Second Quarter Net Income Available for Common Shareholders of
$0.30 Per Share
Second Quarter Normalized FFO Available for Common Shareholders of
$0.52 Per Share
Second Quarter Same Property Cash Basis NOI Increased 5.0%
Completed 396,359 Square Feet of Leasing in the Second Quarter
NEWTON, Mass.--(BUSINESS WIRE)--
Government Properties Income Trust (Nasdaq: GOV) today announced its
financial results for the quarter and six months ended June 30, 2018.
David Blackman, President and Chief Executive Officer of GOV, made the
following statement:
“GOV had a strong second quarter operationally as we grew same
property cash basis NOI by 5% and executed over 396,000 square feet of
new and renewal leases. We also continued to make progress on our
property disposition plan.
During the quarter, we sold two
properties for $129 million in the aggregate, bringing our closed
disposition total under the plan to approximately $149 million year to
date. We also continue to market additional properties for sale as part
of our property disposition plan.”
Results for the Quarter Ended June 30, 2018:
Net income available for common shareholders determined in accordance
with U.S. generally accepted accounting principles, or GAAP, for the
quarter ended June 30, 2018 was $29.6 million, or $0.30 per diluted
share, compared to net income available for common shareholders of $11.7
million, or $0.16 per diluted share, for the quarter ended June 30,
2017. Net income available for common shareholders for the quarter ended
June 30, 2018 includes a $17.3 million, or $0.17 per diluted share, gain
on sale of real estate, a $10.3 million, or $0.10 per diluted share,
unrealized gain on equity securities relating to GOV's investment in The
RMR Group Inc., or RMR Inc., and the reversal of $2.2 million, or $0.02
per diluted share, of previously accrued business management incentive
fee expense. The weighted average number of diluted common shares
outstanding was 99.1 million for the quarter ended June 30, 2018 and
71.1 million for the quarter ended June 30, 2017.
Normalized funds from operations, or Normalized FFO, available for
common shareholders for the quarter ended June 30, 2018 were $51.3
million, or $0.52 per diluted share, compared to Normalized FFO
available for common shareholders for the quarter ended June 30, 2017 of
$42.4 million, or $0.60 per diluted share.
Reconciliations of net income available for common shareholders
determined in accordance with GAAP to funds from operations, or FFO,
available for common shareholders and Normalized FFO available for
common shareholders for the quarters ended June 30, 2018 and 2017 appear
later in this press release.
Results for the Six Months Ended June 30, 2018:
Net income available for common shareholders determined in accordance
with GAAP was $35.9 million, or $0.36 per diluted share, for the six
months ended June 30, 2018, compared to net income available for common
shareholders of $19.1 million, or $0.27 per diluted share, for the six
months ended June 30, 2017. Net income available for common shareholders
for the six months ended June 30, 2018 includes a $23.3 million, or
$0.24 per diluted share, unrealized gain on equity securities relating
to GOV's investment in RMR Inc. and a $17.3 million, or $0.17 per
diluted share, gain on sale of real estate, partially offset by a $5.8
million, or $0.06 per diluted share, loss on impairment of real estate.
The weighted average number of diluted common shares outstanding was
99.1 million for the six months ended June 30, 2018 and 71.1 million for
the six months ended June 30, 2017.
Normalized FFO available for common shareholders for the six months
ended June 30, 2018 were $105.4 million, or $1.06 per diluted share,
compared to Normalized FFO available for common shareholders for the six
months ended June 30, 2017 of $82.3 million, or $1.16 per diluted share.
Reconciliations of net income available for common shareholders
determined in accordance with GAAP to FFO available for common
shareholders and Normalized FFO available for common shareholders for
the six months ended June 30, 2018 and 2017 appear later in this press
release.
Leasing, Occupancy and Same Property Results:
During the quarter ended June 30, 2018, GOV entered new and renewal
leases for an aggregate 396,359 rentable square feet at weighted (by
rentable square feet) average rents that were 0.6% above prior rents for
the same space. The weighted (by rentable square feet) average lease
term for these leases was 6.2 years and leasing concessions and capital
commitments for these leases were $6.8 million, or $2.79 per square
foot, per lease year. These new and renewal leases include approximately
185,000 square feet with government tenants which have weighted (by
rentable square feet) average rents that are 4.1% above prior rents for
the same space, a weighted (by rentable square feet) average lease term
of 8.6 years and leasing concessions and capital commitments of $3.0
million, or $1.87 per square foot per weighted (by square foot) average
lease year.
As of June 30, 2018, 94.0% of GOV’s total rentable square feet was
leased, compared to 94.4% as of March 31, 2018 and 95.0% as of June 30,
2017. Occupancy for properties owned continuously since April 1, 2017,
or same properties, was 94.6% as of June 30, 2018, compared to 95.3% as
of March 31, 2018 and 95.4% as of June 30, 2017. Same properties net
operating income, or NOI, increased 4.2% and same properties cash basis
NOI, or Cash Basis NOI, increased 5.0% for the quarter ended June 30,
2018 compared to the same period in 2017.
Reconciliations of net income available for common shareholders
determined in accordance with GAAP to Consolidated Property NOI and to
Consolidated Property Cash Basis NOI for the quarters ended June 30,
2018 and 2017 appear later in this press release.
Recent Disposition Activities:
In May 2018, GOV sold an office property (one building) located in New
York, NY with 187,060 rentable square feet for $118.5 million, excluding
closing costs.
In May 2018, GOV sold an office property (one building) located in
Sacramento, CA with 110,500 rentable square feet for $10.8 million,
excluding closing costs.
Recent Financing Activities:
On May 1, 2018, one of GOV's subsidiaries redeemed all of its 1.8
million outstanding 5.5% Series A Cumulative Preferred Units for $11.15
per unit, plus accrued and unpaid distributions (an aggregate of $20.3
million).
Conference Call:
At 11:00 a.m. Eastern Time this morning, President and Chief Executive
Officer, David Blackman, and Chief Financial Officer and Treasurer, Mark
Kleifges, will host a conference call to discuss GOV’s second quarter
2018 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 9, 2018. To access the
replay, dial (412) 317-0088. The replay pass code is 10121842.
A live audio webcast of the conference call will also be available in a
listen only mode on GOV’s website, at www.govreit.com.
Participants wanting to access the webcast should visit GOV’s website
about five minutes before the call. The archived webcast will be
available for replay on GOV’s website following the call for about one
week. The transcription, recording and retransmission in any way of
GOV’s second quarter conference call are strictly prohibited without the
prior written consent of GOV.
Supplemental Data:
A copy of GOV’s Second Quarter 2018 Supplemental Operating and Financial
Data is available for download at GOV’s website, which is located at www.govreit.com. GOV’s
website is not incorporated as part of this press release.
GOV is a real estate investment trust, or REIT, which primarily owns
properties located throughout the United States that are majority leased
to government tenants and office properties in the metropolitan
Washington, D.C. market area that are leased to government and private
sector tenants. GOV is managed by the operating subsidiary of The RMR
Group Inc. (Nasdaq: RMR), an alternative asset management company that
is headquartered in Newton, Massachusetts.
Please see the pages attached hereto for a more detailed statement of
GOV’s operating results and financial condition and for an explanation
of GOV’s calculation of FFO available for common shareholders,
Normalized FFO available for common shareholders, NOI and Cash Basis NOI
and a reconciliation of those amounts to amounts determined in
accordance with GAAP.
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 GOV USES
WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”, “INTEND”, “PLAN”,
“ESTIMATE”, “WILL”, “MAY” AND NEGATIVES OR DERIVATIVES OF THESE OR
SIMILAR EXPRESSIONS, GOV IS MAKING FORWARD LOOKING STATEMENTS. THESE
FORWARD LOOKING STATEMENTS ARE BASED UPON GOV’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 GOV’S FORWARD LOOKING STATEMENTS AS A RESULT
OF VARIOUS FACTORS. FOR EXAMPLE:
-
MR. BLACKMAN'S STATEMENTS REGARDING GOV'S QUARTERLY OPERATING AND
LEASING RESULTS MAY IMPLY THAT SIMILAR OR BETTER RESULTS WILL BE
ACHIEVED IN THE FUTURE. HOWEVER, GOV CANNOT BE SURE THAT IT WILL
REALIZE SIMILAR OR BETTER OPERATING OR LEASING RESULTS IN THE FUTURE.
-
MR. BLACKMAN'S STATEMENTS THAT GOV CONTINUED TO MAKE PROGRESS ON ITS
PROPERTY DISPOSITION PLAN AND THAT GOV CONTINUES TO MARKET ADDITIONAL
PROPERTIES FOR SALE MAY IMPLY THAT GOV WILL CONTINUE TO SELL
ADDITIONAL PROPERTIES IN THE FUTURE. HOWEVER, GOV MAY NOT BE ABLE TO
SUCCESSFULLY SELL ADDITIONAL PROPERTIES IN THE FUTURE. ALSO, GOV MAY
SELL ADDITIONAL PROPERTIES AT PRICES THAT ARE LESS THAN THEIR CARRYING
VALUES AND GOV MAY INCUR FUTURE LOSSES AS A RESULT.
THE INFORMATION CONTAINED IN GOV’S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER “RISK FACTORS” IN GOV’S
PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER IMPORTANT
FACTORS THAT COULD CAUSE GOV’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE STATED IN OR IMPLIED BY GOV’S FORWARD LOOKING STATEMENTS. GOV’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, GOV DOES NOT INTEND TO UPDATE OR CHANGE ANY
FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS
OR OTHERWISE.
|
|
|
Government Properties Income Trust
Condensed
Consolidated Statements of Income
(amounts in
thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
|
$
|
108,085
|
|
|
$
|
69,887
|
|
|
$
|
216,802
|
|
|
$
|
139,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Real estate taxes
|
|
|
|
12,365
|
|
|
7,941
|
|
|
25,330
|
|
|
16,118
|
|
|
Utility expenses
|
|
|
|
6,018
|
|
|
4,172
|
|
|
12,707
|
|
|
8,778
|
|
|
Other operating expenses
|
|
|
|
21,599
|
|
|
15,187
|
|
|
44,436
|
|
|
29,179
|
|
|
Depreciation and amortization
|
|
|
|
42,671
|
|
|
20,663
|
|
|
86,875
|
|
|
41,168
|
|
|
Loss on impairment of real estate (1) |
|
|
|
(316
|
)
|
|
—
|
|
|
5,800
|
|
|
—
|
|
|
General and administrative (2) |
|
|
|
4,449
|
|
|
5,087
|
|
|
14,055
|
|
|
9,049
|
|
|
Total expenses
|
|
|
|
86,786
|
|
|
53,050
|
|
|
189,203
|
|
|
104,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
21,299
|
|
|
16,837
|
|
|
27,599
|
|
|
34,891
|
|
|
Dividend income
|
|
|
|
304
|
|
|
304
|
|
|
608
|
|
|
608
|
|
|
Unrealized gain on equity securities (3) |
|
|
|
10,321
|
|
|
—
|
|
|
23,252
|
|
|
—
|
|
|
Interest income
|
|
|
|
149
|
|
|
67
|
|
|
265
|
|
|
128
|
|
|
Interest expense (including net amortization of debt premiums and
discounts and debt issuance costs of $892, $808, $1,856 and
$1,615, respectively)
|
|
|
|
(23,304
|
)
|
|
(13,963
|
)
|
|
(46,070
|
)
|
|
(27,544
|
)
|
|
Net gain on issuance of shares by Select Income REIT
|
|
|
|
8
|
|
|
21
|
|
|
8
|
|
|
21
|
|
|
Income from continuing operations before income taxes, equity in
net earnings of investees and gain on sale of real estate
|
|
|
|
8,777
|
|
|
3,266
|
|
|
5,662
|
|
|
8,104
|
|
|
Income tax expense
|
|
|
|
(83
|
)
|
|
(25
|
)
|
|
(115
|
)
|
|
(43
|
)
|
|
Equity in net earnings of investees
|
|
|
|
3,672
|
|
|
8,581
|
|
|
13,384
|
|
|
11,320
|
|
|
Income from continuing operations
|
|
|
|
12,366
|
|
|
11,822
|
|
|
18,931
|
|
|
19,381
|
|
|
Loss from discontinued operations
|
|
|
|
—
|
|
|
(145
|
)
|
|
—
|
|
|
(289
|
)
|
|
Income before gain on sale of real estate
|
|
|
|
12,366
|
|
|
11,677
|
|
|
18,931
|
|
|
19,092
|
|
|
Gain on sale of real estate (4) |
|
|
|
17,329
|
|
|
—
|
|
|
17,329
|
|
|
—
|
|
|
Net income
|
|
|
|
29,695
|
|
|
11,677
|
|
|
36,260
|
|
|
19,092
|
|
|
Preferred units of limited partnership distributions
|
|
|
|
(93
|
)
|
|
—
|
|
|
(371
|
)
|
|
—
|
|
|
Net income available for common shareholders
|
|
|
|
$
|
29,602
|
|
|
$
|
11,677
|
|
|
$
|
35,889
|
|
|
$
|
19,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
|
99,051
|
|
|
71,088
|
|
|
99,046
|
|
|
71,083
|
|
|
Weighted average common shares outstanding (diluted)
|
|
|
|
99,064
|
|
|
71,119
|
|
|
99,050
|
|
|
71,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share amounts (basic and diluted):
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
|
$
|
0.30
|
|
|
$
|
0.17
|
|
|
$
|
0.37
|
|
|
$
|
0.27
|
|
|
Loss from discontinued operations
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Net income available for common shareholders
|
|
|
|
$
|
0.30
|
|
|
$
|
0.16
|
|
|
$
|
0.36
|
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government Properties Income Trust
Funds from
Operations and Normalized Funds from Operations
(amounts
in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Calculation of Funds from Operations (FFO) and Normalized FFO
available for common shareholders (5):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common shareholders
|
|
|
|
|
|
$
|
29,602
|
|
|
$
|
11,677
|
|
|
$
|
35,889
|
|
|
$
|
19,092
|
|
|
Add (less): Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated properties
|
|
|
|
|
|
42,671
|
|
|
20,663
|
|
|
86,875
|
|
|
41,168
|
|
|
Unconsolidated joint venture properties
|
|
|
|
|
|
2,185
|
|
|
—
|
|
|
4,370
|
|
|
—
|
|
|
FFO attributable to SIR investment
|
|
|
|
|
|
12,414
|
|
|
17,149
|
|
|
30,902
|
|
|
29,553
|
|
|
Loss on impairment of real estate (1) |
|
|
|
|
|
(316
|
)
|
|
—
|
|
|
5,800
|
|
|
—
|
|
|
Equity in earnings of SIR
|
|
|
|
|
|
(4,301
|
)
|
|
(8,207
|
)
|
|
(14,590
|
)
|
|
(10,818
|
)
|
|
Gain on sale of real estate (4) |
|
|
|
|
|
(17,329
|
)
|
|
—
|
|
|
(17,329
|
)
|
|
—
|
|
|
FFO available for common shareholders
|
|
|
|
|
|
64,926
|
|
|
41,282
|
|
|
131,917
|
|
|
78,995
|
|
|
Add (less): Normalized FFO attributable to SIR investment
|
|
|
|
|
|
11,292
|
|
|
17,407
|
|
|
26,898
|
|
|
31,997
|
|
|
FFO attributable to SIR investment
|
|
|
|
|
|
(12,414
|
)
|
|
(17,149
|
)
|
|
(30,902
|
)
|
|
(29,553
|
)
|
|
Net gain on issuance of shares by SIR
|
|
|
|
|
|
(8
|
)
|
|
(21
|
)
|
|
(8
|
)
|
|
(21
|
)
|
|
Estimated business management incentive fees (2) |
|
|
|
|
|
(2,150
|
)
|
|
893
|
|
|
737
|
|
|
893
|
|
|
Unrealized gain on equity securities (3) |
|
|
|
|
|
(10,321
|
)
|
|
—
|
|
|
(23,252
|
)
|
|
—
|
|
|
Normalized FFO available for common shareholders
|
|
|
|
|
|
$
|
51,325
|
|
|
$
|
42,412
|
|
|
$
|
105,390
|
|
|
$
|
82,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
|
|
|
99,051
|
|
71,088
|
|
99,046
|
|
71,083
|
|
Weighted average common shares outstanding (diluted)
|
|
|
|
|
|
99,064
|
|
71,119
|
|
99,050
|
|
71,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share amounts (basic and diluted):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common shareholders
|
|
|
|
|
|
$
|
0.30
|
|
|
$
|
0.16
|
|
|
$
|
0.36
|
|
|
$
|
0.27
|
|
|
FFO available for common shareholders
|
|
|
|
|
|
$
|
0.66
|
|
|
$
|
0.58
|
|
|
$
|
1.33
|
|
|
$
|
1.11
|
|
|
Normalized FFO available for common shareholders
|
|
|
|
|
|
$
|
0.52
|
|
|
$
|
0.60
|
|
|
$
|
1.06
|
|
|
$
|
1.16
|
|
|
Distributions declared per share
|
|
|
|
|
|
$
|
0.43
|
|
|
$
|
0.43
|
|
|
$
|
0.86
|
|
|
$
|
0.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
Loss on impairment of real estate for the three months ended
June 30, 2018 represents an adjustment of $322 to increase the
carrying value of one property (one building) removed from held
for sale status to its estimated fair value and an adjustment of
$6 to reduce the carrying value of one property (one building) to
its estimated fair value less costs to sell. GOV recorded a $6,116
loss on impairment of real estate in the three months ended March
31, 2018 to reduce the carrying value of three properties (three
buildings) to their estimated fair value less costs to sell.
|
|
|
|
|
|
(2)
|
|
|
Incentive fees under GOV’s business management agreement with
The RMR Group LLC are payable after the end of each calendar year,
are calculated based on common share total return, as defined, and
are included in general and administrative expenses in GOV’s
condensed consolidated statements of income. In calculating net
income in accordance with GAAP, GOV recognizes estimated business
management incentive fee expense, if any, in the first, second and
third quarters. Although GOV recognizes this expense, if any, in
the first, second and third quarters for purposes of calculating
net income, GOV does not include such expense in the calculation
of Normalized FFO until the fourth quarter, when the amount of the
business management incentive fee expense for the calendar year,
if any, is determined. Net income includes the reversal of $2,150
of previously accrued business management incentive fee expense
and $893 of estimated business management incentive fee expense in
the three months ended June 30, 2018 and 2017, respectively. Net
income includes $737 and $893 of estimated business management fee
expense in the six months ended June 30, 2018 and 2017,
respectively.
|
|
|
|
|
|
(3)
|
|
|
Unrealized gain on equity securities represents the adjustment
required to adjust the carrying value of GOV's investment in RMR
Inc. common stock to its fair value as of June 30, 2018 in
accordance with new GAAP standards effective January 1, 2018.
|
|
|
|
|
|
(4)
|
|
|
GOV recorded a $17,329 gain on sale of real estate in the three
months ended June 30, 2018 in connection with the sale of one
property (one building).
|
|
|
|
|
|
(5)
|
|
|
GOV calculates FFO available for common shareholders and
Normalized FFO available for common shareholders as shown above.
FFO available for common shareholders is calculated on the basis
defined by The National Association of Real Estate Investment
Trusts, or Nareit, which is net income available for common
shareholders 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 and the
difference between FFO attributable to an equity investment and
equity in earnings of Select Income REIT, or SIR, but excluding
impairment charges on and increases in the carrying value of real
estate assets, any gain or loss on sale of real estate, as well as
certain other adjustments currently not applicable to GOV. GOV's
calculation of Normalized FFO available for common shareholders
differs from Nareit's definition of FFO available for common
shareholders because GOV includes SIR's Normalized FFO
attributable to GOV's equity investment in SIR (net of FFO
attributable to GOV's equity investment in SIR), GOV includes
business management incentive fees, if any, only in the fourth
quarter versus the quarter when they are recognized as expense in
accordance with GAAP due to their quarterly volatility not
necessarily being indicative of GOV'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
and GOV excludes gains on issuance of shares by SIR and unrealized
gains and losses on equity securities. GOV considers FFO available
for common shareholders and Normalized FFO available for common
shareholders to be appropriate supplemental measures of operating
performance for a REIT, along with net income, net income
available for GOV's common shareholders and operating income. GOV
believes that FFO available for common shareholders and Normalized
FFO available for common shareholders provide useful information
to investors because by excluding the effects of certain
historical amounts, such as depreciation expense, FFO available
for common shareholders and Normalized FFO available for common
shareholders may facilitate a comparison of GOV's operating
performance between periods and with other REITs. FFO available
for common shareholders and Normalized FFO available for common
shareholders are among the factors considered by GOV's Board of
Trustees when determining the amount of distributions to GOV's
shareholders. Other factors include, but are not limited to,
requirements to maintain GOV's qualification for taxation as a
REIT, limitations in GOV's credit agreement and public debt
covenants, the availability to GOV of debt and equity capital,
GOV's expectation of its future capital requirements and operating
performance, GOV's receipt of distributions from SIR and GOV's
expected needs for and availability of cash to pay its
obligations. FFO available for common shareholders and Normalized
FFO available for common shareholders do not represent cash
generated by operating activities in accordance with GAAP and
should not be considered alternatives to net income, net income
available for common shareholders or operating income as
indicators of GOV's operating performance or as measures of GOV's
liquidity. These measures should be considered in conjunction with
net income, net income available for common shareholders and
operating income as presented in GOV's Condensed Consolidated
Statements of Income. Other real estate companies and REITs may
calculate FFO available for common shareholders and Normalized FFO
available for common shareholders differently than GOV does.
|
|
|
|
|
|
|
|
Government Properties Income Trust
Calculation and
Reconciliation of Consolidated Property Net Operating Income (NOI)
and Consolidated Property Cash Basis NOI
(1)
(amounts
in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Calculation of Consolidated Property NOI and Consolidated
Property Cash Basis NOI
(2)
:
|
|
|
|
|
|
Rental income (3) |
|
|
|
|
|
$
|
108,085
|
|
|
$
|
69,887
|
|
|
$
|
216,802
|
|
|
$
|
139,183
|
|
|
Property operating expenses
|
|
|
|
|
|
(39,982
|
)
|
|
(27,300
|
)
|
|
(82,473
|
)
|
|
(54,075
|
)
|
|
Consolidated Property NOI
|
|
|
|
|
|
68,103
|
|
|
42,587
|
|
|
134,329
|
|
|
85,108
|
|
|
Non-cash straight line rent adjustments included in rental income (3) |
|
|
|
|
|
(2,744
|
)
|
|
(1,104
|
)
|
|
(5,835
|
)
|
|
(2,404
|
)
|
|
Lease value amortization included in rental income (3) |
|
|
|
|
|
753
|
|
|
617
|
|
|
1,588
|
|
|
1,244
|
|
|
Non-cash amortization included in property operating expenses
(4) |
|
|
|
|
|
(121
|
)
|
|
(121
|
)
|
|
(242
|
)
|
|
(242
|
)
|
|
Consolidated Property Cash Basis NOI
|
|
|
|
|
|
$
|
65,991
|
|
|
$
|
41,979
|
|
|
$
|
129,840
|
|
|
$
|
83,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income Available for Common Shareholders to
Consolidated NOI and Consolidated Property Cash Basis NOI:
|
|
Net income available for common shareholders
|
|
|
|
|
|
$
|
29,602
|
|
|
$
|
11,677
|
|
|
$
|
35,889
|
|
|
$
|
19,092
|
|
|
Preferred units of limited partnership distributions
|
|
|
|
|
|
93
|
|
|
—
|
|
|
371
|
|
|
—
|
|
|
Net income
|
|
|
|
|
|
29,695
|
|
|
11,677
|
|
|
36,260
|
|
|
19,092
|
|
|
Gain on sale of real estate
|
|
|
|
|
|
(17,329
|
)
|
|
—
|
|
|
(17,329
|
)
|
|
—
|
|
|
Income before gain on sale of real estate
|
|
|
|
|
|
12,366
|
|
|
11,677
|
|
|
18,931
|
|
|
19,092
|
|
|
Loss from discontinued operations
|
|
|
|
|
|
—
|
|
|
145
|
|
|
—
|
|
|
289
|
|
|
Income from continuing operations
|
|
|
|
|
|
12,366
|
|
|
11,822
|
|
|
18,931
|
|
|
19,381
|
|
|
Equity in net earnings of investees
|
|
|
|
|
|
(3,672
|
)
|
|
(8,581
|
)
|
|
(13,384
|
)
|
|
(11,320
|
)
|
|
Income tax expense
|
|
|
|
|
|
83
|
|
|
25
|
|
|
115
|
|
|
43
|
|
|
Net gain on issuance of shares by SIR
|
|
|
|
|
|
(8
|
)
|
|
(21
|
)
|
|
(8
|
)
|
|
(21
|
)
|
|
Interest expense
|
|
|
|
|
|
23,304
|
|
|
13,963
|
|
|
46,070
|
|
|
27,544
|
|
|
Interest income
|
|
|
|
|
|
(149
|
)
|
|
(67
|
)
|
|
(265
|
)
|
|
(128
|
)
|
|
Unrealized gain on equity securities
|
|
|
|
|
|
(10,321
|
)
|
|
—
|
|
|
(23,252
|
)
|
|
—
|
|
|
Dividend income
|
|
|
|
|
|
(304
|
)
|
|
(304
|
)
|
|
(608
|
)
|
|
(608
|
)
|
|
Operating income
|
|
|
|
|
|
21,299
|
|
|
16,837
|
|
|
27,599
|
|
|
34,891
|
|
|
General and administrative
|
|
|
|
|
|
4,449
|
|
|
5,087
|
|
|
14,055
|
|
|
9,049
|
|
|
Loss on impairment of real estate
|
|
|
|
|
|
(316
|
)
|
|
—
|
|
|
5,800
|
|
|
—
|
|
|
Depreciation and amortization
|
|
|
|
|
|
42,671
|
|
|
20,663
|
|
|
86,875
|
|
|
41,168
|
|
|
Consolidated Property NOI
|
|
|
|
|
|
68,103
|
|
|
42,587
|
|
|
134,329
|
|
|
85,108
|
|
|
Non-cash amortization included in property operating expenses (4) |
|
|
|
|
|
(121
|
)
|
|
(121
|
)
|
|
(242
|
)
|
|
(242
|
)
|
|
Lease value amortization included in rental income (3) |
|
|
|
|
|
753
|
|
|
617
|
|
|
1,588
|
|
|
1,244
|
|
|
Non-cash straight line rent adjustments included in rental income (3) |
|
|
|
|
|
(2,744
|
)
|
|
(1,104
|
)
|
|
(5,835
|
)
|
|
(2,404
|
)
|
|
Consolidated Property Cash Basis NOI
|
|
|
|
|
|
$
|
65,991
|
|
|
$
|
41,979
|
|
|
$
|
129,840
|
|
|
$
|
83,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Consolidated Property NOI to Same Property NOI
(5)(6)
:
|
|
Rental income
|
|
|
|
|
|
$
|
108,085
|
|
|
$
|
69,887
|
|
|
$
|
216,802
|
|
|
$
|
139,183
|
|
|
Property operating expenses
|
|
|
|
|
|
(39,982
|
)
|
|
(27,300
|
)
|
|
(82,473
|
)
|
|
(54,075
|
)
|
|
Consolidated Property NOI
|
|
|
|
|
|
68,103
|
|
|
42,587
|
|
|
134,329
|
|
|
85,108
|
|
|
Less: NOI of properties not included in same property results
|
|
|
|
|
|
(26,341
|
)
|
|
(2,514
|
)
|
|
(53,456
|
)
|
|
(5,494
|
)
|
|
Same property NOI
|
|
|
|
|
|
$
|
41,762
|
|
|
$
|
40,073
|
|
|
$
|
80,873
|
|
|
$
|
79,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculation of Same Property Cash Basis NOI
(5) (6)
:
|
|
Same property NOI
|
|
|
|
|
|
$
|
41,762
|
|
|
$
|
40,073
|
|
|
$
|
80,873
|
|
|
$
|
79,614
|
|
|
Add: Lease value amortization included in rental income (3) |
|
|
|
|
|
455
|
|
|
530
|
|
|
958
|
|
|
1,067
|
|
|
Less: Non-cash straight line rent adjustments included in rental
income (3) |
|
|
|
|
|
(751
|
)
|
|
(1,102
|
)
|
|
(1,345
|
)
|
|
(2,463
|
)
|
|
Non-cash amortization included in property operating expenses (4) |
|
|
|
|
|
(121
|
)
|
|
(115
|
)
|
|
(238
|
)
|
|
(230
|
)
|
|
Same property Cash Basis NOI
|
|
|
|
|
|
$
|
41,345
|
|
|
$
|
39,386
|
|
|
$
|
80,248
|
|
|
$
|
77,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
GOV calculates Consolidated Property NOI and Consolidated
Property Cash Basis NOI as shown above. The calculations of
Consolidated Property NOI and Consolidated Property Cash Basis NOI
exclude certain components of net income available for common
shareholders in order to provide results that are more closely
related to GOV's consolidated property level results of
operations. GOV defines Consolidated Property NOI as consolidated
income from its rental of real estate less its consolidated
property operating expenses. Consolidated Property NOI excludes
amortization of capitalized tenant improvement costs and leasing
commissions that GOV records as depreciation and amortization. GOV
defines Consolidated Property Cash Basis NOI as Consolidated
Property NOI excluding non-cash straight line rent adjustments,
lease value amortization and non-cash amortization included in
other operating expenses. GOV considers Consolidated Property NOI
and Consolidated Property Cash Basis NOI to be appropriate
supplemental measures to net income available for common
shareholders because they may help both investors and management
to understand the operations of GOV's consolidated properties. GOV
uses Consolidated Property NOI and Consolidated Property Cash
Basis NOI to evaluate individual and company wide consolidated
property level performance, and GOV believes that Consolidated
Property NOI and Consolidated Property Cash Basis NOI provide
useful information to investors regarding GOV's results of
operations because they reflect only those income and expense
items that are generated and incurred at the property level and
may facilitate comparisons of GOV's operating performance between
periods and with other REITs. Consolidated Property NOI and
Consolidated Property Cash Basis NOI do not represent cash
generated by operating activities in accordance with GAAP and
should not be considered alternatives to net income, net income
available for common shareholders or operating income as
indicators of GOV's operating performance or as measures of its
liquidity. These measures should be considered in conjunction with
net income, net income available for common shareholders and
operating income as presented in GOV's Condensed Consolidated
Statements of Income. Other real estate companies and REITs may
calculate Consolidated Property NOI and Consolidated Property Cash
Basis NOI differently than GOV does.
|
|
|
|
|
|
(2)
|
|
|
Excludes one property (one building) classified as discontinued
operations which was sold on August 31, 2017.
|
|
|
|
|
|
(3)
|
|
|
GOV reports rental income on a straight line basis over the
terms of the respective leases; as a result, rental income
includes non-cash straight line rent adjustments. Rental income
also includes expense reimbursements, tax escalations, parking
revenues, service income and other fixed and variable charges paid
to GOV by its tenants, as well as the net effect of non-cash
amortization of intangible lease assets and liabilities.
|
|
|
|
|
|
(4)
|
|
|
GOV recorded a liability for the amount by which the estimated
fair value for accounting purposes exceeded the price GOV paid for
its 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 fees
expense, which is included in property operating expenses.
|
|
|
|
|
|
(5)
|
|
|
For the three months ended June 30, 2018 and 2017, same
property NOI and same property Cash Basis NOI are based on
consolidated properties GOV owned as of June 30, 2018 and which it
owned continuously since April 1, 2017.
|
|
|
|
|
|
(6)
|
|
|
For the six months ended June 30, 2018 and 2017, same property
NOI and same property Cash Basis NOI are based on consolidated
properties GOV owned as of June 30, 2018 and which it owned
continuously since January 1, 2017.
|
|
|
|
|
|
|
|
Government Properties Income Trust
Condensed
Consolidated Balance Sheets
(amounts in thousands,
except share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
|
|
|
2018
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Real estate properties:
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
|
|
|
$
|
587,173
|
|
|
$
|
627,108
|
|
|
Buildings and improvements
|
|
|
|
|
|
2,258,276
|
|
|
2,348,613
|
|
|
Total real estate properties, gross
|
|
|
|
|
|
2,845,449
|
|
|
2,975,721
|
|
|
Accumulated depreciation
|
|
|
|
|
|
(358,286
|
)
|
|
(341,848
|
)
|
|
Total real estate properties, net
|
|
|
|
|
|
2,487,163
|
|
|
2,633,873
|
|
|
Equity investment in Select Income REIT
|
|
|
|
|
|
456,756
|
|
|
467,499
|
|
|
Investment in unconsolidated joint ventures
|
|
|
|
|
|
46,712
|
|
|
50,202
|
|
|
Acquired real estate leases, net
|
|
|
|
|
|
297,696
|
|
|
351,872
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
18,695
|
|
|
16,569
|
|
|
Restricted cash
|
|
|
|
|
|
2,448
|
|
|
3,111
|
|
|
Rents receivable, net
|
|
|
|
|
|
61,522
|
|
|
61,429
|
|
|
Deferred leasing costs, net
|
|
|
|
|
|
22,900
|
|
|
22,977
|
|
|
Other assets, net
|
|
|
|
|
|
113,877
|
|
|
96,033
|
|
|
Total assets
|
|
|
|
|
|
$
|
3,507,769
|
|
|
$
|
3,703,565
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Unsecured revolving credit facility
|
|
|
|
|
|
$
|
452,000
|
|
|
$
|
570,000
|
|
|
Unsecured term loans, net
|
|
|
|
|
|
548,192
|
|
|
547,852
|
|
|
Senior unsecured notes, net
|
|
|
|
|
|
945,346
|
|
|
944,140
|
|
|
Mortgage notes payable, net
|
|
|
|
|
|
180,986
|
|
|
183,100
|
|
|
Accounts payable and other liabilities
|
|
|
|
|
|
80,728
|
|
|
89,440
|
|
|
Due to related persons
|
|
|
|
|
|
7,129
|
|
|
4,859
|
|
|
Assumed real estate lease obligations, net
|
|
|
|
|
|
11,738
|
|
|
13,635
|
|
|
Total liabilities
|
|
|
|
|
|
2,226,119
|
|
|
2,353,026
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred units of limited partnership
|
|
|
|
|
|
—
|
|
|
20,496
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
|
Common shares of beneficial interest, $.01 par value: 150,000,000
shares authorized, 99,165,854 and 99,145,921 shares issued and
outstanding, respectively
|
|
|
|
|
|
992
|
|
|
991
|
|
|
Additional paid in capital
|
|
|
|
|
|
1,968,493
|
|
|
1,968,217
|
|
|
Cumulative net income
|
|
|
|
|
|
205,028
|
|
|
108,144
|
|
|
Cumulative other comprehensive income
|
|
|
|
|
|
139
|
|
|
60,427
|
|
|
Cumulative common distributions
|
|
|
|
|
|
(893,002
|
)
|
|
(807,736
|
)
|
|
Total shareholders’ equity
|
|
|
|
|
|
1,281,650
|
|
|
1,330,043
|
|
|
Total liabilities and shareholders’ equity
|
|
|
|
|
|
$
|
3,507,769
|
|
|
$
|
3,703,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A Maryland Real Estate Investment Trust with transferable shares of
beneficial interest listed on the Nasdaq.
No shareholder,
Trustee or officer is personally liable for any act or obligation of the
Trust.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20180802005159/en/
Government Properties Income Trust
Brad Shepherd, 617-219-1410
Director,
Investor Relations
Source: Government Properties Income Trust