Reports FFO Excluding Certain Items of $0.42
Per Diluted Share
TIER REIT, Inc. (NYSE: TIER), a Dallas-based real estate
investment trust that specializes in acquiring, developing and
operating office properties located in select U.S. markets, today
announced financial results for the quarter ended September 30,
2015.
Highlights for the Quarter Ended September 30, 2015
- Reported FFO attributable to common
stockholders of $18.9 million, or $0.39 per diluted share, an
increase of 10.5% as compared to $17.1 million for the third
quarter of 2014.
- Reported FFO attributable to common
stockholders, excluding certain items of $20.7 million, or $0.42
per diluted share, an increase of 15.0% as compared to $18.0
million for the third quarter of 2014.
- Achieved Same Store GAAP NOI of $35.9
million, an increase of 10.2% as compared to $32.5 million for the
third quarter of 2014.
- Reported a net loss attributable to
common stockholders of $13.8 million, or $0.28 per diluted share,
compared to a net loss attributable to common stockholders of $16.4
million, or $0.33 per diluted share, for the third quarter of
2014.
- Completed approximately 338,000 square
feet of leasing, including approximately 163,000 square feet of new
and expansion leasing.
- Acquired various real estate interests
in The Domain (Austin, Texas) for a contract purchase price of
$201.1 million, and subsequently sold certain non-office interests
for a total of $37.0 million.
- Reduced weighted average borrowing cost
by an additional 29 basis points to 4.14%.
- Completed the listing of the Company’s
shares of common stock on the New York Stock Exchange (NYSE) under
the ticker symbol “TIER.”
“Our high quality, diversified portfolio delivered strong
results in the third quarter, highlighted by a 15.0% increase in
FFO attributable to common stockholders, excluding certain items,
and a 10.2% increase in Same Store GAAP NOI. In July, we
successfully completed the listing of our shares on the NYSE, which
we believe will provide us access to additional capital and allow
us to execute our long term strategy,” stated Scott Fordham, Chief
Executive Officer and President of TIER REIT. “Going forward, we
intend to drive growth by leasing up our existing portfolio,
selling assets in markets we consider non-strategic and redeploying
the proceeds into best-in-class assets in our target, high growth
markets as we identify strategic opportunities to create value for
our stockholders. Additionally, we intend to continue to enhance
our financial flexibility and lower our cost of capital by repaying
higher priced CMBS debt as we did this quarter. We believe we have
an unparalleled opportunity to create long term value for our
stockholders.”
Financial Results
Funds from Operations (FFO) attributable to common stockholders
for the quarter ended September 30, 2015, was $18.9 million, or
$0.39 per diluted share, an increase of 10.5% as compared to $17.1
million, or $0.34 per diluted share, for the quarter ended
September 30, 2014. FFO attributable to common stockholders,
excluding certain items for the quarter ended September 30, 2015,
was $20.7 million, or $0.42 per diluted share, an increase of
15.0%, as compared to $18.0 million, or $0.36 per diluted share,
for the quarter ended September 30, 2014.
Net loss attributable to common stockholders was $13.8 million,
or $0.28 per basic and diluted share for the quarter ended
September 30, 2015, as compared to a net loss attributable to
common stockholders of $16.4 million, or $0.33 per basic and
diluted share, for the quarter ended September 30, 2014.
FFO attributable to common stockholders, excluding certain
items, excludes costs associated with acquisition expenses, loss on
early extinguishment of debt, default interest, and dilution of
Series A Convertible Preferred Stock, as well as non-recurring
items, such as fees paid to terminate third party property
management and administrative services and costs associated with
listing the Company’s shares of common stock on the NYSE and the
related tender offer.
Leasing Update
During the third quarter of 2015, the Company entered into
leases for 338,000 square feet with an average lease term of 6.8
years, which included 175,000 square feet of renewals, 41,000
square feet of expansion space, and 122,000 square feet of new
leasing. Significant leases included a 63,000 square foot lease
with Travelers Insurance at Lawson Commons, a 64,000 square foot
lease with CohnReznick at 500 E. Pratt, and a 41,000 square foot
lease with Carewise Health at Hurstbourne Park.
Occupancy at the Company’s 35 operating office properties was
89.4% at September 30, 2015, compared to occupancy of 87.7% for
those properties at September 30, 2014. Occupancy at the Company’s
operating office properties in strategic markets was 91.9% at
September 30, 2015. As of September 30, 2015, the Company had
approximately 629,000 square feet of commenced leases that were in
free rent, as well as approximately 93,000 square feet of executed
leases yet to commence for currently vacant space.
Acquisition/Disposition Activity
In July 2015, the Company acquired various real estate interests
in both existing operating properties and unimproved land in The
Domain (Austin, Texas), a premier mixed-use development, for a
contract purchase price of $201.1 million. The transaction included
the acquisition of two Class A, creative-space office buildings
totaling 332,000 square feet, a 49.84% interest in two additional
Class A office buildings totaling 337,000 square feet, various land
parcels totaling approximately 24 acres (exclusive of parcels sold)
for future office development, land parcels zoned for multifamily
development, and a deposit for an interest in a multifamily
residential property. The Company subsequently sold the parcels
zoned for multifamily development for approximately $22.0 million
to an unrelated third party and completed the acquisition of the
multifamily property for approximately $15.0 million and
concurrently sold it to an unrelated third party for approximately
$15.0 million.
Financing and Capital Markets Activity
In July 2015, the Company listed its shares of common stock on
the NYSE under the ticker symbol “TIER.” In conjunction with the
listing, the Company commenced a modified “Dutch Auction” tender
offer, through which it purchased a total of approximately 2.63
million shares of common stock for an aggregate cost of
approximately $50.0 million, excluding fees and expenses related to
the tender offer. At September 30, 2015, the Company had 47.2
million shares of common stock outstanding.
During the third quarter of 2015, the Company paid off the $42.0
million loan secured by its Loop Central property and further
reduced its weighted average interest rate by 29 basis points. As
of September 30, 2015, the Company had $101.0 million outstanding
under its credit facility with an additional $66.3 million of
available borrowing capacity. At quarter end, the Company’s total
debt (including the Company’s share of unconsolidated debt) was
$1.2 billion, comprised of 84.0% fixed rate debt (including the
effect of in-place interest rate swaps) and 16.0% variable rate
debt, with a total weighted average effective interest rate of
4.14%.
Distributions
For the third quarter of 2015, the Company’s board of directors
authorized a distribution in the amount of $0.18 per share on its
common stock to stockholders of record as of the close of business
on September 30, 2015, which was paid on October 8, 2015.
On November 3, 2015, the Company’s board of directors authorized
a distribution for the fourth quarter of 2015 in the amount of
$0.18 per share on its common stock to stockholders of record as of
the close of business on December 30, 2015, payable on January 8,
2015.
2015 Outlook
The Company updated its outlook for 2015 FFO attributable to
common stockholders at $0.77 to $0.79 per share and its outlook for
2015 FFO attributable to common stockholders, excluding certain
items, at $1.52 to $1.54 per share. This outlook reflects
management’s view of current and future market conditions,
including assumptions such as rental rates, occupancy levels,
operating and general and administrative expenses, weighted average
diluted shares and units outstanding, interest rates, and the
pending dispositions of Paces West (Atlanta, Georgia) and Fifth
Third Center (Columbus, Ohio). This outlook does not include any
effects related to other potential acquisitions and dispositions
that may occur after the date of this release. Factors that could
cause actual 2015 FFO attributable to common stockholders to differ
materially from the Company’s current expectations are discussed
below.
2015 Outlook includes the following assumptions (in
thousands, except share amounts and percentages):
Low High Same Store Cash NOI growth,
excluding lease termination fees 2.8 % 3.3 % Same Store GAAP NOI
growth, excluding lease termination fees 5.5 % 6.0 % Lease
termination fees $ 2,800 $ 3,000 Straight-line rental income, at
ownership share $ 12,800 $ 13,000 Above- and below-market rent
amortization, at ownership share $ 6,400 $ 6,600 General and
administrative expenses, including certain other items $ 42,200 $
42,000 Dispositions $ 550,000 $ 600,000 Acquisitions $ 200,000 $
200,000 Year-end occupancy 88.9 % 89.5 % Weighted average diluted
shares and units outstanding (in millions) 49.2 49.2 Certain
other items included in general and administrative expenses: BHT
Advisors termination fee and HPT Management buyout fee $ 10,300 $
10,300 Acquisition expenses $ 1,450 $ 1,450 Common stock listing
and related tender offer expenses $ 5,550 $ 5,550 Certain
other items not included in general and administrative expenses:
Acquisition expenses $ 399 $ 399 Loss on early extinguishment of
debt $ 21,700 $ 21,700
Supplemental Information
A copy of the Company’s third quarter 2015 supplemental
information regarding its financial results and operations for the
quarter ended September 30, 2015, is available in the “Investor
Relations” section of the Company’s website at www.tierreit.com. You may also obtain a copy by
contacting the Investor Relations department by email to
ir@tierreit.com.
Conference Call
A conference call will be held on Thursday, November 5, 2015, at
11:00 a.m. Eastern time/10:00 a.m. Central time. TIER REIT will
host the conference call to discuss matters related to the
Company’s financial results and operating performance, as well as
business highlights and outlook. In addition, the Company may
discuss business and financial developments and trends and other
matters affecting the Company, some of which may not have been
previously disclosed. A live audio webcast can be accessed through
the Company’s website at www.tierreit.com under the “Investor Relations”
section. A replay of the call will also be available on the website
for 30 days.
To Participate in the Telephone
Conference Call
Dial in at least five minutes prior to start time. Domestic Call-In
Number: 1-855-327-6837 International Call-In Number: 1-631-891-4304
Conference Call Playback
Call-in Number: 1-877-870-5176 International: 1-858-384-5517
Passcode: 116954 The audio playback can be accessed through
November 19, 2015.
About TIER REIT, Inc.
TIER REIT, Inc. is a self-managed, Dallas, Texas-based real
estate investment trust focused on maximizing total return to
stockholders through the combination of stock appreciation and
income derived from a sustainable distribution. TIER REIT’s
investment strategy is to acquire, develop and operate a portfolio
of best-in-class office properties in select U.S. markets that
consistently lead the nation in population and office-using
employment growth.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws relating to the business
and financial outlook of TIER REIT that are based on our current
expectations, estimates, forecasts and projections and are not
guarantees of future performance. These forward-looking statements
include discussion and analysis of the financial condition of us
and our subsidiaries, including our ability to rent space on
favorable terms, our ability to address debt maturities and fund
our capital requirements, our intentions to sell certain
properties, the value of our assets, our anticipated capital
expenditures, the amount and timing of any anticipated future cash
distributions to our stockholders, and other matters. Words such as
“may,” “anticipates,” “expects,” “intends,” “plans,” “believes,”
“seeks,” “estimates,” “would,” “could,” “should,” “objectives,”
“strategies,” “goals,” and variations of these words and similar
expressions are intended to identify forward-looking statements.
Actual results may differ materially from those expressed in these
forward-looking statements, and you should not place undue reliance
on any such statements. Factors that could cause actual results to
vary materially from those expressed in forward-looking statements
include changes in real estate conditions and in the capital
markets, as well as the risk factors included in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2014, and Form
10-Q for the fiscal quarter ended September 30, 2015.
Forward-looking statements in this press release speak only as of
the date on which such statements were made and, except as required
by law, we undertake no obligation to update any such statements
that may become untrue because of subsequent events.
TIER REIT, Inc.
Condensed Consolidated Balance Sheets (in thousands,
except share and per share amounts)
(unaudited)
September 30,2015
December 31,2014
Assets Real estate Land $ 184,318 $ 286,430 Land held
for development 44,834 — Buildings and improvements, net
1,361,270 1,482,336
Total real estate
1,590,422 1,768,766 Cash and cash equivalents 7,769 31,442
Restricted cash 16,615 35,324 Accounts receivable, net 74,817
83,380 Prepaid expenses and other assets 22,875 7,129 Investments
in unconsolidated entities 85,377 39,885 Deferred financing fees,
net 12,826 10,783 Lease intangibles, net 85,869 94,690 Other
intangible assets, net 10,185 2,144 Assets associated with real
estate held for sale — 137,640
Total
assets $ 1,906,755 $ 2,211,183
Liabilities and
equity Liabilities Notes payable $ 1,089,629 $ 1,194,085
Accounts payable 1,477 2,790 Payables to related parties 302 2,041
Accrued liabilities 72,719 77,375 Acquired below-market leases, net
13,321 16,984 Distributions payable 8,556 — Other liabilities
30,642 21,405 Obligations associated with real estate held for sale
— 108,343
Total liabilities
1,216,646 1,423,023
Commitments and
contingencies Series A Convertible Preferred Stock 2,700
4,626
Equity Preferred stock, $.0001 par value per share;
17,490,000 shares authorized, none outstanding — — Convertible
stock, $.0001 par value per share; 1,000 shares authorized, none
outstanding — — Common stock, $.0001 par value per share;
382,499,000 shares authorized, 47,241,851 and 49,877,350 shares
issued and outstanding at September 30, 2015, and December 31,
2014, respectively (1) 5 5 Additional paid-in capital (1) 2,598,333
2,645,927 Cumulative distributions and net loss attributable to
common stockholders (1,902,927 ) (1,862,555 )
Accumulated other comprehensive loss
(10,148 ) (788 )
Stockholders’ equity
685,263 782,589
Noncontrolling
interests 2,146 945
Total
equity 687,409 783,534
Total
liabilities and equity $ 1,906,755 $ 2,211,183
(1) Amounts have been adjusted retroactively to reflect a
one-for-six reverse stock split effected June 2, 2015.
TIER REIT, Inc. Condensed Consolidated Statements
of Operations and Comprehensive Loss (in thousands, except
share and per share amounts)
(unaudited)
Three Months Ended
September 30,2015
September 30,2014
Rental revenue $ 69,423 $ 72,157
Expenses Property operating expenses 21,290 22,464 Interest
expense 12,765 16,706 Real estate taxes 9,670 11,272 Property
management fees 342 2,229 General and administrative 10,123 4,515
Depreciation and amortization 31,446 29,885
Total expenses 85,636 87,071
Interest and other income 267 88 Loss on early
extinguishment of debt (30 ) —
Loss from
continuing operations before income taxes, equity in operations of
investments, and loss on sale of assets (15,976 ) (14,826 )
Provision for income taxes (36 ) (36 ) Equity in operations of
investments (159 ) 431
Loss from continuing
operations before loss on sale of assets (16,171 )
(14,431 )
Discontinued operations Income (loss) from
discontinued operations 21 (5,975 ) Gain on sale of discontinued
operations 403 4,026
Discontinued
operations 424 (1,949 ) Loss on sale of
assets (85 ) —
Net loss (15,832 )
(16,380 ) Noncontrolling interests in continuing operations 58 34
Noncontrolling interests in discontinued operations (1 ) (9 )
Dilution of Series A Convertible Preferred Stock 1,926
—
Net loss attributable to common
stockholders $ (13,849 ) $ (16,355 )
Basic and diluted
weighted average common shares outstanding (1) 48,842,711
49,877,350
Basic and diluted income (loss) per common share:
(1) Continuing operations $ (0.29 ) $ (0.29 ) Discontinued
operations 0.01 (0.04 )
Basic and diluted
loss per common share $ (0.28 ) $ (0.33 )
Distributions declared per common share (1) $ 0.18 $
—
Net income (loss) attributable to common
stockholders: Continuing operations $ (14,272 ) $ (14,397 )
Discontinued operations 423 (1,958 )
Net
loss attributable to common stockholders $ (13,849 ) $ (16,355
)
Comprehensive loss: Net loss $ (15,832 ) $ (16,380 ) Other
comprehensive loss: unrealized loss on interest rate derivatives
(10,966 ) —
Comprehensive loss (26,798
) (16,380 ) Comprehensive loss attributable to noncontrolling
interests 76 25
Comprehensive loss
attributable to common stockholders $ (26,722 ) $ (16,355 ) (1)
Amounts have been adjusted retroactively to reflect a
one-for-six reverse stock split effected June 2, 2015.
TIER REIT, Inc.
Calculation of FFO and FAD (in thousands, except per
share data) Three Months Ended
Funds from
operations (FFO)
30-Sep-15 30-Sep-14 Net loss $
(15,832 ) $ (16,380 ) Net loss attributable to noncontrolling
interests 57 25 Dilution of Series A Convertible Preferred Stock
1,926 — Adjustments (1): Real estate depreciation and amortization
- consolidated 31,217 36,245 Real estate depreciation and
amortization - unconsolidated joint ventures 1,904 1,275 Real
estate depreciation and amortization - noncontrolling interest (10
) —
Gain on sale of depreciable real
estate
(318 ) (4,026 )
Taxes associated with sale of depreciable
real estate
(5 ) — Noncontrolling interests (OP units & vested restricted
stock units) share of above adjustments (56 ) (68 )
FFO attributable to common stockholders $ 18,883 $ 17,071
FFO, excluding
certain items
FFO attributable to common stockholders $ 18,883 $ 17,071
Adjustments (1): Acquisition expenses 642 4 Tender offer and
listing costs 2,562 — Loss on early extinguishment of debt 127 946
Non-cash default interest (2) 355 — BHT Advisors termination fee
and HPT Management buyout fee 101 — Noncontrolling interests (OP
units & vested restricted stock units) share of above
adjustments (7 ) (1 ) Dilution of Series A Convertible Preferred
Stock (1,926 ) — FFO attributable to common
stock holders, excluding certain items $ 20,737 $ 18,020
Funds available
for distribution (FAD)
FFO attributable to common stock holders $ 18,883 $ 17,071
Adjustments (1): Recurring capital expenditures (13,795 ) (16,056 )
Straight-line rent adjustments (2,525 ) (411 ) Above- and
below-market rent amortization (2,139 ) (827 ) Amortization of
deferred financing fees and mark to market 930 831 Amortization of
restricted shares and units 505 369 Acquisition expenses 642 4
Tender offer and listing costs 2,562 — Loss on early extinguishment
of debt 127 946 Default interest 355 — BHT Advisors termination fee
and HPT Management buyout fee 101 — Depreciation and amortization -
non-real estate assets 229 — Noncontrolling interests (OP units
& vested restricted stock units) share of above adjustments 5
31 Dilution of Series A Convertible Preferred Stock (1,926 )
— FAD attributable to common stockholders $ 3,954
$ 1,958 Weighted average common shares
outstanding - basic (3) 48,843 49,877 Weighted average common
shares outstanding - diluted (3) 49,034 49,996
Diluted FFO per common share (3)
$ 0.39 $ 0.34
Diluted FFO, excluding certain items per
common share (3)
$ 0.42 $ 0.36
Diluted FAD per common share (3)
$ 0.08 $ 0.04
(1)
Adjustments represent our pro rata share
of consolidated and unconsolidated amounts, including discontinued
operations.
(2)
As of September 30, 2015, we had a
non-recourse loan in default which subjects us to incur default
interest at a rate that is 500 basis points higher than the stated
interest rate. Based on our previous experience, we anticipate that
when ownership of the property is conveyed to the lender, this
default interest will be forgiven.
(3)
All periods presented have been adjusted
to reflect the one-for-six reverse stock split that occurred on
June 2, 2015.
TIER REIT, Inc.
Calculation of Same-Store GAAP NOI and Same Store Cash NOI
(in thousands) Three Months
Ended
September 30,2015
September 30,2014
Same Store Revenue: Rental revenue $ 63,394 $ 60,331 Less: Lease
termination fees (2,018 ) (919 ) 61,376
59,412 Same Store Expenses: Property operating
expenses (less tenant improvement demolition costs) 19,282 17,930
Real estate taxes 8,731 9,638 Property management fees 256
1,871 Property Expenses 28,269
29,439 Same Store GAAP NOI - consolidated properties
33,107 29,973 Same Store GAAP NOI - unconsolidated properties (at
ownership %) 2,750 2,571 Same Store
GAAP NOI 35,857 32,544 Less: Straight-line rent revenue
adjustment (1,368 ) (618 ) Amortization of above- and below-market
rents, net (1,476 ) (572 ) Same Store Cash NOI
consolidated properties $ 30,263 $ 28,783 Same Store Cash NOI -
unconsolidated properties (at ownership %) 2,455
2,408 Same Store Cash NOI $ 32,718 $ 31,191
Reconciliation of net loss to Same Store GAAP
NOI and Same Store Cash NOI Net loss $ (15,832 ) $ (16,380 )
Adjustments: Interest expense 12,765 16,706 Tenant improvement
demolition costs 106 244 General and administrative 10,123 4,515
Depreciation and amortization 31,446 29,885 Interest and other
income (267 ) (88 ) Loss on early extinguishment of debt 30 —
Provision for income taxes 36 36 Equity in operations of
investments 159 (431 ) (Income) loss from discontinued operations
(21 ) 5,975 Gain on sale of discontinued operations (403 ) (4,026 )
Loss on sale of assets 85 — Net operating income of non-same store
properties (3,102 ) (5,544 ) Lease termination fees (2,018 ) (919 )
Same store GAAP NOI unconsolidated properties (at ownership %)
2,750 2,571 Same Store GAAP NOI 35,857
32,544 Straight-line rent revenue adjustment (1,368 ) (618 )
Amortization of above- and below-market rents, net (1,476 ) (572 )
Cash NOI adjustments for unconsolidated properties (at ownership %)
(295 ) (163 ) Same Store Cash NOI $ 32,718 $
31,191
Non-GAAP Supplemental Financial Measures
We compute our financial results in accordance with generally
accepted accounting principles (GAAP). Although Funds from
Operations; Funds from Operations, excluding certain items; Funds
Available for Distribution; Same Store GAAP NOI; and Same Store
Cash NOI are non-GAAP financial measures, we believe that these
calculations are helpful to stockholders and potential investors
and are widely recognized measures of real estate investment trust
performance. We have provided a reconciliation of the non-GAAP
financial measures to the most directly comparable GAAP measure in
tables included in this press release.
Funds from Operations (FFO)
Historical cost accounting for real estate assets in accordance
with GAAP implicitly assumes that the value of real estate
diminishes predictably over time. Since real estate values have
historically risen or fallen with market conditions, many industry
investors and analysts have considered the presentation of
operating results for real estate companies that use historical
cost accounting alone to be insufficient for evaluating operating
performance. FFO is a non-GAAP financial measure that is widely
recognized as a measure of a REIT’s operating performance. We use
FFO as defined by the National Association of Real Estate
Investment Trusts (NAREIT) in the April 2002 “White Paper on
Funds From Operations” which is net income (loss), computed in
accordance with GAAP, excluding extraordinary items, as defined by
GAAP, gains (or losses) from sales of property and impairments of
depreciable real estate (including impairments of investments in
unconsolidated entities which resulted from measurable decreases in
the fair value of the depreciable real estate held by the
unconsolidated entity), plus depreciation and amortization of real
estate assets, and after related adjustments for unconsolidated
entities and noncontrolling interests. The determination of whether
impairment charges have been incurred is based partly on
anticipated operating performance and hold periods. Estimated
undiscounted cash flows from a property, derived from estimated
future net rental and lease revenues, net proceeds on the sale of
the property, and certain other ancillary cash flows, are taken
into account in determining whether an impairment charge has been
incurred. While impairment charges for depreciable real estate are
excluded from net income (loss) in the calculation of FFO as
described above, impairments reflect a decline in the value of the
applicable property which we may not recover.
We believe that the use of FFO, together with the required GAAP
presentations, is helpful in understanding our operating
performance because it excludes real estate-related depreciation
and amortization, gains and losses from property dispositions,
impairments of depreciable real estate assets, and extraordinary
items, and as a result, when compared period to period, reflects
the impact on operations from trends in occupancy rates, rental
rates, operating costs, development activities, general and
administrative expenses, and interest costs, which are not
immediately apparent from net income. Factors that impact FFO
include fixed costs, yields on cash held in accounts, income from
portfolio properties and other portfolio assets, interest rates on
debt financing, and operating expenses.
We also evaluate FFO attributable to common stockholders,
excluding certain items. The items excluded relate to certain
non-operating activities or certain non-recurring activities that
create significant FFO volatility. We believe it is useful to
evaluate FFO excluding these items because it provides useful
information in analyzing comparability between reporting periods
and in assessing the sustainability of our operating
performance.
FFO and FFO, excluding certain items, should not be considered
as alternatives to net income (loss), or indications of our
liquidity, nor are they indicative of funds available to fund our
cash needs, including our ability to make distributions.
Additionally, the exclusion of impairments limits the usefulness of
FFO and FFO, excluding certain items, as historical operating
performance measures since an impairment charge indicates that
operating performance has been permanently affected. FFO and FFO,
excluding certain items, are not useful measures in evaluating net
asset value because impairments are taken into account in
determining net asset value but not in determining FFO and FFO,
excluding certain items. FFO and FFO, excluding certain items, are
non-GAAP measurements and should be reviewed in connection with
other GAAP measurements. Our FFO and FFO, excluding certain items,
attributable to common stockholders as presented may not be
comparable to amounts calculated by other REITs that do not define
FFO in accordance with the current NAREIT definition or that
interpret it differently.
Funds Available for Distribution (FAD)
FAD is a non-GAAP financial measure that we define as FFO,
excluding fair value mark to market adjustments, non-real estate
depreciation and amortization, non-cash stock-based compensation
expense, accretion or dilution of Series A preferred stock, the
amortization of financing costs, realized gains (losses) from the
early extinguishment of derivatives, acquisition fees and expenses,
straight-line rent amounts, amortization of above- or below-market
intangible assets and liabilities, gains or losses on early
extinguishment of debt, costs associated with our tender offer and
NYSE listing, default interest incurred or forgiven, and other
non-recurring charges, less recurring capital expenditures, each as
adjusted for our pro rata share of consolidated and unconsolidated
amounts. Recurring capital expenditures are those capital
expenditures, tenant improvements, leasing commissions and deferred
lease incentives that are incurred to maintain current in-place
rents including the leasing costs incurred to replace tenants upon
lease expiration. Recurring capital expenditures exclude
non-recurring capital expenditures. Non-recurring capital
expenditures are those capital expenditures (1) incurred to change
the class or characterization of an asset, (2) identified as
deferred capital needs at the acquisition of a property and were
incurred within a reasonable period of time subsequent to the
property’s acquisition, or (3) incurred for tenant improvements,
leasing commissions, or deferred lease incentives within twelve
months of acquisition to lease space that was vacant at acquisition
and costs incurred to lease space that has been vacant for at least
twelve months. Although our FAD may not be comparable to that of
other REITs and real estate companies, we believe it provides a
meaningful indicator of our ability to fund our cash needs and to
make cash distributions to equity owners.
We believe that net income (loss) is the most directly
comparable GAAP financial measure to FAD. FAD does not represent
cash generated from operating activities in accordance with GAAP
and should not be considered as an alternative to net income (loss)
as an indication of our performance or to cash flows as a measure
of liquidity or our ability to make distributions.
Same Store GAAP NOI and Same Store Cash NOI
Same Store GAAP NOI is equal to rental revenue, less lease
termination fee income, property operating expenses (excluding
tenant improvement demolition costs), real estate taxes, and
property management expenses for our same store properties and is
considered a non-GAAP financial measure. Same Store Cash NOI is
equal to Same Store GAAP NOI less non-cash revenue items including
straight-line rent adjustments and the amortization of above- and
below-market rent. The same store properties include our operating
properties owned and operated for the entirety of the current and
comparable periods and include our current ownership percentage in
each period for properties in which we own an unconsolidated
interest. We view Same Store GAAP NOI and Same Store Cash NOI as
important measures of the operating performance of our properties
because they allow us to compare operating results of properties
owned and operated for the entirety of the current and comparable
periods and therefore eliminate variations caused by acquisitions
or dispositions during the periods under review.
Same Store GAAP NOI and Same Store Cash NOI presented by us may
not be comparable to Same Store GAAP NOI or Same Store Cash NOI
reported by other REITs that do not define Same Store GAAP NOI or
Same Store Cash NOI exactly as we do. We believe that in order to
facilitate a clear understanding of our operating results, Same
Store GAAP NOI and Same Store Cash NOI should be examined in
conjunction with net income (loss) as presented in our consolidated
financial statements and notes thereto. Same Store GAAP NOI and
Same Store Cash NOI should not be considered as alternatives to net
income (loss) as an indication of our performance or to cash flows
as a measure of liquidity or our ability to make distributions.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151104006678/en/
TIER REIT, Inc.Kelly Sargent,
972-483-2460ksargent@tierreit.com
Tier Reit Inc. (NYSE:TIER)
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