dszc/E+ via Getty Images City Office REIT (NYSE:CIO) is now a buy on the back of its low multiple to core FFO, fully covered dividend yield, and occupancy set to rise across its Class A office portfolio. The REIT last declared a quarterly cash dividend of $0.10 per share, kept flat from its prior quarter, and $0.40 per share if annualized for an 8.4% dividend yield. CIO generated fiscal 2024 first quarter core FFO of $0.33 per share, beating consensus by 3 cents and flat sequentially from the prior fourth q ...

Financial Data and Key Metrics Changes - The company's net operating income (NOI) for Q1 2024 was $26.7 million, which is $200,000 lower than Q4 2023 due to lower occupancy [29] - Core funds from operations (FFO) remained stable at $13.5 million or $0.33 per share, unchanged from the previous quarter [29] - Adjusted funds from operations (AFFO) for Q1 was $9.1 million or $0.22 per share, indicating a well-covered dividend [29] - Same-store cash NOI change was negative 1.0% or $200,000 lower compared to Q1 2023, but excluding Cascade Station, the rest of the portfolio showed a positive change of 0.8% [11] Business Line Data and Key Metrics Changes - The company executed 191,000 square feet of new and renewal leases during the quarter, with a significant lease of 43,000 square feet at FRP Ingenuity Drive in Orlando [6][24] - The occupancy rate at the end of the quarter was 83%, which increased to 86% when including signed leases that have not yet commenced [11] - The leasing pipeline remains strong, with expectations for longer-term lease solutions as opposed to shorter-term renewals [6][26] Market Data and Key Metrics Changes - JLL reported that 70% of U.S. office markets experienced an increase in tenant demand compared to the prior quarter, with active office requirements up 28% year-over-year [4] - The sublease vacancy rate has continued to decline, and new construction has significantly slowed, indicating a tightening supply in the office market [23] Company Strategy and Development Direction - The company is focusing on enhancing key assets to grow net operating income, with significant investments planned for renovations and upgrades [26][27] - The strategy includes positioning the best assets for leasing success while being cautious with underperforming properties [17] - The company anticipates that the majority of its portfolio value will reside in newly renovated properties, setting the stage for long-term leasing success [9] Management's Comments on Operating Environment and Future Outlook - Management noted that the office sector is trending towards equilibrium, with gradual improvements expected in the supply-demand equation [5] - The company is reducing guidance to reflect the impact of WeWork's expected downsizing, estimating a $1.8 million impact on core FFO guidance for 2024 [13] - Management expressed optimism about the leasing environment, with trends indicating a shift towards longer-term solutions from tenants [66] Other Important Information - The company has a total debt of $668 million, with a net debt to EBITDA ratio of 6.6x as of March 31 [31] - The company is working with existing lenders due to challenges in the debt markets for new office loans [12] Q&A Session Summary Question: How did the company approach negotiations with WeWork? - Management indicated that they reached an agreement in principle with WeWork to continue in two buildings but with a smaller footprint, which is expected to be finalized soon [25][44] Question: What is the outlook for asset sales given current market conditions? - Management stated that they are being cautious with asset sales due to illiquid market conditions but are positioning their best assets for future monetization [17][46] Question: What is the expected impact of WeWork's downsizing on occupancy? - Management expects to regain two floors from WeWork, which will positively impact occupancy numbers by year-end [56][57] Question: How is the company managing its spec suite investments? - Management noted that spec suite investments are being reduced to a more normalized level after a significant focus in 2023, with expectations of generating over $2 million in NOI from current spec suites [39][40]

[PART I. FINANCIAL INFORMATION](index=1&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=1&type=section&id=Item%201.%20Financial%20Statements) The company's Q1 2024 financial statements reflect an increased net loss, slightly lower revenues, and a shift in financing activities [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company's Q1 2024 operations show decreased rental revenues, lower operating income, and an increased net loss per share, with dividends halved Q1 2024 vs Q1 2023 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | **Rental and other revenues** | $44,493 | $45,957 | | **Total operating expenses** | $36,530 | $36,789 | | **Operating income** | $7,963 | $9,168 | | **Net (loss)/income attributable to the Company** | $(589) | $704 | | **Net loss attributable to common stockholders** | $(2,444) | $(1,151) | | **Net loss per common share (Basic & Diluted)** | $(0.06) | $(0.03) | | **Dividend distributions declared per common share** | $0.10 | $0.20 | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, total assets slightly decreased to $1.51 billion, with stable liabilities and reduced equity Balance Sheet Highlights (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total Real estate properties, net** | $1,317,416 | $1,323,075 | | **Cash and cash equivalents** | $29,533 | $30,082 | | **Total Assets** | $1,505,527 | $1,511,376 | | **Total Debt** | $668,249 | $669,510 | | **Total Liabilities** | $737,874 | $738,743 | | **Total Equity** | $767,653 | $772,633 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2024 cash flows show increased operating cash, decreased investing cash usage, and a significant shift in financing activities Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | **Net Cash Provided By Operating Activities** | $16,386 | $13,883 | | **Net Cash Used In Investing Activities** | $(7,494) | $(12,420) | | **Net Cash (Used In)/Provided By Financing Activities** | $(8,920) | $6,514 | | **Net (Decrease)/Increase in Cash** | $(28) | $7,977 | | **Cash, End of Period** | $43,364 | $52,239 | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's debt, interest rate management, tenant bankruptcy, and a post-quarter loan default on a property - As of March 31, 2024, total principal debt outstanding was **$671.2 million**, with significant maturities in **2024 ($106.1 million)**, **2025 ($254.7 million)**, and **2027-2028 ($280.8 million)**[123](index=123&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - Tenant WeWork Inc. filed for Chapter 11 bankruptcy, rejecting a **46,000 sq ft** lease. As of March 31, 2024, WeWork still operated at two locations totaling **131,000 sq ft**, with the company monitoring for potential future lease rejections[36](index=36&type=chunk) - On May 1, 2024, a default was triggered on the non-recourse loan for the Cascade Station property after the company did not repay the principal at maturity. The process to transfer the property to the lender has been initiated[76](index=76&type=chunk) - The Board of Directors approved a share repurchase plan in May 2023, authorizing up to **$50 million** in repurchases of common or preferred stock. No shares were repurchased during Q1 2024[58](index=58&type=chunk)[59](index=59&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the challenging office market, portfolio performance, revenue decline, and liquidity, noting a post-quarter loan default and cash-sweep triggers - As of March 31, 2024, the company owned **24 properties** with **5.7 million square feet** of net rentable area (NRA), which were approximately **83.0% leased**[80](index=80&type=chunk) - The economic environment, marked by high interest rates and inflation, has made retaining and attracting tenants more challenging. The portfolio's vacancy rate increased to **14.0%** as of March 31, 2024, from **12.5%** a year prior[73](index=73&type=chunk)[74](index=74&type=chunk) - The company's strategy is to focus on owning and acquiring office properties in growth markets, predominantly in the Sun Belt, characterized by growing populations and above-average employment growth[83](index=83&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q1 2024 results show a **3% decrease** in rental revenues primarily due to a property disposition, with slightly lower operating expenses - Rental and other revenues decreased by **$1.5 million (3%)**, primarily due to a **$1.7 million** reduction from the disposition of 190 Office Center in May 2023[154](index=154&type=chunk) - Total operating expenses decreased by **$0.3 million (1%)**, with the disposition of 190 Office Center reducing expenses by **$1.1 million**, partially offset by higher costs at other properties[155](index=155&type=chunk) Leasing Activity - Q1 2024 | Leasing Type | Square Feet (000's) | Average Effective Rents | | :--- | :--- | :--- | | **New Leasing** | 110 | $33.33 | | **Renewal Leasing** | 81 | $32.50 | | **Total Leasing** | 191 | $32.98 | [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by cash and a credit facility, but is impacted by a post-quarter loan default and cash-sweep triggers on four properties - The company had **$29.5 million** of cash and cash equivalents and **$13.8 million** of restricted cash as of March 31, 2024[181](index=181&type=chunk) - Post-quarter end, the company defaulted on the non-recourse loan for its Cascade Station property and is transferring the asset to the lender[183](index=183&type=chunk) - As of March 31, 2024, lenders for four mortgage borrowings have triggered 'cash-sweep periods', directing property cash flows into restricted accounts totaling **$9.6 million**[163](index=163&type=chunk) Contractual Obligations as of March 31, 2024 (in thousands) | Contractual Obligations | Total | Payments Due in 2024 | Payments Due in 2025-2026 | Payments Due in 2027-2028 | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | **Principal payments on mortgage loans** | $671,191 | $106,146 | $284,260 | $280,785 | $0 | | **Interest payments** | $75,759 | $23,165 | $40,082 | $12,512 | $0 | | **Lease obligations** | $36,071 | $465 | $1,510 | $1,190 | $32,906 | | **Total** | **$798,019** | **$144,774** | **$325,852** | **$294,487** | **$32,906** | [Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate fluctuations, largely mitigated by fixed-rate debt and swaps, with a hypothetical 1% SOFR increase impacting annual interest costs by **$0.6 million** - The company's main market risk is from interest rate changes, which it manages using derivative financial instruments like interest rate swaps[173](index=173&type=chunk) - As of March 31, 2024, approximately **$611.2 million**, or **91.1%**, of the company's debt had fixed or effectively fixed interest rates[174](index=174&type=chunk) - A **1%** increase in the SOFR would lead to a **$0.6 million** increase in annual interest costs on the **$60.0 million** of variable-rate debt[174](index=174&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The Company's Chief Executive Officer and Chief Financial Officer determined that disclosure controls and procedures were effective as of March 31, 2024[141](index=141&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[142](index=142&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in litigation that arises in the ordinary course of business, which management does not believe will have a material adverse effect on financial position or operational results - Management believes that ongoing litigation, which arises in the ordinary course of business, will not have a material adverse effect on the Company's financial position or results of operations[193](index=193&type=chunk)[57](index=57&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section of the report does not present any new or updated risk factors, typically referring to the comprehensive risk factor disclosure in the company's most recent Annual Report on Form 10-K - There were no new risk factors reported for the period. The report references disclosures in previous filings[198](index=198&type=chunk) [Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company disclosed a default on the non-recourse loan for its Cascade Station property, initiating transfer to the lender without expected material gain or loss due to prior impairment - On May 1, 2024, an event of default was triggered on the non-recourse loan for the Cascade Station property following non-payment at maturity[194](index=194&type=chunk) - The company is transferring the property to the lender and does not anticipate a material gain or loss due to a prior impairment charge on the asset[194](index=194&type=chunk)

Financial Performance - Rental and other revenues for Q1 2024 were $44.5 million, a decrease from $45.96 million in Q1 2023[36] - GAAP net loss attributable to common stockholders was approximately $2.4 million, or ($0.06) per fully diluted share[2] - Core FFO was approximately $13.5 million, or $0.33 per fully diluted share[2] - AFFO was approximately $9.1 million, or $0.22 per fully diluted share[2] - Net Operating Income (NOI) was approximately $26.7 million for Q1 2024, benefiting from $0.9 million of termination fee income[26] - Same Store Cash NOI decreased by 1.0% compared to the same period in the prior year[14] - Same store NOI for Q1 2024 was $26,014, down 2.4% from $26,663 in Q1 2023[39] - Core FFO attributable to common stockholders for Q1 2024 was $13,542, compared to $12,631 in Q1 2023[56] - FFO per common share for Q1 2024 was $0.30, while Core FFO per common share was $0.33[56] Occupancy and Leasing - In-place occupancy was 83.0% as of March 31, 2024, or 86.0% including signed leases not yet occupied[5] - Executed approximately 191,000 square feet of new and renewal leases during the quarter, including 110,000 square feet of new leases[6] - The company signed renewal leases with a weighted average lease term of 4.2 years at an average annual rent of $32.50 per square foot[44] Dividends - The company declared a first quarter dividend of $0.10 per share of common stock, paid on April 24, 2024[2] - The cash dividend declared for Q1 2024 was $0.10 per share, paid on April 24, 2024[45] Guidance and Expectations - The 2024 guidance for Core FFO per fully diluted share is updated to a range of $1.14 to $1.22[16] - The company expects a reduction in Core FFO of $1.8 million or $0.04 per fully diluted share due to lease modifications related to WeWork spaces[41] - The company anticipates Core FFO for the full year 2024 to be between $47,000 and $48,750[59] Assets and Liabilities - Total assets as of March 31, 2024, were $1,505,527, a slight decrease from $1,511,376 at the end of 2023[54] - Total liabilities as of March 31, 2024, were $737,874, compared to $738,743 at the end of 2023[54]

VANCOUVER, May 3, 2024 /PRNewswire/ -- 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 dilu ...

VANCOUVER, March 15, 2024 /PRNewswire/ -- City Office REIT, Inc. (NYSE: CIO) ("City Office," "CIO" or the "Company") announced today that its Board of Directors has authorized a quarterly dividend amount of $0.10 per share of common stock and common unit of partnership interest for the first quarter of 2024. Additionally, the Board of Directors authorized a regular quarterly dividend of $0.4140625 per share of the Company's 6.625% Series A Cumulative Redeemable Preferred Stock.  The dividends will be payabl ...

John Webb/iStock via Getty Images This article was coproduced with Leo Nelissen. I don’t think anyone has ever used “dumpster diving” in a positive context. However, did you know some people make decent money dumpster diving? Last year, Business Insider published an article with the interesting title: “We met dumpster diving 14 years ago and now make up to $3,000 a month selling our trash treasures.” $3,000 a month is $36,000 a year. The median household income in the U.S. is roughly $74,600. However, i ...

Alex Potemkin/iStock via Getty Images City Office REIT's (NYSE:CIO) preferreds (NYSE:CIO.PR.A) are a buy and I've taken a significant position after first considering the commons when I last covered the internally managed office REIT. While rising office vacancies across the US will continue to form a fundamental headwind for office owners, CIO's fiscal 2023 fourth quarter occupancy rate at 84.5% remains healthy albeit dipping by roughly 90 basis points sequentially. Critically, the dip was mainly led b ...

Financial Data and Key Metrics - Total debt as of December 31 was $670 million, with net debt to EBITDA at 6.6x [7] - Cash and restricted cash stood at $43 million as of quarter-end [7] - Core FFO per share for 2023 was $1.39, within the guidance range, with a total AFFO payout ratio of 66% [40] - Fourth quarter NOI was $26.9 million, $300k higher than Q3, impacted by $1.4 million write-off related to WeWork lease at Block 23 [30][69] - Same-store cash NOI grew by 3% for 2023 compared to the prior year, but Q4 same-store cash NOI was down 0.5% year-over-year [70] Business Line Data and Key Metrics - Executed 599,000 square feet of new and renewal leasing in 2023, with Q4 seeing 109,000 square feet of new leases, the highest in 2023 [23] - Portfolio occupancy ended the year at 84.5%, with 114,000 square feet of signed leases not yet commenced [32] - Retention rate in Q4 was 21%, significantly impacted by 70,000 square feet of lease departures in Portland [32] - Spec suite and vacancy conditioning program investments totaled $900,000 in Q4, or $0.02 per share [31] Market Data and Key Metrics - Office market sales volumes in 2023 were down 57% year-over-year, with many transactions aided by seller financing or assumable debt [24] - New office construction in Q4 2023 was the lowest in over 20 years, with most projects being build-to-suit or pre-leased [25] - Subleasing is moderating, with Q4 indicating a decrease in sublease availability across many office markets [25] - 60% of total office vacancy is concentrated in just 10% of buildings, with demand highest for premier, well-located buildings [43] Company Strategy and Industry Competition - Focus on leasing to drive cash flow and enhance borrowing capacity [1] - Prioritizing liquidity, capital protection, and prudent debt maturity management [29] - Advancing spec suite and property renovation programs to align with market demands [46] - Exploring creative ways to unlock value at properties, including potential asset sales or unique buyer opportunities [82] Management Commentary on Operating Environment and Future Outlook - Corporate return-to-office policies are gaining momentum, with major companies requiring employees to attend the office at least three days a week [13][42] - Leasing momentum from Q4 2023 carried into 2024, with a pipeline exceeding 200,000 square feet, including larger corporate tenants [26] - Challenges in the investment sales market and frozen debt capital for new originations are being closely monitored [24] - 2024 guidance assumes no acquisitions, $21 million in dispositions, and a core FFO per share range of $1.18 to $1.22 [51][73] Other Important Information - WeWork lease at Block 23 was rejected, with $1 million letter of credit being drawn against costs and lost income [6] - Negotiations with a high-quality co-working operator for Block 23 are in late stages [6] - WeWork withheld rent payments at Block 23 and Terraces, but agreed to repay overdue amounts by end of February [45] - Cascade Station property in Portland may transition back to the lender due to challenging market conditions [71] Q&A Session Summary Question: Cascade Station marketability and impact on occupancy [53] - Response: Cascade Station is a small asset (128,000 square feet), and its exit is expected mid-2024, with a slight uptick in occupancy by year-end [54] Question: Same-store cash NOI growth expectations for 2024 [55] - Response: Same-store cash NOI is expected to be flat in 2024, with new leasing offsetting negatives from lease departures [56][76] Question: Leasing momentum and market trends [9] - Response: Leasing momentum is driven by larger corporate tenants, with active negotiations for four leases averaging over 40,000 square feet each [26][58] Question: Potential transition of WeWork space at Block 23 to a corporate tenant [80] - Response: Transitioning to a corporate tenant is possible, but continuing as a co-working space is the logical choice due to existing build-out [62] Question: Asset sales and leverage reduction [63] - Response: Selling assets in the current environment is challenging due to limited buyers and frozen debt markets, but the company remains open to compelling opportunities [64][65] Question: Mortgage assumptions and market activity [66] - Response: Assumable mortgages are complex, and muted activity is expected until debt markets open up [83]

❑ Acquisition of three properties in Raleigh, Phoenix and Dallas for $614 million in December 2021 enhanced and diversified the portfolio 2525 McKinnon Dallas, TX Irreplaceable location in the heart of Uptown The Terraces Dallas, TX New building in desirable Preston Center The Square Phoenix, AZ Irreplaceable location in Old Town Scottsdale OVER $560 MILLION OF GAINS ACROSS 11 DISPOSITIONS Lake Vista Pointe, Dallas $33.01 $19.78 SUCCESSFUL EXECUTION ON PROPERTY REPOSITIONINGS ACTIVE STEPS TO POSITION FOR LO ...