UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 10-Q
__________________________________
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| |
x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the quarterly period ended SeptemberJune 30, 20162017
OR |
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o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the transition period from ______ to ______ Commission file number 001-36113
COLUMBIA PROPERTY TRUST, INC.
(Exact name of registrant as specified in its charter)
|
| | |
Maryland | | 20-0068852 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
One Glenlake Parkway, Suite 1200
Atlanta, GA 30328
(Address of principal executive offices)
(Zip Code)
(404) 465-2200
(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer", and "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act (check one).
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| | | |
Large accelerated filer | x | Accelerated filer | o |
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | o |
| | Emerging Growth Company | o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
Number of shares outstanding of the registrant's
only class of common stock, as of OctoberJuly 24, 2016: 123,478,8092017: 121,235,494 shares
FORM 10-Q
COLUMBIA PROPERTY TRUST, INC.
TABLE OF CONTENTS
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q of Columbia Property Trust, Inc. ("Columbia Property Trust," "the Company," "we," "our," or "us") other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those acts. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, including known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "will," "expect," "intend," "anticipate," "estimate," "believe," "continue," or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the U.S. Securities and Exchange Commission ("SEC"). We make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Any such forward-looking statements are subject to risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual conditions, our ability to accurately anticipate results expressed in such forward-looking statements, including our ability to generate positive cash flow from operations, make distributions to stockholders, and maintain the value of our real estate properties, may be significantly hindered. See Item 1A in Columbia Property Trust's Annual Report on Form 10-K for the year ended December 31, 20152016 for a discussion of some of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements. The risk factors described in our Annual Report are not the only ones we face, but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also harm our business.
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PART I. | FINANCIAL INFORMATION |
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ITEM 1. | CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
The information furnished in the accompanying consolidated balance sheets and related consolidated statements of operations, comprehensive income, equity, and cash flows, reflects all normal and recurring adjustments that are, in management's opinion, necessary for a fair and consistent presentation of the aforementioned financial statements. The accompanying consolidated financial statements should be read in conjunction with the condensed notes to Columbia Property Trust's financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Quarterly Report on Form 10-Q, and with audited consolidated financial statements and the related notes for the year ended December 31, 20152016. Columbia Property Trust's results of operations for the three and ninesix months ended SeptemberJune 30, 20162017 are not necessarily indicative of the operating results expected for the full year.
COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per-share amounts)
| | | (Unaudited) | (Unaudited) |
| September 30, 2016 | | December 31, 2015 | June 30, 2017 | | December 31, 2016 |
Assets: | | | | | | |
Real estate assets, at cost: | | | | | | |
Land | $ | 787,456 |
| | $ | 896,467 |
| $ | 751,351 |
| | $ | 751,351 |
|
Buildings and improvements, less accumulated depreciation of $500,583 and $613,639, as of September 30, 2016 and December 31, 2015, respectively | 2,371,273 |
| | 2,897,431 |
| |
Intangible lease assets, less accumulated amortization of $141,451 and $250,085, as of September 30, 2016 and December 31, 2015, respectively | 204,200 |
| | 259,136 |
| |
Buildings and improvements, less accumulated depreciation of $471,029 and $435,457, as of June 30, 2017 and December 31, 2016, respectively | | 2,117,880 |
| | 2,121,150 |
|
Intangible lease assets, less accumulated amortization of $99,910 and $112,777, as of June 30, 2017 and December 31, 2016, respectively | | 182,428 |
| | 193,311 |
|
Construction in progress | 28,888 |
| | 31,847 |
| 49,069 |
| | 36,188 |
|
Real estate assets held for sale, less accumulated depreciation and amortization of $111,425 as of September 30, 2016 | 238,876 |
| | — |
| |
Real estate assets held for sale, less accumulated depreciation and amortization of $180,791, as of December 31, 2016 | | — |
| | 412,506 |
|
Total real estate assets | 3,630,693 |
| | 4,084,881 |
| 3,100,728 |
| | 3,514,506 |
|
Investment in unconsolidated joint venture | 125,605 |
| | 118,695 |
| 125,584 |
| | 127,346 |
|
Cash and cash equivalents | 190,856 |
| | 32,645 |
| 506,538 |
| | 216,085 |
|
Tenant receivables, net of allowance for doubtful accounts of $35 and $8 as of September 30, 2016 and December 31, 2015, respectively | 6,366 |
| | 11,670 |
| |
Tenant receivables, net of allowance for doubtful accounts of $31 as of December 31, 2016 | | 4,002 |
| | 7,163 |
|
Straight-line rent receivable | 70,186 |
| | 109,062 |
| 77,875 |
| | 64,811 |
|
Prepaid expenses and other assets | 24,885 |
| | 35,848 |
| 39,815 |
| | 24,275 |
|
Intangible lease origination costs, less accumulated amortization of $81,735 and $181,482, as of September 30, 2016 and December 31, 2015, respectively | 58,645 |
| | 77,190 |
| |
Deferred lease costs, less accumulated amortization of $33,729 and $40,817, as of September 30, 2016 and December 31, 2015, respectively | 60,383 |
| | 88,127 |
| |
Intangible lease origination costs, less accumulated amortization of $68,771 and $74,578, as of June 30, 2017 and December 31, 2016, respectively | | 48,586 |
| | 54,279 |
|
Deferred lease costs, less accumulated amortization of $25,838 and $22,753, as of June 30, 2017 and December 31, 2016, respectively | | 129,849 |
| | 125,799 |
|
Investment in development authority bonds | 120,000 |
| | 120,000 |
| 120,000 |
| | 120,000 |
|
Other assets held for sale, less accumulated amortization of $23,125 as of September 30, 2016 | 32,306 |
| | — |
| |
Other assets held for sale, less accumulated amortization of $34,152, as of December 31, 2016 | | — |
| | 45,529 |
|
Total assets | $ | 4,319,925 |
| | $ | 4,678,118 |
| $ | 4,152,977 |
| | $ | 4,299,793 |
|
Liabilities: | | | | | | |
Line of credit and notes payable, net of unamortized deferred financing costs of $3,406 and $4,492, as of September 30, 2016 and December 31, 2015, respectively | $ | 821,586 |
| | $ | 1,130,571 |
| |
Bonds payable, net of discounts of $1,709 and $1,020 and unamortized deferred financing costs of $5,528 and $3,721, as of September 30, 2016 and December 31, 2015, respectively | 692,763 |
| | 595,259 |
| |
Line of credit and notes payable, net of unamortized deferred financing costs of $2,614 and $3,136, as of June 30, 2017 and December 31, 2016, respectively | | $ | 646,160 |
| | $ | 721,466 |
|
Bonds payable, net of discounts of $1,574 and $1,664 and unamortized deferred financing costs of $5,062 and $5,364, as of June 30, 2017 and December 31, 2016, respectively | | 693,364 |
| | 692,972 |
|
Accounts payable, accrued expenses, and accrued capital expenditures | 81,617 |
| | 98,759 |
| 140,151 |
| | 131,028 |
|
Dividends payable | — |
| | 37,354 |
| — |
| | 36,727 |
|
Deferred income | 20,411 |
| | 24,814 |
| 19,392 |
| | 19,694 |
|
Intangible lease liabilities, less accumulated amortization of $46,480 and $81,496, as of September 30, 2016 and December 31, 2015, respectively | 36,239 |
| | 57,167 |
| |
Obligations under capital leases | 120,000 |
| | 120,000 |
| |
Liabilities held for sale, less accumulated amortization $1,210 as of September 30, 2016 | 15,644 |
| | — |
| |
Intangible lease liabilities, less accumulated amortization of $39,939 and $44,564, as of June 30, 2017 and December 31, 2016, respectively | | 29,067 |
| | 33,375 |
|
Obligations under capital lease | | 120,000 |
| | 120,000 |
|
Liabilities held for sale, less accumulated amortization of $1,239, as of December 31, 2016 | | — |
| | 41,763 |
|
Total liabilities | 1,788,260 |
| | 2,063,924 |
| 1,648,134 |
| | 1,797,025 |
|
Commitments and Contingencies (Note 7) | — |
| | — |
| — |
| | — |
|
Equity: | | | | | | |
Common stock, $0.01 par value, 225,000,000 shares authorized, 123,471,082 and 124,363,073 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively | 1,234 |
| | 1,243 |
| |
Common stock, $0.01 par value, 225,000,000 shares authorized, 121,235,494 and 122,184,193 shares issued and outstanding, as of June 30, 2017 and December 31, 2016, respectively | | 1,211 |
| | 1,221 |
|
Additional paid-in capital | 4,565,651 |
| | 4,588,303 |
| 4,513,922 |
| | 4,538,912 |
|
Cumulative distributions in excess of earnings | (2,027,155 | ) | | (1,972,916 | ) | (2,009,405 | ) | | (2,036,482 | ) |
Cumulative other comprehensive loss | (8,065 | ) | | (2,436 | ) | (885 | ) | | (883 | ) |
Total equity | 2,531,665 |
| | 2,614,194 |
| 2,504,843 |
| | 2,502,768 |
|
Total liabilities and equity | $ | 4,319,925 |
| | $ | 4,678,118 |
| $ | 4,152,977 |
| | $ | 4,299,793 |
|
See accompanying notes.
COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per-share amounts)
| | | (Unaudited) | | (Unaudited) | (Unaudited) | | (Unaudited) |
| Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
Revenues: | | | | | | | | | | | | | | |
Rental income | $ | 87,561 |
| | $ | 107,011 |
| | $ | 280,714 |
| | $ | 332,736 |
| $ | 67,121 |
| | $ | 93,567 |
| | $ | 138,294 |
| | $ | 193,153 |
|
Tenant reimbursements | 17,090 |
| | 22,627 |
| | 55,551 |
| | 77,395 |
| 6,972 |
| | 18,708 |
| | 15,556 |
| | 38,461 |
|
Hotel income | 6,270 |
| | 6,941 |
| | 17,484 |
| | 18,898 |
| — |
| | 6,551 |
| | 1,339 |
| | 11,214 |
|
Other property income | 2,345 |
| | 1,140 |
| | 14,026 |
| | 4,357 |
| 764 |
| | 9,104 |
| | 1,824 |
| | 11,681 |
|
| 113,266 |
| | 137,719 |
| | 367,775 |
| | 433,386 |
| 74,857 |
| | 127,930 |
| | 157,013 |
| | 254,509 |
|
Expenses: | | | | | | | | | | | | | | |
Property operating costs | 39,101 |
| | 46,538 |
| | 120,679 |
| | 144,375 |
| 21,831 |
| | 40,242 |
| | 45,936 |
| | 81,578 |
|
Hotel operating costs | 4,946 |
| | 5,331 |
| | 14,315 |
| | 15,069 |
| 9 |
| | 5,038 |
| | 2,085 |
| | 9,369 |
|
Asset and property management fees | 387 |
| | 472 |
| | 1,058 |
| | 1,372 |
| 260 |
| | 341 |
| | 529 |
| | 671 |
|
Depreciation | 26,778 |
| | 32,441 |
| | 84,517 |
| | 100,261 |
| 20,423 |
| | 28,450 |
| | 42,028 |
| | 57,739 |
|
Amortization | 11,895 |
| | 20,276 |
| | 42,902 |
| | 67,233 |
| 8,191 |
| | 14,932 |
| | 17,648 |
| | 31,007 |
|
General and administrative | 7,467 |
| | 6,797 |
| | 25,718 |
| | 21,921 |
| 9,201 |
| | 7,761 |
| | 17,969 |
| | 18,251 |
|
Acquisition expenses | — |
| | 1,680 |
| | — |
| | 3,675 |
| |
| 90,574 |
| | 113,535 |
| | 289,189 |
| | 353,906 |
| 59,915 |
| | 96,764 |
| | 126,195 |
| | 198,615 |
|
Real estate operating income | 22,692 |
| | 24,184 |
| | 78,586 |
| | 79,480 |
| 14,942 |
| | 31,166 |
| | 30,818 |
| | 55,894 |
|
Other income (expense): | | | | | | | | | | | | | | |
Interest expense | (17,138 | ) | | (22,012 | ) | | (52,415 | ) | | (66,261 | ) | (14,462 | ) | | (17,380 | ) | | (29,577 | ) | | (35,277 | ) |
Interest and other income | 1,839 |
| | 1,808 |
| | 5,452 |
| | 5,448 |
| 2,477 |
| | 1,808 |
| | 4,827 |
| | 3,613 |
|
Loss on interest rate swaps | — |
| | (1,102 | ) | | — |
| | (1,110 | ) | |
Loss on early extinguishment of debt | (18,905 | ) | | (2,672 | ) | | (18,997 | ) | | (3,149 | ) | — |
| | (92 | ) | | (45 | ) | | (92 | ) |
| (34,204 | ) | | (23,978 | ) | | (65,960 | ) | | (65,072 | ) | (11,985 | ) | | (15,664 | ) | | (24,795 | ) | | (31,756 | ) |
Income (loss) before income taxes, unconsolidated joint venture, and gains on sales of real estate | (11,512 | ) | | 206 |
| | 12,626 |
| | 14,408 |
| |
Income tax expense | (65 | ) | | (245 | ) | | (387 | ) | | (140 | ) | |
Income before income taxes, unconsolidated joint ventures, and sales of real estate: | | 2,957 |
| | 15,502 |
| | 6,023 |
| | 24,138 |
|
Income tax benefit (expense) | | (7 | ) | | (245 | ) | | 381 |
| | (322 | ) |
Loss from unconsolidated joint venture | (1,937 | ) | | — |
| | (5,441 | ) | | — |
| (1,817 | ) | | (1,952 | ) | | (3,702 | ) | | (3,504 | ) |
Income (loss) before gains on sales of real estate | (13,514 | ) |
| (39 | ) |
| 6,798 |
|
| 14,268 |
| |
Gains on sales of real estate | 50,412 |
| | 20,182 |
| | 50,083 |
| | 20,182 |
| |
Income before sales of real estate: | | 1,133 |
|
| 13,305 |
|
| 2,702 |
|
| 20,312 |
|
Gain (loss) on sales of real estate assets | | — |
| | (19 | ) | | 73,153 |
| | (329 | ) |
Net income | $ | 36,898 |
|
| $ | 20,143 |
|
| $ | 56,881 |
|
| $ | 34,450 |
| $ | 1,133 |
|
| $ | 13,286 |
|
| $ | 75,855 |
|
| $ | 19,983 |
|
Per-share information – basic: |
| |
| | | | |
| |
| | | | |
Net income | $ | 0.30 |
| | $ | 0.16 |
| | $ | 0.46 |
| | $ | 0.28 |
| $ | 0.01 |
| | $ | 0.11 |
| | $ | 0.62 |
| | $ | 0.16 |
|
Weighted-average common shares outstanding – basic | 123,215 |
| | 124,359 |
| | 123,271 |
| | 124,359 |
| 121,534 |
| | 123,206 |
| | 121,768 |
| | 123,299 |
|
Per-share information – diluted: | | | | | | | | | | | | | | |
Net income | $ | 0.30 |
| | $ | 0.16 |
| | $ | 0.46 |
| | $ | 0.28 |
| $ | 0.01 |
| | $ | 0.11 |
| | $ | 0.62 |
| | $ | 0.16 |
|
Weighted-average common shares outstanding – diluted | 123,350 |
| | 124,460 |
| | 123,348 |
| | 124,445 |
| 121,909 |
| | 123,294 |
| | 122,115 |
| | 123,357 |
|
Dividends per share | $ | 0.30 |
| | $ | 0.30 |
| | $ | 0.90 |
| | $ | 0.90 |
| $ | 0.20 |
| | $ | 0.30 |
| | $ | 0.40 |
| | $ | 0.60 |
|
See accompanying notes.
COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
| | | (Unaudited) | | (Unaudited) | (Unaudited) | | (Unaudited) |
| Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
Net income | $ | 36,898 |
| | $ | 20,143 |
| | $ | 56,881 |
| | $ | 34,450 |
| $ | 1,133 |
| | $ | 13,286 |
| | $ | 75,855 |
| | $ | 19,983 |
|
Settlement of interest rate swap | — |
| | 1,102 |
| | — |
| | 1,102 |
| |
Market value adjustments to interest rate swap | 1,250 |
| | (4,147 | ) | | (5,629 | ) | | (3,552 | ) | (636 | ) | | (2,022 | ) | | (2 | ) | | (6,879 | ) |
Comprehensive income | $ | 38,148 |
| | $ | 17,098 |
| | $ | 51,252 |
| | $ | 32,000 |
| $ | 497 |
| | $ | 11,264 |
| | $ | 75,853 |
| | $ | 13,104 |
|
See accompanying notes.
COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20162017 AND 20152016 (UNAUDITED)
(in thousands, except per-share amounts)
|
| | | | | | | | | | | | | | | | | | | | | | |
| Equity |
| Common Stock | | Additional Paid-In Capital | | Cumulative Distributions in Excess of Earnings | | Cumulative Other Comprehensive Loss | | Total Equity |
| Shares | | Amount | | | | |
Balance, December 31, 2015 | 124,363 |
| | $ | 1,243 |
| | $ | 4,588,303 |
| | $ | (1,972,916 | ) | | $ | (2,436 | ) | | $ | 2,614,194 |
|
Repurchases of common stock | (1,105 | ) | | (11 | ) | | (24,989 | ) | | — |
| | — |
| | (25,000 | ) |
Common stock issued to employees and directors, and amortized (net of income tax witholdings) | 213 |
| | 2 |
| | 2,337 |
| | — |
| | — |
| | 2,339 |
|
Distributions to common stockholders ($0.90 per share) | — |
| | — |
| | — |
| | (111,120 | ) | | — |
| | (111,120 | ) |
Net income | — |
| | — |
| | — |
| | 56,881 |
| | — |
| | 56,881 |
|
Market value adjustment to interest rate swap | — |
| | — |
| | — |
| | — |
| | (5,629 | ) | | (5,629 | ) |
Balance, September 30, 2016 | 123,471 |
| | $ | 1,234 |
| | $ | 4,565,651 |
| | $ | (2,027,155 | ) | | $ | (8,065 | ) | | $ | 2,531,665 |
|
|
| | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Cumulative Distributions in Excess of Earnings | | Cumulative Other Comprehensive Loss | | Total Equity |
| Shares | | Amount | | | | |
Balance, December 31, 2016 | 122,184 |
| | $ | 1,221 |
| | $ | 4,538,912 |
| | $ | (2,036,482 | ) | | $ | (883 | ) | | $ | 2,502,768 |
|
Repurchases of common stock | (1,252 | ) | | (13 | ) | | (27,488 | ) | | — |
| | — |
| | (27,501 | ) |
Common stock issued to employees and directors, and amortized (net of income tax withholdings) | 303 |
| | 3 |
| | 2,498 |
| | — |
| | — |
| | 2,501 |
|
Distributions to common stockholders ($0.40 per share) | — |
| | — |
| | — |
| | (48,778 | ) | | — |
| | (48,778 | ) |
Net income | — |
| | — |
| | — |
| | 75,855 |
| | — |
| | 75,855 |
|
Market value adjustment to interest rate swap | — |
| | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) |
Balance, June 30, 2017 | 121,235 |
| | $ | 1,211 |
| | $ | 4,513,922 |
| | $ | (2,009,405 | ) | | $ | (885 | ) | | $ | 2,504,843 |
|
|
| | | | | | | | | | | | | | | | | | | | | | |
| Equity |
| Common Stock | | Additional Paid-In Capital | | Cumulative Distributions in Excess of Earnings | | Cumulative Other Comprehensive Income (Loss) | | Total Equity |
| Shares | | Amount | | | | |
Balance, December 31, 2014 | 124,973 |
| | $ | 1,249 |
| | $ | 4,601,808 |
| | $ | (1,867,611 | ) | | $ | (1,968 | ) | | $ | 2,733,478 |
|
Repurchases of common stock | (570 | ) | | (5 | ) | | (12,802 | ) | | — |
| | — |
| | (12,807 | ) |
Common stock issued to employees and directors, and amortized (net of income tax witholdings) | 107 |
| | 1 |
| | 2,198 |
| | — |
| | — |
| | 2,199 |
|
Distributions to common stockholders ($0.90 per share) | — |
| | — |
| | — |
| | (112,570 | ) | | — |
| | (112,570 | ) |
Net income | — |
| | — |
| | — |
| | 34,450 |
| | — |
| | 34,450 |
|
Settlement of interest rate swap | — |
| | — |
| | — |
| | — |
| | 1,102 |
| | 1,102 |
|
Market value adjustment to interest rate swap | — |
| | — |
| | — |
| | — |
| | (3,552 | ) | | (3,552 | ) |
Balance, September 30, 2015 | 124,510 |
| | $ | 1,245 |
| | $ | 4,591,204 |
| | $ | (1,945,731 | ) | | $ | (4,418 | ) | | $ | 2,642,300 |
|
|
| | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Additional Paid-In Capital | | Cumulative Distributions in Excess of Earnings | | Cumulative Other Comprehensive Loss | | Total Equity |
| Shares | | Amount | | | | |
Balance, December 31, 2015 | 124,363 |
| | $ | 1,243 |
| | $ | 4,588,303 |
| | $ | (1,972,916 | ) | | $ | (2,436 | ) | | $ | 2,614,194 |
|
Repurchases of common stock | (1,105 | ) | | (11 | ) | | (24,989 | ) | | — |
| | — |
| | (25,000 | ) |
Common stock issued to employees and directors, and amortized (net of income tax withholdings) | 206 |
| | 2 |
| | 1,415 |
| | — |
| | — |
| | 1,417 |
|
Distributions to common stockholders ($0.60 per share) | — |
| | — |
| | — |
| | (74,079 | ) | | — |
| | (74,079 | ) |
Net income | — |
| | — |
| | — |
| | 19,983 |
| | — |
| | 19,983 |
|
Market value adjustment to interest rate swap | — |
| | — |
| | — |
| | — |
| | (6,879 | ) | | (6,879 | ) |
Balance, June 30, 2016 | 123,464 |
| | $ | 1,234 |
| | $ | 4,564,729 |
| | $ | (2,027,012 | ) | | $ | (9,315 | ) | | $ | 2,529,636 |
|
See accompanying notes.
COLUMBIA PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| | | (Unaudited) | (Unaudited) |
| Nine Months Ended September 30, | Six Months Ended June 30, |
| 2016 | | 2015 | 2017 | | 2016 |
Cash Flows from Operating Activities: | | | | | | |
Net income | $ | 56,881 |
| | $ | 34,450 |
| $ | 75,855 |
| | $ | 19,983 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Straight-line rental income | (15,470 | ) | | (11,300 | ) | (12,463 | ) | | (16,622 | ) |
Depreciation | 84,517 |
| | 100,261 |
| 42,028 |
| | 57,739 |
|
Amortization | 39,271 |
| | 59,880 |
| 16,789 |
| | 28,057 |
|
Noncash interest expense | 2,765 |
| | 3,138 |
| 1,491 |
| | 1,927 |
|
Loss on early extinguishment of debt | 18,997 |
| | 3,149 |
| 45 |
| | 92 |
|
Gain on interest rate swaps | — |
| | (1,532 | ) | |
Loss from unconsolidated joint venture | 5,441 |
| | — |
| 3,702 |
| | 3,504 |
|
Gains on sales of real estate | (50,083 | ) | | (20,182 | ) | |
(Gain) loss on sales of real estate assets | | (73,153 | ) | | 329 |
|
Stock-based compensation expense | 3,512 |
| | 2,925 |
| 3,953 |
| | 2,595 |
|
Changes in assets and liabilities, net of acquisitions: | | | | |
Decrease (increase) in tenant receivables, net | 4,646 |
| | (3,205 | ) | |
Decrease in prepaid expenses and other assets | 5,776 |
| | 377 |
| |
Increase (decrease) in accounts payable and accrued expenses | (3,799 | ) | | 6,539 |
| |
Increase (decrease) in deferred income | (2,750 | ) | | 479 |
| |
Net cash provided by operating activities | 149,704 |
| | 174,979 |
| |
Changes in assets and liabilities, net of acquisitions and dispositions: | | | | |
Decrease in tenant receivables, net | | 3,712 |
| | 2,035 |
|
Increase in prepaid expenses and other assets | | (1,024 | ) | | (27 | ) |
Decrease in accounts payable and accrued expenses | | (20,456 | ) | | (9,191 | ) |
Decrease in deferred income | | (4,516 | ) | | (983 | ) |
Net cash provided by operating activities | | 35,963 |
| | 89,438 |
|
Cash Flows from Investing Activities: | | | | | | |
Net proceeds from the sale of real estate | 482,089 |
| | 422,125 |
| |
Real estate acquisitions | — |
| | (1,062,031 | ) | |
Net proceeds from the sales of real estate | | 504,660 |
| | 159,387 |
|
Prepaid earnest money and transaction costs | | (12,341 | ) | | — |
|
Capital improvements | (34,447 | ) | | (64,086 | ) | (35,090 | ) | | (22,792 | ) |
Deferred lease costs paid | (19,713 | ) | | (15,403 | ) | (10,432 | ) | | (13,692 | ) |
Investments in unconsolidated joint venture | (12,351 | ) | | — |
| (1,940 | ) | | (8,728 | ) |
Net cash provided by (used in) investing activities | 415,578 |
| | (719,395 | ) | |
Net cash provided by investing activities | | 444,857 |
| | 114,175 |
|
Cash Flows from Financing Activities: | | | | | | |
Financing costs paid | (3,111 | ) | | (9,607 | ) | (70 | ) | | (139 | ) |
Prepayments to settle debt and interest rate swap | (17,921 | ) | | (3,165 | ) | |
Proceeds from lines of credit and notes payable | 435,000 |
| | 1,854,000 |
| — |
| | 215,000 |
|
Repayments of lines of credit and notes payable | (745,070 | ) | | (1,625,187 | ) | (75,830 | ) | | (289,697 | ) |
Proceeds from issuance of bonds payable | 348,691 |
| | 349,507 |
| |
Repayment of bonds payable | (250,000 | ) | | — |
| |
Distributions paid to stockholders | (148,474 | ) | | (112,570 | ) | (85,505 | ) | | (111,433 | ) |
Repurchases of common stock | (26,186 | ) | | (13,529 | ) | |
Net cash provided by (used in) financing activities | (407,071 | ) | | 439,449 |
| |
Redemptions of common stock | | (28,962 | ) | | (26,186 | ) |
Net cash used in financing activities | | (190,367 | ) | | (212,455 | ) |
Net increase (decrease) in cash and cash equivalents | 158,211 |
| | (104,967 | ) | 290,453 |
| | (8,842 | ) |
Cash and cash equivalents, beginning of period | 32,645 |
| | 149,790 |
| 216,085 |
| | 32,645 |
|
Cash and cash equivalents, end of period | $ | 190,856 |
| | $ | 44,823 |
| $ | 506,538 |
| | $ | 23,803 |
|
See accompanying notes.
COLUMBIA PROPERTY TRUST, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBERJUNE 30, 20162017
(unaudited)
Columbia Property Trust, Inc. ("Columbia Property Trust") (NYSE: CXP) is a Maryland corporation that operates as a real estate investment trust ("REIT") for federal income tax purposes and owns and operates commercial real estate properties. Columbia Property Trust was incorporated in 2003, commenced operations in 2004, and conducts business primarily through Columbia Property Trust Operating Partnership, L.P. ("Columbia Property Trust OP"), a Delaware limited partnership. Columbia Property Trust is the general partner and sole owner of Columbia Property Trust OP and possesses full legal control and authority over its operations. Columbia Property Trust OP acquires, develops, owns, leases, and operates real properties directly, through wholly owned subsidiaries, or through unconsolidated joint ventures. ReferencesUnless otherwise noted, references to Columbia Property Trust, "we," "us," or "our" herein shall include Columbia Property Trust and all subsidiaries of Columbia Property Trust, direct and indirect, and any unconsolidated joint ventures.indirect.
Columbia Property Trust typically invests in high-quality, income-generating office properties. As of SeptemberJune 30, 2016,2017, Columbia Property Trust owned 24 office15 operating properties, and one hotel, containing approximately 11.67.8 million square feet of commercial space, located primarily in 11 statesNew York, San Francisco, Washington, D.C. and the District of Columbia.Atlanta. All of the properties are wholly owned, except for one property, which is owned through an unconsolidated joint venture, as described in Note 4, Unconsolidated Joint Venture. As of SeptemberJune 30, 2016,2017, the office properties, including 51% of the Market Square Joint Venture, inbuildings, which Columbia Property Trust owns a 51% interest,through an unconsolidated joint venture, were approximately 90.7% leased, excluding the 9127 South Jamaica Street building, which was subsequently95.3% leased. On July 6, 2017, Columbia Property Trust contributed two of its San Francisco properties to joint ventures and sold on October 12, 2016 (seea 22.5% interest in each joint venture, and acquired a 49.5% interest in a property in Manhattan through another joint venture. See Note 3, Real Estate Transactions).Transactions, for additional information.
| |
2. | Summary of Significant Accounting Policies |
Basis of Presentation
The consolidated financial statements of Columbia Property Trust have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"), including the instructions to Form 10-Q and Article 10 of Regulation S-X, and do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. In the opinion of management, the statements for thesethe unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Results for these interim periods are not necessarily indicative of a full year's results. Columbia Property Trust's consolidated financial statements include the accounts of Columbia Property Trust, Columbia Property Trust OP, and any variable interest entity in which Columbia Property Trust or Columbia Property Trust OP was deemed the primary beneficiary. With respect to entities that are not variable interest entities, Columbia Property Trust's consolidated financial statements also include the accounts of any entity in which Columbia Property Trust, Columbia Property Trust OP, or their subsidiaries own a controlling financial interest and any limited partnership in which Columbia Property Trust, Columbia Property Trust OP, or their subsidiaries own a controlling general partnership interest. All intercompany balances and transactions have been eliminated in consolidation. For further information, refer to the financial statements and footnotes included in Columbia Property Trust's Annual Report on Form 10-K for the year ended December 31, 20152016 (the "20152016 Form 10-K").
Fair Value Measurements
Columbia Property Trust estimates the fair value of its assets and liabilities (where currently required under GAAP) consistent with the provisions of Accounting Standard Codification ("ASC") 820, Fair Value Measurements ("ASC 820"). Under this standard, fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date, under current market conditions. While various techniques and assumptions can be used to estimate fair value depending on the nature of the asset or liability, the accounting standard for fair value measurements and disclosures provides the following fair value technique parameters and hierarchy, depending upon availability:
Level 1 – Assets or liabilities for which the identical term is traded on an active exchange, such as publicly traded instruments or futures contracts.
Level 2 – Assets or liabilities valued based on observable market data for similar instruments.
Level 3 – Assets or liabilities for which significant valuation assumptions are not readily observable in the market. Such assets or liabilities are valued based on the best available data, some of which may be internally developed. Significant assumptions may include risk premiums that a market participant would consider.
Real Estate Assets
Columbia Property Trust is required to make subjective assessments as to the useful lives of its depreciable assets. Columbia Property Trust considers the period of future benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. The estimated useful lives of its assets by class are as follows:
|
| | |
Buildings | | 4040-45 years |
Building and site improvements | | 5-25 years |
Tenant improvements | | Shorter of economic life or lease term |
Intangible lease assets | | Lease term |
Evaluating the Recoverability of Real Estate Assets
Columbia Property Trust continually monitors events and changes in circumstances that could indicate that the carrying amounts of its real estate and related intangible assets, of both operating properties and properties under construction, in which Columbia Property Trust has an ownership interest, either directly or through investments in joint ventures, may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of real estate assets and related intangible assets and liabilities may not be recoverable, Columbia Property Trust assesses the recoverability of these assets and liabilities by determining whether the respective carrying values will be recovered through the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying values, Columbia Property Trust adjusts the carrying value of the real estate assets and related intangible assets and liabilities to the estimated fair values, pursuant to the property, plant, and equipment accounting standard for the impairment or disposal of long-lived assets, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, in orderhierarchy of preference,information, depending upon availability: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of future cash flows, including estimated residual value. Certain of Columbia Property Trust's assets may be carried at more than an amount that could be realized in a current disposition transaction. Based on the assessment as described above, Columbia Property Trust has determined that there is no impairment in the carrying values of ourall its real estate assets and related intangible assets are recoverable as of SeptemberJune 30, 2016.2017.
Projections of expected future operating cash flows require that Columbia Property Trust estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. TheDue to the inherent subjectivity of the assumptions used in theto project future cash flow analysis, including discount rates, could resultflows, estimated fair values may differ from the values that would be realized in an incorrect assessment of the property's fair value and could result in the misstatement of the carrying value of Columbia Property Trust's real estate assets and related intangible assets and liabilities and net income.market transactions.
Assets Held for Sale
Columbia Property Trust classifies assetsproperties as held for sale according to ASCAccounting Standard Codification 360, Accounting for the Impairment or Disposal of Long-Lived Assets ("ASC 360"). According to ASC 360, assetsproperties, having separately identifiable operations and cash flows, are considered held for sale when the following criteria are met:
Management, having the authority to approve the action, commits to a plan to sell the property.
The property is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such property.
An active program to locate a buyer and other actions required to complete the plan to sell the property have been initiated.
The property is being actively marketed for sale at a price that is reasonable in relation to its current fair value.
Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.
The sale of the property is probable (i.e., typically subject to a binding sale contract with a non-refundable deposit), and transfer of the property is expected to qualify for recognition as a completed sale within one year.
At such time that a property is determined to be held for sale, its carrying amount is adjusted to the lower of its depreciated book value or its estimated fair value, less costs to sell, and depreciation is no longer recognized; and assets and liabilities are required to be classified as held for sale on the accompanying consolidated balance sheet. As of SeptemberJune 30, 2017, none of Columbia Property Trust's properties met the criteria to be classified as held for sale in the accompanying balance sheet. As of December 31, 2016, the Key Center Tower, and the Key Center Marriott, 5 Houston Center, Energy Center I, and the 9127 South Jamaica Street building515 Post Oak were subject to binding sale contracts and met the other aforementioned criteria; thus, these properties are classified as held for sale in the accompanying consolidated balance sheet as of
consolidated balance sheet as of that date. The sale of the 9127 South Jamaica Street building5 Houston Center, Energy Center I, and 515 Post Oak closed on October 12, 2016January 6, 2017, and the sale of Key Center Tower and Key Center Marriott closed on January 31, 2017 (see Note 3, Real Estate Transactions). The Key Center Tower and the Key Center Marriott transaction is expected to close in the fourth quarter of 2016.
The major classes of assets and liabilities classified as held for sale as of September 30,December 31, 2016, are provided below (in thousands):
| | | September 30, 2016 | December 31, 2016 |
Real estate assets held for sale: | | |
Real estate assets, at cost: | | |
Land | $ | 15,036 |
| $ | 30,243 |
|
Buildings and improvements, less accumulated depreciation of $86,881 | 210,340 |
| |
Intangible lease assets, less accumulated amortization of $24,544 | 11,798 |
| |
Buildings and improvements, less accumulated depreciation of $152,246 | | 366,126 |
|
Intangible lease assets, less accumulated amortization of $28,545 | | 13,365 |
|
Construction in progress | 1,702 |
| 2,772 |
|
Total real estate assets held for sale, net | $ | 238,876 |
| $ | 412,506 |
|
Other assets held for sale: | | |
Tenant receivables, net of allowance for doubtful accounts | $ | 2,011 |
| $ | 1,722 |
|
Straight-line rent receivable | 13,854 |
| 20,221 |
|
Prepaid expenses and other assets | 2,721 |
| 3,184 |
|
Intangible lease origination costs, less accumulated amortization of $18,597 | 1,204 |
| |
Deferred lease costs, less accumulated amortization of $4,528 | 12,516 |
| |
Intangible lease origination costs, less accumulated amortization of $22,949 | | 1,815 |
|
Deferred lease costs, less accumulated amortization of $11,203 | | 18,587 |
|
Total other assets held for sale, net | $ | 32,306 |
| $ | 45,529 |
|
Liabilities held for sale: | | |
Accounts payable, accrued expenses, and accrued capital expenditures | $ | 11,224 |
| $ | 34,812 |
|
Deferred income | 1,653 |
| 4,214 |
|
Intangible lease liabilities, less accumulated amortization of $1,210 | 2,767 |
| |
Intangible lease liabilities, less accumulated amortization of $1,239 | | 2,737 |
|
Total liabilities held for sale, net | $ | 15,644 |
| $ | 41,763 |
|
Intangible Assets and Liabilities Arising from In-Place Leases whereWhere Columbia Property Trust Is the Lessor
Upon the acquisition of real properties, Columbia Property Trust allocates the purchase price of the properties to tangible assets, consisting of land, building, site improvements, and identified intangible assets and liabilities, including the value of in-place leases, based in each case on Columbia Property Trust's estimate of their fair values in accordance with ASC 820 (see Fair Value Measurements section above for additional detail). As of SeptemberJune 30, 20162017 and December 31, 2015,2016, Columbia Property Trust had the following intangible in-place lease assets and liabilities, excluding amounts held for sale (in thousands):
|
| | | | | | | | | | | | | | | | |
| | Intangible Lease Assets | | Intangible Lease Origination Costs | | Intangible Below-Market In-Place Lease Liabilities |
| Above-Market In-Place Lease Assets | | Absorption Period Costs | |
September 30, 2016 | Gross | $ | 19,994 |
| | $ | 184,740 |
| | $ | 140,380 |
| | $ | 82,719 |
|
| Accumulated Amortization | (17,328 | ) | | (104,542 | ) | | (81,735 | ) | | (46,480 | ) |
| Net | $ | 2,666 |
| | $ | 80,198 |
| | $ | 58,645 |
| | $ | 36,239 |
|
December 31, 2015 | Gross | $ | 50,463 |
| | $ | 317,841 |
| | $ | 258,672 |
| | $ | 138,663 |
|
| Accumulated Amortization | (37,971 | ) | | (194,446 | ) | | (181,482 | ) | | (81,496 | ) |
| Net | $ | 12,492 |
| | $ | 123,395 |
| | $ | 77,190 |
| | $ | 57,167 |
|
|
| | | | | | | | | | | | | | | | |
| | Intangible Lease Assets | | Intangible Lease Origination Costs | | Intangible Below-Market In-Place Lease Liabilities |
| Above-Market In-Place Lease Assets | | Absorption Period Costs | |
June 30, 2017 | Gross | $ | 1,689 |
| | $ | 139,732 |
| | $ | 117,357 |
| | $ | 69,006 |
|
| Accumulated Amortization | (796 | ) | | (77,622 | ) | | (68,771 | ) | | (39,939 | ) |
| Net | $ | 893 |
| | $ | 62,110 |
| | $ | 48,586 |
| | $ | 29,067 |
|
December 31, 2016 | Gross | $ | 10,589 |
| | $ | 154,582 |
| | $ | 128,857 |
| | $ | 77,939 |
|
| Accumulated Amortization | (9,305 | ) | | (83,254 | ) | | (74,578 | ) | | (44,564 | ) |
| Net | $ | 1,284 |
| | $ | 71,328 |
| | $ | 54,279 |
| | $ | 33,375 |
|
For the three and ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, Columbia Property Trust recognized the following amortization of intangible lease assets and liabilities (in thousands):
|
| | | | | | | | | | | | | | | |
| Intangible Lease Assets | | Intangible Lease Origination Costs | | Intangible Below-Market In-Place Lease Liabilities |
Above-Market In-Place Lease Assets | | Absorption Period Costs | |
For the three months ended September 30, 2016 | $ | 594 |
| | $ | 6,133 |
| | $ | 3,757 |
| | $ | 2,768 |
|
For the three months ended September 30, 2015 | $ | 823 |
| | $ | 10,926 |
| | $ | 6,728 |
| | $ | 4,634 |
|
For the nine months ended September 30, 2016 | $ | 2,014 |
| | $ | 22,602 |
| | $ | 13,811 |
| | $ | 10,206 |
|
For the nine months ended September 30, 2015 | $ | 3,578 |
| | $ | 35,724 |
| | $ | 23,006 |
| | $ | 15,190 |
|
|
| | | | | | | | | | | | | | | |
| Intangible Lease Assets | | Intangible Lease Origination Costs | | Intangible Below-Market In-Place Lease Liabilities |
Above-Market In-Place Lease Assets | | Absorption Period Costs | |
For the three months ended June 30, 2017 | $ | 161 |
| | $ | 4,189 |
| | $ | 2,740 |
| | $ | 1,911 |
|
For the three months ended June 30, 2016 | $ | 626 |
| | $ | 7,918 |
| | $ | 4,772 |
| | $ | 3,745 |
|
For the six months ended June 30, 2017 | $ | 449 |
| | $ | 9,257 |
| | $ | 5,829 |
| | $ | 4,316 |
|
For the six months ended June 30, 2016 | $ | 1,420 |
| | $ | 16,447 |
| | $ | 10,041 |
| | $ | 7,426 |
|
The remaining net intangible assets and liabilities remaining as of SeptemberJune 30, 20162017, will be amortized as follows (in thousands):
| | | Intangible Lease Assets | | Intangible Lease Origination Costs | | Intangible Below-Market In-Place Lease Liabilities | Intangible Lease Assets | | Intangible Lease Origination Costs | | Intangible Below-Market In-Place Lease Liabilities |
Above-Market In-Place Lease Assets | | Absorption Period Costs | | Above-Market In-Place Lease Assets | | Absorption Period Costs | |
For the remainder of 2016 | $ | 348 |
| | $ | 5,682 |
| | $ | 3,289 |
| | $ | 2,567 |
| |
For the remainder of 2017 | | $ | 47 |
| | $ | 7,232 |
| | $ | 5,053 |
| | $ | 3,312 |
|
For the years ending December 31: | | | | | | | | | | | | | | |
2017 | 612 |
| | 17,237 |
| | 11,371 |
| | 7,576 |
| |
2018 | 270 |
| | 13,467 |
| | 9,964 |
| | 5,649 |
| 97 |
| | 12,834 |
| | 9,540 |
| | 5,649 |
|
2019 | 270 |
| | 11,639 |
| | 8,999 |
| | 4,972 |
| 97 |
| | 11,247 |
| | 8,974 |
| | 4,972 |
|
2020 | 270 |
| | 9,709 |
| | 7,950 |
| | 3,836 |
| 97 |
| | 9,318 |
| | 7,925 |
| | 3,836 |
|
2021 | 270 |
| | 5,823 |
| | 4,008 |
| | 2,171 |
| 97 |
| | 5,432 |
| | 3,984 |
| | 2,171 |
|
2022 | | 97 |
| | 4,054 |
| | 3,006 |
| | 1,938 |
|
Thereafter | 626 |
| | 16,641 |
| | 13,064 |
| | 9,468 |
| 361 |
| | 11,993 |
| | 10,104 |
| | 7,189 |
|
| $ | 2,666 |
| | $ | 80,198 |
| | $ | 58,645 |
| | $ | 36,239 |
| $ | 893 |
| | $ | 62,110 |
| | $ | 48,586 |
| | $ | 29,067 |
|
Intangible Assets and Liabilities Arising from In-Place Leases whereWhere Columbia Property Trust Is the Lessee
Columbia Property Trust is the lessee on certain in-place ground leases. Intangible above-market and below-market in-place lease values are recorded as intangible lease liabilities and assets, respectively, and are amortized as an adjustment to property operating cost over the remaining term of the respective leases. Columbia Property Trust had gross below-market lease assets of approximately
$140.9 million as of SeptemberJune 30, 20162017 and December 31, 2015,2016, and recognized amortization of these assets of approximately $0.6 million for the three months ended SeptemberJune 30, 2017 and 2016, and 2015, and approximately $1.9$1.3 million for the ninesix months ended SeptemberJune 30, 2017 and 2016, and 2015.respectively.
As of SeptemberJune 30, 2016,2017, the remaining net below-market intangible lease assets will be amortized as follows (in thousands):
| | For the remainder of 2016 | $ | 637 |
| |
For the remainder of 2017 | | $ | 1,274 |
|
For the years ending December 31: | | |
2017 | 2,549 |
| |
2018 | 2,549 |
| 2,549 |
|
2019 | 2,549 |
| 2,549 |
|
2020 | 2,549 |
| 2,549 |
|
2021 | 2,549 |
| 2,549 |
|
2022 | | 2,549 |
|
Thereafter | 107,954 |
| 105,406 |
|
| $ | 121,336 |
| $ | 119,425 |
|
Interest Rate Swap Agreements
Columbia Property Trust enters into interest rate swap contracts to mitigate its interest rate risk on the related financial instruments. Columbia Property Trust does not enter into derivative or interest rate swap transactions for speculative purposes; however, certain of its derivatives may not qualify for hedge accounting treatment. Columbia Property Trust records the fair value of its interest rate swaps either as prepaid expenses and other assets or as accounts payable, accrued expenses, and accrued capital expenditures. Changes in the fair value of the effective portion of interest rate swaps that are designated as cash flow hedges are recorded as other comprehensive income, while changes in the fair value of the ineffective portion of a cash flow hedge, if any, are recognized currently in earnings. All changes in the fair value of interest rate swaps that do not qualify for hedge accounting treatment are recorded as gain (loss)or loss on interest rate swaps. Amounts received or paid under interest rate swap agreements are recorded as interest expense for contracts that qualify for hedge accounting treatment and as gain (loss)or loss on interest rate swaps for contracts that do not qualify for hedge accounting treatment. The following tables provide additional information related to Columbia Property Trust's interest rate swaps (in thousands):
| | | | | | Estimated Fair Value as of | | | | Estimated Fair Value as of |
Instrument Type | | Balance Sheet Classification | | September 30, 2016 | | December 31, 2015 | | Balance Sheet Classification | | June 30, 2017 | | December 31, 2016 |
Derivatives designated as hedging instruments: | | | | | | | | |
Interest rate contracts | | Accounts payable | | $ | (8,065 | ) | | $ | (2,436 | ) | | Accounts payable | | $ | (885 | ) | | $ | (882 | ) |
Columbia Property Trust applied the provisions of ASC 820 in recording its interest rate swaps at fair value. The fair values of the interest rate swaps, classified under Level 2, were determined using a third-party proprietary model that is based on prevailing market data for contracts with matching durations, current and anticipated London Interbank Offered Rate ("LIBOR") information, and reasonable estimates about relevant future market conditions. Columbia Property Trust has determined that the fair value, as determined by the third party, is reasonable.
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
Market value adjustment to interest rate swaps designated as hedging instruments and included in other comprehensive income | $ | 1,250 |
| | $ | (4,147 | ) | | $ | (5,629 | ) | | $ | (3,552 | ) |
Loss on interest rate swap recognized through earnings | $ | — |
| | $ | (1,102 | ) | | $ | — |
| | $ | (1,110 | ) |
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Market value adjustment to interest rate swaps designated as hedging instruments and included in other comprehensive income | $ | (636 | ) | | $ | (2,022 | ) | | $ | (2 | ) | | $ | (6,879 | ) |
During the periods presented, there was no hedge ineffectiveness required to be recognized into earnings on the interest rate swaps that qualified for hedge accounting treatment.
Income Taxes
Columbia Property Trust has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), and has operated as such beginning with its taxable year ended December 31, 2003. To qualify as a REIT, Columbia Property Trust must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its REIT taxable income, as defined by the Code, to its stockholders. As a REIT, Columbia Property Trust generally is not subject to income tax on income it distributes to stockholders. Columbia Property Trust's stockholder distributions typically exceed its taxable income due to the inclusion of noncash expenses, such as depreciation, in taxable income. As a result, Columbia Property Trust typically does not incur federal income taxes other than as described in the following paragraph. Columbia Property Trust is, however, subject to certain state and local taxes related to the operations of properties in certain locations, which have been provided for in the accompanying consolidated financial statements.
Columbia Property Trust TRS, LLC, ("Columbia Property Trust TRS"), Columbia KCP TRS, LLC, ("Columbia KCP TRS"), and Columbia Energy TRS, LLC ("Columbia Energy TRS") (collectively, the "TRS Entities") are wholly owned subsidiaries of Columbia Property Trust and are organized as Delaware limited liability companies, and operate,companies. The TRS Entities, among other things, office propertiesprovide tenant services that Columbia Property Trust, does not intend to hold long term andas a full-service hotel.REIT, cannot otherwise provide. Columbia Property Trust has elected to treat the TRS Entities as taxable REIT subsidiaries. Columbia Property Trust may perform certain additional, noncustomary services for tenants of its buildings through the TRS Entities; however, any earnings related to such services are subject to federal and state income taxes. In addition, for Columbia Property Trust to continue to qualify as a REIT, Columbia Property Trust must limit its investments in taxable REIT subsidiaries to 25% of the value of the total assets. The TRS Entities' deferred tax assets and
liabilities represent temporary differences between the financial reporting basis and the tax basis of assets and liabilities based on the enacted rates expected to be in effect when the temporary differences reverse. If applicable,
Columbia Property Trust records interest and penalties related to uncertain tax positions as general and administrative expense in the accompanying consolidated statements of operations.
Recent Accounting Pronouncements
In August 2016,February 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standard Update 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Non-Financial Assets ("ASU 2016-15, Classification of Cash Receipts and Payments ("ASU 2016-15"2017-05"), which addresseswill apply to the statementpartial sale of cash flow classification requirements for several types of receipts and payments.non-financial assets, including real estate assets, to unconsolidated joint ventures. ASU 2016-15 provides2017-05 will require that among other things, (i) debt prepayments and extinguishment costs should be classified as financing activities, (ii) insurance proceeds should be classified in accordance with the nature100% of the respective claims,gain be recognized for non-financial assets transferred to an unconsolidated joint venture and (iii) distributionsany non-controlling interest received in such non-financial assets be measured at fair value. ASU 2017-05 is to be implemented at the same time as Accounting Standards Update 2014-09, Revenue from equity method investees should be classified based on the underlying nature of the investee activity according to specific guidelines. ASU 2016-15Contracts with Customers (as described below), and is effective for Columbia Property Trust on January 1, 2018, with early adoption permitted. ASU 2016-15 is not expected to materially impact Columbia Property Trust'sTrust anticipates adopting ASU 2017-05 retrospectively with a cumulative-effect adjustment booked to retained earnings at adoption. This adjustment will (1) mark investments in unconsolidated joint ventures to fair value as of the date of contribution to the unconsolidated joint ventures, and (2) recognize the remainder of the gain associated with transferring the assets to the unconsolidated joint venture. Columbia Property Trust is evaluating the impact of ASU 2017-05 and anticipates applying the modified-retrospective approach of implementation by recording a cumulative-effect adjustment to equity for investments in unconsolidated joint ventures in which Columbia Property Trust had previously contributed property and recognized a gain on a partial property sale (see Note 4, Unconsolidated Joint Venture).
In January 2017, the FASB issued Accounting Standards Update 2017-01, Clarifying the Definition of a Business ("ASU 2017-01"), which provides a more narrow definition of a business to be used in determining the accounting policies, ortreatment of an acquisition, and, as a result, many acquisitions that previously qualified as business combinations will be treated as asset acquisitions. For asset acquisitions, acquisition costs may be capitalized, and purchase price may be allocated on a relative fair-value basis. ASU 2017-01 is effective prospectively for Columbia Property Trust on January 1, 2018, with early adoption permitted. For real estate acquisitions completed subsequent to its financial statements.adoption, Columbia Property Trust anticipates that ASU 2017-01 will result in simplified purchase price allocations and the capitalization of associated acquisition costs.
In February 2016, the FASB issued Accounting Standards Update2016-02ASU 2016-02,, Leases ("ASU 2016-02"), which amends the existing standards for lease accounting by requiring lessees to recognize most leases on their balance sheets and by making targeted changes to lessor accounting and reporting.reporting, including the classification of lease components and nonlease components, such as services provided to tenants. The new standard will require lessees to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months, and classify such leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee.lessee, or not. This classification will determine whether the lease expense is recognized based on an effective interest method (finance leases), or on a straight-line basis over the term of the lease (operating leases). Leases with a term of 12 months or less will be accounted for using an approach that is similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance as applies to sales-type leases, direct financing leases, and operating leases. ASU 2016-02 supersedes previous leasing standards. ASU 2016-02 iswill be effective for Columbia Property Trust on January 1, 2019 and supersedes previous leasing standards. Once effective, Columbia Property Trust anticipates separating lease components from nonlease components, which will be evaluated under ASU 2014-09, as described below.
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which establishes a comprehensive model to account for reporting periodsrevenue arising from contracts with customers. ASU 2014-09 applies to all contracts with customers, except those that are within the scope of other topics in the FASB's Accounting Standards Codification, including real estate leases. ASU 2014-09 will require companies to perform a five-step analysis of transactions to determine when and how revenue is recognized. ASU 2014-09 will be effective retrospectively for Columbia Property Trust beginning after December 15,on January 1, 2018, withand early adoption is permitted. Columbia Property Trust is evaluatingcontinuing to evaluate the impact that ASU 2016-022014-09 will have on its financial positionstatements and resultsdisclosures; however, Columbia Property Trust primarily derives revenue from real estate leases, which are excluded from ASU 2014-09. Columbia Property Trust is in the process of operations.evaluating the criteria of ASU 2014-09 and determining what impact the new standard will have on revenue streams generated from activities other than leasing, including asset management fees. At adoption, Columbia Property Trust anticipates applying the modified-retrospective approach of implementation as of the effective date and providing more extensive disclosures around our revised revenue recognition policy. Columbia Property Trust also anticipates that, upon the adoption of ASU 2016-02, as described above, nonlease components of revenue will also be evaluated under ASU 2014-09.
| |
3. | Real Estate Transactions |
AcquisitionsDispositions
During 2016 and the ninefirst six months ended September 30,of 2017, Columbia Property Trust closed the following transactions:
|
| | | | | | | | | | | | | |
Property | | Location | | Date | | Purchase Price(1) (in thousands) | | Gain (Loss) on Sale (in thousands) |
2017 | | | | | | | | | |
Key Center Tower & Marriott(2) | | Cleveland, OH | | January 31, 2017 | | $ | 267,500 |
| | $ | 9,500 |
| |
Houston Properties Sale(3) | | Houston, TX | | January 6, 2017 | | $ | 272,000 |
| | $ | 63,700 |
| |
2016 | | | | | | | | | |
SanTan Corporate Center | | Phoenix, AZ | | December 15, 2016 | | $ | 58,500 |
| | $ | 9,800 |
| |
Sterling Commerce | | Dallas, TX | | November 30, 2016 | | $ | 51,000 |
| | $ | 12,500 |
| |
9127 South Jamaica Street | | Denver, CO | | October 12, 2016 | | $ | 19,500 |
| | $ | — |
| (4) |
80 Park Plaza | | Newark, NJ | | September 30, 2016 | | $ | 174,500 |
| | $ | 21,600 |
| |
9189, 9191 & 9193 South Jamaica Street | | Denver, CO | | September 22, 2016 | | $ | 122,000 |
| | $ | 27,200 |
| |
800 North Frederick | | Suburban, MD | | July 8, 2016 | | $ | 48,000 |
| | $ | 2,100 |
| |
100 East Pratt | | Baltimore, MD | | March 31, 2016 | | $ | 187,000 |
| | $ | (300 | ) | |
| |
(1) | Purchase price, as shown, is before purchase price adjustments. |
| |
(2) | Key Center Tower & Marriott were sold in one transaction on January 31, 2017. At closing, Columbia Property Trust received $254.5 million of gross proceeds and a $13.0 million, 10-year accruing note receivable from the principal of the buyer. As a result, Columbia Property Trust has applied the installment method to account for this transaction, and deferred $13.0 million of the total $22.5 million gain on sale. The Key Center Tower and Key Center Marriott generated net income of $5.4 million for the first six months of 2016, and a net loss of $1.9 million for the first 31 days of 2017, excluding the gain on sale. |
| |
(3) | 5 Houston Center, Energy Center I, and 515 Post Oak were sold in one transaction on January 6, 2017 (the "Houston Properties Sale"). The properties included in the Houston Properties Sale generated net income of $7.1 million for the first six months of 2016, and a net loss of $14.9 thousand for the first six days of 2017, excluding the gain on sale. |
| |
(4) | Columbia Property Trust recorded a de minimus loss on the sale of 9127 South Jamaica Street. |
Acquisitions
Columbia Property Trust did not acquire any properties. During 2015,properties during 2016 or the six months ended June 30, 2017. In February 2017, Columbia Property Trust acquired the following properties (in thousands):
|
| | | | | | | | | | | | | | | | |
| | 315 Park Avenue South Building | | 1881 Campus Commons Building | | 116 Huntington Avenue Building | | 229 West 43rd Street Building |
Location | | New York, NY |
| | Reston, VA |
| | Boston, MA |
| | New York, NY |
|
Date Acquired | | January 7, 2015 |
| | January 7, 2015 |
| | January 8, 2015 |
| | August 4, 2015 |
|
Purchase price: | | | | | | | | |
Land | | $ | 119,633 |
| | $ | 7,179 |
| | $ | — |
| | $ | 207,233 |
|
Building and improvements | | 232,598 |
| | 49,273 |
| | 108,383 |
| | 265,952 |
|
Intangible lease assets | | 16,912 |
| | 4,643 |
| | 7,907 |
| | 27,039 |
|
Intangible below market ground lease assets | | — |
| | — |
| | 30,244 |
| | — |
|
Intangible lease origination costs | | 4,148 |
| | 1,603 |
| | 2,669 |
| | 10,059 |
|
Intangible below market lease liability | | (7,487 | ) | | (97 | ) | | (1,878 | ) | | — |
|
Total purchase price | | $ | 365,804 |
| | $ | 62,601 |
| | $ | 147,325 |
| | $ | 510,283 |
|
Note 2, Summary of Significant Accounting Policies, providesdeposited $12.0 million in earnest money, upon entering a discussion of the estimated useful life for each asset class.
315 Parkfirm contract to purchase 149 Madison Avenue, South Building & 1881 Campus Commons Building
On January 7, 2015, Columbia Property Trust acquired two assets, 315 Park Avenue South, a 327,000-square-foot12-story, 127,000-square-foot office building in New York, New York (the "315 Park Avenue South Building"), and 1881 Campus Commons, a 244,000-square-foot office building in Reston, Virginia (the "1881 Campus Commons Building"). This portfolio was acquired for $436.0 million, exclusive of transaction costs and purchase price adjustments, using proceeds from the issuance of $350.0 million bonds payable due in 2025, proceeds from the Revolving Credit Facility, as described in Note 5, Line of Credit and Notes Payable, and cash on hand.York. Closing is expected to occur later this year.
Allianz Joint Ventures
As of the acquisition date, the 315 Park Avenue South Building was 94.9% leased to nine tenants, including Credit Suisse (74%). For the period from January 7, 2015 to September 30, 2015,On July 6, 2017, Columbia Property Trust recognized revenuescontributed the 333 Market Street Building and the University Circle Property to joint ventures, and simultaneously sold a 22.5% interest in those joint ventures to Allianz Real Estate ("Allianz"), an unrelated third party, for a total of $18.8$234.0 million and a net loss(the "San Francisco Joint Ventures"). Upon the earlier of $4.8 million from the 315 Park Avenue South Building. The net loss includes acquisition expenses of $1.2 million.
As of the acquisition date, the 1881 Campus Commons Building was 78.0% leased to 15 tenants, including SOS International (15%) and Siemens (12%). For the period from January 7, 2015 to September 30, 2015,July 6, 2018, or when Columbia Property Trust recognized revenuesand Allianz jointly invest $600.0 million in additional assets acquisitions (excluding 114 Fifth Ave described below), Allianz will acquire another 22.5% interest in each of $4.6the San Francisco Joint Ventures at the same aggregate price, $234.0 million, andadjusted for any capital expenditures at the properties made during the intervening period. At that point, Columbia Property Trust will hold a net loss55.0% equity interest in each of $1.6 million from the 1881 Campus Commons Building. The net loss includes acquisition expenses of $0.5 million.
116 Huntington Avenue BuildingSan Francisco Joint Ventures.
On January 8, 2015,July 6, 2017, Columbia Property Trust acquired a 271,000-square-foot office49.5% equity interest in a joint venture that owns the 114 Fifth Avenue property for $108.9 million from Allianz (the "114 Fifth Avenue Joint Venture"). 114 Fifth Avenue is a 19-story, 352,000-square-foot building located in Boston, Massachusetts (the "116 HuntingtonManhattan’s Flatiron District which is currently 100% leased and is unencumbered by debt. The 114 Fifth Avenue Building"), for $152.0 million, inclusive of capital credits, using proceeds from the issuance of $350.0 million bonds payable due in 2025, proceeds from the Revolving Credit Facility, and cash on hand. As of the acquisition date, the 116 Huntington Avenue Building was 78.0% leased to 17 tenants, including American Tower (21%), GE Healthcare (13%), and Brigham and Women's (12%). For the period from January 8, 2015 to September 30, 2015,Joint Venture is owned by Columbia Property Trust recognized revenues of $8.3 million(49.5%), Allianz (49.5%) and a net loss of $0.6 million fromL&L Holding Company (1.0%). L&L Holding Company is the 116 Huntington Avenue Building. The net loss includes acquisition expenses of $0.3 million.
229 West 43rd Street Building
On August 4, 2015, Columbia Property Trust acquired the 481,000-square-foot office portion of the 229 West 43rd Street building, a 16-story,732,000-square-foot building located in the Times Square sub-market of Manhattan in New York, New York (the "229 West 43rd Street Building"), for $516.0 million, exclusive of transaction costsgeneral partner, and purchase price adjustments. This acquisition was funded with the $300 Million Bridge Loan, as described in Note 5, Line of Creditwill continue to perform asset and Notes Payable, and borrowings on the Revolving Credit Facility. As of the acquisition date, the 229 West 43rd Street Building was 98% leased to nine tenants, including Yahoo! (40%), Snapchat (13%), Collective, Inc. (12%), and MongoDB (10%). For the period from August 4, 2015 to September 30, 2015, Columbia Property Trust recognized revenues of $5.5 million and net income of $0.4 million from the 229 West 43rd Street Building. The net income includes acquisition expenses of $1.7 million.
Proforma Financial Information
The following unaudited pro forma statements of operations presentedproperty management services for the three and nine months ended September 30, 2015, have been prepared for Columbia Property Trust to give effect to the acquisitions of the 315 Park Avenue South Building, the 1881 Campus Commons Building, the 116 Huntington Avenue Building, and the 229 West 43rd Street Building as if the acquisitions occurred on January 1, 2014. Other than 1881 Campus Commons, which was sold in December 2015, Columbia Property Trust owned these buildings for the entirety of the three and nine months ended September 30, 2016. The following unaudited pro forma financial results for Columbia Property Trust have been prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had these acquisitions been consummated as of January 1, 2014 (in thousands).
|
| | | | | | | |
| Three Months Ended September 30, 2015 | | Nine Months Ended September 30, 2015 |
Revenues | $ | 140,225 |
| | $ | 450,020 |
|
Net income | $ | 21,534 |
| | $ | 36,183 |
|
Net income per share - basic | $ | 0.17 |
| | $ | 0.29 |
|
Net income per share - diluted | $ | 0.17 |
| | $ | 0.29 |
|
Dispositions
During 2016 and 2015, Columbia Property Trust closed on the following transactions:
9127 South Jamaica Street Building
On October 12, 2016, Columbia Property Trust sold the 9127 South Jamaica Street building, one of the four buildings at the South Jamaica Street Property in Denver, Colorado, for $19.5 million, before purchase price adjustments.
80 Park Plaza Property
On September 30, 2016, Columbia Property Trust sold the 80 Park Plaza Property in Newark, New Jersey, for $174.5 million, before purchase price adjustments, and recognized a gain of approximately $21.6 million on the sale in the third quarter of 2016. A portion of the net sale proceeds of $169.3 million were used to repay the outstanding balance of the Revolving Credit Facility of $99.0 million after quarter end.
South Jamaica Street Property
On September 22, 2016, Columbia Property Trust sold three of the four buildings at the South Jamaica Street Property in Denver, Colorado, for $122.0 million, before purchase price adjustments, and recognized a gain of approximately $27.2 million on the sale in the third quarter of 2016. The net sale proceeds of $108.0 million were used to reduce the outstanding balance of the Revolving Credit Facility.
800 North Frederick Property
On July 8, 2016, Columbia Property Trust sold the 800 North Frederick Property in suburban Maryland for $48.0 million, before purchase price adjustments, and recognized a gain of approximately $2.1 million on the sale in the third quarter of 2016. The net sale proceeds of $45.4 million were used to reduce the outstanding balance of the Revolving Credit Facility.
100 East Pratt Property
On March 31, 2016, Columbia Property Trust sold the 100 East Pratt Property in Baltimore, Maryland, for $187.0 million, before purchase price adjustments, and recognized a $0.3 million loss on the sale. The net sale proceeds of $159.4 million were used to repay $119.0 million remaining on the $300 Million Bridge Loan on April 1, 2016, and to reduce the outstanding balance of the Revolving Credit Facility.
1881 Campus Commons Building
On December 10, 2015, Columbia Property Trust sold the 1881 Campus Commons Building in Reston, Virginia, for $65.0 million, exclusive of purchase price adjustments and closing costs, yielding a gain of $0.5 million. The proceeds from the sale of the 1881 Campus Commons Building were used to reduce the outstanding balance of the $300 Million Bridge Loan.
Market Square Buildings - Partial Sale
On October 28, 2015, Columbia Property Trust transferred the Market Square Buildings, as described in Note 4, Unconsolidated Joint Venture, and the related $325.0 million mortgage note to a joint venture (the "Market Square Joint Venture") and sold a 49% interest in the Market Square Joint Venture to Blackstone Property Partners ("Blackstone") for approximately $120.0 million of net proceeds, which were used to repay a portion of the $300 Million Bridge Loan. As a result of this transaction, Columbia Property Trust recognized a gain on real estate of $3.1 million and retains a 51% interest in the Market Square Joint Venture. The Market Square Joint Venture owns and operates the Market Square Buildings through a REIT ("Market Square REIT East & West, LLC"). See Note 4, Unconsolidated Joint Venture, for additional information.
11 Property Sale
On July 1, 2015, Columbia Property Trust sold 11 properties to an unaffiliated third party for $433.3 million, exclusive of closing costs (the "11 Property Sale"), which resulted in a gain of $19.7 million. The proceeds for 10 of the properties were available on July 1, 2015, and the remaining proceeds were available on August 3, 2015. For the period from January 1, 2015 through July 1, 2015, the aggregate net income, excluding the gain on sale, for the properties included in the 11 Property Sale was $6.5 million. The following properties make up the 11 Property Sale:
|
| | |
170 Park Avenue | Bannockburn Lake III | Acxiom |
180 Park Avenue | 544 Lakeview | 215 Diehl Road |
Robbins Road | Highland Landmark III | 1580 West Nursery |
550 King Street | The Corridors III | |
property.4. Unconsolidated Joint Venture
Columbia Property Trust owns a majority interest51% of 51% inan unconsolidated joint venture that owns the Market Square buildings (the "Market Square Joint Venture,Venture"), and Blackstone Property Partners ("Blackstone") owns the remaining 49% interest in the joint venture.interest. The Market Square Joint Venture owns and operates the Market Square Buildingsbuildings through Market Square REIT East & West, LLC, which operates as a
REIT. The Market Square Buildingsbuildings are two, 13-story office buildings containing 698,000 square feet of office space in Washington, D.C. (the "Market Square Buildings"). Columbia Property Trust shares substantive participation rights with Blackstone, including management selection and termination, and the approval of material operating and capital decisions. As such, Columbia Property Trust uses the equity method of accounting to record its investment in the Market Square Joint Venture. Under the equity method, the investment in the joint venture is recorded at cost and adjusted for cash contributions and distributions, and allocations of income (loss).or loss. Cash distributions and earnings are allocated according to the provisions of the joint venture agreement, which are consistent with the ownership percentages for the Market Square Joint Venture.
Columbia Property Trust evaluates the recoverability of its investment in unconsolidated joint venture in accordance with accounting standards for equity investments by first reviewing the investment for any indicators of impairment. If indicators are present, Columbia Property Trust estimates the fair value of the investment. If the carrying value of the investment is greater than the estimated fair value, management makes an assessment of whether the impairment is "temporary" or "other-than-temporary." In making this assessment, management considers the following: (1) the length of time and the extent to which fair value has been less than cost, and (2) Columbia Property Trust's intent and ability to retain its interest long enough for a recovery in market value. Based on the assessment as described above, Columbia Property Trust has determined that the carrying value of its investment in unconsolidated joint venture is recoverable as of June 30, 2017.
As of SeptemberJune 30, 2017 and December 31, 2016, the outstanding balance on the interest-only Market Square mortgage note is $325.0 million, bearing interest at 5.07%. The Market Square mortgage note matures on July 1, 2023. On October 28, 2015, Columbia Property Trust entered intoguarantees a guaranty of a $25.0 million portion of the Market Square mortgage note, the amount of which has been reduced to $23.3$12.6 million as of SeptemberJune 30, 2017 from $16.1 million as of December 31, 2016, as a result of leasing at the Market Square Buildings. The amount of the guaranty will continue to be reduced as space is leased.
Condensed balance sheet information for the Market Square Joint Venture is as follows (in thousands):
| | | September 30, 2016 | | December 31, 2015 | June 30, 2017 | | December 31, 2016 |
Total assets | $ | 578,097 |
| | $ | 573,073 |
| $ | 582,664 |
| | $ | 587,344 |
|
Total debt | $ | 324,642 |
| | $ | 324,603 |
| $ | 324,682 |
| | $ | 324,656 |
|
Total equity | $ | 239,845 |
| | $ | 230,060 |
| $ | 239,207 |
| | $ | 242,802 |
|
Columbia Property Trust's investment | $ | 125,605 |
| | $ | 118,695 |
| $ | 125,584 |
| | $ | 127,346 |
|
Condensed income statement information for the Market Square Joint Venture is as follows (in thousands). The Market Square Joint Venture was formed subsequent to September 30, 2015.:
| | | | | | | | For the Three Months Ended June 30, 2017 | | For the Six Months Ended June 30, 2017 |
| Three Months Ended September 30, 2016 | | Nine Months Ended September 30, 2016 | 2017 | | 2016 | | 2017 | | 2016 |
Total revenues | $ | 9,787 |
| | $ | 31,226 |
| $ | 10,428 |
| | $ | 9,776 |
| | $ | 20,562 |
| | $ | 21,439 |
|
Net loss | $ | (3,799 | ) | | $ | (10,669 | ) | $ | (3,563 | ) | | $ | (3,827 | ) | | $ | (7,259 | ) | | $ | (6,870 | ) |
Columbia Property Trust's share | $ | (1,937 | ) | | $ | (5,441 | ) | |
Columbia Property Trust's share of net loss | | $ | (1,817 | ) | | $ | (1,952 | ) | | $ | (3,702 | ) | | $ | (3,504 | ) |
Columbia Property Trust provides property and asset management services to the Market Square Joint Venture. Under these agreements, Columbia Property Trust oversees the day-to-day operations of the Market Square Joint Venture and the Market Square Buildings, including property management, property accounting, and other property services. Columbia Property Trust receives property management fees equal to 3.0% of the gross revenue of the Market Square Buildings and reimbursements of property operating costs, payable monthly, and receives asset management fees of $1.0 million annually, payable in equal quarterly installments. During the three and nine months ended September 30, 2016, Columbia Property Trust earned $0.6 million and $1.9 million, respectively, in fees related to these asset and property management services whichof $0.7 million and $0.6 million for the three months ended June 30, 2017 and 2016, respectively, and $1.3 million for each of the six month periods ended June 30, 2017 and 2016. Such fees are included in other property income on the accompanying consolidated statementstatements of operations. The Market Square Joint Venture was formed in October 2015, so similar fees were not earned during the nine months ended September 30, 2015.
As of SeptemberJune 30, 2017 and December 31, 2016, $0.1 million in property management fees of $0.1 million were due from the Market Square Joint Venture and are included in prepaid expenses and other assets on the accompanying consolidated balance sheet.sheets.
5. Line of Credit and Notes Payable
As of SeptemberJune 30, 20162017 and December 31, 20152016, Columbia Property Trust had the following line of credit and notes payable indebtedness (excluding bonds payable; see Note 6, Bonds Payable) in thousands:
|
| | | | | | | | |
Facility | | September 30, 2016 | | December 31, 2015 |
$300 Million Term Loan | | $ | 300,000 |
| | $ | 300,000 |
|
$150 Million Term Loan | | 150,000 |
| | 150,000 |
|
650 California Street Building mortgage note | | 126,920 |
| | 128,785 |
|
Revolving Credit Facility | | 99,000 |
| | 247,000 |
|
221 Main Street Building mortgage note | | 73,000 |
| | 73,000 |
|
263 Shuman Boulevard Building mortgage note | | 49,000 |
| | 49,000 |
|
One Glenlake Building mortgage note | | 27,072 |
| | 29,278 |
|
$300 Million Bridge Loan | | — |
| | 119,000 |
|
SanTan Corporate Center mortgage notes | | — |
| | 39,000 |
|
Less: Deferred financing costs related to term loans and notes payable, net of accumulated amortization | | (3,406 | ) | | (4,492 | ) |
Total indebtedness | | $ | 821,586 |
| | $ | 1,130,571 |
|
|
| | | | | | | | |
Facility | | June 30, 2017 | | December 31, 2016 |
$300 Million Term Loan | | $ | 300,000 |
| | $ | 300,000 |
|
$150 Million Term Loan | | 150,000 |
| | 150,000 |
|
650 California Street building mortgage note | | 125,005 |
| | 126,287 |
|
263 Shuman Boulevard building mortgage note(1) | | 49,000 |
| | 49,000 |
|
One Glenlake building mortgage note | | 24,769 |
| | 26,315 |
|
221 Main Street building mortgage note | | — |
| | 73,000 |
|
Revolving Credit Facility | | — |
| | — |
|
Less: Deferred financing costs related to term loans and notes payable, net of accumulated amortization | | (2,614 | ) | | (3,136 | ) |
| | $ | 646,160 |
| | $ | 721,466 |
|
| |
(1) | In January 2017, the lender put this loan into default because the full-building lease with OfficeMax was not renewed, as required by the loan agreement. OfficeMax vacated the property in 2015, and the lease expired in May 2017. Columbia Property Trust is in the process of working to transfer this property to the lender. |
Fair Value of Debt
The estimated fair value of Columbia Property Trust's line of credit and notes payable as of SeptemberJune 30, 20162017 and December 31, 2015,2016, was approximately $829.4$651.7 million and $1,140.1$728.5 million, respectively. The related carrying value of the line of credit and notes payable as of SeptemberJune 30, 20162017 and December 31, 2015,2016, was $825.0$648.8 million and $1,135.1$724.6 million, respectively. Columbia Property Trust estimated the fair value of the $300 Million Term Loan (the "$300 Million Term Loan") and the Revolving Credit Facility (the "Revolving Credit Facility") by obtaining estimates for similar facilities from multiple market participants as of the respective reporting dates. Therefore, the fair values determined are considered to be based on observable market data for similar instruments (Level 2). The fair values of all other debt instruments were estimated based on discounted cash flow analyses using the current incremental borrowing rates for similar types of borrowing arrangements as of the respective reporting dates. The discounted cash flow method of assessing fair value results in a general approximation of value, and such value may never actually be realized.
Interest Paid and Capitalized and Debt Covenants
During the ninesix months ended SeptemberJune 30, 20162017 and 20152016, Columbia Property Trust made interest payments totaling approximately $21.7$11.2 million and $43.4$15.2 million, respectively, of which approximately $0.2$0.3 million and $0.4$0.1 million, were capitalized during the nine months ended September 30, 2016 and 2015, respectively.respectively, was capitalized. As of SeptemberJune 30, 2016,2017, Columbia Property Trust believes it wasis in compliance with the restrictive financial covenants on its term loans, the Revolving Credit Facility, and notes payable obligations.
Debt Repayments
Subsequent to quarter end, Columbia Property Trust used proceeds from the 80 Park Plaza Property sale to fully repay the Revolving Credit Facility balance of $99.0 million.
On June 30, 2016, Columbia Property Trust used borrowings on the Revolving Credit Facility to repay the $39.0 million SanTan Corporate Center mortgage notes, which were scheduled to mature on October 11, 2016. In the second quarter of 2016, Columbia Property Trust wrote off approximately $10,000 of related unamortized financing costs, which are included in loss on early extinguishment in the accompanying statements of operations.
On April 1, 2016,March 10, 2017, Columbia Property Trust repaid the $119.0$73.0 million remaining on its $300 million, six-month unsecured loan,balance of the 221 Main Street building mortgage note, which was used to finance a portion of the 229 West 43rd Street Building acquisition in August of 2015 (the "$300 Million Bridge Loan"). The $300 Million Bridge Loan wasoriginally scheduled to mature on August 4, 2016.May 10, 2017. Columbia Property Trust recognized a loss on early extinguishment of debt of $82,000$45,000 related to unamortized deferred financing costs.
Term Loan Amendment
On July 25, 2017, Columbia Property Trust amended the terms of it $150 Million Term Loan, to reduce the current interest rate from 3.52% to 3.07% per annum. The amendment reduced the interest rate from LIBOR, plus an applicable margin ranging from 1.40% to 2.35%, to LIBOR, plus an applicable margin ranging from 0.90% to 1.75%. The maturity date, debt covenants, and other terms of the $150 Million Term Loan are unchanged. The interest rate is effectively fixed with an interest rate swap agreement, which is designated as a cash flow hedge.
6. Bonds Payable
On August 12, 2016, Columbia Property Trust OP issued $350.0 million of ten-year,10-year, unsecured 3.650% senior notes at 99.626% of their face value (the "2026 Bonds Payable"), which are guaranteed by Columbia Property Trust. Columbia Property Trust OP received net proceeds from the 2026 Bonds Payable of $346.4 million, which were used to redeem $250.0 million of seven-year, unsecured 5.875% senior notes due April 2018 (the "2018 Bonds Payable"), including a $17.9 million make-whole payment reflected as an early loss on extinguishment of debt in the accompanying consolidated statement of operations. The remaining net proceeds were used to repay borrowings on the Revolving Credit Facility.. The 2026 Bonds Payable require semi-annual interest payments in February and August based on a contractual annual interest rate of 3.650%. In the accompanying consolidated balance sheets, the 2026 Bonds Payable are shown net of the initial issuance discount of approximately $1.3 million, which will beis being amortized to interest expense over the term of the 2026 Bonds Payable using the effective interest method. The principal amount of the 2026 Bonds Payable is due and payable on the maturity date, August 15, 2026.
In March 2015, Columbia Property Trust OP issued $350.0 million of ten-year,10-year, unsecured 4.150% senior notes at 99.859% of their face value (the "2025 Bonds Payable"), which are guaranteed by Columbia Property Trust. Columbia Property Trust OP received proceeds from the 2025 Bonds Payable, net of fees, of $347.2 million. The 2025 Bonds Payable require semi-annual interest payments in April and October based on a contractual annual interest rate of 4.150%. In the accompanying consolidated balance sheets, the 2025 Bonds Payable are shown net of the initial issuance discount of approximately $0.5 million, which will beis being amortized to interest expense over the term of the 2025 Bonds Payable using the effective interest method. The principal amount of the 2025 Bonds Payable is due and payable on the maturity date, April 1, 2025.
Interest payments of $20.8$13.8 million were made on the 20182026 Bonds Payable and the 2025 Bonds Payable during the ninesix months ended SeptemberJune 30, 2016,2017, and $14.6 million in interest payments of $7.3 million were made on the 2025 Bonds Payable or the 2018 Bonds Payable during the ninesix months ended SeptemberJune 30, 2015.2016. Columbia Property Trust is subject to substantially similar covenants under the 2026 Bonds Payable and the 2025 Bonds Payable. As of SeptemberJune 30, 20162017, Columbia Property Trust believes it was in compliance with the restrictive financial covenants on the 2026 Bonds Payable and the 2025 Bonds Payable.
As of SeptemberJune 30, 2017 and December 31, 2016, the estimated fair value of the 2026 Bonds Payable and the 2025 Bonds Payable was approximately $703.2$703.0 million and as of December 31, 2015, the estimated fair value of the 2025 Bonds Payable and the 2018 Bonds Payable was approximately $602.3 million.$703.1 million, respectively. The related carrying value of the bonds payable, net of discounts, as of SeptemberJune 30, 20162017 and December 31, 2015,2016, was $698.3$698.4 million and $599.0$698.3 million, respectively. The fair value of the bonds payable was estimated based on discounted cash flow analyses using the current incremental borrowing rates for similar types of borrowings as the bonds as of the respective reporting dates (Level 2). The discounted cash flow method of assessing fair value results in a general approximation of value, which may differ from the price that could be achieved in a market transaction.
| |
7. | Commitments and Contingencies |
Commitments Under Existing Lease Agreements
Certain lease agreements include provisions that, at the option of the tenant, may obligate Columbia Property Trust to expend capital to expand an existing property or provide other expenditures for the benefit of the tenant. As of SeptemberJune 30, 2016, Columbia Property Trust is committed, under2017, no tenants have exercised such options that have not been materially satisfied or recorded as a recently signed lease, to contribute approximately $70.1 million toward leasehold improvements at our 222 East 41st Street property, which is expected to be paid during 2016 and 2017.liability on the accompanying consolidated balance sheet.
Guaranty of Debt of Unconsolidated Joint Venture
Upon entering into the Market Square Joint Venture in October 2015, Columbia Property Trust entered into a guaranty of a $25.0 million portion of the Market Square mortgage note, the amount of which is reduced as space is leased. As a result of leasing, the guaranty has been reduced to $23.3$12.6 million as of SeptemberJune 30, 2016.2017. Columbia Property Trust believes that the likelihood of
making a payment under this guaranty is remote; therefore, no liability has been recorded related to this guaranty as of SeptemberJune 30, 2016.2017.
Litigation
Columbia Property Trust is subject to various legal proceedings, claims, and administrative proceedings arising in the ordinary course of business, some of which are expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any reasonably possible loss relating to these matters using the latest information available.
Columbia Property Trust records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, Columbia Property Trust accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, Columbia Property Trust accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, Columbia Property Trust discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, Columbia Property Trust discloses the nature and estimate of the possible loss of the litigation. Columbia Property Trust does not disclose information with respect to litigation where the possibility of an unfavorable outcome is considered to be remote. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business, or financial condition of Columbia Property Trust. Columbia Property Trust is not currently involved in any legal proceedings of which management would consider the outcome to be reasonably likely to have a material adverse effect on the results of operations, liquidity, or financial condition of Columbia Property Trust.
Common Stock Repurchase Program
Columbia Property Trust's board of directors has authorized the repurchase of up to an aggregate of $200 million of its common stock, par value $0.01 per share, through September 4, 2017 (the "Stock Repurchase Program"). Since this program commenced on September 4, 2015, Columbia Property Trust has spent a total of $41.3 million to acquire 1.8acquired 4.4 million shares at an average price of $22.60 per share.$22.08, for aggregate purchases of $96.5 million. During the three months ended SeptemberJune 30, 2016,2017, Columbia Property Trust made no share repurchases.repurchased 1.3 million shares at an average price of $21.95, for aggregate purchases of $27.5 million. As of SeptemberJune 30, 2016, $158.72017, $103.5 million remains available for repurchases under the Stock Repurchase Program. Common stock repurchases are charged against equity as incurred, and the repurchased shares are retired. Columbia Property Trust will continue to evaluate the purchase of shares, primarily through open market transactions, which are subject to market conditions and other factors.
Long-Term Incentive Plan
Columbia Property Trust maintains a shareholder-approved, long-term incentive plan that provides for grants of up to 2.04.8 million shares of stock to be made to certain employees and independent directors of Columbia Property Trust (the "LTIP").On
In 2017, Columbia Property Trust has granted 138,938 shares of common stock to employees under the LTIP for 2017. Such awards are time-based and will vest ratably on each anniversary of the grant over the next four years. Performance-based stock unit awards representing 330,541 shares were also made in 2017. The payout of these performance-based awards can range from 0% to 150%, depending on total shareholder return relative to the FTSE NAREIT Equity Office Index, over a three-year performance period. At the conclusion of the three-year performance period, 75% of the shares earned will vest, and the remaining 25% vest one year later. The performance-based awards also include one- and two-year transitional awards, which will vest at the end of the respective performance periods. The awards will be expensed over the vesting period, using the estimated fair value for each award. Time-based awards will be expensed using the grant-date fair value or closing price of the award on the grant date. Performance-based awards will be expensed over the vesting period at the estimated fair value of the grant date, as determined by the Monte Carlo valuation method.
Additionally, on January 21, 2016,20, 2017, Columbia Property Trust granted 231,015193,535 shares of common stock to employees, net of 20,84217,938 shares repurchasedwithheld to fund incomesettle the related tax witholdings,liability, under the LTIP (the "2015 LTIP Employee Grant"),for 2016 performance, of which 25% vested upon grant, andgrant; the remaining shares will vest in three equal incrementsratably, with the passage of time, on January 31, 2017, 2018, 2019, and 2019.2020. Employees will receive quarterly dividends related to their entire grant, including the unvested shares, on each dividend payment date. A summary of the activity for the employee stock grants under the LTIP for the ninesix months ended SeptemberJune 30, 20162017 follows:
| | | | For the Nine Months Ended September 30, 2016 | | For the Six Months Ended June 30, 2017 |
| | Shares (in thousands) | | Weighted-Average Grant-Date Fair Value(1) | | Shares (in thousands) | | Weighted-Average Grant-Date Fair Value(1) |
Unvested shares - beginning of period | | 151 |
| | $ | 24.59 |
| |
Unvested shares – beginning of period | | | 256 |
| | $ | 22.62 |
|
Granted | | 247 |
| | $ | 21.79 |
| | 663 |
| | $ | 20.20 |
|
Vested | | (138 | ) | | $ | 23.32 |
| | (161 | ) | | $ | 22.67 |
|
Forfeited | | (3 | ) | | $ | 21.90 |
| | (7 | ) | | $ | 21.21 |
|
Unvested shares - end of period(2) | | 257 |
| | $ | 22.62 |
| |
Unvested shares – end of period(2) | | | 751 |
| | $ | 20.48 |
|
| |
(1) | Columbia Property Trust determined the weighted-average, grant-date fair value using the market closing price on the date of the respective grants. |
| |
(2) | As of SeptemberJune 30, 2016,2017, we expect approximately 244,000713,000 of the 257,000751,000 unvested shares to ultimately vest, assuming a forfeiture rate of 5.0%, which was determined based on peer company data, adjusted for the specifics of the LTIP. |
During the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, Columbia Property Trust paid quarterly installments of the independent directors' annual equity retainers by granting shares to theits independent directors which vested at the time of grant. A summary of these grants, made under the LTIP follows:by granting the following shares, all of which vested immediately:
|
| | | | | | | |
Date of Grant | | Shares | | Grant-Date Fair Value |
2016 Director Grants: | | | | |
January 4, 2016 | | 7,439 |
| | $ | 23.00 |
|
April 1, 2016 | | 8,120 |
| | $ | 21.89 |
|
July 1, 2016 | | 8,158 |
| | $ | 21.52 |
|
2015 Director Grants: | | | | |
January 2, 2015 | | 5,850 |
| | $ | 25.75 |
|
April 1, 2015 | | 4,995 |
| | $ | 27.16 |
|
July 1, 2015 | | 4,144 |
| | $ | 24.84 |
|
|
| | | | | | | | |
Date of Grant | | Shares | | Grant-Date Fair Value |
2017 Director Grants: | | | | | |
January 3, 2017 | | 8,279 |
| | | $ | 21.58 |
|
May 2, 2017 | | 33,581 |
| (1) | | $ | 22.57 |
|
2016 Director Grants: | | | | | |
January 4, 2016 | | 7,439 |
| | | $ | 23.00 |
|
April 1, 2016 | | 8,120 |
| | | $ | 21.89 |
|
| |
(1) | On May 2, 2017, the independent directors’ equity retainers were paid for the ensuing annual period. Prior to this time, the independent directors’ equity retainers were paid quarterly. |
For the three and ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, Columbia Property Trust incurred the stock-based compensation expense related to the following events (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
Amortization of unvested LTIP awards | $ | 650 |
| | $ | 381 |
| | $ | 2,190 |
| | $ | 1,308 |
| |
Future employee awards(1) | 91 |
| | 412 |
| | 797 |
| | 1,228 |
| |
Amortization of LTIP awards | | $ | 887 |
| | $ | 689 |
| | $ | 1,804 |
| | $ | 1,540 |
|
Amortization of future LTIP awards(1) | | 617 |
| | 346 |
| | 1,212 |
| | 706 |
|
Issuance of shares to independent directors | 176 |
| | 103 |
| | 525 |
| | 389 |
| 758 |
| | 178 |
| | 937 |
| | 349 |
|
Total stock-based compensation expense | $ | 917 |
| | $ | 896 |
| | $ | 3,512 |
| | $ | 2,925 |
| $ | 2,262 |
| | $ | 1,213 |
| | $ | 3,953 |
| | $ | 2,595 |
|
| |
(1) | These estimated future employeeReflects amortization of LTIP awards relate tofor service during the current period, tofor which shares will be grantedissued in January of the subsequent year, with 25% vesting on the date of grant, and the remaining 75% vesting ratably on January 31st of each of the following three years.future periods. |
These expenses are included in general and administrative expenses in the accompanying consolidated statements of operations. As of SeptemberJune 30, 20162017 and December 31, 2015,2016, there was $3.8$11.3 million and $2.2$3.2 million, respectively, of unrecognized compensation costs related to unvested awards under the LTIP. This amountLTIP, which will be amortized over the respective vesting period, ranging from one to threefour years at the time of grant. Effective in 2017, Columbia Property Trust changed from an LTIP measured over a one-year performance period to an LTIP measured over a three-year performance period and, as a result, has issued additional unvested shares this year.
9. Supplemental Disclosures of Noncash Investing and Financing Activities
Outlined below are significant noncash investing and financing activities for the ninesix months ended SeptemberJune 30, 20162017 and 20152016 (in thousands):
|
| | | | | | | |
| Nine Months Ended September 30, |
| 2016 | | 2015 |
Investments in real estate funded with other assets | $ | 1,442 |
| | $ | 27,000 |
|
Other assets assumed at acquisition | $ | — |
| | $ | 7,785 |
|
Other liabilities assumed at acquisition | $ | — |
| | $ | 4,765 |
|
Discount on issuance of bonds payable | $ | 1,309 |
| | $ | 494 |
|
Amortization of net discounts (premiums) on debt | $ | 222 |
| | $ | (94 | ) |
Market value adjustments to interest rate swaps that qualify for hedge accounting treatment | $ | — |
| | $ | (3,552 | ) |
Accrued capital expenditures and deferred lease costs | $ | 16,074 |
| | $ | 16,444 |
|
Accrued deferred financing costs | $ | 12 |
| | $ | 2 |
|
Common stock issued to employees and directors, and amortized (net of income tax witholdings) | $ | 2,339 |
| | $ | 2,925 |
|
|
| | | | | | | |
| Six Months Ended June 30, |
| 2017 | | 2016 |
Investments in real estate funded with other assets | $ | 311 |
| | $ | — |
|
Deposits applied to sales of real estate | $ | 10,000 |
| | $ | — |
|
Amortization of net discounts on debt | $ | 90 |
| | $ | 151 |
|
Market value adjustments to interest rate swaps that qualify for hedge accounting treatment | $ | (2 | ) | | $ | (6,879 | ) |
Accrued capital expenditures and deferred lease costs | $ | 28,547 |
| | $ | 7,505 |
|
Common stock issued to employees and directors, and amortized (net of income tax withholdings) | $ | 2,501 |
| | $ | 1,417 |
|
10. Earnings Per Share
For the three and ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, in computing the basic and diluted earnings-per-share,earnings per share, net income has been reduced for the dividends paid on unvested shares related to unvested awards under the LTIP. The following table reconciles the numerator for the basic and diluted earnings-per-share computations shown on the consolidated statements of operations for the three and ninesix months ended SeptemberJune 30, 20162017 and 20152016 (in thousands):
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 | | 2017 | | 2016 |
Net income | | $ | 36,898 |
| | $ | 20,143 |
| | $ | 56,881 |
| | $ | 34,450 |
| | $ | 1,133 |
| | $ | 13,286 |
| | $ | 75,855 |
| | $ | 19,983 |
|
Distributions paid on unvested shares | | (77 | ) | | (45 | ) | | (237 | ) | | (139 | ) | | (85 | ) | | (77 | ) | | (168 | ) | | (159 | ) |
Net income used to calculate basic and diluted earnings per share | | $ | 36,821 |
| | $ | 20,098 |
|
| $ | 56,644 |
|
| $ | 34,311 |
| | $ | 1,048 |
| | $ | 13,209 |
|
| $ | 75,687 |
|
| $ | 19,824 |
|
The following table reconciles the denominator for the basic and diluted earnings-per-share computations shown on the consolidated statements of operations for the three and ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively (in thousands):
|
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2016 | | 2015 | | 2016 | | 2015 |
Weighted-average common shares - basic | | 123,215 |
| | 124,359 |
| | 123,271 |
| | 124,359 |
|
Plus incremental weighted-average shares from time-vested conversions, less assumed share repurchases: | | | | | | | | |
Previously granted LTIP awards, unvested | | 82 |
| | 37 |
| | 46 |
| | 28 |
|
Future LTIP awards for the current year | | 53 |
| | 64 |
| | 31 |
| | 58 |
|
Weighted-average common shares - diluted | | 123,350 |
| | 124,460 |
| | 123,348 |
| | 124,445 |
|
|
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Weighted-average common shares – basic | | 121,534 |
| | 123,206 |
| | 121,768 |
| | 123,299 |
|
Plus incremental weighted-average shares from time-vested conversions, less assumed share repurchases: | | | | | | | | |
Previously granted LTIP awards, unvested | | 90 |
| | 43 |
| | 75 |
| | 26 |
|
Future LTIP awards | | 285 |
| | 45 |
| | 272 |
| | 32 |
|
Weighted-average common shares – diluted | | 121,909 |
| | 123,294 |
| | 122,115 |
| | 123,357 |
|
11. Segment Information
Columbia Property Trust establishes operating segments at the property level and aggregates individual properties into reportable segments for geographic locations in which Columbia Property Trust has significant investments. Columbia Property Trust considers geographic location when evaluating its portfolio composition and in assessing the ongoing operations and performance of its properties. As of June 30, 2017, Columbia Property Trust had the following reportable segments: New York, San Francisco, Atlanta, Washington, D.C., Boston, Los Angeles, and all other office markets. The all other office markets reportable segment consists of properties in similar, low-barrier-to-entry geographic locations in which Columbia Property Trust does not plan to make further investments. During the periods presented, there have been no material inter-segment transactions.
Net operating income ("NOI") is a non-GAAP financial measure. NOI is the primary performance measure reviewed by management to assess operating performance of properties and is calculated by deducting operating expenses from operating
revenues. Operating revenues include rental income, tenant reimbursements, hotel income, and other property income; and operating expenses include property and hotel operating costs. The NOI performance metric consists of only revenues and expenses directly related to real estate rental operations. NOI reflects property acquisitions and dispositions, occupancy levels, rental rate increases or decreases, and the recoverability of operating expenses. NOI, as Columbia Property Trust calculates it, may not be directly comparable to similarly titled, but differently calculated, measures for other REITs.
When assessing ongoing performance of our reportable segments, management does not evaluate assets or capital expenditures by reportable segment. Additionally, expenses, such as depreciation and amortization and others included in the reconciliation of GAAP net income to NOI, are reviewed by management on a consolidated basis, rather than by reportable segment.
The following table presents operating revenues by geographic reportable segment (in thousands):
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
New York | $ | 25,524 |
| | $ | 36,239 |
| | $ | 53,110 |
| | $ | 65,687 |
|
San Francisco | 27,593 |
| | 27,815 |
| | 54,775 |
| | 55,903 |
|
Atlanta | 9,510 |
| | 9,230 |
| | 18,838 |
| | 18,433 |
|
Washington, D.C.(1) | 7,745 |
| | 8,428 |
| | 15,128 |
| | 17,913 |
|
Boston | 2,720 |
| | 3,105 |
| | 5,624 |
| | 5,903 |
|
Los Angeles | 1,857 |
| | 1,920 |
| | 3,635 |
| | 3,891 |
|
All other office markets | 4,856 |
| | 38,841 |
| | 14,447 |
| | 84,825 |
|
Total office segments | 79,805 |
| | 125,578 |
| | 165,557 |
| | 252,555 |
|
Hotel | 5 |
| | 6,630 |
| | 1,223 |
| | 11,362 |
|
Corporate | 365 |
| | 708 |
| | 719 |
| | 1,526 |
|
Total | 80,175 |
| | 132,916 |
| | 167,499 |
| | 265,443 |
|
Operating revenues included in loss from unconsolidated joint venture(1) | (5,318 | ) | | (4,986 | ) | | (10,486 | ) | | (10,934 | ) |
Total operating revenues | $ | 74,857 |
| | $ | 127,930 |
| | $ | 157,013 |
| | $ | 254,509 |
|
| |
(1) | Includes operating revenues for our interest in the Market Square Buildings for all periods presented. Columbia Property Trust records its 51% interest in the Market Square Joint Venture using the equity method of accounting, and reflects its interest in the operating revenues of the Market Square Buildings in loss from unconsolidated joint venture in the accompanying consolidated statements of operations. |
The following table presents NOI by geographic reportable segment (in thousands):
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
New York | $ | 16,259 |
| | $ | 24,086 |
| | $ | 33,875 |
| | $ | 41,135 |
|
San Francisco | 19,701 |
| | 19,381 |
| | 39,567 |
| | 40,452 |
|
Atlanta | 8,285 |
| | 8,226 |
| | 16,578 |
| | 16,507 |
|
Washington, D.C.(1) | 3,565 |
| | 4,555 |
| | 6,843 |
| | 9,671 |
|
Boston | 1,192 |
| | 1,463 |
| | 2,601 |
| | 2,686 |
|
Los Angeles | 1,202 |
| | 1,192 |
| | 2,284 |
| | 2,442 |
|
All other office markets | 4,597 |
| | 23,605 |
| | 11,527 |
| | 52,388 |
|
Total office segments | 54,801 |
| | 82,508 |
| | 113,275 |
| | 165,281 |
|
Hotel | (14 | ) | | 1,523 |
| | (890 | ) | | 1,870 |
|
Corporate | 395 |
| | 517 |
| | 847 |
| | 1,066 |
|
Total | $ | 55,182 |
| | $ | 84,548 |
| | $ | 113,232 |
| | $ | 168,217 |
|
| |
(1) | Includes NOI for our interest in the Market Square Buildings for all periods presented. Columbia Property Trust records its 51% interest in the Market Square Joint Venture using the equity method of accounting, and reflects its interest in the NOI of the Market Square Buildings in loss from unconsolidated joint venture in the accompanying consolidated statements of operations. |
A reconciliation of GAAP net income to NOI is presented below (in thousands):
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Net income | $ | 1,133 |
| | $ | 13,286 |
| | $ | 75,855 |
| | $ | 19,983 |
|
Depreciation | 20,423 |
| | 28,450 |
| | 42,028 |
| | 57,739 |
|
Amortization | 8,191 |
| | 14,932 |
| | 17,648 |
| | 31,007 |
|
General and administrative | 9,201 |
| | 7,761 |
| | 17,969 |
| | 18,251 |
|
Net interest expense | 13,785 |
| | 17,372 |
| | 28,350 |
| | 35,264 |
|
Interest income from development authority bonds | (1,800 | ) | | (1,800 | ) | | (3,600 | ) | | (3,600 | ) |
Loss on early extinguishment of debt | — |
| | 92 |
| | 45 |
| | 92 |
|
Income tax expense (benefit) | 7 |
| | 245 |
| | (381 | ) | | 322 |
|
Adjustments included in loss from unconsolidated joint venture | 4,242 |
| | 4,191 |
| | 8,471 |
| | 8,830 |
|
Loss (gains) on sales of real estate assets | — |
| | 19 |
| | (73,153 | ) | | 329 |
|
NOI | $ | 55,182 |
| | $ | 84,548 |
| | $ | 113,232 |
| | $ | 168,217 |
|
12. Financial Information for Parent Guarantor, Issuer Subsidiary, and Non-Guarantor Subsidiaries
The 2026 Bonds Payable and the 2025 Bonds Payable (see Note 6, Bonds Payable) were issued by Columbia Property Trust OP, and are guaranteed by Columbia Property Trust. In accordance with SEC Rule 3-10(c), Columbia Property Trust includes herein condensed consolidating financial information in lieu of separate financial statements of the subsidiary issuer (Columbia Property Trust OP), as defined in the bond indentures, because all of the following criteria are met:
| |
(1) | The subsidiary issuer (Columbia Property Trust OP) is 100% owned by the parent company guarantor (Columbia Property Trust); |
| |
(2) | The guarantee is full and unconditional; and |
| |
(3) | No other subsidiary of the parent company guarantor (Columbia Property Trust) guarantees the 2026 Bonds Payable or the 2025 Bonds Payable. |
Columbia Property Trust uses the equity method with respect to its investment in subsidiaries included in its condensed consolidating financial statements. We have corrected the presentation of intercompany cash transfers between the REIT Parent and its subsidiaries in the consolidating statements of cash flow. Instead of showing one amount for intercompany transfers between each entity group, intercompany transfers are broken out by cash flow type (i.e. operating, investing and financing) for all periods presented, consistent with the equity method of accounting. All such changes are eliminated in consolidation, and therefore do not impact the Company’s consolidated financial totals. Management has concluded that the effect of this correction is not material to the consolidated financial statements. This change had the following impact to the consolidating statement of cash flows for the six months ended June 30, 2016: increase to operating cash flows for the parent and issuer of $3.6 million and $37.5 million, respectively; and increase (decrease) in investing cash flows of $(25.5) million, $151.5 million and $159.4 million, and increase (decrease) in financing cash flows of $21.9 million, $(189.0) million and $(159.4) million for the parent, issuer and non-guarantors, respectively. The impact to individual financial statement captions within the consolidating statement of cash flows is footnoted below.
Set forth below are Columbia Property Trust's condensed consolidating balance sheets as of SeptemberJune 30, 20162017 and December 31, 20152016 (in thousands), as well as its condensed consolidating statements of operations and its condensed consolidating statements of comprehensive income for the three and ninesix months ended SeptemberJune 30, 20162017 and 20152016 (in thousands); and its condensed consolidating statements of cash flows for the ninesix months ended SeptemberJune 30, 20162017 and 20152016 (in thousands).
Condensed Consolidating Balance Sheets (in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| As of September 30, 2016 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating adjustments | | Columbia Property Trust (Consolidated) |
Assets: | | | | | | | | | |
Real estate assets, at cost: | | | | | | | | | |
Land | $ | — |
| | $ | 6,241 |
| | $ | 781,215 |
| | $ | — |
| | $ | 787,456 |
|
Buildings and improvements, net | — |
| | 28,707 |
| | 2,342,566 |
| | — |
| | 2,371,273 |
|
Intangible lease assets, net | — |
| | — |
| | 204,200 |
| | — |
| | 204,200 |
|
Construction in progress | — |
| | 448 |
| | 28,440 |
| | — |
| | 28,888 |
|
Real estate assets held for sale, net | — |
| | — |
| | 238,876 |
| | — |
| | 238,876 |
|
Total real estate assets | — |
| | 35,396 |
| | 3,595,297 |
| | — |
| | 3,630,693 |
|
Investment in unconsolidated joint venture | — |
| | 125,605 |
| | — |
| | — |
| | 125,605 |
|
Cash and cash equivalents | 169,434 |
| | 9,343 |
| | 12,079 |
| | — |
| | 190,856 |
|
Investment in subsidiaries | 2,045,043 |
| | 1,880,585 |
| | — |
| | (3,925,628 | ) | | — |
|
Tenant receivables, net of allowance | — |
| | 77 |
| | 6,289 |
| | — |
| | 6,366 |
|
Straight-line rent receivable | — |
| | 1,557 |
| | 68,629 |
| | — |
| | 70,186 |
|
Prepaid expenses and other assets | 317,188 |
| | 262,417 |
| | 16,580 |
| | (571,300 | ) | | 24,885 |
|
Intangible lease origination costs, net | — |
| | — |
| | 58,645 |
| | — |
| | 58,645 |
|
Deferred lease costs, net | — |
| | 1,955 |
| | 58,428 |
| | — |
| | 60,383 |
|
Investment in development authority bonds | — |
| | — |
| | 120,000 |
| | — |
| | 120,000 |
|
Other assets held for sale | — |
| | — |
| | 32,306 |
| | — |
| | 32,306 |
|
Total assets | $ | 2,531,665 |
| | $ | 2,316,935 |
| | $ | 3,968,253 |
| | $ | (4,496,928 | ) | | $ | 4,319,925 |
|
Liabilities: | | | | | | | | | |
Line of credit and notes payable | $ | — |
| | $ | 546,505 |
| | $ | 705,844 |
| | $ | (430,763 | ) | | $ | 821,586 |
|
Bonds payable, net | — |
| | 692,763 |
| | — |
| | — |
| | 692,763 |
|
Accounts payable, accrued expenses, and accrued capital expenditures | — |
| | 20,352 |
| | 61,265 |
| | — |
| | 81,617 |
|
Due to affiliates | — |
| | 31 |
| | 1,561 |
| | (1,592 | ) | | — |
|
Deferred income | — |
| | 249 |
| | 20,162 |
| | — |
| | 20,411 |
|
Intangible lease liabilities, net | — |
| | — |
| | 36,239 |
| | — |
| | 36,239 |
|
Obligations under capital leases | — |
| | — |
| | 120,000 |
| | — |
| | 120,000 |
|
Liabilities held for sale | — |
| | — |
| | 154,589 |
| | (138,945 | ) | | 15,644 |
|
Total liabilities | — |
| | 1,259,900 |
| | 1,099,660 |
| | (571,300 | ) | | 1,788,260 |
|
Equity: | | | | | | | | | |
Total equity | 2,531,665 |
| | 1,057,035 |
| | 2,868,593 |
| | (3,925,628 | ) | | 2,531,665 |
|
Total liabilities and equity | $ | 2,531,665 |
| | $ | 2,316,935 |
| | $ | 3,968,253 |
| | $ | (4,496,928 | ) | | $ | 4,319,925 |
|
Condensed Consolidating Balance Sheets (in thousands)
| | | As of December 31, 2015 | As of June 30, 2017 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating adjustments | | Columbia Property Trust (Consolidated) | Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating Adjustments | | Columbia Property Trust (Consolidated) |
Assets: | | | | | | | | | | | | | | | | | | |
Real estate assets, at cost: | | | | | | | | | | | | | | | | | | |
Land | $ | — |
| | $ | 6,241 |
| | $ | 890,226 |
| | $ | — |
| | $ | 896,467 |
| $ | — |
| | $ | — |
| | $ | 751,351 |
| | $ | — |
| | $ | 751,351 |
|
Building and improvements, net | — |
| | 28,913 |
| | 2,868,518 |
| | — |
| | 2,897,431 |
| |
Buildings and improvements, net | | — |
| | 144 |
| | 2,117,736 |
| | — |
| | 2,117,880 |
|
Intangible lease assets, net | — |
| | — |
| | 259,136 |
| | — |
| | 259,136 |
| — |
| | — |
| | 182,428 |
| | — |
| | 182,428 |
|
Construction in progress | — |
| | 917 |
| | 30,930 |
| | — |
| | 31,847 |
| — |
| | — |
| | 49,069 |
| | — |
| | 49,069 |
|
Total real estate assets | — |
| | 36,071 |
| | 4,048,810 |
| | — |
| | 4,084,881 |
| — |
| | 144 |
| | 3,100,584 |
| | — |
| | 3,100,728 |
|
Investment in unconsolidated joint venture | — |
| | 118,695 |
| | — |
| | — |
| | 118,695 |
| — |
| | 125,584 |
| | — |
| | — |
| | 125,584 |
|
Cash and cash equivalents | 989 |
| | 14,969 |
| | 16,687 |
| | — |
| | 32,645 |
| 492,259 |
| | 6,581 |
| | 7,698 |
| | — |
| | 506,538 |
|
Investment in subsidiaries | 2,333,408 |
| | 1,901,581 |
| | — |
| | (4,234,989 | ) | | — |
| 1,683,352 |
| | 1,465,906 |
| | — |
| | (3,149,258 | ) | | — |
|
Tenant receivables, net of allowance | — |
| | 52 |
| | 11,618 |
| | — |
| | 11,670 |
| — |
| | 33 |
| | 3,969 |
| | — |
| | 4,002 |
|
Straight-line rent receivable | — |
| | 1,311 |
| | 107,751 |
| | — |
| | 109,062 |
| — |
| | — |
| | 77,875 |
| | — |
| | 77,875 |
|
Prepaid expenses and other assets | 317,151 |
| | 265,615 |
| | 26,153 |
| | (573,071 | ) | | 35,848 |
| 329,234 |
| | 124,139 |
| | 18,797 |
| | (432,355 | ) | | 39,815 |
|
Intangible lease origination costs, net | — |
| | — |
| | 77,190 |
| | — |
| | 77,190 |
| — |
| | — |
| | 48,586 |
| | — |
| | 48,586 |
|
Deferred lease costs, net | — |
| | 2,055 |
| | 86,072 |
| | — |
| | 88,127 |
| — |
| | — |
| | 129,849 |
| | — |
| | 129,849 |
|
Investment in development authority bonds | — |
| | — |
| | 120,000 |
| | — |
| | 120,000 |
| — |
| | — |
| | 120,000 |
| | — |
| | 120,000 |
|
Total assets | $ | 2,651,548 |
| | $ | 2,340,349 |
| | $ | 4,494,281 |
| | $ | (4,808,060 | ) | | $ | 4,678,118 |
| $ | 2,504,845 |
| | $ | 1,722,387 |
| | $ | 3,507,358 |
| | $ | (3,581,613 | ) | | $ | 4,152,977 |
|
Liabilities: | | | | | | | | | | | | | | | | | | |
Lines of credit and notes payable, net | $ | — |
| | $ | 812,836 |
| | $ | 888,340 |
| | $ | (570,605 | ) | | $ | 1,130,571 |
| |
Line of credit and notes payable | | $ | — |
| | $ | 447,920 |
| | $ | 629,003 |
| | $ | (430,763 | ) | | $ | 646,160 |
|
Bonds payable, net | — |
| | 595,259 |
| | — |
| | — |
| | 595,259 |
| — |
| | 693,364 |
| | — |
| | — |
| | 693,364 |
|
Accounts payable, accrued expenses, and accrued capital expenditures | — |
| | 13,313 |
| | 85,446 |
| | — |
| | 98,759 |
| 2 |
| | 11,588 |
| | 128,561 |
| | — |
| | 140,151 |
|
Dividends payable | 37,354 |
| | — |
| | — |
| | — |
| | 37,354 |
| |
Due to affiliates | — |
| | 21 |
| | 2,445 |
| | (2,466 | ) | | — |
| — |
| | — |
| | 1,592 |
| | (1,592 | ) | | — |
|
Deferred income | — |
| | 200 |
| | 24,614 |
| | — |
| | 24,814 |
| — |
| | 87 |
| | 19,305 |
| | — |
| | 19,392 |
|
Intangible lease liabilities, net | — |
| | — |
| | 57,167 |
| | — |
| | 57,167 |
| — |
| | — |
| | 29,067 |
| | — |
| | 29,067 |
|
Obligations under capital leases | — |
| | — |
| | 120,000 |
| | — |
| | 120,000 |
| |
Obligations under capital lease | | — |
| | — |
| | 120,000 |
| | — |
| | 120,000 |
|
Total liabilities | 37,354 |
| | 1,421,629 |
| | 1,178,012 |
| | (573,071 | ) | | 2,063,924 |
| 2 |
| | 1,152,959 |
| | 927,528 |
| | (432,355 | ) | | 1,648,134 |
|
Equity: | | | | | | | | | | | | | | | | | | |
Total equity | 2,614,194 |
| | 918,720 |
| | 3,316,269 |
| | (4,234,989 | ) | | 2,614,194 |
| 2,504,843 |
| | 569,428 |
| | 2,579,830 |
| | (3,149,258 | ) | | 2,504,843 |
|
Total liabilities and equity | $ | 2,651,548 |
| | $ | 2,340,349 |
| | $ | 4,494,281 |
| | $ | (4,808,060 | ) | | $ | 4,678,118 |
| $ | 2,504,845 |
| | $ | 1,722,387 |
| | $ | 3,507,358 |
| | $ | (3,581,613 | ) | | $ | 4,152,977 |
|
Condensed Consolidating Statements of OperationsBalance Sheets (in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, 2016 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating adjustments | | Columbia Property Trust (Consolidated) |
Revenues: | | | | | | | | | |
Rental income | $ | — |
| | $ | 956 |
| | $ | 86,702 |
| | $ | (97 | ) | | $ | 87,561 |
|
Tenant reimbursements | — |
| | 564 |
| | 16,526 |
| | — |
| | 17,090 |
|
Hotel income | — |
| | — |
| | 6,270 |
| | — |
| | 6,270 |
|
Other property income | 245 |
| | — |
| | 2,196 |
| | (96 | ) | | 2,345 |
|
| 245 |
| | 1,520 |
| | 111,694 |
| | (193 | ) | | 113,266 |
|
Expenses: | | | | | | | | | |
Property operating costs | — |
| | 860 |
| | 38,338 |
| | (97 | ) | | 39,101 |
|
Hotel operating costs | — |
| | — |
| | 4,946 |
| | — |
| | 4,946 |
|
Asset and property management fees: | | | | | | | | | |
Related-party | — |
| | 40 |
| | — |
| | (40 | ) | | — |
|
Other | — |
| | — |
| | 387 |
| | — |
| | 387 |
|
Depreciation | — |
| | 745 |
| | 26,033 |
| | — |
| | 26,778 |
|
Amortization | — |
| | 86 |
| | 11,809 |
| | — |
| | 11,895 |
|
General and administrative | 38 |
| | 2,297 |
| | 5,188 |
| | (56 | ) | | 7,467 |
|
| 38 |
| | 4,028 |
| | 86,701 |
| | (193 | ) | | 90,574 |
|
Real estate operating income (loss) | 207 |
| | (2,508 | ) | | 24,993 |
| | — |
| | 22,692 |
|
Other income (expense): | | | | | | | | | |
Interest expense | — |
| | (12,249 | ) | | (12,256 | ) | | 7,367 |
| | (17,138 | ) |
Interest and other income | 3,571 |
| | 3,813 |
| | 1,822 |
| | (7,367 | ) | | 1,839 |
|
Loss on early extinguishment of debt | — |
| | (18,905 | ) | | — |
| | — |
| | (18,905 | ) |
| 3,571 |
| | (27,341 | ) | | (10,434 | ) | | — |
| | (34,204 | ) |
Income before income taxes, equity method investments, and gains on sales of real estate | 3,778 |
| | (29,849 | ) | | 14,559 |
| | — |
| | (11,512 | ) |
Income tax expense | — |
| | — |
| | (65 | ) | | — |
| | (65 | ) |
Income from subsidiaries | 33,120 |
| | 61,442 |
| | — |
| | (94,562 | ) | | — |
|
Loss from unconsolidated joint venture | — |
| | (1,937 | ) | | — |
| | — |
| | (1,937 | ) |
Income before on gains on sales of real estate assets | 36,898 |
|
| 29,656 |
|
| 14,494 |
|
| (94,562 | ) |
| (13,514 | ) |
Gain on sales of real estate assets | — |
| | — |
| | 50,412 |
| | — |
| | 50,412 |
|
Net income | $ | 36,898 |
|
| $ | 29,656 |
|
| $ | 64,906 |
|
| $ | (94,562 | ) |
| $ | 36,898 |
|
|
| | | | | | | | | | | | | | | | | | | |
| As of December 31, 2016 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating Adjustments | | Columbia Property Trust (Consolidated) |
Assets: | | | | | | | | | |
Real estate assets, at cost: | | | | | | | | | |
Land | $ | — |
| | $ | — |
| | $ | 751,351 |
| | $ | — |
| | $ | 751,351 |
|
Building and improvements, net | — |
| | 219 |
| | 2,120,931 |
| | — |
| | 2,121,150 |
|
Intangible lease assets, net | — |
| | — |
| | 193,311 |
| | — |
| | 193,311 |
|
Construction in progress | — |
| | — |
| | 36,188 |
| | — |
| | 36,188 |
|
Real estate assets held for sale, net | — |
| | 34,956 |
| | 377,550 |
| | — |
| | 412,506 |
|
Total real estate assets | — |
| | 35,175 |
| | 3,479,331 |
| | — |
| | 3,514,506 |
|
Investment in unconsolidated joint venture | — |
| | 127,346 |
| | — |
| | — |
| | 127,346 |
|
Cash and cash equivalents | 174,420 |
| | 16,509 |
| | 25,156 |
| | — |
| | 216,085 |
|
Investment in subsidiaries | 2,047,922 |
| | 1,782,752 |
| | — |
| | (3,830,674 | ) | | — |
|
Tenant receivables, net of allowance | — |
| | — |
| | 7,163 |
| | — |
| | 7,163 |
|
Straight-line rent receivable | — |
| | — |
| | 64,811 |
| | — |
| | 64,811 |
|
Prepaid expenses and other assets | 317,153 |
| | 262,216 |
| | 15,593 |
| | (570,687 | ) | | 24,275 |
|
Intangible lease origination costs, net | — |
| | — |
| | 54,279 |
| | — |
| | 54,279 |
|
Deferred lease costs, net | — |
| | — |
| | 125,799 |
| | — |
| | 125,799 |
|
Investment in development authority bonds | — |
| | — |
| | 120,000 |
| | — |
| | 120,000 |
|
Other assets held for sale, net | — |
| | 3,767 |
| | 41,814 |
| | (52 | ) | | 45,529 |
|
Total assets | $ | 2,539,495 |
| | $ | 2,227,765 |
| | $ | 3,933,946 |
| | $ | (4,401,413 | ) | | $ | 4,299,793 |
|
Liabilities: | | | | | | | | | |
Lines of credit and notes payable, net | $ | — |
| | $ | 447,643 |
| | $ | 704,585 |
| | $ | (430,762 | ) | | $ | 721,466 |
|
Bonds payable, net | — |
| | 692,972 |
| | — |
| | — |
| | 692,972 |
|
Accounts payable, accrued expenses, and accrued capital expenditures | — |
| | 10,395 |
| | 120,633 |
| | — |
| | 131,028 |
|
Dividends payable | 36,727 |
| | — |
| | — |
| | — |
| | 36,727 |
|
Due to affiliates | — |
| | 58 |
| | 1,534 |
| | (1,592 | ) | | — |
|
Deferred income | — |
| | — |
| | 19,694 |
| | — |
| | 19,694 |
|
Intangible lease liabilities, net | — |
| | — |
| | 33,375 |
| | — |
| | 33,375 |
|
Obligations under capital leases | — |
| | — |
| | 120,000 |
| | — |
| | 120,000 |
|
Liabilities held for sale | — |
| | 2,651 |
| | 177,497 |
| | (138,385 | ) | | 41,763 |
|
Total liabilities | 36,727 |
| | 1,153,719 |
| | 1,177,318 |
| | (570,739 | ) | | 1,797,025 |
|
Equity: | | | | | | | | | |
Total equity | 2,502,768 |
| | 1,074,046 |
| | 2,756,628 |
| | (3,830,674 | ) | | 2,502,768 |
|
Total liabilities and equity | $ | 2,539,495 |
| | $ | 2,227,765 |
| | $ | 3,933,946 |
| | $ | (4,401,413 | ) | | $ | 4,299,793 |
|
Consolidating Statements of Operations (in thousands)
| | | For the Three Months Ended September 30, 2015 | For the Three Months Ended June 30, 2017 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating adjustments | | Columbia Property Trust (Consolidated) | Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating Adjustments | | Columbia Property Trust (Consolidated) |
Revenues: | | | | | | | | | | | | | | | | | | |
Rental income | $ | — |
| | $ | 682 |
| | $ | 106,424 |
| | $ | (95 | ) | | $ | 107,011 |
| $ | — |
| | $ | — |
| | $ | 67,216 |
| | $ | (95 | ) | | $ | 67,121 |
|
Tenant reimbursements | — |
| | 290 |
| | 22,337 |
| | — |
| | 22,627 |
| — |
| | (100 | ) | | 7,072 |
| | — |
| | 6,972 |
|
Hotel income | — |
| | — |
| | 6,941 |
| | — |
| | 6,941 |
| |
Other property income | — |
| | — |
| | 1,227 |
| | (87 | ) | | 1,140 |
| 245 |
| | — |
| | 519 |
| | — |
| | 764 |
|
| — |
| | 972 |
| | 136,929 |
| | (182 | ) | | 137,719 |
| 245 |
| | (100 | ) | | 74,807 |
| | (95 | ) | | 74,857 |
|
Expenses: | | | | | | | | | | | | | | | | | | |
Property operating costs | — |
| | 752 |
| | 45,881 |
| | (95 | ) | | 46,538 |
| — |
| | (45 | ) | | 21,971 |
| | (95 | ) | | 21,831 |
|
Hotel operating costs | — |
| | — |
| | 5,331 |
| | — |
| | 5,331 |
| — |
| | — |
| | 9 |
| | — |
| | 9 |
|
Asset and property management fees: | | | | | | | | | | |
Related-party | — |
| | 30 |
| | — |
| | (30 | ) | | — |
| |
Other | — |
| | — |
| | 472 |
| | — |
| | 472 |
| |
Asset and property management fees | | — |
| | — |
| | 260 |
| | — |
| | 260 |
|
Depreciation | — |
| | 651 |
| | 31,790 |
| | — |
| | 32,441 |
| — |
| | 152 |
| | 20,271 |
| | — |
| | 20,423 |
|
Amortization | — |
| | 59 |
| | 20,217 |
| | — |
| | 20,276 |
| — |
| | — |
| | 8,191 |
| | — |
| | 8,191 |
|
General and administrative | 37 |
| | 2,338 |
| | 4,479 |
| | (57 | ) | | 6,797 |
| 56 |
| | 2,739 |
| | 6,406 |
| | — |
| | 9,201 |
|
Acquisition expenses | — |
| | — |
| | 1,680 |
| | — |
| | 1,680 |
| |
| 37 |
| | 3,830 |
| | 109,850 |
| | (182 | ) | | 113,535 |
| 56 |
| | 2,846 |
| | 57,108 |
| | (95 | ) | | 59,915 |
|
Real estate operating income (loss) | (37 | ) | | (2,858 | ) | | 27,079 |
| | — |
| | 24,184 |
| 189 |
| | (2,946 | ) | | 17,699 |
| | — |
| | 14,942 |
|
Other income (expense): | | | | | | | | | | | | | | | | | | |
Interest expense | — |
| | (12,189 | ) | | (16,709 | ) | | 6,886 |
| | (22,012 | ) | — |
| | (10,568 | ) | | (8,668 | ) | | 4,774 |
| | (14,462 | ) |
Interest and other income | 3,469 |
| | 3,417 |
| | 1,808 |
| | (6,886 | ) | | 1,808 |
| 4,228 |
| | 1,220 |
| | 1,803 |
| | (4,774 | ) | | 2,477 |
|
Loss on interest rate swaps | — |
| | (1,101 | ) | | (1 | ) | | — |
| | (1,102 | ) | |
Loss on early extinguishment of debt | — |
| | (573 | ) | | (2,099 | ) | | — |
| | (2,672 | ) | |
Income from subsidiaries | 16,711 |
| | 24,273 |
| | — |
| | (40,984 | ) | | — |
| |
| 20,180 |
| | 13,827 |
| | (17,001 | ) | | (40,984 | ) | | (23,978 | ) | 4,228 |
| | (9,348 | ) | | (6,865 | ) | | — |
| | (11,985 | ) |
Income before income tax expense | 20,143 |
| | 10,969 |
| | 10,078 |
| | (40,984 | ) | | 206 |
| |
Income (loss) before income taxes and unconsolidated entities: | | 4,417 |
| | (12,294 | ) | | 10,834 |
| | — |
| | 2,957 |
|
Income tax expense | — |
| | (5 | ) | | (240 | ) | | — |
| | (245 | ) | — |
| | — |
| | (7 | ) | | — |
| | (7 | ) |
Income before gain (loss) on sale of real estate assets | 20,143 |
| | 10,964 |
| | 9,838 |
| | (40,984 | ) | | (39 | ) | |
Gain (loss) on sale of real estate assets | — |
| | (19 | ) | | 20,201 |
| | — |
| | 20,182 |
| |
Net income | $ | 20,143 |
| | $ | 10,945 |
| | $ | 30,039 |
| | $ | (40,984 | ) | | $ | 20,143 |
| |
Income (loss) from unconsolidated entities | | (3,284 | ) | | 6,187 |
| | — |
| | (4,720 | ) | | (1,817 | ) |
Net income (loss) | | $ | 1,133 |
|
| $ | (6,107 | ) |
| $ | 10,827 |
|
| $ | (4,720 | ) |
| $ | 1,133 |
|
Consolidating Statements of Operations (in thousands)
| | | For the Nine Months Ended September 30, 2016 | For the Three Months Ended June 30, 2016 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating adjustments | | Columbia Property Trust (Consolidated) | Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating Adjustments | | Columbia Property Trust (Consolidated) |
Revenues: | | | | | | | | | | | | | | | | | | |
Rental income | $ | — |
| | $ | 2,669 |
| | $ | 278,330 |
| | $ | (285 | ) | | $ | 280,714 |
| $ | — |
| | $ | 863 |
| | $ | 92,796 |
| | $ | (92 | ) | | $ | 93,567 |
|
Tenant reimbursements | — |
| | 1,421 |
| | 54,130 |
| | — |
| | 55,551 |
| — |
| | 455 |
| | 18,253 |
| | — |
| | 18,708 |
|
Hotel income | — |
| | — |
| | 17,484 |
| | — |
| | 17,484 |
| — |
| | — |
| | 6,551 |
| | — |
| | 6,551 |
|
Other property income | 735 |
| | — |
| | 13,571 |
| | (280 | ) | | 14,026 |
| 245 |
| | — |
| | 8,955 |
| | (96 | ) | | 9,104 |
|
| 735 |
| | 4,090 |
| | 363,515 |
| | (565 | ) | | 367,775 |
| 245 |
| | 1,318 |
| | 126,555 |
| | (188 | ) | | 127,930 |
|
Expenses: | | | | | | | | | | | | | | | | | | |
Property operating costs | — |
| | 2,360 |
| | 118,604 |
| | (285 | ) | | 120,679 |
| — |
| | 731 |
| | 39,603 |
| | (92 | ) | | 40,242 |
|
Hotel operating costs | — |
| | — |
| | 14,315 |
| | — |
| | 14,315 |
| — |
| | — |
| | 5,038 |
| | — |
| | 5,038 |
|
Asset and property management fees: | | | | | | | | | | | | | | | | | | |
Related-party | — |
| | 112 |
| | — |
| | (112 | ) | | — |
| — |
| | 42 |
| | — |
| | (42 | ) | | — |
|
Other | — |
| | — |
| | 1,058 |
| | — |
| | 1,058 |
| — |
| | — |
| | 341 |
| | — |
| | 341 |
|
Depreciation | — |
| | 2,166 |
| | 82,351 |
| | — |
| | 84,517 |
| — |
| | 723 |
| | 27,727 |
| | — |
| | 28,450 |
|
Amortization | — |
| | 239 |
| | 42,663 |
| | — |
| | 42,902 |
| — |
| | 77 |
| | 14,855 |
| | — |
| | 14,932 |
|
General and administrative | 116 |
| | 6,575 |
| | 19,195 |
| | (168 | ) | | 25,718 |
| 38 |
| | 2,087 |
| | 5,690 |
| | (54 | ) | | 7,761 |
|
| 116 |
| | 11,452 |
| | 278,186 |
| | (565 | ) | | 289,189 |
| 38 |
| | 3,660 |
| | 93,254 |
| | (188 | ) | | 96,764 |
|
Real estate operating income (loss) | 619 |
| | (7,362 | ) | | 85,329 |
| | — |
| | 78,586 |
| 207 |
| | (2,342 | ) | | 33,301 |
| | — |
| | 31,166 |
|
Other income (expense): | | | | | | | | | | | | | | | | | | |
Interest expense | — |
| | (36,479 | ) | | (38,071 | ) | | 22,135 |
| | (52,415 | ) | — |
| | (11,825 | ) | | (12,933 | ) | | 7,378 |
| | (17,380 | ) |
Interest and other income | 10,680 |
| | 11,471 |
| | 5,436 |
| | (22,135 | ) | | 5,452 |
| 3,555 |
| | 3,824 |
| | 1,807 |
| | (7,378 | ) | | 1,808 |
|
Loss on early extinguishment of debt | — |
| | (18,987 | ) | | (10 | ) | | — |
| | (18,997 | ) | — |
| | (82 | ) | | (10 | ) | | — |
| | (92 | ) |
| 10,680 |
|
| (43,995 | ) |
| (32,645 | ) |
| — |
|
| (65,960 | ) | 3,555 |
| | (8,083 | ) | | (11,136 | ) | | — |
| | (15,664 | ) |
Income before income taxes, equity method investments, and gains on sales of real estate | 11,299 |
|
| (51,357 | ) |
| 52,684 |
|
| — |
|
| 12,626 |
| |
Income (loss) before income taxes and unconsolidated entities: | | 3,762 |
| | (10,425 | ) | | 22,165 |
| | — |
| | 15,502 |
|
Income tax expense | — |
| | (12 | ) | | (375 | ) | | — |
| | (387 | ) | — |
| | (5 | ) | | (240 | ) | | — |
| | (245 | ) |
Income from subsidiaries | 45,582 |
| | 89,972 |
| | — |
| | (135,554 | ) | | — |
| 9,524 |
| | 17,804 |
| | — |
| | (27,328 | ) | | — |
|
Loss from unconsolidated joint venture | — |
| | (5,441 | ) | | — |
| | — |
| | (5,441 | ) | — |
| | (1,952 | ) | | — |
| | — |
| | (1,952 | ) |
Income before gains on sales of real estate | 56,881 |
|
| 33,162 |
|
| 52,309 |
|
| (135,554 | ) |
| 6,798 |
| |
Gains on sales of real estate | — |
| | — |
| | 50,083 |
| | — |
| | 50,083 |
| |
Income before sale of real estate assets: | | 13,286 |
| | 5,422 |
| | 21,925 |
| | (27,328 | ) | | 13,305 |
|
Loss on sale of real estate assets | | — |
| | — |
| | (19 | ) | | — |
| | (19 | ) |
Net income | $ | 56,881 |
|
| $ | 33,162 |
|
| $ | 102,392 |
|
| $ | (135,554 | ) |
| $ | 56,881 |
| $ | 13,286 |
| | $ | 5,422 |
| | $ | 21,906 |
| | $ | (27,328 | ) | | $ | 13,286 |
|
Consolidating Statements of Operations (in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, 2015 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating adjustments | | Columbia Property Trust (Consolidated) |
Revenues: | | | | | | | | | |
Rental income | $ | — |
| | $ | 1,926 |
| | $ | 331,089 |
| | $ | (279 | ) | | $ | 332,736 |
|
Tenant reimbursements | — |
| | 804 |
| | 76,591 |
| | — |
| | 77,395 |
|
Hotel income | — |
| | — |
| | 18,898 |
| | — |
| | 18,898 |
|
Other property income | — |
| | — |
| | 4,605 |
| | (248 | ) | | 4,357 |
|
| — |
| | 2,730 |
| | 431,183 |
| | (527 | ) | | 433,386 |
|
Expenses: | | | | | | | | | |
Property operating costs | — |
| | 2,286 |
| | 142,368 |
| | (279 | ) | | 144,375 |
|
Hotel operating costs | — |
| | — |
| | 15,069 |
| | — |
| | 15,069 |
|
Asset and property management fees: | | | | | | | | | |
Related-party | — |
| | 70 |
| | — |
| | (70 | ) | | — |
|
Other | — |
| | — |
| | 1,372 |
| | — |
| | 1,372 |
|
Depreciation | — |
| | 1,907 |
| | 98,354 |
| | — |
| | 100,261 |
|
Amortization | — |
| | 173 |
| | 67,060 |
| | — |
| | 67,233 |
|
General and administrative | 113 |
| | 6,492 |
| | 15,494 |
| | (178 | ) | | 21,921 |
|
Acquisition expenses | — |
| | 11 |
| | 3,664 |
| | — |
| | 3,675 |
|
| 113 |
| | 10,939 |
| | 343,381 |
| | (527 | ) | | 353,906 |
|
Real estate operating income (loss) | (113 | ) | | (8,209 | ) | | 87,802 |
| | — |
| | 79,480 |
|
Other income (expense): | | | | | | | | | |
Interest expense | — |
| | (32,656 | ) | | (52,904 | ) | | 19,299 |
| | (66,261 | ) |
Interest and other income | 10,586 |
| | 8,720 |
| | 5,441 |
| | (19,299 | ) | | 5,448 |
|
Loss on interest rate swaps | — |
| | (1,101 | ) | | (9 | ) | | — |
| | (1,110 | ) |
Loss on early extinguishment of debt | — |
| | (1,050 | ) | | (2,099 | ) | | — |
| | (3,149 | ) |
Income from subsidiaries | 23,977 |
| | 46,301 |
| | — |
| | (70,278 | ) | | — |
|
| 34,563 |
| | 20,214 |
| | (49,571 | ) | | (70,278 | ) | | (65,072 | ) |
Income before income tax expense and gain (loss) on sale of real estate assets | 34,450 |
| | 12,005 |
| | 38,231 |
| | (70,278 | ) | | 14,408 |
|
Income tax expense | — |
| | (16 | ) | | (124 | ) | | — |
| | (140 | ) |
Income before gain (loss) on sale of real estate assets | 34,450 |
| | 11,989 |
| | 38,107 |
| | (70,278 | ) | | 14,268 |
|
Gain (loss) on sale of real estate assets | — |
| | (19 | ) | | 20,201 |
| | — |
| | 20,182 |
|
Net income | $ | 34,450 |
| | $ | 11,970 |
| | $ | 58,308 |
| | $ | (70,278 | ) | | $ | 34,450 |
|
|
| | | | | | | | | | | | | | | | | | | |
| For the Six Months Ended June 30, 2017 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating Adjustments | | Columbia Property Trust (Consolidated) |
Revenues: | | | | | | | | | |
Rental income | $ | — |
| | $ | 51 |
| | $ | 138,438 |
| | $ | (195 | ) | | $ | 138,294 |
|
Tenant reimbursements | — |
| | (66 | ) | | 15,622 |
| | — |
| | 15,556 |
|
Hotel income | — |
| | — |
| | 1,339 |
| | — |
| | 1,339 |
|
Other property income | 490 |
| | — |
| | 1,352 |
| | (18 | ) | | 1,824 |
|
| 490 |
| | (15 | ) | | 156,751 |
| | (213 | ) | | 157,013 |
|
Expenses: | | | | | | | | | |
Property operating costs | — |
| | 128 |
| | 46,003 |
| | (195 | ) | | 45,936 |
|
Hotel operating costs | — |
| | — |
| | 2,085 |
| | — |
| | 2,085 |
|
Asset and property management fees: | | | | | | | | | |
Related-party | — |
| | 3 |
| | — |
| | (3 | ) | | — |
|
Other | — |
| | — |
| | 529 |
| | — |
| | 529 |
|
Depreciation | — |
| | 234 |
| | 41,794 |
| | — |
| | 42,028 |
|
Amortization | — |
| | 5 |
| | 17,643 |
| | — |
| | 17,648 |
|
General and administrative | 96 |
| | 5,256 |
| | 12,632 |
| | (15 | ) | | 17,969 |
|
| 96 |
| | 5,626 |
| | 120,686 |
| | (213 | ) | | 126,195 |
|
Real estate operating income (loss) | 394 |
| | (5,641 | ) | | 36,065 |
| | — |
| | 30,818 |
|
Other income (expense): | | | | | | | | | |
Interest expense | — |
| | (20,851 | ) | | (19,133 | ) | | 10,407 |
| | (29,577 | ) |
Interest and other income | 8,330 |
| | 3,297 |
| | 3,607 |
| | (10,407 | ) | | 4,827 |
|
Loss on early extinguishment of debt | — |
| | — |
| | (45 | ) | | — |
| | (45 | ) |
| 8,330 |
| | (17,554 | ) | | (15,571 | ) | | — |
| | (24,795 | ) |
Income (loss) before income taxes, unconsolidated entities, and sales of real estate: | 8,724 |
| | (23,195 | ) | | 20,494 |
| | — |
| | 6,023 |
|
Income tax benefit | — |
| | — |
| | 381 |
| | — |
| | 381 |
|
Income (loss) from unconsolidated entities | 67,131 |
| | 69,283 |
| | — |
| | (140,116 | ) | | (3,702 | ) |
Income before sales of real estate assets: | 75,855 |
| | 46,088 |
| | 20,875 |
| | (140,116 | ) | | 2,702 |
|
Gains on sales of real estate assets | — |
| | 11,050 |
| | 62,103 |
| | — |
| | 73,153 |
|
Net income | $ | 75,855 |
| | $ | 57,138 |
| | $ | 82,978 |
| | $ | (140,116 | ) | | $ | 75,855 |
|
Consolidating Statements of Comprehensive Income (in thousands)
|
| | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, 2016 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating adjustments | | Columbia Property Trust (Consolidated) |
Net income | $ | 36,898 |
| | $ | 29,656 |
| | $ | 64,906 |
| | $ | (94,562 | ) | | $ | 36,898 |
|
Market value adjustments to interest rate swaps | 1,250 |
| | 1,250 |
| | — |
| | (1,250 | ) | | 1,250 |
|
Comprehensive income | $ | 38,148 |
| | $ | 30,906 |
| | $ | 64,906 |
| | $ | (95,812 | ) | | $ | 38,148 |
|
|
| | | | | | | | | | | | | | | | | | | |
| For the Six Months Ended June 30, 2016 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating Adjustments | | Columbia Property Trust (Consolidated) |
Revenues: | | | | | | | | | |
Rental income | $ | — |
| | $ | 1,713 |
| | $ | 191,628 |
| | $ | (188 | ) | | $ | 193,153 |
|
Tenant reimbursements | — |
| | 857 |
| | 37,604 |
| | — |
| | 38,461 |
|
Hotel income | — |
| | — |
| | 11,214 |
| | — |
| | 11,214 |
|
Other property income | 490 |
| | — |
| | 11,376 |
| | (185 | ) | | 11,681 |
|
| 490 |
| | 2,570 |
| | 251,822 |
| | (373 | ) | | 254,509 |
|
Expenses: | | | | | | | | | |
Property operating costs | — |
| | 1,501 |
| | 80,265 |
| | (188 | ) | | 81,578 |
|
Hotel operating costs | — |
| | — |
| | 9,369 |
| | — |
| | 9,369 |
|
Asset and property management fees: | | | | | | | | | |
Related-party | — |
| | 72 |
| | — |
| | (72 | ) | | — |
|
Other | — |
| | — |
| | 671 |
| | — |
| | 671 |
|
Depreciation | — |
| | 1,421 |
| | 56,318 |
| | — |
| | 57,739 |
|
Amortization | — |
| | 153 |
| | 30,854 |
| | — |
| | 31,007 |
|
General and administrative | 77 |
| | 4,281 |
| | 14,006 |
| | (113 | ) | | 18,251 |
|
| 77 |
| | 7,428 |
| | 191,483 |
| | (373 | ) | | 198,615 |
|
Real estate operating income (loss) | 413 |
| | (4,858 | ) | | 60,339 |
| | — |
| | 55,894 |
|
Other income (expense): | | | | | | | | | |
Interest expense | — |
| | (24,230 | ) | | (25,814 | ) | | 14,767 |
| | (35,277 | ) |
Interest and other income | 7,109 |
| | 7,658 |
| | 3,613 |
| | (14,767 | ) | | 3,613 |
|
Loss on early extinguishment of debt | — |
| | (82 | ) | | (10 | ) | | — |
| | (92 | ) |
| 7,109 |
| | (16,654 | ) | | (22,211 | ) | | — |
| | (31,756 | ) |
Income (loss) before income taxes, unconsolidated entities, and sales of real estate: | 7,522 |
| | (21,512 | ) | | 38,128 |
| | — |
| | 24,138 |
|
Income tax expense | — |
| | (12 | ) | | (310 | ) | | — |
| | (322 | ) |
Income from unconsolidated entities | 12,461 |
| | 28,625 |
| | — |
| | (41,086 | ) | | — |
|
Loss from unconsolidated joint venture | — |
| | (3,504 | ) | | — |
| | — |
| | (3,504 | ) |
Income before sales of real estate assets: | 19,983 |
| | 3,597 |
| | 37,818 |
| | (41,086 | ) | | 20,312 |
|
Loss on sales of real estate assets | — |
| | — |
| | (329 | ) | | — |
| | (329 | ) |
Net income | $ | 19,983 |
| | $ | 3,597 |
| | $ | 37,489 |
| | $ | (41,086 | ) | | $ | 19,983 |
|
|
| | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, 2015 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating adjustments | | Columbia Property Trust (Consolidated) |
Net income | $ | 20,143 |
| | $ | 10,945 |
| | $ | 30,039 |
| | $ | (40,984 | ) | | $ | 20,143 |
|
Settlement of interest rate swap | 1,102 |
| | 1,102 |
| | — |
| | (1,102 | ) | | 1,102 |
|
Market value adjustments to interest rate swaps | (4,147 | ) | | (4,147 | ) | | — |
| | 4,147 |
| | (4,147 | ) |
Comprehensive income | $ | 17,098 |
| | $ | 7,900 |
| | $ | 30,039 |
| | $ | (37,939 | ) | | $ | 17,098 |
|
|
| | | | | | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, 2016 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating adjustments | | Columbia Property Trust (Consolidated) |
Net income | $ | 56,881 |
| | $ | 33,162 |
| | $ | 102,392 |
| | $ | (135,554 | ) | | $ | 56,881 |
|
Market value adjustments to interest rate swaps | (5,629 | ) | | (5,629 | ) | | — |
| | 5,629 |
| | (5,629 | ) |
Comprehensive income | $ | 51,252 |
| | $ | 27,533 |
| | $ | 102,392 |
| | $ | (129,925 | ) | | $ | 51,252 |
|
|
| | | | | | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, 2015 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating adjustments | | Columbia Property Trust (Consolidated) |
Net income | $ | 34,450 |
| | $ | 11,970 |
| | $ | 58,308 |
| | $ | (70,278 | ) | | $ | 34,450 |
|
Settlement of interest rate swap | 1,102 |
| | 1,102 |
| | — |
| | (1,102 | ) | | 1,102 |
|
Market value adjustments to interest rate swaps | (3,552 | ) | | (3,552 | ) | | — |
| | 3,552 |
| | (3,552 | ) |
Comprehensive income | $ | 32,000 |
| | $ | 9,520 |
| | $ | 58,308 |
| | $ | (67,828 | ) | | $ | 32,000 |
|
Consolidating Statements of Cash FlowsComprehensive Income (in thousands)
|
| | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, 2016 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Columbia Property Trust (Consolidated) |
Cash flows from operating activities | $ | 635 |
| | $ | (38,952 | ) | | $ | 188,021 |
| | $ | 149,704 |
|
Cash flows from investing activities: | | | | | | | |
Net proceeds from sale of real estate | 482,089 |
| | — |
| | — |
| | 482,089 |
|
Investment in real estate and related assets | — |
| | (1,552 | ) | | (52,608 | ) | | (54,160 | ) |
Investment in unconsolidated joint venture | — |
| | (12,351 | ) | | — |
| | (12,351 | ) |
Net cash used in investing activities | 482,089 |
| | (13,903 | ) | | (52,608 | ) | | 415,578 |
|
Cash flows from financing activities: | | | | | | | |
Debt prepayment and interest rate settlement costs paid | (17,921 | ) | | — |
| | — |
| | (17,921 | ) |
Borrowings, net of fees | 348,691 |
| | 431,889 |
| | — |
| | 780,580 |
|
Repayments | (250,000 | ) | | (702,000 | ) | | (43,070 | ) | | (995,070 | ) |
Distributions | (148,474 | ) | | — |
| | — |
| | (148,474 | ) |
Repurchases of common stock | (26,186 | ) | | — |
| | — |
| | (26,186 | ) |
Intercompany contributions (distributions) | (220,389 | ) | | 317,340 |
| | (96,951 | ) | | — |
|
Net cash provided by (used in) financing activities | (314,279 | ) | | 47,229 |
| | (140,021 | ) | | (407,071 | ) |
Net decrease in cash and cash equivalents | 168,445 |
| | (5,626 | ) | | (4,608 | ) | | 158,211 |
|
Cash and cash equivalents, beginning of period | 989 |
| | 14,969 |
| | 16,687 |
| | 32,645 |
|
Cash and cash equivalents, end of period | $ | 169,434 |
| | $ | 9,343 |
| | $ | 12,079 |
| | $ | 190,856 |
|
|
| | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, 2017 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating Adjustments | | Columbia Property Trust (Consolidated) |
Net income (loss) | $ | 1,133 |
| | $ | (6,107 | ) | | $ | 10,827 |
| | $ | (4,720 | ) | | $ | 1,133 |
|
Market value adjustments to interest rate swaps | (636 | ) | | (636 | ) | | — |
| | 636 |
| | (636 | ) |
Comprehensive income (loss) | $ | 497 |
| | $ | (6,743 | ) | | $ | 10,827 |
| | $ | (4,084 | ) | | $ | 497 |
|
|
| | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, 2016 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating Adjustments | | Columbia Property Trust (Consolidated) |
Net income | $ | 13,286 |
| | $ | 5,422 |
| | $ | 21,906 |
| | $ | (27,328 | ) | | $ | 13,286 |
|
Market value adjustments to interest rate swaps | (2,022 | ) | | (2,022 | ) | | — |
| | 2,022 |
| | (2,022 | ) |
Comprehensive income | $ | 11,264 |
| | $ | 3,400 |
| | $ | 21,906 |
| | $ | (25,306 | ) | | $ | 11,264 |
|
|
| | | | | | | | | | | | | | | | | | | |
| For the Six Months Ended June 30, 2017 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating Adjustments | | Columbia Property Trust (Consolidated) |
Net income | $ | 75,855 |
| | $ | 57,138 |
| | $ | 82,978 |
| | $ | (140,116 | ) | | $ | 75,855 |
|
Market value adjustments to interest rate swaps | (2 | ) | | (2 | ) | | — |
| | 2 |
| | (2 | ) |
Comprehensive income | $ | 75,853 |
| | $ | 57,136 |
| | $ | 82,978 |
| | $ | (140,114 | ) | | $ | 75,853 |
|
|
| | | | | | | | | | | | | | | | | | | |
| For the Six Months Ended June 30, 2016 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Consolidating Adjustments | | Columbia Property Trust (Consolidated) |
Net income | $ | 19,983 |
| | $ | 3,597 |
| | $ | 37,489 |
| | $ | (41,086 | ) | | $ | 19,983 |
|
Market value adjustments to interest rate swaps | (6,879 | ) | | (6,879 | ) | | — |
| | 6,879 |
| | (6,879 | ) |
Comprehensive income (loss) | $ | 13,104 |
| | $ | (3,282 | ) | | $ | 37,489 |
| | $ | (34,207 | ) | | $ | 13,104 |
|
Consolidating Statements of Cash Flows (in thousands)
| | | For the Nine Months Ended September 30, 2015 | For the Six Months Ended June 30, 2017 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Eliminations | | Columbia Property Trust (Consolidated) | Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Eliminations | | Columbia Property Trust (Consolidated) |
Cash flows from operating activities | $ | (107 | ) | | $ | (37,391 | ) | | $ | 212,477 |
| | $ | — |
| | $ | 174,979 |
| $ | 58,752 |
| | $ | 58,688 |
| | $ | 58,639 |
| | $ | (140,116 | ) | | $ | 35,963 |
|
Cash flows from investing activities: | | | | | | | | | | | | | | | | | | |
Net proceeds from sale of real estate | 10,727 |
| | 411,398 |
| | — |
| | — |
| | 422,125 |
| — |
| | 49,531 |
| | 455,129 |
| | — |
| | 504,660 |
|
Investment in real estate and related assets | (57,198 | ) | | (1,006,340 | ) | | (77,982 | ) | | — |
| | (1,141,520 | ) | (12,000 | ) | | (400 | ) | | (45,463 | ) | | — |
| | (57,863 | ) |
Investment in subsidiaries | (1,065,695 | ) | | — |
| | — |
| | 1,065,695 |
| | — |
| |
Net cash used in investing activities | (1,112,166 | ) | | (594,942 | ) | | (77,982 | ) |
| 1,065,695 |
| | (719,395 | ) | |
Investment in unconsolidated joint venture | | — |
| | (1,940 | ) | | — |
| | — |
| | (1,940 | ) |
Distributions from subsidiaries | | 385,554 |
| | 331,630 |
| | — |
| | (717,184 | ) | | — |
|
Net cash provided by investing activities | | 373,554 |
| | 378,821 |
| | 409,666 |
| | (717,184 | ) | | 444,857 |
|
Cash flows from financing activities: | | | | | | | | | | | | | | | | | | |
Debt prepayment and interest rate swap settlement costs paid | — |
| | (1,102 | ) | | (2,063 | ) | | — |
| | (3,165 | ) | |
Borrowings, net of fees | — |
| | 2,193,900 |
| | — |
| | — |
| | 2,193,900 |
| — |
| | (70 | ) | | — |
| | — |
| | (70 | ) |
Repayments of line of credit and notes payable | — |
| | (1,290,000 | ) | | (335,187 | ) | | — |
| | (1,625,187 | ) | |
Repayments | | — |
| | — |
| | (75,830 | ) | | — |
| | (75,830 | ) |
Distributions | (112,570 | ) | | — |
| | — |
| | — |
| | (112,570 | ) | (85,505 | ) | | (447,367 | ) | | (409,933 | ) | | 857,300 |
| | (85,505 | ) |
Repurchases of common stock | (13,529 | ) | | — |
| | — |
| | — |
| | (13,529 | ) | (28,962 | ) | | — |
| | — |
| | — |
| | (28,962 | ) |
Intercompany contributions (distributions) | 1,121,404 |
| | (268,560 | ) | | 212,851 |
| | (1,065,695 | ) | | — |
| |
Net cash provided by (used in) financing activities | 995,305 |
| | 634,238 |
| | (124,399 | ) |
| (1,065,695 | ) | | 439,449 |
| (114,467 | ) | | (447,437 | ) | | (485,763 | ) | | 857,300 |
| | (190,367 | ) |
Net increase (decrease) in cash and cash equivalents | (116,968 | ) | | 1,905 |
| | 10,096 |
|
| — |
| | (104,967 | ) | 317,839 |
| | (9,928 | ) | | (17,458 | ) | | — |
| | 290,453 |
|
Cash and cash equivalents, beginning of period | 119,488 |
| | 10,504 |
| | 19,798 |
| | — |
| | 149,790 |
| 174,420 |
| | 16,509 |
| | 25,156 |
| | — |
| | 216,085 |
|
Cash and cash equivalents, end of period | $ | 2,520 |
| | $ | 12,409 |
| | $ | 29,894 |
|
| $ | — |
| | $ | 44,823 |
| $ | 492,259 |
| | $ | 6,581 |
| | $ | 7,698 |
| | $ | — |
| | $ | 506,538 |
|
|
| | | | | | | | | | | | | | | | | | | |
| For the Six Months Ended June 30, 2016 |
| Columbia Property Trust (Parent) (Guarantor) | | Columbia Property Trust OP (the Issuer) | | Non- Guarantors | | Eliminations | | Columbia Property Trust (Consolidated) |
Cash flows from operating activities | $ | 4,009 |
| | $ | 11,635 |
| | $ | 114,880 |
| | $ | (41,086 | ) | | $ | 89,438 |
|
Cash flows from investing activities: | | | | | | | | | |
Net proceeds from sales of real estate(1) | — |
| | — |
| | 159,387 |
| | — |
| | 159,387 |
|
Investment in real estate and related assets | — |
| | (755 | ) | | (35,729 | ) | | — |
| | (36,484 | ) |
Investment in unconsolidated joint venture | — |
| | (8,728 | ) | | — |
| | — |
| | (8,728 | ) |
Distributions from subsidiaries(2) | 133,891 |
| | 151,470 |
| | — |
| | (285,361 | ) | | — |
|
Net cash provided by investing activities | 133,891 |
| | 141,987 |
| | 123,658 |
|
| (285,361 | ) | | 114,175 |
|
Cash flows from financing activities: | | | | | | | | | |
Borrowings, net of fees | — |
| | 214,861 |
| | — |
| | — |
| | 214,861 |
|
Repayments of line of credit and notes payable | — |
| | (248,000 | ) | | (41,697 | ) | | — |
| | (289,697 | ) |
Distributions(3) | (111,433 | ) | | (125,011 | ) | | (201,436 | ) | | 326,447 |
| | (111,433 | ) |
Repurchases of common stock | (26,186 | ) | | — |
| | — |
| | — |
| | (26,186 | ) |
Net cash used in financing activities | (137,619 | ) | | (158,150 | ) | | (243,133 | ) |
| 326,447 |
| | (212,455 | ) |
Net increase (decrease) in cash and cash equivalents | 281 |
| | (4,528 | ) | | (4,595 | ) |
| — |
| | (8,842 | ) |
Cash and cash equivalents, beginning of period | 989 |
| | 14,969 |
| | 16,687 |
| | — |
| | 32,645 |
|
Cash and cash equivalents, end of period | $ | 1,270 |
| | $ | 10,441 |
| | $ | 12,092 |
|
| $ | — |
| | $ | 23,803 |
|
| |
(1) | Net proceeds from sales of real estate increased (decreased) by $(159.4) million and $159.4 million for the parent and non-guarantors, respectively. |
| |
(2) | Distributions from subsidiaries increased (decreased) by $133.9 million, $151.5 million, and $(285.4) million for the parent, issuer, and eliminations, respectively. |
| |
(3) | Distributions (increased) decreased by $(125.0) million, $(201.4) million, and $326.4 million, for the issuer, non-guarantors, and eliminations, respectively. The intercompany transfers, net line item is no longer presented based on the changes to the other line items described herein. |
12.13. Subsequent Event
Columbia Property Trust has evaluated subsequent events in connection with the preparation of itsthe consolidated financial statements and notes thereto included in this report on Form 10-Q and noted the following item in addition to those disclosed elsewhere in this report:
Property Disposition
During October 2016, Columbia Property Trust closed on the sale of the 9127 South Jamaica Street building in Denver, Colorado,Allianz Joint Ventures as described in Note 3, Real Estate Transactions.Transactions; and
Amendment of $150 Million Term Loan, as described in Note 5, Line of Credit and Notes Payable.
| |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements (and notes thereto) and the "Cautionary Note Regarding Forward-Looking Statements" preceding Part I of this report, as well as our consolidated financial statements (and the notes thereto) and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our 20152016 Form 10-K.
Executive Summary
OurOur primary strategic objective is to generate long-term shareholder returns throughfrom a combination of steadily growing cash flows and appreciation in the values of our net asset values, with a focus onproperties, through the acquisition and ownership of high-quality office properties principally located in high-barrier-to-entry markets. Capital recycling initiativesWe typically pursue office building acquisitions that are enabling us to improvecompetitive within the top tier of their markets or that will be repositioned as such through value-add initiatives. In addition, our concentration in key marketsinvestment objectives include optimizing our portfolio allocation between stabilized investments and more growth-oriented, value-add investments, with an emphasis on central business districts as well as to reduceand multi-tenant buildings.
At the beginning of the year, we completed our exposure to single-tenant assets. During 2015near-term disposition program with the sale of the Houston and 2016,Cleveland assets for $539.5 million. Since 2011, we have sold 16more than 50 properties situated in outlying markets for approximately $1.0over $3.3 billion, and reinvested $2.3 billion of those proceeds in acquisitions in New York, andSan Francisco, Boston, and in targeted capital improvements.improvements for our existing portfolio. We are continuing to explorecurrently focused on reinvesting the sale ofremaining proceeds into additional non-core assets and pursue additional investment opportunities inwithin our key markets,target markets:
We recently established a strategic partnership with Allianz, which will allowenable us to increase our portfolio allocationsscale in key markets on a leverage-neutral basis. On July 6, 2017, we consummated the partnership by simultaneously selling partial interests in two of our San Francisco properties, 333 Market Street and University Circle, to central business districtsAllianz for $234.0 million, and multi-tenant buildings, and at the same time, optimize our portfolio allocation between traditional, stabilized coreby acquiring a partial interest in 114 Fifth Avenue in Manhattan from Allianz for $108.9 million. We expect to make additional joint investments and growth-oriented, value-add investments. While transitioningwith Allianz.
We are also under contract to purchase 149 Madison Avenue in New York, a 12-story, 127,000-square-foot office building, with closing expected later this year. We plan to fully redevelop this property as modern boutique office space.
Transitioning the portfolio from primarily suburban single tenant buildings to more growth-oriented, value-add properties is likely to causeprimarily multi-tenant CBD buildings has caused some dilution in earnings for a period of time,earnings; however, we believe that this transition will improve the opportunity forour growth potential over the longerlong term.
We are continuingLeasing continues to proactively manage ourbe a key area of focus, for both vacant space and upcoming lease expirations. During 2016,Through the first six months of 2017, we have leased 783,752605,000 square feet of space. space and addressed some of our most significant vacancies:
In April,San Francisco, at 650 California Street, we executed a 30-year, full building12-year, 61,000-square-foot lease of 390,000-square feet at the 222 East 41st Street propertywith WeWork in February; an eight-year, 86,000-square-foot lease with Affirm in April; and a 22,000-square-foot renewal and expansion with an existing tenant in April.
In New York, which replacesat 229 West 43rd Street, we amended Snap Inc.'s lease in February to expand its space by 26,000 square feet to a total of 121,000 square feet, and to extend the lease for the majority of the building that was scheduled to expire later this year; and in June2027.
In Atlanta, at One Glenlake, we executed a 130,000-square foot10-year, 66,000-square-foot lease in April, and an 11-year, 40,000-square-foot lease renewal and expansion in June along with several smaller leases during the second quarter to bring the building to 100% leased at the SanTan Corporate Center in Phoenix, Arizona, resulting in a slight rent roll up, with a long-time tenant occupying the entirety of one of the two buildings at the property; and a 35,000-square-foot lease at the 315 Park Avenue South Building in New York, which brought the property to 97% leased.quarter end.
We continue to supportmaintain a flexible balance sheet by maintainingwith low leverage withand an emphasis on unsecured borrowings. During 2015 and 2016, we have refinanced approximately $1.3 billionborrowings, with weighted average maturities of unsecured debt and repaid $371.5 million of mortgage loans. As a result, over this period we have extended our weighted-average debt maturity from 3.3 years to 6.35.9 years(1), decreased our weighted-average cost of borrowing from 4.24% per annum to 3.61%of 3.70%(1) per annum, and increased ouran unencumbered pool of assets as a percentage of gross real estate assets from 61.7% to 79.5%of 82%(1). Our board has adopted a stock repurchase program that authorizesallows us to purchase uptake advantage of market opportunities when our stock is undervalued from time to $200.0time. In the second quarter of 2017, we repurchased $27.5 million of our common stock through September(1.3 million shares at an average price of 2017. We believe such a program enables us to benefit from market downturns, which may cause our stock to be undervalued from time to time.$21.95 per share). To date, under our current repurchase program, we have purchasedrepurchased an aggregate of $41.3$96.5 million of common stock including $25.0 million purchased in early 2016.at an average price of $22.08.
| |
(1) | Statistics (i) include 51% of the debt held by the the Market Square Joint Venture in which we own a 51%an interest and (ii) are adjusted for the repayment of the outstanding balance of our Revolving Credit Facility of $99.0 million, which occurred on October 3, 2016.through an unconsolidated joint venture. |
Key Performance Indicators
Our operating results depend primarily upon the level of income generated by the leases at our properties. Occupancy and rental rates are critical drivers of our lease income. Over the last year, our quarter-end average portfolio percentage leased ranged from 90.6% at December 31, 2016 to 93.3%.95.3% at June 30, 2017. The following table sets forth details related to recent leasing activities, which drive changes in our rental revenues:
|
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2016 | | 2015 | | 2016 | | 2015 |
Total number of leases | 11 |
| | | 16 |
| | 32 |
| | | 53 |
|
Lease term (months) | 82 |
| | | 101 |
| | 341 |
| | | 107 |
|
Square feet of leasing - renewal | 92,625 |
| (1) | | 18,560 |
| | 253,099 |
| (1) | | 163,315 |
|
Square feet of leasing - new | 34,388 |
| (2) | | 120,446 |
| | 530,653 |
| (2) | | 371,053 |
|
Total square feet of leasing | 127,013 |
| | | 139,006 |
| | 783,752 |
| | | 534,368 |
|
Rent leasing spread - renewal(3) | 26.3 | % | | | 8.5 | % | | 25.8 | % | | | 47.0 | % |
Rent leasing spread - new(4) | — | % | | | 7.6 | % | | 18.9 | % | (5) | | 69.4 | % |
Rent leasing spread - all leases(3)(4) | 26.3 | % | | | 7.7 | % | | 19.2 | % | | | 62.7 | % |
Tenant improvements, per square foot - renewal | $ | 50.85 |
| | | $ | 11.19 |
| | $ | 38.66 |
| | | $ | 24.36 |
|
Tenant improvements, per square foot - new | $ | 31.36 |
| | | $ | 39.84 |
| | $ | 168.18 |
| (5) | | $ | 62.13 |
|
Tenant improvements, per square foot - all leases | $ | 44.59 |
| | | $ | 38.37 |
| | $ | 161.51 |
| | | $ | 53.43 |
|
Leasing commissions, per square foot - renewal | $ | 16.98 |
| | | $ | 7.43 |
| | $ | 13.88 |
| | | $ | 14.35 |
|
Leasing commissions, per square foot - new | $ | 24.07 |
| | | $ | 23.51 |
| | $ | 43.70 |
| (5) | | $ | 29.05 |
|
Leasing commissions, per square foot - all leases | $ | 19.25 |
| | | $ | 22.68 |
| | $ | 42.16 |
| | | $ | 25.67 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Total number of leases | 19 |
| | 12 |
| | 35 |
| | 21 |
|
Square feet of leasing – renewal(1) | 69,580 |
| | 148,489 |
| | 204,936 |
| | 160,474 |
|
Square feet of leasing – new(2) | 248,771 |
| | 447,026 |
| | 389,329 |
| | 496,265 |
|
Total square feet of leasing | 318,351 |
| | 595,515 |
| | 594,265 |
| | 656,739 |
|
Lease term (months) | 108 |
| | 361 |
| | 114 |
| | 352 |
|
Tenant improvements, per square foot – renewal | $ | 81.23 |
| | $ | 25.29 |
| | $ | 51.11 |
| | $ | 24.72 |
|
Tenant improvements, per square foot – new | $ | 97.29 |
| | $ | 174.94 |
| | $ | 83.70 |
| | $ | 170.08 |
|
Tenant improvements, per square foot – all leases | $ | 94.23 |
| | $ | 171.14 |
| | $ | 77.33 |
| | $ | 166.44 |
|
Leasing commissions, per square foot – renewal | $ | 19.45 |
| | $ | 10.39 |
| | $ | 15.50 |
| | $ | 10.34 |
|
Leasing commissions, per square foot – new | $ | 23.00 |
| | $ | 44.73 |
| | $ | 20.61 |
| | $ | 43.97 |
|
Leasing commissions, per square foot – all leases | $ | 22.32 |
| | $ | 43.86 |
| | $ | 19.61 |
| | $ | 43.13 |
|
| | | | | | | |
Rent leasing spread – renewal(3) | 74.8 | % | | 25.9 | % | | 44.0 | % | | 25.3 | % |
Rent leasing spread – new(4) | 96.9 | % | | 15.4 | % | | 133.1 | % | | 18.9 | % |
Rent leasing spread – all leases(3)(4) | 85.1 | % | | 15.4 | % | | 101.3 | % | | 19.0 | % |
| |
(1) | Includes 51% of renewal leasing at the Market Square Joint Venture, inbuildings, which we own a 51% interest.through an unconsolidated joint venture. There was 41,00011,000 square feet and 14,000 square feet of renewal leasing for the second quarter to dateof 2017 and 57,0002016, respectively, and 18,000 and 16,000 square feet of renewal leasing year to datefor the first six months of 2017 and 2016, respectively, at the Market Square Buildings. |
| |
(2) | Includes 51% of new leasing at the Market Square Joint Venture, inbuildings, which we own a 51% interest.through an unconsolidated joint venture. There was 3,0004,000 square feet of new leasing for the second quarter to dateof 2016, and 12,0005,000 and 9,000 square feet of new leasing year to datefor the first six months of 2017 and 2016, respectively, at the Market Square Buildings. |
| |
(3) | Rent leasing spreads for renewal leases are calculated based on the change in base rental income measured on a straight-line basis. |
| |
(4) | Rent leasing spreads for new leases are calculated only for properties that have been vacant less than one year, and are measured on a straight-line basis. |
| |
(5)
| In the second quarter of 2016, we executed a new 390,000-square-foot, 30-year lease at our 222 East 41st Street property with NYU Langone Medical, which resulted in positive rent leasing spreads of 14.4%, tenant improvements of $180.10 per square foot, and leasing commissions of $44.90 per square foot. |
In 2015,2017, rent leasing spreads are significantly positive (85.1% and 101.3% for the quarter and six-month period ended June 30, 2017, respectively) due to leasing 188,000 square feet at 650 California Street in San Francisco. This leasing required significant tenant improvements; however, the net economic impact of leasing at 650 California Street is favorable. In 2016, rent leasing spreads were positive and tenant improvements per square foot were higher due to a 390,000-square-foot, 30-year lease expansion and extension with the anchor tenant at our 221 Main222 East 41st Street building in San Francisco, CaliforniaProperty and a new lease for 45,000 square feet at 315 Park Avenue South in New York. For the three months ended September 30, 2016, rent leasing spreads increased, primarily due to an 11,000-square foot, 9-year130,000-square-foot lease renewal at our 650 California StreetSanTan Corporate Center property (138%).in Phoenix, Arizona. Over the next 12 months, approximately 983,000168,000 square feet of leases at our leasesoperating properties (approximately 11%3.1% of our office portfolio based on revenues) are scheduled to expire. Approximately 451,000 of this total relates to properties currently being marketed for sale. The remainder of theThese near-term expirations primarily relate to our properties in New York and San Francisco. Overall, weFrancisco, with 62,000 square feet of this space pre-leased. We currently expect to replace thesethe remaining leases with starting rates above those currently in place at the properties.
Liquidity and Capital Resources
Overview
Cash flows generated from the operation of our properties are primarily used to fund recurring expenditures and stockholder dividends. Our board of directors elected to maintain the quarterly stockholder distribution rate of $0.30 per share for the third quarter of 2016. The amount of distributions to common stockholders is determined by our board of directors and is dependent upon a number of factors, including funds deemed available for distribution based principally on our current and future projected operating cash flows, reduced by capital requirements necessary to maintain our existing portfolio. In determining the amount of distributions to common stockholders, we also consider our future capital needs and future sources of liquidity, as well as the annual distribution requirements necessary to maintain our status as a REIT under the Code. Investments in new property acquisitions and first-generation capital improvements are generally funded with capital proceeds from property sales, debt, or cash on hand. In order to adjust to a payout level consistent with our current investment objectives, beginning with the first quarter of 2017, our board of directors elected to reduce the quarterly stockholder distribution rate from $0.30 per share to $0.20 per share, and maintained
this rate for the second quarter of 2017. We have transformed the composition of our portfolio by selling suburban assets and reinvesting in assets in high-barrier-to-entry markets, which offer lower initial yields and higher potential for growth over time. We believe this dividend rate is sustainable over the near and medium term and offers the potential for growth over the long term.
Short-term Liquidity and Capital Resources
During the ninesix months ended SeptemberJune 30, 2016,2017, we generated net cash flows from operating activities of $149.7$36.0 million, which consistsconsisted primarily of receipts from tenants for rent and reimbursements, reduced by payments for operating costs, administrative expenses, and interest expense. During the same period, we paid total distributions to stockholders of $148.5$85.5 million, which includesincluded dividend payments of $37.4for three quarters ($36.7 million for the fourth quarter of 20152016 and $111.1an aggregate of $48.8 million for the first threeand second quarters of 2016.2017).
During the ninesix months ended SeptemberJune 30, 2016,2017, we issued the 2026 Bonds Payable, generatingsold five properties for net proceeds of $348.7$504.7 million which wereand used to prepay our $250 million 2018 Bonds Payable, originally due in April 2018, and for the related early redemption premium. The remaining bond proceeds and the net proceeds of $482.1 million from current year property dispositions were used to pay down the outstanding balance on our Revolving Credit Facility, to repay the $119.0 million remaining on the $300 Million Bridge Loan, to repay the $39.0 million SanTan Corporate Center mortgage notes, to fund $54.2the early repayment of the 221 Main Street building mortgage note for $73.0 million, of leasing and capital projects of $47.5 million, and share repurchases of $27.5 million. We intend to redeem $26.2 million ofreinvest the remaining proceeds in strategic acquisition opportunities within our common stock. target markets.
Over the short-term, we expect our primary sources of capital to be operating cash flows select property dispositions, and future debt financings. We expect that our principal demands for funds will be operating expenses, distributions to stockholders,property acquisitions, capital improvements to our existing assets,portfolio, stock repurchases, property acquisitions,stockholder distributions, operating expenses, and interest and principal payments on current and maturing debt. We believe that we have adequate liquidity and capital resources to meet our current obligations as they come due. We used the proceeds from 80 Park Plaza disposition, which closed on September 30, 2016, to fully pay down the remaining balance on our Revolving Credit Facility after quarter end. As a result,of July 24, 2017, we have access to the full $500.0 million capacity of the Revolving Credit Facility as well as $610.0 million of October 25, 2016.cash on hand.
Long-term Liquidity and Capital Resources
Over the long term, we expect that our primary sources of capital will include operating cash flows, borrowing proceeds, and select property dispositions, and proceeds from secured or unsecured borrowings.dispositions. We expect that our primary uses of capital will continue to include stockholder distributions; acquisitions; capital expenditures, such as building improvements, tenant improvements, and leasing costs; and repaying or refinancing debt.
Consistent with our financing objectives and operational strategy, we continue to maintain net debt levels historically less than 40% of the undepreciated cost of our assets. Our debt-to-real-estate-asset ratio is calculated usingassets over the consolidated outstanding debt balance and real estate at cost.long term. As of SeptemberJune 30, 2016,2017, our debt-to-real-estate-assetnet-debt-to-real-estate-asset ratio includingwas approximately 25.2%, which includes our 51% ofinterest in the debt and real estate atof the Market Square Joint venture, in which we own a 51% interest, was approximately 35.7%.Venture. Our net-debt-to-real-estate-asset ratio is calculated using our debt balance, net of cash on hand, and real estate at cost.
Revolving Credit Facility
The Revolving Credit Facility has a capacity of $500.0 million and matures in July 2019, with two, six-month extension options. As of SeptemberJune 30, 2016,2017, we had anno outstanding balance of $99.0 millionborrowings on the Revolving Credit Facility, which was repaid subsequent to quarter end.Facility. Amounts outstanding under the Revolving Credit Facility bear interest at LIBOR, plus an applicable margin ranging from 0.875% to 1.55% for LIBOR borrowings, or an alternate base rate, plus an applicable margin ranging from 0.00% to 0.55% for base-rate borrowings, based on our applicable credit rating. The per-annum facility fee on the aggregate revolving commitment (used or unused) ranges from 0.125% to 0.30%, also based on our applicable credit rating. Additionally, we have the ability to increase the capacity of the Revolving Credit Facility, along with the $300 Million Term Loan, which provides for four accordion options for an aggregate amount of up to $400 million, subject to certain limitations.
Term Loans
The $300 Million Term Loan matures in July 2020 and, along with the Revolving Credit Facility, provides for four accordion options for an aggregate amount of up to $400 million, subject to certain conditions. The $300 Million Term Loan bears interest, at our option, at either (i) LIBOR, plus an applicable margin ranging from 0.90% to 1.75% for LIBOR loans, or (ii) an alternate base rate, plus an applicable margin ranging from 0.00% to 0.75% for base-rate loans, based on our applicable credit rating.
The $150 Million Term Loanmillion term loan matures in July 2022 (the "$150 Million Term Loan"). TheAs of June 30, 2017, the $150 Million Term Loan bearsincurred interest, at our option, at either (i) LIBOR, plus an applicable margin ranging from 1.40% to 2.35% for LIBOR loans, or (ii) an alternate base rate, plus an applicable margin ranging from 0.40% to 1.35% for base-rate loans. The interest rate on the $150 Million Term Loan is effectively fixed with an interest rate swap agreement. Based on the termsAs of the interest rate swap and our current credit rating,June 30, 2017, the interest rate on the $150 Million Term Loan iswas effectively fixed at 3.52% with an interest rate swap agreement on the LIBOR component of the rate, which is designated as a cash flow hedge.
On July 25, 2017, we amended the terms of the $150 Million Term Loan to reduce the current interest rate from 3.52% to 3.07% per annum. The amendment reduced the interest rate from LIBOR, plus an applicable margin ranging from 1.40% to 2.35%, to LIBOR, plus an applicable margin ranging from 0.90% to 1.75%. The maturity date, debt covenants, and other terms of the $150
Million Term Loan are unchanged. The existing interest rate swap agreement effectively fixes the new interest rate at 3.07% per annum and retains its cash flow hedge designation.
Bonds Payable
In August 2016, we issued $350.0 million of ten-year,10-year, unsecured 3.650% senior notes at 99.626% of their face value under our Universal Shelf Registration Statement (defined below). We received proceeds from the 2026 Bonds Payable, net of fees, of $346.4
million, which were used to prepay our $250 million 2018 Bonds Payable, originally due in April of 2018. The 2026 Bonds Payable require semi-annual interest payments in February and August based on a contractual annual interest rate of 3.650%. The principal amount of the 2026 Bonds Payable is due and payable on the maturity date, August 15, 2026.
In March 2015, we issued $350.0 million of ten-year,10-year, unsecured 4.150% senior notes at 99.859% of their face value under our Universal Shelf Registration Statement (defined below). We received proceeds from the 2025 Bonds Payable, net of fees, of $347.2 million. The 2025 Bonds Payable require semi-annual interest payments in April and October based on a contractual annual interest rate of 4.150%. The principal amount of the 2025 Bonds Payable is due and payable on the maturity date, April 1, 2025.
Debt Covenants
Our portfoliomortgage debt, instruments, the $300 Million Term Loan, the $150 Million Term Loan, the Revolving Credit Facility, the 2026 Bonds Payable and the 2025 Bonds Payable contain certain covenants and restrictions that require us to meet certain financial ratios. We believe we were in compliance with all of our debt covenants as of SeptemberJune 30, 20162017. We expect to continue to be able to meet the requirements of our debt covenants over the next 12 months.
Universal Shelf Registration Statement
We have on file a universal shelf registration statement on Form S-3 (No. 333-198764) with the SEC (the "Universal Shelf Registration Statement"), which was effective upon filing in September 2014. The Universal Shelf Registration Statement provides us with future flexibility to offer, from time to time and in one or more offerings, debt securities, common stock, preferred stock, depositary shares, warrants, or any combination thereof. The terms of any such future offerings would be established at the time of an offering.
Contractual Commitments and Contingencies
As of SeptemberJune 30, 2016,2017, our contractual obligations will become payable in the following periods (in thousands):
| | Contractual Obligations | | Total | | 2016 | | 2017-2018 | | 2019-2020 | | Thereafter | | Total | | 2017 | | 2018-2019 | | 2020-2021 | | Thereafter |
Debt obligations(1) | | $ | 1,690,742 |
| | $ | 1,390 |
| | $ | 153,587 |
| | $ | 520,015 |
| | $ | 1,015,750 |
| | $ | 1,514,523 |
| | $ | 51,898 |
| | $ | 146,875 |
| | $ | 300,000 |
| | $ | 1,015,750 |
|
Interest obligations on debt(1)(2) | | 380,648 |
| | 14,700 |
| | 108,827 |
| | 92,565 |
| | 164,556 |
| | 341,762 |
| | 28,285 |
| | 103,894 |
| | 86,010 |
| | 123,573 |
|
Capital lease obligations(3) | | 120,000 |
| | — |
| | — |
| | — |
| | 120,000 |
| | 120,000 |
| | — |
| | — |
| | 120,000 |
| | — |
|
Operating lease obligations(4) | | 211,600 |
| | 639 |
| | 5,433 |
| | 5,462 |
| | 200,066 |
| | 207,121 |
| | 1,321 |
| | 5,342 |
| | 5,342 |
| | 195,116 |
|
Total | | $ | 2,402,990 |
| | $ | 16,729 |
| | $ | 267,847 |
| | $ | 618,042 |
| | $ | 1,500,372 |
| | $ | 2,183,406 |
| | $ | 81,504 |
| | $ | 256,111 |
| | $ | 511,352 |
| | $ | 1,334,439 |
|
| |
(1) | Includes 51% of the debt and interest obligations for the Market Square Joint Venture, in which we own a 51% interest.through an unconsolidated joint venture. The Market Square Joint Venture holds a $325 million mortgage note on the Market Square Buildings, bearing interest at 5.07% and maturing on July 1, 2023. WeAs of June 30, 2017, we guarantee $23.3$12.6 million of the Market Square Buildings mortgage note payable (see Note 7, Commitments & Contingencies, to the accompanying financial statements). |
| |
(2) | Interest obligations on variable-rate debt are measured at the rate at which they are effectively fixed with interest rate swap agreements (where applicable). Interest obligations on all other debt are measured at the contractual rate. See Item 3, Quantitative and Qualitative Disclosure About Market Risk, for more information regarding our interest rate swaps. |
| |
(3) | Amounts include principal obligations only. We made interest payments on these obligations of $5.4$3.6 million during the ninesix months ended SeptemberJune 30, 2016,2017, all of which waswere funded with interest income earned on the corresponding investments in development authority bonds. These obligations will be fully satisfied at maturity with equivalent investments in development authority bonds. |
| |
(4) | Reflects obligations related to ground leases at certain properties, as describedescribed in Note 2, Summary of Significant Accounting Policies. In addition to the amounts shown, certain lease agreements include provisions that, at the option of the tenant, may obligate us to expend capital to expand an existing property or provide other expenditures for the benefit of the tenant, including a remaining commitment to contribute $70.1$69.0 million toward leasehold improvements. See Note 7, Commitments and Contingencies, for more information. |
Results of Operations
Overview
As of SeptemberJune 30, 2016,2017, we owned controlling interests in 24 office properties and one hotel.15 operating properties. As of SeptemberJune 30, 2016,2017, our office properties, including 51% of the Market Square Joint Venture, in which Columbia Property Trust owns a 51% interest,we own through an unconsolidated joint venture, were approximately 90.7% leased, excluding the 9127 South Jamaica Street building, which was subsequently sold on October 12, 2016 (see Note 3, Real Estate Transactions).95.3% leased. Our operating results are impacted by recent acquisition, disposition and joint venture activity as set forth below. In the near-term, we expect real estate operating income to fluctuate, primarily based on acquisitions, dispositions,investing and leasing activities.
Recent Dispositions
|
| | | | | | | | | | | |
Recent Acquisitions | | | | | | | | |
Property | | Location | | Rentable Square Footage | | Acquisition Date | | Purchase Price(1) (in thousands) |
2015 | | | | | | | | |
229 West 43rd Street | | New York, NY | | 481,000 |
| | August 4, 2015 | | $ | 516,000 |
|
116 Huntington Avenue | | Boston, MA | | 271,000 |
| | January 8, 2015 | | $ | 152,000 |
|
315 Park Avenue South | | New York, NY | | 327,000 |
| | January 7, 2015 | | $ | 372,000 |
|
1881 Campus Commons | | Reston, VA | | 244,000 |
| | January 7, 2015 | | $ | 64,000 |
|
|
| | | | | | | | | | | |
Property | | Location | | Rentable Square Footage | | Transaction Date | | Sale Price(1) (in thousands) |
2017 | | | | | | | | |
Key Center Tower & Marriott | | Cleveland, OH | | 1,326,000 |
| | January 31, 2017 | | $ | 267,500 |
|
Houston Properties Sale: | | | | 1,187,000 |
| | January 6, 2017 | | $ | 272,000 |
|
5 Houston Center | | Houston, TX | | 581,000 |
| | | | |
Energy Center I | | Houston, TX | | 332,000 |
| | | | |
515 Post Oak | | Houston, TX | | 274,000 |
| | | | |
2016 | | | | | | | | |
SanTan Corporate Center | | Phoenix, AZ | | 267,000 |
| | December 15, 2016 | | $ | 58,500 |
|
Sterling Commerce | | Dallas, TX | | 310,000 |
| | November 30, 2016 | | $ | 51,000 |
|
9127 South Jamaica Street | | Denver, CO | | 108,000 |
| | October 12, 2016 | | $ | 19,500 |
|
80 Park Plaza | | Newark, NJ | | 961,000 |
| | September 30, 2016 | | $ | 174,500 |
|
9189, 9191 & 9193 South Jamaica Street | | Denver, CO | | 370,000 |
| | September 22, 2016 | | $ | 122,000 |
|
800 North Frederick | | Suburban MD | | 393,000 |
| | July 8, 2016 | | $ | 48,000 |
|
100 East Pratt | | Baltimore, MD | | 653,000 |
| | March 31, 2016 | | $ | 187,000 |
|
| |
(1) | Exclusive of transaction costs and purchase price adjustments.adjustments |
|
| | | | | | | | | | | |
Recent Dispositions | | | | | | | | |
Property | | Location | | Rentable Square Footage | | Transaction Date | | Sale Price(1) (in thousands) |
2016 | | | | | | | | |
9127 South Jamaica Street | | Denver, CO | | 108,000 |
| | October 12, 2016 | | $ | 19,500 |
|
80 Park Plaza | | Newark, NJ | | 961,000 |
| | September 30, 2016 | | $ | 174,500 |
|
9189, 9191 & 9193 South Jamaica Street | | Denver, CO | | 370,000 |
| | September 22, 2016 | | $ | 122,000 |
|
800 North Frederick | | Suburban MD | | 393,000 |
| | July 8, 2016 | | $ | 48,000 |
|
100 East Pratt | | Baltimore, MD | | 653,000 |
| | March 31, 2016 | | $ | 187,000 |
|
2015 | | | | | | | | |
1881 Campus Commons | | Reston, VA | | 244,000 |
| | December 10, 2015 | | $ | 65,000 |
|
11 Property Sale: | | | | 2,856,000 |
| | July 1, 2015 | | $ | 433,250 |
|
170 Park Avenue | | Northern NJ | | 145,000 |
| | | | |
180 Park Avenue | | Northern NJ | | 224,000 |
| | | | |
1580 West Nursery Road | | Baltimore, MD | | 315,000 |
| | | | |
Acxiom Buildings | | Chicago, IL | | 322,000 |
| | | | |
Highland Landmark III | | Chicago, IL | | 273,000 |
| | | | |
The Corridors III | | Chicago, IL | | 222,000 |
| | | | |
215 Diehl Road | | Chicago, IL | | 162,000 |
| | | | |
544 Lakeview | | Chicago, IL | | 139,000 |
| | | | |
Bannockburn Lake III | | Chicago, IL | | 106,000 |
| | | | |
Robbins Road | | Boston, MA | | 458,000 |
| | | | |
550 King Street | | Boston, MA | | 490,000 |
| | | | |
| |
(1)
| Exclusive of transaction costs and purchase price adjustments. |
|
| | | | | | | | | | | | | |
Joint Venture | | | | | | | | | | |
Property Contributed to Joint Venture | | Location | | % Sold / Retained | | Rentable Square Footage | | Closing Date | | Contributed Value |
2015 | | | | | | | | | | |
Market Square Buildings | | Washington, D.C. | | 49%/51% | | 698,000 |
| | October 28, 2015 | | $ | 595,000 |
|
Comparison of the three months ended SeptemberThree Months Ended June 30, 20162017 with the three months ended SeptemberThree Months Ended June 30, 20152016
Rental income was $87.6$67.1 million for the three months ended SeptemberJune 30, 2016,2017, which represents a decrease as compared with $107.0$93.6 million for the three months ended SeptemberJune 30, 2015.2016. The decrease is primarily due to transferring the Market Square Buildings to a joint venture ($8.7 million); dispositions ($8.1 million); and vacancy at our 222 East 41st Street property ($5.8 million) as the full building is being prepared for NYU's Langone Medical lease to commence in the fourth quarter of 2016, partially offset by additional rental income from the acquisition of the 229 West 43rd Street Building in August 2015 ($3.226.2 million). We expect future rental income to fluctuate based on recent and future investing and leasing acquisition, and disposition activity.activities.
Tenant reimbursements and property operating costs were $17.1$7.0 million and $39.1$21.8 million, respectively, for the three months ended SeptemberJune 30, 2016,2017, which reflects a proportional decreasecorresponding decreases as compared with $22.6$18.7 million and $46.5$40.2 million, respectively, for the three months ended SeptemberJune 30, 2015. The decrease in tenant reimbursements is due to the transfer of the Market Square Buildings to a joint venture ($2.2 million); dispositions ($2.0 million); and vacancy at our 222 East 41st Street property ($1.4 million) as the full building is being prepared for NYU's Langone Medical lease to commence in the fourth quarter of 2016, partially offset by additional tenant reimbursements from the acquisition of the 229 West 43rd Street Building ($1.0 million).2016. The decrease in property operating costs is alsoprimarily due to the transfer of the Market Square Buildings to a joint venturedispositions ($5.015.5 million) and dispositionsthe new net lease at 222 East 41st Street ($3.3 million), partially offset by additional property operating costs from. The decrease in tenant reimbursements is primarily due to dispositions ($9.1 million) and the acquisition of the 229 West 43rdnew net lease at 222 East 41st Street Building ($1.7 million). Tenant reimbursements and property operating costs are expected to fluctuate with leasing activity and changes in our portfolio.
Hotel income, net of hotel operating costs, was $1.3$1.5 million for the three months ended SeptemberJune 30, 2016,2016. The Key Center Marriott was sold on January 31, 2017.
Other property income was $0.8 million for the three months ended June 30, 2017, which represents a decrease as compared with $1.6$9.1 million for the three months ended SeptemberJune 30, 2015,2016, primarily due to earning an early termination fee of $6.2 million at 222 East 41st Street in June 2016. The terminated lease was replaced with a higher level of occupancy and corporate events at the hotel in the third quarter of 2015. The Key Center Marriott is under a firm sales contract, expected to closefull-building lease, which commenced in the fourth quarter of 2016.
Other property operating income was $2.3is expected to fluctuate in the future, based on additional lease restructuring activities and as a result of providing asset management services to the San Francisco Joint Ventures (see Note 3, Real Estate Transactions, of the accompanying financial statements).
Asset and property management fees remained stable at $0.3 million for the three months ended SeptemberJune 30, 2016,2017 and June 30, 2016. Future asset and property management fees are expected to remain stable in the near term, and may increase as a result of future investing activity.
Depreciation was $20.4 million for the three months ended June 30, 2017, which represents a decrease as compared with $28.5 million for the three months ended June 30, 2016. The decrease is primarily due to dispositions ($7.3 million). Depreciation is expected to fluctuate based on recent and future investing activity.
Amortization was $8.2 million for the three months ended June 30, 2017, which represents a decrease as compared with $14.9 million for the three months ended June 30, 2016. The decrease is primarily due to dispositions ($2.1 million) and intangibles written off due to the early termination or expiration of leases ($4.1 million). We expect future amortization to fluctuate, based on recent and future investing activity.
General and administrative expenses were $9.2 million for the three months ended June 30, 2017, which represents an increase as compared with $1.1$7.8 million for the three months ended September June 30, 2015,2016, primarily due to an early termination atvesting under our 222 East 41st Street propertystock-based incentive compensation plan ($0.61.1 million) and management fees earned from the Market Square Joint Venture in 2016 ($0.6 million), as described in Note 4, Unconsolidated Joint Venture. The terminated space at our 222 East 41st Street property has been relet in a full-building lease, expected to commence later in 2016. Future other property income is expected to fluctuate, primarily as a result of lease restructuring and termination activities.
Asset and property management fees were $0.4 million for the three months ended September 30, 2016, which represents a decrease as compared with $0.5 million for the three months ended September 30, 2015, primarily due to transferring the Market Square Buildings to a joint venture in the fourth quarter of 2015. Future asset and property management fees are expected to fluctuate primarily based on future acquisition and disposition activity.
Depreciation was $26.8 million for the three months ended September 30, 2016, which represents a decrease as compared with $32.4 million for the three months ended September 30, 2015, primarily due to transferring the Market Square Buildings to a joint venture ($3.4 million) and dispositions ($3.1 million), partially offset by additional depreciation from the acquisition of the 229 West 43rd Street Building in August 2015 ($0.7 million). Excluding the impact of additional acquisitions and dispositions, depreciation is expected to increase in future periods due to ongoing capital improvements at our existing properties.
Amortization was $11.9 million for the three months ended September 30, 2016, which represents a decrease as compared with$20.3 million for the three months ended September 30, 2015. The decrease is primarily due to dispositions ($3.6 million); the expiration of leases ($2.4 million); the early termination of the lease at our 222 East 41st Street property ($1.3 million); and transferring the Market Square Buildings to a joint venture ($1.3 million), partially offset by additional amortization from the acquisition of the 229 West 43rd Street Building in August 2015 ($0.8 million). We expect future amortization to fluctuate primarily as a result of future leasing activity, acquisitions, and dispositions.
General and administrative expenses were $7.5 million for the three months ended September 30, 2016, which represents an increase as compared with $6.8 million for the three months ended September 30, 2015, primarily due to the continued development of our regional management and investment platform. We expect future general and administrative expenses to remain at similar levels over the near-term.
For the three months ended September 30, 2015, we incurred total acquisition expenses of $1.7 million in connection with acquiring the 229 West 43rd Street Building in August 2015. See Note 3, Real Estate Transactions, of the accompanying financial statements for details of this acquisitions. We expect future acquisition expenses to fluctuate with acquisition activity.near term.
Interest expense was $17.1$14.5 million for the three months ended SeptemberJune 30, 2016,2017, which represents a decrease as compared with $22.0$17.4 million for the three months ended SeptemberJune 30, 2015,2016, primarily due to transferring the Market Square mortgage note to
a joint venturecredit borrowings in the prior period ($4.1 million); the repayment of mortgage notes ($0.7 million); and a bridge loan outstanding during the third quarter of 2015 ($0.71.0 million), partially reduced byand bond interest savings resulting from the impactissuance of the 2026 Bonds Payable and redemption of the 2018 Bonds Payable in 2016 ($0.60.5 million). We expect interest expense to continue to decrease slightly in the near-term as disposition proceeds are useddue to reduce borrowingsthe $150 Million Term Loan amendment, which results in a lower effective interest rate, and to fluctuate based on our Revolving Credit Facility.future acquisition activities.
Interest and other income was stable at$2.5 million for the three months ended June 30, 2017, which represents an increase compared with $1.8 million for the three months ended SeptemberJune 30, 2016 and 2015. Interest2016. The increase is due to interest income is expected to remain at comparable levelsearned on additional cash deposits held in future periods, as the2017 ($0.6 million). The majority of this income is earned on investments in development authority bonds with a remaining term of approximately 5.34.5 years as of SeptemberJune 30, 2016.2017 ($1.8 million for both the three months ended June 30, 2017 and June 30, 2016). Interest income earned on development authority bonds is entirely offset by interest expense incurred on the corresponding capital leases. Interest income is expected to remain at similar levels until we reinvest cash on hand.
We recognized a loss on interest rate swapsearly extinguishment of $1.1debt of $0.1 million for the three months ended SeptemberJune 30, 2015, related to the 333 Market Street Building mortgage note, which was repaid in June 2015. We do not anticipate gains and losses on interest rate swaps in the near-term, as our only interest rate swap is accounted for as a hedge; thus, changes in the market value are recorded to other comprehensive income.
We recognized a loss on early extinguishment of debt of $18.9 million and $2.7 million for the three months ended September 30, 2016 and 2015, respectively.2016. In SeptemberApril 2016, we repaid our 2018 Bonds Payable 1.6 yearsthe $119.0 million remaining balance on a bridge loan approximately three months early, using proceeds from the 2026 Bonds Payable, resultingwhich resulted in an early redemption premium of $17.9 million and the write-off of related deferred financing costs. The 2015 loss was primarily due to a prepayment premium to settle the 215 Diehl Road building mortgage note in connection with selling the property in the 11 Property Sale. We expect future gains or losses on early extinguishments of debt to fluctuate with financing activities.
We recognized a lossLoss from the unconsolidated joint venture of $1.9venture was relatively stable at $1.8 million and $2.0 million for the three months ended SeptemberJune 30, 2017 and June 30, 2016, as real estate operating income from the Market Square Buildings was reduced by interest incurred on the property's $325 million mortgage note.respectively. Future income or loss from unconsolidated joint venture willmay fluctuate withas a result of future investing activities and leasing and other operating activities at the Market Square Buildings.
Net Income
Net income was $36.9$1.1 million, or $0.30$0.01 per basic and diluted share, for the three months ended SeptemberJune 30, 2016,2017, which represents an increasea decrease as compared with $20.1$13.3 million, or $0.16$0.11 per basic and diluted share, for the three months endedSeptember June 30, 2015.2016. The increasedecrease is due to additional quarter-over-quarter gains on sales of real estatelost income from sold properties ($30.210.2 million) and the lease termination income earned in June 2016 ($6.2 million), partially offset by additional loss on early extinguishmentinterest savings as a result of debt repayments ($16.23.0 million) related to replacing our $250.0 million 2018 unsecured bonds payable at 5.875% with $350.0 million of 2026 unsecured bonds payable at 3.650%, in the third quarter of 2016. See. See the "Supplemental Performance Measures" section below for our same storesame-store results compared with the prior year. We expect future earnings to fluctuate as a result of leasing activity at our existing properties our planned near-term dispositions, and acquisitioninvesting activity.
Comparison of the nine monthsSix Months ended SeptemberJune 30, 20162017 with the nine months ended SeptemberSix Months Ended June 30, 20152016
Rental income was $280.7$138.3 million for the ninesix months ended SeptemberJune 30, 2016,2017, which representsrepresents a decrease as compared with $332.7$193.2 million for the threesix months ended SeptemberJune 30, 2015.2016. The decrease is primarily due to dispositions ($38.4 million); transferring the Market Square Buildings to a joint venture ($28.3 million); and vacancy at our 222 East 41st Street property ($5.7 million) as the full building is being prepared for NYU's Langone Medical lease to commence in the fourth quarter of 2016, partially offset by additional rental income from the acquisition of the 229 West 43rd Street Building in August 2015 ($19.952.9 million). We expect future rental income to fluctuate based on recent and future investing and leasing acquisition, and disposition activity.
Tenant reimbursements and property operating costs were $55.6were $15.6 million and $120.7$45.9 million, respectively, for the ninesix months ended SeptemberJune 30, 2016,2017, which reflects a proportional decrease ascorresponding decreases as compared with $77.4$38.5 million and $144.4$81.6 million, respectively,respectively, for the ninesix months ended SeptemberJune 30, 2015. The decrease in tenant reimbursements is due to dispositions ($11.5 million) and the transfer of the Market Square Buildings to a joint venture ($8.6 million), partially offset by additional tenant reimbursements from the acquisition of the 229 West 43rd Street Building ($2.9 million).2016. The decrease in property operating costs is alsoprimarily due to dispositions ($16.331.0 million) and the transfer ofnew net lease at 222 East 41st Street ($6.0 million). The decrease in tenant reimbursements is primarily due to dispositions ($19.4 million) and the Market Square Buildings to a joint venturenew net lease at 222 East 41st Street ($14.9 million), partially offset by additional property operating costs from the acquisition of the 229 West 43rd Street Building ($6.92.8 million). Tenant reimbursementsreimbursements and property operating costs are expected to fluctuate with leasing activity and changes in our portfolio.
Hotel income, net of hotel operating costs, was $3.2$(0.7) million for the ninesix months ended SeptemberJune 30, 2016,2017, which represents a decrease as compared with $3.8$1.8 million for the ninesix months ended SeptemberJune 30, 2015, primarily2016, due to a higher levelthe sale of group bookings and meetings at the hotel in 2015. The Key Center Marriott is under a firm sales contract, expected to close in the fourth quarter of 2016.on January 31, 2017.
Other property incomeincome was $14.0 million for the nine months ended September 30, 2016, which represents an increase as compared with$4.4$1.8 million for the nine months ended September 30, 2015, primarily due to an early termination at our 222 East 41st Street property ($6.2 million) and management fees earned from the Market Square Joint Venture in 2016 ($1.9 million), as described in Note 4, Unconsolidated Joint Venture. The terminated space has been relet in a full-building lease expected to commence later in 2016. Future other property income is expected to fluctuate, primarily as a result of lease restructuring and termination activities.
Asset and property management fees were $1.1 million for the ninesix months ended SeptemberJune 30, 2016,2017, which represents a decrease as compared with $1.4$11.7 million for the ninesix months ended SeptemberJune 30, 2015,2016, primarily due to transferring the Market Square Buildings toearning an early termination fee of $6.2 million at 222 East 41st Street in June 2016 and $2.8 million for other lease terminations. The terminated lease at 222 East 41st Street was replaced with a joint venturefull-building lease, which commenced in the fourth quarter of 2015. Future asset and2016. Other property management fees areoperating income is expected to fluctuate within the future acquisitionbased on additional lease restructuring activities, and disposition activity.
Depreciation was $84.5 million for the nine months ended September 30, 2016, which represents a decrease as compared with $100.3 million for the nine months ended September 30, 2015, primarily due to dispositions ($12.8 million) and transferring the Market Square Buildings to a joint venture ($10.6 million), partially offset by additional depreciation from the acquisition of the 229 West 43rd Street Building in August 2015 ($5.4 million). Excluding the impact of additional acquisitions and dispositions, depreciation is expected to increase in future periods due to ongoing capital improvements at our existing properties.
Amortization was $42.9 million for the nine months ended September 30, 2016, which represents a decrease as compared with $67.2 million for the nine months endedSeptember 30, 2015. The decrease is primarily due to dispositions ($13.5 million); the expiration of leases ($8.1 million); and transferring the Market Square Buildings to a joint venture ($5.6 million); partially offset by additional amortization from the acquisition of the 229 West 43rd Street Building in August 2015 ($3.5 million). We expect future amortization to fluctuate primarily as a result of future leasing activity, acquisitions, and dispositions.
General and administrative expenses were $25.7 million forproviding asset management services to the nine months ended September 30, 2016, which represents an increase as compared with $21.9 million for the nine months ended September 30, 2015. The increase is due to costs incurred to develop our regional management and investment platform ($3.1 million) and bad debt expenses ($0.5 million). We expect future general and administrative expenses to remain stable over the near-term.
For the nine months ended September 30, 2015, we incurred total acquisition expenses of $3.7 million in connection with acquiring three properties in January 2015 and the 229 West 43rd Street Building in August 2015. SeeSan Francisco Joint Ventures (see Note 3, Real Estate Transactions, of the accompanying financial statements for details of these acquisitions. We expect future acquisition expenses to fluctuate with acquisition activity.statements).
Interest expense was $52.4Asset and property management fees were $0.5 million for the ninesix months ended SeptemberJune 30, 2016,2017, which represents a decrease as compared with $66.3$0.7 million and June 30, 2016, due to dispositions ($0.2 million). Future asset and property management fees are expected to remain stable in the near-term and may increase as a result of future investing activity.
Depreciation was $42.0 million for the ninesix months ended SeptemberJune 30, 2015,2017, which represents a decrease as compared with $57.7 million for the six months ended June 30, 2016. The decrease is primarily due to transferringdispositions ($15.5 million). Depreciation is expected to fluctuate based on recent and future investing activity.
Amortization was $17.6 million for the Market Squaresix months ended June 30, 2017, which represents a decrease as compared with $31.0 million for the six months ended June 30, 2016. The decrease is primarily due to dispositions ($5.9 million) and intangibles written off due to the early termination or expiration of leases ($6.6 million). We expect future amortization to fluctuate based on recent and future investing activity.
General and administrative expenses remained relatively stable at $18.0 million and $18.3 million for the six months ended June 30, 2017 and June 30, 2016, respectively. We expect future general and administrative expenses to remain at similar levels over the near term.
Interest expense was $29.6 million for the six months ended June 30, 2017, which represents a decrease as compared with $35.3 million for the six months ended June 30, 2016, primarily due to incurring interest on bridge loan and line of credit borrowings in the prior period ($2.5 million), mortgage note to a joint venturepayoffs ($12.4 million) and repaying mortgage loans ($4.72.1 million), partially offset by the net impact ofand bond interest savings resulting from the issuance of bonds in March 2015the 2026 Bonds Payable and August 2016redemption of the 2018 Bonds Payable ($3.51.0 million). We expect interest expense to continue to decrease slightly in the near-term as disposition proceeds are usednear term due to reduce borrowingsthe $150 Million Term Loan amendment, which results in a lower effective interest rate, and to fluctuate based on our Revolving Credit Facility.future acquisition activities.
Interest and other income was stable at $5.5 million and $5.4$4.8 million for the ninesix months ended SeptemberJune 30, 2016 and 2015, respectively. Interest2017, which represents an increase compared with $3.6 million for the six months ended June 30, 2016. The increase is due to interest income is expected to remain at comparable levels in future periods, as theearned on cash deposits ($1.1 million). The majority of this income is earned on investments in development authority bonds with a remaining term of approximately 5.3approximately 4.5 years as of SeptemberJune 30, 2016.2017 ($3.6 million for both the six months ended June 30, 2017 and June 30, 2016). Interest income earned on development authority bonds is entirely offset by interest expense incurred on the correspondingcorresponding capital leases.
We recognized a loss Interest income is expected to remain at similar levels until we reinvest cash on interest rate swaps of $1.1 million for the nine months ended September 30, 2015, related to the 333 Market Street Building mortgage note, which was repaid in June 2015. We do not anticipate gains and losses on interest rate swaps in the near-term, as our only interest rate swap is accounted for as a hedge; thus, changes in the market value are recorded to other comprehensive income.hand.
We recognized a loss on early extinguishment of debt of $19.0 millionof $45,000 and $3.1 million$92,000 for the ninesix months ended SeptemberJune 30, 2017 and June 30, 2016, and 2015, respectively. In March 2017, we repaid the 221 Main Street building mortgage note approximately two months early; and in April 2016, we repaid the $119.0 million remaining balance on a bridge loan used to finance a portion of the acquisition of the 229 West 43rd Street Building approximately three months early, and in September 2016, we repaid our 2018 Bonds Payable 1.6 years early, using proceeds from the 2026 Bonds Payable. In March 2015, we repaid a bridge loan used to finance acquisitions in Januaryearly. Both of 2015 approximately four months early. The bond pay off in 2016 resulted in an early redemption premium of $17.9 million, and all of thethese early repayments resulted in the write-off of related deferred financing costs. We expect future gains or losses on early extinguishments of debt to fluctuate with financing activities.
We recognized a loss from the unconsolidated joint ventureventure of $5.4$3.7 million and $3.5 million for the ninesix months ended SeptemberJune 30, 2017 and June 30, 2016, as real estate operating income from the Market Square Buildings was reduced by interest incurred on the property's $325 million mortgage note.respectively. Future income or loss from unconsolidated joint venture willmay fluctuate with operating activityas a result of future investing activities and leasing at the Market Square Buildings.
We recognized a gain on sale of real estate assets of $73.2 million for the six months ended June 30, 2017, and a loss on sale of real estate assets of $0.3 million for the six months ended June 30, 2016. During the first three months of 2017, we sold three properties in Houston, Texas, and the Key Center Tower and Marriott in Cleveland, Ohio. The loss in 2016 results from post-closing adjustments and true ups for prior period transactions. See Note 3, Real Estate Transactions, for details of these transactions. Future gains on sale of real estate assets will fluctuate with future disposition activity.
Net income was $75.9 million, or $0.62 per basic and diluted share, for the six months ended June 30, 2017, which represents an increase as compared with $20.0 million, or $0.16 per basic and diluted share, for the six months ended June 30, 2016. The increase is due to gains on sale of real estate ($73.2 million) and interest savings as a result of debt repayments ($5.6 million), partially offset by lost income from sold properties ($20.8 million) and lease termination income earned in June 2016 ($6.2 million). See the "Supplemental Performance Measures" section below for our same-store results compared with the prior year. We expect future earnings to fluctuate as a result of leasing activity at our existing properties and investing activity.
Net IncomeNOI by Geographic Segment
We consider geographic location when evaluating our portfolio composition, and in assessing the ongoing operations and performance of our properties. As of June 30, 2017, we aggregated our properties into the following geographic segments: New York, San Francisco, Atlanta, Washington, D.C., Boston, Los Angeles, and all other office markets. All other office markets consists of properties in low-barrier-to-entry geographic locations in which we do not plan to make further investments.
The following table presents NOI by geographic segment (in thousands):
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
New York | $ | 16,259 |
| | $ | 24,086 |
| | $ | 33,875 |
| | $ | 41,135 |
|
San Francisco | 19,701 |
| | 19,381 |
| | 39,567 |
| | 40,452 |
|
Atlanta | 8,285 |
| | 8,226 |
| | 16,578 |
| | 16,507 |
|
Washington, D.C. | 3,565 |
| | 4,555 |
| | 6,843 |
| | 9,671 |
|
Boston | 1,192 |
| | 1,463 |
| | 2,601 |
| | 2,686 |
|
Los Angeles | 1,202 |
| | 1,192 |
| | 2,284 |
| | 2,442 |
|
All other office markets | 4,597 |
| | 23,605 |
| | 11,527 |
| | 52,388 |
|
Total office segments | 54,801 |
| | 82,508 |
| | 113,275 |
| | 165,281 |
|
Hotel | (14 | ) | | 1,523 |
| | (890 | ) | | 1,870 |
|
Corporate | 395 |
| | 517 |
| | 847 |
| | 1,066 |
|
Total | $ | 55,182 |
| | $ | 84,548 |
| | $ | 113,232 |
| | $ | 168,217 |
|
New York
Net income waPrior-year NOI was positively impacted by an early termination fee earned at 222 East 41s st$56.9 million Street in June 2016. The terminated lease was replaced with a full-building lease, which commenced in the fourth quarter of 2016. New York NOI is expected to increase in the near-term with the acquisition of a 49.5% interest in 114 5th Avenue, as described in Note 3, Real Estate Transactions, oof the accompanying, consolidated financial statements.r $0.46 per basic
Washington, D.C.
NOI has been impacted by a decrease in occupancy at 80 M Street and diluted share, forMarket Square. Washington, D.C. Over the nine months ended September 30, 2016, which represents annear term, Washington, D.C. NOI is expected to increase as compared with $34.5 million, or $0.28 per basic and diluted share, for the nine months ended September 30, 2015. The increase isprimarily due to additional year-over-year gains on sales of real estate ($29.9 million), partially offset by an net increase in interest expense andrecent leasing activity at 80 M Street.
All other financing costs, including amounts related to our interest in the Market Square Joint Venture ($8.2 million). See "Supplemental Performance Measures" section below for our same store results compared with the prior year period. We expect future earnings to fluctuateoffice markets
NOI has decreased significantly as a result of leasing activityselling 9 office properties between July 1, 2016 and January 31, 2017. We expect all other office markets NOI to further decrease in the near-term due to the expiration of the OfficeMax lease at 263 Shuman and the planned return of this property to the lender.
Hotel
NOI has decreased significantly as a result of the sale of the Key Center Marriott, our existing properties, our planned near-term dispositions, and acquisition activity.only hotel, on January 31, 2017.
Supplemental Performance Measures
In addition to net income, we measure the performance of the company using certain non-GAAP supplemental performance measures, including: (i) Funds From Operations ("FFO"), (ii) Net Operating Income ("NOI"), and (iii) Same Store Net Operating Income ("Same Store NOI"). These non-GAAP metrics are commonly used by industry analysts and investors as supplemental operation performance measures of REITs and are viewed by management to be useful indicators of operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors have considered presentation of operating results for real estate companies using historical cost accounting alone to be insufficient. Management believes that the use of FFO, NOI, and Same Store NOI, combined with net income, improves the understanding of operating results of REITs among the investing public and makes comparisons of REIT operating results more meaningful.
Net income is the most comparable GAAP measure to FFO, NOI, and Same Store NOI. Each of these supplemental performance measures exclude expenses that materially impact our overall results of operations and, therefore, should not be considered as a
substitute for net income, income before income taxes, or any other measures derived in accordance with GAAP. Furthermore, these metrics may not be comparable to other similarly titled measures used by other companies.
Funds From Operations
FFO is a non-GAAP measure used by many investors and analysts who follow the real estate industry to measure the performance of an equity REIT. We consider FFO a useful measure of our performance because it principally adjusts for the effects of GAAP depreciation and amortization of real estate assets, which assumes that the value of real estate diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a meaningful supplemental measure of our performance. We believe that the use of FFO, combined with the required GAAP presentations, is beneficial in improving our investors' understanding of our operating results and allowing for comparisons among other companies who define FFO as we do.
FFO, as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), represents net income (computed in accordance with GAAP), excluding gains (losses)or losses on sales of real estate and impairments of real estate assets, plus real estate-related depreciation and amortization and, after adjustments for unconsolidated partnerships and joint ventures, for both continuing and discontinued operations. We compute FFO in accordance with NAREIT's definition, which may differ from the methodology for calculating FFO, or similarly titled measures, used by other companies, and this may not be comparable to those presentations.
FFO doesis not representreduced for the amounts available for management's discretionary use because of needed to fund capital replacementreplacements or expansion,expansions, debt service obligations, or other commitments and uncertainties, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions. Our presentation of FFO should not be considered as an alternative to net income (computed in accordance with GAAP) or as an indicator of financial performance.
Reconciliations of netNet income reconciles to FFO as follows (in thousands):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
Reconciliation of Net Income to FFO: | | | | | | | | |
Net income | $ | 36,898 |
| | $ | 20,143 |
| | $ | 56,881 |
| | $ | 34,450 |
| $ | 1,133 |
| | $ | 13,286 |
| | $ | 75,855 |
| | $ | 19,983 |
|
Adjustments: | | | | | | | | | | | | | | |
Depreciation of real estate assets | 26,778 |
| | 32,441 |
| | 84,517 |
| | 100,261 |
| 20,423 |
| | 28,450 |
| | 42,028 |
| | 57,739 |
|
Amortization of lease-related costs | 11,895 |
| | 20,276 |
| | 42,902 |
| | 67,233 |
| 8,191 |
| | 14,932 |
| | 17,648 |
| | 31,007 |
|
Depreciation and amortization included in loss from unconsolidated joint venture(1) | 2,123 |
| | — |
| | 6,670 |
| | — |
| 2,123 |
| | 2,077 |
| | 4,221 |
| | 4,547 |
|
Gains on sales of real estate assets | (50,412 | ) | | (20,182 | ) | | (50,083 | ) | | (20,182 | ) | |
Total Funds From Operations adjustments | (9,616 | ) | | 32,535 |
|
| 84,006 |
|
| 147,312 |
| |
Loss (gains) on sales of real estate assets | | — |
| | 19 |
| | (73,153 | ) | | 329 |
|
Total funds from operations adjustments | | 30,737 |
| | 45,478 |
|
| (9,256 | ) |
| 93,622 |
|
NAREIT FFO available to common stockholders | $ | 27,282 |
| | $ | 52,678 |
|
| $ | 140,887 |
|
| $ | 181,762 |
| $ | 31,870 |
| | $ | 58,764 |
|
| $ | 66,599 |
|
| $ | 113,605 |
|
| |
(1) | Reflects 51% of depreciation and amortization for the Market Square Joint Venture, inbuildings, which we own a 51% interest.through an unconsolidated joint venture. |
Net Operating Income
As set forth below, NOI is calculated by deducting property operating costs from rental and other property revenues for continuing operations. As a performance metric consisting of only revenues and expenses directly related to ongoing real estate rental operations, which have been or will be settled in cash, NOI is narrower in scope than FFO.
NOI, as we calculate it, may not be directly comparable to similarly titled, but differently calculated, measures for other REITs. We believe that NOI is another useful supplemental performance measure, as it is an input in many REIT valuation models, and it provides a means by which to evaluate the performance of the properties.
The major factors influencing our NOI are property acquisitions and dispositions, occupancy levels, rental rate increases or decreases, and the recoverability of operating expenses.
Same Store Net Operating Income
We also evaluate the performance of our properties, on a "same store" basis, using a metric referred to as Same Store NOI. We view Same Store NOI as a useful supplemental performance measure because it improves comparability between periods by eliminating the near-term effects of changes in the composition of our portfolio.acquisitions and dispositions. On an individual property basis, Same Store NOI is computed in a consistentthe same manner as NOI.NOI (as described in the preceding section). For the periods presented, we have defined our same storesame-store portfolio as those properties that have been continuously owned and operatingoperated since JulyApril 1, 2015.2016 (the first day of the first period presented). NOI and Same Store NOI are calculated as follows for the three months ended SeptemberJune 30, 20162017 and 20152016 (in thousands):
|
| | | | | | | |
| Three Months Ended September 30, |
| 2016 | | 2015 |
Revenues: | | | |
Rental income | $ | 73,824 |
| | $ | 77,467 |
|
Tenant reimbursements | 11,735 |
| | 16,301 |
|
Hotel income | 6,270 |
| | 6,941 |
|
Other property income | 814 |
| | 217 |
|
Lease termination income | 1,518 |
| | 637 |
|
Total revenues | 94,161 |
| | 101,563 |
|
Operating expenses: | | | |
Property operating costs | (32,417 | ) | | (33,202 | ) |
Hotel operating costs | (4,946 | ) | | (5,331 | ) |
Total operating expenses | (37,363 | ) | | (38,533 | ) |
Same Store NOI - wholly-owned properties(1)(2) | $ | 56,798 |
| | $ | 63,030 |
|
Same Store NOI - 51% of Market Square Buildings(3) | $ | 2,301 |
| | $ | 2,948 |
|
| | | |
NOI from acquisitions(4) | 6,909 |
| | 4,330 |
|
NOI from dispositions(5) | 5,143 |
| | 15,070 |
|
NOI | $ | 71,151 |
| | $ | 85,378 |
|
|
| | | | | | | |
| Three Months Ended June 30, |
| 2017 | | 2016 |
Revenues: | | | |
Rental income | $ | 67,120 |
| | $ | 67,379 |
|
Tenant reimbursements | 7,038 |
| | 9,687 |
|
Other property income | 734 |
| | 673 |
|
Lease termination income | (47 | ) | | 8,085 |
|
Total revenues | 74,845 |
| | 85,824 |
|
Property operating expenses | (21,987 | ) | | (23,764 | ) |
Same Store NOI – wholly owned properties(1) | $ | 52,858 |
| | $ | 62,060 |
|
Same Store NOI – Market Square Buildings(2) | $ | 2,425 |
| | $ | 2,239 |
|
NOI from acquisitions(3) | — |
| | — |
|
NOI from dispositions(4) | (101 | ) | | 20,249 |
|
NOI | $ | 55,182 |
| | $ | 84,548 |
|
| |
(1) | Reflects NOI from properties that were wholly-ownedwholly owned for the entirety of the periods presented. |
| |
(2) | Same store NOI declined for the three months ended September 30, 2016, as compared to the same period in prior year, primarily due to leasing activity at 222 East 41st Street. In the second quarter of 2016, we terminated Jones Day’s lease, the majority tenant at 222 East 41st Street, and executed a new lease with NYU Langone Medical for the entire property. As a result, we earned a lease termination fee of $6.2 million from Jones Day in the second quarter in lieu of the rent due for third quarter of 2016. The NYU lease commenced in the fourth quarter of 2016. |
| |
(3)
| Reflects NOI fromfor 51% of the Market Square Buildings, for all periods presented. On October 28, 2015,in which we transferred the Market Square Buildings and the $325.0 million mortgage note to a joint venture, and sold a 49%own an interest in thethrough an unconsolidated joint venture. Our interest inThe NOI fromfor the Market Square Buildings is included in loss from unconsolidated joint venture for the third quarter of 2016, and in our accompanying consolidated resultsstatements of operations for the third quarter of 2015.operations. |
| |
(3) | No properties have been acquired since April 1, 2016. |
| |
(4) | Reflects activity for the following property acquired since July 1, 2015, for all periods presented: 229 West 43rd Street
|
| |
(5)
| Reflects activity for the following properties sold since JulyApril 1, 2015,2016, for all periods presented: Key Center Tower & Key Center Marriott, 5 Houston Center, Energy Center I, 515 Post Oak, SanTan Corporate Center, Sterling Commerce, 80 Park Plaza, 9127, 9189, 9191 & 9193 South Jamaica Street, and 800 North Frederick, 100 East Pratt, 1881 Campus Commons, 49% of the Market Square Buildings, 170 Park Avenue, 180 Park Avenue, 1580 West Nursery Road, Acxiom, Highland Landmark III, The Corridors III, 215 Diehl Road, 544 Lakeview, Bannockburn Lake III, 550 King Street, and Robbins Road.Frederick. |
Same store NOI decreased for the three months ended June 30, 2017, as compared with the three months ended June 30, 2016, due to a $6.2 million early termination fee earned at 222 East 41st Street in June 2016, and lease expirations at 315 Park Avenue South and 80 M Street. The terminated lease at 222 East 41st Street has been replaced with a full-building lease, which commenced in the fourth quarter of 2016, and most of the expired space at 80 M Street has been leased to WeWork, with a lease commencing in July 2017. The decline in same store NOI is expected to reverse and increase as a result of recent leasing activity.
A reconciliation of Net IncomeGAAP net income to NOI and Same Store NOI is presented below (in thousands):
| | | Three Months Ended September 30, | Three Months Ended June 30, |
| 2016 | | 2015 | 2017 | | 2016 |
Net income | $ | 36,898 |
| | $ | 20,143 |
| $ | 1,133 |
| | $ | 13,286 |
|
Depreciation | | 20,423 |
| | 28,450 |
|
Amortization | | 8,191 |
| | 14,932 |
|
General and administrative | | 9,201 |
| | 7,761 |
|
Net interest expense | 17,116 |
| | 22,004 |
| 13,785 |
| | 17,372 |
|
Interest income from development authority bonds | (1,800 | ) | | (1,800 | ) | (1,800 | ) | | (1,800 | ) |
Loss on early extinguishment of debt | | — |
| | 92 |
|
Income tax expense | 65 |
| | 245 |
| 7 |
| | 245 |
|
Depreciation | 26,778 |
| | 32,441 |
| |
Amortization | 11,895 |
| | 20,276 |
| |
Real estate acquisition costs | — |
| | 1,680 |
| |
Gain on sale of real estate assets | (50,412 | ) | | (20,182 | ) | |
Loss on early extinguishment of debt | 18,905 |
| | 2,672 |
| |
General and administrative | 7,467 |
| | 6,797 |
| |
Settlement of interest rate swaps | — |
| | 1,102 |
| |
Adjustments include in loss from unconsolidated joint venture | 4,239 |
| | — |
| |
NOI | $ | 71,151 |
| | $ | 85,378 |
| |
Same Store NOI - 51% of Market Square Buildings(1) | (2,301 | ) | | (2,948 | ) | |
Adjustments included in loss from unconsolidated joint venture | | 4,242 |
| | 4,191 |
|
Loss on sales of real estate assets | | — |
| | 19 |
|
NOI: | | $ | 55,182 |
| | $ | 84,548 |
|
Same Store NOI – Market Square Buildings(1) | | (2,425 | ) | | (2,239 | ) |
NOI from acquisitions(2) | (6,909 | ) | | (4,330 | ) | — |
| | — |
|
NOI from dispositions(3) | (5,143 | ) | | (15,070 | ) | 101 |
| | (20,249 | ) |
Same Store NOI - wholly-owned properties(4) | $ | 56,798 |
| | $ | 63,030 |
| |
Same Store NOI – wholly owned properties(4) | | $ | 52,858 |
| | $ | 62,060 |
|
| |
(1) | Reflects NOI fromfor 51% of the Market Square Buildings, for all periods presented. On October 28, 2015,in which we transferred the Market Square Buildings and the $325.0 million mortgage note to a joint venture, and sold a 49%own an interest in thethrough an unconsolidated joint venture. Our interest inThe NOI fromfor the Market Square Buildings is included in loss from unconsolidated joint venture for the third quarter of 2016, and in our accompanying consolidated resultsstatements of operations for the third quarter of 2015.operations. |
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(2) | Reflects activity for the following propertyNo properties have been acquired since JulyApril 1, 2015, for all periods presented: 229 West 43rd Street.2016. |
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(3) | Reflects activity for the following properties sold since JulyApril 1, 2015,2016, for all periods presented: Key Center Tower & Key Center Marriott, 5 Houston Center, Energy Center I, 515 Post Oak, SanTan Corporate Center, Sterling Commerce, 80 Park Plaza, 9127, 9189, 9191 & 9193 South Jamaica Street, and 800 North Frederick,100 East Pratt, 1881 Campus Commons, 49% of the Market Square Buildings, 170 Park Avenue, 180 Park Avenue, 1580 West Nursery Road, Acxiom, Highland Landmark III, The Corridors III, 215 Diehl Road, 544 Lakeview, Bannockburn Lake III, 550 King Street, and Robbins Road.Frederick. |
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(4) | Reflects NOI from properties that were wholly-ownedwholly owned for the entirety of the periods presented. |
Election as a REIT
We have elected to be taxed as a REIT under the Code and have operated as such beginning with our taxable year ended December 31, 2003. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our adjusted taxable income, as defined in the Code, to our stockholders, computed without regard to the dividends-paid deduction and by excluding our net capital gain. As a REIT, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income for that year and for the four years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially affect our net income and net cash available for distribution to our stockholders. However, we believe that we are organized and operate in such a manner as to qualify for treatment as a REIT for federal income tax purposes.
The TRS Entities are wholly owned subsidiaries of Columbia Property Trust and are organized as Delaware limited liability companies, and operate,companies. The TRS Entities, among other things, office propertiesprovide tenant services that we do not intend to hold long term andColumbia Property Trust, as a full-service hotel.REIT, cannot otherwise provide. We have elected to treat the TRS Entities as taxable REIT subsidiaries. We may perform certain additional, noncustomary services for tenants of our buildings through the TRS Entities; however, any earnings related to such services are subject to federal and state income taxes. In addition, for us to continue to qualify as a REIT, we must limit our investments in taxable REIT subsidiaries to 25% of the value of our total assets. Deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted rates expected to be in effect when the temporary differences reverse.
No provisions for federal income taxes have been made in our accompanying consolidated financial statements, other than the provisions relating to the TRS Entities, as we made distributions in excess of taxable income for the periods presented. We are
subject to certain state and local taxes related to property operations in certain locations, which have been provided for in our accompanying consolidated financial statements.
Inflation
We are exposed to inflation risk, as income from long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our tenant leases that are intended to protect us from, and mitigate the risk of, the impact of inflation. These provisions include rent steps, reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements on a per-square-foot basis, or, in some cases, annual reimbursement of operating expenses above a certain per-square-foot allowance. However, due to the long-term nature of the leases, the leases may not reset frequently enough to fully cover inflation.
Application of Critical Accounting Policies
There have been no material changes in our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015.2016.
Related-Party Transactions
During the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, we did not have any related party transactions, except as described in Note 4, Unconsolidated Joint Venture, of the accompanying financial statements.
Commitments and Contingencies
We are subject to certain commitments and contingencies with regard to certain transactions. Refer to Note 7, Commitments and Contingencies, of our accompanying consolidated financial statements for further explanation. Examples of such commitments and contingencies include:
structural repairs at one of our properties with estimated costs, net of recoveries, ranging from $15.0 million to $20.0 million;
guaranty of debt of an unconsolidated joint venture of $23.3$12.6 million;
obligations under operating leases;
obligations under capital leases;
commitments under existing lease agreements, including a commitment for $70.1 million in leasehold improvements related to a recently executed lease, which is expected to be paid during 2016 and 2017;agreements; and
litigation.
Subsequent Event
We have evaluated subsequent events in connection with the preparation of itsthe consolidated financial statements and notes thereto included in this report on Form 10-Q and noted the following item in addition to those disclosed elsewhere in this report:
Property Disposition
During October 2016, we closed on the sale of the 9127 South Jamaica Street building in Denver, Colorado,Allianz Joint Ventures as described in Note 3, Real Estate Transactions,of the accompanying consolidated financial statements.statements; and
Amendment of $150 Million Term Loan, as described in Note 5, Line of Credit and Notes Payable,of the accompanying consolidated financial statements.
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ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
As a result of certain of our debt facilities, we are exposed to interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flow, primarily through a low to moderate level of overall borrowings. However, we currently have a substantial amount of debt outstanding. We manage our ratio of fixed- to floating-rate debt with the objective of achieving a mix that we believe is appropriate in light of anticipated changes. We closely monitor interest rates and will continue to consider the sources and terms of our borrowing facilities to determine whether we have appropriately guarded ourselves against the risk of increasing interest rates in future periods.
Additionally, we have entered into interest rate swaps and may enter into other interest rate swaps, caps, or other arrangements to mitigate our interest rate risk on a related financial instrument. We do not currently enter into derivative or interest rate transactions for speculative purposes; however, certain of our derivatives may not qualify for hedge accounting treatment. All of our debt was entered into for other-than-trading purposes.
Our financial instruments consist of both fixed-rate and variable-rate debt. Our variable-rate borrowings consist of the Revolving Credit Facility, the $300 Million Term Loan, and the $150 Million Term Loan. However, only the Revolving Credit Facility and the $300 Million Term Loan bear interest at effectively variable rates, as the variable rate on the $150 Million Term Loan has been effectively fixed through the interest rate swap agreement described in the "Liquidity and Capital Resources" section of Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations.
As of SeptemberJune 30, 20162017, we had $99.0 million ofno outstanding borrowings under the Revolving Credit Facility, which was fully repaid on October 3, 2016, using a portion of the proceeds from the September 30, 2016 sale of the 80 Park Plaza building;Facility; $150.0 million outstanding on the $150 Million Term Loan; $300.0 million outstanding on the $300 Million Term Loan; $349.6 million in 2025 Bonds Payable outstanding; $348.7$348.8 million in 2026 Bonds Payable outstanding; and $276.0$198.8 million outstanding on fixed-rate, term mortgage loans. The weighted-average interest rate of all of our debt instruments was 3.42%3.57% as of SeptemberJune 30, 2016.2017.
Approximately $1,124.3$1,047.2 million of our total debt outstanding as of SeptemberJune 30, 2016,2017, is subject to fixed rates, either directly or when coupled with an interest rate swap agreement. As of SeptemberJune 30, 2016,2017, these balances incurred interest expense at an average interest rate of 3.94%3.93% and have expirations ranging from 2017 through 2026. A change in the market interest rate impacts the net financial instrument position of our fixed-rate debt portfolio; however, it has no impact on interest incurred or cash flows. A 1.0% change in interest rates would have a $3.0 million annual impact on our interest payments. The amounts outstanding on our Revolving Credit Facility in the future will largely depend upon future acquisition and disposition activity.
Our unconsolidated Market Square Joint Venture holds a $325 million mortgage note, which bears interest at 5.07%. Adjusting for 51% of the debt at the Market Square Joint Venture, in which we own a 51% interest,through an unconsolidated joint venture, our weighted-average interest rate is 3.58%3.74%.
We do not believe there is any exposure to increases in interest rates related to the capital lease obligations of $120.0 million at SeptemberJune 30, 2016,2017, as the obligations are at fixed interest rates.
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ITEM 4. | CONTROLS AND PROCEDURES |
Management's Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods in SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended SeptemberJune 30, 20162017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. | OTHER INFORMATION |
From time to time, we are party to legal proceedings, which arise in the ordinary course of our business. We are not currently involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations, liquidity, or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.
There have been no material changes from the risk factors disclosed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2015.2016.
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ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
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(a) | During the quarter ended SeptemberJune 30, 2016,2017, we did not sell any equity securities that were not registered under the Securities Act of 1933. |
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(c) | On September 4, 2015, our board of directors approved the Stock Repurchase Program, which provides for Columbia Property Trust to buy up to $200 million of our common stock over a two-year period, ending on September 4, 2017. |
During the quarter ended SeptemberJune 30, 2016,2017, we did not purchase or retire anyrepurchased and retired the following shares in accordance with the Stock Repurchase Program.Program, as described in Note 8, Equity.
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Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plan | | Maximum Approximate Dollar Value Available for Future Purchase(1) |
July 2016 | | — |
| | $ | — |
| | — |
| | $ | 158,683,331 |
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August 2016 | | — |
| | $ | — |
| | — |
| | $ | 158,683,331 |
|
September 2016 | | — |
| | $ | — |
| | — |
| | $ | 158,683,331 |
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Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plan | | Maximum Approximate Dollar Value Available for Future Purchase(1) |
April 2017 | | — |
| | $ | — |
| | — |
| | $ | 130,943,000 |
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May 2017 | | 1,200,000 |
| | $ | 21.956 |
| | 1,200,000 |
| | $ | 104,596,000 |
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June 2017 | | 51,670 |
| | $ | 21.735 |
| | 51,670 |
| | $ | 103,473,000 |
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(1) | Amounts available for future purchase relate only to our Stock Repurchase Program and represent the remainder of the $200 million authorized by our board of directors for share repurchases. |
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ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
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(a) | There have been no defaults with respect to any of our indebtedness. |
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ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
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(a) | During the thirdsecond quarter of 2016,2017, there was no information that was required to be disclosed in a report on Form 8-K that was not disclosed in a report on Form 8-K. |
On July 25, 2017, we amended the terms of the $150 Million Term Loan to reduce the current interest rate from 3.52% to 3.07% per annum. The amendment reduced the interest rate from LIBOR, plus an applicable margin ranging from 1.40% to 2.35%, to LIBOR, plus an applicable margin ranging from 0.90% to 1.75%. The maturity date, debt covenants, and other terms of the $150 Million Term Loan are unchanged. The new interest rate of 3.07% per annum is effectively fixed by an existing interest rate swap agreement designated as a cash flow hedge.
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(b) | There are no material changes to the procedures by which stockholders may recommend nominees to our board of directors since the filing of our most recent Schedule 14A. |
The exhibits required to be filed with this report are set forth onin the Exhibit Index to this quarterly report attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | COLUMBIA PROPERTY TRUST, INC. (Registrant) |
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Dated: | OctoberJuly 27, 20162017 | By: | /s/ JAMES A. FLEMING |
| | | James A. Fleming Executive Vice President and Chief Financial Officer |
EXHIBIT INDEX TO
THIRDSECOND QUARTER 20162017 FORM 10-Q OF
COLUMBIA PROPERTY TRUST, INC.
The following documents are filed as exhibits to this report. Exhibits that are not required for this report are omitted.
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Ex. | Description |
3.1 | Second Amended and Restated Articles of Incorporation as Amended by the First, Second, Third and Fourth Articles of Amendment and the Articles Supplementary (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 5, 2013). |
3.2 | Second Articles of Amendment (incorporated by reference to Exhibit 3.1 to the Company's currentCurrent Report on Form 8-K filed with the Commission on August 15, 2013). |
3.3 | Third Articles of Amendment (incorporated by reference to Exhibit 3.2 to the Company's currentCurrent Report on Form 8-K filed with the Commission on August 15, 2013). |
3.4 | Fourth Articles of Amendment (incorporated by reference to Exhibit 3.1 to the Company's currentCurrent Report on Form 8-K filed with the Commission on July 1, 2014). |
3.5 | Articles Supplementary (incorporated by reference to Exhibit 3.1 to the Company's currentCurrent Report on Form 8-K filed with the Commission on September 4, 2013). |
3.6 | Fifth Articles of Amendment (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on May 3, 2017). |
3.7 | Third Amended and Restated Bylaws, as amended (incorporated by reference to Exhibit 3.2 to the Company's Current Report on Form 8-K filed with the Commission on September 4, 2013)February 13, 2017). |
4.1 | Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates) (incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K filed with the Commission on March 1, 2013). |
4.2 | Indenture, dated March 12, 2015 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Commission on March 12, 2015). |
4.3 | SupplementSupplemental Indenture, dated March 12, 2015 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the Commission on March 12, 2015). |
4.4 | Form of 4.150% Senior Notes due 2025 (included in Exhibit 4.3). |
4.5 | Supplemental Indenture, dated August 12, 2016 (incorporated by reference to Exhibit 4.1 to the Company’sCompany's Current Report on Form 8-K filed with the Commission on August 12, 2016). |
4.6 | Form of 3.650% Senior Notes due 2026 (incorporated by reference to Exhibit 4.2 to the Company’sCompany's Current Report on Form 8-K filed with the Commission on August 12, 2016). |
10.1 | Columbia Property Trust, Inc. Amended and Restated 2013 Long-Term Incentive Plan (incorporated by reference to Appendix A to the Company's definitive Proxy Statement of Schedule 14A filed with the Commission on March 17, 2017). |
12.1* | Calculation of Earnings to Fixed Charges |
31.1* | Certification of the Principal Executive Officer of the Company, pursuant to Securities Exchange Act Rules 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* | Certification of the Principal Financial Officer of the Company, pursuant to Securities Exchange Act Rules 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1* | Certification of the Principal Executive Officer and Principal Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS* | XBRL Instance Document. |
101.SCH* | XBRL Taxonomy Extension Schema. |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase. |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase. |
101.LAB* | XBRL Taxonomy Extension Label Linkbase. |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase. |
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* | Filed herewith. |