$268.5 Million of Asset Sales since January 1, 2019
First Quarter Net Income Available for Common Shareholders of
$34.0 Million
First Quarter Normalized FFO Available for Common Shareholders of
$73.3 Million, or
$1.53 Per Share
Completed 825,475 Square Feet of Leasing in the First Quarter for
a 12.8% Roll-up in Rents
NEWTON, Mass.--(BUSINESS WIRE)--
Office Properties Income Trust (Nasdaq: OPI) today announced its
financial results for the quarter ended March 31, 2019.
David Blackman, President and Chief Executive Officer of OPI, made the
following statement:
"Our priorities for 2019 are reducing leverage through asset sales,
achieving the best results for our properties through leasing and active
property management and returning to growth during the second half of
the year through an active capital recycling program.
Our first quarter operating activities generated strong leasing results.
During the quarter, we entered new and renewal leases for more than
825,000 square feet at a weighted average lease term of 7.5 years and at
weighted average rents that were 12.8% above prior rents for the same
space.
We also advanced our disposition program during the quarter. In addition
to closing on $268.5 million of property sales, our active marketing
campaign of 33 properties began to show results. We entered agreements
for three properties for $28.4 million and have a number of offers we
are evaluating on the balance of the sale portfolio. With the successful
completion of this disposition program, we expect to achieve our
long-term leverage target and return to accretive growth in the second
half of 2019."
Results for the Quarter Ended March 31, 2019:
Net income available for common shareholders for the quarter ended
March 31, 2019 was $34.0 million, or $0.71 per diluted share, compared
to net income available for common shareholders of $6.3 million, or
$0.25 per diluted share, for the quarter ended March 31, 2018. Net
income available for common shareholders for the quarter ended March 31,
2019 includes a $22.1 million, or $0.46 per diluted share, unrealized
gain on equity securities related to OPI's investment in The RMR Group
Inc., or RMR Inc., and a $22.1 million, or $0.46 per diluted share, gain
on sale of real estate, partially offset by a $3.2 million, or $0.07 per
diluted share, loss on impairment of real estate. Net income available
for common shareholders for the quarter ended March 31, 2018 includes a
$12.9 million, or $0.52 per diluted share, unrealized gain on equity
securities, partially offset by a $6.1 million, or $0.25 per diluted
share, loss on impairment of real estate. The weighted average number of
diluted common shares outstanding was 48.0 million for the quarter ended
March 31, 2019 and 24.8 million for the quarter ended March 31, 2018.
Normalized FFO available for common shareholders for the quarter ended
March 31, 2019 were $73.3 million, or $1.53 per diluted share, compared
to Normalized FFO available for common shareholders for the quarter
ended March 31, 2018 of $54.1 million, or $2.18 per diluted share.
Reconciliations of net income available for common shareholders
determined in accordance with U.S. generally accepted accounting
principles, or GAAP, to FFO available for common shareholders and
Normalized FFO available for common shareholders for the quarters ended
March 31, 2019 and 2018 appear later in this press release.
Leasing, Occupancy and Pro Forma Same Property Results:
During the quarter ended March 31, 2019, OPI entered new and renewal
leases for an aggregate of 825,000 rentable square feet at weighted (by
rentable square feet) average rents that were 12.8% above prior rents
for the same space. The weighted (by rentable square feet) average lease
term for these leases was 7.5 years and leasing concessions and capital
commitments for these leases were $28.8 million, or $4.67 per square
foot, per lease year.
As of March 31, 2019, 89.6% of OPI’s total rentable square feet was
leased, compared to 91.0% as of December 31, 2018 and 94.4% as of
March 31, 2018.
Pro forma results combine the results of OPI and Select Income REIT, or
SIR, for the three months ended March 31, 2019 and 2018 as if the merger
of SIR with OPI that closed on December 31, 2018, or the Merger, had
occurred on January 1, 2018. Pro forma same property occupancy was 89.6%
as of March 31, 2019, compared to 92.7% as of March 31, 2018. Pro forma
Same Property Cash Basis NOI was $107.0 million for the quarter ended
March 31, 2019 which was a 2.8% decrease compared to the same period in
2018.
Reconciliations of net income available for common shareholders
determined in accordance with GAAP to Consolidated Property NOI and
Consolidated Property Cash Basis NOI for the quarters ended March 31,
2019 and 2018 and a calculation of pro forma Same Property NOI and Same
Property Cash Basis NOI for the quarter ended March 31, 2019 appear
later in this press release.
Recent Property Disposition Activities:
As previously announced, in February 2019, OPI sold a property portfolio
consisting of 34 office buildings located in Northern Virginia and
Maryland containing 1.6 million rentable square feet for $198.5 million,
excluding closing costs.
In March 2019, OPI sold one office building located in Washington, D.C.
containing 129,035 rentable square feet for $70.0 million, excluding
closing costs.
In April 2019, OPI entered into an agreement to sell one building
located in Buffalo, NY containing 121,711 rentable square feet for $17.4
million, excluding closing costs.
Also in April 2019, OPI entered into an agreement to sell one building
located in Hanover, PA containing 502,300 rentable square feet for $6.0
million, excluding closing costs.
In May 2019, OPI entered into an agreement to sell one building located
in Maynard, MA containing 287,037 rentable square feet for $5.0 million,
excluding closing costs.
Recent Financing Activities:
In February 2019, OPI repaid the remaining principal balance outstanding
of $88 million under its $250 million unsecured term loan due 2022 and
repaid amounts outstanding under its revolving credit facility with
proceeds from its disposition program.
In March 2019, OPI repaid $65 million under its $300 million unsecured
term loan due 2020 with proceeds from its disposition program.
Conference Call:
At 10:00 a.m. Eastern Time this morning, President and Chief Executive
Officer, David Blackman, and Chief Financial Officer and Treasurer,
Jeffrey Leer, will host a conference call to discuss OPI’s first quarter
2019 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 Friday, May 10, 2019. To access the
replay, dial (412) 317-0088. The replay pass code is 05032019.
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 first quarter conference call are strictly prohibited without the
prior written consent of OPI.
Supplemental Data:
A copy of OPI’s First Quarter 2019 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 available for common shareholders, Normalized FFO
available for common shareholders, Consolidated Property NOI,
Consolidated Property Cash Basis NOI, Same Property NOI and Same
Property Cash Basis NOI and pro forma Same Property NOI and pro forma
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 income (loss) from continuing operations,
net income and net income available for common shareholders as
indicators of OPI’s operating performance or as measures of OPI’s
liquidity. These measures should be considered in conjunction with
income (loss) from continuing operations, net income and net income
available for common shareholders as presented in OPI's condensed
consolidated statements of income. OPI considers these non-GAAP measures
to be appropriate supplemental measures of operating performance for a
real estate investment trust, or REIT, along with income (loss) from
continuing operations, net income and net income available for common
shareholders. 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 Consolidated Property NOI,
Consolidated 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 at 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 available for common shareholders,
Normalized FFO available for common shareholders, Consolidated Property
NOI, Consolidated 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’s pro forma Same Property Cash
Basis NOI as if the Merger had occurred on January 1, 2018 also are
provided in the pages attached hereto. Such pro forma financial
information is not necessarily indicative of OPI’s expected financial
position or results of operations for any future period. Differences
could result from numerous factors, including future changes in OPI’s
portfolio of investments, OPI’s capital structure, OPI's property level
operating expenses and revenues, including rents expected to be received
on OPI’s existing leases or leases OPI may enter into, changes in
interest rates and other reasons. Actual future results are likely to be
different from amounts presented in the pro forma financial information
and such differences could be significant.
OPI is a REIT focused on owning, operating and leasing buildings
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
(amounts in
thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2019
|
|
|
2018
|
|
Rental income
|
|
|
|
$
|
174,777
|
|
|
|
$
|
108,717
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Real estate taxes
|
|
|
|
18,392
|
|
|
|
12,964
|
|
|
Utility expenses
|
|
|
|
9,381
|
|
|
|
6,690
|
|
|
Other operating expenses
|
|
|
|
30,136
|
|
|
|
22,837
|
|
|
Depreciation and amortization
|
|
|
|
77,521
|
|
|
|
44,204
|
|
|
Loss on impairment of real estate (1) |
|
|
|
3,204
|
|
|
|
6,116
|
|
|
Acquisition and transaction related costs (2) |
|
|
|
584
|
|
|
|
—
|
|
|
General and administrative (3) |
|
|
|
8,723
|
|
|
|
9,606
|
|
|
Total expenses
|
|
|
|
147,941
|
|
|
|
102,417
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of real estate (4) |
|
|
|
22,092
|
|
|
|
—
|
|
|
Dividend income
|
|
|
|
980
|
|
|
|
304
|
|
|
Unrealized gain on equity securities (5) |
|
|
|
22,128
|
|
|
|
12,931
|
|
|
Interest income
|
|
|
|
248
|
|
|
|
116
|
|
|
Interest expense (including net amortization of debt premiums,
discounts
|
|
|
|
|
|
|
|
|
and issuance costs of $2,841 and $965, respectively)
|
|
|
|
(37,133
|
)
|
|
|
(22,766
|
)
|
|
Loss on early extinguishment of debt
|
|
|
|
(414
|
)
|
|
|
—
|
|
|
Income (loss) from continuing operations before income tax expense
and
|
|
|
|
|
|
|
|
|
equity in net losses of investees
|
|
|
|
34,737
|
|
|
|
(3,115
|
)
|
|
Income tax expense
|
|
|
|
(483
|
)
|
|
|
(32
|
)
|
|
Equity in net losses of investees
|
|
|
|
(235
|
)
|
|
|
(577
|
)
|
|
Income (loss) from continuing operations
|
|
|
|
34,019
|
|
|
|
(3,724
|
)
|
|
Income from discontinued operations (6) |
|
|
|
—
|
|
|
|
10,289
|
|
|
Net income
|
|
|
|
34,019
|
|
|
|
6,565
|
|
|
Preferred units of limited partnership distributions
|
|
|
|
—
|
|
|
|
(278
|
)
|
|
Net income available for common shareholders
|
|
|
|
$
|
34,019
|
|
|
|
$
|
6,287
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
|
48,031
|
|
|
|
24,760
|
|
|
Weighted average common shares outstanding (diluted)
|
|
|
|
48,046
|
|
|
|
24,760
|
|
|
|
|
|
|
|
|
|
|
Per common share amounts (basic and diluted):
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
|
$
|
0.71
|
|
|
|
$
|
(0.16
|
)
|
|
Income from discontinued operations
|
|
|
|
$
|
—
|
|
|
|
$
|
0.42
|
|
|
Net income available for common shareholders
|
|
|
|
$
|
0.71
|
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes on pages 6 and 7.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office Properties Income Trust
Funds from
Operations and Normalized Funds from Operations
(amounts
in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
Calculation of FFO and Normalized FFO available for common
shareholders
(7)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common shareholders
|
|
|
|
$
|
34,019
|
|
|
|
$
|
6,287
|
|
|
Add (less):
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
Consolidated properties
|
|
|
|
77,521
|
|
|
|
44,204
|
|
|
|
Unconsolidated joint venture properties
|
|
|
|
1,751
|
|
|
|
2,185
|
|
|
|
FFO attributable to SIR investment
|
|
|
|
—
|
|
|
|
18,488
|
|
|
|
Loss on impairment of real estate (1) |
|
|
|
3,204
|
|
|
|
6,116
|
|
|
|
Equity in earnings of SIR included in discontinued operations
|
|
|
|
—
|
|
|
|
(10,289
|
)
|
|
|
Gain on sale of real estate (4) |
|
|
|
(22,092
|
)
|
|
|
—
|
|
|
|
Unrealized gain on equity securities (5) |
|
|
|
(22,128
|
)
|
|
|
(12,931
|
)
|
|
FFO available for common shareholders
|
|
|
|
72,275
|
|
|
|
54,060
|
|
|
Add (less):
|
|
Acquisition and transaction related costs (2)
|
|
|
|
584
|
|
|
|
—
|
|
|
|
Loss on early extinguishment of debt
|
|
|
|
414
|
|
|
|
—
|
|
|
|
Normalized FFO attributable to SIR investment
|
|
|
|
—
|
|
|
|
15,606
|
|
|
|
FFO attributable to SIR investment
|
|
|
|
—
|
|
|
|
(18,488
|
)
|
|
|
Estimated business management incentive fees (3) |
|
|
|
—
|
|
|
|
2,887
|
|
|
Normalized FFO available for common shareholders
|
|
|
|
$
|
73,273
|
|
|
|
$
|
54,065
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding (basic)
|
|
|
|
48,031
|
|
|
24,760
|
|
Weighted average common shares outstanding (diluted)
|
|
|
|
48,046
|
|
|
24,760
|
|
|
|
|
|
|
|
|
|
|
|
Per common share amounts (basic and diluted):
|
|
|
|
|
|
|
|
|
Net income available for common shareholders
|
|
|
|
$
|
0.71
|
|
|
|
$
|
0.25
|
|
|
FFO available for common shareholders
|
|
|
|
$
|
1.50
|
|
|
|
$
|
2.18
|
|
|
Normalized FFO available for common shareholders
|
|
|
|
$
|
1.53
|
|
|
|
$
|
2.18
|
|
|
Distributions declared per share
|
|
|
|
$
|
0.55
|
|
|
|
$
|
1.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
OPI recorded an adjustment of $2,757 to reduce the carrying
value of one building to its estimated fair value less costs to
sell and a $447 loss on impairment of real estate related to the
disposal of the Northern Virginia and Maryland property portfolio
during the three months ended March 31, 2019. OPI recorded an
adjustment of $6,116 to reduce the carrying value of three
buildings to their estimated fair values less costs to sell in the
three months ended March 31, 2018.
|
|
|
|
|
(2)
|
|
Acquisition and transaction related costs for the three months
ended March 31, 2019 include costs incurred in connection with the
Merger.
|
|
|
|
|
(3)
|
|
Incentive fees under OPI’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 OPI’s
condensed consolidated statements of income. In calculating net
income in accordance with GAAP, OPI recognizes estimated business
management incentive fee expense, if any, in the first, second and
third quarters. Although OPI recognizes this expense, if any, in
the first, second and third quarters for purposes of calculating
net income, OPI 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. No estimated business management incentive
fees were included in net income for the three months ended March
31, 2019. Net income includes $2,887 of estimated business
management incentive fee expense for the three months ended March
31, 2018.
|
|
|
|
|
(4)
|
|
During the quarter ended March 31, 2019, OPI recorded a $22,092
gain on the sale of one building in March 2019.
|
|
|
|
|
(5)
|
|
Unrealized gain on equity securities represents the adjustment
required to adjust the carrying value of OPI's investment in RMR
Inc. common stock to its fair value as of March 31, 2019 and 2018.
|
|
|
|
|
(6)
|
|
Income from discontinued operations includes operating results
related to OPI's former equity method investment in SIR.
|
|
|
|
|
(7)
|
|
OPI calculates funds from operations, or 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, 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 SIR included in discontinued operations, 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 OPI. In calculating Normalized FFO available for
common shareholders, OPI adjusts for the 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 available for common shareholders and Normalized FFO
available for common shareholders 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 available for common
shareholders and Normalized FFO available for common shareholders
differently than OPI does.
|
|
|
|
|
|
|
|
|
Office Properties Income Trust
Calculation and
Reconciliation of Consolidated Property NOI, Consolidated Property
Cash Basis NOI, Same Property NOI
and Same Property
Cash Basis NOI
(1)
(amounts in
thousands)
(unaudited)
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Calculation of Consolidated Property NOI and Consolidated
Property Cash Basis NOI:
|
|
|
|
|
|
|
|
|
|
|
|
Rental income (2) |
|
|
$
|
174,777
|
|
|
|
$
|
108,717
|
|
|
Property operating expenses
|
|
|
(57,909
|
)
|
|
|
(42,491
|
)
|
|
Consolidated Property NOI
|
|
|
116,868
|
|
|
|
66,226
|
|
|
Non-cash straight line rent adjustments included in rental income (2) |
|
|
(6,794
|
)
|
|
|
(3,091
|
)
|
|
Lease value amortization included in rental income (2) |
|
|
1,147
|
|
|
|
835
|
|
|
Lease termination fees included in rental income (2) |
|
|
(294
|
)
|
|
|
—
|
|
|
Non-cash amortization included in property operating expenses (3) |
|
|
(121
|
)
|
|
|
(121
|
)
|
|
Consolidated Property Cash Basis NOI
|
|
|
$
|
110,806
|
|
|
|
$
|
63,849
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income Available for Common Shareholders
to Consolidated Property NOI and Consolidated Property Cash Basis
NOI:
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common shareholders
|
|
|
$
|
34,019
|
|
|
|
$
|
6,287
|
|
|
Preferred units of limited partnership distributions
|
|
|
—
|
|
|
|
278
|
|
|
Net income
|
|
|
34,019
|
|
|
|
6,565
|
|
|
Income from discontinued operations
|
|
|
—
|
|
|
|
(10,289
|
)
|
|
Income (loss) from continuing operations
|
|
|
34,019
|
|
|
|
(3,724
|
)
|
|
Equity in net losses of investees
|
|
|
235
|
|
|
|
577
|
|
|
Income tax expense
|
|
|
483
|
|
|
|
32
|
|
|
Loss on early extinguishment of debt
|
|
|
414
|
|
|
|
—
|
|
|
Interest expense
|
|
|
37,133
|
|
|
|
22,766
|
|
|
Interest income
|
|
|
(248
|
)
|
|
|
(116
|
)
|
|
Unrealized gain on equity securities
|
|
|
(22,128
|
)
|
|
|
(12,931
|
)
|
|
Dividend income
|
|
|
(980
|
)
|
|
|
(304
|
)
|
|
Gain on sale of real estate
|
|
|
(22,092
|
)
|
|
|
—
|
|
|
General and administrative
|
|
|
8,723
|
|
|
|
9,606
|
|
|
Acquisition and transaction related costs
|
|
|
584
|
|
|
|
—
|
|
|
Loss on impairment of real estate
|
|
|
3,204
|
|
|
|
6,116
|
|
|
Depreciation and amortization
|
|
|
77,521
|
|
|
|
44,204
|
|
|
Consolidated Property NOI
|
|
|
116,868
|
|
|
|
66,226
|
|
|
Non-cash amortization included in property operating expenses (3) |
|
|
(121
|
)
|
|
|
(121
|
)
|
|
Lease termination fees included in rental income (2) |
|
|
(294
|
)
|
|
|
—
|
|
|
Lease value amortization included in rental income (2) |
|
|
1,147
|
|
|
|
835
|
|
|
Non-cash straight line rent adjustments included in rental income (2) |
|
|
(6,794
|
)
|
|
|
(3,091
|
)
|
|
Consolidated Property Cash Basis NOI
|
|
|
$
|
110,806
|
|
|
|
$
|
63,849
|
|
|
|
|
|
|
|
|
|
Reconciliation of Consolidated Property NOI to Same Property NOI
(4)
:
|
|
|
|
|
|
|
|
Rental income (2) |
|
|
$
|
174,777
|
|
|
|
$
|
108,717
|
|
|
Property operating expenses
|
|
|
(57,909
|
)
|
|
|
(42,491
|
)
|
|
Consolidated Property NOI
|
|
|
116,868
|
|
|
|
66,226
|
|
|
Less: NOI of properties not included in same property results
|
|
|
|
|
|
|
|
SIR assets acquired
|
|
|
(60,522
|
)
|
|
|
—
|
|
|
Historical OPI assets
|
|
|
(3,904
|
)
|
|
|
(12,113
|
)
|
|
Same Property NOI
|
|
|
$
|
52,442
|
|
|
|
$
|
54,113
|
|
|
|
|
|
|
|
|
|
Calculation of Same Property Cash Basis NOI
(4)
:
|
|
|
|
|
|
|
|
Same property NOI
|
|
|
$
|
52,442
|
|
|
|
$
|
54,113
|
|
|
Add: Lease value amortization included in rental income (2) |
|
|
318
|
|
|
|
547
|
|
|
Less: Non-cash straight line rent adjustments included in rental
income (2) |
|
|
(1,665
|
)
|
|
|
(2,536
|
)
|
|
Non-cash amortization included in property operating expenses (3) |
|
|
(121
|
)
|
|
|
(116
|
)
|
|
Same Property Cash Basis NOI
|
|
|
$
|
50,974
|
|
|
|
$
|
52,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes on page 9.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The calculations of Consolidated Property net operating income,
or 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 OPI’s
consolidated property level results of operations. OPI calculates
Consolidated Property NOI and Consolidated Property Cash Basis NOI
as shown above. OPI 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 OPI records as depreciation and
amortization expense. OPI defines Consolidated Property Cash Basis
NOI as Consolidated 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 Consolidated 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 Consolidated
Property NOI, Consolidated 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 Consolidated Property NOI,
Consolidated Property Cash Basis NOI, Same Property NOI and Same
Property Cash Basis NOI differently than OPI does.
|
|
|
|
|
(2)
|
|
OPI 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 OPI by its tenants, as well as the net effect of non-cash
amortization of intangible lease assets and liabilities and lease
termination fees, if any.
|
|
|
|
|
(3)
|
|
OPI recorded a liability for the amount by which the estimated
fair value for accounting purposes exceeded the price OPI 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.
|
|
|
|
|
(4)
|
|
For the three months ended March 31, 2019 and 2018, Same
Property NOI and Same Property Cash Basis NOI are based on
consolidated properties OPI owned as of March 31, 2019 and which
it owned continuously since January 1, 2018.
|
|
|
|
|
|
|
|
|
|
Office Properties Income Trust
Pro Forma Summary
Same Property Results
(1)
(dollars
and square feet in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
OPI (Excluding Former SIR Properties):
|
|
|
|
3/31/2019
|
|
|
|
3/31/2018
|
|
Leasable buildings
|
|
|
|
113
|
|
|
|
|
113
|
|
|
Total sq. ft. (2) |
|
|
|
13,596
|
|
|
|
|
13,585
|
|
|
Percent leased (3) |
|
|
|
92.5
|
%
|
|
|
|
94.8
|
%
|
|
Same Property Cash Basis NOI (4)
|
|
|
|
$
|
50,974
|
|
|
|
|
$
|
52,008
|
|
|
Same Property Cash Basis NOI % change
|
|
|
|
|
(2.0
|
%)
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
Former SIR Properties:
|
|
|
3/31/2019
|
|
|
3/31/2018
|
|
|
|
|
|
|
As reported
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
SIR (excluding ILPT)
|
|
|
SIR 2018 Disposition (5) |
|
|
Pro Forma SIR
|
|
Leasable buildings (6) |
|
|
99
|
|
|
|
100
|
|
|
|
(1
|
)
|
|
|
99
|
|
|
Total sq. ft. (2) |
|
|
16,538
|
|
|
|
16,956
|
|
|
|
(418
|
)
|
|
|
16,538
|
|
|
Percent leased (3) |
|
|
87.2
|
%
|
|
|
88.7
|
%
|
|
|
—
|
%
|
|
|
90.1
|
%
|
|
Same Property Cash Basis NOI (4) |
|
|
$
|
56,049
|
|
|
|
$
|
58,097
|
|
|
|
$
|
(40
|
)
|
|
|
$
|
58,057
|
|
|
Same Property Cash Basis NOI % change
|
|
|
(3.5
|
%)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
Pro Forma Combined:
|
|
|
|
3/31/2019
|
|
|
|
3/31/2018
|
|
Leasable buildings (6) |
|
|
|
212
|
|
|
|
|
212
|
|
|
Total sq. ft. (2) |
|
|
|
30,134
|
|
|
|
|
30,123
|
|
|
Percent leased (3) |
|
|
|
89.6
|
%
|
|
|
|
92.7
|
%
|
|
Same Property Cash Basis NOI (4) |
|
|
|
$
|
107,023
|
|
|
|
|
$
|
110,065
|
|
|
Same Property Cash Basis NOI % change
|
|
|
|
(2.8
|
%)
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
OPI (excluding former SIR properties) same property results for
the three months ended March 31, 2019 and 2018, are based on
consolidated properties owned as of March 31, 2019 and which OPI
had owned continuously since January 1, 2018. Former SIR
properties same property results for the three months ended March
31, 2019 and 2018, are based on consolidated properties SIR owned
prior to the Merger and which it had owned continuously since
January 1, 2018 and which OPI owned as of March 31, 2019. Pro
forma combined same property results combine the same property
results of OPI and SIR for the three months ended March 31, 2019
and 2018, as if the Merger had occurred on January 1, 2018. See
calculation of pro forma Same Property Cash Basis NOI for the
three months ended March 31, 2019 on page 11.
|
|
|
|
|
(2)
|
|
Subject to changes when space is remeasured or reconfigured for
tenants.
|
|
|
|
|
(3)
|
|
Percent leased includes (i) space being fitted out for
occupancy pursuant to OPI's lease agreements, if any, and (ii)
space which is leased, but is not occupied or is being offered for
sublease by tenants, if any, as of the measurement date.
|
|
|
|
|
(4)
|
|
See page 9 for the definition of Consolidated Property Cash
Basis NOI, a description of why OPI believes it is an appropriate
supplemental measure and a description of how OPI uses this
measure.
|
|
|
|
|
(5)
|
|
SIR sold a vacant land parcel in August 2018 prior to the
completion of the Merger.
|
|
|
|
|
(6)
|
|
Includes two leasable land parcels as of March 31, 2019 and
three leasable land parcels as of March 31, 2018.
|
|
|
|
|
|
|
|
|
Office Properties Income Trust
Calculation of Pro
Forma Same Property NOI and Same Property Cash Basis NOI
(1)
(amounts
in thousands)
(unaudited)
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2019
|
|
|
|
OPI
|
|
|
Former
|
|
|
|
|
|
|
(Excluding Former
|
|
|
SIR
|
|
|
Pro Forma
|
|
|
|
SIR Properties)
|
|
|
Properties
|
|
|
Combined
|
|
Reconciliation of Consolidated Property NOI to Same Property NOI:
(2)
|
|
|
|
|
|
|
|
|
|
|
Rental income (3) |
|
|
$
|
93,680
|
|
|
|
$
|
81,097
|
|
|
|
$
|
174,777
|
|
|
Property operating expenses
|
|
|
(37,334
|
)
|
|
|
(20,575
|
)
|
|
|
(57,909
|
)
|
|
Consolidated Property NOI
|
|
|
56,346
|
|
|
|
60,522
|
|
|
|
116,868
|
|
|
Less: NOI of properties not included in same property results
|
|
|
(3,904
|
)
|
|
|
—
|
|
|
|
(3,904
|
)
|
|
Same Property NOI
|
|
|
$
|
52,442
|
|
|
|
$
|
60,522
|
|
|
|
$
|
112,964
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculation of Same Property Cash Basis NOI:
(2)
|
|
|
|
|
|
|
|
|
|
|
Same Property NOI
|
|
|
$
|
52,442
|
|
|
|
$
|
60,522
|
|
|
|
$
|
112,964
|
|
|
Add: Lease value amortization included in rental income (3) |
|
|
318
|
|
|
|
830
|
|
|
|
1,148
|
|
|
Less: Non-cash straight line rent adjustments included in rental
income (3) |
|
|
(1,665
|
)
|
|
|
(5,009
|
)
|
|
|
(6,674
|
)
|
|
Lease termination fees included in rental income (3) |
|
|
—
|
|
|
|
(294
|
)
|
|
|
(294
|
)
|
|
Non-cash amortization included in property operating expenses (4) |
|
|
(121
|
)
|
|
|
—
|
|
|
|
(121
|
)
|
|
Same Property Cash Basis NOI
|
|
|
$
|
50,974
|
|
|
|
$
|
56,049
|
|
|
|
$
|
107,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
See page 9 for the definitions of Consolidated Property NOI and
Consolidated Property Cash Basis NOI, a description of why OPI
believes these are appropriate supplemental measures and a
description of how OPI uses these measures.
|
|
|
|
|
(2)
|
|
OPI (excluding Former SIR properties) same property results for
the three months ended March 31, 2019 are based on consolidated
properties owned as of March 31, 2019 and which OPI had owned
continuously since January 1, 2018. Former SIR properties same
property results for the three months ended March 31, 2019 are
based on consolidated properties SIR owned prior to the Merger and
which it had owned continuously since January 1, 2018 and which
OPI owned as of March 31, 2019. Pro forma combined same property
results combine the same property results of OPI and SIR for the
three months ended March 31, 2019, as if the Merger had occurred
on January 1, 2018.
|
|
|
|
|
(3)
|
|
OPI 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 OPI by its tenants, as well as the net effect of non-cash
amortization of intangible lease assets and liabilities and lease
termination fees, if any.
|
|
|
|
|
(4)
|
|
OPI recorded a liability for the amount by which the estimated
fair value for accounting purposes exceeded the price OPI 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.
|
|
|
|
|
|
|
|
|
|
|
|
Office Properties Income Trust
Condensed
Consolidated Balance Sheets
(dollars in thousands,
except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
ASSETS
|
|
|
|
|
|
|
|
Real estate properties:
|
|
|
|
|
|
|
|
Land
|
|
|
$
|
918,992
|
|
|
|
$
|
924,164
|
|
|
Buildings and improvements
|
|
|
3,001,385
|
|
|
|
3,020,472
|
|
|
Total real estate properties, gross
|
|
|
3,920,377
|
|
|
|
3,944,636
|
|
|
Accumulated depreciation
|
|
|
(386,688
|
)
|
|
|
(375,147
|
)
|
|
Total real estate properties, net
|
|
|
3,533,689
|
|
|
|
3,569,489
|
|
|
Assets of properties held for sale
|
|
|
23,999
|
|
|
|
253,501
|
|
|
Investment in unconsolidated joint ventures
|
|
|
42,505
|
|
|
|
43,665
|
|
|
Acquired real estate leases, net
|
|
|
1,000,960
|
|
|
|
1,056,558
|
|
|
Cash and cash equivalents
|
|
|
20,153
|
|
|
|
35,349
|
|
|
Restricted cash
|
|
|
4,464
|
|
|
|
3,594
|
|
|
Rents receivable, net
|
|
|
67,776
|
|
|
|
72,051
|
|
|
Deferred leasing costs, net
|
|
|
30,788
|
|
|
|
25,672
|
|
|
Other assets, net
|
|
|
202,864
|
|
|
|
178,704
|
|
|
Total assets
|
|
|
$
|
4,927,198
|
|
|
|
$
|
5,238,583
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Unsecured revolving credit facility
|
|
|
$
|
80,000
|
|
|
|
$
|
175,000
|
|
|
Unsecured term loans, net
|
|
|
234,674
|
|
|
|
387,152
|
|
|
Senior unsecured notes, net
|
|
|
2,360,063
|
|
|
|
2,357,497
|
|
|
Mortgage notes payable, net
|
|
|
326,202
|
|
|
|
335,241
|
|
|
Liabilities of properties held for sale
|
|
|
178
|
|
|
|
4,271
|
|
|
Accounts payable and other liabilities
|
|
|
114,613
|
|
|
|
145,536
|
|
|
Due to related persons
|
|
|
5,626
|
|
|
|
34,887
|
|
|
Assumed real estate lease obligations, net
|
|
|
18,838
|
|
|
|
20,031
|
|
|
Total liabilities
|
|
|
3,140,194
|
|
|
|
3,459,615
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
Common shares of beneficial interest, $.01 par value: 200,000,000
shares authorized, 48,091,903 and 48,082,903 shares issued and
outstanding, respectively
|
|
|
481
|
|
|
|
481
|
|
|
Additional paid in capital
|
|
|
2,610,666
|
|
|
|
2,609,801
|
|
|
Cumulative net income
|
|
|
180,901
|
|
|
|
146,882
|
|
|
Cumulative other comprehensive income (loss)
|
|
|
(297
|
)
|
|
|
106
|
|
|
Cumulative common distributions
|
|
|
(1,004,747
|
)
|
|
|
(978,302
|
)
|
|
Total shareholders’ equity
|
|
|
1,787,004
|
|
|
|
1,778,968
|
|
|
Total liabilities and shareholders’ equity
|
|
|
$
|
4,927,198
|
|
|
|
$
|
5,238,583
|
|
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 regarding OPI's leasing activity may imply
that similar or better results will be achieved in the future.
However, OPI cannot be sure that it will realize similar or better
leasing results in the future,
-
Mr. Blackman's statements that OPI continued to advance its
disposition program during the quarter, that OPI continues to market
additional properties for sale, that OPI expects to achieve its
long-term leverage target and that OPI expects to return to accretive
growth in the second half of 2019 may imply that OPI will continue to
sell additional properties in the future, achieve its long-term
leverage target and achieve future growth. However, OPI may not be
able to successfully sell additional properties in the future or may
sell additional properties at prices that are less than their carrying
values and, as a result, OPI may incur losses in the future, may not
be able to achieve its long-term leverage ratio and may not achieve
future growth, and
-
This press release states that OPI has entered into agreements to sell
three separate buildings for an aggregate sales price of approximately
$28.4 million, excluding closing costs. These sales are subject to
conditions. Those conditions may not be met and these sales may not
occur, may be delayed or their 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.
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/20190503005083/en/
Olivia Snyder, Manager, Investor Relations
(617) 219-1410
Source: Office Properties Income Trust