Reported First Quarter FFO, Excluding
Certain Items, of $0.45 Per Diluted Share
Affirms 2016 Guidance
TIER REIT, Inc. (NYSE: TIER), a Dallas-based real estate
investment trust that specializes in owning and operating
best-in-class office properties in select U.S. markets, today
announced financial and operating results for the first quarter
ended March 31, 2016.
First Quarter 2016 Highlights
- Reported Funds from Operations (FFO)
attributable to common stockholders, excluding certain items, for
the first quarter 2016 of $0.45 per diluted share, as compared to
$0.35 per diluted share for the first quarter 2015
- Earned Same Store GAAP NOI for the
first quarter 2016 of $34.2 million, as compared to $30.5 million
for the first quarter 2015, an increase of 11.8%
- Earned Same Store Cash NOI for the
first quarter 2016 of $30.1 million, as compared to $28.7 million
for the first quarter 2015, an increase of 4.8%
- Increased the size of the Company’s
credit facility by $110 million, from $750 million to $860 million,
and converted the facility from secured to unsecured
- Sold Lawson Commons, a 436,000 square
foot office building in St. Paul, Minnesota, for $68.4 million,
utilizing proceeds to pay off debt
“We are very pleased with our first quarter results,” stated
Scott Fordham, Chief Executive Officer and President of TIER REIT.
“We have made good progress on several of our strategic objectives
for 2016, including the sale of Lawson Commons and the conversion
of our credit facility to unsecured. For the remainder of the year,
we remain focused on occupancy, disposing of non-strategic assets,
and further strengthening our balance sheet.”
First Quarter Financial Results
NAREIT-defined FFO attributable to common stockholders for the
quarter ended March 31, 2016, was $20.2 million, or $0.42 per
diluted share, as compared to $16.9 million, or $0.34 per diluted
share, for the quarter ended March 31, 2015. FFO attributable
to common stockholders, excluding certain items, for the quarter
ended March 31, 2016, was $21.3 million, or $0.45 per diluted
share, as compared to $17.4 million, or $0.35 per diluted share,
for the quarter ended March 31, 2015.
Net loss attributable to common stockholders was $12.7 million,
or $0.27 per diluted share for the quarter ended March 31,
2016, as compared to $5.9 million, or $0.12 per diluted share, for
the quarter ended March 31, 2015.
Leasing Update
Occupancy at the Company’s properties was 88.9% at
March 31, 2016, as compared to 89.7% at December 31, 2015.
Downward pressure in occupancy is expected to continue through the
third quarter of 2016 before positive movement is anticipated.
During the first quarter of 2016, the Company leased 462,000
square feet, which included 271,000 square feet of renewals, 70,000
square feet of expansion space, and 121,000 square feet of new
leasing.
Additionally, the Company completed early renewals during the
first quarter of approximately 76,000 square feet of space at its
Houston properties that were scheduled to expire in 2017.
Subsequent to quarter end, the Company leased an additional 66,000
square feet at Burnett Plaza in Fort Worth, thereby completely
backfilling the 116,000 square feet being vacated by Quicksilver
Resources.
Dispositions
On March 1, 2016, Lawson Commons, a 436,000 square foot office
building in St. Paul, Minnesota, was sold for a total contract
sales price of $68.4 million.
Financing and Capital Markets Activity
During the first quarter of 2016, the Company successfully
converted its credit facility from secured to unsecured as a result
of meeting certain financial covenants. In addition, the Company
increased available borrowings under the credit facility from
$750.0 million to $860.0 million, including a $50.0 million
increase in the 5-year term loan and a $60.0 million increase in
the revolving line of credit.
Aided by the proceeds from the sale of Lawson Commons, the
Company paid off the $55.8 million construction loan secured by Two
BriarLake Plaza, which was scheduled to mature in October 2016, and
subsequent to quarter end, paid off the $23.2 million loan secured
by Plaza at MetroCenter, which was scheduled to mature in July
2016. In addition, a $49.1 million construction loan (Company’s
share $24.5 million), which is secured by two office properties
held in a joint venture at The Domain in Austin, Texas, was
refinanced, which was scheduled to mature in September 2016. As a
result of these transactions, the Company reduced its remaining
2016 debt maturities to $112 million.
Distributions
For the first quarter of 2016, 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 March 31, 2016, which was paid on April 8, 2016.
On May 5, 2016, the Company’s board of directors authorized a
distribution for the second quarter of 2016 in the amount of $0.18
per share on its common stock to stockholders of record as of the
close of business on June 30, 2016, payable on July 8, 2016.
Board of Directors
Dennis J. Martin joined the board of directors as an independent
director during the first quarter. The board is currently composed
of seven directors of whom six are independent, including the
chairman.
2016 Outlook
The Company affirmed its 2016 outlook for NAREIT-defined FFO, as
well as FFO, excluding certain items, at $1.51 to $1.57 per diluted
share. This outlook reflects management’s view of current and
future market conditions, including assumptions such as disposition
activity, rental rates, occupancy levels, operating and general and
administrative expenses, weighted average diluted shares
outstanding, and interest rates. This outlook does not include any
effects related to potential acquisitions.
The Company’s 2016 outlook includes the following
assumptions:
- $200 million to $400 million of
dispositions of non-strategic properties
- Same Store Cash NOI growth of 1.0% to
3.0%
- Same Store GAAP NOI growth of 1.0% to
3.0%
- Lease termination fees of $1.0 million
to $2.0 million
- Straight line rent and lease incentive
revenue of $11.0 million to $13.0 million
- Above- and below-market rent
amortization of $4.4 million to $5.0 million
- General and administrative expenses,
excluding certain items, of $23.5 million to $24.5 million
- Year-end occupancy of 89.5% to
90.5%
- Weighted average of 47.9 million shares
of common stock outstanding
Supplemental Information
A copy of the Company’s supplemental information regarding its
financial results and operations for the quarter ended
March 31, 2016, is available in the “Investor Relations”
section of the Company’s website at www.tierreit.com. A copy may
also be obtained by contacting the Investor Relations department by
email to ir@tierreit.com.
Conference Call
A conference call will be held on Tuesday, May 10, 2016, at
11:00 AM Eastern time / 10:00 AM 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: 877.407.0789International Call-In Number:
201.689.8562
Conference Call Playback
Call-in Number: 877.870.5176International: 858.384.5517Passcode:
13634158The audio playback can be accessed through May 24,
2016.
About TIER REIT, Inc.
TIER REIT, Inc. is a self-managed, Dallas-based real estate
investment trust focused on delivering outsized stockholder return
through stock price appreciation and dividend growth while offering
unparalleled tenant service. 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 both population and office-using employment growth. Within these
markets, we target TIER1 submarkets, which are primarily urban and
amenity-rich locations. For additional information regarding TIER
REIT, please visit www.tierreit.com or call 972.483.2400.
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, our intentions with respect to development activity,
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,” “will,”
“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, 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)
March 31,2016
December 31,2015
Assets Real estate Land $ 176,309 $ 179,989 Land held
for development 45,059 45,059 Buildings and improvements, net
1,276,519 1,348,200 Real estate under development 5,201
—
Total real estate 1,503,088 1,573,248
Cash and cash equivalents 5,532 12,248 Restricted cash 12,756
10,712 Accounts receivable, net 78,562 76,228 Prepaid expenses and
other assets 6,025 6,712 Investments in unconsolidated entities
90,000 88,998 Deferred financing fees, net 3,310 3,111 Lease
intangibles, net 78,045 83,548 Other intangible assets, net
9,986 10,086
Total assets $ 1,787,304
$ 1,864,891
Liabilities and equity
Liabilities Notes payable, net $ 1,032,973 $ 1,071,571
Accounts payable 834 831 Payables to related parties 294 292
Accrued liabilities 55,847 70,766 Acquired below-market leases, net
10,456 11,934 Distributions payable 8,600 8,596 Other liabilities
33,944 23,082
Total liabilities
1,142,948 1,187,072
Commitments and
contingencies Series A Convertible Preferred Stock —
2,700
Equity Preferred stock, $.0001 par value per share;
17,500,000 and 17,490,000 shares authorized at March 31, 2016, and
December 31, 2015, respectively, 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, 47,404,980 and 47,362,372 shares
issued and outstanding at March 31, 2016, and December 31, 2015,
respectively 5 5 Additional paid-in capital 2,603,564 2,600,193
Cumulative distributions and net loss attributable to common
stockholders (1,944,022 ) (1,922,721 ) Accumulated other
comprehensive loss (16,732 ) (3,860 )
Stockholders’ equity 642,815 673,617
Noncontrolling interests 1,541
1,502
Total equity 644,356
675,119
Total liabilities and equity $ 1,787,304
$ 1,864,891
TIER REIT,
Inc. Condensed Consolidated Statements of Operations and
Comprehensive Loss (in thousands, except share and per share
amounts) (unaudited) Three Months Ended
March 31,2016
March 31,2015
Rental revenue $ 68,478 $ 75,819
Expenses Property operating expenses 20,485 25,179 Interest
expense 12,240 16,522 Real estate taxes 11,064 11,644 Property
management fees 284 2,332 Asset impairment losses 4,826 132 General
and administrative 6,504 6,414 Depreciation and amortization
32,044 30,022
Total expenses
87,447 92,245 Interest and other income 274
145 Loss on early extinguishment of debt — (36
)
Loss from continuing operations before income taxes, equity in
operations of investments, and gain on sale of assets
(18,695 ) (16,317 ) Benefit (provision) for income taxes (182 ) 76
Equity in operations of investments 415 243
Loss from continuing operations before gain on sale of
assets (18,462 ) (15,998 )
Discontinued
operations Income from discontinued operations — 1,490 Gain on
sale of discontinued operations — 8,606
Discontinued operations — 10,096
Gain on sale of assets 5,739 —
Net
loss (12,723 ) (5,902 ) Noncontrolling interests in continuing
operations 16 27 Noncontrolling interests in discontinued
operations — (17 )
Net loss attributable to
common stockholders $ (12,707 ) $ (5,892 )
Basic and diluted
weighted average common shares outstanding (1) 47,389,591
49,891,436
Basic and diluted earnings (loss) per common share:
(1) Continuing operations $ (0.27 ) $ (0.32 ) Discontinued
operations — 0.20
Basic and diluted
loss per common share $ (0.27 ) $ (0.12 )
Distributions declared per common share (1) $ 0.18 $
—
Net income (loss) attributable to common
stockholders: Continuing operations $ (12,707 ) $ (15,971 )
Discontinued operations — 10,079
Net
loss attributable to common stockholders $ (12,707 ) $ (5,892 )
Comprehensive loss: Net loss $ (12,723 ) $ (5,902 ) Other
comprehensive loss: unrealized loss on interest rate derivatives
(12,880 ) (4,556 )
Comprehensive loss (25,603
) (10,458 ) Comprehensive loss attributable to noncontrolling
interests 24 18
Comprehensive loss
attributable to common stockholders $ (25,579 ) $ (10,440 )
__________________________
(1) Amounts have been adjusted retroactively to reflect a
one-for-six reverse stock split effected on June 2, 2015.
Calculation of FFO and FFO, excluding certain
items (in thousands, except per share amounts)
Three Months Ended
March 31,2016
March 31,2015
Net loss $ (12,723 ) $ (5,902 ) Net loss attributable to
noncontrolling interests 16 10
Adjustments
(1):
Real estate depreciation and amortization from consolidated
properties 31,770 30,022 Real estate depreciation and amortization
from unconsolidated properties 2,045 1,287 Real estate depreciation
and amortization - noncontrolling interests (6 ) — Impairment of
depreciable real estate 4,826 132 Gain on sale of depreciable real
estate (5,739 ) (8,606 ) Taxes associated with sale of depreciable
real estate 64 — Noncontrolling interests (21 ) (39 )
FFO attributable to common stockholders 20,232 16,904
Acquisition expenses — 2 Severance charges 493 — Tender offer and
listing costs — 503 Loss on early extinguishment of debt — 36
Non-cash default interest 617 — Noncontrolling interests (1
) (1 ) FFO attributable to common stockholders, excluding
certain items $ 21,341 $ 17,444 Weighted average
common shares outstanding - basic (2) 47,390 49,891 Weighted
average common shares outstanding - diluted (2) (3) 47,715 50,066
Net loss per common share - basic and diluted (2) (3) $ (0.27 ) $
(0.12 ) FFO per common share - diluted (2) $ 0.42 $ 0.34 FFO,
excluding certain items, per common share - diluted (2) $ 0.45 $
0.35
_______________________
(1) Reflects the adjustments of continuing operations, as well
as discontinued operations.
(2) Amounts have been adjusted retroactively to reflect a
one-for-six reverse stock split effected on June 2, 2015.
(3) There are no dilutive securities for purposes of calculating
net loss per common share.
Same Store GAAP NOI and Same Store Cash NOI
(in thousands, except percentages)
Three Months Ended Same Store GAAP NOI:
March 31,2016
March 31,2015
Favorable/(Unfavorable)
Revenues: Total revenue $ 58,924 $ 57,411 $ 1,513 Less: Lease
termination fees (432 ) (545 ) 113
58,492 56,866 1,626 2.9 %
Expenses: Property operating expenses (less tenant improvement
demolition costs) 17,556 17,909 353 2.0 % Real estate taxes 9,187
8,813 (374 ) (4.2 )% Property management fees 142
1,837 1,695 92.3 % Property expenses
26,885 28,559 1,674 5.9 %
Same Store GAAP NOI - consolidated properties 31,607 28,307
3,300 11.7 %
Same Store GAAP NOI - unconsolidated properties (at
ownership %) 2,550 2,235 315
14.1 %
Same Store GAAP NOI $ 34,157 $ 30,542
$ 3,615 11.8 %
Same Store Cash NOI:
Same Store GAAP NOI - consolidated properties $ 31,607 $ 28,307 $
3,300 Less: Straight-line rent revenue adjustment (2,663 ) (413 )
(2,250 ) Above- and below-market rent amortization (1,042 )
(1,220 ) 178
Same Store Cash NOI -
consolidated properties 27,902 26,674 1,228 4.6 %
Same Store
Cash NOI - unconsolidated properties (at ownership %)
2,204 2,042 162 7.9 %
Same
Store Cash NOI $ 30,106 $ 28,716 $ 1,390
4.8 %
Reconciliation
of net loss to Same Store GAAP NOI and Same Store Cash NOI: Net
loss $ (12,723 ) $ (5,902 ) Adjustments: Interest expense 12,240
16,522 Asset impairment losses 4,826 132 Tenant improvement
demolition costs 64 127 General and administrative 5,510 5,381 BHT
Advisors termination fee and HPT Management buyout fee — — Tender
offer and listing costs — 503 Amortization of restricted shares and
units 994 535 Straight-line rent expense adjustment — (7 )
Acquisition expense — 2 Real estate depreciation and amortization
31,770 30,022 Depreciation and amortization of non-real estate
assets 274 — Interest and other income (274 ) (145 ) Loss on early
extinguishment of debt — 36 Provision (benefit) for income taxes
182 (76 ) Equity in operations of investments (415 ) (243 ) Income
from discontinued operations — (1,490 ) Gain on sale of
discontinued operations — (8,606 ) Gain on sale of assets (5,739 )
— Net operating income of non-same store properties (4,670 ) (7,939
) Lease termination fees (432 ) (545 ) Same store GAAP NOI of
unconsolidated properties (at ownership %) 2,550
2,235
Same Store GAAP NOI 34,157 30,542
Straight-line rent revenue adjustment (2,663 ) (413 ) Above- and
below-market rent amortization (1,042 ) (1,220 ) Cash NOI
adjustments for unconsolidated properties (at ownership %)
(346 ) (193 )
Same Store Cash NOI $ 30,106 $
28,716
Non-GAAP Supplemental Financial Measures
We compute our financial results in accordance with generally
accepted accounting principles (GAAP). Although Funds from
Operations and Funds from Operations, excluding certain items, 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, 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 as indicators 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,
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 interpret it differently, or that identify and
exclude different items related to non-operating activities or
certain non-recurring activities.
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
office properties owned and operated for the entirety of both
periods being compared and include our comparable 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 both periods
being compared and therefore eliminate variations caused by
acquisitions or dispositions during such periods.
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 an indicator of our
ability to make distributions or as alternatives to net income
(loss) as an indication of our performance or to cash flows as a
measure of liquidity.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160509006504/en/
TIER REIT, Inc.Scott McLaughlin,
972-483-2465smclaughlin@tierreit.com
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