Organization and Description of Business | 6 Months Ended |
Jun. 30, 2014 |
Accounting Policies [Abstract] | ' |
Organization and Description of Business | ' |
1. Organization and Description of Business |
City Office REIT, Inc. (the “Company”) was organized in the state of Maryland on November 26, 2013. On April 21, 2014, the Company completed its initial public offering (“IPO”) of shares of the Company’s common stock. The Company contributed the net proceeds of the IPO to City Office REIT Operating Partnership, L.P., a Maryland limited partnership (the “Operating Partnership”), in exchange for common units in the Operating Partnership. Both the Company and the Operating Partnership commenced operations upon completion of the IPO and certain related formation transactions (the “Formation Transactions”). |
The Company’s interest in the Operating Partnership entitles the Company to share in distributions from, and allocations of profits and losses of, the Operating Partnership in proportion to the Company’s percentage ownership of common units. As the sole general partner of the Operating Partnership, the Company has the exclusive power under the partnership agreement to manage and conduct the Operating Partnership’s business, subject to limited approval and voting rights of the limited partners. |
City Office REIT, Inc. Predecessor (the “Predecessor”) represents the combination of the six properties outlined below (the “Properties”). The Predecessor does not represent a legal entity. The Predecessor and its related assets and liabilities are under common control and were contributed to a newly formed Operating Partnership in connection with the “IPO” of the Company on April 21, 2014. |
The historical financial results in these financial statements for periods prior to April 21, 2014 relate to the Predecessor. The Predecessor is comprised of the following properties: |
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| • | | City Center: Property in St. Petersburg, Florida, acquired in December 2010. | | | | | | | | | |
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| • | | Central Fairwinds: Property in Orlando, Florida, acquired in May 2012. | | | | | | | | | |
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| • | | AmberGlen: Property in Portland, Oregon, acquired in December 2009. | | | | | | | | | |
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| • | | Washington Group Plaza: Property in downtown Boise, Idaho, acquired in June 2013. | | | | | | | | | |
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| • | | Corporate Parkway: Property in Allentown, Pennsylvania, acquired in May 2013. | | | | | | | | | |
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| • | | Cherry Creek: Property in Denver, Colorado, acquired in January 2014. | | | | | | | | | |
The Company intends to elect to be taxed and to operate in a manner that will allow it to qualify as a real estate investment trust (“REIT”) commencing with its taxable year ending December 31, 2014. Subject to qualification as a REIT, the Company will be permitted to deduct distributions paid to its stockholders, eliminating the U.S. federal taxation of income represented by such distributions at the Company level. REITs are subject to a number of organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to U.S. federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates. |
Pursuant to the Jumpstart Our Business Startups Act (the “JOBS Act”), the Company qualifies as an emerging growth company (“EGC”). An EGC may choose to take advantage of the extended private company transition period provided for complying with new or revised accounting standards that may be issued by the Financial Accounting Standards Board (“FASB”) or the Securities and Exchange Commission (the “SEC”). The Company has elected to opt out of such extended transition period. This election is irrevocable. |
Initial Public Offering and Formation Transactions |
The Company’s operations will be carried on primarily through the Operating Partnership and wholly owned subsidiaries of the Operating Partnership. Both the Company and the Operating Partnership commenced operations upon completion of the IPO and certain related formation transactions (the “Formation Transactions”). |
On April 21, 2014, the Company closed the IPO, pursuant to which it sold 5,800,000 shares of common stock to the public at a public offering price of $12.50 per share. The Company raised $72.5 million in gross proceeds, resulting in net proceeds to us of approximately $63.4 million after deducting approximately $5.1 million in underwriting discounts and approximately $4.0 million in other expenses relating to the IPO. On May 9, 2014, the underwriters of the IPO exercised their overallotment option to purchase an additional 782,150 shares of the Company’s common stock at the IPO price of $12.50 a share resulting in additional gross proceeds of approximately $9.8 million. The net proceeds to the Company were $9.1 million after deducting approximately $0.7 million in underwriting discounts. The Company’s common stock began trading on the New York Stock Exchange under the symbol “CIO” on April 15, 2014. |
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The Company contributed the net proceeds of the IPO to the Operating Partnership in exchange for common units in the Operating Partnership. The Operating Partnership utilized a portion of the net proceeds of the IPO to pay fees in connection with the assumption of the indebtedness, pay expenses incurred in connection with the IPO and Formation Transactions and repay loans that were made to several of the contributing entities by certain investors in such entities. The remaining funds are expected to be used for general working capital purposes and to fund potential future acquisitions. |
Pursuant to the Formation Transactions and exercise of the underwriters’ overallotment option, the Operating Partnership acquired a 100% interest in each of the Washington Group Plaza, Cherry Creek and Corporate Parkway properties and acquired an approximate 76% economic interest in the AmberGlen property, 90% interest in the Central Fairwinds property and 95% interest in the City Center property. These initial property interests were contributed in exchange for 3,731,209 common units, 1,610,765 common stock and $19.4 million of cash. On May 9, 2014, subsequent to the exercise of the underwriters’ overallotment option, 479,305 common units and 248,095 common stock were redeemed for $9.1 million in cash. |
In connection with the IPO and Formation Transactions, the Company, through its Operating Partnership, extinguished the loan on the Central Fairwinds property and completed a refinancing of three properties (Cherry Creek, City Center and Corporate Parkway) with a new $95 million non-recourse mortgage loan and proceeds from the IPO. The loan bears a fixed interest rate of 4.34% and matures on May 6, 2021. |
The following is a summary of the Predecessor Statement of Operations for the period from April 1, 2014 through April 20, 2014 and for the period from January 1, 2014 through April 20, 2014, and the Company’s Statement of Operations for the period from April 21, 2014 through June 30, 2014. These amounts are included in the condensed consolidated and combined statement of operations herein for the three and six months ended June 30, 2014. All balances as of December 31, 2013 and for the three and six months ended June 30, 2013 are those of the Predecessor. |
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| | Predecessor | | | City Office REIT, Inc. | |
| | April 1, 2014 through | | | January 1, 2014 through | | | April 21, 2014 through | |
April 20, 2014 | April 20, 2014 | June 30, 2014 |
Revenues: | | | | | | | | | | | | |
Rental income | | $ | 1,628,480 | | | $ | 8,865,238 | | | $ | 6,085,796 | |
Expense reimbursement | | | 105,569 | | | | 555,611 | | | | 397,203 | |
Other | | | 47,198 | | | | 342,859 | | | | 128,963 | |
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Total Revenues | | | 1,781,247 | | | | 9,763,708 | | | | 6,611,962 | |
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Operating Expenses: | | | | | | | | | | | | |
Property operating expenses | | | 510,431 | | | | 2,764,893 | | | | 1,757,182 | |
Insurance | | | 23,570 | | | | 176,428 | | | | 145,998 | |
Property taxes | | | 136,684 | | | | 597,788 | | | | 424,524 | |
Property management fees | | | 27,265 | | | | 234,882 | | | | 158,896 | |
Acquisition costs | | | — | | | | 806,344 | | | | 343,803 | |
Base management fees | | | — | | | | — | | | | 185,176 | |
Stock based compensation | | | — | | | | — | | | | 285,142 | |
General and administrative | | | 29,799 | | | | 79,799 | | | | 334,504 | |
Depreciation and amortization | | | 701,962 | | | | 3,861,939 | | | | 2,713,845 | |
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Total Operating Expenses | | | 1,429,711 | | | | 8,522,073 | | | | 6,349,070 | |
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Operating income | | | 351,536 | | | | 1,241,635 | | | | 262,892 | |
Interest expense, net | | | (610,378 | ) | | | (3,771,792 | ) | | | (2,966,616 | ) |
Change in fair value of earn-out | | | — | | | | — | | | | (104,865 | ) |
Gain on equity investment | | | — | | | | 4,474,644 | | | | — | |
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Net (Loss)/Income | | | (258,842 | ) | | | 1,944,487 | | | | (2,808,589 | ) |
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Net Loss attributable to noncontrolling interests in properties | | | 18,785 | | | | 28,710 | | | | 50,260 | |
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Net (Loss)/Income attributable to Predecessor | | | (240,057 | ) | | | 1,973,197 | | | | — | |
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Net loss attributable to Operating Partnership noncontrolling interests | | | | | | | | | | | 814,127 | |
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Net loss attributable to Stockholders | | | | | | | | | | | (1,944,202 | ) |
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