Exhibit 99.2
City Office REIT, Inc.
Pro Forma Consolidated Financial Statements
(Unaudited)
As previously announced, on June 4, 2014, City Office REIT, Inc. closed on the acquisition of a three building 197,000 square foot office property in the Greenwood Village submarket of Denver, Colorado (“Plaza 25”). The contract purchase price for the three building office property was $25.1 million, exclusive of closing costs. The Company funded 100% of the purchase with cash. Plaza 25 is 93% occupied as of the date of the closing.
The accompanying unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2014 reflects the acquisition of Plaza 25 as if the purchase had occurred on March 31, 2014. The unaudited Pro Forma Statement of Operations for the quarter ended March 31, 2014 and the year ended December 31, 2013 reflects the acquisition of Plaza 25 as if the purchase had occurred on January 1, 2013. The Pro Forma Consolidated Balance Sheet and Consolidated Statement of Operations for the quarter ended March 31, 2014 of the Company, prior to the Plaza 25 acquisition has been derived from the unaudited Pro Forma Consolidated Balance Sheet and Consolidated Statement of Operations included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed with the SEC on May 23, 2014 adjusted to reclassify the noncontrolling interest portion of the net proceeds from the offering from common stock and additional paid in capital to noncontrolling interest in operating partnership. The accompanying unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2013 of the Company, prior to the Plaza 25 acquisition was derived from the unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2013 included in the Company’s Prospectus filing on Form 424B4 filed with the SEC on April 16, 2014.
Pro forma information is intended to provide investors with information about the impact of transactions by showing how specific transactions might have affected historical financial statements, illustrating the scope of the change in the historical financial position and results of operations. The adjustments made to historical financial information give effect to events that are directly attributable to the acquisition of the property and are factually supportable. The Unaudited Pro Forma Consolidated Financial Statements are prepared in accordance with Article 11 of Regulation S-X.
The Unaudited Pro Forma Consolidated Financial Statements set forth below are not fact and there can be no assurance that the Company’s results would not have differed significantly from those set forth below if the acquisition had actually occurred on January 1, 2013. Accordingly, the Unaudited Pro Forma Consolidated Financial Statements are presented for illustrative purposes only and do not purport to represent, and are not necessarily indicative of, what our actual financial position and results of operations would have been had the acquisition of the property occurred on the date indicated, nor are they indicative of our future financial position or results of operations. Readers are cautioned not to place undue reliance on such information and the Company makes no representations regarding the information set forth below or its ultimate performance compared to it. The Unaudited Pro Forma Consolidated Financial Statements exclude any non-recurring charges or credits directly attributable to the acquisition.
City Office REIT, Inc.
Pro Forma Consolidated Balance Sheet
As of March 31, 2014
(Unaudited)
Pro Forma City Office REIT Inc. Prior to Acquisition |
Plaza 25 Acquisition |
Pro Forma Reflecting Acquisition |
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Assets |
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Real estate properties, net |
144,805,273 | 20,250,815 | (A) | 165,056,088 | ||||||||
Cash and cash equivalents |
40,186,667 | (24,583,749 | ) | 15,602,918 | ||||||||
Restricted cash |
4,968,690 | — | 4,968,690 | |||||||||
Rents receivable, net |
5,526,962 | — | 5,526,962 | |||||||||
Deferred financing costs, net |
2,373,261 | — | 2,373,261 | |||||||||
Deferred leasing costs, net |
2,246,430 | — | 2,246,430 | |||||||||
Acquired lease intangible assets, net |
24,105,435 | 4,671,780 | (A) | 28,777,215 | ||||||||
Prepaid expenses and other assets |
646,913 | 1,926 | (B) | 648,839 | ||||||||
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Total Assets |
224,859,631 | 340,772 | 225,200,403 | |||||||||
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Liabilities and Equity |
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Liabilities: |
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Mortgage loans payable |
155,189,971 | — | 155,189,971 | |||||||||
Accounts payable and accrued liabilities |
5,557,301 | 228,187 | (B) | 5,785,488 | ||||||||
Deferred rent |
910,833 | 15,135 | (B) | 925,968 | ||||||||
Tenant rent deposits |
1,483,427 | 397,307 | (B) | 1,880,734 | ||||||||
Acquired lease intangible liabilities, net |
393,389 | — | 393,389 | |||||||||
Other liabilities |
6,000,000 | — | 6,000,000 | |||||||||
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Total Liabilities |
169,534,921 | 640,629 | 170,175,550 | |||||||||
Commitments and Contingencies |
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Equity |
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Stockholders’ Equity: |
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Common stock and additional paid in capital |
39,580,106 | (299,857 | ) (C) | 39,280,249 | ||||||||
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Total Stockholder Equity |
39,580,106 | (299,857 | ) | 39,280,249 | ||||||||
Noncontrolling interests in operating partnership |
17,076,033 | — | 17,076,033 | |||||||||
Noncontrolling interests in properties |
(1,331,429 | ) | — | (1,331,429 | ) | |||||||
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Total Equity |
55,324,710 | (299,857 | ) | 55,024,853 | ||||||||
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Total Liabilities and Stockholder Equity |
224,859,631 | 340,772 | 225,200,403 | |||||||||
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City Office REIT, Inc.
Pro Forma Consolidated Statement of Operations
For the Three Months Ended March 31, 2014
(Unaudited)
Pro Forma City Office REIT Inc. Prior to Acquisition |
Plaza 25 Acquisition |
Pro Forma Reflecting Acquisition |
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Revenue: |
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Rental income |
7,236,758 | 889,879 | (AA) | 8,126,637 | ||||||||
Expense reimbursement |
450,043 | 51,213 | (BB) | 501,256 | ||||||||
Other |
295,660 | 2,075 | 297,735 | |||||||||
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Total Revenues |
7,982,461 | 943,167 | 8,925,628 | |||||||||
Operating Expenses: |
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Property operating expenses |
2,304,462 | 326,317 | 2,630,779 | |||||||||
Insurance |
152,858 | 8,715 | 161,573 | |||||||||
Property taxes |
461,104 | 135,002 | 596,106 | |||||||||
Property acquisition costs |
— | — | — | |||||||||
Base management fee |
205,073 | — | 205,073 | |||||||||
General and administrative |
369,250 | — | 369,250 | |||||||||
Property management fees |
207,617 | 17,499 | 225,116 | |||||||||
Stock based compensation |
366,950 | — | 366,950 | |||||||||
Depreciation and amortization |
3,159,977 | 55,800 | (CC) | 3,215,777 | ||||||||
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Total Operating Expenses |
7,227,291 | 543,333 | 7,770,624 | |||||||||
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Operating Income |
755,170 | 399,834 | 1,155,004 | |||||||||
Interest expense, net |
1,840,005 | — | 1,840,005 | |||||||||
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Net Income |
(1,084,835 | ) | 399,834 | (685,001 | ) | |||||||
Net Income Attributable to properties |
99,203 | — | 99,203 | |||||||||
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(985,632 | ) | 399,834 | (585,798 | ) | ||||||||
Net Income Attributable to Noncontrolling Interests in Operating Partnership |
280,055 | — | 280,055 | |||||||||
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Net Income Attributable to City Office REIT, Inc. |
(705,577 | ) | 399,834 | (305,743 | ) | |||||||
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Pro forma weighted average common shares outstanding - basic and diluted |
8,545,187 | |||||||||||
Pro forma basic earnings per share |
$ | (0.04 | ) | |||||||||
Pro Forma weighted average number of common units held by Noncontrolling interest in operating partnership outstanding |
3,251,903 |
City Office REIT, Inc.
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2013
(Unaudited)
Pro Forma City Office REIT Inc. Prior to Acquisition |
Plaza 25 Acquisition |
Pro Forma Reflecting Acquisition |
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Revenue: |
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Rental income |
29,598,376 | 3,000,086 | (AA) | 32,598,462 | ||||||||
Expense reimbursement |
2,185,817 | 184,733 | (BB) | 2,370,550 | ||||||||
Other |
785,162 | 4,841 | 790,003 | |||||||||
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Total Revenues |
32,569,355 | 3,189,660 | 35,759,015 | |||||||||
Operating Expenses: |
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Property operating expenses |
8,873,869 | 1,136,854 | 10,010,723 | |||||||||
Insurance |
610,906 | 34,131 | 645,037 | |||||||||
Property taxes |
1,805,440 | 543,211 | 2,348,651 | |||||||||
Property acquisition costs |
1,479,292 | — | 1,479,292 | |||||||||
Base management fee |
951,365 | — | 951,365 | |||||||||
General and administrative |
1,477,000 | — | 1,477,000 | |||||||||
Property management fees |
665,325 | 63,914 | 729,239 | |||||||||
Stock based compensation |
1,467,792 | — | 1,467,792 | |||||||||
Depreciation and amortization |
13,065,765 | 223,200 | (CC) | 13,288,965 | ||||||||
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Total Operating Expenses |
30,396,754 | 2,001,310 | 32,398,064 | |||||||||
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Operating Income |
2,172,601 | 1,188,350 | 3,360,951 | |||||||||
Canadian offering costs |
1,983,195 | — | 1,983,195 | |||||||||
Interest expense, net |
7,197,139 | — | 7,197,139 | |||||||||
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Net Income |
(7,007,733 | ) | 1,188,350 | (5,819,383 | ) | |||||||
Net Income Attributable to properties |
(190,624 | ) | — | (190,624 | ) | |||||||
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(7,198,357 | ) | 1,188,350 | (6,010,007 | ) | ||||||||
Net Income Attributable to Noncontrolling Interests in Operating Partnership |
2,358,069 | — | 2,358,069 | |||||||||
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Net Income Attributable to City Office REIT, Inc. |
(4,840,288 | ) | 1,188,350 | (3,651,938 | ) | |||||||
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Pro forma weighted average common shares outstanding - basic and diluted |
8,545,187 | |||||||||||
Pro forma basic earnings per share |
$ | (0.43 | ) | |||||||||
Pro Forma weighted average number of common units held by Noncontrolling interest in operating partnership outstanding |
3,251,903 |
City Office REIT, Inc.
Notes and Management’s Assumption to Unaudited Pro Forma Consolidated Financial Statements
Basis of Pro Forma Presentation
1. Notes to the Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2014
(A) The acquisition of the Plaza 25 was accounted for using preliminary estimates of the fair value of the tangible and intangible assets acquired and liabilities assumed in connection with the acquisition and are therefore subject to change.
(B) Reflects the working capital acquired and assumed through the Plaza 25 acquisition.
(C) Reflects the acquisition costs incurred upon closing of the transaction.
2. Notes to the Unaudited Pro Forma Consolidated Statements of Operations for the three month period ended March 31, 2014 and the year ended December 31, 2013
(AA) Reflects the effect of straight line rental revenue of Plaza 25.
(BB) Reflects the operating expenses incurred by lessor and reimbursed by the tenant.
(CC) Reflects the estimated depreciation expense based on the preliminary estimates of fair value for the tangible and intangible assets acquired and are therefore subject to change.