) |
| (509 | ) |
| (124 | ) | ||||
Equity in net income (loss) of investees |
| (196 | ) |
| 94 |
|
| (573 | ) |
| (1,112 | ) | ||||
Income (loss) from continuing operations |
| (3,939 | ) |
| (9,723 | ) |
| (34,694 | ) |
| 11,939 |
| ||||
Income from discontinued operations (7) |
| — |
|
| 9,274 |
|
| — |
|
| 23,872 |
| ||||
Net income (loss) |
| (3,939 | ) |
| (449 | ) |
| (34,694 | ) |
| 35,811 |
| ||||
Preferred units of limited partnership distributions |
| — |
|
| — |
|
| — |
|
| (371 | ) | ||||
Net income (loss) available for common shareholders |
| $ | (3,939 | ) |
| $ | (449 | ) |
| $ | (34,694 | ) |
| $ | 35,440 |
|
|
|
|
|
|
|
|
|
| ||||||||
Weighted average common shares outstanding (basic) |
| 48,073 |
|
| 24,768 |
|
| 48,051 |
|
| 24,764 |
| ||||
Weighted average common shares outstanding (diluted) |
| 48,073 |
|
| 24,768 |
|
| 48,051 |
|
| 24,769 |
| ||||
|
|
|
|
|
|
|
|
| ||||||||
Per common share amounts (basic and diluted): |
|
|
|
|
|
|
|
| ||||||||
Income (loss) from continuing operations |
| $ | (0.08 | ) |
| $ | (0.39 | ) |
| $ | (0.72 | ) |
| $ | 0.47 |
|
Income from discontinued operations |
| $ | — |
|
| $ | 0.37 |
|
| $ | — |
|
| $ | 0.96 |
|
Net income (loss) available for common shareholders |
| $ | (0.08 | ) |
| $ | (0.02 | ) |
| $ | (0.72 | ) |
| $ | 1.43 |
|
See Notes on pages 7 and 8.
Office Properties Income Trust Funds from Operations and Normalized Funds from Operations (amounts in thousands, except per share data) (unaudited) | ||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||||||
Calculation of FFO and Normalized FFO available for common shareholders (8): |
|
|
|
|
|
| ||||||||||
Net income (loss) available for common shareholders |
| $ | (3,939 | ) |
| $ | (449 | ) |
| $ | (34,694 | ) |
| $ | 35,440 |
|
Add (less): Depreciation and amortization: |
|
|
|
|
|
|
|
| ||||||||
Consolidated properties |
| 74,939 |
|
| 42,569 |
|
| 226,373 |
|
| 129,444 |
| ||||
Unconsolidated joint venture properties |
| 1,397 |
|
| 1,913 |
|
| 4,558 |
|
| 6,283 |
| ||||
FFO attributable to SIR investment |
| — |
|
| 19,012 |
|
| — |
|
| 49,914 |
| ||||
Loss on impairment of real estate (1) |
| 8,521 |
|
| — |
|
| 14,105 |
|
| 5,800 |
| ||||
Equity in earnings of SIR included in discontinued operations |
| — |
|
| (9,253 | ) |
| — |
|
| (23,843 | ) | ||||
Gain on sale of real estate (4) |
| (11,463 | ) |
| — |
|
| (33,538 | ) |
| (17,329 | ) | ||||
(Gain) loss on equity securities, net (5) |
| — |
|
| (17,425 | ) |
| 44,007 |
|
| (40,677 | ) | ||||
FFO available for common shareholders |
| 69,455 |
|
| 36,367 |
|
| 220,811 |
|
| 145,032 |
| ||||
Add (less): Acquisition and transaction related costs (2) |
| — |
|
| 3,813 |
|
| 682 |
|
| 3,813 |
| ||||
Loss on early extinguishment of debt (6) |
| 284 |
|
| — |
|
| 769 |
|
| — |
| ||||
Normalized FFO attributable to SIR investment |
| — |
|
| 15,584 |
|
| — |
|
| 42,482 |
| ||||
FFO attributable to SIR investment |
| — |
|
| (19,012 | ) |
| — |
|
| (49,914 | ) | ||||
Net gain on issuance of shares by SIR included in discontinued operations |
| — |
|
| (21 | ) |
| — |
|
| (29 | ) | ||||
Estimated business management incentive fees (3) |
| — |
|
| 16,236 |
|
| — |
|
| 16,973 |
| ||||
Normalized FFO available for common shareholders |
| $ | 69,739 |
|
| $ | 52,967 |
|
| $ | 222,262 |
|
| $ | 158,357 |
|
|
|
|
|
|
|
|
|
| ||||||||
Weighted average common shares outstanding (basic) |
| 48,073 |
| 24,768 |
| 48,051 |
| 24,764 | ||||||||
Weighted average common shares outstanding (diluted) |
| 48,073 |
| 24,768 |
| 48,051 |
| 24,769 | ||||||||
|
|
|
|
|
|
|
|
| ||||||||
Per common share amounts: |
|
|
|
|
|
|
|
| ||||||||
Net income (loss) available for common shareholders (basic and diluted) |
| $ | (0.08 | ) |
| $ | (0.02 | ) |
| $ | (0.72 | ) |
| $ | 1.43 |
|
FFO available for common shareholders (basic and diluted) |
| $ | 1.44 |
|
| $ | 1.47 |
|
| $ | 4.60 |
|
| $ | 5.86 |
|
Normalized FFO available for common shareholders (basic and diluted) |
| $ | 1.45 |
|
| $ | 2.14 |
|
| $ | 4.63 |
|
| $ | 6.39 |
|
Distributions declared per share |
| $ | 0.55 |
|
| $ | 1.72 |
|
| $ | 1.65 |
|
| $ | 5.16 |
|
Office Properties Income Trust Calculation and Reconciliation of Property NOI, Property Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI (1) (amounts in thousands) (unaudited) | ||||||||||||||||
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | ||||||||
Calculation of Property NOI and Property Cash Basis NOI: |
|
|
|
| ||||||||||||
Rental income (2) |
| $ | 167,411 |
|
| $ | 106,102 |
|
| $ | 518,220 |
|
| $ | 322,904 |
|
Property operating expenses |
| (58,718 | ) |
| (41,640 | ) |
| (171,936 | ) |
| (124,113 | ) | ||||
Property NOI |
| 108,693 |
|
| 64,462 |
|
| 346,284 |
|
| 198,791 |
| ||||
Non-cash straight line rent adjustments included in rental income (2) |
| (6,904 | ) |
| (1,990 | ) |
| (19,365 | ) |
| (7,825 | ) | ||||
Lease value amortization included in rental income (2) |
| 35 |
|
| 773 |
|
| 2,628 |
|
| 2,361 |
| ||||
Lease termination fees included in rental income (2) |
| (22 | ) |
| (122 | ) |
| (9,183 | ) |
| (122 | ) | ||||
Non-cash amortization included in property operating expenses (3) |
| (121 | ) |
| (121 | ) |
| (363 | ) |
| (363 | ) | ||||
Property Cash Basis NOI |
| $ | 101,681 |
|
| $ | 63,002 |
|
| $ | 320,001 |
|
| $ | 192,842 |
|
|
|
|
|
|
|
|
|
| ||||||||
Reconciliation of Net Income (Loss) Available for Common Shareholders to Property NOI and Property Cash Basis NOI: | ||||||||||||||||
Net income (loss) available for common shareholders |
| $ | (3,939 | ) |
| $ | (449 | ) |
| $ | (34,694 | ) |
| $ | 35,440 |
|
Preferred units of limited partnership distributions |
| — |
|
| — |
|
| — |
|
| 371 |
| ||||
Net income (loss) |
| (3,939 | ) |
| (449 | ) |
| (34,694 | ) |
| 35,811 |
| ||||
Income from discontinued operations |
| — |
|
| (9,274 | ) |
| — |
|
| (23,872 | ) | ||||
Income (loss) from continuing operations |
| (3,939 | ) |
| (9,723 | ) |
| (34,694 | ) |
| 11,939 |
| ||||
Equity in net (income) loss of investees |
| 196 |
|
| (94 | ) |
| 573 |
|
| 1,112 |
| ||||
Income tax expense |
| 156 |
|
| 9 |
|
| 509 |
|
| 124 |
| ||||
Loss on early extinguishment of debt |
| 284 |
|
| — |
|
| 769 |
|
| — |
| ||||
Interest expense |
| 32,367 |
|
| 23,374 |
|
| 104,848 |
|
| 69,444 |
| ||||
Interest income |
| (358 | ) |
| (140 | ) |
| (847 | ) |
| (405 | ) | ||||
(Gain) loss on equity securities, net |
| — |
|
| (17,425 | ) |
| 44,007 |
|
| (40,677 | ) | ||||
Dividend income |
| — |
|
| (304 | ) |
| (1,960 | ) |
| (912 | ) | ||||
Gain on sale of real estate |
| (11,463 | ) |
| — |
|
| (33,538 | ) |
| (17,329 | ) | ||||
General and administrative |
| 7,990 |
|
| 22,383 |
|
| 25,457 |
|
| 36,438 |
| ||||
Acquisition and transaction related costs |
| — |
|
| 3,813 |
|
| 682 |
|
| 3,813 |
| ||||
Loss on impairment of real estate |
| 8,521 |
|
| — |
|
| 14,105 |
|
| 5,800 |
| ||||
Depreciation and amortization |
| 74,939 |
|
| 42,569 |
|
| 226,373 |
|
| 129,444 |
| ||||
Property NOI |
| 108,693 |
|
| 64,462 |
|
| 346,284 |
|
| 198,791 |
| ||||
Non-cash amortization included in property operating expenses (3) |
| (121 | ) |
| (121 | ) |
| (363 | ) |
| (363 | ) | ||||
Lease termination fees included in rental income (2) |
| (22 | ) |
| (122 | ) |
| (9,183 | ) |
| (122 | ) | ||||
Lease value amortization included in rental income (2) |
| 35 |
|
| 773 |
|
| 2,628 |
|
| 2,361 |
| ||||
Non-cash straight line rent adjustments included in rental income (2) |
| (6,904 | ) |
| (1,990 | ) |
| (19,365 | ) |
| (7,825 | ) | ||||
Property Cash Basis NOI |
| $ | 101,681 |
|
| $ | 63,002 |
|
| $ | 320,001 |
|
| $ | 192,842 |
|
|
|
|
|
|
|
|
|
| ||||||||
Reconciliation of Property NOI to Same Property NOI (4) (5): |
|
|
|
|
|
|
|
| ||||||||
Rental income (2) |
| $ | 167,411 |
|
| $ | 106,102 |
|
| $ | 518,220 |
|
| $ | 322,904 |
|
Property operating expenses |
| (58,718 | ) |
| (41,640 | ) |
| (171,936 | ) |
| (124,113 | ) | ||||
Property NOI |
| 108,693 |
|
| 64,462 |
|
| 346,284 |
|
| 198,791 |
| ||||
Less: NOI of properties not included in same property results: |
|
|
|
|
|
|
|
| ||||||||
SIR assets acquired |
| (58,337 | ) |
| — |
|
| (186,274 | ) |
| — |
| ||||
Historical OPI assets |
| (232 | ) |
| (12,240 | ) |
| (5,828 | ) |
| (37,380 | ) | ||||
Same Property NOI |
| $ | 50,124 |
|
| $ | 52,222 |
|
| $ | 154,182 |
|
| $ | 161,411 |
|
|
|
|
|
|
|
|
|
| ||||||||
Calculation of Same Property Cash Basis NOI (4) (5): |
|
|
|
|
|
|
|
| ||||||||
Same Property NOI |
| $ | 50,124 |
|
| $ | 52,222 |
|
| $ | 154,182 |
|
| $ | 161,411 |
|
Add: Lease value amortization included in rental income (2) |
| 280 |
|
| 541 |
|
| 887 |
|
| 1,588 |
| ||||
Less: Non-cash straight line rent adjustments included in rental income (2) |
| (1,753 | ) |
| (1,528 | ) |
| (4,262 | ) |
| (6,376 | ) | ||||
Lease termination fees included in rental income (2) |
| (22 | ) |
| (23 | ) |
| (1,541 | ) |
| (23 | ) | ||||
Non-cash amortization included in property operating expenses (3) |
| (121 | ) |
| (113 | ) |
| (351 | ) |
| (336 | ) | ||||
Same Property Cash Basis NOI |
| $ | 48,508 |
|
| $ | 51,099 |
|
| $ | 148,915 |
|
| $ | 156,264 |
|
See Notes on page 10.
Office Properties Income Trust Pro Forma Summary Same Property Results (1) (dollars and square feet in thousands) (unaudited) | |||||||
| For the Three Months Ended September 30, | ||||||
OPI (Excluding SIR Properties): | 2019 |
| 2018 | ||||
Leasable properties | 109 |
|
| 109 |
| ||
Total sq. ft. (2) | 13,073 |
|
| 13,069 |
| ||
Percent leased (3) | 93.0 | % |
| 94.4 | % | ||
Same Property Cash Basis NOI (4) | $ | 48,508 |
|
| $ | 51,099 |
|
Same Property Cash Basis NOI % change | (5.1 | %) |
|
| |||
| For the Three Months Ended September 30, | ||||||||||||||
SIR Properties: | 2019 |
| 2018 | ||||||||||||
|
|
| As reported |
| Less: |
|
| ||||||||
|
|
| SIR (Excluding ILPT) (5) |
| Dispositions (6) |
| Pro Forma SIR | ||||||||
Leasable properties (6) | 91 |
|
| 99 |
|
| (8 | ) |
| 91 |
| ||||
Total sq. ft. (2) | 14,217 |
|
| 16,538 |
|
| (2,321 | ) |
| 14,217 |
| ||||
Percent leased (3) | 93.6 | % |
| 89.8 | % |
| — | % |
| 97.1 | % | ||||
Same Property Cash Basis NOI (4) | $ | 50,806 |
|
| $ | 59,349 |
|
| $ | (3,509 | ) |
| $ | 55,840 |
|
Same Property Cash Basis NOI % change | (9.0 | %) |
|
|
|
|
|
| |||||||
| For the Three Months Ended September 30, | ||||||
Pro Forma Combined: | 2019 |
| 2018 | ||||
Leasable properties (7) | 200 |
|
| 200 |
| ||
Total sq. ft. (2) | 27,290 |
|
| 27,286 |
| ||
Percent leased (3) | 93.3 | % |
| 95.8 | % | ||
Same Property Cash Basis NOI (4) | $ | 99,314 |
|
| $ | 106,939 |
|
Same Property Cash Basis NOI % change | (7.1 | %) |
|
|
Office Properties Income Trust Reconciliation and Calculation of Pro Forma Same Property NOI and Same Property Cash Basis NOI (1) (amounts in thousands) (unaudited) | ||||||||||||
|
| For the Three Months Ended September 30, 2019 | ||||||||||
|
| OPI (Excluding |
| SIR |
| Pro Forma | ||||||
|
| SIR Properties) |
| Properties |
| Combined | ||||||
Reconciliation of Property NOI to Same Property NOI: (2) |
|
|
|
|
|
| ||||||
Rental income (3) |
| $ | 87,735 |
|
| $ | 79,676 |
|
| $ | 167,411 |
|
Property operating expenses |
| (37,379 | ) |
| (21,339 | ) |
| (58,718 | ) | |||
Property NOI |
| 50,356 |
|
| 58,337 |
|
| 108,693 |
| |||
Less: NOI of properties not included in same property results |
| (232 | ) |
| (2,236 | ) |
| (2,468 | ) | |||
Same Property NOI |
| $ | 50,124 |
|
| $ | 56,101 |
|
| $ | 106,225 |
|
|
|
|
|
|
|
| ||||||
Calculation of Same Property Cash Basis NOI: (2) |
|
|
|
|
|
| ||||||
Same property NOI |
| $ | 50,124 |
|
| $ | 56,101 |
|
| $ | 106,225 |
|
Add: Lease value amortization included in rental income (3) |
| 280 |
|
| (245 | ) |
| 35 |
| |||
Less: Non-cash straight line rent adjustments included in rental income (3) |
| (1,753 | ) |
| (5,050 | ) |
| (6,803 | ) | |||
Lease termination fees included in rental income (3) |
| (22 | ) |
| — |
|
| (22 | ) | |||
Non-cash amortization included in property operating expenses (4) |
| (121 | ) |
| — |
|
| (121 | ) | |||
Same Property Cash Basis NOI |
| $ | 48,508 |
|
| $ | 50,806 |
|
| $ | 99,314 |
|
Office Properties Income Trust Condensed Consolidated Balance Sheets (dollars in thousands, except per share data) (unaudited) | ||||||||
|
| September 30, |
| December 31, | ||||
|
| 2019 |
| 2018 | ||||
ASSETS |
|
|
|
| ||||
Real estate properties: |
|
|
|
| ||||
Land |
| $ | 854,083 |
|
| $ | 924,164 |
|
Buildings and improvements |
| 2,702,657 |
|
| 3,020,472 |
| ||
Total real estate properties, gross |
| 3,556,740 |
|
| 3,944,636 |
| ||
Accumulated depreciation |
| (375,565 | ) |
| (375,147 | ) | ||
Total real estate properties, net |
| 3,181,175 |
|
| 3,569,489 |
| ||
Assets of properties held for sale |
| 155,395 |
|
| 253,501 |
| ||
Investments in unconsolidated joint ventures |
| 40,502 |
|
| 43,665 |
| ||
Acquired real estate leases, net |
| 808,817 |
|
| 1,056,558 |
| ||
Cash and cash equivalents |
| 29,002 |
|
| 35,349 |
| ||
Restricted cash |
| 4,031 |
|
| 3,594 |
| ||
Rents receivable, net |
| 70,234 |
|
| 72,051 |
| ||
Deferred leasing costs, net |
| 37,890 |
|
| 25,672 |
| ||
Other assets, net |
| 33,203 |
|
| 178,704 |
| ||
Total assets |
| $ | 4,360,249 |
|
| $ | 5,238,583 |
|
|
|
|
|
| ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
| ||||
Unsecured revolving credit facility |
| $ | 210,000 |
|
| $ | 175,000 |
|
Unsecured term loans, net |
| — |
|
| 387,152 |
| ||
Senior unsecured notes, net |
| 2,015,099 |
|
| 2,357,497 |
| ||
Mortgage notes payable, net |
| 311,025 |
|
| 335,241 |
| ||
Liabilities of properties held for sale |
| 16,240 |
|
| 4,271 |
| ||
Accounts payable and other liabilities |
| 118,338 |
|
| 145,536 |
| ||
Due to related persons |
| 7,674 |
|
| 34,887 |
| ||
Assumed real estate lease obligations, net |
| 15,260 |
|
| 20,031 |
| ||
Total liabilities |
| 2,693,636 |
|
| 3,459,615 |
| ||
|
|
|
|
| ||||
Commitments and contingencies |
|
|
|
| ||||
|
|
|
|
| ||||
Shareholders’ equity: |
|
|
|
| ||||
Common shares of beneficial interest, $.01 par value: 200,000,000 shares authorized, 48,203,332 and 48,082,903 shares issued and outstanding, respectively |
| 482 |
|
| 481 |
| ||
Additional paid in capital |
| 2,612,062 |
|
| 2,609,801 |
| ||
Cumulative net income |
| 112,188 |
|
| 146,882 |
| ||
Cumulative other comprehensive income (loss) |
| (461 | ) |
| 106 |
| ||
Cumulative common distributions |
| (1,057,658 | ) |
| (978,302 | ) | ||
Total shareholders’ equity |
| 1,666,613 |
|
| 1,778,968 |
| ||
Total liabilities and shareholders’ equity |
| $ | 4,360,249 |
|
| $ | 5,238,583 |
|
Warning Concerning Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever OPI uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, OPI is making forward-looking statements. These forward-looking statements are based upon OPI’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by OPI’s forward-looking statements as a result of various factors. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond OPI's control. For example:
The information contained in OPI’s filings with the SEC, including under “Risk Factors” in OPI’s periodic reports, or incorporated therein, identifies other important factors that could cause OPI’s actual results to differ materially from those stated in or implied by OPI’s forward-looking statements. OPI’s filings with the SEC are available on the SEC's website at www.sec.gov.
You should not place undue reliance upon forward-looking statements.
Except as required by law, OPI does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.
A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq. No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.
View source version on businesswire.com: https://www.businesswire.com/news/home/20191101005147/en/
Olivia Snyder, Manager, Investor Relations (617) 219-1410
Source: Office Properties Income Trust