TIER Tier Reit, Inc.

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