Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 7-May-14 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'CommonWealth REIT | ' |
Entity Central Index Key | '0000803649 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 118,436,415 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Real estate properties: | ' | ' |
Land | $747,181 | $699,135 |
Buildings and improvements | 5,168,335 | 4,838,030 |
Total real estate properties, at cost, gross | 5,915,516 | 5,537,165 |
Accumulated depreciation | -934,776 | -895,059 |
Total real estate properties, at cost, net | 4,980,740 | 4,642,106 |
Properties held for sale | 214,677 | 573,531 |
Acquired real estate leases, net | 244,634 | 255,812 |
Equity investments | 518,934 | 517,991 |
Cash and cash equivalents | 177,555 | 222,449 |
Restricted cash | 17,441 | 22,101 |
Rents receivable, net of allowance for doubtful accounts of $7,462 and $7,885, respectively | 239,766 | 223,769 |
Other assets, net | 206,967 | 188,675 |
Total assets | 6,600,714 | 6,646,434 |
LIABILITIES AND SHAREHOLDERS' EQUITY | ' | ' |
Revolving credit facility | 235,000 | 235,000 |
Senior unsecured debt, net | 1,856,135 | 1,855,900 |
Mortgage notes payable, net | 898,804 | 914,510 |
Liabilities related to properties held for sale | 23,066 | 28,734 |
Accounts payable and accrued expenses | 136,482 | 165,855 |
Assumed real estate lease obligations, net | 33,064 | 33,935 |
Rent collected in advance | 29,618 | 27,553 |
Security deposits | 13,682 | 11,976 |
Due to related persons | 15,793 | 9,385 |
Total liabilities | 3,241,644 | 3,282,848 |
Common shares of beneficial interest, $0.01 par value: | ' | ' |
Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized; 118,413,730 and 118,386,918 shares issued and outstanding, respectively | 1,184 | 1,184 |
Additional paid in capital | 4,217,651 | 4,213,474 |
Cumulative net income | 2,230,288 | 2,209,840 |
Cumulative other comprehensive loss | -26,724 | -38,331 |
Cumulative common distributions | -3,111,868 | -3,082,271 |
Cumulative preferred distributions | -585,122 | -573,971 |
Total shareholders' equity | 3,359,070 | 3,363,586 |
Total liabilities and shareholders' equity | 6,600,714 | 6,646,434 |
Series D | ' | ' |
50,000,000 shares authorized; | ' | ' |
Preferred shares of beneficial interest, $0.01 par value | 368,270 | 368,270 |
Series E | ' | ' |
50,000,000 shares authorized; | ' | ' |
Preferred shares of beneficial interest, $0.01 par value | $265,391 | $265,391 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | 3 Months Ended | 12 Months Ended |
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 |
Rents receivable, allowance for doubtful accounts (in dollars) | $7,462 | $7,885 |
Common shares of beneficial interest, par value (in dollars per share) | $0.01 | $0.01 |
Common shares of beneficial interest, shares authorized | 350,000,000 | 350,000,000 |
Common shares of beneficial interest, shares issued | 118,413,730 | 118,386,918 |
Common shares of beneficial interest, shares outstanding | 118,413,730 | 118,386,918 |
Series D | ' | ' |
Preferred shares of beneficial interest, par value (in dollars per share) | $0.01 | $0.01 |
Preferred shares of beneficial interest, shares authorized | 50,000,000 | 50,000,000 |
Preferred shares, dividend yield (as a percent) | 6.50% | 6.50% |
Preferred shares of beneficial interest, shares issued | 15,180,000 | 15,180,000 |
Preferred shares of beneficial interest, shares outstanding | 15,180,000 | 15,180,000 |
Preferred shares, aggregate liquidation preference (in dollars) | 379,500 | 379,500 |
Series E | ' | ' |
Preferred shares of beneficial interest, par value (in dollars per share) | $0.01 | $0.01 |
Preferred shares of beneficial interest, shares authorized | 50,000,000 | 50,000,000 |
Preferred shares, dividend yield (as a percent) | 7.25% | 7.25% |
Preferred shares of beneficial interest, shares issued | 11,000,000 | 11,000,000 |
Preferred shares of beneficial interest, shares outstanding | 11,000,000 | 11,000,000 |
Preferred shares, aggregate liquidation preference (in dollars) | $275,000 | $275,000 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Revenues: | ' | ' |
Rental income | $172,040 | $211,300 |
Tenant reimbursements and other income | 45,220 | 51,312 |
Total revenues | 217,260 | 262,612 |
Expenses: | ' | ' |
Operating expenses | 101,731 | 104,130 |
Depreciation and amortization | 51,649 | 62,570 |
General and administrative | 24,848 | 16,663 |
Reversal of loss on asset impairment | -4,761 | ' |
Acquisition related costs | 5 | 628 |
Total expenses | 173,472 | 183,991 |
Operating income | 43,788 | 78,621 |
Interest and other income | 384 | 455 |
Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of ($309) and $608, respectively) | -37,935 | -51,896 |
Loss on early extinguishment of debt | ' | -60,027 |
Gain on sale of equity investment | ' | 66,293 |
Gain on issuance of shares by an equity investee | 109 | ' |
Income from continuing operations before income tax expense and equity in earnings of investees | 6,346 | 33,446 |
Income tax expense | -555 | -988 |
Equity in earnings of investees | 10,934 | 4,262 |
Income from continuing operations | 16,725 | 36,720 |
Discontinued operations: | ' | ' |
Income (loss) from discontinued operations | 4,011 | -6 |
Loss on asset impairment from discontinued operations | -288 | -3,946 |
Gain on sale of properties from discontinued operations | ' | 1,260 |
Income before gain on sale of properties | 20,448 | 34,028 |
Gain on sale of properties | ' | 1,596 |
Net income | 20,448 | 35,624 |
Net income attributable to noncontrolling interest in consolidated subsidiary | ' | -9,957 |
Net income attributable to CommonWealth REIT | 20,448 | 25,667 |
Preferred distributions | -11,151 | -11,151 |
Net income available for CommonWealth REIT common shareholders | 9,297 | 14,516 |
Amounts attributable to CommonWealth REIT common shareholders: | ' | ' |
Income from continuing operations | 5,574 | 17,208 |
Income (loss) from discontinued operations | 4,011 | -6 |
Loss on asset impairment from discontinued operations | -288 | -3,946 |
Gain on sale of properties from discontinued operations | ' | 1,260 |
Net income available for CommonWealth REIT common shareholders | $9,297 | $14,516 |
Weighted average common shares outstanding - basic and diluted (in shares) | 118,400 | 94,154 |
Basic and diluted earnings per common share attributable to CommonWealth REIT common shareholders: | ' | ' |
Income from continuing operations (in dollars per share) | $0.05 | $0.18 |
Income (loss) from discontinued operations (in dollars per share) | $0.03 | ($0.03) |
Net income available for common shareholders (in dollars per share) | $0.08 | $0.15 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ' | ' |
Amortization of debt discounts, premiums and deferred financing fees | ($309) | $608 |
CONDENSED_CONSOLIDATED_STATEME2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ' | ' |
Net income | $20,448 | $35,624 |
Other comprehensive income (loss), net of tax: | ' | ' |
Unrealized gain on derivative instruments | 1,000 | 1,051 |
Foreign currency translation adjustments | 10,587 | 973 |
Equity in unrealized income (loss) of an investee | 20 | -16 |
Total comprehensive income | 32,055 | 37,632 |
Less: comprehensive income attributable to noncontrolling interest in consolidated subsidiary | ' | -9,953 |
Comprehensive income attributable to CommonWealth REIT | $32,055 | $27,679 |
CONDENSED_CONSOLIDATED_STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net income | $20,448 | $35,624 |
Adjustments to reconcile net income to cash provided by operating activities: | ' | ' |
Depreciation | 37,682 | 47,349 |
Net amortization of debt discounts, premiums and deferred financing fees | -309 | 629 |
Straight line rental income | -5,977 | -10,962 |
Amortization of acquired real estate leases | 11,979 | 16,903 |
Other amortization | 4,231 | 4,800 |
(Reversal of) loss on asset impairment | -4,473 | 3,946 |
Loss on early extinguishment of debt | ' | 60,027 |
Equity in earnings of investees | -10,934 | -4,262 |
Gain on sale of equity investment | ' | -66,293 |
Gain on issuance of shares by an equity investee | -109 | ' |
Distributions of earnings from investees | 10,120 | 4,111 |
Gain on sale of properties | ' | -2,856 |
Other non-cash expenses | 10,496 | ' |
Change in assets and liabilities: | ' | ' |
Restricted cash | 5,362 | 3,100 |
Rents receivable and other assets | -18,250 | -21,203 |
Accounts payable and accrued expenses | -12,545 | -27,769 |
Rent collected in advance | -1,125 | -1,948 |
Security deposits | 204 | -42 |
Due to related persons | -173 | 1,678 |
Cash provided by operating activities | 46,627 | 42,832 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Real estate acquisitions | ' | -149,318 |
Real estate improvements | -38,457 | -26,964 |
Principal payments received from direct financing lease | 1,795 | 1,711 |
Proceeds from sale of properties, net | ' | 2,163 |
Proceeds from sale of equity investment, net | ' | 239,576 |
Distributions in excess of earnings from investees | ' | 168 |
Increase in restricted cash | -702 | -1,197 |
Cash (used in) provided by investing activities | -37,364 | 66,139 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Proceeds from issuance of common shares, net | ' | 626,991 |
Repurchase and retirement of outstanding debt securities | ' | -728,021 |
Proceeds from borrowings | ' | 921,000 |
Payments on borrowings | -14,066 | -942,135 |
Deferred financing fees | ' | -1,193 |
Distributions to common shareholders | -29,597 | -20,951 |
Distributions to preferred shareholders | -11,151 | -11,151 |
Distributions to noncontrolling interest in consolidated subsidiary | ' | -7,259 |
Cash used in financing activities | -54,814 | -162,719 |
Effect of exchange rate changes on cash | 657 | 221 |
Decrease in cash and cash equivalents | -44,894 | -53,527 |
Cash and cash equivalents at beginning of period | 222,449 | 102,219 |
Cash and cash equivalents at end of period | 177,555 | 48,692 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ' | ' |
Interest paid | 43,228 | 71,368 |
Taxes paid | 2,321 | 507 |
NON-CASH INVESTING ACTIVITIES: | ' | ' |
Investment in real estate mortgage receivable | ' | ($7,688) |
Basis_of_Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2014 | |
Basis of Presentation | ' |
Basis of Presentation | ' |
Note 1. Basis of Presentation | |
The accompanying condensed consolidated financial statements of CommonWealth REIT and its subsidiaries, or the Company, CWH, we, us or our, have been prepared without audit. Certain information and footnote disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2013, or our Annual Report. In the opinion of our management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included. All intercompany transactions and balances with or among our subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Reclassifications have been made to the prior years’ financial statements to conform to the current year’s presentation. | |
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include the allowance for doubtful accounts, purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets. |
Recent_Accounting_Pronouncemen
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2014 | |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements | ' |
Note 2. Recent Accounting Pronouncements | |
In April 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, or ASU 2014-08. ASU 2014-08 changes the criteria for reporting a discontinued operation. Under the new pronouncement, a disposal of a part of an organization that has a major effect on its operations and financial results is a discontinued operation. We are required to adopt ASU 2014-08 prospectively for all disposals or components of our business classified as held for sale during fiscal periods beginning after December 15, 2014 and are currently evaluating what impact, if any, its adoption will have to the presentation of our condensed consolidated financial statements. |
Board_of_Trustees
Board of Trustees | 3 Months Ended |
Mar. 31, 2014 | |
Board of Trustees | ' |
Board of Trustees | ' |
Note 3. Board of Trustees | |
On March 18, 2014, Related Fund Management, LLC and Corvex Management LP, or together, Related/Corvex, delivered to us written consents which they represented were from a sufficient number of holders of our outstanding common shares to remove, without cause, all of our then Trustees and any other person or persons elected or appointed to our Board of Trustees prior to the effective time of the Related/Corvex removal proposal. After inspection, our then Board of Trustees determined that holders of more than 2/3 of our outstanding common shares as of the February 18, 2014 record date consented to the Related/Corvex proposal, reaching the threshold required to remove, without cause, all of our then Trustees and any other person or persons appointed as a Trustee prior to the effective time of the Related/Corvex removal proposal. Accordingly, on March 25, 2014, all of our Trustees certified their removal as Trustees of CWH. As a result, we currently have no Trustees and therefore no Trustees serving on our Board of Trustees or on an Audit Committee, Compensation Committee or Nominating and Governance Committee of our Board of Trustees. | |
Our officers have called a special meeting of shareholders to be held on May 23, 2014 for the purpose of electing new Trustees of CWH. For further information regarding this special meeting, please see the Definitive Information Statement we filed with the Securities and Exchange Commission, or the SEC, on April 11, 2014. Copies of all our documents filed with the SEC are available at the SEC’s website, www.sec.gov. |
Real_Estate_Properties
Real Estate Properties | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Real Estate Properties | ' | |||||||
Real Estate Properties | ' | |||||||
Note 4. Real Estate Properties | ||||||||
During the three months ended March 31, 2014, we made improvements to our properties totaling $27,830. | ||||||||
Property Sales: | ||||||||
We classify all properties that meet the criteria outlined in the Property, Plant and Equipment Topic of the FASB Accounting Standards Codification, or the Codification, as held for sale, as such on our condensed consolidated balance sheets. As of March 31, 2014, we had one central business district, or CBD, property (two buildings) and 13 suburban properties (41 buildings) with a combined 2,784,098 square feet held for sale. As of March 31, 2014, these properties are subject to an agreement for sale which we currently expect to close. | ||||||||
During the three months ended March 31, 2014, we ceased to actively market two CBD properties (two buildings) and 29 suburban properties (65 buildings) with a combined 5,641,450 square feet which we had previously classified as held for sale as of December 31, 2013, which were not under agreement for sale when our entire Board of Trustees was removed. These properties were reclassified to properties held and used in operations because they no longer meet the requirements under GAAP for classification as held for sale. Operating results for these properties were reclassified from discontinued operations to continuing operations for all periods presented herein. In connection with this reclassification, we reversed previously recorded impairment losses totaling $4,761 which includes the elimination of estimated costs to sell. | ||||||||
Results of operations for properties sold or held for sale are included in discontinued operations in our condensed consolidated statements of operations once the criteria for discontinued operations in the Presentation of Financial Statements Topic of the Codification are met. Summarized balance sheet information for all properties classified as held for sale and income statement information for properties held for sale or sold is as follows: | ||||||||
Balance Sheets: | ||||||||
March 31, 2014 | December 31, 2013 | |||||||
Real estate properties | $ | 201,557 | $ | 536,552 | ||||
Acquired real estate leases | 4,943 | 6,937 | ||||||
Rents receivable | 4,207 | 14,180 | ||||||
Other assets, net | 3,970 | 15,862 | ||||||
Properties held for sale | $ | 214,677 | $ | 573,531 | ||||
Mortgage notes payable | $ | 19,688 | $ | 20,018 | ||||
Assumed real estate lease obligations | 1,419 | 2,070 | ||||||
Rent collected in advance | 859 | 4,043 | ||||||
Security deposits | 1,100 | 2,603 | ||||||
Liabilities related to properties held for sale | $ | 23,066 | $ | 28,734 | ||||
Income Statements: | ||||||||
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Rental income | $ | 7,274 | $ | 15,512 | ||||
Tenant reimbursements and other income | 522 | 1,731 | ||||||
Total revenues | 7,796 | 17,243 | ||||||
Operating expenses | 3,479 | 11,564 | ||||||
Depreciation and amortization | — | 3,953 | ||||||
General and administrative | 3 | 1,287 | ||||||
Total expenses | 3,482 | 16,804 | ||||||
Operating income | 4,314 | 439 | ||||||
Interest and other income | — | 3 | ||||||
Interest expense | (303 | ) | (448 | ) | ||||
Income (loss) from discontinued operations | $ | 4,011 | $ | (6 | ) |
Investment_in_Direct_Financing
Investment in Direct Financing Lease | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Investment in Direct Financing Lease | ' | |||||||
Investment in Direct Financing Lease | ' | |||||||
Note 5. Investment in Direct Financing Lease | ||||||||
We have an investment in a direct financing lease that relates to a lease with a term that exceeds 75% of the useful life of an office tower located within a mixed use property in Phoenix, AZ. We recognize income using the effective interest method to produce a level yield on funds not yet recovered. Estimated unguaranteed residual values at the date of lease inception represent our initial estimates of the fair value of the leased assets at the expiration of the lease, which do not exceed their original cost. Significant assumptions used in estimating residual values include estimated net cash flows over the remaining lease term and expected future real estate values. The carrying amount of our net investment is included in other assets in our condensed consolidated balance sheets. The following table summarizes the carrying amount of our net investment in this direct financing lease: | ||||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
Total minimum lease payments receivable | $ | 20,962 | $ | 22,986 | ||||
Estimated unguaranteed residual value of leased asset | 4,951 | 4,951 | ||||||
Unearned income | (7,945 | ) | (8,174 | ) | ||||
Net investment in direct financing lease | $ | 17,968 | $ | 19,763 | ||||
We monitor the payment history and credit profile of the tenant and have determined that no allowance for losses related to our direct financing lease was necessary at March 31, 2014 and December 31, 2013. Our direct financing lease has an expiration date in 2045. |
Equity_Investments
Equity Investments | 3 Months Ended | |||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||
Equity Investments | ' | |||||||||||||||||
Equity Investments | ' | |||||||||||||||||
Note 6. Equity Investments | ||||||||||||||||||
At March 31, 2014 and December 31, 2013, we had the following equity investments in Select Income REIT, or SIR, Government Properties Income Trust, or GOV, and Affiliates Insurance Company, or AIC: | ||||||||||||||||||
Ownership Percentage | Equity Investments | Equity in Earnings (Loss) | ||||||||||||||||
Three Months Ended | ||||||||||||||||||
March 31, | December 31, | March 31, | December 31, | March 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||
SIR | 44.1 | % | 44.2 | % | $ | 513,099 | $ | 512,078 | $ | 11,032 | $ | — | ||||||
GOV | 0 | % | 0 | % | — | — | — | 4,111 | ||||||||||
AIC | 12.5 | % | 12.5 | % | 5,835 | 5,913 | (98 | ) | 151 | |||||||||
$ | 518,934 | $ | 517,991 | $ | 10,934 | $ | 4,262 | |||||||||||
At March 31, 2014, we owned 22,000,000, or approximately 44.1%, of the common shares of beneficial interest of SIR, with a carrying value of $513,099 and a market value, based on quoted market prices, of $665,940 ($30.27 per share). SIR is a real estate investment trust, or REIT, that is primarily focused on owning and investing in net leased, single tenant properties and was one of our consolidated subsidiaries until July 2, 2013. On July 2, 2013, our ownership percentage of SIR was reduced to below 50% and we began accounting for our investment in SIR under the equity method. Under the equity method, we record our percentage share of net earnings of SIR in our consolidated statements of operations. Prior to July 2, 2013, the operating results and investments of SIR were included in our consolidated results of operations and financial position. On July 2, 2013, our share of the underlying equity of SIR exceeded our carrying value by $17,609. As required under GAAP, we are amortizing this difference to equity in earnings of investees over a 34 year period, which approximates the average remaining useful lives of the buildings owned by SIR as of July 2, 2013. If we determine there is an “other than temporary” decline in the fair value of this investment, we would record a charge to earnings as determined under applicable accounting standards. See Note 15 for additional information regarding SIR. | ||||||||||||||||||
During the three months ended March 31, 2014, we received cash distributions from SIR totaling $10,120. | ||||||||||||||||||
The following summarized financial data of SIR as reported in SIR’s Quarterly Report on Form 10-Q for the period ended March 31, 2014, or the SIR Quarterly Report, includes the results of operations for periods prior to July 2, 2013 (the date on which SIR ceased to be our consolidated subsidiary), which are included on a consolidated basis in our condensed consolidated results of operations when SIR was our consolidated subsidiary. References in our financial statements to the SIR Quarterly Report are included as references to the source of the data only, and the information in the SIR Quarterly Report is not incorporated by reference into our financial statements. | ||||||||||||||||||
Condensed Consolidated Balance Sheets: | ||||||||||||||||||
March 31, | December 31, | |||||||||||||||||
2014 | 2013 | |||||||||||||||||
Real estate properties, net | $ | 1,573,489 | $ | 1,579,234 | ||||||||||||||
Acquired real estate leases, net | 125,530 | 129,426 | ||||||||||||||||
Cash and cash equivalents | 204,319 | 20,025 | ||||||||||||||||
Rents receivable, net | 58,462 | 55,335 | ||||||||||||||||
Other assets, net | 22,515 | 17,839 | ||||||||||||||||
Total assets | $ | 1,984,315 | $ | 1,801,859 | ||||||||||||||
Revolving credit facility | $ | 345,000 | $ | 159,000 | ||||||||||||||
Term loan | 350,000 | 350,000 | ||||||||||||||||
Mortgage notes payable | 19,232 | 27,147 | ||||||||||||||||
Assumed real estate lease obligations, net | 26,239 | 26,966 | ||||||||||||||||
Other liabilities | 41,856 | 40,055 | ||||||||||||||||
Shareholders’ equity | 1,201,988 | 1,198,691 | ||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,984,315 | $ | 1,801,859 | ||||||||||||||
Condensed Consolidated Statements of Income: | ||||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||||
2014 | 2013 | |||||||||||||||||
Rental income | $ | 45,063 | $ | 37,458 | ||||||||||||||
Tenant reimbursements and other income | 7,965 | 6,402 | ||||||||||||||||
Total revenues | 53,028 | 43,860 | ||||||||||||||||
Operating expenses | 9,979 | 7,874 | ||||||||||||||||
Depreciation and amortization | 9,294 | 6,665 | ||||||||||||||||
Acquisition related costs | 238 | 533 | ||||||||||||||||
General and administrative | 5,176 | 2,719 | ||||||||||||||||
Total expenses | 24,687 | 17,791 | ||||||||||||||||
Operating income | 28,341 | 26,069 | ||||||||||||||||
Interest expense | (3,358 | ) | (3,473 | ) | ||||||||||||||
Gain on early extinguishment of debt | 243 | — | ||||||||||||||||
Income before income tax expense and equity in earnings (loss) of an investee | 25,226 | 22,596 | ||||||||||||||||
Income tax expense | (71 | ) | (40 | ) | ||||||||||||||
Equity in earnings (loss) of an investee | (97 | ) | 76 | |||||||||||||||
Net income | $ | 25,058 | $ | 22,632 | ||||||||||||||
Weighted average common shares outstanding | 49,841 | 39,283 | ||||||||||||||||
Net income per common share | $ | 0.5 | $ | 0.58 | ||||||||||||||
As of March 31, 2014, we had invested $5,209 in AIC, an insurance company owned in equal proportion by us, our manager, Reit Management & Research LLC, or RMR, GOV, SIR and four other companies to which RMR provides management services. At March 31, 2014, we owned 12.5% of AIC with a carrying value of $5,835. For the three months ended March 31, 2013, during which time SIR was both a shareholder of AIC and our consolidated subsidiary, our condensed consolidated financial statements include SIR’s equity investment interest in AIC. We use the equity method to account for our investment in AIC because we believe that during the relevant period we had significant influence over AIC as a majority of our former Trustees, our President and principals of our manager are also directors of AIC. Under the equity method, we record our and our percentage share of SIR’s percentage share of net earnings from AIC while SIR was our consolidated subsidiary in our condensed consolidated statements of operations. If we determine there is an “other than temporary” decline in the fair value of this investment, we would record a charge to earnings as determined under applicable accounting standards. In evaluating the fair value of this investment, we have considered, among other things, the assets and liabilities held by AIC, AIC’s overall financial condition and the financial condition and prospects for AIC’s insurance business. See Note 15 for additional information about our investment in AIC. | ||||||||||||||||||
On March 25, 2014, as a result of the removal, without cause, of all of our Trustees, we underwent a change in control, as defined in the shareholders agreement among us, the other shareholders of AIC and AIC. In April 2014, as a result of this change in control and in accordance with the terms of the shareholders agreement, the other shareholders of AIC provided notice of exercise of their right to purchase the 20,000 shares of AIC we own. The aggregate proceeds we would receive if those other shareholders fully exercise their right to purchase all of the AIC shares we own would be $5,776. We expect that those other AIC shareholders will purchase from us pro rata all of the AIC shares we own, following which we will no longer own any equity interest in AIC. The purchase of any of our AIC shares will not affect our current participation in the AIC property insurance program, which is scheduled to expire in June 2014, unless renewed. |
Real_Estate_Mortgages_Receivab
Real Estate Mortgages Receivable | 3 Months Ended |
Mar. 31, 2014 | |
Real Estate Mortgages Receivable | ' |
Real Estate Mortgages Receivable | ' |
Note 7. Real Estate Mortgages Receivable | |
As of March 31, 2014 and December 31, 2013, we had total real estate mortgages receivable with an aggregate carrying value of $8,107 included in other assets in our condensed consolidated balance sheets. We provided mortgage financing totaling $7,688 at 6.0% per annum in connection with our sale of three suburban office and industrial properties (18 buildings) in January 2013 in Dearborn, MI; this real estate mortgage requires monthly interest payments and matures on January 24, 2023. We also provided mortgage financing totaling $419 at 6.0% per annum in connection with our sale of a suburban office property in Salina, NY in April 2012; this real estate mortgage requires monthly interest payments and matures on April 30, 2019. |
Shareholders_Equity
Shareholders' Equity | 3 Months Ended |
Mar. 31, 2014 | |
Shareholders' Equity | ' |
Shareholders' Equity | ' |
Note 8. Shareholders’ Equity | |
Common Share Issuances: | |
On January 28, 2014, we granted 2,000 common shares of beneficial interest, par value $0.01 per share, valued at $23.46 per share, the closing price of our common shares on the New York Stock Exchange, or NYSE, on that day, to two of our former Trustees as part of their then annual compensation. | |
On February 7, 2014, March 7, 2014, April 7, 2014 and May 7, 2014, we issued 12,187, 10,625, 11,410 and 11,275 common shares, respectively, to RMR pursuant to the amended and restated business management agreement discussed in Note 15. | |
Share Awards: | |
As a result of the removal, without cause, of our Trustees on March 25, 2014, the vesting of 130,914 common shares previously issued to our officers and certain employees of RMR pursuant to our equity compensation plans accelerated in accordance with the terms of their governing share grants. During the three months ended March 31, 2014, we recorded $3,412 of compensation expense related to the vesting of these shares. | |
Common and Preferred Share Distributions: | |
On February 15, 2014, we paid a quarterly distribution on our series D cumulative convertible preferred shares, or series D preferred shares, of $0.4063 per share, or $6,167, and a quarterly distribution on our series E preferred shares of $0.4531 per share, or $4,984, both of which were paid to shareholders of record as of February 1, 2014. | |
On February 21, 2014, we paid a quarterly distribution on our common shares of $0.25 per share, or $29,597, to shareholders of record on January 13, 2014. | |
Under our governing documents and Maryland law, distributions to our shareholders are to be authorized and declared by CWH’s Board of Trustees. Accordingly, no additional distributions may be declared on our preferred shares or common shares until new Trustees are elected and qualified and take action to declare such distributions, if any. | |
Series D Preferred Shares: | |
As of March 31, 2014, we had 15,180,000 outstanding series D preferred shares. The removal, without cause, of our entire prior Board of Trustees on March 25, 2014, triggered a Fundamental Change Conversion Right of the series D preferred shares, as defined in our articles supplementary setting forth the terms of the series D preferred shares. Pursuant to such right, the holders of series D preferred shares have the option to elect to convert all or any portion of their series D preferred shares at any time from April 9, 2014 until prior to the close of business on May 14, 2014 into a number of common shares per $25.00 liquidation preference of the series D preferred shares equal to the sum of such $25.00 liquidation preference plus accrued and unpaid dividends to, but not including, May 14, 2014, divided by 98% of the average of the closing sale prices of the common shares for the five consecutive trading days ending on May 9, 2014. |
Cumulative_Other_Comprehensive
Cumulative Other Comprehensive Income (Loss) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Cumulative Other Comprehensive Income (Loss) | ' | |||||||||||||
Cumulative Other Comprehensive Income (Loss) | ' | |||||||||||||
Note 9. Cumulative Other Comprehensive Income (Loss) | ||||||||||||||
The following table presents the amounts recognized in cumulative other comprehensive income (loss) by component for the three months ended March 31, 2014: | ||||||||||||||
Unrealized | Foreign | Equity in | ||||||||||||
Gain (Loss) | Currency | Unrealized | ||||||||||||
on Derivative | Translation | Gain (Loss) of | ||||||||||||
Instruments | Adjustments | an Investee | Total | |||||||||||
Balances as of December 31, 2013 | $ | (11,706 | ) | $ | (26,647 | ) | $ | 22 | $ | (38,331 | ) | |||
Other comprehensive income (loss) before reclassifications | (229 | ) | 10,587 | 27 | 10,385 | |||||||||
Amounts reclassified from cumulative other comprehensive income (loss) to net income | 1,229 | — | (7 | ) | 1,222 | |||||||||
Net current period other comprehensive income | 1,000 | 10,587 | 20 | 11,607 | ||||||||||
Balances as of March 31, 2014 | $ | (10,706 | ) | $ | (16,060 | ) | $ | 42 | $ | (26,724 | ) | |||
The following table presents reclassifications out of cumulative other comprehensive income (loss) for the three months ended March 31, 2014: | ||||||||||||||
Amounts Reclassifed from | ||||||||||||||
Details about Cumulative Other | Cumulative Other Comprehensive | Affected Line Items in the | ||||||||||||
Comprehensive Income (Loss) Components | Income (Loss) to Net Income | Statement of Operations | ||||||||||||
Interest rate swap contracts | $ | 1,229 | Interest expense | |||||||||||
Unrealized gains and losses on available for sale securities | (7 | ) | Equity in earnings of investees | |||||||||||
$ | 1,222 |
Indebtedness
Indebtedness | 3 Months Ended |
Mar. 31, 2014 | |
Indebtedness | ' |
Indebtedness | ' |
Note 10. Indebtedness | |
Prepayments: | |
In March 2014, we prepaid $11,988 of mortgage debt using cash on hand. | |
Unsecured Revolving Credit Facility and Unsecured Term Loan: | |
We have a $750,000 unsecured revolving credit facility, maturing on October 19, 2015, that we have used in the past for general business purposes, including acquisitions. We also have a $500,000 unsecured term loan that matures in December 2016. The removal of our entire Board of Trustees, without cause, constitutes events of default under our revolving credit facility and term loan agreements and, as a result, we are not able to borrow under our revolving credit facility. Effective as of April 11, 2014, we entered into separate forbearance agreements regarding our revolving credit facility and term loan agreements in respect of which we were required to pay certain fees to, and expenses of, the lenders. Pursuant to each forbearance agreement, the applicable lenders have agreed, on and subject to the terms and conditions set forth therein, to forbear during the period described below from exercising certain of their rights and remedies under the revolving credit facility or term loan, as applicable, including, without limitation, their right to accelerate repayment of the loans thereunder and to require that the loans bear interest at the post-default rate. The forbearance period under each forbearance agreement runs from April 11, 2014 through the first to occur of the following: | |
· 5:00 p.m. Eastern time on July 10, 2014; | |
· 5:00 p.m. Eastern time on the date 21 calendar days following the date on which our shareholders elect a replacement Board of Trustees; | |
· the occurrence of any event of default (other than with respect to an event of default as a result of the removal of our entire Board of Trustees, without cause, or our failure to provide quarterly financial statements and related certificates to the lenders) under the revolving credit facility agreement or the term loan agreement, as applicable; | |
· our failure to continue to satisfy certain minimum available cash requirements, including maintaining 80% (eighty percent) of the net cash proceeds received from certain asset dispositions; | |
· our exercise of our right to repurchase any series D preferred shares otherwise convertible upon a Fundamental Change, as defined in our articles supplementary setting forth the terms of the series D preferred shares; or | |
· our breach of the forbearance agreement. | |
Upon termination of the forbearance period, the lenders under our revolving credit facility and term loan agreements will be entitled to exercise certain remedies, including the right to accelerate repayment of their loans and to require that their loans bear interest at the post-default rate. A new Board of Trustees and management will be required to negotiate with our bank lenders for amendments to, or waivers under, our revolving credit facility and term loan agreements, or explore alternatives for funding the repayment of amounts outstanding under these agreements. Access to various types of future financing sources, including debt or equity offerings and new bank loan facilities, will depend upon a number of factors, including our business practices and plans under a new Board of Trustees, our credit ratings and market conditions. We can provide no assurance regarding the future availability of borrowings under our revolving credit facility, our access to future financing or whether some or all of our indebtedness may be accelerated. | |
Borrowings under our revolving credit facility bear interest at LIBOR plus a premium, which was 150 basis points as of March 31, 2014. We also pay a facility fee of 35 basis points per annum on the total amount of lending commitments under our revolving credit facility. Both the interest rate premium and the facility fee are subject to adjustment based upon changes to our credit ratings. As of March 31, 2014, the interest rate payable on borrowings under our revolving credit facility was 1.7%. The weighted average interest rate for borrowings under our revolving credit facility was 1.7% for both the three months ended March 31, 2014 and 2013. As a result of the event of default described above, subject to the terms of the applicable forbearance agreement, lenders under our revolving credit facility may elect to apply the post-default interest rate, which is generally an additional 4% to the then prevailing interest rate under this agreement, to borrowings outstanding thereunder. As of March 31, 2014, we had $235,000 outstanding under our revolving credit facility. | |
Our term loan bears interest at a rate of LIBOR plus a premium, which was 185 basis points as of March 31, 2014. The interest rate premium is subject to adjustment based upon changes to our credit ratings. As of March 31, 2014, the interest rate for the amount outstanding under our term loan was 2.0%. The weighted average interest rate for the amount outstanding under our term loan was 2.0% and 2.1% for the three months ended March 31, 2014 and 2013, respectively. As a result of the event of default described above, subject to the terms of the applicable forbearance agreement, lenders under our term loan may elect to apply the post-default interest rate, which is generally an additional 4% to the then prevailing interest rate under this agreement, to borrowings outstanding thereunder. | |
Credit Facility and Term Loan Debt Covenants: | |
Our public debt indenture and related supplements, our revolving credit facility agreement and our term loan agreement contain a number of financial and other covenants, including covenants that restrict our ability to incur indebtedness or to make distributions under certain circumstances and require us to maintain financial ratios and a minimum net worth. At March 31, 2014, we believe we were in compliance with all of our respective covenants under our public debt indenture and related supplements, our revolving credit facility and our term loan agreements, except for the defaults noted above. | |
Mortgage Debt: | |
At March 31, 2014, 12 of our continuing properties (17 buildings) costing $1,250,900 with an aggregate net book value of $1,087,104 secured mortgage notes totaling $898,804 (including net premiums and discounts) maturing from 2015 through 2026. In addition, we had mortgage debt secured by two properties (three buildings) classified as held for sale totaling $19,688 (including net premiums and discounts). |
Income_Taxes
Income Taxes | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Income Taxes | ' | |||||||
Income Taxes | ' | |||||||
Note 11. Income Taxes | ||||||||
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and are generally not subject to federal and state income taxes provided we distribute a sufficient amount of our taxable income to our shareholders and meet other requirements for qualifying as a REIT. However, we are subject to certain state, local and Australian taxes without regard to our REIT status. Our provision for income taxes consists of the following: | ||||||||
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
State | $ | 34 | $ | 163 | ||||
Foreign | 521 | 825 | ||||||
Income tax provision | $ | 555 | $ | 988 |
Fair_Value_of_Assets_and_Liabi
Fair Value of Assets and Liabilities | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Fair Value of Assets and Liabilities | ' | |||||||||||||
Fair Value of Assets and Liabilities | ' | |||||||||||||
Note 12. Fair Value of Assets and Liabilities | ||||||||||||||
The table below presents certain of our assets and liabilities measured at fair value during 2014, categorized by the level of inputs used in the valuation of each asset and liability: | ||||||||||||||
Fair Value at Reporting Date Using | ||||||||||||||
Quoted Prices in | Significant | |||||||||||||
Active Markets for | Significant Other | Unobservable | ||||||||||||
Identical Assets | Observable Inputs | Inputs | ||||||||||||
Description | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||
Recurring Fair Value Measurements: | ||||||||||||||
Effective portion of interest rate swap contracts(1) | $ | (10,706 | ) | $ | — | $ | (10,706 | ) | $ | — | ||||
Non-Recurring Fair Value Measurements: | ||||||||||||||
Properties held for sale(2) | $ | 213,244 | $ | — | $ | — | $ | 213,244 | ||||||
(1) The fair value of our interest rate swap contracts is determined using the net discounted cash flows of the expected cash flows of each derivative based on the market based interest rate curve (level 2 inputs) and adjusted for our credit spread and the actual and estimated credit spreads of the counterparties (level 3 inputs). Although we have determined that the majority of the inputs used to value our derivatives fall within level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and the counterparties. As of March 31, 2014, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified as level 2 inputs in the fair value hierarchy. | ||||||||||||||
(2) As of March 31, 2014, we recorded a loss on asset impairment totaling $288 for one of our CBD properties (two buildings) and 13 of our suburban properties (41 buildings) to reduce the aggregate carrying value of these properties from $213,532 to their estimated fair value of $218,000, reflected in the table below, or $213,244 net of costs to sell. All of these properties were classified as held for sale as of December 31, 2013. We used current contracted sale prices (level 3 inputs) in determining the fair value of these properties. The valuation techniques and significant unobservable inputs used for our level 3 fair value measurements at March 31, 2014 were as follows: | ||||||||||||||
Description | Fair Value at | Primary | Unobservable | Range | ||||||||||
March 31, | Valuation | Inputs | (Weighted | |||||||||||
2014 | Techniques | Average) | ||||||||||||
Properties held for sale on which we recognized impairment losses | $ | 218,000 | Current Contracted Sale Prices | N/A | N/A | |||||||||
We are exposed to certain risks relating to our ongoing business operations, including the effect of changes in foreign currency exchange rates and interest rates. The only risk we currently manage by using derivative instruments is a part of our interest rate risk. Although we have not done so as of March 31, 2014, and have no present intention to do so, we may manage our Australian currency exchange exposure by borrowing in Australian dollars or using derivative instruments in the future, depending on the relative significance of our business activities in Australia at that time. We have interest rate swap agreements to manage our interest rate risk exposure on $172,822 of mortgage debt due 2019, which require interest at a premium over LIBOR. The interest rate swap agreements utilized by us qualify as cash flow hedges and effectively modify our exposure to interest rate risk by converting our floating interest rate debt to a fixed interest rate basis for this loan through December 1, 2016, thus reducing the impact of interest rate changes on future interest expense. These agreements involve the receipt of floating interest rate amounts in exchange for fixed rate interest payments over the life of the agreements without an exchange of the underlying principal amount. The fair value of our derivative instruments increased by $1,000 and $1,051 during the three months ended March 31, 2014 and 2013, respectively, based primarily on changes in market interest rates. As of March 31, 2014 and December 31, 2013, the fair value of these derivative instruments included in accounts payable and accrued expenses and cumulative other comprehensive loss in our condensed consolidated balance sheets totaled ($10,706) and ($11,706), respectively. We may enter additional interest rate swaps or hedge agreements to manage some of our additional interest rate risk associated with our floating rate borrowings. The table below presents the effects of our interest rate derivatives on our condensed consolidated statements of operations and condensed consolidated statements of comprehensive income for the three months ended March 31, 2014 and 2013: | ||||||||||||||
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
2014 | 2013 | |||||||||||||
Balance at beginning of period | $ | (11,706 | ) | $ | (16,624 | ) | ||||||||
Amount of loss recognized in cumulative other comprehensive income | (229 | ) | (185 | ) | ||||||||||
Amount of loss reclassified from cumulative other comprehensive income into interest expense | 1,229 | 1,236 | ||||||||||||
Unrealized gain on derivative instruments | 1,000 | 1,051 | ||||||||||||
Balance at end of period | $ | (10,706 | ) | $ | (15,573 | ) | ||||||||
Over the next 12 months, we estimate that approximately $4,916 will be reclassified from cumulative other comprehensive income as an increase to interest expense. | ||||||||||||||
In addition to the assets and liabilities described in the above table, our financial instruments include our cash and cash equivalents, rents receivable, investment in direct financing lease receivable, real estate mortgages receivable, restricted cash, revolving credit facility, senior notes and mortgage notes payable, accounts payable and accrued expenses, rent collected in advance, security deposits and amounts due to related persons. At March 31, 2014 and December 31, 2013, the fair values of these additional financial instruments, excluding mortgage debt related to properties held for sale, were not materially different from their carrying values, except as follows: | ||||||||||||||
March 31, 2014 | December 31, 2013 | |||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||
Amount | Value | Amount | Value | |||||||||||
Senior notes and mortgage notes payable | $ | 2,082,117 | $ | 2,174,291 | $ | 2,097,164 | $ | 2,143,834 | ||||||
The fair values of our senior notes and mortgage notes payable are based on estimates using discounted cash flow analyses and currently prevailing interest rates adjusted by credit risk spreads (level 3 inputs). | ||||||||||||||
Other financial instruments that potentially subject us to concentrations of credit risk consist principally of rents receivable; however, as of March 31, 2014, no single tenant of ours is responsible for more than 3% of our total annualized rents. | ||||||||||||||
Our derivative financial instruments, including interest rate swaps, are entered with major financial institutions and we monitor the amount of credit exposure to any one counterparty. |
Earnings_Per_Common_Share
Earnings Per Common Share | 3 Months Ended |
Mar. 31, 2014 | |
Earnings Per Common Share | ' |
Earnings Per Common Share | ' |
Note 13. Earnings Per Common Share | |
As of March 31, 2014, we had 15,180,000 series D preferred shares that were convertible on that date or during the three months then ended into 7,298,165 of our common shares and the effect of our convertible preferred shares on income from continuing operations attributable to CommonWealth REIT common shareholders per share was anti-dilutive for all periods presented. | |
As discussed in Note 8, the removal, without cause, of our entire Board of Trustees on March 25, 2014, triggered a Fundamental Change Conversion Right of the series D preferred shares. Pursuant to such right, the holders of series D preferred shares have the option to elect to convert all or any portion of their series D preferred shares at any time from April 9, 2014 until prior to the close of business on May 14, 2014 into a number of common shares per $25.00 liquidation preference of the series D preferred shares equal to the sum of such $25.00 liquidation preference plus accrued and unpaid dividends to, but not including, May 14, 2014, divided by 98% of the average of the closing sale prices of the common shares for the five consecutive trading days ending on May 9, 2014. The issuance of a large number of common shares as a result of the exercise of this Fundamental Change Conversion Right may have a dilutive effect on income from continuing operations attributable to CommonWealth REIT common shareholders per share for future periods. |
Segment_Information
Segment Information | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Segment Information | ' | |||||||
Segment Information | ' | |||||||
Note 14. Segment Information | ||||||||
Our primary business is the ownership and operation of a nationwide portfolio of properties. We account for each of our individual properties as a separate operating segment. We have aggregated our separate operating segments into two reportable segments based on our primary method of internal reporting: CBD properties and suburban properties. More than 90% of our CBD and suburban properties are office properties. Each of our reportable segments includes within its segments properties with similar operating and economic characteristics that are subject to unique supply and demand conditions. Our operating segments (i.e., our individual properties) are managed and operated consistently in accordance with our standard operating procedures, and our management responsibilities do not vary significantly from location to location based on the size of the property or geographic location within each primary reporting segment. We use property net operating income, or NOI, to evaluate the performance of our operating segments. We define NOI as income from our real estate including lease termination fees received from tenants less our property operating expenses, which expenses include property marketing costs. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions. See Note 6 for financial information relating to SIR. | ||||||||
As of March 31, 2014, we owned 40 CBD properties (53 buildings) and 116 suburban properties (209 buildings), excluding properties classified as held for sale. The prior period has been restated to reflect properties reclassified from discontinued operations to continuing operations during 2014. See Note 4 for additional information regarding our properties and the reasons for this reclassification. | ||||||||
Property level information by operating segment for properties classified as held and used in operations as of March 31, 2014, and for the three months ended March 31, 2014 and 2013, is as follows: | ||||||||
As of March 31, | ||||||||
2014 | 2013 | |||||||
Square feet (in thousands): | ||||||||
CBD properties | 21,889 | 22,146 | ||||||
Suburban properties | 21,024 | 46,091 | ||||||
Total properties | 42,913 | 68,237 | ||||||
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Rental income: | ||||||||
CBD properties | $ | 110,239 | $ | 112,171 | ||||
Suburban properties | 61,801 | 99,129 | ||||||
Total properties | $ | 172,040 | $ | 211,300 | ||||
Tenant reimbursements and other income: | ||||||||
CBD properties | $ | 30,241 | $ | 31,108 | ||||
Suburban properties | 14,979 | 20,204 | ||||||
Total properties | $ | 45,220 | $ | 51,312 | ||||
NOI: | ||||||||
CBD properties | $ | 73,170 | $ | 78,985 | ||||
Suburban properties | 42,359 | 79,497 | ||||||
Total properties | $ | 115,529 | $ | 158,482 | ||||
As of March 31, 2014, our investments in CBD properties and suburban properties, net of accumulated depreciation, excluding properties classified as held for sale, were $3,072,571 and $1,908,169, respectively, including $146,892 of CBD properties and $92,284 of suburban properties located in Australia. | ||||||||
The following table includes the reconciliation of NOI to net income, the most directly comparable financial measure under GAAP reported in our condensed consolidated financial statements. We consider NOI to be an appropriate supplemental measure to net income because it may help both investors and management to understand the operations of our properties. We use NOI internally to evaluate individual, regional and companywide property level performance, and we believe that NOI provides useful information to investors regarding our results of operations because it reflects only those income and expense items that are incurred at the property level and may facilitate comparisons of our operating performance between periods and with other REITs. The calculation of NOI excludes certain components of net income in order to provide results that are more closely related to our properties’ results of operations. NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered as an alternative to net income, net income attributable to CommonWealth REIT, net income available for CommonWealth REIT common shareholders, operating income or cash flow from operating activities, determined in accordance with GAAP, or as an indicator of our financial performance or liquidity, nor is this measure necessarily indicative of sufficient cash flow to fund all of our needs. This measure should be considered in conjunction with net income, net income attributable to CommonWealth REIT, net income available for CommonWealth REIT common shareholders, operating income and cash flow from operating activities as presented in our condensed consolidated statements of operations, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate NOI differently than we do. A reconciliation of NOI to net income for the three months ended March 31, 2014 and 2013, is as follows: | ||||||||
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Rental income | $ | 172,040 | $ | 211,300 | ||||
Tenant reimbursements and other income | 45,220 | 51,312 | ||||||
Operating expenses | (101,731 | ) | (104,130 | ) | ||||
NOI | $ | 115,529 | $ | 158,482 | ||||
NOI | $ | 115,529 | $ | 158,482 | ||||
Depreciation and amortization | (51,649 | ) | (62,570 | ) | ||||
General and administrative | (24,848 | ) | (16,663 | ) | ||||
Reversal of loss on asset impairment | 4,761 | — | ||||||
Acquisition related costs | (5 | ) | (628 | ) | ||||
Operating income | 43,788 | 78,621 | ||||||
Interest and other income | 384 | 455 | ||||||
Interest expense | (37,935 | ) | (51,896 | ) | ||||
Loss on early extinguishment of debt | — | (60,027 | ) | |||||
Gain on sale of equity investment | — | 66,293 | ||||||
Gain on issuance of shares by an equity investee | 109 | — | ||||||
Income from continuing operations before income tax expense and equity in earnings of investees | 6,346 | 33,446 | ||||||
Income tax expense | (555 | ) | (988 | ) | ||||
Equity in earnings of investees | 10,934 | 4,262 | ||||||
Income from continuing operations | 16,725 | 36,720 | ||||||
Income (loss) from discontinued operations | 4,011 | (6 | ) | |||||
Loss on asset impairment from discontinued operations | (288 | ) | (3,946 | ) | ||||
Gain on sale of properties from discontinued operations | — | 1,260 | ||||||
Income before gain on sale of properties | 20,448 | 34,028 | ||||||
Gain on sale of properties | — | 1,596 | ||||||
Net income | $ | 20,448 | $ | 35,624 |
Related_Person_Transactions
Related Person Transactions | 3 Months Ended |
Mar. 31, 2014 | |
Related Person Transactions | ' |
Related Person Transactions | ' |
Note 15. Related Person Transactions | |
RMR: We have no employees. Personnel and various services we require to operate our business are provided to us by RMR. We have two agreements with RMR to provide management and administrative services to us: (i) a business management agreement, which relates to our business generally, and (ii) a property management agreement, which relates to our property level operations. | |
One of our former Managing Trustees, Mr. Barry Portnoy, is Chairman, majority owner and an employee of RMR. Our other former Managing Trustee and our President, Mr. Adam Portnoy, is the son of Mr. Barry Portnoy, and an owner, President, Chief Executive Officer and a director of RMR. Each of our other executive officers is also an officer of RMR. Two of our former Independent Trustees serve as independent directors or independent trustees of other public companies to which RMR provides management services. Mr. Barry Portnoy serves as a managing director or managing trustee of a majority of those companies and Mr. Adam Portnoy serves as a managing trustee of a majority of those companies. In addition, officers of RMR serve as officers of those companies. | |
Pursuant to our business management agreement with RMR, we recognized business management fees of $15,378 and $11,905 for the three months ended March 31, 2014 and 2013, respectively. The fees for the three months ended March 31, 2014, include estimated 2014 incentive fees payable in common shares based on our common share total return. These amounts are included in general and administrative expenses and income (loss) from discontinued operations, as appropriate, in our condensed consolidated financial statements. In accordance with the terms of our business management agreement, as amended in December 2013, we issued 34,222 of our common shares to RMR for the three months ended March 31, 2014 as payment for 10% of the base business management fee we recognized for such period. On May 7, 2014, we issued 11,275 of our common shares as payment for 10% of the base business management fee we recognized for April 2014. | |
In connection with our property management agreement with RMR, the aggregate property management and construction supervision fees we recognized were $6,970 and $8,376 for the three months ended March 31, 2014 and 2013, respectively. These amounts are included in operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements. | |
The business management fees, property management fees and construction supervision fees that we incurred during the three months ended March 31, 2013 include fees incurred by SIR, as SIR was a consolidated subsidiary of ours during that period. | |
MacarthurCook Fund Management Limited, or MacarthurCook, previously provided us with business and property management services related to our Australian properties. Our contract with MacarthurCook terminated on January 31, 2013, and on that date we entered into a business and property management agreement, or the Australia Management Agreement, with RMR Australia Asset Management Pty Limited, or RMR Australia, for the benefit of CWH Australia Trust (formerly the MacarthurCook Industrial Property Fund), a subsidiary of ours. The terms of the Australia Management Agreement are substantially similar to the terms of the management agreement we had with MacarthurCook. RMR Australia is owned by our former Managing Trustees and our President and it has been granted an Australian financial services license by the Australian Securities & Investments Commission. Similar to our prior arrangement with respect to fees we paid to MacarthurCook, RMR has agreed to waive half of the fees payable by us under our property management agreement with RMR and half of the business management fees otherwise payable by us under our business management agreement with RMR related to real estate investments that are subject to the Australia Management Agreement for so long as the Australia Management Agreement is in effect and we or any of our subsidiaries are paying the fees under that agreement. Pursuant to the Australia Management Agreement, we recognized aggregate business and property management fees of $430 for the three months ended March 31, 2014, which amount is equal to the fees waived by RMR and excluded from the amount that was payable to RMR during the three months ended March 31, 2014. Pursuant to the Australia Management Agreement, we recognized aggregate business and property management fees of $320 for the period from February 1, 2013 to March 31, 2013, which amount is equal to the fees waived by RMR and excluded from the amounts that were payable to RMR during such period. | |
For January 2013, RMR agreed to waive half of the fees payable by us under our property management agreement and half of the business management fees related to real estate investments located outside of the United States, Puerto Rico and Canada, so long as our business and property management agreement with MacarthurCook with respect to those investments was in effect and we or any of our subsidiaries were paying fees under that agreement. MacarthurCook earned $161 in January 2013 with respect to our Australian properties, which amount is equal to the fees waived by RMR and excluded from the amount that was payable to RMR during that month. | |
The removal of our Board of Trustees constitutes a “change of control” under our property management agreement with RMR, triggering a termination right for RMR. In addition, either we or RMR may terminate our business management agreement with RMR upon 60 days’ prior written notice for any reason. | |
GOV: GOV was formerly our 100% owned subsidiary. Our former Managing Trustees and our President are also managing trustees of GOV. RMR provides management services to both us and GOV. GOV’s executive officers are officers of RMR. | |
In 2009, GOV completed an initial public offering pursuant to which GOV ceased to be a majority owned subsidiary of ours. To facilitate this offering, we and GOV entered into a transaction agreement that governs our separation from and relationship with GOV. Pursuant to this transaction agreement and subject to certain conditions, among other things, we granted GOV the right of first refusal to acquire any property owned by us that we determine to divest, if the property is then majority leased to a government tenant, which right of first refusal will also apply in the event of an indirect sale of any such properties as a result of a change of control of us. | |
On March 15, 2013, we sold all of our 9,950,000 common shares of GOV in a public offering for net proceeds (after deducting underwriters’ discounts and commissions and expenses) of $239,576 and we realized a gain of $66,293. In connection with this public offering, on March 11, 2013, we entered into a registration agreement with GOV under which we agreed to pay all expenses incurred by GOV relating to the registration and sale of our GOV common shares. We incurred $310 of reimbursements payable to GOV pursuant to this agreement during 2013. In addition, under the registration agreement, GOV agreed to indemnify us and our officers, Trustees and controlling persons, and we agreed to indemnify GOV and its officers, trustees and controlling persons, against certain liabilities related to the public offering, including liabilities under the Securities Act of 1933, as amended, or the Securities Act. | |
SIR: SIR was formerly our 100% owned subsidiary. We are SIR’s largest shareholder and, until July 2, 2013, SIR was one of our consolidated subsidiaries. As of March 31, 2014, we owned 22,000,000 common shares of SIR, which represented approximately 44.1% of SIR’s outstanding common shares. Our former Managing Trustees and our President are also managing trustees of SIR and our Treasurer and Chief Financial Officer also serves as the treasurer and chief financial officer of SIR. In addition, one of our former Independent Trustees is an independent trustee of SIR. RMR provides management services to both us and SIR. SIR’s executive officers are officers of RMR. | |
In March 2012, SIR completed an initial public offering, or the SIR IPO. To facilitate the SIR IPO, we and SIR entered into a transaction agreement that governs our separation from and relationship with SIR. The transaction agreement provides that, among other things, (i) the current assets and liabilities of the 79 properties that we transferred to SIR, as of the time of closing of the SIR IPO, were settled between us and SIR so that we retained all pre-closing current assets and liabilities and SIR assumed all post-closing current assets and liabilities and (ii) SIR will indemnify us with respect to any liability relating to any property transferred by us to SIR, including any liability which relates to periods prior to SIR’s formation, other than the pre-closing current assets and current liabilities that we retained with respect to the 79 transferred properties. | |
In March 2013, we entered into a registration agreement with SIR, pursuant to which SIR agreed to, among other things, file a registration statement with respect to an offering of up to all of the 22,000,000 common shares of SIR that we own, and SIR filed a registration statement on Form S-3 to permit the resale by us of some or all of the common shares of SIR we own. We have not sold any of the common shares of SIR that we own pursuant to that registration statement. Under the registration agreement, we agreed to pay all expenses incurred by SIR relating to the registration and sale of the shares in an offering. We incurred and paid $636 of reimbursements to SIR pursuant to this agreement. By letter dated March 31, 2014, SIR notified us that, effective that same day, SIR had elected to terminate the registration agreement with us as a result of the removal, without cause, of all of our Trustees, which constitutes a change of control of us as provided in that agreement. The letter also noted that SIR would welcome the opportunity to meet with our new Board of Trustees, once elected, to discuss mutually beneficial arrangements regarding the registration of the shares of SIR owned by CWH. | |
AIC: We, RMR, GOV, SIR and four other companies to which RMR provides management services each currently own 12.5% of AIC, an Indiana insurance company. A majority of our former Trustees, our President and most of the trustees and directors of the other AIC shareholders currently serve on the board of directors of AIC. RMR provides management and administrative services to AIC pursuant to a management and administrative services agreement with AIC. | |
We and the shareholders of AIC have purchased property insurance providing $500,000 of coverage pursuant to an insurance program arranged by AIC and with respect to which AIC is a reinsurer of certain coverage amounts. This program currently expires in June 2014. As of March 31, 2014, we invested $5,209 in AIC since we became an equity owner of AIC in 2009. We use the equity method to account for this investment because we believe that during the relevant period we had significant influence over AIC as a majority of our former Trustees, our President and principals of our manager are also directors of AIC. We recognized a loss of $98 and income of $151 related to our investment in AIC for the three months ended March 31, 2014 and 2013, respectively. For the three months ended March 31, 2013, during which time SIR was both a shareholder of AIC and our consolidated subsidiary, our consolidated financial statements include SIR’s equity investment interest in AIC. | |
On March 25, 2014, as a result of the removal, without cause, of all of our Trustees, we underwent a change in control, as defined in the shareholders agreement among us, the other shareholders of AIC and AIC. In April 2014, as a result of this change in control and in accordance with the terms of the shareholders agreement, the other shareholders of AIC provided notice of exercise of their right to purchase the 20,000 shares of AIC we own. The aggregate proceeds we would receive if those other shareholders fully exercise their right to purchase all of the AIC shares we own would be $5,776. We expect that those other AIC shareholders will purchase from us pro rata all of the AIC shares we own, following which we will no longer own any equity interest in AIC. The purchase of any of our AIC shares will not affect our current participation in the AIC property insurance program, which is scheduled to expire in June 2014, unless renewed. | |
Indemnification: Pursuant to our declaration of trust and separate indemnification agreements, we have advanced amounts incurred for legal fees and costs on behalf of certain of our former Trustees and current officers with respect to the legal proceedings described in Part II, Item 1, “Legal Proceedings” in this Quarterly Report on Form 10-Q. Pursuant to indemnification provisions in our business and property management agreements with RMR, we have also advanced amounts incurred for legal fees and costs on behalf of RMR for claims brought against RMR in its capacity as our business and property manager with respect to certain legal proceedings described in Part II, Item 1, “Legal Proceedings” in this Quarterly Report on Form 10-Q. For the three months ended March 31, 2014 and 2013, we incurred approximately $3,870 and $3,138, respectively, in such legal fees and costs, including our costs. | |
Settlement of Certain Tenant Litigation: On March 1, 2014, pursuant to mediation, we and an affiliate of RMR agreed to terms of a settlement of a long running litigation with an unrelated third party that was a tenant, or the Tenant, of two separate properties: one property owned by us and one property owned by the RMR affiliate. This litigation arose as a result of flooding in 1999 and 2001 at both of these properties. After the flooding, Tenant filed a complaint seeking declaratory and injunctive relief providing that Tenant was no longer obligated to pay rent at the two properties in question and brought claims against CWH and the RMR affiliate, as landlords, for, among other things, breach of the covenants of quiet enjoyment and habitability. We and RMR counterclaimed, seeking damages based in part upon Tenant’s failure to pay rent and make repairs. The settlement agreement regarding this litigation provides for a payment by Tenant of $12,000 to CWH and the RMR affiliate, payable in three installments ($6,000 on June 30, 2014 and $3,000 on each of September 30, 2014 and December 31, 2014), split pro-rata between CWH and the RMR affiliate based upon the balance of the rent due under each lease. The total rent due under the CWH lease was approximately $9,200; the total rent due under the lease with the RMR affiliate was approximately $1,100. This settlement was approved by the court on May 6, 2014. |
Real_Estate_Properties_Tables
Real Estate Properties (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Real Estate Properties | ' | |||||||
Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures | ' | |||||||
Balance Sheets: | ||||||||
March 31, 2014 | December 31, 2013 | |||||||
Real estate properties | $ | 201,557 | $ | 536,552 | ||||
Acquired real estate leases | 4,943 | 6,937 | ||||||
Rents receivable | 4,207 | 14,180 | ||||||
Other assets, net | 3,970 | 15,862 | ||||||
Properties held for sale | $ | 214,677 | $ | 573,531 | ||||
Mortgage notes payable | $ | 19,688 | $ | 20,018 | ||||
Assumed real estate lease obligations | 1,419 | 2,070 | ||||||
Rent collected in advance | 859 | 4,043 | ||||||
Security deposits | 1,100 | 2,603 | ||||||
Liabilities related to properties held for sale | $ | 23,066 | $ | 28,734 | ||||
Income Statements: | ||||||||
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Rental income | $ | 7,274 | $ | 15,512 | ||||
Tenant reimbursements and other income | 522 | 1,731 | ||||||
Total revenues | 7,796 | 17,243 | ||||||
Operating expenses | 3,479 | 11,564 | ||||||
Depreciation and amortization | — | 3,953 | ||||||
General and administrative | 3 | 1,287 | ||||||
Total expenses | 3,482 | 16,804 | ||||||
Operating income | 4,314 | 439 | ||||||
Interest and other income | — | 3 | ||||||
Interest expense | (303 | ) | (448 | ) | ||||
Income (loss) from discontinued operations | $ | 4,011 | $ | (6 | ) |
Investment_in_Direct_Financing1
Investment in Direct Financing Lease (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Investment in Direct Financing Lease | ' | |||||||
Summary of carrying amount of net investment in direct financing lease | ' | |||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
Total minimum lease payments receivable | $ | 20,962 | $ | 22,986 | ||||
Estimated unguaranteed residual value of leased asset | 4,951 | 4,951 | ||||||
Unearned income | (7,945 | ) | (8,174 | ) | ||||
Net investment in direct financing lease | $ | 17,968 | $ | 19,763 |
Equity_Investments_Tables
Equity Investments (Tables) | 3 Months Ended | |||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||
Equity Investments | ' | |||||||||||||||||
Schedule of equity investments | ' | |||||||||||||||||
Ownership Percentage | Equity Investments | Equity in Earnings (Loss) | ||||||||||||||||
Three Months Ended | ||||||||||||||||||
March 31, | December 31, | March 31, | December 31, | March 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||
SIR | 44.1 | % | 44.2 | % | $ | 513,099 | $ | 512,078 | $ | 11,032 | $ | — | ||||||
GOV | 0 | % | 0 | % | — | — | — | 4,111 | ||||||||||
AIC | 12.5 | % | 12.5 | % | 5,835 | 5,913 | (98 | ) | 151 | |||||||||
$ | 518,934 | $ | 517,991 | $ | 10,934 | $ | 4,262 | |||||||||||
SIR | ' | |||||||||||||||||
Equity Investments | ' | |||||||||||||||||
Summary of balance sheet information of equity method investee | ' | |||||||||||||||||
March 31, | December 31, | |||||||||||||||||
2014 | 2013 | |||||||||||||||||
Real estate properties, net | $ | 1,573,489 | $ | 1,579,234 | ||||||||||||||
Acquired real estate leases, net | 125,530 | 129,426 | ||||||||||||||||
Cash and cash equivalents | 204,319 | 20,025 | ||||||||||||||||
Rents receivable, net | 58,462 | 55,335 | ||||||||||||||||
Other assets, net | 22,515 | 17,839 | ||||||||||||||||
Total assets | $ | 1,984,315 | $ | 1,801,859 | ||||||||||||||
Revolving credit facility | $ | 345,000 | $ | 159,000 | ||||||||||||||
Term loan | 350,000 | 350,000 | ||||||||||||||||
Mortgage notes payable | 19,232 | 27,147 | ||||||||||||||||
Assumed real estate lease obligations, net | 26,239 | 26,966 | ||||||||||||||||
Other liabilities | 41,856 | 40,055 | ||||||||||||||||
Shareholders’ equity | 1,201,988 | 1,198,691 | ||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,984,315 | $ | 1,801,859 | ||||||||||||||
Summary of income statement information of equity method investee | ' | |||||||||||||||||
Three Months Ended March 31, | ||||||||||||||||||
2014 | 2013 | |||||||||||||||||
Rental income | $ | 45,063 | $ | 37,458 | ||||||||||||||
Tenant reimbursements and other income | 7,965 | 6,402 | ||||||||||||||||
Total revenues | 53,028 | 43,860 | ||||||||||||||||
Operating expenses | 9,979 | 7,874 | ||||||||||||||||
Depreciation and amortization | 9,294 | 6,665 | ||||||||||||||||
Acquisition related costs | 238 | 533 | ||||||||||||||||
General and administrative | 5,176 | 2,719 | ||||||||||||||||
Total expenses | 24,687 | 17,791 | ||||||||||||||||
Operating income | 28,341 | 26,069 | ||||||||||||||||
Interest expense | (3,358 | ) | (3,473 | ) | ||||||||||||||
Gain on early extinguishment of debt | 243 | — | ||||||||||||||||
Income before income tax expense and equity in earnings (loss) of an investee | 25,226 | 22,596 | ||||||||||||||||
Income tax expense | (71 | ) | (40 | ) | ||||||||||||||
Equity in earnings (loss) of an investee | (97 | ) | 76 | |||||||||||||||
Net income | $ | 25,058 | $ | 22,632 | ||||||||||||||
Weighted average common shares outstanding | 49,841 | 39,283 | ||||||||||||||||
Net income per common share | $ | 0.5 | $ | 0.58 |
Cumulative_Other_Comprehensive1
Cumulative Other Comprehensive Income (Loss) (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Cumulative Other Comprehensive Income (Loss) | ' | |||||||||||||
Schedule of amounts recognized in cumulative other comprehensive income (Loss) by component | ' | |||||||||||||
Unrealized | Foreign | Equity in | ||||||||||||
Gain (Loss) | Currency | Unrealized | ||||||||||||
on Derivative | Translation | Gain (Loss) of | ||||||||||||
Instruments | Adjustments | an Investee | Total | |||||||||||
Balances as of December 31, 2013 | $ | (11,706 | ) | $ | (26,647 | ) | $ | 22 | $ | (38,331 | ) | |||
Other comprehensive income (loss) before reclassifications | (229 | ) | 10,587 | 27 | 10,385 | |||||||||
Amounts reclassified from cumulative other comprehensive income (loss) to net income | 1,229 | — | (7 | ) | 1,222 | |||||||||
Net current period other comprehensive income | 1,000 | 10,587 | 20 | 11,607 | ||||||||||
Balances as of March 31, 2014 | $ | (10,706 | ) | $ | (16,060 | ) | $ | 42 | $ | (26,724 | ) | |||
Schedule of reclassifications out of cumulative other comprehensive income (loss) | ' | |||||||||||||
Amounts Reclassifed from | ||||||||||||||
Details about Cumulative Other | Cumulative Other Comprehensive | Affected Line Items in the | ||||||||||||
Comprehensive Income (Loss) Components | Income (Loss) to Net Income | Statement of Operations | ||||||||||||
Interest rate swap contracts | $ | 1,229 | Interest expense | |||||||||||
Unrealized gains and losses on available for sale securities | (7 | ) | Equity in earnings of investees | |||||||||||
$ | 1,222 |
Income_Taxes_Tables
Income Taxes (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Income Taxes | ' | |||||||
Schedule of components of provision for income taxes | ' | |||||||
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
State | $ | 34 | $ | 163 | ||||
Foreign | 521 | 825 | ||||||
Income tax provision | $ | 555 | $ | 988 |
Fair_Value_of_Assets_and_Liabi1
Fair Value of Assets and Liabilities (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Fair Value of Assets and Liabilities | ' | |||||||||||||
Schedule of assets and liabilities measured at fair value | ' | |||||||||||||
Fair Value at Reporting Date Using | ||||||||||||||
Quoted Prices in | Significant | |||||||||||||
Active Markets for | Significant Other | Unobservable | ||||||||||||
Identical Assets | Observable Inputs | Inputs | ||||||||||||
Description | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||
Recurring Fair Value Measurements: | ||||||||||||||
Effective portion of interest rate swap contracts(1) | $ | (10,706 | ) | $ | — | $ | (10,706 | ) | $ | — | ||||
Non-Recurring Fair Value Measurements: | ||||||||||||||
Properties held for sale(2) | $ | 213,244 | $ | — | $ | — | $ | 213,244 | ||||||
(1) The fair value of our interest rate swap contracts is determined using the net discounted cash flows of the expected cash flows of each derivative based on the market based interest rate curve (level 2 inputs) and adjusted for our credit spread and the actual and estimated credit spreads of the counterparties (level 3 inputs). Although we have determined that the majority of the inputs used to value our derivatives fall within level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and the counterparties. As of March 31, 2014, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified as level 2 inputs in the fair value hierarchy. | ||||||||||||||
(2) As of March 31, 2014, we recorded a loss on asset impairment totaling $288 for one of our CBD properties (two buildings) and 13 of our suburban properties (41 buildings) to reduce the aggregate carrying value of these properties from $213,532 to their estimated fair value of $218,000, reflected in the table below, or $213,244 net of costs to sell. All of these properties were classified as held for sale as of December 31, 2013. We used current contracted sale prices (level 3 inputs) in determining the fair value of these properties. The valuation techniques and significant unobservable inputs used for our level 3 fair value measurements at March 31, 2014 were as follows: | ||||||||||||||
Description | Fair Value at | Primary | Unobservable | Range | ||||||||||
March 31, | Valuation | Inputs | (Weighted | |||||||||||
2014 | Techniques | Average) | ||||||||||||
Properties held for sale on which we recognized impairment losses | $ | 218,000 | Current Contracted Sale Prices | N/A | N/A | |||||||||
Schedule of valuation techniques and significant unobservable inputs used for level 3 fair value measurements | ' | |||||||||||||
Description | Fair Value at | Primary | Unobservable | Range | ||||||||||
March 31, | Valuation | Inputs | (Weighted | |||||||||||
2014 | Techniques | Average) | ||||||||||||
Properties held for sale on which we recognized impairment losses | $ | 218,000 | Current Contracted Sale Prices | N/A | N/A | |||||||||
Schedule of effects of interest rate derivatives on our condensed consolidated statements of operations and condensed consolidated statements of comprehensive income | ' | |||||||||||||
Three Months Ended | ||||||||||||||
March 31, | ||||||||||||||
2014 | 2013 | |||||||||||||
Balance at beginning of period | $ | (11,706 | ) | $ | (16,624 | ) | ||||||||
Amount of loss recognized in cumulative other comprehensive income | (229 | ) | (185 | ) | ||||||||||
Amount of loss reclassified from cumulative other comprehensive income into interest expense | 1,229 | 1,236 | ||||||||||||
Unrealized gain on derivative instruments | 1,000 | 1,051 | ||||||||||||
Balance at end of period | $ | (10,706 | ) | $ | (15,573 | ) | ||||||||
Fair value and carrying value of financial instruments | ' | |||||||||||||
March 31, 2014 | December 31, 2013 | |||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||
Amount | Value | Amount | Value | |||||||||||
Senior notes and mortgage notes payable | $ | 2,082,117 | $ | 2,174,291 | $ | 2,097,164 | $ | 2,143,834 | ||||||
Segment_Information_Tables
Segment Information (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Segment Information | ' | |||||||
Schedule of property level information by geographic region and property type, property square feet | ' | |||||||
As of March 31, | ||||||||
2014 | 2013 | |||||||
Square feet (in thousands): | ||||||||
CBD properties | 21,889 | 22,146 | ||||||
Suburban properties | 21,024 | 46,091 | ||||||
Total properties | 42,913 | 68,237 | ||||||
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Rental income: | ||||||||
CBD properties | $ | 110,239 | $ | 112,171 | ||||
Suburban properties | 61,801 | 99,129 | ||||||
Total properties | $ | 172,040 | $ | 211,300 | ||||
Tenant reimbursements and other income: | ||||||||
CBD properties | $ | 30,241 | $ | 31,108 | ||||
Suburban properties | 14,979 | 20,204 | ||||||
Total properties | $ | 45,220 | $ | 51,312 | ||||
NOI: | ||||||||
CBD properties | $ | 73,170 | $ | 78,985 | ||||
Suburban properties | 42,359 | 79,497 | ||||||
Total properties | $ | 115,529 | $ | 158,482 | ||||
Schedule of reconciliation of NOI to net income | ' | |||||||
Three Months Ended March 31, | ||||||||
2014 | 2013 | |||||||
Rental income | $ | 172,040 | $ | 211,300 | ||||
Tenant reimbursements and other income | 45,220 | 51,312 | ||||||
Operating expenses | (101,731 | ) | (104,130 | ) | ||||
NOI | $ | 115,529 | $ | 158,482 | ||||
NOI | $ | 115,529 | $ | 158,482 | ||||
Depreciation and amortization | (51,649 | ) | (62,570 | ) | ||||
General and administrative | (24,848 | ) | (16,663 | ) | ||||
Reversal of loss on asset impairment | 4,761 | — | ||||||
Acquisition related costs | (5 | ) | (628 | ) | ||||
Operating income | 43,788 | 78,621 | ||||||
Interest and other income | 384 | 455 | ||||||
Interest expense | (37,935 | ) | (51,896 | ) | ||||
Loss on early extinguishment of debt | — | (60,027 | ) | |||||
Gain on sale of equity investment | — | 66,293 | ||||||
Gain on issuance of shares by an equity investee | 109 | — | ||||||
Income from continuing operations before income tax expense and equity in earnings of investees | 6,346 | 33,446 | ||||||
Income tax expense | (555 | ) | (988 | ) | ||||
Equity in earnings of investees | 10,934 | 4,262 | ||||||
Income from continuing operations | 16,725 | 36,720 | ||||||
Income (loss) from discontinued operations | 4,011 | (6 | ) | |||||
Loss on asset impairment from discontinued operations | (288 | ) | (3,946 | ) | ||||
Gain on sale of properties from discontinued operations | — | 1,260 | ||||||
Income before gain on sale of properties | 20,448 | 34,028 | ||||||
Gain on sale of properties | — | 1,596 | ||||||
Net income | $ | 20,448 | $ | 35,624 |
Board_of_Trustees_Details
Board of Trustees (Details) | Mar. 25, 2014 | Feb. 18, 2014 |
item | ||
Board of Trustees | ' | ' |
Minimum holders of outstanding common shares consented to the proposal, reaching the required threshold (as a percent) | ' | 66.67% |
Number of trustees | 0 | ' |
Number of trustees serving on Board of Trustees or on an Audit Committee, Compensation Committee or Nominating and Governance Committee | 0 | ' |
Real_Estate_Properties_Details
Real Estate Properties (Details) (USD $) | 1 Months Ended | 3 Months Ended | |
In Thousands, unless otherwise specified | Jan. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 |
property | sqft | sqft | |
Real estate properties information | ' | ' | ' |
Real estate improvements | ' | $27,830 | ' |
Number of Properties Sold | 3 | ' | ' |
Property square feet | ' | 42,913,000 | 68,237,000 |
Reversal of loss on asset impairment | ' | $4,761 | ' |
CBD | ' | ' | ' |
Real estate properties information | ' | ' | ' |
Number of Real Estate Properties Held for Sale | ' | 1 | ' |
Number of buildings held for sale | ' | 2 | ' |
Number of Real Estate Properties Held for Use | ' | 2 | ' |
Number of Buildings Held for Use | ' | 2 | ' |
Suburban property | ' | ' | ' |
Real estate properties information | ' | ' | ' |
Number of Real Estate Properties Held for Sale | ' | 13 | ' |
Number of buildings held for sale | ' | 41 | ' |
Number of Real Estate Properties Held for Use | ' | 29 | ' |
Number of Buildings Held for Use | ' | 65 | ' |
CBD and suburban properties | ' | ' | ' |
Real estate properties information | ' | ' | ' |
Property square feet, held for sale | ' | 2,784,098 | ' |
Property square feet | ' | 5,641,450 | ' |
Real_Estate_Properties_Details1
Real Estate Properties (Details 2) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Balance Sheets: | ' | ' |
Real estate properties | $5,915,516 | $5,537,165 |
Acquired real estate leases | 244,634 | 255,812 |
Rents receivable | 239,766 | 223,769 |
Other assets, net | 206,967 | 188,675 |
Properties held for sale | 214,677 | 573,531 |
Mortgage notes payable | 898,804 | 914,510 |
Assumed real estate lease obligations | 33,064 | 33,935 |
Rent collected in advance | 29,618 | 27,553 |
Security deposits | 13,682 | 11,976 |
Liabilities related to properties held for sale | 23,066 | 28,734 |
Real estate properties held for sale | ' | ' |
Balance Sheets: | ' | ' |
Real estate properties | 201,557 | 536,552 |
Acquired real estate leases | 4,943 | 6,937 |
Rents receivable | 4,207 | 14,180 |
Other assets, net | 3,970 | 15,862 |
Properties held for sale | 214,677 | 573,531 |
Mortgage notes payable | 19,688 | 20,018 |
Assumed real estate lease obligations | 1,419 | 2,070 |
Rent collected in advance | 859 | 4,043 |
Security deposits | 1,100 | 2,603 |
Liabilities related to properties held for sale | $23,066 | $28,734 |
Real_Estate_Properties_Details2
Real Estate Properties (Details 3) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Statements of Operations: | ' | ' |
Rental income | $172,040 | $211,300 |
Tenant reimbursements and other income | 45,220 | 51,312 |
Total revenues | 217,260 | 262,612 |
Operating expenses | 101,731 | 104,130 |
Depreciation and amortization | 51,649 | 62,570 |
General and administrative | 24,848 | 16,663 |
Total expenses | 173,472 | 183,991 |
Operating income | 43,788 | 78,621 |
Interest and other income | 384 | 455 |
Interest expense | -37,935 | -51,896 |
Income (loss) from discontinued operations | 4,011 | -6 |
Discontinued operations, properties sold or held for sale | ' | ' |
Statements of Operations: | ' | ' |
Rental income | 7,274 | 15,512 |
Tenant reimbursements and other income | 522 | 1,731 |
Total revenues | 7,796 | 17,243 |
Operating expenses | 3,479 | 11,564 |
Depreciation and amortization | ' | 3,953 |
General and administrative | 3 | 1,287 |
Total expenses | 3,482 | 16,804 |
Operating income | 4,314 | 439 |
Interest and other income | ' | 3 |
Interest expense | -303 | -448 |
Income (loss) from discontinued operations | $4,011 | ($6) |
Investment_in_Direct_Financing2
Investment in Direct Financing Lease (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Investment in Direct Financing Lease | ' | ' |
Percentage of term exceeding useful life of one office tower | 75.00% | ' |
Total minimum lease payments receivable | $20,962 | $22,986 |
Estimated unguaranteed residual value of leased asset | 4,951 | 4,951 |
Unearned income | -7,945 | -8,174 |
Net investment in direct financing lease | 17,968 | 19,763 |
Allowance for losses related to our direct financing lease | $0 | $0 |
Equity_Investments_Details
Equity Investments (Details) (USD $) | 3 Months Ended | 0 Months Ended | 3 Months Ended | 3 Months Ended | 3 Months Ended | ||||||||
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Jul. 02, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Jul. 02, 2013 | Mar. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 |
SIR | SIR | SIR | SIR | GOV | GOV | GOV | AIC | AIC | AIC | ||||
Maximum | |||||||||||||
Equity Investments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Equity method investments, ownership percentage | ' | ' | ' | ' | 44.10% | 44.20% | 50.00% | ' | 0.00% | 0.00% | 12.50% | ' | 12.50% |
Equity Investments | $518,934 | ' | $517,991 | ' | $513,099 | $512,078 | ' | ' | ' | ' | $5,835 | ' | $5,913 |
Equity in Earnings (Loss) | 10,934 | 4,262 | ' | ' | 11,032 | ' | ' | 4,111 | ' | ' | -98 | 151 | ' |
Equity investments, common shares owned | ' | ' | ' | ' | 22,000,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Equity investments, market value based on quoted market prices | ' | ' | ' | ' | 665,940 | ' | ' | ' | ' | ' | ' | ' | ' |
Equity investments, quoted market price of common share (in dollars per share) | ' | ' | ' | ' | $30.27 | ' | ' | ' | ' | ' | ' | ' | ' |
Market value of common shares exceeding carrying value | ' | ' | ' | 17,609 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amortization of the difference between carrying value and share of underlying equity | ' | ' | ' | '34 years | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash distributions | ' | ' | ' | ' | $10,120 | ' | ' | ' | ' | ' | ' | ' | ' |
Equity_Investments_Details_2
Equity Investments (Details 2) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||||
Balance Sheets: | ' | ' | ' | ' |
Real estate properties, net | $4,980,740 | $4,642,106 | ' | ' |
Acquired real estate leases, net | 244,634 | 255,812 | ' | ' |
Cash and cash equivalents | 177,555 | 222,449 | 48,692 | 102,219 |
Rents receivable, net | 239,766 | 223,769 | ' | ' |
Other assets, net | 206,967 | 188,675 | ' | ' |
Total assets | 6,600,714 | 6,646,434 | ' | ' |
Revolving credit facility | 235,000 | 235,000 | ' | ' |
Mortgage notes payable | 898,804 | 914,510 | ' | ' |
Assumed real estate lease obligations, net | 33,064 | 33,935 | ' | ' |
Other liabilities | 136,482 | 165,855 | ' | ' |
Total liabilities and shareholders' equity | 6,600,714 | 6,646,434 | ' | ' |
SIR | ' | ' | ' | ' |
Balance Sheets: | ' | ' | ' | ' |
Real estate properties, net | 1,573,489 | 1,579,234 | ' | ' |
Acquired real estate leases, net | 125,530 | 129,426 | ' | ' |
Cash and cash equivalents | 204,319 | 20,025 | ' | ' |
Rents receivable, net | 58,462 | 55,335 | ' | ' |
Other assets, net | 22,515 | 17,839 | ' | ' |
Total assets | 1,984,315 | 1,801,859 | ' | ' |
Revolving credit facility | 345,000 | 159,000 | ' | ' |
Term loan | 350,000 | 350,000 | ' | ' |
Mortgage notes payable | 19,232 | 27,147 | ' | ' |
Assumed real estate lease obligations, net | 26,239 | 26,966 | ' | ' |
Other liabilities | 41,856 | 40,055 | ' | ' |
Shareholders' equity | 1,201,988 | 1,198,691 | ' | ' |
Total liabilities and shareholders' equity | $1,984,315 | $1,801,859 | ' | ' |
Equity_Investments_Details_3
Equity Investments (Details 3) (USD $) | 3 Months Ended | 1 Months Ended | ||||
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Apr. 30, 2014 |
SIR | SIR | AIC | AIC | |||
item | Subsequent Event | |||||
Income Statements: | ' | ' | ' | ' | ' | ' |
Rental income | $172,040 | $211,300 | $45,063 | $37,458 | ' | ' |
Tenant reimbursements and other income | 45,220 | 51,312 | 7,965 | 6,402 | ' | ' |
Total revenues | 217,260 | 262,612 | 53,028 | 43,860 | ' | ' |
Operating expenses | 101,731 | 104,130 | 9,979 | 7,874 | ' | ' |
Depreciation and amortization | ' | ' | 9,294 | 6,665 | ' | ' |
Acquisition related costs | ' | ' | 238 | 533 | ' | ' |
General and administrative | 24,848 | 16,663 | 5,176 | 2,719 | ' | ' |
Total expenses | 173,472 | 183,991 | 24,687 | 17,791 | ' | ' |
Operating income | 43,788 | 78,621 | 28,341 | 26,069 | ' | ' |
Interest expense | -37,935 | -51,896 | -3,358 | -3,473 | ' | ' |
Gain on extinguishment of debt | ' | -60,027 | 243 | ' | ' | ' |
Income from continuing operations before income tax expense and equity in earnings of investees | 6,346 | 33,446 | 25,226 | 22,596 | ' | ' |
Income tax expense | -555 | -988 | -71 | -40 | ' | ' |
Equity in earnings (loss) of an investee | 10,934 | 4,262 | -97 | 76 | ' | ' |
Net income | 20,448 | 35,624 | 25,058 | 22,632 | ' | ' |
Weighted average common shares outstanding | ' | ' | 49,841,000 | 39,283,000 | ' | ' |
Per common share: | ' | ' | ' | ' | ' | ' |
Net income per common share (in dollars per share) | ' | ' | $0.50 | $0.58 | ' | ' |
Amount invested in equity investee | ' | ' | ' | ' | 5,209 | ' |
Combined carrying value of equity method investments | ' | ' | ' | ' | 5,835 | ' |
Number of other companies which are shareholders of related party | ' | ' | ' | ' | 4 | ' |
Equity method investments, ownership percentage | ' | ' | 44.10% | ' | 12.50% | ' |
Equity investments, common shares sold | ' | ' | ' | ' | ' | 20,000 |
Equity investments, proceeds from sale | ' | ' | ' | ' | ' | $5,776 |
Real_Estate_Mortgages_Receivab1
Real Estate Mortgages Receivable (Details) (USD $) | 1 Months Ended | |||
In Thousands, unless otherwise specified | Jan. 31, 2013 | Apr. 30, 2012 | Mar. 31, 2014 | Dec. 31, 2013 |
property | ||||
Real Estate Mortgages Receivable | ' | ' | ' | ' |
Total real estate mortgage receivable included in other assets, carrying value | ' | ' | $8,107 | $8,107 |
Interest rate on real estate mortgage receivable (as a percent) | 6.00% | 6.00% | ' | ' |
Number of properties sold or agreed to be sold | 3 | ' | ' | ' |
Number of buildings sold | 18 | ' | ' | ' |
Mortgage financing related to sale of suburban property | $7,688 | $419 | ' | ' |
Shareholders_Equity_Details
Shareholders' Equity (Details) (USD $) | 0 Months Ended | 0 Months Ended | 3 Months Ended | 0 Months Ended | 0 Months Ended | ||||||||||||
In Thousands, except Share data, unless otherwise specified | Mar. 25, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 07, 2014 | Feb. 07, 2014 | 7-May-14 | Apr. 07, 2014 | Mar. 25, 2014 | Feb. 15, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Feb. 15, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Feb. 21, 2014 | Jan. 28, 2014 | Mar. 25, 2014 |
RMR | RMR | RMR | RMR | Equity compensation plan | Series D | Series D | Series D | Series E | Series E | Series E | Common Shares | Common Shares | Common Shares | ||||
Subsequent Event | Subsequent Event | Officers and employees | Trustees | Equity compensation plan | |||||||||||||
RMR | trustee | Officers and employees | |||||||||||||||
RMR | |||||||||||||||||
Shareholders' Equity | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Common shares issued | ' | ' | ' | 10,625 | 12,187 | 11,275 | 11,410 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Shares of beneficial interest granted | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,000 | ' |
Par value of shares of beneficial interest (in dollars per share) | ' | $0.01 | $0.01 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.01 | ' |
Price per common share (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $23.46 | ' |
Number of former trustees to whom common shares granted | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2 | ' |
Shares issued | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 130,914 |
Compensation expense | ' | ' | ' | ' | ' | ' | ' | $3,412 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Cash distributions paid on preferred shares (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | $0.41 | ' | ' | $0.45 | ' | ' | ' | ' | ' |
Distribution paid or declared on preferred shares | 0 | ' | ' | ' | ' | ' | ' | ' | 6,167 | ' | ' | 4,984 | ' | ' | ' | ' | ' |
Additional distributions on common stock declared (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0.25 | ' | ' |
Distributions paid or declared on common shares | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $29,597 | ' | ' |
Preferred shares outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | 15,180,000 | 15,180,000 | ' | 11,000,000 | 11,000,000 | ' | ' | ' |
Liquidation preference (in dollars per share) | ' | ' | ' | ' | ' | ' | ' | ' | ' | $25 | ' | ' | ' | ' | ' | ' | ' |
Percentage of average closing market price of the entity's common stock based on which ratio for conversion of preferred shares into common shares is determined | ' | ' | ' | ' | ' | ' | ' | ' | ' | 98.00% | ' | ' | ' | ' | ' | ' | ' |
Number of consecutive trading days considered for calculating the average of the closing sale prices of the common shares | ' | ' | ' | ' | ' | ' | ' | ' | ' | '5 days | ' | ' | ' | ' | ' | ' | ' |
Cumulative_Other_Comprehensive2
Cumulative Other Comprehensive Income (Loss) (Details) (USD $) | 3 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2014 |
Amounts recognized in cumulative other comprehensive income (Loss) by component | ' |
Balances at beginning of period | ($38,331) |
Other comprehensive income (loss) before reclassifications | 10,385 |
Amounts reclassified from cumulative other comprehensive (loss) income to net loss | 1,222 |
Net current period other comprehensive income (loss) | 11,607 |
Balances at end of period | -26,724 |
Unrealized Gain (Loss) on Derivative Instruments | ' |
Amounts recognized in cumulative other comprehensive income (Loss) by component | ' |
Balances at beginning of period | -11,706 |
Other comprehensive income (loss) before reclassifications | -229 |
Amounts reclassified from cumulative other comprehensive (loss) income to net loss | 1,229 |
Net current period other comprehensive income (loss) | 1,000 |
Balances at end of period | -10,706 |
Foreign Currency Translation Adjustments | ' |
Amounts recognized in cumulative other comprehensive income (Loss) by component | ' |
Balances at beginning of period | -26,647 |
Other comprehensive income (loss) before reclassifications | 10,587 |
Net current period other comprehensive income (loss) | 10,587 |
Balances at end of period | -16,060 |
Equity in Unrealized Gain (Loss) of an Investee | ' |
Amounts recognized in cumulative other comprehensive income (Loss) by component | ' |
Balances at beginning of period | 22 |
Other comprehensive income (loss) before reclassifications | 27 |
Amounts reclassified from cumulative other comprehensive (loss) income to net loss | -7 |
Net current period other comprehensive income (loss) | 20 |
Balances at end of period | $42 |
Cumulative_Other_Comprehensive3
Cumulative Other Comprehensive Income (Loss) (Details 2) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Reclassifications out of cumulative other comprehensive income (Loss) | ' | ' |
Interest expenses | $37,935 | $51,896 |
Equity in earnings of investees | -10,934 | -4,262 |
Total reclassifications | -1,222 | ' |
Cumulative Other Comprehensive Income (Loss) to Net Income | ' | ' |
Reclassifications out of cumulative other comprehensive income (Loss) | ' | ' |
Total reclassifications | 1,222 | ' |
Unrealized gains and losses on available for sale securities | ' | ' |
Reclassifications out of cumulative other comprehensive income (Loss) | ' | ' |
Total reclassifications | 7 | ' |
Unrealized gains and losses on available for sale securities | Cumulative Other Comprehensive Income (Loss) to Net Income | ' | ' |
Reclassifications out of cumulative other comprehensive income (Loss) | ' | ' |
Equity in earnings of investees | -7 | ' |
Interest rate swap contracts | Cumulative Other Comprehensive Income (Loss) to Net Income | ' | ' |
Reclassifications out of cumulative other comprehensive income (Loss) | ' | ' |
Interest expenses | $1,229 | ' |
Indebtedness_Details
Indebtedness (Details) (USD $) | 3 Months Ended | 3 Months Ended | 3 Months Ended | |||||||
In Thousands, unless otherwise specified | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 |
Real estate properties held for sale | Real estate properties held for sale | Unsecured revolving credit facility, due October 2015 | Unsecured revolving credit facility, due October 2015 | Unsecured term loan, due December 2016 | Unsecured term loan, due December 2016 | Mortgage notes maturing from 2014 through 2026 | Mortgage Notes Payable, due 2014 at 4.95% | |||
property | property | |||||||||
Indebtedness | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Prepayment of debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | $11,988 |
Outstanding indebtedness | ' | ' | ' | ' | ' | ' | 500,000 | ' | ' | ' |
Maximum borrowing capacity | ' | ' | ' | ' | 750,000 | ' | ' | ' | ' | ' |
Number of calendar days in forbearance period following the replacement of Board of Trustees | '21 days | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Minimum percentage of maintenance of net cash proceeds received from asset dispositions | 80.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Variable rate basis | ' | ' | ' | ' | 'LIBOR | ' | 'LIBOR | ' | ' | ' |
Basis points on variable rate (as a percent) | ' | ' | ' | ' | 1.50% | ' | 1.85% | ' | ' | ' |
Facility fee of lending commitments under our revolving credit facility (as a percent) | ' | ' | ' | ' | 0.35% | ' | ' | ' | ' | ' |
Interest rate payable (as a percent) | ' | ' | ' | ' | 1.70% | ' | 2.00% | ' | ' | ' |
Average interest rate (as a percent) | ' | ' | ' | ' | 1.70% | 1.70% | 2.00% | 2.10% | ' | ' |
Addition in prevailing interest rate (as a percent) | ' | ' | ' | ' | 4.00% | ' | 4.00% | ' | ' | ' |
Amount outstanding | ' | ' | ' | ' | 235,000 | ' | ' | ' | ' | ' |
Number of Real Estate Properties Secured by Mortgage | ' | ' | 2 | ' | ' | ' | ' | ' | 12 | ' |
Number of buildings secured by mortgage | ' | ' | 3 | ' | ' | ' | ' | ' | 17 | ' |
Cost of properties mortgaged | 5,915,516 | 5,537,165 | 201,557 | 536,552 | ' | ' | ' | ' | 1,250,900 | ' |
Mortgaged properties aggregate net book value | 4,980,740 | 4,642,106 | ' | ' | ' | ' | ' | ' | 1,087,104 | ' |
Mortgage notes payable, net | $898,804 | $914,510 | $19,688 | $20,018 | ' | ' | ' | ' | $898,804 | ' |
Income_Taxes_Details
Income Taxes (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Provision for income taxes | ' | ' |
State | $34 | $163 |
Foreign | 521 | 825 |
Income tax provision | $555 | $988 |
Fair_Value_of_Assets_and_Liabi2
Fair Value of Assets and Liabilities (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 |
Nonrecurring Fair Value Measurements: | ' | ' | ' |
Properties held for sale | $4,980,740 | ' | $4,642,106 |
Effects of interest rate derivatives on our consolidated statements of operations and consolidated statements of comprehensive income (loss) | ' | ' | ' |
Unrealized gain on derivative instruments | 1,000 | 1,051 | ' |
CBD Office | ' | ' | ' |
Nonrecurring Fair Value Measurements: | ' | ' | ' |
Loss on asset impairment | 288 | ' | ' |
Interest Rate Swap | ' | ' | ' |
Recurring Fair Value Measurements: | ' | ' | ' |
Interest rate swap agreements qualifying as cash flow hedges used for hedging mortgage note payable | 172,822 | ' | ' |
Derivative, variable rate basis | 'LIBOR | ' | ' |
Interest Rate Swap | Cash Flow Hedges | ' | ' | ' |
Recurring Fair Value Measurements: | ' | ' | ' |
Effective portion of interest rate swap contracts | -10,706 | -15,573 | ' |
Nonrecurring Fair Value Measurements: | ' | ' | ' |
Increase (Decrease) in fair value of interest rate cash flow hedges | 1,000 | 1,051 | ' |
Effects of interest rate derivatives on our consolidated statements of operations and consolidated statements of comprehensive income (loss) | ' | ' | ' |
Balance at beginning of period | -11,706 | -16,624 | ' |
Amount of loss recognized in cumulative other comprehensive income | -229 | -185 | ' |
Amount of loss reclassified from cumulative other comprehensive income into interest expense | 1,229 | 1,236 | ' |
Unrealized gain on derivative instruments | 1,000 | 1,051 | ' |
Balance at end of period | -10,706 | -15,573 | ' |
Reclassification from cumulative other comprehensive income (loss) into interest expense, over the next 12 months | 4,916 | ' | ' |
Recurring | Total Fair value | ' | ' | ' |
Recurring Fair Value Measurements: | ' | ' | ' |
Effective portion of interest rate swap contracts | -10,706 | ' | ' |
Effects of interest rate derivatives on our consolidated statements of operations and consolidated statements of comprehensive income (loss) | ' | ' | ' |
Balance at end of period | -10,706 | ' | ' |
Recurring | Fair Value at Reporting Date Using Significant Other Observable Inputs (Level 2) | ' | ' | ' |
Recurring Fair Value Measurements: | ' | ' | ' |
Effective portion of interest rate swap contracts | -10,706 | ' | ' |
Effects of interest rate derivatives on our consolidated statements of operations and consolidated statements of comprehensive income (loss) | ' | ' | ' |
Balance at end of period | -10,706 | ' | ' |
Nonrecurring | Carrying Amount | Suburban Office Industrial and Other | ' | ' | ' |
Nonrecurring Fair Value Measurements: | ' | ' | ' |
Properties held for sale | 213,532 | ' | ' |
Nonrecurring | Total Fair value | ' | ' | ' |
Nonrecurring Fair Value Measurements: | ' | ' | ' |
Properties held for sale | 213,244 | ' | ' |
Nonrecurring | Total Fair value | Suburban Office Industrial and Other | ' | ' | ' |
Nonrecurring Fair Value Measurements: | ' | ' | ' |
Properties held for sale | 213,244 | ' | ' |
Nonrecurring | Fair Value at Reporting Date Using Significant Unobservable Inputs (Level 3) | ' | ' | ' |
Nonrecurring Fair Value Measurements: | ' | ' | ' |
Properties held for sale | $213,244 | ' | ' |
Nonrecurring | Fair Value at Reporting Date Using Significant Unobservable Inputs (Level 3) | Suburban | ' | ' | ' |
Nonrecurring Fair Value Measurements: | ' | ' | ' |
Number of Available for Sale Real Estate Properties Held for Sale Expected to Sell within One Year | 13 | ' | ' |
Number of Available for Sale Real Estate buildings Held for Sale Expected to Sell within One Year | 41 | ' | ' |
Nonrecurring | Fair Value at Reporting Date Using Significant Unobservable Inputs (Level 3) | CBD | ' | ' | ' |
Nonrecurring Fair Value Measurements: | ' | ' | ' |
Number of Available for Sale Real Estate Properties Held for Sale Expected to Sell within One Year | 1 | ' | ' |
Number of Available for Sale Real Estate buildings Held for Sale Expected to Sell within One Year | 2 | ' | ' |
Fair_Value_of_Assets_and_Liabi3
Fair Value of Assets and Liabilities (Details 2) (Properties held for sale for which we recognized impairment losses, Current Contracted Sale Prices, Level 3, USD $) | Mar. 31, 2014 |
In Thousands, unless otherwise specified | |
Properties held for sale for which we recognized impairment losses | Current Contracted Sale Prices | Level 3 | ' |
Fair Value of Assets and Liabilities | ' |
Fair value of assets | $218,000 |
Fair_Value_of_Assets_and_Liabi4
Fair Value of Assets and Liabilities (Details 3) (USD $) | 3 Months Ended | ||||
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 |
Total rents | Carrying Amount | Carrying Amount | Fair Value | Fair Value | |
Credit concentration | |||||
Fair value of financial instruments | ' | ' | ' | ' | ' |
Senior notes and mortgage notes payable | ' | $2,082,117 | $2,097,164 | $2,174,291 | $2,143,834 |
Concentration risk, percentage | 3.00% | ' | ' | ' | ' |
Earnings_Per_Common_Share_Deta
Earnings Per Common Share (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Common Stock | ' |
Common shares from conversion of preferred shares | 7,298,165 |
Series D Convertible Preferred Shares | ' |
Common shares from conversion of preferred shares | 15,180,000 |
Preferred Stock Conversion Ratio Percentage | '0.98 |
Liquidation preference (in dollars per share) | $25 |
Number of consecutive trading days considered for calculating the average of the closing sale prices of the common shares | '5 days |
Segment_Information_Details
Segment Information (Details) (USD $) | 3 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 |
item | sqft | ||
sqft | |||
Segment information | ' | ' | ' |
Number of reportable segments | 2 | ' | ' |
Square feet | 42,913,000 | 68,237,000 | ' |
Rental income | $172,040 | $211,300 | ' |
Tenant reimbursements and other income | 45,220 | 51,312 | ' |
NOI | 115,529 | 158,482 | ' |
Investment in properties, net of accumulated depreciation | 4,980,740 | ' | 4,642,106 |
Minimum | ' | ' | ' |
Segment information | ' | ' | ' |
Percentage of CBD and suburban properties that are office properties | 90.00% | ' | ' |
CBD Properties | ' | ' | ' |
Segment information | ' | ' | ' |
Number of Real Estate Properties | 40 | ' | ' |
Number of buildings | 53 | ' | ' |
Square feet | 21,889,000 | 22,146,000 | ' |
Rental income | 110,239 | 112,171 | ' |
Tenant reimbursements and other income | 30,241 | 31,108 | ' |
NOI | 73,170 | 78,985 | ' |
Investment in properties, net of accumulated depreciation | 3,072,571 | ' | ' |
CBD Properties | Australia | ' | ' | ' |
Segment information | ' | ' | ' |
Investment in properties, net of accumulated depreciation | 146,892 | ' | ' |
Suburban Properties | ' | ' | ' |
Segment information | ' | ' | ' |
Number of Real Estate Properties | 116 | ' | ' |
Number of buildings | 209 | ' | ' |
Square feet | 21,024,000 | 46,091,000 | ' |
Rental income | 61,801 | 99,129 | ' |
Tenant reimbursements and other income | 14,979 | 20,204 | ' |
NOI | 42,359 | 79,497 | ' |
Investment in properties, net of accumulated depreciation | 1,908,169 | ' | ' |
Suburban Properties | Australia | ' | ' | ' |
Segment information | ' | ' | ' |
Investment in properties, net of accumulated depreciation | $92,284 | ' | ' |
Segment_Information_Details_2
Segment Information (Details 2) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Segment Information | ' | ' |
Rental income | $172,040 | $211,300 |
Tenant reimbursements and other income | 45,220 | 51,312 |
Operating expenses | -101,731 | -104,130 |
NOI | 115,529 | 158,482 |
Reconciliation of NOI to net income | ' | ' |
NOI | 115,529 | 158,482 |
Depreciation and amortization | -51,649 | -62,570 |
General and administrative | -24,848 | -16,663 |
Reversal of loss on asset impairment | 4,761 | ' |
Acquisition related costs | -5 | -628 |
Operating income | 43,788 | 78,621 |
Interest and other income | 384 | 455 |
Interest expense | -37,935 | -51,896 |
Loss on early extinguishment of debt | ' | -60,027 |
Gain on sale of equity investment | ' | 66,293 |
Gain on issuance of shares by an equity investee | 109 | ' |
Income from continuing operations before income tax expense and equity in earnings of investees | 6,346 | 33,446 |
Income tax expense | -555 | -988 |
Equity in earnings of investees | 10,934 | 4,262 |
Income from continuing operations | 16,725 | 36,720 |
Income (loss) from discontinued operations | 4,011 | -6 |
Loss on asset impairment from discontinued operations | -288 | -3,946 |
Gain on sale of properties from discontinued operations | ' | 1,260 |
Income before gain on sale of properties | 20,448 | 34,028 |
Gain on sale of properties | ' | 1,596 |
Net income | $20,448 | $35,624 |
Related_Person_Transactions_De
Related Person Transactions (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2012 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 02, 2014 | Mar. 31, 2014 | Apr. 30, 2014 | Mar. 02, 2014 | Jan. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | 7-May-14 | Mar. 02, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 15, 2013 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Apr. 30, 2014 | Mar. 31, 2014 | Mar. 31, 2014 |
In Thousands, except Share data, unless otherwise specified | item | SIR | SIR | SIR | Parent | Amended Agreement | Amended Agreement | RMR | RMR | RMR | RMR | RMR | RMR | RMR Australia | RMR Australia | GOV | GOV | GOV | AIC | AIC | AIC | CWH | CWH and an RMR affiliate | |
property | item | Subsequent Event | item | item | Subsequent Event | Parent | item | Subsequent Event | item | |||||||||||||||
item | ||||||||||||||||||||||||
Related person transactions | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of employees | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of agreements | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of entities independent trustees serving as independent directors or independent trustees of other public companies to which related party provides management services | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Business management fees | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $15,378 | $11,905 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Portion of shares issued in payment of an incentive management fee | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 34,222 | ' | 11,275 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Base business management fee payable in common shares (as a percent) | ' | ' | ' | ' | ' | ' | 10.00% | 10.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Property management and construction supervision fees | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,970 | 8,376 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Business and property management fees | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 320 | 430 | ' | ' | ' | ' | ' | ' | ' | ' |
Payments to MacarthurCook Fund Management Limited | ' | ' | ' | ' | ' | ' | ' | ' | ' | 161 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Period of prior written notice for termination of either agreement by entity or related party | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '60 days | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ownership percentage prior to transaction | ' | ' | ' | 100.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | ' | ' | ' | ' | ' | ' |
Shares sold | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 9,950,000 | ' | ' | ' | ' | ' | ' | ' |
Net proceeds received on sale of common shares | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 239,576 | ' | ' | ' | ' | ' | ' | ' |
Realized gain on sale of common shares | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 66,293 | ' | ' | ' | ' | ' | ' | ' |
Amount of reimbursements payable to related party | 15,793 | 9,385 | ' | 636 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 310 | ' | ' | ' | ' | ' |
Less than wholly owned subsidiary, common shares owned | ' | ' | ' | 22,000,000 | 22,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Equity method investments, ownership percentage | ' | ' | ' | 44.10% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 12.50% | ' | ' | ' | ' |
Number of properties sold or transferred or agreed to be sold or transferred | ' | ' | 79 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of other companies which are shareholders of related party | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4 | ' | ' | ' | ' |
Coverage amount for property insurance | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 500,000 | ' | ' | ' | ' |
Amount invested in equity investee | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5,209 | ' | ' | ' | ' |
Income (loss) on equity investment | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -98 | 151 | ' | ' | ' |
Equity investments, common shares sold | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 20,000 | ' | ' |
Equity investments, proceeds from sale | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5,776 | ' | ' |
Legal fees and costs | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,870 | 3,138 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of properties acquired or agreed to be acquired | ' | ' | ' | ' | ' | 1 | ' | ' | 2 | ' | ' | ' | ' | 1 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Settlement amount | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 12,000 |
Number of installments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3 |
Installment amount receivable on June 30, 2014 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 6,000 |
Each installment amount receivable after first installment | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,000 |
Rent due under lease | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1,100 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $9,200 | ' |