Peakstone Realty Trust(PKST) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Net loss widened significantly in 2023, driven by major impairment charges and property dispositions that also reduced assets and equity Consolidated Balance Sheet Summary (in thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total real estate, net | $2,161,077 | $2,852,617 | | Total assets | $2,840,209 | $3,633,376 | | Debt, net | $1,442,003 | $1,485,402 | | Total liabilities | $1,594,929 | $1,647,241 | | Total equity | $1,245,280 | $1,857,323 | Consolidated Statement of Operations Summary (in thousands) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Rental income | $61,713 | $101,330 | $191,226 | $340,592 | | Real estate impairment provision | $0 | $10,697 | $397,373 | $86,254 | | Net loss from investment in unconsolidated entity | ($144,598) | $0 | ($176,767) | $0 | | Net loss | ($139,948) | ($119,373) | ($583,332) | ($193,240) | | Net loss per share, basic and diluted | ($3.55) | ($3.08) | ($14.97) | ($5.08) | Consolidated Statement of Cash Flows Summary (Nine Months Ended, in thousands) | Metric | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $58,770 | $135,348 | | Net cash provided by investing activities | $289,796 | $921,545 | | Net cash used in financing activities | ($216,413) | ($1,155,150) | Notes to Consolidated Financial Statements Significant 2023 events included major property dispositions, large real estate and joint venture impairments, and preferred share redemptions - During the nine months ended September 30, 2023, the company sold nine properties for gross proceeds of approximately $308.7 million, recognizing a net gain of $24.7 million[53][54] - A real estate impairment provision of approximately $397.4 million was recorded on 16 properties during the first nine months of 2023[55][98][99] - The company recorded an other-than-temporary impairment of approximately $129.3 million for its investment in the Office Joint Venture, representing a complete write-off[68][69][101] - On April 10, 2023, the company redeemed all shares of its Series A Preferred Stock for a payment of $125.0 million plus accrued distributions[123] Segment Net Operating Income (NOI) (in thousands) | Segment | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Industrial NOI | $36,998 | $39,912 | | Office NOI | $89,692 | $193,635 | | Other NOI | $24,842 | $29,792 | | Total NOI | $151,532 | $263,339 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes declining performance to property dispositions and significant impairments, though liquidity remains strong at $516.6 million - As of September 30, 2023, the company's wholly-owned portfolio of 73 properties was 96.4% leased with a weighted average remaining lease term of 6.3 years[162] - The increased net loss was driven by a $311.1 million increase in real estate impairment provisions and a $176.8 million increase in losses from the unconsolidated Office Joint Venture[209][216][221] - As of September 30, 2023, the company had total liquidity of $516.6 million from cash and its Revolving Credit Facility[239] Same Store NOI Comparison (Nine Months Ended, in thousands) | Segment | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Industrial | $36,678 | $36,545 | 0% | | Office | $85,148 | $92,041 | (7)% | | Other | $26,227 | $26,900 | (3)% | | Total Same Store NOI | $148,053 | $155,486 | (5)% | FFO and AFFO per Share | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | FFO per share | ($2.79) | $0.68 | ($2.69) | $3.45 | | AFFO per share | $0.78 | $1.08 | $2.18 | $4.06 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate changes, with a hypothetical 100 bps rate increase impacting earnings by $2.0 million annually - The company's primary market risk exposure is to interest rate changes on its variable rate debt[262] - As of September 30, 2023, the company had approximately $1.2 billion in fixed-rate debt and $200.0 million in variable-rate debt, after considering interest rate swaps[264] - A hypothetical 100 basis point increase in interest rates would decrease future earnings and cash flows by approximately $2.0 million annually[265] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[267] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[268] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reported no material pending legal proceedings - The company is not a party to any material pending legal proceedings[149][269] Item 1A. Risk Factors No material changes were reported to the risk factors disclosed in the 2022 Annual Report on Form 10-K - No material changes to the risk factors from the Annual Report on Form 10-K for the year ended December 31, 2022, were reported[270] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no sales of unregistered securities during the nine months ended September 30, 2023 - There were no sales of unregistered securities during the nine months ended September 30, 2023[271]