☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2022
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
incorporation or organization) (I.R.S. Employer
Former name, former address and former fiscal year, if changed since last report: N/A
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 |
Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging growth company |
☐
3 | ||||||||
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6 | ||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | ||||||
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June 30, | December 31, | |||||||
2019 | 2018 | |||||||
Assets | ||||||||
Real estate properties | ||||||||
Land | $ | 224,837 | $ | 223,789 | ||||
Building and improvement | 762,537 | 704,113 | ||||||
Tenant improvement | 86,374 | 77,426 | ||||||
Furniture, fixtures and equipment | 285 | 319 | ||||||
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1,074,033 | 1,005,647 | |||||||
Accumulated depreciation | (86,475 | ) | (70,484 | ) | ||||
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987,558 | 935,163 | |||||||
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Cash and cash equivalents | 11,581 | 16,138 | ||||||
Restricted cash | 19,295 | 17,007 | ||||||
Rents receivable, net | 31,008 | 26,095 | ||||||
Deferred leasing costs, net | 11,039 | 10,402 | ||||||
Acquired lease intangible assets, net | 71,972 | 75,501 | ||||||
Other assets | 17,141 | 2,755 | ||||||
Assets held for sale | — | 17,370 | ||||||
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Total Assets | $ | 1,149,594 | $ | 1,100,431 | ||||
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Liabilities and Equity | ||||||||
Liabilities: | ||||||||
Debt | $ | 709,670 | $ | 645,354 | ||||
Accounts payable and accrued liabilities | 22,960 | 25,892 | ||||||
Deferred rent | 5,625 | 5,331 | ||||||
Tenant rent deposits | 5,780 | 4,564 | ||||||
Acquired lease intangible liabilities, net | 9,249 | 8,887 | ||||||
Other liabilities | 19,512 | 11,148 | ||||||
Liabilities related to assets held for sale | — | 878 | ||||||
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Total Liabilities | 772,796 | 702,054 | ||||||
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Commitments and Contingencies (Note 9) | ||||||||
Equity: | ||||||||
6.625% Series A Preferred stock, $0.01 par value per share, 5,600,000 shares authorized, 4,480,000 issued and outstanding | 112,000 | 112,000 | ||||||
Common stock, $0.01 par value, 100,000,000 shares authorized, 39,647,063 and 39,544,073 shares issued and outstanding | 396 | 395 | ||||||
Additional paid-in capital | 377,937 | 377,126 | ||||||
Accumulated deficit | (114,565 | ) | (92,108 | ) | ||||
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Total Stockholders’ Equity | 375,768 | 397,413 | ||||||
Non-controlling interests in properties | 1,030 | 964 | ||||||
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Total Equity | 376,798 | 398,377 | ||||||
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Total Liabilities and Equity | $ | 1,149,594 | $ | 1,100,431 | ||||
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Subsequent Events (Note 11) |
June 30, 2022 | December 31, 2021 | |||||||
Assets | ||||||||
Real estate properties | ||||||||
Land | $ | 200,686 | $ | 204,801 | ||||
Building and improvement | 1,230,702 | 1,244,177 | ||||||
Tenant improvement | 129,496 | 119,011 | ||||||
Furniture, fixtures and equipment | 664 | 664 | ||||||
1,561,548 | 1,568,653 | |||||||
Accumulated depreciation | (170,569 | ) | (157,356 | ) | ||||
1,390,979 | 1,411,297 | |||||||
Cash and cash equivalents | 26,352 | 21,321 | ||||||
Restricted cash | 43,044 | 20,945 | ||||||
Rents receivable, net | 37,501 | 30,415 | ||||||
Deferred leasing costs, net | 21,213 | 20,327 | ||||||
Acquired lease intangible assets, net | 61,762 | 68,925 | ||||||
Other assets | 30,526 | 28,283 | ||||||
Total Assets | $ | 1,611,377 | $ | 1,601,513 | ||||
Liabilities and Equity | ||||||||
Liabilities: | ||||||||
Debt | $ | 654,366 | $ | 653,648 | ||||
Accounts payable and accrued liabilities | 33,136 | 27,101 | ||||||
Deferred rent | 10,089 | 11,600 | ||||||
Tenant rent deposits | 6,856 | 6,165 | ||||||
Acquired lease intangible liabilities, net | 10,042 | 10,872 | ||||||
Other liabilities | 20,895 | 21,532 | ||||||
Total Liabilities | 735,384 | 730,918 | ||||||
Commitments and Contingencies (Note 9) | 0 | 0 | ||||||
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 June 30, 2022 and December 31, 2021 | 112,000 | 112,000 | ||||||
Common stock, $0.01 par value, 100,000,000 shares authorized, 43,330,831 and 43,554,375 shares issued and outstanding as of June 30, 2022 and December 31, 2021 | 433 | 435 | ||||||
Additional paid-in capital | 479,057 | 482,061 | ||||||
Retained earnings | 281,735 | 275,502 | ||||||
Accumulated other comprehensive income/(loss) | 1,885 | (382 | ) | |||||
Total Stockholders’ Equity | 875,110 | 869,616 | ||||||
Non-controlling interests in properties | 883 | 979 | ||||||
Total Equity | 875,993 | 870,595 | ||||||
Total Liabilities and Equity | $ | 1,611,377 | $ | 1,601,513 | ||||
Subsequent Events (Note 11) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Rental and other revenues | $ | 41,171 | $ | 30,236 | 78,291 | 61,770 | ||||||||||
Operating expenses: | ||||||||||||||||
Property operating expenses | 14,526 | 11,748 | 28,370 | 23,374 | ||||||||||||
General and administrative | 3,362 | 1,966 | 5,660 | 3,943 | ||||||||||||
Depreciation and amortization | 14,604 | 11,771 | 29,022 | 23,665 | ||||||||||||
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Total operating expenses | 32,492 | 25,485 | 63,052 | 50,982 | ||||||||||||
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Operating income | 8,679 | 4,751 | 15,239 | 10,788 | ||||||||||||
Interest expense: | ||||||||||||||||
Contractual interest expense | (7,502 | ) | (5,081 | ) | (14,645 | ) | (10,269 | ) | ||||||||
Amortization of deferred financing costs and debt fair value | (334 | ) | (354 | ) | (671 | ) | (986 | ) | ||||||||
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(7,836 | ) | (5,435 | ) | (15,316 | ) | (11,255 | ) | |||||||||
Net gain on sale of real estate property | 478 | — | 478 | 46,980 | ||||||||||||
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Net income/(loss) | 1,321 | (684 | ) | 401 | 46,513 | |||||||||||
Less: | ||||||||||||||||
Net income attributable to non-controlling interests in properties | (165 | ) | (114 | ) | (334 | ) | (249 | ) | ||||||||
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Net income/(loss) attributable to the Company | 1,156 | (798 | ) | 67 | 46,264 | |||||||||||
Preferred stock distributions | (1,855 | ) | (1,855 | ) | (3,710 | ) | (3,710 | ) | ||||||||
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Net (loss)/income attributable to common stockholders | $ | (699 | ) | $ | (2,653 | ) | $ | (3,643 | ) | $ | 42,554 | |||||
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Net (loss)/income per common share: | ||||||||||||||||
Basic | $ | (0.02 | ) | $ | (0.07 | ) | $ | (0.09 | ) | $ | 1.18 | |||||
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Diluted | $ | (0.02 | ) | $ | (0.07 | ) | $ | (0.09 | ) | $ | 1.17 | |||||
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Weighted average common shares outstanding: | ||||||||||||||||
Basic | 39,640 | 36,132 | 39,603 | 36,103 | ||||||||||||
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Diluted | 39,640 | 36,132 | 39,603 | 36,452 | ||||||||||||
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Dividend distributions declared per common share | $ | 0.235 | $ | 0.235 | $ | 0.470 | $ | 0.470 | ||||||||
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Rental and other revenues | $ | 45,498 | $ | 39,964 | $ | 90,350 | $ | 79,480 | ||||||||
Operating expenses: | ||||||||||||||||
Property operating expenses | 16,836 | 14,179 | 33,325 | 28,297 | ||||||||||||
General and administrative | 3,614 | 3,068 | 7,070 | 5,868 | ||||||||||||
Depreciation and amortization | 15,701 | 14,954 | 31,516 | 29,369 | ||||||||||||
Total operating expenses | 36,151 | 32,201 | 71,911 | 63,534 | ||||||||||||
Operating income | 9,347 | 7,763 | 18,439 | 15,946 | ||||||||||||
Interest expense: | ||||||||||||||||
Contractual interest expense | (5,982 | ) | (5,639 | ) | (11,729 | ) | (11,883 | ) | ||||||||
Amortization of deferred financing costs and debt fair value | (302 | ) | (272 | ) | (614 | ) | (602 | ) | ||||||||
(6,284 | ) | (5,911 | ) | (12,343 | ) | (12,485 | ) | |||||||||
Net gain on sale of real estate property | — | — | 21,658 | 47,400 | ||||||||||||
Net income | 3,063 | 1,852 | 27,754 | 50,861 | ||||||||||||
Less: | ||||||||||||||||
Net income attributable to non-controlling interests in properties | (164 | ) | (190 | ) | (335 | ) | (382 | ) | ||||||||
Net income attributable to the Company | 2,899 | 1,662 | 27,419 | 50,479 | ||||||||||||
Preferred stock distributions | (1,855 | ) | (1,855 | ) | (3,710 | ) | (3,710 | ) | ||||||||
Net income/(loss) attributable to common stockholders | $ | 1,044 | $ | (193 | ) | $ | 23,709 | $ | 46,769 | |||||||
Net income/(loss) per common share: | ||||||||||||||||
Basic | $ | 0.02 | $ | 0.00 | $ | 0.54 | $ | 1.08 | ||||||||
Diluted | $ | 0.02 | $ | 0.00 | $ | 0.53 | $ | 1.06 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 43,632 | 43,482 | 43,593 | 43,440 | ||||||||||||
Diluted | 44,482 | 43,482 | 44,445 | 44,080 | ||||||||||||
Dividend distributions declared per common share | $ | 0.20 | $ | 0.15 | $ | 0.40 | $ | 0.30 | ||||||||
Comprehensive Income
Number of shares of preferred stock | Preferred stock | Number of shares of common stock | Common stock | Additional paid-in capital | Accumulated deficit | Total stockholders’ equity | Non- controlling interests in properties | Total equity | ||||||||||||||||||||||||||||
Balance - December 31, 2018 | 4,480 | $ | 112,000 | 39,544 | $ | 395 | $ | 377,126 | $ | (92,108 | ) | $ | 397,413 | $ | 964 | $ | 398,377 | |||||||||||||||||||
Restricted stock award grants and vesting | — | — | 92 | 1 | 302 | (83 | ) | 220 | — | 220 | ||||||||||||||||||||||||||
Common stock dividend distributions declared | — | — | — | — | — | (9,314 | ) | (9,314 | ) | — | (9,314 | ) | ||||||||||||||||||||||||
Preferred stock dividend distributions declared | — | — | — | — | — | (1,855 | ) | (1,855 | ) | — | (1,855 | ) | ||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | 12 | 12 | |||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (134 | ) | (134 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | (1,089 | ) | (1,089 | ) | 169 | (920 | ) | ||||||||||||||||||||||||
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Balance - March 31, 2019 | 4,480 | $ | 112,000 | 39,636 | $ | 396 | $ | 377,428 | $ | (104,449 | ) | $ | 385,375 | $ | 1,011 | $ | 386,386 | |||||||||||||||||||
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Restricted stock award grants and vesting | — | — | 11 | — | 509 | (99 | ) | 410 | — | 410 | ||||||||||||||||||||||||||
Common stock dividend distributions declared | — | — | — | — | — | (9,318 | ) | (9,318 | ) | — | (9,318 | ) | ||||||||||||||||||||||||
Preferred stock dividend distributions declared | — | — | — | — | — | (1,855 | ) | (1,855 | ) | — | (1,855 | ) | ||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | 10 | 10 | |||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (156 | ) | (156 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,156 | 1,156 | 165 | 1,321 | |||||||||||||||||||||||||||
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Balance - June 30, 2019 | 4,480 | $ | 112,000 | 39,647 | $ | 396 | $ | 377,937 | $ | (114,565 | ) | $ | 375,768 | $ | 1,030 | $ | 376,798 | |||||||||||||||||||
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Number of shares of preferred stock | Preferred stock | Number of shares of common stock | Common stock | Additional paid-in capital | Accumulated deficit | Total stockholders’ equity | Non- controlling interests in properties | Total equity | ||||||||||||||||||||||||||||
Balance – December 31, 2017 | 4,480 | $ | 112,000 | 36,012 | $ | 360 | $ | 334,241 | $ | (86,977 | ) | $ | 359,624 | $ | 208 | $ | 359,832 | |||||||||||||||||||
Restricted stock award grants and vesting | — | — | 120 | 1 | 356 | (72 | ) | 285 | — | 285 | ||||||||||||||||||||||||||
Common stock dividend distributions declared | — | — | — | — | — | (8,491 | ) | (8,491 | ) | — | (8,491 | ) | ||||||||||||||||||||||||
Preferred stock dividend distributions declared | — | — | — | — | — | (1,855 | ) | (1,855 | ) | — | (1,855 | ) | ||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (29 | ) | (29 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | 47,063 | 47,063 | 135 | 47,198 | |||||||||||||||||||||||||||
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Balance – March 31, 2018 | 4,480 | $ | 112,000 | 36,132 | $ | 361 | $ | 334,597 | $ | (50,332 | ) | $ | 396,626 | $ | 314 | $ | 396,940 | |||||||||||||||||||
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Restricted stock award grants and vesting | — | — | 1 | — | 412 | (80 | ) | 332 | — | 332 | ||||||||||||||||||||||||||
Common stock dividend distributions declared | — | — | — | — | — | (8,491 | ) | (8,491 | ) | — | (8,491 | ) | ||||||||||||||||||||||||
Preferred stock dividend distributions declared | — | — | — | — | — | (1,855 | ) | (1,855 | ) | — | (1,855 | ) | ||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | 43 | 43 | |||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | (135 | ) | (135 | ) | |||||||||||||||||||||||||
Net income | — | — | — | — | — | (798 | ) | (798 | ) | 114 | (684 | ) | ||||||||||||||||||||||||
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Balance - June 30, 2018 | 4,480 | $ | 112,000 | 36,133 | $ | 361 | $ | 335,009 | $ | (61,556 | ) | $ | 385,814 | $ | 336 | $ | 386,150 | |||||||||||||||||||
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net income | $ | 3,063 | $ | 1,852 | $ | 27,754 | $ | 50,861 | ||||||||
Other comprehensive income: | ||||||||||||||||
Unrealized cash flow hedge gain/(loss) | 450 | (47 | ) | 2,064 | 480 | |||||||||||
Amounts reclassified to interest expense | 63 | 147 | 203 | 289 | ||||||||||||
Other comprehensive income | 513 | 100 | 2,267 | 769 | ||||||||||||
Comprehensive income | 3,576 | 1,952 | 30,021 | 51,630 | ||||||||||||
Less: | ||||||||||||||||
Comprehensive income attributable to non-controlling interests in properties | (164 | ) | (190 | ) | (335 | ) | (382 | ) | ||||||||
Comprehensive income attributable to the Company | $ | 3,412 | $ | 1,762 | $ | 29,686 | $ | 51,248 | ||||||||
Changes in Equity
Six Months Ended June 30, | ||||||||
2019 | 2018 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 401 | $ | 46,513 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 29,022 | 23,665 | ||||||
Amortization of deferred financing costs and debt fair value | 671 | 986 | ||||||
Amortization of above/below market leases | (92 | ) | (140 | ) | ||||
Increase in straight-line rent/expense | (3,424 | ) | (1,842 | ) | ||||
Non-cash stock compensation | 879 | 705 | ||||||
Net gain on sale of real estate property | (478 | ) | (46,980 | ) | ||||
Changes in non-cash working capital: | ||||||||
Rents receivable, net | (1,677 | ) | (93 | ) | ||||
Other assets | (1,082 | ) | (3,034 | ) | ||||
Accounts payable and accrued liabilities | (5,241 | ) | (6,467 | ) | ||||
Deferred rent | 53 | (2,042 | ) | |||||
Tenant rent deposits | (394 | ) | 89 | |||||
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Net Cash Provided By Operating Activities | 18,638 | 11,360 | ||||||
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Cash Flows (to)/from Investing Activities: | ||||||||
Additions to real estate properties | (9,881 | ) | (9,156 | ) | ||||
Acquisition of real estate | (61,012 | ) | (55,453 | ) | ||||
Net proceeds from sale of real estate | 33,941 | 84,839 | ||||||
Deferred leasing costs | (1,598 | ) | (2,057 | ) | ||||
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Net Cash (Used In)/Provided By Investing Activities | (38,550 | ) | 18,173 | |||||
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Cash Flows from/(to) Financing Activities: | ||||||||
Debt issuance and extinguishment costs | (648 | ) | (1,942 | ) | ||||
Proceeds from mortgage loans payable | 40,950 | — | ||||||
Repayment of mortgage loans payable | (2,327 | ) | (34,121 | ) | ||||
Proceeds from credit facility | 55,000 | 82,000 | ||||||
Repayment of credit facility | (52,500 | ) | (57,000 | ) | ||||
Shares withheld for payment of taxes on restricted stock unit vesting | (246 | ) | (86 | ) | ||||
Contributions from non-controlling interests in properties | 22 | 43 | ||||||
Distributions to non-controlling interests in properties | (290 | ) | (165 | ) | ||||
Dividend distributions paid to stockholders and Operating Partnership unitholders | (22,318 | ) | (20,664 | ) | ||||
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Net Cash Provided By/(Used In) Financing Activities | 17,643 | (31,935 | ) | |||||
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Net Decrease in Cash, Cash Equivalents and Restricted Cash | (2,269 | ) | (2,402 | ) | ||||
Cash, Cash Equivalents and Restricted Cash, Beginning of Period | 33,145 | 35,014 | ||||||
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Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 30,876 | $ | 32,612 | ||||
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Reconciliation of Cash, Cash Equivalents and Restricted Cash: | ||||||||
Cash and Cash Equivalents, End of Period | $ | 11,581 | $ | 14,655 | ||||
Restricted Cash, End of Period | 19,295 | 17,957 | ||||||
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Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 30,876 | $ | 32,612 | ||||
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Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid for interest | $ | 14,696 | $ | 9,962 | ||||
Purchases of additions in real estate properties included in accounts payable | $ | 1,411 | $ | 3,380 | ||||
Purchases of deferred leasing costs included in accounts payable | $ | 160 | $ | 158 | ||||
Debt assumed on acquisition of real estate | $ | 22,473 | $ | — |
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, 2021 | 4,480 | $ | 112,000 | 43,554 | $ | 435 | $ | 482,061 | $ | 275,502 | $ | (382 | ) | $ | 869,616 | $ | 979 | $ | 870,595 | |||||||||||||||||||||
Restricted stock award grants and vesting | — | — | — | — | 972 | (68 | ) | — | 904 | — | 904 | |||||||||||||||||||||||||||||
Common stock dividend distribution declared | — | — | — | — | — | (8,711 | ) | — | (8,711 | ) | — | (8,711 | ) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared | — | — | — | — | — | (1,855 | ) | — | (1,855 | ) | — | (1,855 | ) | |||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | 3 | 3 | ||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | (254 | ) | (254 | ) | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 24,520 | — | 24,520 | 171 | 24,691 | ||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 1,754 | 1,754 | — | 1,754 | ||||||||||||||||||||||||||||||
Balance—March 31, 2022 | 4,480 | $ | 112,000 | 43,554 | $ | 435 | $ | 483,033 | $ | 289,388 | $ | 1,372 | $ | 886,228 | $ | 899 | $ | 887,127 | ||||||||||||||||||||||
Restricted stock award grants and vesting | — | — | 171 | 2 | 1,020 | (117 | ) | — | 905 | — | 905 | |||||||||||||||||||||||||||||
Common stock repurchased | — | — | (395 | ) | (4 | ) | (4,996 | ) | — | — | (5,000 | ) | — | (5,000 | ) | |||||||||||||||||||||||||
Common stock dividend distribution declared | — | — | — | — | — | (8,580 | ) | — | (8,580 | ) | — | (8,580 | ) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared | — | — | — | — | — | (1,855 | ) | — | (1,855 | ) | — | (1,855 | ) | |||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | (180 | ) | (180 | ) | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 2,899 | — | 2,899 | 164 | 3,063 | ||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 513 | 513 | — | 513 | ||||||||||||||||||||||||||||||
Balance—June 30, 2022 | 4,480 | $ | 112,000 | 43,330 | $ | 433 | $ | 479,057 | $ | 281,735 | $ | 1,885 | $ | 875,110 | $ | 883 | $ | 875,993 | ||||||||||||||||||||||
Number of shares of preferred stock | Preferred stock | Number of shares of common stock | Common stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive loss | Total stockholders’ equity | Non-controlling interests in properties | Total equity | |||||||||||||||||||||||||||||||
Balance—December 31, 2020 | 4,480 | $ | 112,000 | 43,397 | $ | 433 | $ | 479,411 | $ | (172,958 | ) | $ | (1,960 | ) | $ | 416,926 | $ | 949 | $ | 417,875 | ||||||||||||||||||||
Restricted stock award grants and vesting | — | — | — | — | 695 | (50 | ) | — | 645 | — | 645 | |||||||||||||||||||||||||||||
Common stock dividend distribution declared | — | — | — | — | — | (6,510 | ) | — | (6,510 | ) | — | (6,510 | ) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared | — | — | — | — | — | (1,855 | ) | — | (1,855 | ) | — | (1,855 | ) | |||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | (220 | ) | (220 | ) | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 48,817 | — | 48,817 | 192 | 49,009 | ||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 669 | 669 | — | 669 | ||||||||||||||||||||||||||||||
Balance—March 31, 2021 | 4,480 | $ | 112,000 | 43,397 | $ | 433 | $ | 480,106 | $ | (132,556 | ) | $ | (1,291 | ) | $ | 458,692 | $ | 921 | $ | 459,613 | ||||||||||||||||||||
Restricted stock award grants and vesting | — | — | 157 | 2 | 523 | (76 | ) | — | 449 | — | 449 | |||||||||||||||||||||||||||||
Common stock dividend distribution declared | — | — | — | — | — | (6,533 | ) | — | (6,533 | ) | — | (6,533 | ) | |||||||||||||||||||||||||||
Preferred stock dividend distribution declared | — | — | — | — | — | (1,855 | ) | — | (1,855 | ) | — | (1,855 | ) | |||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | 2 | 2 | ||||||||||||||||||||||||||||||
Distributions | — | — | — | — | — | — | — | — | (204 | ) | (204 | ) | ||||||||||||||||||||||||||||
Net income | — | — | — | — | — | 1,662 | — | 1,662 | 190 | 1,852 | ||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 100 | 100 | — | 100 | ||||||||||||||||||||||||||||||
Balance—June 30, 2021 | 4,480 | $ | 112,000 | 43,554 | $ | 435 | $ | 480,629 | $ | (139,358 | ) | $ | (1,191 | ) | $ | 452,515 | $ | 909 | $ | 453,424 | ||||||||||||||||||||
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net income | $ | 27,754 | $ | 50,861 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 31,516 | 29,369 | ||||||
Amortization of deferred financing costs and debt fair value | 614 | 602 | ||||||
Amortization of above and below market leases | 80 | 301 | ||||||
Straight-line rent/expense | (4,356 | ) | 85 | |||||
Non-cash stock compensation | 1,895 | 1,310 | ||||||
Receipts from sales-type lease | 43,549 | — | ||||||
Net gain on sale of real estate property | (21,658 | ) | (47,400 | ) | ||||
Changes in non-cash working capital: | ||||||||
Rents receivable, net | (4,109 | ) | 635 | |||||
Other assets | (764 | ) | (1,048 | ) | ||||
Accounts payable and accrued liabilities | 1,268 | (2,757 | ) | |||||
Deferred rent | (1,511 | ) | 2,850 | |||||
Tenant rent deposits | 691 | 877 | ||||||
Net Cash Provided By Operating Activities | 74,969 | 35,685 | ||||||
Cash Flows (to)/from Investing Activities: | ||||||||
Additions to real estate properties | (16,462 | ) | (9,499 | ) | ||||
Acquisition of real estate | — | (43,256 | ) | |||||
Net proceeds from sale of real estate | — | 93,303 | ||||||
Deferred leasing costs | (4,786 | ) | (3,131 | ) | ||||
Net Cash (Used In)/Provided By Investing Activities | (21,248 | ) | 37,417 | |||||
Cash Flows to Financing Activities: | ||||||||
Proceeds from borrowings | 31,000 | 98,000 | ||||||
Repayment of borrowings | (30,941 | ) | (163,363 | ) | ||||
Dividend distributions paid to stockholders | (21,132 | ) | (16,729 | ) | ||||
Repurchases of common stock | (5,000 | ) | — | |||||
Distributions to non-controlling interests in properties | (434 | ) | (424 | ) | ||||
Shares withheld for payment of taxes on restricted stock unit vesting | (87 | ) | (216 | ) | ||||
Contributions from non-controlling interests in properties | 3 | 2 | ||||||
Net Cash Used In Financing Activities | (26,591 | ) | (82,730 | ) | ||||
Net Increase/(Decrease) in Cash, Cash Equivalents and Restricted Cash | 27,130 | (9,628 | ) | |||||
Cash, Cash Equivalents and Restricted Cash, Beginning of Period | 42,266 | 45,951 | ||||||
Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 69,396 | $ | 36,323 | ||||
Reconciliation of Cash, Cash Equivalents and Restricted Cash: | ||||||||
Cash and Cash Equivalents, End of Period | 26,352 | 13,394 | ||||||
Restricted Cash, End of Period | 43,044 | 22,929 | ||||||
Cash, Cash Equivalents and Restricted Cash, End of Period | $ | 69,396 | $ | 36,323 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid for interest | $ | 10,850 | $ | 11,955 | ||||
Purchase of additions in real estate properties included in accounts payable | $ | 10,301 | $ | 4,233 | ||||
Purchase of deferred leasing costs included in accounts payable | $ | 2,926 | $ | 2,164 |
New2021.
Adopted in the Current Year
leases that commence or are modified on or after the date that an entity first applies the amendments. The Company adopted the new standard effectiveASU
Transition method practical expedient – permits the Company to use the effective date as the dateadoption of initial application. Upon adoption, the Company ASU
Package of practical expedients – permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. This allowed the Company to continue classifying its leases at transition in substantially the same manner.
Single component practical expedient – permits the Company to not separate lease and non-lease components of leases. Upon transition, rental income, expense reimbursement, and other were aggregated into a single line within rental and other revenuesmaterial impact on the condensedCompany’s consolidated statement of operations.
Land easement practical expedient – permits the Company not to reassess under the new standard its prior conclusions about land easements.
Short-term lease practical expedient – permits the Company not to recognize leases with a term equal to or less than 12 months.
Lessor Accounting
The accounting for lessors under the new standard remained relatively unchanged with a few targeted updates impacting the Company, which included: (i) narrower definition of initial direct costs that requires certain costs to be expensed rather than capitalized, and (ii) provisions for uncollectible rents to be recorded as a reduction in revenue rather than as bad debt expense.
Lessee Accounting
The new standard requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating at inception, with classification affecting the pattern and recording of expenses in the statement of operations. Upon transition the Company recognized right-of use assets and lease liabilities principally for its ground and office leases.
3. Real Estate Investments
Property | Date Acquired | Percentage Owned | ||||||
| ||||||||
| ||||||||
| 100 | % |
Each of the
acquisition.
Canyon Park | Cascade Station | Total June 30, 2019 | ||||||||||
Land | $ | 7,098 | $ | — | $ | 7,098 | ||||||
Buildings and improvements | 36,619 | 25,141 | 61,760 | |||||||||
Tenant improvements | 1,797 | 2,080 | 3,877 | |||||||||
Acquired intangible assets | 8,109 | 3,134 | 11,243 | |||||||||
Other assets | 10 | 3,164 | 3,174 | |||||||||
Debt | — | (697 | ) | (697 | ) | |||||||
Accounts payable and other liabilities | (1,266 | ) | (186 | ) | (1,452 | ) | ||||||
Lease intangible liabilities | (1,297 | ) | (220 | ) | (1,517 | ) | ||||||
|
|
|
|
|
| |||||||
Net assets acquired | $ | 51,070 | $ | 32,416 | $ | 83,486 | ||||||
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|
|
|
The acquisition of the Cascade Station property was partially funded through an assumption of debt in the amount of $22.5 million.
The following table summarizes the Company’s allocation of the purchase price of assets acquired and liabilities assumed during the six months ended June 30, 2018 (in thousands):
Pima Center | ||||
Buildings and improvements | $ | 42,235 | ||
Tenant improvements | 2,898 | |||
Acquired intangible assets | 10,691 | |||
Other assets | 95 | |||
Accounts payable and other liabilities | (337 | ) | ||
Lease intangible liabilities | (129 | ) | ||
|
| |||
Net assets acquired | $ | 55,453 | ||
|
|
5910 Pacific Center and 9985 Pacific Heights | ||||
Land | $ | 37,294 | ||
Building and improvement | 2,979 | |||
Tenant improvement | 917 | |||
Lease intangible assets | 2,469 | |||
Other assets | 19 | |||
Accounts payable and other liabilities | (319 | ) | ||
Lease intangible liabilities | (103 | ) | ||
Net assets acquired | $ | 43,256 | ||
On February
Lease Intangible Assets | Lease Intangible Liabilities | |||||||||||||||||||||||||||||||
June 30, 2019 | Above Market Leases | Below Market Ground Lease(1) | In Place Leases | Leasing Commissions | Total | Below Market Leases | Below Market Ground Lease(1) | Total | ||||||||||||||||||||||||
Cost | $ | 11,924 | $ | — | $ | 86,640 | $ | 35,126 | $ | 133,690 | $ | (14,359 | ) | $ | (138 | ) | $ | (14,497 | ) | |||||||||||||
Accumulated amortization | (5,784 | ) | — | (41,672 | ) | (14,262 | ) | (61,718 | ) | 5,210 | 38 | 5,248 | ||||||||||||||||||||
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| |||||||||||||||||
$ | 6,140 | $ | — | $ | 44,968 | $ | 20,864 | $ | 71,972 | $ | (9,149 | ) | $ | (100 | ) | $ | (9,249 | ) | ||||||||||||||
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| |||||||||||||||||
Lease Intangible Assets | Lease Intangible Liabilities | |||||||||||||||||||||||||||||||
December 31, 2018 | Above Market Leases | Below Market Ground Lease(1) | In Place Leases | Leasing Commissions | Total | Below Market Leases | Below Market Ground Lease(1) | Total | ||||||||||||||||||||||||
Cost | $ | 10,595 | $ | 1,855 | $ | 82,474 | $ | 31,706 | $ | 126,630 | $ | (12,925 | ) | $ | (138 | ) | $ | (13,063 | ) | |||||||||||||
Accumulated amortization | (4,800 | ) | (19 | ) | (34,273 | ) | (12,037 | ) | (51,129 | ) | 4,140 | 36 | 4,176 | |||||||||||||||||||
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| |||||||||||||||||
$ | 5,795 | $ | 1,836 | $ | 48,201 | $ | 19,669 | $ | 75,501 | $ | (8,785 | ) | $ | (102 | ) | $ | (8,887 | ) | ||||||||||||||
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Lease Intangible Assets | Lease Intangible Liabilities | |||||||||||||||||||||||||||
June 30, 2022 | Above Market Leases | In Place Leases | Leasing Commissions | Total | Below Market Leases | Below Market Ground Lease | Total | |||||||||||||||||||||
Cost | $ | 19,488 | $ | 84,897 | $ | 37,591 | $ | 141,976 | $ | (16,605 | ) | $ | (138 | ) | $ | (16,743 | ) | |||||||||||
Accumulated amortization | (8,877 | ) | (52,350 | ) | (18,987 | ) | (80,214 | ) | 6,651 | 50 | 6,701 | |||||||||||||||||
$ | 10,611 | $ | 32,547 | $ | 18,604 | $ | 61,762 | $ | (9,954 | ) | $ | (88 | ) | $ | (10,042 | ) | ||||||||||||
Lease Intangible Assets | Lease Intangible Liabilities | |||||||||||||||||||||||||||
December 31, 2021 | Above Market Leases | In Place Leases | Leasing Commissions | Total | Below Market Leases | Below Market Ground Lease | Total | |||||||||||||||||||||
Cost | $ | 21,147 | $ | 93,761 | $ | 39,345 | $ | 154,253 | $ | (16,743 | ) | $ | (138 | ) | $ | (16,881 | ) | |||||||||||
Accumulated amortization | (9,627 | ) | (56,987 | ) | (18,714 | ) | (85,328 | ) | 5,961 | 48 | 6,009 | |||||||||||||||||
$ | 11,520 | $ | 36,774 | $ | 20,631 | $ | 68,925 | $ | (10,782 | ) | $ | (90 | ) | $ | (10,872 | ) | ||||||||||||
2019 | $ | 10,192 | ||
2020 | 18,332 | |||
2021 | 15,022 | |||
2022 | 7,255 | |||
2023 | 4,393 | |||
Thereafter | 7,529 | |||
|
| |||
$ | 62,723 | |||
|
|
2022 | $ | 5,283 | ||
2023 | 9,028 | |||
2024 | 6,695 | |||
2025 | 6,507 | |||
2026 | 6,461 | |||
Thereafter | 17,746 | |||
$ | 51,720 | |||
Property | June 30, 2019 | December 31, 2018 | Interest Rate as of June 30, 2019 (1) | Maturity | ||||||||||
Unsecured Credit Facility (2) | $ | 150,000 | $ | 147,500 | LIBOR +1.60 | %(3) | March 2022 | |||||||
Midland Life Insurance (4) | 86,142 | 86,973 | 4.34 | May 2021 | ||||||||||
Mission City | 47,000 | 47,000 | 3.78 | November 2027 | ||||||||||
190 Office Center | 41,152 | 41,250 | 4.79 | October 2025 | ||||||||||
Canyon Park (5) | 40,950 | — | 4.30 | March 2027 | ||||||||||
Circle Point | 39,650 | 39,650 | 4.49 | September 2028 | ||||||||||
SanTan | 34,347 | 34,682 | 4.56 | March 2027 | ||||||||||
Intellicenter | 33,227 | 33,481 | 4.65 | October 2025 | ||||||||||
The Quad | 30,600 | 30,600 | 4.20 | September 2028 | ||||||||||
FRP Collection | 29,288 | 29,589 | 3.85 | September 2023 | ||||||||||
2525 McKinnon | 27,000 | 27,000 | 4.24 | April 2027 | ||||||||||
Cascade Station | 22,474 | — | 4.55 | May 2024 | ||||||||||
Greenwood Blvd | 22,425 | 22,425 | 4.60 | December 2025 | ||||||||||
5090 N 40th St | 22,000 | 22,000 | 3.92 | January 2027 | ||||||||||
AmberGlen | 20,000 | 20,000 | 3.69 | May 2027 | ||||||||||
Lake Vista Pointe | 17,882 | 18,044 | 4.28 | August 2024 | ||||||||||
Central Fairwinds | 17,712 | 17,882 | 4.00 | June 2024 | ||||||||||
FRP Ingenuity Drive | 17,000 | 17,000 | 4.44 | December 2024 | ||||||||||
Carillon Point | 16,154 | 16,330 | 3.50 | October 2023 | ||||||||||
|
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|
| |||||||||||
Total Principal | 715,003 | 651,406 | ||||||||||||
Deferred financing costs, net | (6,030 | ) | (6,052 | ) | ||||||||||
Unamortized fair value adjustments | 697 | — | ||||||||||||
|
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|
| |||||||||||
Total | $ | 709,670 | $ | 645,354 | ||||||||||
|
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|
|
Property | June 30, 2022 | December 31, 2021 | Interest Rate as of June 30, 2022 (1) | Maturity | ||||||||||
Unsecured Credit Facility (3)(4) | $ | 162,000 | $ | 142,000 | LIBOR +1.30 | % (2) | November 2025 | |||||||
Term Loan (3) | 50,000 | 50,000 | LIBOR +1.25 | % (2) | September 2024 | |||||||||
Mission City | 47,000 | 47,000 | 3.78 | % | November 2027 | |||||||||
Canyon Park (5) | 40,031 | 40,381 | 4.30 | % | March 2027 | |||||||||
Circle Point | 39,650 | 39,650 | 4.49 | % | September 2028 | |||||||||
190 Office Center | 39,239 | 39,581 | 4.79 | % | October 2025 | |||||||||
SanTan | 32,477 | 32,807 | 4.56 | % | March 2027 | |||||||||
Intellicenter | 31,591 | 31,883 | 4.65 | % | October 2025 | |||||||||
The Quad | 30,600 | 30,600 | 4.20 | % | September 2028 | |||||||||
FRP Collection | 27,162 | 27,535 | 3.10 | % | September 2023 | |||||||||
2525 McKinnon | 27,000 | 27,000 | 4.24 | % | April 2027 | |||||||||
Greenwood Blvd | 21,660 | 21,920 | 3.15 | % | December 2025 | |||||||||
Cascade Station | 21,387 | 21,581 | 4.55 | % | May 2024 | |||||||||
5090 N. 40 th | 21,024 | 21,233 | 3.92 | % | January 2027 | |||||||||
AmberGlen | 20,000 | 20,000 | 3.69 | % | May 2027 |
Property | June 30, 2022 | December 31, 2021 | Interest Rate as of June 30, 2022 (1) | Maturity | ||||||||||
Central Fairwinds | 16,491 | 16,707 | 3.15 | % | June 2024 | |||||||||
FRP Ingenuity Drive | 16,312 | 16,457 | 4.44 | % | December 2024 | |||||||||
Carillon Point | 14,981 | 15,185 | 3.10 | % | October 2023 | |||||||||
Lake Vista Pointe (6) | — | 17,018 | — | — | ||||||||||
Total Principal | 658,605 | 658,538 | ||||||||||||
Deferred financing costs, net | (4,501 | ) | (5,223 | ) | ||||||||||
Unamortized fair value adjustments | 262 | 333 | ||||||||||||
Total | $ | 654,366 | $ | 653,648 | ||||||||||
(1) | All interest rates are fixed interest rates with the exception of the |
(2) | As of June 30, 2022, the one-month LIBOR rate was 1.79%. |
(3) | In September 2019, the Company entered into a five-year $50 million Term Loan (the “Term Loan”) increasing its authorized borrowings under the Unsecured Credit Facility 30-day LIBOR payments. |
(4) | In March June 30 , 2022, the Unsecured Credit Facility had $162.0 million drawn and a $4.2 million letter of credit to satisfy escrow requirements for a mortgage lender. The Unsecured Credit Facility requires the Company to maintain a fixed charge coverage ratio of no less than 1.50x. |
|
|
(5) | The mortgage loan anticipated repayment date (“ARD”) is March 1, 2027. The final scheduled maturity date can be extended up to 5 years beyond the ARD. If the loan is not paid off at ARD, the loan’s interest rate shall be adjusted to the greater of (i) the initial interest rate plus 200 basis points or (ii) the yield on the five year “on the run” treasury reported by Bloomberg market data service plus 450 basis points. |
(6) | In June 2022, the loan balance of $ 16.8 |
2019 | $ | 2,692 | ||
2020 | 6,186 | |||
2021 | 89,125 | |||
2022 | 156,165 | |||
2023 | 47,822 | |||
Thereafter | 413,013 | |||
|
| |||
$ | 715,003 | |||
|
|
2022 | $ | 3,141 | ||
2023 | 48,149 | |||
2024 | 108,479 | |||
2025 | 253,997 | |||
2026 | 4,536 | |||
Thereafter | 240,303 | |||
$ | 658,605 | |||
As
Interest Rate Swap was reported as a liability at its fair value of approximately $0.4 million, which is included in other liabilities on the Company’s condensed consolidated balance sheet.
Forleases for the three and six months ended June 30, 2019,2022 and the three and six months ended June 30, 2021 as follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Fixed payments | $ | 38,309 | $ | 34,311 | $ | 76,628 | $ | 67,862 | ||||||||
Variable payments | 6,180 | 5,629 | 12,620 | 11,536 | ||||||||||||
$ | 44,489 | $ | 39,940 | $ | 89,248 | $ | 79,398 | |||||||||
Three months ended June 30, 2019 | Six months ended June 30, 2019 | |||||||||
Fixed payments | $ | 32,861 | $ | 65,060 | ||||||
Variable payments | 5,646 | 10,526 | ||||||||
|
|
|
| |||||||
$ | 38,507 | $ | 75,586 | |||||||
|
|
|
|
for the sales-type lease at the Lake Vista Pointe property for the three a
2019 | $ | 60,208 | ||
2020 | 113,808 | |||
2021 | 102,819 | |||
2022 | 85,402 | |||
2023 | 67,284 | |||
Thereafter | 143,674 | |||
|
| |||
$ | 573,195 | |||
|
|
2022 | $ | 63,397 | ||
2023 | 117,160 | |||
2024 | 104,445 | |||
2025 | 92,922 | |||
2026 | 84,779 | |||
Thereafter | 252,335 | |||
$ | 715,038 | |||
right-of-useRight-of-use assets and lease liabilities have been included within other assets and other liabilities on the Company’s condensed consolidated balance sheet as follows (in thousands):
As of June 30, 2019 | ||||
Right-of-use asset – operating leases | $ | 13,215 | ||
Lease liability – operating leases | $ | 8,250 | ||
Right-of-use asset – financing leases | $ | 91 | ||
Lease liability – financing leases | $ | 90 |
June 30, 2022 | December 31, 2021 | |||||||
Right-of-use | $ | 13,858 | $ | 14,114 | ||||
Lease liability – operating leases | $ | 9,009 | $ | 9,160 | ||||
Right-of-use | $ | 10,180 | $ | 10,308 | ||||
Lease liability – financing leases | $ | 1,450 | $ | 1,425 |
Operating Leases | Financing Leases | |||||||
2019 | $ | 303 | $ | 13 | ||||
2020 | 782 | 27 | ||||||
2021 | 781 | 27 | ||||||
2022 | 741 | 27 | ||||||
2023 | 659 | 4 | ||||||
Thereafter | 27,277 | — | ||||||
|
|
|
| |||||
Total future minimum lease payments | 30,543 | 98 | ||||||
Discount | (22,293 | ) | (8 | ) | ||||
|
|
|
| |||||
Total | $ | 8,250 | $ | 90 | ||||
|
|
|
|
Operating Leases | Financing Leases | |||||||
2022 | $ | 290 | $ | 17 | ||||
2023 | 836 | 12 | ||||||
2024 | 770 | 7 | ||||||
2025 | 770 | 8 | ||||||
2026 | 724 | 8 | ||||||
Thereafter | 27,151 | 6,946 | ||||||
Total future minimum lease payments | 30,541 | 6,998 | ||||||
Discount | (21,532 | ) | (5,548 | ) | ||||
Total | $ | 9,009 | $ | 1,450 | ||||
The Company believes that it is in compliance in all material respects with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. Management is not aware of any environmental liability that it believes would have a material adverse impact on the Company’s financial position or results of operations. Management is unaware of any instances in which the Company would incur significant environmental costs if any or all properties were sold, disposed of or abandoned. However, there can be no assurance that any such
Restricted Stock Units
8, 2022.
On May 2, 2019,4, 2022, the Company’s stockholders approved an amendment to the Equity Incentive Plan increasing the maximum number of shares of common stock that may be issued under the Equity Incentive Plan from 1,263,5802,263,580 shares to 2,263,5803,763,580 shares. To the extent an award granted under the Equity Incentive Plan expires or terminates, the shares subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards.
Number of RSUs | Number of Performance RSUs | |||||||
Outstanding at December 31, 2021 | 342,159 | 217,500 | ||||||
Granted | 237,986 | 90,000 | ||||||
Issuance of dividend equivalents | 3,902 | — | ||||||
Vested | — | — | ||||||
Forfeited | — | — | ||||||
Outstanding at March 31, 2022 | 584,047 | 307,500 | ||||||
Granted | — | — | ||||||
Issuance of dividend equivalents | 7,451 | — | ||||||
Vested | (177,812 | ) | — | |||||
Forfeited | — | — | ||||||
Outstanding at June 30, 2022 | 413,686 | 307,500 |
Number of RSUs | Number of Performance RSUs | |||||||
Outstanding at December 31, 2020 | 332,435 | 97,500 | ||||||
Granted | 169,500 | 120,000 | ||||||
Issuance of dividend equivalents | 5,139 | — | ||||||
Vested | — | — | ||||||
Forfeited | — | — | ||||||
Outstanding at March 31, 2021 | 507,074 | 217,500 | ||||||
Granted | — | — | ||||||
Issuance of dividend equivalents | 6,884 | — | ||||||
Vested | (177,038 | ) | — | |||||
Forfeited | — | — | ||||||
Outstanding at June 30, 2021 | 336,920 | 217,500 |
Units Granted | Fair Value (in thousands) | Weighted Average Grant Fair Value Per Share | ||||||||||||||
RSUs | Performance RSUs | |||||||||||||||
2021 | 169,500 | 120,000 | $ | 2,808 | $ | 9.70 | ||||||||||
2022 | 237,986 | 90,000 | 5,753 | 17.54 |
RSUs | Performance RSUs | Total | ||||||||||
2021 | $ | 457 | $ | 208 | $ | 665 | ||||||
2022 | 652 | 340 | 992 |
RSUs | Performance RSUs | Total | ||||||||||
2021 | $ | 920 | $ | 391 | $ | 1,311 | ||||||
2022 | 1,251 | 645 | 1,896 |
A RSU award represents the right to receivean additional
11. Subsequent Events
On July 31, 2019, an indirect, wholly-owned subsidiary of the Company entered into an Administrative Services Agreement (the “Administrative Services Agreement”) with Clarity Real Estate III GP, Limited Partnership and Clarity Real Estate Ventures GP, Limited Partnership (together, “Clarity”), entities affiliated with principals of Second City and officers of the Company. Pursuant to the Administrative Services Agreement, the Company will provide various administrative services and support to the related entities managing the Clarity funds.
uncertaintly regarding the Company’s obligations under its floating rate debt instruments upon discontinuation of LIBOR;
a material increase in institutional ownership of real estate in secondary markets that could result in, among others, compression of cap rates and fewer acquisition opportunities being available to the Company; and
The forward looking statements includedSEC, many of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this report are madeReport speaks only as of the date of this report,Report. Factors or events that could cause our actual results to differ may emerge from time to time, and except as otherwise required by federal securities law, we doit is not have anypossible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or revise any forward looking statements to reflect subsequent events or circumstances.
otherwise, except as may be required by applicable securities laws.
billed to or paid by the tenant. The full amount of the expenses for this lease type is reflected in operating expenses, and the reimbursement is reflected in tenant recoveries. All tenants in our Lake VistaCanyon Park, Superior Pointe, FRP Ingenuity Drive, Sorrento Mesa,The Terraces and Canyon Park2525 McKinnon properties have triple net leases. Certain tenants at AmberGlen, Superior Pointe, FRP Collection, 2525 McKinnon,Block 23, Bloc 83, Florida Research Park, Circle Point, The Quad, and Cascade Station and Denver Tech have leases on a triple net basis. We are also a lessor for a fee simple ground lease at the AmberGlen property. All of our remaining leases are predominately full-service gross leases.
Metropolitan Area | Property | Economic Interest | NRA (000s Square Feet) | In Place Occupancy | Annualized Base Rent per Square Foot | Annualized Gross Rent per Square Foot(1) | Annualized Base Rent(2) ($000s) | |||||||||||||||||||
Phoenix, AZ (21.3% of NRA) | Pima Center | 100.0 | % | 272 | 96.5 | % | $ | 27.15 | $ | 27.15 | $ | 7,122 | ||||||||||||||
SanTan | 100.0 | % | 267 | 98.6 | % | $ | 27.67 | $ | 27.67 | $ | 7,272 | |||||||||||||||
5090 N 40th St | 100.0 | % | 175 | 95.8 | % | $ | 28.96 | $ | 28.96 | $ | 4,848 | |||||||||||||||
Camelback Square | 100.0 | % | 173 | 80.8 | % | $ | 29.24 | $ | 29.24 | $ | 4,092 | |||||||||||||||
The Quad | 100.0 | % | 163 | 100.0 | % | $ | 28.14 | $ | 28.39 | $ | 4,587 | |||||||||||||||
Papago Tech | 100.0 | % | 163 | 100.0 | % | $ | 21.85 | $ | 21.85 | $ | 3,556 | |||||||||||||||
Denver, CO (18.3%) | Cherry Creek | 100.0 | % | 356 | 100.0 | % | $ | 18.53 | $ | 18.53 | $ | 6,591 | ||||||||||||||
Circle Point | 100.0 | % | 272 | 98.8 | % | $ | 17.46 | $ | 30.36 | $ | 4,692 | |||||||||||||||
DTC Crossroads | 100.0 | % | 189 | 53.7 | % | $ | 26.24 | $ | 26.24 | $ | 2,665 | |||||||||||||||
Superior Pointe | 100.0 | % | 151 | 96.5 | % | $ | 17.66 | $ | 29.17 | $ | 2,579 | |||||||||||||||
Logan Tower | 100.0 | % | 72 | 73.3 | % | $ | 21.62 | $ | 21.62 | $ | 1,139 | |||||||||||||||
Tampa, FL (18.2%) | Park Tower | 94.8 | % | 471 | 93.5 | % | $ | 24.45 | $ | 24.45 | $ | 10,761 | ||||||||||||||
City Center | 95.0 | % | 241 | 94.7 | % | $ | 25.40 | $ | 25.40 | $ | 5,807 | |||||||||||||||
Intellicenter | 100.0 | % | 204 | 100.0 | % | $ | 23.99 | $ | 23.99 | $ | 4,881 | |||||||||||||||
Carillon Point | 100.0 | % | 124 | 100.0 | % | $ | 28.06 | $ | 28.06 | $ | 3,485 | |||||||||||||||
Orlando, FL (12.6%) | FRP Collection | 95.0 | % | 272 | 84.5 | % | $ | 24.29 | $ | 26.17 | $ | 5,575 | ||||||||||||||
Central Fairwinds | 97.0 | % | 168 | 89.5 | % | $ | 24.49 | $ | 24.49 | $ | 3,685 | |||||||||||||||
Greenwood Blvd | 100.0 | % | 155 | 100.0 | % | $ | 22.75 | $ | 22.75 | $ | 3,527 | |||||||||||||||
FRP Ingenuity Drive | 100.0 | % | 125 | 100.0 | % | $ | 21.50 | $ | 29.50 | $ | 2,677 | |||||||||||||||
San Diego, CA (10.2%) | Sorrento Mesa | 100.0 | % | 296 | 85.3 | % | $ | 25.19 | $ | 31.19 | $ | 6,360 | ||||||||||||||
Mission City | 100.0 | % | 286 | 95.6 | % | $ | 35.14 | $ | 35.14 | $ | 9,603 | |||||||||||||||
Dallas, TX (10.1%) | 190 Office Center | 100.0 | % | 303 | 89.5 | % | $ | 25.64 | $ | 25.64 | $ | 6,960 | ||||||||||||||
Lake Vista Pointe | 100.0 | % | 163 | 100.0 | % | $ | 16.00 | $ | 24.00 | $ | 2,613 | |||||||||||||||
2525 McKinnon | 100.0 | % | 111 | 90.4 | % | $ | 28.04 | $ | 45.04 | $ | 2,822 | |||||||||||||||
Portland, OR (5.8%) | AmberGlen | 76.0 | % | 201 | 96.9 | % | $ | 21.30 | $ | 23.89 | $ | 4,151 | ||||||||||||||
Cascade Station | 100.0 | % | 128 | 100.0 | % | $ | 26.37 | $ | 32.38 | $ | 3,363 | |||||||||||||||
Seattle, WA (3.5%) | Canyon Park | 100.0 | % | 207 | 100.0 | % | $ | 21.20 | $ | 29.20 | $ | 4,384 | ||||||||||||||
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Total / Weighted Average – June 30, 2019 (3) | 5,708 | 93.4 | % | $ | 24.36 | $ | 27.00 | $ | 129,797 | |||||||||||||||||
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Metropolitan Area | Property | Economic Interest | NRA (000s Square Feet) | In Place Occupancy | Annualized Base Rent per Square Foot | Annualized Gross Rent per Square Foot (1) | Annualized Base Rent (2) ($000s) | |||||||||||||||||||
Phoenix, AZ | Block 23 | 100.0 | % | 307 | 94.0 | % | $ | 29.63 | $ | 31.88 | $ | 8,552 | ||||||||||||||
Pima Center | 100.0 | % | 272 | 63.9 | % | $ | 28.63 | $ | 28.63 | $ | 4,976 | |||||||||||||||
SanTan | 100.0 | % | 267 | 96.5 | % | $ | 30.10 | $ | 30.10 | $ | 7,746 | |||||||||||||||
5090 N. 40 th St | 100.0 | % | 176 | 95.4 | % | $ | 31.88 | $ | 31.88 | $ | 5,335 | |||||||||||||||
Camelback Square | 100.0 | % | 172 | 69.9 | % | $ | 33.56 | $ | 33.56 | $ | 4,026 | |||||||||||||||
The Quad | 100.0 | % | 163 | 100.0 | % | $ | 31.15 | $ | 31.46 | $ | 5,078 | |||||||||||||||
Papago Tech | 100.0 | % | 163 | 86.1 | % | $ | 23.39 | $ | 23.39 | $ | 3,277 | |||||||||||||||
Tampa, FL | Park Tower | 94.8 | % | 478 | 86.4 | % | $ | 27.27 | $ | 27.27 | $ | 11,253 | ||||||||||||||
City Center | 95.0 | % | 245 | 85.0 | % | $ | 27.84 | $ | 27.84 | $ | 5,791 | |||||||||||||||
Intellicenter | 100.0 | % | 204 | 100.0 | % | $ | 25.64 | $ | 25.64 | $ | 5,219 | |||||||||||||||
Carillon Point | 100.0 | % | 124 | 100.0 | % | $ | 29.52 | $ | 29.52 | $ | 3,666 | |||||||||||||||
Denver, CO | Denver Tech | 100.0 | % | 381 | 93.2 | % | $ | 23.98 | $ | 28.08 | $ | 8,425 | ||||||||||||||
Circle Point | 100.0 | % | 272 | 75.4 | % | $ | 19.42 | $ | 33.28 | $ | 3,984 | |||||||||||||||
Superior Pointe | 100.0 | % | 152 | 91.3 | % | $ | 18.77 | $ | 31.77 | $ | 2,609 | |||||||||||||||
Orlando, FL | Florida Research Park | 96.5 | % | 393 | 80.7 | % | $ | 25.37 | $ | 27.34 | $ | 7,973 | ||||||||||||||
Central Fairwinds | 97.0 | % | 168 | 94.6 | % | $ | 27.26 | $ | 27.26 | $ | 4,337 | |||||||||||||||
Greenwood Blvd | 100.0 | % | 155 | 100.0 | % | $ | 24.25 | $ | 24.25 | $ | 3,760 | |||||||||||||||
Dallas, TX | 190 Office Center | 100.0 | % | 303 | 75.5 | % | $ | 27.11 | $ | 27.11 | $ | 6,210 | ||||||||||||||
The Terraces | 100.0 | % | 173 | 95.9 | % | $ | 37.99 | $ | 57.99 | $ | 6,290 | |||||||||||||||
2525 McKinnon | 100.0 | % | 111 | 93.0 | % | $ | 27.05 | $ | 46.05 | $ | 2,801 | |||||||||||||||
Portland, OR | AmberGlen | 76.0 | % | 203 | 98.4 | % | $ | 23.55 | $ | 26.45 | $ | 4,695 | ||||||||||||||
Cascade Station | 100.0 | % | 128 | 100.0 | % | $ | 28.77 | $ | 30.68 | $ | 3,685 | |||||||||||||||
San Diego, CA | Mission City | 100.0 | % | 281 | 88.0 | % | $ | 38.24 | $ | 38.24 | $ | 9,466 | ||||||||||||||
Seattle, WA | Canyon Park | 100.0 | % | 207 | 100.0 | % | $ | 23.17 | $ | 27.17 | $ | 4,791 | ||||||||||||||
Total / Weighted Average – Excluding Acquisitions in Lease-Up (3) | 5,498 | 88.6 | % | $ | 27.54 | $ | 30.49 | $ | 133,945 | |||||||||||||||||
Raleigh, NC (8.3%) | Bloc 83 | 100.0 | % | 495 | 68.3 | % | $ | 37.03 | $ | 37.12 | $ | 12,527 | ||||||||||||||
Total / Weighted Average – June 30, 2022 | 5,993 | 86.9 | % | $ | 28.16 | $ | 30.92 | $ | 146,472 | |||||||||||||||||
(1) |
Annualized gross rent per square foot |
(2) | Annualized base rent is calculated by multiplying (i) rental payments (defined as cash rents before abatements) for the month ended June 30, |
(3) | Averages weighted based on the property’s NRA, adjusted for occupancy. Including contracted leases, occupancy was 85.2% at Bloc 83 as of June 30, 2022. |
Summary While we generally expect the trend of Significantpositive population and economic growth in our cities to continue, there is no way for us to predict whether these trends will continue, especially in light of the potential changes in tax policy, fiscal policy and monetary policy. In addition, it is uncertain and impossible to estimate the potential impact that the
and Estimates
2021.
2021
period.
$2.8by $2.6 million, or 24%19%, to $14.5$16.8 million for the three months ended June 30, 20192022, from $11.7$14.2 million for the three months ended June 30, 2018.2021. Of this increase, the acquisitions of Block 23, The Terraces and Bloc 83 in December 2021 contributed increases of $0.7 million, $0.9 million and $0.7 million, respectively. An increase of $0.2 million was attributable to the Ingenuity Drive property within the Florida Research Park portfolio as that property was converted from a single tenant property where the tenant paid for its own operating expenses into a multi-tenant property where expenses are paid by the landlord and reimbursements are charged to the tenants. Offsetting these increases, the disposition of Sorrento Mesa resulted in a $0.6 million decrease in property operating expenses was primarily due to the acquisitions described above. The acquisition of the Circle Point, The Quad, Greenwood Blvd, Camelback Square, Canyon Park and Cascade Station contributed an additional $0.9 million, $0.3 million, $0.4 million, $0.4 million, $0.2 million and $0.1 million, respectively, in additional property operating expenses. Park Tower operating expenses also increased by $0.2 million due to the higher occupancy at that property. Plaza 25 decreased by $0.4 million due to the sale of that property in February 2019. The remaining property operatingproperties’ expenses aggregate toincreased a netcombined $0.7 million increase in comparison to the prior-year period.
million.
stock-based compensation expense and higher professional fees.
Other Expense (Income)
Interest Expense. Interest expense increased $2.4 million, or 44%, to $7.82022, from $5.9 million for the three months ended June 30, 2019, compared to $5.4 million for the three months ended June 30, 2018.2021. The increase was primarily dueattributable to interest expense related to acquisitions. Interest expense for the Circle Point, The Quad, Greenwood Blvd, Canyon Park and Cascade Station property level debt increased by $0.5 million, $0.3 million, $0.3 million, $0.4 million and $0.1 million, respectively, and the interest on the line of credit increased by $1.1 million as a result of acquisitions funded by our $250 million Unsecured Credit Facility. These increases were partially offset by a $0.2 million decreaseincrease in the Plaza 25 debt as a result of its saleamount drawn and the extinguishment of its property levelinterest rates on our floating rate debt.
2021
increased a combined $0.4 million.
increased a combined $1.5 million.
Depreciation and Amortization. Depreciationdecrease, depreciation and amortization increased $5.3for Pima Center decreased by $1.0 million from the prior period as the amortization expense associated with acquired lease intangible assets has now been fully amortized. The remaining properties’ depreciation expenses were marginally lower in comparison to the prior period.
Other Expense (Income)
Interest Expense. Interest expense increased $4.0 million, or 36%, to $15.3real estate property of $47.4 million for the six months ended June 30, 2019, compared2021 related to $11.3the sale of our Cherry Creek property in February 2021.
Cash Flows
Comparison of Six Months Ended June 30, 2019 to Six Months Ended June 30, 2018
Cash, cash equivalents and restricted cash were $30.9 million and $32.6 million as of June 30, 2019 and June 30, 2018, respectively.
Cash flow from operating activities. Net cash provided by operating activities was primarily due to receipts received from the sales-type lease at the Lake Vista Pointe property, which was sold in June 2022.
Cash flow to investing activities. Net cash used in investing activities increased by $56.8 million to $38.6 million for the six months ended June 30, 2019 compared to $18.2$37.4 million provided by investing activities for the six months ended June 30, 2018.same period in 2021. The increase in cash used in investing activities was primarily due to the acquisition of Canyon Park and Cascade Stationa decrease in 2019. Additionally, we realized lower proceeds from sale of real estate for the six months ended June 30, 2022 compared to the same period in 2021. The higher proceeds from sale of real estate in 2019 compared2021 was attributable to 2018, which included proceeds from the sale of Washington Group Plazathe Cherry Creek property in 2018.
2021.
borrowings.
2022.
The
2022.
Our long-term liquidity needs consist primarily of funds necessary for the repayment of debt at maturity, property acquisitions and
Payments Due by Period (in thousands) | ||||||||||||||||||||
Contractual Obligations | Total | 2019 | 2020-2021 | 2022-2023 | More than 5 years | |||||||||||||||
Principal payments on mortgage loans | $ | 715,003 | $ | 2,692 | $ | 95,311 | $ | 203,987 | $ | 413,013 | ||||||||||
Interest payments (1) | 162,109 | 15,110 | 57,650 | 40,589 | 48,760 | |||||||||||||||
Tenant-related commitments | 10,907 | 5,890 | 4,418 | 599 | — | |||||||||||||||
Operating and financing lease obligations | 30,641 | 316 | 1,617 | 1,431 | 27,277 | |||||||||||||||
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| |||||||||||
Total | $ | 918,660 | $ | 24,008 | $ | 158,996 | $ | 246,606 | $ | 489,050 | ||||||||||
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Payments Due by Period | ||||||||||||||||||||
Contractual Obligations | Total | 2022 | 2023-2024 | 2025-2026 | More than 5 years | |||||||||||||||
Principal payments on mortgage loans | $ | 658,605 | $ | 3,141 | $ | 156,628 | $ | 258,533 | $ | 240,303 | ||||||||||
Interest payments (1) | 94,099 | 12,307 | 45,770 | 28,211 | 7,811 | |||||||||||||||
Tenant-related commitments | 23,620 | 23,620 | — | — | — | |||||||||||||||
Lease obligations | 37,539 | 307 | 1,625 | 1,510 | 34,097 | |||||||||||||||
Total | $ | 813,863 | $ | 39,375 | $ | 204,023 | $ | 288,254 | $ | 282,211 | ||||||||||
(1) | Contracted interest on the floating rate |
Off-Balance Sheet Arrangements
As of June 30, 2019, we had a $5.3 million letter of credit outstanding under our Unsecured Credit Facility to satisfy escrow requirements for a mortgage lender.
10%LIBOR rate at approximately 1.27% until maturity of the Term Loan. When factoring in the Term Loan as fixed rate debt through the Interest Rate Swap, approximately 75.4% of our debt was fixed rate debt and 24.6% was variable rate debt as of June 30, 2022. An increase of 1% in LIBOR would result in a $1.6 million increase to our annual interest costs by approximately $0.4 million on debt outstanding as of June 30, 2019,2022 and would decrease the fair value of our outstanding debt, as well as increase interest costs associated with future debt issuances or borrowings under our Unsecured Credit Facility. A 10%1% decrease in LIBOR, assuming a rate floor of 0%, would result in a $1.6 million decrease to our annual interest costs by approximately $0.4 million on debt outstanding as of June 30, 2019,2022 and would increase the fair value of our outstanding debt, as well as decrease interest costs associated with future debt issuances or borrowings under our Unsecured Credit Facility.
2022.
We are subject to conflicts of interest arising out of our relationship with Second City and Clarity. As a resultexpenses as part of the internalization of our former external advisor on February 1, 2016, we agreed to allow our management to continue to provide services to Second City underrent payment while future increases (above the terms of an administrative services agreement. In addition, the terms of the administrative services agreement and the employment agreements we entered into with each of our executive officers permit, under certain circumstances and subjectbase year stop) in property operating expenses are billed to the oversight of our Board of Directors, our executive officers to advise or oversee new or additional fundstenant based on such tenant’s proportionate square footage in the future. On July 31, 2019, we, throughproperty. Additionally, our
Issuer Purchases of Equity Securities (1) | ||||||||||||||||
Period | Total Number of Shares of Common Stock Purchased | Average Price Paid per Share of Common Stock Repurchased | Total Number of Shares of Common Stock Purchased as Part of Share Repurchase Plans | Approximate Dollar Value of Shares of Common Stock that May Yet Be Purchased Under the Share Repurchase Plans (2) (thousands) | ||||||||||||
April 1 – 30, 2022 | — | $ | — | — | $ | 50,000 | ||||||||||
May 1 – 31, 2022 | — | — | — | 50,000 | ||||||||||||
June 1 – 30, 2022 | 394,833 | 12.64 | 394,833 | 45,008 | ||||||||||||
Total | 394,833 | $ | 12.64 | 394,833 | $ | 45,008 | ||||||||||
None.
(2) | Represents approximate dollar value of shares that could have been purchased under the plans in effect at the end of the month. |
Chief Executive Officer, Greg Tylee, the Company’s President and Chief Operating Officer, and Anthony Maretic, the Company’s Chief Financial Officer, Secretary and Treasurer. The Employment Agreement Amendments clarify that the Company’s executive officers may participate in the organization and administration of Clarity.
A committee consisting solely of the independent members of the Company’s Board of Directors approved the Company’s entry into the Administrative Services Agreement and the Employment Agreement Amendments. The foregoing descriptions of the Administrative Services Agreement and the Employment Agreement Amendments are not complete. Reference is made to the full text of the Administrative Services Agreement and each of the Employment Agreement Amendments filed as Exhibit 10.2, Exhibit 10.3, Exhibit 10.4, and Exhibit 10.5, respectively, to this Quarterly Report on Form 10-Q.
† | Filed herewith. |
* |
|
Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements. |
Date: August | |||||||||
By: | /s/ James Farrar | ||||||||
James Farrar | |||||||||
| |||||||||
(Principal Executive Officer) | |||||||||
Date: August | |||||||||
By: | /s/ Anthony Maretic | ||||||||
Anthony Maretic | |||||||||
| |||||||||
Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer) |
28