Pro Forma Consolidated Financial Statements
(Unaudited)
On June 18, 2025, the Company entered into a purchase and sale agreement to sell Block 23, Pima Center, 5090 N 40th St, SanTan, Papago Tech, The Quad, and Camelback Square (the “Phoenix Portfolio”) for $296.0 million. On August 15, 2025, the Company completed the first closing of the Phoenix Portfolio sale transaction for gross sales proceeds of $266.0 million. The first closing of the sale represents six of the Company’s seven properties located in Phoenix, Arizona. The Company’s Pima Center property continues to be under contract at a $30 million gross sales price. The sale of the Pima Center property is expected to close at a later date, subject to the Company obtaining certain approvals related to the property’s ground lease. The Company does not have a material relationship with the buyer of the Phoenix Portfolio and the disposition is not an affiliated transaction.
Concurrent to the first closing of the Phoenix Portfolio sale transaction, the Company entered into a third amendment to the Amended and Restated Credit Agreement which, among other things, will reduce the available commitment for the revolving credit facility to $150 million. Upon closing of each disposition, net proceeds shall be used to pay down the Company’s term loan and revolving credit facility, less amounts used to repay property-level debt related to the Phoenix Portfolio.
The accompanying unaudited Pro Forma Consolidated Balance Sheet is presented as of June 30, 2025 and the unaudited Pro Forma Consolidated Statements of Operations and unaudited Pro Forma Consolidated Statements of Comprehensive Income are presented for the six-month period ended June 30, 2025 and the year ended December 31, 2024. The unaudited Pro Forma Financial Statements include certain pro forma adjustments to illustrate the estimated effect of the Company’s disposition of the entire Phoenix Portfolio, including Pima Center. The City Office REIT, Inc. Historical columns have been derived from the audited financial statements as of and for the year ended December 31, 2024 and from the unaudited interim financial statements for the six-month period ended June 30, 2025.
On the unaudited Pro Forma Consolidated Balance Sheet, the pro forma adjustments reflect the removal of the disposed properties as if the transaction had occurred on June 30, 2025. On the unaudited Pro Forma Consolidated Statements of Operations and unaudited Pro Forma Consolidated Statements of Comprehensive Income, for the six-month period ended June 30, 2025 and the year ended December 31, 2024, the pro forma adjustments reflect the removal of historical revenue and expenses of the disposed properties for the periods presented as if the transaction had occurred on January 1, 2024.
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 disposition had actually occurred on January 1, 2024. 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 the Company’s actual financial position and results of operations would have been had the disposition of the properties occurred on the date indicated, nor are they indicative of the Company’s 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 the Company’s ultimate performance compared to it.
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. This pro forma consolidated information should not be viewed as indicative of the Company’s financial results in the future and should be read in conjunction with the Company’s financial statements as filed on Form 10-K for the year ended December 31, 2024 and on Form 10-Q for the period ended June 30, 2025. The adjustments made to historical financial information give effect to events that are directly attributable to the disposition of the Phoenix Portfolio and are factually supportable. The unaudited Pro Forma Consolidated Financial Statements are prepared in accordance with Article 11 of Regulation S-X.
City Office REIT, Inc.
Pro Forma Consolidated Balance Sheet
As of June 30, 2025
(Unaudited)
(In thousands, except par value and share data)
| City Office REIT, Inc. Historical |
Disposition of Phoenix Portfolio |
City Office REIT, Inc. Pro Forma |
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| Assets |
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| Real estate properties, net |
904,790 | — | 904,790 | |||||||||||||
| Cash and cash equivalents |
18,264 | — | 18,264 | |||||||||||||
| Restricted cash |
16,237 | — | 16,237 | |||||||||||||
| Rents receivable, net |
40,472 | — | 40,472 | |||||||||||||
| Deferred leasing costs, net |
21,643 | — | 21,643 | |||||||||||||
| Acquired lease intangible assets, net |
25,423 | — | 25,423 | |||||||||||||
| Other assets |
5,147 | — | 5,147 | |||||||||||||
| Assets held for sale |
296,167 | (296,167 | ) | A | — | |||||||||||
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| Total Assets |
$ | 1,328,143 | $ | (296,167 | ) | $ | 1,031,976 | |||||||||
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| Liabilities and Equity |
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| Liabilities: |
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| Debt |
$ | 647,188 | $ | (278,082 | ) | B | $ | 369,106 | ||||||||
| Accounts payable and accrued liabilities |
22,637 | — | 22,637 | |||||||||||||
| Deferred rent |
5,265 | — | 5,265 | |||||||||||||
| Tenant rent deposits |
5,241 | — | 5,241 | |||||||||||||
| Acquired lease intangible liabilities, net |
4,069 | — | 4,069 | |||||||||||||
| Other liabilities |
11,499 | — | 11,499 | |||||||||||||
| Liabilities related to assets held for sale |
16,816 | (16,816 | ) | A | — | |||||||||||
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| Total Liabilities |
712,715 | (294,898 | ) | 417,817 | ||||||||||||
| Equity: |
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| 6.625% Series A Preferred stock, $0.01 par value per share, 5,600,000 shares authorized, 4,480,000 issued and outstanding |
112,000 | — | 112,000 | |||||||||||||
| Common stock, $0.01 par value, 100,000,000 shares authorized, 40,358,240 shares issued and outstanding |
403 | — | 403 | |||||||||||||
| Additional paid-in capital |
443,481 | — | 443,481 | |||||||||||||
| Retained earnings |
60,901 | (1,269 | ) | A | 59,632 | |||||||||||
| Accumulated other comprehensive loss |
(1,847 | ) | — | (1,847 | ) | |||||||||||
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| Total Stockholders’ Equity |
614,938 | (1,269 | ) | 613,669 | ||||||||||||
| Non-controlling interests in properties |
490 | — | 490 | |||||||||||||
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| Total Equity |
615,428 | (1,269 | ) | 614,159 | ||||||||||||
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| Total Liabilities and Equity |
$ | 1,328,143 | $ | (296,167 | ) | $ | 1,031,976 | |||||||||
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City Office REIT, Inc.
Pro Forma Consolidated Statement of Operations
For the Six Months Ended June 30, 2025
(Unaudited)
(In thousands, except per share data)
| City Office REIT, Inc. Historical |
Disposition of Phoenix Portfolio |
City Office REIT, Inc. Pro Forma |
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| Rental and other revenues |
$ | 84,602 | $ | (19,464 | ) | AA | $ | 65,138 | ||||||||
| Operating expenses: |
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| Property operating expenses |
32,585 | (7,829 | ) | AA | 24,756 | |||||||||||
| General and administrative |
8,055 | — | 8,055 | |||||||||||||
| Depreciation and amortization |
31,189 | (8,225 | ) | AA | 22,964 | |||||||||||
| Impairment of real estate |
102,229 | — | 102,229 | |||||||||||||
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| Total operating expenses |
174,058 | (16,054 | ) | 158,004 | ||||||||||||
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| Operating loss |
(89,456 | ) | (3,410 | ) | (92,866 | ) | ||||||||||
| Interest expense: |
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| Contractual interest expense |
(16,618 | ) | 1,702 | AA | (14,916 | ) | ||||||||||
| Amortization of deferred financing costs and debt fair value |
(734 | ) | 96 | AA | (638 | ) | ||||||||||
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| (17,352 | ) | 1,798 | (15,554 | ) | ||||||||||||
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| Net loss |
(106,808 | ) | (1,612 | ) | (108,420 | ) | ||||||||||
| Less: |
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| Net income attributable to non-controlling interests in properties |
(228 | ) | — | (228 | ) | |||||||||||
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| Net loss attributable to the Company |
(107,036 | ) | (1,612 | ) | (108,648 | ) | ||||||||||
| Preferred stock distributions |
(3,710 | ) | — | (3,710 | ) | |||||||||||
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| Net loss attributable to common stockholders |
$ | (110,746 | ) | $ | (1,612 | ) | $ | (112,358 | ) | |||||||
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| Net loss per common share: |
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| Basic |
$ | (2.75 | ) | $ | (2.79 | ) | ||||||||||
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| Diluted |
$ | (2.75 | ) | $ | (2.79 | ) | ||||||||||
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| Weighted average common shares outstanding: |
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| Basic |
40,332 | 40,332 | ||||||||||||||
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| Diluted |
40,332 | 40,332 | ||||||||||||||
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| Dividend distributions declared per common share |
$ | 0.20 | $ | 0.20 | ||||||||||||
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City Office REIT, Inc.
Pro Forma Consolidated Statement of Comprehensive Income
For the Six Months Ended June 30, 2025
(Unaudited)
(In thousands)
| City Office REIT, Inc. Historical |
Disposition of Phoenix Portfolio |
City Office REIT, Inc. Pro Forma |
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| Net loss |
$ | (106,808 | ) | $ | (1,612 | ) | AA | $ | (108,420 | ) | ||||||
| Other comprehensive loss: |
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| Unrealized cash flow hedge loss |
(1,007 | ) | — | (1,007 | ) | |||||||||||
| Amounts reclassified to interest expense |
(158 | ) | — | (158 | ) | |||||||||||
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| Other comprehensive loss |
(1,165 | ) | — | (1,165 | ) | |||||||||||
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| Comprehensive loss |
(107,973 | ) | (1,612 | ) | (109,585 | ) | ||||||||||
| Less: |
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| Comprehensive income attributable to non-controlling interests in properties |
(197 | ) | — | (197 | ) | |||||||||||
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| Comprehensive loss attributable to the Company |
$ | (108,170 | ) | $ | (1,612 | ) | $ | (109,782 | ) | |||||||
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City Office REIT, Inc.
Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2024
(Unaudited)
(In thousands, except per share data)
| City Office REIT, Inc. Historical |
Disposition of Phoenix Portfolio |
City Office REIT, Inc. Pro Forma |
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| Rental and other revenues |
$ | 171,126 | $ | (39,167 | ) | AA | $ | 131,959 | ||||||||
| Operating expenses: |
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| Property operating expenses |
69,460 | (15,791 | ) | AA | 53,669 | |||||||||||
| General and administrative |
15,201 | — | 15,201 | |||||||||||||
| Depreciation and amortization |
59,321 | (16,158 | ) | AA | 43,163 | |||||||||||
| Impairment of real estate |
8,463 | — | 8,463 | |||||||||||||
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| Total operating expenses |
152,445 | (31,949 | ) | 120,496 | ||||||||||||
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| Operating income |
18,681 | (7,218 | ) | 11,463 | ||||||||||||
| Interest expense: |
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| Contractual interest expense |
(32,960 | ) | 3,430 | AA | (29,530 | ) | ||||||||||
| Amortization of deferred financing costs and debt fair value |
(1,384 | ) | 187 | AA | (1,197 | ) | ||||||||||
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| (34,344 | ) | 3,617 | (30,727 | ) | ||||||||||||
| Net loss on disposition of real estate property |
(1,462 | ) | (102,229 | ) | BB | (103,691 | ) | |||||||||
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| Net loss |
(17,125 | ) | (105,830 | ) | (122,955 | ) | ||||||||||
| Less: |
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| Net income attributable to non-controlling interests in properties |
(555 | ) | — | (555 | ) | |||||||||||
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| Net loss attributable to the Company |
(17,680 | ) | (105,830 | ) | (123,510 | ) | ||||||||||
| Preferred stock distributions |
(7,420 | ) | — | (7,420 | ) | |||||||||||
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| Net loss attributable to common stockholders |
$ | (25,100 | ) | $ | (105,830 | ) | $ | (130,930 | ) | |||||||
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| Net loss per common share: |
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| Basic |
$ | (0.63 | ) | $ | (3.26 | ) | ||||||||||
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| Diluted |
$ | (0.63 | ) | $ | (3.26 | ) | ||||||||||
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| Weighted average common shares outstanding: |
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| Basic |
40,140 | 40,140 | ||||||||||||||
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| Diluted |
40,140 | 40,140 | ||||||||||||||
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| Dividend distributions declared per common share |
$ | 0.40 | $ | 0.40 | ||||||||||||
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City Office REIT, Inc.
Pro Forma Consolidated Statement of Comprehensive Income
For the Year Ended December 31, 2024
(Unaudited)
(In thousands)
| City Office REIT, Inc. Historical |
Disposition of Phoenix Portfolio |
City Office REIT, Inc. Pro Forma |
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| Net loss |
$ | (17,125 | ) | $ | (105,830 | ) | AA | $ | (122,955 | ) | ||||||
| Other comprehensive loss: |
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| Unrealized cash flow hedge gain |
3,092 | — | 3,092 | |||||||||||||
| Amounts reclassified to interest expense |
(3,537 | ) | — | (3,537 | ) | |||||||||||
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| Other comprehensive loss |
(445 | ) | — | (445 | ) | |||||||||||
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| Comprehensive loss |
(17,570 | ) | (105,830 | ) | (123,400 | ) | ||||||||||
| Less: |
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| Comprehensive income attributable to non-controlling interests in properties |
(575 | ) | — | (575 | ) | |||||||||||
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| Comprehensive loss attributable to the Company |
$ | (18,145 | ) | $ | (105,830 | ) | $ | (123,975 | ) | |||||||
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City Office REIT, Inc.
Notes to Unaudited Pro Forma Consolidated Financial Statements
1. Adjustments to Unaudited Pro Forma Consolidated Balance Sheet
(A) On August 15, 2025, the Company completed the first closing of the Phoenix Portfolio sale transaction for gross sales proceeds of $266.0 million. The first closing of the sale represents six of the Company’s seven properties located in Phoenix, Arizona. The Company’s Pima Center property continues to be under contract at a $30 million gross sales price. The sale of the Pima Center property is expected to close at a later date, subject to the Company obtaining certain approvals related to the property’s ground lease. The Company will receive total gross sales proceeds of $296.0 million and remove the full carrying value of the Phoenix Portfolio properties as shown below, with such amounts having been presented as assets held for sale of $296.2 million and liabilities related to assets held for sale of $16.8 million as at June 30, 2025.
Net sales proceeds from the Phoenix Portfolio sale transaction will be approximately $278.1 million.
| (In thousands) | ||||
| Gross sales price |
$ | 296,000 | ||
| Estimated closing and transaction costs |
(12,400 | ) | ||
| Estimated working capital adjustments |
(5,518 | ) | ||
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| Net sales proceeds |
278,082 | |||
| Less: Carrying value of real estate assets |
(261,507 | ) | ||
| Less: Carrying value of unamortized lease intangible assets |
(3,276 | ) | ||
| Less: Carrying value of unamortized deferred leasing costs |
(5,801 | ) | ||
| Less: Carrying value of other assets |
(25,583 | ) | ||
| Less: Carrying value of unamortized lease intangible liabilities |
1,081 | |||
| Less: Carrying value of other liabilities |
15,735 | |||
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| Pro forma loss |
$ | (1,269 | ) | |
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(B) The net sales proceeds will first be used to settle $80.5 million of property-level debt related to the Phoenix Portfolio disposition and the remaining proceeds of $197.6 million will be used to pay down the Company’s term loan and revolving credit facility. As such, there is a $278.1 million pro forma adjustment to debt.
2. Adjustments to Unaudited Pro Forma Consolidated Statement of Operations and Unaudited Pro Forma Consolidated Statement of Comprehensive Income
(AA) These pro forma adjustments remove the actual historical revenue and expenses for the six-month period ended June 30, 2025 and year ended December 31, 2024 related to the operations of the Phoenix Portfolio under the Company’s ownership. The impairment of real estate recognized in the City Office REIT Historical Statement of Operations for the six-month period ended June 30, 2025 was recorded to reduce the carrying amount of the Phoenix Portfolio to its estimated fair value less cost to sell upon classification of the Phoenix Portfolio as held for sale. No pro forma adjustment has been included to remove the effect of this nonrecurring item.
(BB) This pro forma adjustment reflects a loss on disposition of $102.2 million (which is equal to the impairment of real estate recorded in the City Office REIT Historical Statement of Operations for the six-month period ended June 30, 2025) as if the Phoenix Portfolio disposition occurred on January 1, 2024.