Second Quarter Net Income of $1.3 Million,
or $0.03 Per Share
Second Quarter Normalized FFO of $67.2
Million, or $1.40 Per Share
Second Quarter CAD of $45.5 Million, or
$0.95 Per Share
Second Quarter Same Property Cash Basis NOI
Increased 2.5%
Completed 642,000 Square Feet of Leasing in
the Second Quarter for a 3.9% Roll-Up in Rents
Office Properties Income Trust (Nasdaq: OPI) today announced its
financial results for the quarter and six months ended June 30,
2020.
David Blackman, President and Chief Executive
Officer of OPI, made the following statement:
“OPI delivered solid results for the 2020
second quarter, exceeding consensus estimates and our expectations.
Highlights include completing 642,000 square feet of leasing with a
3.9% roll-up in rents for a weighted average lease term of more
than six years, a year over year increase in same property cash
basis NOI of 2.5%, a CAD dividend payout ratio of 57.9% and
continued strong collection of cash rents. To date, we have granted
only $2.5 million of deferrals to 23 tenants for the months of
April through September, which represents only 88 basis points of
contractual rents over that period. We also issued an aggregate of
$162 million of 30 year senior unsecured notes in June and July
and, in July, we entered an agreement to sell a four property
business park for $25.4 million and an agreement to purchase an
office property for $38.1 million under our capital recycling
program. All of this is against the back drop of a strained economy
from the COVID-19 pandemic. However, the successful completion of
OPI’s $1 billion disposition program in 2019, our relatively low
leveraged balance sheet and diverse portfolio of high quality
tenants better positions OPI to weather these difficult economic
conditions.
As a result, we remain optimistic that our
business will continue to perform well throughout the remainder of
2020."
Results for the Quarter Ended June 30, 2020:
Net income for the quarter ended June 30, 2020 was $1.3 million,
or $0.03 per diluted share, compared to a net loss of $64.8
million, or $1.35 per diluted share, for the quarter ended June 30,
2019. Net income for the quarter ended June 30, 2020 includes a
$0.6 million, or $0.01 per diluted share, loss on early
extinguishment of debt. Net loss for the quarter ended June 30,
2019 includes a $66.1 million, or $1.38 per diluted share,
unrealized loss on equity securities related to OPI's former
investment in The RMR Group Inc., or RMR Inc., which OPI sold on
July 1, 2019, and a $2.4 million, or $0.05 per diluted share, loss
on impairment of real estate, partially offset by certain net
revenue events recorded during the quarter ended June 30, 2019
totaling $8.2 million, or $0.17 per diluted share, including a $7.4
million early termination fee related to a single tenant property
located in San Jose, CA. The weighted average number of diluted
common shares outstanding was 48.1 million for the quarter ended
June 30, 2020 and 48.0 million for the quarter ended June 30,
2019.
Normalized funds from operations, or Normalized FFO, and cash
available for distribution, or CAD, for the quarter ended June 30,
2020 were $67.2 million, or $1.40 per diluted share, and $45.5
million, or $0.95 per diluted share, respectively, compared to
Normalized FFO and CAD for the quarter ended June 30, 2019 of $79.3
million, or $1.65 per diluted share, and $56.7 million, or $1.18
per diluted share, respectively.
Reconciliations of net income (loss) determined in accordance
with U.S. generally accepted accounting principles, or GAAP, to
funds from operations, or FFO, Normalized FFO and CAD for the
quarters ended June 30, 2020 and 2019 appear later in this press
release.
Results for the Six Months Ended June 30, 2020:
Net income for the six months ended June 30, 2020 was $12.1
million, or $0.25 per diluted share, compared to a net loss of
$30.8 million, or $0.64 per diluted share, for the six months ended
June 30, 2019. Net income for the six months ended June 30, 2020
includes a $10.8 million, or $0.22 per diluted share, gain on sale
of real estate, partially offset by a $3.8 million, or $0.08 per
diluted share, loss on early extinguishment of debt. Net loss for
the six months ended June 30, 2019 includes a $44.0 million, or
$0.92 per diluted share, unrealized loss on equity securities
related to OPI's former investment in RMR Inc., which OPI sold on
July 1, 2019, and a $5.6 million, or $0.12 per diluted share, loss
on impairment of real estate, partially offset by a $22.1 million,
or $0.46 per diluted share, net gain on sale of real estate and
certain net revenue events totaling $8.2 million, or $0.17 per
diluted share, including a $7.4 million early termination fee
related to a single tenant property located in San Jose, CA. The
weighted average number of diluted common shares outstanding was
48.1 million for the six months ended June 30, 2020 and 48.0
million for the six months ended June 30, 2019.
Normalized FFO and CAD for the six months ended June 30, 2020
were $134.7 million, or $2.80 per diluted share, and $92.9 million,
or $1.93 per diluted share, respectively, compared to Normalized
FFO and CAD for the six months ended June 30, 2019 of $152.5
million, or $3.17 per diluted share, and $110.2 million, or $2.29
per diluted share, respectively.
Reconciliations of net income (loss) determined in accordance
with GAAP to FFO, Normalized FFO and CAD for the six months ended
June 30, 2020 and 2019 appear later in this press release.
Leasing, Occupancy and Same Property Results:
During the quarter ended June 30, 2020, OPI entered new and
renewal leases for an aggregate of 642,000 rentable square feet at
weighted (by rentable square feet) average rents that were 3.9%
above prior rents for the same space. The weighted (by rentable
square feet) average lease term for these leases was approximately
6.1 years and leasing concessions and capital commitments were
$16.5 million, or $4.25 per square foot, per lease year.
As of June 30, 2020, 91.7% of OPI’s total rentable square feet
was leased, compared to 91.5% as of March 31, 2020 and 91.6% as of
June 30, 2019. Occupancy for properties owned continuously since
April 1, 2019, or same properties, was 92.8% as of June 30, 2020,
compared to 92.6% as of March 31, 2020 and 93.4% as of June 30,
2019. Same property cash basis net operating income, or Cash Basis
NOI, increased 2.5% for the quarter ended June 30, 2020 compared to
the quarter ended June 30, 2019. The increase in same property Cash
Basis NOI is due to an increase in cash received from contractual
rents of $1.1 million, which is primarily the result of free rent
expiring and decreases in operating expenses, including
approximately $1.7 million of expense savings as a result of cost
savings initiatives in response to the COVID-19 pandemic.
Reconciliations of net income (loss) determined in accordance
with GAAP to net operating income, or NOI, and Cash Basis NOI, and
a reconciliation of NOI to same property NOI and same property Cash
Basis NOI, for the quarters ended June 30, 2020 and 2019, appear
later in this press release.
As a result of the COVID-19 pandemic, overall new leasing volume
for 2020 has slowed and may continue to slow, but OPI continues to
believe that overall tenant retention levels may increase. Also as
a result of the COVID-19 pandemic, OPI has granted temporary rent
assistance to date totaling $2.5 million to 23 tenants, pursuant to
a deferred payment plan whereby these tenants will pay, in most
cases one month of rent, over a 12-month period beginning in
September 2020. The $2.5 million of granted temporary rent
assistance is detailed as follows:
Granted Temporary Rent
Assistance
Percentage of Monthly
Contractual Rents
April 2020
$
445,530
0.95
%
May 2020
817,495
1.74
%
June 2020
959,352
2.07
%
Subtotal
2,222,377
1.59
%
July 2020
134,086
0.29
%
August 2020
59,206
0.12
%
September 2020
59,206
0.12
%
Total
$
2,474,875
0.88
%
For the quarter ended June 30, 2020, OPI collected approximately
98% of contractual rent obligations and 99% of contractual rent
obligations after giving effect to such rent deferrals.
While it is still early to assess the full impact the COVID-19
pandemic will have on OPI's business, OPI believes it will benefit
from the approximately 62.8% of annualized rental income paid by
investment grade tenants, the majority of which is made up of
government tenants, and the diversity of its tenant base, both
geographically and by industry, which OPI believes may help
mitigate the economic impact caused by the COVID-19 pandemic.
Recent Acquisition Activities:
In July 2020, OPI entered into an agreement to acquire an office
property located in Denver, CO containing approximately 68,000
rentable square feet for a purchase price of $38.1 million,
excluding acquisition related costs. This property is 100% leased
to a single tenant and has a remaining lease term of 11.5 years.
This acquisition is expected to occur before the end of the third
quarter.
Recent Disposition Activities:
In July 2020, OPI entered into an agreement to sell a four
property business park located in Fairfax, VA containing
approximately 171,000 rentable square feet for a sales price of
$25.4 million, excluding closing costs. This sale is expected to
occur before the end of the third quarter.
Recent Financing Activities:
As previously announced, in April 2020, OPI prepaid, at par plus
accrued interest, a mortgage note secured by one property with an
outstanding principal balance of $32.7 million, an annual interest
rate of 5.7% and a maturity date in July 2020 using cash on hand
and borrowings under its revolving credit facility.
In June 2020, OPI issued $150.0 million of 6.375% senior
unsecured notes due 2050 in an underwritten public offering,
raising net proceeds of $144.8 million, after deducting
underwriters’ discounts and estimated offering expenses. In
connection with this offering, OPI granted the underwriters a 30
day option to purchase up to an additional $22.5 million aggregate
principal amount of these notes. In July 2020, the underwriters
partially exercised this option for an additional $12.0 million of
these notes. OPI used the aggregate net proceeds of this offering
to repay amounts outstanding under OPI's revolving credit facility
and for general business purposes.
Conference Call:
At 10:00 a.m. Eastern Time this morning, President and Chief
Executive Officer, David Blackman, Chief Financial Officer and
Treasurer, Matthew Brown, and Vice President and Chief Operating
Officer, Christopher Bilotto, will host a conference call to
discuss OPI’s second quarter 2020 financial results.
The conference call telephone number is (877) 328-1172.
Participants calling from outside the United States and Canada
should dial (412) 317-5418. No pass code is necessary to access the
call from either number. Participants should dial in about 15
minutes prior to the scheduled start of the call. A replay of the
conference call will be available through 11:59 p.m. on Thursday,
August 6, 2020. To access the replay, dial (412) 317-0088. The
replay pass code is 10145302.
A live audio webcast of the conference call will also be
available in a listen only mode on OPI’s website, at
www.opireit.com. Participants wanting to access the webcast should
visit OPI’s website about five minutes before the call. The
archived webcast will be available for replay on OPI’s website
following the call for about one week. The transcription,
recording and retransmission in any way of OPI’s second quarter
conference call are strictly prohibited without the prior written
consent of OPI.
Supplemental Data:
A copy of OPI’s Second Quarter 2020 Supplemental Operating and
Financial Data is available for download at OPI’s website,
www.opireit.com. OPI’s website is not incorporated as part of this
press release.
Non-GAAP Financial Measures:
OPI presents certain “non-GAAP financial measures” within the
meaning of applicable rules of the Securities and Exchange
Commission, or SEC, including FFO, Normalized FFO, CAD, Property
NOI, Property Cash Basis NOI, Same Property NOI and Same Property
Cash Basis NOI. These measures do not represent cash generated by
operating activities in accordance with GAAP and should not be
considered alternatives to net income (loss) as indicators of OPI’s
operating performance or as measures of OPI’s liquidity. These
measures should be considered in conjunction with net income (loss)
as presented in OPI's condensed consolidated statements of income
(loss). OPI considers these non-GAAP measures to be appropriate
supplemental measures of operating performance for a real estate
investment trust, or REIT, along with net income (loss). OPI
believes these measures provide useful information to investors
because by excluding the effects of certain historical amounts,
such as depreciation and amortization expense, they may facilitate
a comparison of OPI’s operating performance between periods and
with other REITs and, in the case of Property NOI, Property Cash
Basis NOI, Same Property NOI and Same Property Cash Basis NOI
reflecting only those income and expense items that are generated
and incurred at the property level may help both investors and
management to understand the operations of OPI's properties.
Please see the pages attached hereto for a more detailed
statement of OPI’s operating results and financial condition and
for an explanation of OPI’s calculation of FFO, Normalized FFO,
CAD, Property NOI, Property Cash Basis NOI, Same Property NOI and
Same Property Cash Basis NOI and a reconciliation of those amounts
to amounts determined in accordance with GAAP.
OPI is a REIT focused on owning, operating and leasing
properties primarily leased to single tenants and those with high
credit quality characteristics such as government entities. OPI is
managed by the operating subsidiary of The RMR Group Inc. (Nasdaq:
RMR), an alternative asset management company that is headquartered
in Newton, Massachusetts.
Office Properties Income
Trust
Condensed Consolidated
Statements of Income (Loss)
(amounts in thousands, except
per share data)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Rental income
$
145,603
$
176,032
$
295,488
$
350,809
Expenses:
Real estate taxes
15,781
18,147
32,588
36,539
Utility expenses
5,201
7,470
12,213
16,851
Other operating expenses
25,787
29,692
51,667
59,828
Depreciation and amortization
64,170
73,913
127,113
151,434
Loss on impairment of real estate (1)
—
2,380
—
5,584
Acquisition and transaction related costs
(2)
—
98
—
682
General and administrative
7,204
8,744
14,313
17,467
Total expenses
118,143
140,444
237,894
288,385
Gain (loss) on sale of real estate (3)
66
(17
)
10,822
22,075
Dividend income
—
980
—
1,960
Loss on equity securities (4)
—
(66,135
)
—
(44,007
)
Interest and other income
30
241
736
489
Interest expense (including net
amortization of debt premiums, discounts and issuance costs of
$2,402, $2,863, $4,685 and $5,704, respectively)
(25,205
)
(35,348
)
(52,364
)
(72,481
)
Loss on early extinguishment of debt
(5)
(557
)
(71
)
(3,839
)
(485
)
Income (loss) before income tax (expense)
benefit and equity in net losses of investees
1,794
(64,762
)
12,949
(30,025
)
Income tax (expense) benefit
(235
)
130
(274
)
(353
)
Equity in net losses of investees
(260
)
(142
)
(536
)
(377
)
Net income (loss)
$
1,299
$
(64,774
)
$
12,139
$
(30,755
)
Weighted average common shares outstanding
(basic and diluted)
48,106
48,049
48,101
48,040
Per common share amounts (basic and
diluted):
Net income (loss)
$
0.03
$
(1.35
)
$
0.25
$
(0.64
)
See Notes on pages 6 and 7.
Office Properties Income
Trust
Funds from Operations,
Normalized Funds from Operations and Cash Available for
Distribution
(amounts in thousands, except
per share data)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Calculation of FFO, Normalized FFO and
CAD (6)(7):
Net income (loss)
$
1,299
$
(64,774
)
$
12,139
$
(30,755
)
Add (less): Depreciation and
amortization:
Consolidated properties
64,170
73,913
127,113
151,434
Unconsolidated joint venture
properties
1,237
1,410
2,478
3,161
Loss on impairment of real estate (1)
—
2,380
—
5,584
(Gain) loss on sale of real estate (3)
(66
)
17
(10,822
)
(22,075
)
Loss on equity securities (4)
—
66,135
—
44,007
FFO
66,640
79,081
130,908
151,356
Add (less): Acquisition and transaction
related costs (2)
—
98
—
682
Loss on early extinguishment of debt
(5)
557
71
3,839
485
Normalized FFO
67,197
79,250
134,747
152,523
Add (less): Non-cash expenses (8)
808
695
887
1,287
Distributions from unconsolidated joint
ventures
102
600
153
1,121
Depreciation and amortization -
unconsolidated joint ventures
(1,237
)
(1,410
)
(2,478
)
(3,161
)
Equity in net losses of investees
260
142
536
377
Loss on early extinguishment of debt
settled in cash
—
—
(1,138
)
—
Non-cash straight line rent adjustments
included in rental income
(3,468
)
(5,667
)
(9,051
)
(12,461
)
Lease value amortization included in
rental income
1,405
1,446
2,837
2,593
Net amortization of debt premiums,
discounts and issuance costs
2,402
2,863
4,685
5,704
Recurring capital expenditures
(21,926
)
(21,200
)
(38,269
)
(37,745
)
CAD (7)
$
45,543
$
56,719
$
92,909
$
110,238
Weighted average common shares outstanding
(basic and diluted)
48,106
48,049
48,101
48,040
Per common share amounts (basic and
diluted):
Net income (loss)
$
0.03
$
(1.35
)
$
0.25
$
(0.64
)
FFO
$
1.39
$
1.65
$
2.72
$
3.15
Normalized FFO
$
1.40
$
1.65
$
2.80
$
3.17
CAD
$
0.95
$
1.18
$
1.93
$
2.29
Distributions declared per share
$
0.55
$
0.55
$
1.10
$
1.10
(1)
Loss on impairment of real estate for the three months ended
June 30, 2019 includes an adjustment of $2,380 to reduce the
carrying value of one property to its estimated fair value less
costs to sell. Loss on impairment of real estate for the six months
ended June 30, 2019 also includes an adjustment of $2,757 to reduce
the carrying value of one property to its estimated fair value less
costs to sell and a $447 loss on impairment of real estate related
to the sale of a portfolio of 34 properties during the three months
ended March 31, 2019.
(2)
Acquisition and transaction related costs for the three and
six months ended June 30, 2019 consist of post-merger activity
costs incurred in connection with OPI's acquisition of Select
Income REIT on December 31, 2018 in a merger transaction and other
related transactions.
(3)
Gain on sale of real estate for the six months ended June
30, 2020 represents a $10,822 net gain on the sale of six
properties. Gain on sale of real estate for the six months ended
June 30, 2019 represents a $22,075 gain on the sale of one
property.
(4)
Loss on equity securities for the three and six months ended
June 30, 2019 represents an unrealized loss to adjust the carrying
value of OPI's former investment in RMR Inc. common stock to its
fair value as of June 30, 2019. On July 1, 2019, OPI sold its
investment in RMR Inc. common stock.
(5)
Loss on early extinguishment of debt for the three and six
months ended June 30, 2020 includes prepayment fees related to the
repayment of two mortgage notes, write offs of the unamortized
portion of certain discounts and issuance costs resulting from the
early repayment of debt and a loss related to the settlement of a
mortgage note receivable in connection with a property OPI sold in
2016. Loss on early extinguishment of debt for the three and six
months ended June 30, 2019 includes write offs of the unamortized
portion of certain discounts and issuance costs resulting from the
early repayment of debt.
(6)
OPI calculates FFO and Normalized FFO as shown above. FFO is
calculated on the basis defined by The National Association of Real
Estate Investment Trusts, which is net income (loss), calculated in
accordance with GAAP, plus real estate depreciation and
amortization of consolidated properties and its proportionate share
of the real estate depreciation and amortization of unconsolidated
joint venture properties, but excluding impairment charges on real
estate assets, any gain or loss on sale of real estate and equity
securities, as well as certain other adjustments currently not
applicable to OPI. In calculating Normalized FFO, OPI adjusts for
the other items shown above and includes business management
incentive fees, if any, only in the fourth quarter versus the
quarter when they are recognized as an expense in accordance with
GAAP due to their quarterly volatility not necessarily being
indicative of OPI’s core operating performance and the uncertainty
as to whether any such business management incentive fees will be
payable when all contingencies for determining such fees are known
at the end of the calendar year. FFO and Normalized FFO are among
the factors considered by OPI’s Board of Trustees when determining
the amount of distributions to OPI’s shareholders. Other factors
include, but are not limited to, requirements to maintain OPI's
qualification for taxation as a REIT, limitations in OPI’s credit
agreement and public debt covenants, the availability to OPI of
debt and equity capital, OPI’s expectation of its future capital
requirements and operating performance and OPI’s expected needs for
and availability of cash to pay its obligations. Other real estate
companies and REITs may calculate FFO and Normalized FFO
differently than OPI does.
(7)
OPI calculates CAD as shown above. OPI defines CAD as
Normalized FFO minus recurring real estate related capital
expenditures and other non-cash and non-recurring items. CAD is
among the factors considered by OPI's Board of Trustees when
determining the amount of distributions to its shareholders. Other
real estate companies and REITs may calculate CAD differently than
OPI does.
(8)
Non-cash expenses include equity based compensation,
adjustments recorded to capitalize interest expense and
amortization of the liability for the amount by which the estimated
fair value for accounting purposes exceeded the price OPI paid for
its former investment in RMR Inc. common stock in June 2015. This
liability is being amortized on a straight line basis through
December 31, 2035 as an allocated reduction to business management
fee expense and property management fee expense, which are included
in general and administrative and other operating expenses,
respectively.
Office Properties Income
Trust
Calculation and Reconciliation
of Property NOI, Property Cash Basis NOI, Same Property NOI and
Same Property Cash Basis NOI (1)
(amounts in thousands)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Calculation of Property NOI and
Property Cash Basis NOI:
Rental income
$
145,603
$
176,032
$
295,488
$
350,809
Property operating expenses
(46,769
)
(55,309
)
(96,468
)
(113,218
)
Property NOI
98,834
120,723
199,020
237,591
Non-cash straight line rent adjustments
included in rental income
(3,468
)
(5,667
)
(9,051
)
(12,461
)
Lease value amortization included in
rental income
1,405
1,446
2,837
2,593
Lease termination fees included in rental
income
(3
)
(8,867
)
(6
)
(9,161
)
Non-cash amortization included in property
operating expenses (2)
(121
)
(121
)
(242
)
(242
)
Property Cash Basis NOI
$
96,647
$
107,514
$
192,558
$
218,320
Reconciliation of Net Income (Loss) to
Property NOI and Property Cash Basis NOI:
Net income (loss)
$
1,299
$
(64,774
)
$
12,139
$
(30,755
)
Equity in net losses of investees
260
142
536
377
Income tax expense (benefit)
235
(130
)
274
353
Income (loss) before income tax expense
(benefit) and equity in net losses of investees
1,794
(64,762
)
12,949
(30,025
)
Loss on early extinguishment of debt
557
71
3,839
485
Interest expense
25,205
35,348
52,364
72,481
Interest and other income
(30
)
(241
)
(736
)
(489
)
Loss on equity securities
—
66,135
—
44,007
Dividend income
—
(980
)
—
(1,960
)
(Gain) loss on sale of real estate
(66
)
17
(10,822
)
(22,075
)
General and administrative
7,204
8,744
14,313
17,467
Acquisition and transaction related
costs
—
98
—
682
Loss on impairment of real estate
—
2,380
—
5,584
Depreciation and amortization
64,170
73,913
127,113
151,434
Property NOI
98,834
120,723
199,020
237,591
Non-cash amortization included in property
operating expenses (2)
(121
)
(121
)
(242
)
(242
)
Lease termination fees included in rental
income
(3
)
(8,867
)
(6
)
(9,161
)
Lease value amortization included in
rental income
1,405
1,446
2,837
2,593
Non-cash straight line rent adjustments
included in rental income
(3,468
)
(5,667
)
(9,051
)
(12,461
)
Property Cash Basis NOI
$
96,647
$
107,514
$
192,558
$
218,320
Reconciliation of Property NOI to Same
Property NOI (3) (4):
Rental income
$
145,603
$
176,032
$
295,488
$
350,809
Property operating expenses
(46,769
)
(55,309
)
(96,468
)
(113,218
)
Property NOI
98,834
120,723
199,020
237,591
Less: NOI of properties not included in
same property results
552
(21,003
)
(268
)
(38,403
)
Same Property NOI
$
99,386
$
99,720
$
198,752
$
199,188
Calculation of Same Property Cash Basis
NOI (3) (4):
Same Property NOI
$
99,386
$
99,720
$
198,752
$
199,188
Add: Lease value amortization included in
rental income
1,405
1,559
2,837
2,813
Less: Non-cash straight line rent
adjustments included in rental income
(3,470
)
(5,124
)
(8,999
)
(11,405
)
Lease termination fees included in rental
income
(3
)
(1,225
)
(6
)
(1,519
)
Non-cash amortization included in property
operating expenses (2)
(117
)
(97
)
(234
)
(193
)
Same Property Cash Basis NOI
$
97,201
$
94,833
$
192,350
$
188,884
See Notes on page 9.
(1)
The calculations of Property NOI and Property Cash Basis NOI
exclude certain components of net income (loss) in order to provide
results that are more closely related to OPI’s property level
results of operations. OPI calculates Property NOI and Property
Cash Basis NOI as shown above. OPI defines Property NOI as income
from its rental of real estate less its property operating
expenses. Property NOI excludes amortization of capitalized tenant
improvement costs and leasing commissions that OPI records as
depreciation and amortization expense. OPI defines Property Cash
Basis NOI as Property NOI excluding non-cash straight line rent
adjustments, lease value amortization, lease termination fees, if
any, and non-cash amortization included in other operating
expenses. OPI calculates Same Property NOI and Same Property Cash
Basis NOI in the same manner that it calculates the corresponding
Property Cash Basis NOI amounts, except that it only includes same
properties in calculating Same Property NOI and Same Property Cash
Basis NOI. OPI uses Property NOI, Property Cash Basis NOI, Same
Property NOI and Same Property Cash Basis NOI to evaluate
individual and company-wide property level performance. Other real
estate companies and REITs may calculate Property NOI, Property
Cash Basis NOI, Same Property NOI and Same Property Cash Basis NOI
differently than OPI does.
(2)
OPI recorded a liability for the amount by which the
estimated fair value for accounting purposes exceeded the price OPI
paid for its former investment in RMR Inc. common stock in June
2015. A portion of this liability is being amortized on a straight
line basis through December 31, 2035 as a reduction to property
management fee expense, which is included in property operating
expenses.
(3)
For the three months ended June 30, 2020 and 2019, Same
Property NOI and Same Property Cash Basis NOI are based on
properties OPI owned continuously since April 1, 2019, and exclude
properties classified as held for sale and properties undergoing
significant redevelopment, if any, and three properties owned by
two unconsolidated joint ventures in which OPI owns 51% and 50%
interests.
(4)
For the six months ended June 30, 2020 and 2019, Same
Property NOI and Same Property Cash Basis NOI are based on
properties OPI owned continuously since January 1, 2019, and
exclude properties classified as held for sale and properties
undergoing significant redevelopment, if any, and three properties
owned by two unconsolidated joint ventures in which OPI owns 51%
and 50% interests.
Office Properties Income
Trust
Condensed Consolidated Balance
Sheets
(dollars in thousands, except
per share data)
(unaudited)
June 30,
December 31,
2020
2019
ASSETS
Real estate properties:
Land
$
843,418
$
840,550
Buildings and improvements
2,691,482
2,652,681
Total real estate properties, gross
3,534,900
3,493,231
Accumulated depreciation
(422,716
)
(387,656
)
Total real estate properties, net
3,112,184
3,105,575
Assets of properties held for sale
—
70,877
Investments in unconsolidated joint
ventures
39,067
39,756
Acquired real estate leases, net
645,589
732,382
Cash and cash equivalents
24,485
93,744
Restricted cash
5,616
6,952
Rents receivable
95,005
83,556
Deferred leasing costs, net
45,029
40,107
Other assets, net
10,688
20,187
Total assets
$
3,977,663
$
4,193,136
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility
$
200,000
$
—
Senior unsecured notes, net
1,766,387
2,017,379
Mortgage notes payable, net
210,539
309,946
Liabilities of properties held for
sale
—
14,693
Accounts payable and other liabilities
115,593
125,048
Due to related persons
6,856
7,141
Assumed real estate lease obligations,
net
11,858
13,175
Total liabilities
2,311,233
2,487,382
Commitments and contingencies
Shareholders’ equity:
Common shares of beneficial interest, $.01
par value: 200,000,000 shares authorized, 48,227,800 and 48,201,941
shares issued and outstanding, respectively
482
482
Additional paid in capital
2,613,868
2,612,425
Cumulative net income
189,356
177,217
Cumulative other comprehensive loss
(85
)
(200
)
Cumulative common distributions
(1,137,191
)
(1,084,170
)
Total shareholders’ equity
1,666,430
1,705,754
Total liabilities and shareholders’
equity
$
3,977,663
$
4,193,136
Warning Concerning
Forward-Looking Statements
This press release contains statements that constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and other securities laws.
Also, whenever OPI uses words such as “believe”, “expect”,
“anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and
negatives or derivatives of these or similar expressions, OPI is
making forward-looking statements. These forward-looking statements
are based upon OPI’s present intent, beliefs or expectations, but
forward-looking statements are not guaranteed to occur and may not
occur. Actual results may differ materially from those contained in
or implied by OPI’s forward-looking statements as a result of
various factors. Forward-looking statements involve known and
unknown risks, uncertainties and other factors, some of which are
beyond OPI's control. For example:
- Mr. Blackman's statements about leasing activity and roll-ups
in rents may imply that OPI will continue to have positive leasing
activity in future periods. However, OPI's ability to realize
positive leasing activity depends on various factors, including
market conditions, tenants' demand for OPI's properties, the timing
of lease expirations and OPI's ability to successfully compete for
tenants, among other factors. As a result, OPI may not realize
positive leasing activity in future periods,
- Mr. Blackman's statements about the limited amount of rent
deferrals that OPI granted to its tenants and statements elsewhere
in this press release about the extent of OPI's rent collections in
the second quarter despite the COVID-19 pandemic may imply that OPI
will continue to have strong rent collections in the future.
However, if the COVID-19 pandemic and the current economic
conditions continue for an extended period of time or worsen, OPI’s
tenants may be significantly adversely impacted, which may result
in those tenants seeking relief from their rent obligations, their
inability to pay rent, the termination of their leases or OPI's
tenants not renewing their leases or renewing their leases for less
space. Further, some of OPI’s government leases provide the tenant
with certain rights to terminate their lease early. Budgetary and
other fiscal pressures may result in some governmental tenants
terminating their leases early or not renewing their leases. In
addition, the COVID-19 pandemic has caused changes in workplace
practices, including increased remote work arrangements. To the
extent those practices become permanent or increased, leasing
demand for office space may decline. Therefore, the impact OPI
experiences in the near term may be worse than it expects and its
tenant retention levels may not increase and they could
decline,
- Mr. Blackman states that the successful completion of OPI's $1
billion asset disposition program in 2019, OPI's relatively low
leveraged balance sheet and its diverse portfolio of high quality
tenants better positions OPI to weather difficult economic
conditions. In addition, this press release includes additional
statements regarding OPI's belief that the characteristics of its
tenant base will help mitigate the economic impact from the
COVID-19 pandemic. However, if the COVID-19 pandemic and the
current economic conditions continue for an extended period or
worsen, OPI may not be able to maintain its current leverage levels
and its portfolio may not prove as stable as currently expected.
Further, OPI’s ability to borrow under its revolving credit
facility is subject to OPI satisfying certain covenants and
conditions. If OPI’s operating results and financial condition are
significantly negatively impacted by current economic conditions or
otherwise, OPI may fail to satisfy those covenants and
conditions,
- Mr. Blackman states that OPI remains optimistic that its
business will continue to perform well throughout the remainder of
2020. However, as noted elsewhere in this press release, the
economic conditions caused by the COVID-19 pandemic could
increasingly negatively impact OPI and its business. In addition,
OPI's business is subject to risks, some of which are beyond OPI's
control. As a result, OPI's business may not perform well
throughout the remainder of 2020 and thereafter and it could
experience declines,
- OPI has entered into an agreement to acquire an office property
located in Denver, CO for $38.1 million, excluding acquisition
related costs. This acquisition is subject to conditions. Those
conditions may not be satisfied and this acquisition may not occur,
may be delayed or the terms may change, and
- OPI has entered into an agreement to sell a four property
business park for a sales price of $25.4 million, excluding closing
costs. This sale is subject to conditions. Those conditions may not
be satisfied and this sale may not occur, may be delayed or the
terms may change.
The information contained in OPI’s filings with the SEC,
including under “Risk Factors” in OPI’s periodic reports, or
incorporated therein, identifies other important factors that could
cause OPI’s actual results to differ materially from those stated
in or implied by OPI’s forward-looking statements. OPI’s filings
with the SEC are available on the SEC's website at www.sec.gov.
You should not place undue reliance upon forward-looking
statements.
Except as required by law, OPI does not intend to update or
change any forward-looking statements as a result of new
information, future events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005255/en/
Olivia Snyder, Manager, Investor Relations (617) 219-1410
Office Properties Income (NASDAQ:OPI)
Historical Stock Chart
From Jun 2024 to Jul 2024
Office Properties Income (NASDAQ:OPI)
Historical Stock Chart
From Jul 2023 to Jul 2024