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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Tier Reit, Inc. | NYSE:TIER | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 28.88 | 0 | 01:00:00 |
Maryland
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68-0509956
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(State or other jurisdiction of incorporation or
organization)
|
|
(I.R.S. Employer
Identification No.)
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Large accelerated filer
x
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|
Accelerated filer
o
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Non-accelerated filer
o
|
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Emerging growth company
o
|
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Page
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March 31, 2018
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December 31, 2017
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||||
Assets
|
|
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Real estate
|
|
|
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|
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Land
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$
|
156,577
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|
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$
|
139,951
|
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Land held for development
|
45,059
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45,059
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|
||
Buildings and improvements, net
|
1,177,433
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1,061,418
|
|
||
Real estate under development
|
51,286
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29,525
|
|
||
Total real estate
|
1,430,355
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1,275,953
|
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||
Cash and cash equivalents
|
10,183
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13,800
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|
||
Restricted cash
|
12,565
|
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8,510
|
|
||
Accounts receivable, net
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76,385
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81,129
|
|
||
Prepaid expenses and other assets
|
14,238
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28,112
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||
Investments in unconsolidated entities
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31,314
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31,852
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||
Deferred financing fees, net
|
3,426
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1,387
|
|
||
Lease intangibles, net
|
110,533
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|
87,047
|
|
||
Assets associated with real estate held for sale
|
—
|
|
|
53,348
|
|
||
Total assets
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$
|
1,688,999
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$
|
1,581,138
|
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Liabilities and equity
|
|
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||
Liabilities
|
|
|
|
|
|
||
Notes payable, net
|
$
|
890,533
|
|
|
$
|
794,538
|
|
Accounts payable and accrued liabilities
|
76,144
|
|
|
81,166
|
|
||
Acquired below-market leases, net
|
27,684
|
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|
17,942
|
|
||
Other liabilities
|
7,078
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|
7,567
|
|
||
Obligations associated with real estate held for sale
|
—
|
|
|
2,354
|
|
||
Total liabilities
|
1,001,439
|
|
|
903,567
|
|
||
Commitments and contingencies
|
|
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Equity
|
|
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|
||
Preferred stock, $.0001 par value per share; 17,500,000 shares authorized at March 31, 2018, and December 31, 2017, 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, 47,655,669 and 47,623,324 shares issued and outstanding at March 31, 2018, and December 31, 2017, respectively
|
5
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5
|
|
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Additional paid-in capital
|
2,610,288
|
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|
2,609,540
|
|
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Cumulative distributions and net loss attributable to common stockholders
|
(1,936,561
|
)
|
|
(1,936,960
|
)
|
||
Accumulated other comprehensive income
|
10,479
|
|
|
4,218
|
|
||
Stockholders’ equity
|
684,211
|
|
|
676,803
|
|
||
Noncontrolling interests
|
3,349
|
|
|
768
|
|
||
Total equity
|
687,560
|
|
|
677,571
|
|
||
Total liabilities and equity
|
$
|
1,688,999
|
|
|
$
|
1,581,138
|
|
|
Three Months Ended
|
||||||
|
March 31, 2018
|
|
March 31, 2017
|
||||
Rental revenue
|
$
|
54,143
|
|
|
$
|
56,363
|
|
Expenses
|
|
|
|
|
|
||
Property operating expenses
|
13,155
|
|
|
14,690
|
|
||
Interest expense
|
8,109
|
|
|
8,780
|
|
||
Real estate taxes
|
8,754
|
|
|
8,560
|
|
||
Property management fees
|
85
|
|
|
60
|
|
||
General and administrative
|
5,503
|
|
|
5,707
|
|
||
Depreciation and amortization
|
24,616
|
|
|
24,529
|
|
||
Total expenses
|
60,222
|
|
|
62,326
|
|
||
Interest and other income
|
45
|
|
|
318
|
|
||
Loss on early extinguishment of debt
|
(8,988
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)
|
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(545
|
)
|
||
Loss before income taxes, equity in operations of investments, and gains
|
(15,022
|
)
|
|
(6,190
|
)
|
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Provision for income taxes
|
(195
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)
|
|
(244
|
)
|
||
Equity in operations of investments
|
287
|
|
|
(256
|
)
|
||
Loss before gains
|
(14,930
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)
|
|
(6,690
|
)
|
||
Gain on sale of assets
|
12,014
|
|
|
90,750
|
|
||
Gain on remeasurement of investment in unconsolidated entities
|
11,242
|
|
|
14,168
|
|
||
Net income
|
8,326
|
|
|
98,228
|
|
||
Noncontrolling interests
|
64
|
|
|
(57
|
)
|
||
Net income attributable to common stockholders
|
$
|
8,390
|
|
|
$
|
98,171
|
|
Weighted average common shares outstanding - basic
|
47,645,050
|
|
|
47,510,915
|
|
||
Weighted average common shares outstanding - diluted
|
48,299,882
|
|
|
47,806,069
|
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||
|
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|
||||
Basic income per common share
|
$
|
0.18
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$
|
2.05
|
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Diluted income per common share
|
$
|
0.17
|
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$
|
2.04
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|
|
|
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|
||||
Distributions declared per common share
|
$
|
0.18
|
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|
$
|
0.18
|
|
|
|
|
|
||||
Comprehensive income:
|
|
|
|
|
|
||
Net income
|
$
|
8,326
|
|
|
$
|
98,228
|
|
Other comprehensive income: unrealized income on interest rate derivatives
|
5,438
|
|
|
2,069
|
|
||
Comprehensive income
|
13,764
|
|
|
100,297
|
|
||
Comprehensive (income) loss attributable to noncontrolling interests
|
62
|
|
|
(58
|
)
|
||
Comprehensive income attributable to common stockholders
|
$
|
13,826
|
|
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$
|
100,239
|
|
|
|
|
|
|
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Cumulative
Distributions
and
Net Loss Attributable to Common Stockholders
|
|
Accumulated Other Comprehensive Income (Loss)
|
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|
|||||||||||||
|
Common Stock
|
|
Additional Paid-in Capital
|
|
|
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|
|||||||||||||||||
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Number of Shares
|
|
Par value
|
|
|
|
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Noncontrolling Interests
|
|
Total
Equity
|
||||||||||||||||
|
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|
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|
||||||||||||||||||||
Three months ended March 31, 2018
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
||||||
Balance at December 31, 2017
|
47,623
|
|
|
$
|
5
|
|
|
$
|
2,609,540
|
|
|
$
|
(1,936,960
|
)
|
|
$
|
4,218
|
|
|
$
|
768
|
|
|
$
|
677,571
|
|
Cumulative effect of changes in accounting principles
|
—
|
|
|
—
|
|
|
—
|
|
|
635
|
|
|
825
|
|
|
—
|
|
|
1,460
|
|
||||||
Balance at January 1, 2018
|
47,623
|
|
|
$
|
5
|
|
|
$
|
2,609,540
|
|
|
$
|
(1,936,325
|
)
|
|
$
|
5,043
|
|
|
$
|
768
|
|
|
$
|
679,031
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
8,390
|
|
|
—
|
|
|
(64
|
)
|
|
8,326
|
|
||||||
Unrealized gain on interest rate derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,436
|
|
|
2
|
|
|
5,438
|
|
||||||
Share based compensation, net
|
33
|
|
|
—
|
|
|
748
|
|
|
—
|
|
|
—
|
|
|
43
|
|
|
791
|
|
||||||
Contributions by noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,603
|
|
|
2,603
|
|
||||||
Distributions declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Common stock ($0.18 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,626
|
)
|
|
—
|
|
|
—
|
|
|
(8,626
|
)
|
||||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
||||||
Balance at March 31, 2018
|
47,656
|
|
|
$
|
5
|
|
|
$
|
2,610,288
|
|
|
$
|
(1,936,561
|
)
|
|
$
|
10,479
|
|
|
$
|
3,349
|
|
|
$
|
687,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Three months ended March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at December 31, 2016
|
47,473
|
|
|
$
|
5
|
|
|
$
|
2,606,098
|
|
|
$
|
(1,986,515
|
)
|
|
$
|
(1,042
|
)
|
|
$
|
1,970
|
|
|
$
|
620,516
|
|
Cumulative effect of a change in accounting principle
|
—
|
|
|
—
|
|
|
290
|
|
|
(290
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Balance at January 1, 2017
|
47,473
|
|
|
$
|
5
|
|
|
$
|
2,606,388
|
|
|
$
|
(1,986,805
|
)
|
|
$
|
(1,042
|
)
|
|
$
|
1,970
|
|
|
$
|
620,516
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
98,171
|
|
|
—
|
|
|
57
|
|
|
98,228
|
|
||||||
Unrealized gain on interest rate derivatives
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,068
|
|
|
1
|
|
|
2,069
|
|
||||||
Share based compensation, net
|
53
|
|
|
—
|
|
|
683
|
|
|
—
|
|
|
—
|
|
|
(102
|
)
|
|
581
|
|
||||||
Contributions by noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
438
|
|
|
438
|
|
||||||
Distributions declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Common stock ($0.18 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,606
|
)
|
|
—
|
|
|
—
|
|
|
(8,606
|
)
|
||||||
Noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
(5
|
)
|
||||||
Deconsolidation of investment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,500
|
)
|
|
(1,500
|
)
|
||||||
Balance at March 31, 2017
|
47,526
|
|
|
$
|
5
|
|
|
$
|
2,607,071
|
|
|
$
|
(1,897,240
|
)
|
|
$
|
1,026
|
|
|
$
|
859
|
|
|
$
|
711,721
|
|
|
Three Months Ended
|
||||||
|
March 31, 2018
|
|
March 31, 2017
|
||||
Cash flows from operating activities
|
|
|
|
|
|
||
Net income
|
$
|
8,326
|
|
|
$
|
98,228
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
||
Gain on sale of assets
|
(12,014
|
)
|
|
(90,750
|
)
|
||
Gain on remeasurement of investment in unconsolidated entities
|
(11,242
|
)
|
|
(14,168
|
)
|
||
Loss on early extinguishment of debt
|
8,988
|
|
|
545
|
|
||
Hedge ineffectiveness expense from derivatives
|
—
|
|
|
30
|
|
||
Amortization of restricted shares and units
|
1,000
|
|
|
910
|
|
||
Depreciation and amortization
|
24,616
|
|
|
24,529
|
|
||
Amortization of lease intangibles
|
(63
|
)
|
|
(246
|
)
|
||
Amortization of above- and below-market rent
|
(1,276
|
)
|
|
(908
|
)
|
||
Amortization of deferred financing fees
|
404
|
|
|
812
|
|
||
Equity in operations of investments
|
(287
|
)
|
|
256
|
|
||
Ownership portion of fees from unconsolidated entities
|
48
|
|
|
18
|
|
||
Distributions from investments
|
10
|
|
|
3,325
|
|
||
Change in accounts receivable
|
644
|
|
|
(1,135
|
)
|
||
Change in prepaid expenses and other assets
|
911
|
|
|
336
|
|
||
Change in lease commissions
|
(1,130
|
)
|
|
(2,752
|
)
|
||
Change in other lease intangibles
|
4
|
|
|
(335
|
)
|
||
Change in accounts payable and accrued liabilities
|
(21,510
|
)
|
|
(20,560
|
)
|
||
Change in other liabilities
|
508
|
|
|
(194
|
)
|
||
Cash used in operating activities
|
(2,063
|
)
|
|
(2,059
|
)
|
||
|
|
|
|
||||
Cash flows from investing activities
|
|
|
|
|
|
||
Escrow deposits
|
(3,000
|
)
|
|
(3,000
|
)
|
||
Return of investments
|
1,711
|
|
|
1,451
|
|
||
Purchases of real estate
|
(98,875
|
)
|
|
(39,363
|
)
|
||
Investments in unconsolidated entities
|
(409
|
)
|
|
(4,384
|
)
|
||
Capital expenditures for real estate
|
(8,526
|
)
|
|
(10,146
|
)
|
||
Capital expenditures for real estate under development
|
(18,211
|
)
|
|
(12,079
|
)
|
||
Proceeds from sales of assets
|
141,391
|
|
|
261,578
|
|
||
Cash provided by investing activities
|
14,081
|
|
|
194,057
|
|
||
|
|
|
|
||||
Cash flows from financing activities
|
|
|
|
|
|
||
Financing costs
|
(3,178
|
)
|
|
(1,221
|
)
|
||
Proceeds from notes payable
|
702,000
|
|
|
125,000
|
|
||
Payments on notes payable
|
(700,384
|
)
|
|
(257,731
|
)
|
||
Payments for early extinguishment of debt
|
(3,632
|
)
|
|
(436
|
)
|
||
Transfer of common stock
|
(210
|
)
|
|
(329
|
)
|
||
Distributions paid to common stockholders
|
(8,626
|
)
|
|
(17,200
|
)
|
||
Distributions paid to noncontrolling interests
|
(3
|
)
|
|
(12
|
)
|
||
Contributions from noncontrolling interests
|
2,453
|
|
|
438
|
|
||
Cash used in financing activities
|
(11,580
|
)
|
|
(151,491
|
)
|
||
|
|
|
|
||||
Net change in cash, cash equivalents, and restricted cash
|
438
|
|
|
40,507
|
|
||
Cash, cash equivalents, and restricted cash at beginning of period
|
22,310
|
|
|
22,393
|
|
||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
22,748
|
|
|
$
|
62,900
|
|
|
|
|
|
Lease Intangibles
|
||||||||||||
|
|
|
|
Assets
|
|
Liabilities
|
||||||||||
|
|
|
|
|
|
Acquired Above-Market Leases
|
|
Acquired Below-Market Leases
|
||||||||
|
|
Buildings and Improvements
|
|
Other Lease Intangibles
|
|
|
||||||||||
as of March 31, 2018
|
|
|
|
|
||||||||||||
Cost
|
|
$
|
1,639,073
|
|
|
$
|
172,211
|
|
|
$
|
4,857
|
|
|
$
|
(61,205
|
)
|
Less: accumulated depreciation and amortization
|
|
(461,640
|
)
|
|
(61,966
|
)
|
|
(4,569
|
)
|
|
33,521
|
|
||||
Net
|
|
$
|
1,177,433
|
|
|
$
|
110,245
|
|
|
$
|
288
|
|
|
$
|
(27,684
|
)
|
|
|
|
|
Lease Intangibles
|
||||||||||||
|
|
|
|
Assets
|
|
Liabilities
|
||||||||||
|
|
|
|
|
|
Acquired Above-Market Leases
|
|
Acquired Below-Market Leases
|
||||||||
|
|
Buildings and Improvements
|
|
Other Lease Intangibles
|
|
|
||||||||||
as of December 31, 2017
|
|
|
|
|
||||||||||||
Cost
|
|
$
|
1,514,544
|
|
|
$
|
146,926
|
|
|
$
|
4,857
|
|
|
$
|
(50,399
|
)
|
Less: accumulated depreciation and amortization
|
|
(453,126
|
)
|
|
(60,298
|
)
|
|
(4,438
|
)
|
|
32,457
|
|
||||
Net
|
|
$
|
1,061,418
|
|
|
$
|
86,628
|
|
|
$
|
419
|
|
|
$
|
(17,942
|
)
|
April 2018 - December 2018
|
$
|
5,546
|
|
2019
|
$
|
7,154
|
|
2020
|
$
|
6,308
|
|
2021
|
$
|
5,059
|
|
2022
|
$
|
4,357
|
|
|
March 31,
2018 |
|
March 31, 2017
|
||||
Cash and cash equivalents
|
$
|
10,183
|
|
|
$
|
55,215
|
|
Restricted cash
|
12,565
|
|
|
7,685
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
22,748
|
|
|
$
|
62,900
|
|
|
March 31,
2018 |
|
December 31,
2017 |
||||
Straight-line rental revenue receivable
|
$
|
52,908
|
|
|
$
|
57,372
|
|
Insurance receivable
|
18,067
|
|
|
18,826
|
|
||
Tenant receivables
|
4,192
|
|
|
4,221
|
|
||
Non-tenant receivables
|
1,448
|
|
|
893
|
|
||
Allowance for doubtful accounts
|
(230
|
)
|
|
(183
|
)
|
||
Total
|
$
|
76,385
|
|
|
$
|
81,129
|
|
Property Name
|
Date of Sale
|
|
Location
|
|
Rentable Square Footage
|
|
Contract Sale Price
|
|
Proceeds from Sale
|
|||||
500 East Pratt
|
02/13/18
|
|
Baltimore, MD
|
|
280
|
|
|
$
|
60,000
|
|
|
$
|
56,602
|
|
Centreport Office Center
|
02/22/18
|
|
Fort Worth, TX
|
|
133
|
|
|
12,696
|
|
|
12,439
|
|
||
Loop Central
|
03/27/18
|
|
Houston, TX
|
|
575
|
|
|
72,982
|
|
|
72,128
|
|
||
|
|
|
|
|
988
|
|
|
$
|
145,678
|
|
|
$
|
141,169
|
|
|
December 31, 2017
|
||
Buildings and improvements, net of approximately $29.0 million in accumulated depreciation
|
$
|
45,396
|
|
Accounts receivable and other assets
|
3,335
|
|
|
Lease intangibles, net of approximately $5.6 million in accumulated amortization
|
2,830
|
|
|
Other intangible assets, net of approximately $1.2 million in accumulated amortization
|
1,787
|
|
|
Assets associated with real estate held for sale
|
$
|
53,348
|
|
|
|
||
Acquired below-market leases, net of approximately $1.3 million in accumulated amortization
|
$
|
364
|
|
Other liabilities
|
1,990
|
|
|
Obligations associated with real estate held for sale
|
$
|
2,354
|
|
|
|
|
|
Ownership Interest
|
|
Unconsolidated
Investment Balance
|
||||||||||
Entity Name
|
|
Property
|
|
March 31,
2018 |
|
December 31, 2017
|
|
March 31,
2018 |
|
December 31,
2017 |
||||||
Domain Junction 8 Venture LLC (1)(2)
|
|
Domain 8
|
|
100.00
|
%
|
|
50.00
|
%
|
|
$
|
—
|
|
|
$
|
882
|
|
208 Nueces Street, LLC (2)
|
|
Third + Shoal
|
|
47.50
|
%
|
|
47.50
|
%
|
|
31,314
|
|
|
30,970
|
|
||
Total (3)
|
|
|
|
`
|
|
|
|
|
|
$
|
31,314
|
|
|
$
|
31,852
|
|
(1)
|
On March 30, 2018, we acquired our unrelated third party’s
50%
interest in Domain Junction 8 Venture LLC increasing our ownership interest to
100%
, and this property was consolidated.
|
(2)
|
We evaluate our investments in unconsolidated entities in order to determine if they are variable interest entities (“VIEs”). Based on our assessment, we identified each of these entities as a VIE, but we are not the primary beneficiary, as we do not have the power to direct the activities that most significantly impact the economic performance of these entities. For VIEs in which we are not deemed to be the primary beneficiary, we continue to account for them using the equity method. The maximum amount of exposure to loss with respect to these VIEs is the carrying amount of our investment and any debt guaranteed by us. As of
March 31, 2018
, and
December 31, 2017
, Tier OP guaranteed
25%
and
50%
, respectively, of the construction loan of 208 Nueces Street, LLC, as discussed below in “Guarantees.” At
March 31, 2018
, our VIEs have total assets of approximately
$97.4 million
and total liabilities of approximately
$42.8 million
. At
December 31, 2017
, our VIEs had total assets of approximately
$172.3 million
and total liabilities of approximately
$125.1 million
.
|
(3)
|
Our investment in unconsolidated entities at
March 31, 2018
, and
December 31, 2017
, includes basis adjustments that total approximately
$5.4 million
and
$9.4 million
, respectively. These amounts represent the aggregate difference between our historical cost basis and our equity basis reflected at the joint venture level, which is typically amortized over the life of the related assets and liabilities. Basis differences occur from impairment of investments and upon the transfer of assets that were previously owned by us into a joint venture. In addition, certain acquisition, transaction, and other costs may not be reflected in the net assets at the joint venture level.
|
Principal payments due in:
|
|
||
April 2018 - December 2018
|
$
|
49,295
|
|
2019
|
1,589
|
|
|
2020
|
91,403
|
|
|
2021
|
72,402
|
|
|
2022
|
312,000
|
|
|
Thereafter
|
366,000
|
|
|
Less: unamortized debt issuance costs (1)
|
(2,156
|
)
|
|
Notes payable, net
|
$
|
890,533
|
|
(1)
|
Excludes approximately
$3.4 million
of unamortized debt issuance costs associated with the revolving line of credit because these costs are presented as an asset on our condensed consolidated balance sheets.
|
|
|
|
|
Basis of Fair Value Measurements
|
||||||||||||
|
|
|
|
Quoted Prices In Active Markets for Identical Items (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
||||||||
|
|
Total Fair Value
|
|
|
|
|||||||||||
Description
|
|
|
|
|
||||||||||||
March 31, 2018
|
|
|
|
|
|
|
|
|
||||||||
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
||||||||
Assets
|
|
$
|
10,483
|
|
|
$
|
—
|
|
|
$
|
10,483
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2017
|
|
|
|
|
|
|
|
|
||||||||
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
||||||||
Assets
|
|
$
|
5,045
|
|
|
$
|
—
|
|
|
$
|
5,045
|
|
|
$
|
—
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||
|
Carrying Amount
|
|
Fair
Value
|
|
Carrying Amount
|
|
Fair
Value
|
||||||||
Notes payable
|
$
|
892,689
|
|
|
$
|
896,346
|
|
|
$
|
801,339
|
|
|
$
|
805,786
|
|
Less: unamortized debt issuance costs
|
(2,156
|
)
|
|
|
|
(6,801
|
)
|
|
|
||||||
Notes payable, net
|
$
|
890,533
|
|
|
|
|
$
|
794,538
|
|
|
|
Type/Description
|
|
Notional Value
|
|
Index
|
|
Strike Rate
|
|
Effective Date
|
|
Maturity Date
|
|||
Interest rate swap - cash flow hedge
|
|
$
|
125,000
|
|
|
one-month LIBOR
|
|
1.6775
|
%
|
|
12/31/14
|
|
10/31/19
|
Interest rate swap - cash flow hedge
|
|
$
|
125,000
|
|
|
one-month LIBOR
|
|
1.6935
|
%
|
|
04/30/15
|
|
10/31/19
|
Interest rate swap - cash flow hedge
|
|
$
|
125,000
|
|
|
one-month LIBOR
|
|
1.7615
|
%
|
|
06/30/15
|
|
05/31/22
|
Interest rate swap - cash flow hedge
|
|
$
|
150,000
|
|
|
one-month LIBOR
|
|
1.7695
|
%
|
|
06/30/15
|
|
05/31/22
|
Derivatives Designated as Hedging Instruments:
|
Derivative Assets
|
|||||||
|
March 31,
2018 |
|
December 31,
2017 |
|||||
Interest rate swaps
|
$
|
10,483
|
|
|
$
|
5,045
|
|
|
Gain recognized
in OCI on derivatives
|
||||||
|
Three Months Ended
|
||||||
|
March 31, 2018
|
|
March 31, 2017
|
||||
Interest rate swaps
|
$
|
5,438
|
|
|
$
|
2,069
|
|
|
Amount reclassified from
OCI into income
|
||||||
|
Three Months Ended
|
||||||
Location
|
March 31, 2018
|
|
March 31, 2017
|
||||
Interest expense (1)
|
$
|
159
|
|
|
$
|
1,246
|
|
(1)
|
Increases in fair value as a result of accrued interest associated with our swap transactions are recorded in accumulated OCI and subsequently reclassified into income. Such amounts are shown net in the statements of changes in equity and offset dollar for dollar.
|
|
Total interest expense presented in the Condensed Consolidated Statements of Operations and Comprehensive Income in which the effects of cash flow hedges are recorded
|
|||||||
|
Three Months Ended
|
|||||||
Location
|
March 31, 2018
|
|
March 31, 2017
|
|||||
Interest expense
|
$
|
8,109
|
|
|
$
|
8,780
|
|
|
March 31, 2018
|
|
March 31, 2017
|
||||||||||
|
Units
|
|
Weighted Average Price per unit
|
|
Units
|
|
Weighted Average Price per unit
|
||||||
Outstanding at the beginning of the year
|
19,672
|
|
|
$
|
17.03
|
|
|
39,255
|
|
|
$
|
16.45
|
|
Issued
|
—
|
|
|
$
|
—
|
|
|
1,917
|
|
|
$
|
18.27
|
|
Converted
|
(1,917
|
)
|
|
$
|
18.27
|
|
|
(12,966
|
)
|
|
$
|
14.78
|
|
Outstanding at the end of the period (1)
|
17,755
|
|
|
$
|
16.90
|
|
|
28,206
|
|
|
$
|
17.34
|
|
(1)
|
As of
March 31, 2018
,
none
of the RSUs held by our independent directors are vested.
|
|
March 31, 2018
|
|
March 31, 2017
|
||||||||||
|
Units
|
|
Weighted Average Price per unit
|
|
Units
|
|
Weighted Average Price per unit
|
||||||
Outstanding at the beginning of the year
|
208,620
|
|
|
$
|
16.59
|
|
|
111,063
|
|
|
$
|
15.26
|
|
Issued
|
129,188
|
|
|
$
|
17.24
|
|
|
93,455
|
|
|
$
|
18.17
|
|
Outstanding at the end of the period
|
337,808
|
|
|
$
|
16.84
|
|
|
204,518
|
|
|
$
|
16.59
|
|
Assumption
|
|
Value
|
Expected volatility
|
|
24% - 26%
|
Risk-free interest rate
|
|
1.15% - 2.37%
|
Expected term
|
|
35 months
|
Expected dividend yield
|
|
3.7% - 4.5%
|
|
March 31, 2018
|
|
March 31, 2017
|
||||||||||
|
Shares
|
|
Weighted Average Price per share
|
|
Shares
|
|
Weighted Average Price per share
|
||||||
Outstanding at the beginning of the year
|
180,791
|
|
|
$
|
20.47
|
|
|
246,805
|
|
|
$
|
20.74
|
|
Issued
|
125,558
|
|
|
$
|
17.24
|
|
|
100,170
|
|
|
$
|
18.17
|
|
Forfeiture
|
—
|
|
|
$
|
—
|
|
|
(13,179
|
)
|
|
$
|
16.92
|
|
Restrictions lapsed
|
(41,062
|
)
|
|
$
|
26.23
|
|
|
(57,553
|
)
|
|
$
|
25.64
|
|
Outstanding at the end of the period
|
265,287
|
|
|
$
|
18.05
|
|
|
276,243
|
|
|
$
|
18.97
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31, 2018
|
|
March 31, 2017
|
||||
Numerator:
|
|
|
|
|
||||
Net income attributable to common stockholders
|
|
$
|
8,390
|
|
|
$
|
98,171
|
|
Less: net income allocated to participating securities
|
|
—
|
|
|
(582
|
)
|
||
Numerator for basic net income per share
|
|
$
|
8,390
|
|
|
$
|
97,589
|
|
Add: undistributed net income allocated to participating securities
|
|
—
|
|
|
530
|
|
||
Less: undistributed net income re-allocated to participating securities
|
|
—
|
|
|
(527
|
)
|
||
Numerator for diluted net income per share (1)
|
|
$
|
8,390
|
|
|
$
|
97,592
|
|
|
|
|
|
|
||||
Denominator:
|
|
|
|
|
||||
Weighted average common shares outstanding - basic
|
|
47,645
|
|
|
47,511
|
|
||
Effect of dilutive securities
|
|
655
|
|
|
295
|
|
||
Weighted average common shares outstanding - diluted
|
|
48,300
|
|
|
47,806
|
|
||
|
|
|
|
|
||||
Basic net income per common share
|
|
$
|
0.18
|
|
|
$
|
2.05
|
|
Diluted net income per common share
|
|
$
|
0.17
|
|
|
$
|
2.04
|
|
|
|
|
|
|
||||
Securities excluded from weighted average common shares outstanding-diluted because their effect would be anti-dilutive
|
|
19
|
|
|
37
|
|
(1)
|
In periods where there is no undistributed net income to allocate to participating securities, the treasury stock method is used to calculate dilutive securities.
|
|
Three Months Ended
|
||||||
|
March 31, 2018
|
|
March 31, 2017
|
||||
Interest paid, net of amounts capitalized
|
$
|
7,804
|
|
|
$
|
6,782
|
|
Income taxes paid
|
$
|
2
|
|
|
$
|
3
|
|
|
|
|
|
||||
Non-cash investing activities:
|
|
|
|
|
|
||
Property and equipment additions in accounts payable and accrued liabilities
|
$
|
17,712
|
|
|
$
|
6,176
|
|
Liabilities assumed through the purchase of real estate
|
$
|
7,028
|
|
|
$
|
3,267
|
|
Escrow deposits applied to purchase of real estate
|
$
|
21,350
|
|
|
$
|
10,000
|
|
Escrow deposit applied to purchase of real estate from noncontrolling interest
|
$
|
150
|
|
|
$
|
—
|
|
Sale of real estate and lease intangibles to unconsolidated joint venture
|
$
|
—
|
|
|
$
|
13,804
|
|
Acquisition of controlling interest in unconsolidated entity
|
$
|
927
|
|
|
$
|
9,770
|
|
|
|
|
|
||||
Non-cash financing activities:
|
|
|
|
|
|
||
Mortgage notes assumed (1)
|
$
|
89,733
|
|
|
$
|
80,000
|
|
Financing costs in accounts payable and accrued liabilities
|
$
|
—
|
|
|
$
|
10
|
|
Unrealized gain on interest rate derivatives
|
$
|
5,438
|
|
|
$
|
2,069
|
|
(1)
|
The approximately
$89.7 million
mortgage notes assumed during the three months ended March 31, 2018, includes approximately
$44.9 million
of debt assumed when we acquired the remaining
50.00%
interest in our Domain 8 property, and approximately
$44.9 million
of debt associated with our previously held
50.00%
unconsolidated interest in the Domain 8 property. Domain 8 was consolidated during the three months ended March 31, 2018. The approximately
$80.0 million
mortgage notes assumed during the three months ended March 31, 2017, includes approximately
$40.1 million
of debt assumed when we acquired the remaining
50.16%
interest in our Domain 2 and Domain 7 properties, and approximately
$39.9 million
of debt associated with our previously held
49.84%
unconsolidated interest in the Domain 2 and Domain 7 properties. Domain 2 and Domain 7 were consolidated during the three months ended March 31, 2017.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
•
|
market disruptions and economic conditions experienced by the U.S. economy or real estate industry as a whole and the local economic conditions in the markets in which our properties are located;
|
•
|
our ability to renew expiring leases and lease vacant spaces at favorable rates or at all;
|
•
|
the inability of tenants to continue paying their rent obligations due to bankruptcy, insolvency, or a general downturn in their businesses;
|
•
|
the availability of cash flow from operating activities to fund distributions and capital expenditures;
|
•
|
our ability to raise capital in the future by issuing additional equity or debt securities, selling our assets, or otherwise to fund our future capital needs;
|
•
|
the availability and terms of financing, including the impact of higher interest rates on the cost and/or availability of financing;
|
•
|
our ability to strategically acquire, develop, or dispose of assets on favorable terms, or at all;
|
•
|
our level of debt and the terms and limitations imposed on us by our debt agreements;
|
•
|
our ability to retain our executive officers and other key personnel;
|
•
|
unfavorable changes in laws or regulations impacting our business or our assets; and
|
•
|
factors that could affect our ability to qualify as a real estate investment trust for federal income tax purposes.
|
Three months ended March 31, 2018
|
Renewal
|
|
Expansion
|
|
New
|
|
Total
|
||||||||
Square feet leased
|
56,000
|
|
|
1,000
|
|
|
11,000
|
|
|
68,000
|
|
||||
Weighted average lease term (in years)
|
6.1
|
|
|
2.9
|
|
|
6.4
|
|
|
6.1
|
|
||||
Increase (decrease) in weighted average net rental rates per square foot per year (1)
|
$
|
4.95
|
|
|
$
|
(0.90
|
)
|
|
$
|
7.73
|
|
|
$
|
5.37
|
|
% increase (decrease) in weighted average net rental rates per square foot per year
|
23
|
%
|
|
(3
|
)%
|
|
58
|
%
|
|
27
|
%
|
||||
Leasing cost per square foot per year (2)
|
$
|
3.97
|
|
|
$
|
5.36
|
|
|
$
|
7.34
|
|
|
$
|
4.55
|
|
(1)
|
Weighted average net rental rates are calculated as the straight-line fixed base rental amount paid by a tenant under the terms of their related lease agreements, less any portion of that base rent used to offset real estate taxes, utility charges, and other operating expenses incurred in connection with the leased space, weighted for the relative square feet under the lease. Increase reflects change in net rental rates related to the lease previously occupying the specific space.
|
(2)
|
Includes tenant improvements and leasing commissions.
|
|
Three Months Ended
|
||||||
|
March 31, 2018
|
|
March 31, 2017
|
||||
Net income
|
$
|
8,326
|
|
|
$
|
98,228
|
|
Noncontrolling interests
|
64
|
|
|
(57
|
)
|
||
Net income attributable to common stockholders
|
8,390
|
|
|
98,171
|
|
||
Adjustments:
|
|
|
|
|
|
||
Real estate depreciation and amortization from consolidated properties
|
24,500
|
|
|
24,431
|
|
||
Real estate depreciation and amortization from unconsolidated properties
|
391
|
|
|
566
|
|
||
Real estate depreciation and amortization - noncontrolling interests
|
(433
|
)
|
|
—
|
|
||
Gain on sale of depreciable real estate
|
(12,014
|
)
|
|
(90,750
|
)
|
||
Gain on remeasurement of investment in unconsolidated entities
|
(11,242
|
)
|
|
(14,168
|
)
|
||
Noncontrolling interests
|
297
|
|
|
48
|
|
||
FFO attributable to common stockholders
|
9,889
|
|
|
18,298
|
|
||
|
|
|
|
||||
Severance charges
|
19
|
|
|
—
|
|
||
Interest rate hedge ineffectiveness expense (1)
|
—
|
|
|
30
|
|
||
Loss on early extinguishment of debt
|
8,988
|
|
|
545
|
|
||
Default interest (2)
|
602
|
|
|
602
|
|
||
Noncontrolling interests
|
(4
|
)
|
|
(1
|
)
|
||
FFO attributable to common stockholders, excluding certain items
|
$
|
19,494
|
|
|
$
|
19,474
|
|
Weighted average common shares outstanding - basic
|
47,645
|
|
|
47,511
|
|
||
Weighted average common shares outstanding - diluted
|
48,300
|
|
|
47,806
|
|
||
Net income per common share - diluted
|
$
|
0.17
|
|
|
$
|
2.04
|
|
FFO per common share - diluted
|
$
|
0.20
|
|
|
$
|
0.38
|
|
FFO, excluding certain items, per common share - diluted
|
$
|
0.40
|
|
|
$
|
0.41
|
|
(1)
|
Interest rate swaps are adjusted to fair value through other comprehensive income. However, because our interest rate swaps do not have a LIBOR floor while the hedged debt is subject to a LIBOR floor, the portion of the change in fair value of our interest rate swaps attributable to this mismatch is reclassified to interest rate hedge ineffectiveness expense. We adopted new accounting guidance on January 1, 2018, that eliminates the requirement to separately measure and report hedge ineffectiveness expense.
|
(2)
|
We have 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. Although there can be no assurance, we anticipate that when this property is sold or when ownership of this property is conveyed to the lender, this default interest will be forgiven.
|
|
|
|
Three Months Ended
|
||||||
|
|
|
March 31, 2018
|
|
March 31, 2017
|
||||
Same Store Revenue:
|
|||||||||
|
Rental revenue
|
$
|
43,212
|
|
|
$
|
43,064
|
|
|
|
|
Less: Lease termination fees
|
(335
|
)
|
|
—
|
|
||
|
|
|
42,877
|
|
|
43,064
|
|
||
|
|
|
|
|
|
||||
Same Store Expenses:
|
|||||||||
|
|
Property operating expenses (less tenant improvement demolition costs)
|
10,646
|
|
|
10,142
|
|
||
|
|
Real estate taxes
|
7,455
|
|
|
7,359
|
|
||
|
|
Property management fees
|
26
|
|
|
9
|
|
||
|
Property Expenses
|
18,127
|
|
|
17,510
|
|
|||
Same Store NOI
|
$
|
24,750
|
|
|
$
|
25,554
|
|
||
|
|
|
|
||||||
Decrease in Same Store NOI
|
(3.1
|
)%
|
|
|
|||||
|
|
|
|
|
|
||||
Same Store NOI
|
$
|
24,750
|
|
|
$
|
25,554
|
|
||
|
|
Less:
|
|
|
|
||||
|
|
Straight-line rent revenue adjustment
|
(391
|
)
|
|
(1,993
|
)
|
||
|
|
Above- and below-market rent amortization
|
(910
|
)
|
|
(975
|
)
|
||
Same Store Cash NOI
|
$
|
23,449
|
|
|
$
|
22,586
|
|
||
|
|
|
|
||||||
Increase in Same Store Cash NOI
|
3.8
|
%
|
|
|
|||||
|
|
|
|
|
|
||||
Reconciliation of net income to Same Store NOI and Same Store Cash NOI
|
|||||||||
|
Net income
|
$
|
8,326
|
|
|
$
|
98,228
|
|
|
|
|
Adjustments:
|
|
|
|
||||
|
|
Interest expense
|
8,109
|
|
|
8,780
|
|
||
|
|
Tenant improvement demolition costs
|
108
|
|
|
81
|
|
||
|
|
General and administrative
|
5,503
|
|
|
5,707
|
|
||
|
|
Depreciation and amortization
|
24,616
|
|
|
24,529
|
|
||
|
|
Interest and other income
|
(45
|
)
|
|
(318
|
)
|
||
|
|
Loss on early extinguishment of debt
|
8,988
|
|
|
545
|
|
||
|
|
Provision for income taxes
|
195
|
|
|
244
|
|
||
|
|
Equity in operations of investments
|
(287
|
)
|
|
256
|
|
||
|
|
Gain on sale of assets
|
(12,014
|
)
|
|
(90,750
|
)
|
||
|
|
Gain on remeasurement of investment in unconsolidated entities
|
(11,242
|
)
|
|
(14,168
|
)
|
||
|
|
Net operating income of non-same store properties
|
(7,172
|
)
|
|
(7,580
|
)
|
||
|
|
Lease termination fees
|
(335
|
)
|
|
—
|
|
||
Same Store NOI
|
24,750
|
|
|
25,554
|
|
||||
|
|
Straight-line rent revenue adjustment
|
(391
|
)
|
|
(1,993
|
)
|
||
|
|
Above- and below-market rent amortization
|
(910
|
)
|
|
(975
|
)
|
||
Same Store Cash NOI
|
$
|
23,449
|
|
|
$
|
22,586
|
|
|
|
Total number of shares purchased
|
|
Average price paid per share
|
|
Total number of shares purchased as part of publicly announced plans or programs
|
|
Maximum number of shares that may yet be purchased under the plans or programs
|
|
January 2018
|
|
10,634
|
|
|
$19.71
|
|
not applicable
|
|
not applicable
|
February 2018
|
|
—
|
|
|
—
|
|
not applicable
|
|
not applicable
|
March 2018
|
|
—
|
|
|
—
|
|
not applicable
|
|
not applicable
|
Total
|
|
10,634
|
|
|
$19.71
|
|
|
|
|
Exhibit Number
|
|
Description
|
3.1
|
|
|
3.2
|
|
|
3.3
|
|
|
3.4
|
|
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1*
|
|
|
101
|
|
The following financial information from TIER REIT, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income, (iii) Condensed Consolidated Statements of Changes in Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements (filed herewith)
|
|
TIER REIT, INC.
|
|
Dated: May 8, 2018
|
By:
|
/s/ Hannah Q. Wrenn
|
|
|
Hannah Q. Wrenn
|
|
|
Chief Accounting Officer
|
|
|
(Principal Accounting Officer)
|
1 Year Tier Reit Inc. Chart |
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