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Section 1: 8-K (8-K)

Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 
Date of Report (Date of earliest event reported): February 26, 2018
 
TIER REIT, Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
 
 
 
 
Maryland
 
001-37512
 
68-0509956
(State or other jurisdiction of incorporation
or organization)
 
(Commission File Number)
 
 
(I.R.S. Employer
Identification No.)
 
5950 Sherry Lane, Suite 700, Dallas, Texas
75225
(Address of principal executive offices)
(Zip Code)
 
(972) 483-2400
(Registrant’s telephone number, including area code)
 
None
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o






Item 7.01                                           Regulation FD Disclosure

Attached to this Form 8-K as Exhibit 99.1 is a copy of a presentation, which is also available on the Company’s website at www.tierreit.com/ir, that the Company intends to use in investor meetings beginning February 26, 2018.

The information in this Item 7.01, including Exhibit 99.1, is being furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall the information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01.    Financial Statements and Exhibits.

(d)     Exhibits.

Exhibit No.
 
Description
 
 
 
99.1
 


                        




SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
 
 
 
 
TIER REIT, INC.
 
 
 
 
 
 
Dated: February 26, 2018
By:
/s/ Telisa Webb Schelin
 
 
Telisa Webb Schelin
 
 
Chief Legal Officer, Executive Vice President
 
 
and Secretary




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Section 2: EX-99.1 (EXHIBIT 99.1)

companypresentation4a2
Austin + Dallas + Houston + Charlotte + Nashville + Atlanta + Denver OFFICE B ROUGHT TO LIF E C o m p a n y P r e s e n t a t i o n FEB'18


 
High-quality portfolio Proven execution Flexible balance sheet Significant value creation opportunities Experienced management team WHY TIER? Focused strategy Austin + Dallas + Houston + Charlotte + Nashville + Atlanta + Denver


 
3 Delivered 2017 DOMAIN 8


 
4 Service + Sustainability Value Creation Proven track record in publicly- traded real estate companies Successful history of investing & creating value in target markets Ability to complete complex transactions Demonstrated path toward long- term value creation Seven Target Growth Markets High-growth, demand-driven markets Amenity-rich, high-density submarkets – TIER1 submarkets High-quality, Class A office properties Emphasis on LIVE.WORK.PLAY environments TIER ONE Property Services Unparalleled customer service & operational excellence Operating & developing to highest sustainability standards A leader in BOMA 360 designations Significant LEED & Energy Star certifications Focus + Strategy Legacy District One, Dallas Experience + Innovation Domain 11, Austin (Rendering) Bank of America Plaza, Charlotte Targeted Approach


 
5 Seven Target Growth Markets TIER REIT targets high-growth, demand-driven TIER1 submarkets that will benefit most from population and office-using employment growth Denver Houston Austin Atlanta Nashville Dallas Charlotte CBD The Domain Southwest Westchase The Galleria Katy Freeway West Uptown SouthPark Preston Center Plano Legacy Uptown Current market location Midtown Buckhead CBD / LoDo Platte River Cherry Creek CBD West End The Gulch Target growth market


 
6 Approximately 96% of NOI derived from our high-growth, demand-driven target markets1 High-Quality Portfolio Additional Quality Indicators1 Including in-process development, >25% of portfolio SF will be recently constructed2 Enviable roster of investment- grade tenants Weighted average lease life approaching 7 years Domain 7 Bank of America Plaza 1 December 31, 2017 operating portfolio GAAP NOI, pro forma for acquisition of 96.5% economic interest in Domain Point on 1.4.18; sale of 500 East Pratt on 2.13.18; Domain 8, Third + Shoal and Domain 11 at stabilization & ownership share; pending dispositions of Centreport Office Center and Loop Central; and potential disposition of Eldridge Place anticipated by YE'18 2 Recently constructed includes properties delivered since 2012 NOI by Market1 Austin 46% Dallas 20% Houston 14% Charlotte 13% Nashville 3% Other 4%


 
7 Acquired 2015


 
8 Domain 8 Development Results Domain 11 (Rendering) Aggregate Value Creation: $106mm to $128mm1 Third + Shoal (Rendering) Creating ~$2.22 to $2.68/share of incremental value with minimal lease-up risk, driving long-term cash flow growth1 1 Includes estimated value creation of Domain 8, Domain 11 and Third + Shoal using estimated stabilized NOI, assuming a 5.5%-6.0% exit capitalization rate less actual or budgeted development costs, at ownership share for Third + Shoal and Domain 8 2 At ownership share 2017 2018 2019DeliveryTimeline Domain 8 (Delivered) Domain 11Third + Shoal NA V + Dividen d Developments ~96% pre-leased2 & delivering at ~9%+ stabilized yields


 
9 Delivering 2018 THIRD + SHOAL


 
10 Domain 12 (Rendering) Creating Value: Austin Future Development Domain 12, Austin, TX ~320K net rentable SF Fully designed & permitted Domain 10, Austin, TX ~300K net rentable SF Fully designed & permitted by 3.31.18 1 Development potential incremental value calculated using estimated stabilized NOI from above developments, assuming a 5.5%-6.0% exit capitalization rate less estimated development costs Domain 10 (Rendering) Potential value creation: $162mm to $209mm1 Domain 9, Austin, TX ~300K net rentable SF Fully designed & permitted by 3.31.18 Opportunity to create ~$3.38 to $4.35/share of incremental value through future development1 Domain 9 (Rendering) NA V + Dividen d Approximate 8.5%+ yield on future development opportunities


 
11 Rendering DOMAIN 8-12


 
12 BLOCK D & G Conceptual renderings of future redevelopment


 
13 DOMAIN POINT 9.5 acre expansion of The Domain & future redevelopment


 
14 Acquired 2015 & 2017Rendering LD2 (future) LD1 (existing) LD3 (future)


 
15 Creating Value: Dallas Future Development Legacy District, Plano, TX ~600K net rentable SF in two phases (Legacy District Two & Three) Legacy District Two fully designed & permitted 1 Development potential incremental value calculated using estimated stabilized NOI from above developments, assuming a 5.5%-6.0% exit capitalization rate less estimated development costs Legacy District (Rendering) Potential value creation: $82mm to $96mm1 Opportunity to create ~$1.71 to $2.00/share of incremental value through future development1 NA V + Dividen d Approximate 8.5%+ yield on future development opportunities


 
16 Creating Value: Leasing Mark-to-Market Rents Stabilize Occupancy at 93% In-place rents 11%-24% below market for tenants expiring through 2019 Opportunity to lease up to 286K SF of vacant space 1 Mark-to-market potential incremental value calculated using incremental estimated NOI from re-leasing SF expiring through 12.31.19 at Bank of America Plaza and The Terrace at current market rates and a 6.0%-7.0% NOI exit capitalization rate less $50/SF estimated leasing capital 2 Stabilize occupancy potential incremental value calculated using estimated NOI generated from increasing occupancy of Two BriarLake Plaza, Eldridge Place, and Burnett Plaza at 90% NOI margins of current market rates and a 6.0%-7.0% NOI exit capitalization rate less $50/SF estimated leasing capital Bank of America Plaza BriarLake Plaza Potential incremental value creation: $136mm to $162mm1,2 NA V + Dividen d


 
17 Acquired 2006 THE TERRACE


 
18 350 300 250 200 150 100 50 0 2018 2019 2020 2021 2022 Thereafter $44 $86 $66 $310 $300 1 Data shown as of 12.31.17 pro forma for the pending disposition of Fifth Third Columbus; and the recast of our credit facility that closed on 1.18.18 2 Estimated equity value is based on common stock, restricted stock, and restricted stock units outstanding multiplied by consensus NAV of $22.05 per share Capital Structure1 Debt Maturities ($mm) Total net liquidity of $241mm Mortgage debt Unsecured bank debt Capital structure as of 12.31.17 ($mm) Total estimated enterprise value: $1,850 Mortgage Debt $ 196 Unsecured term loan 575 Unsecured revolver 35 Cash (15) Total net debt $ 791 Estimated equity value2 1,059 Total est. enterprise value $ 1,850 43% 57% $0 $0


 
19 Managing our Houston Presence Houston Class A office property sales since 2017, including known-pending sales, total over $3 billion Loop Central currently under contract with expected closing 1Q'18 Eldridge Place POTENTIAL DISPOSITIONBriarLake Plaza Minimal lease expirations through 2018 Properties fully operational following Hurricane Harvey New state-of-the-art lobbies being designed in all three buildings, primarily funded by insurance Weighted average lease life of over six years & minimal lease expirations through 2019 Prospective leasing activity is picking up Historically highest net rents in prime Westchase submarket


 
20 Acquired 2014 5950 SHERRY LANE


 
21 Experienced Management Team Significant real estate & public company experience spanning 30+ years Jim Sharp Chief Financial Officer & Treasurer Bill Reister EVP & Chief Investment Officer Heath Johnson Managing Director Asset Management Dallas Lucas President & Chief Operating Officer Scott Fordham Chief Executive Officer & Director Scott McLaughlin Senior Vice President Investor Relations Our team is 100% committed to optimizing the value of TIER’s common stock through execution of our strategic plan or pursuing other strategic alternatives, including public or private execution


 
22 Delivering 2018Rendering THIRD + SHOAL


 
23 Top-tier market with a highly educated workforce combined with pro-business government policy 10.7% Class A vacancy, up from 9.4% in prior year YoY: 13.9% Class A rent growth / 1.4mm SF net absorption 4Q’17: 0.8% Class A rent growth / 0.4mm SF net absorption 3.5mm SF under construction, ~58% pre-leased Five-year forecast of 1.1% avg. annual rent growth Austin The Domain The Terrace Third + Shoal The Terrace Third+Shoal (Rendering) Domain 7 Office-Using Employment & Population Growth1 Portfolio Snapshot Market Commentary1 1 Based on Moody’s Analytics, Bureau of Labor Statistics, CoStar Portfolio Strategy, and JLL as of 4Q’17


 
24 Dallas’ diversified economy, affordability, location and quality of labor have put it on many corporate relocation lists 18.6% Class A vacancy, up from 18.2% in prior year YoY: 5.6% Class A rent growth / 5.4mm SF net absorption 4Q’17: 0.2% Class A rent compression / 1.2mm SF net absorption 7.0mm SF under construction, ~60% pre-leased Five-year forecast of 1.9% avg. annual rent growth Dallas-Fort Worth Burnett Plaza 5950 Sherry LaneLegacy District 5950 Sherry Lane Burnett Plaza Legacy District 1 Based on Moody’s Analytics, Bureau of Labor Statistics, CoStar Portfolio Strategy, and JLL as of 4Q’17 Office-Using Employment & Population Growth1 Portfolio Snapshot Market Commentary1


 
25 Houston Office demand will take time to return to normal following energy-related headwinds and Hurricane Harvey 24.7% Class A vacancy, up from 21.1% in prior year YoY: 1.1% Class A rent compression / 1.5mm SF net absorption 4Q’17: 1.4% Class A rent compression / (0.1mm) SF net absorption Sublease inventory of 9.3mm SF as of 4Q’17 2.0mm SF under construction, ~69% pre-leased BriarLake Plaza Eldridge Place BriarLake Plaza Eldridge Place Office-Using Employment & Population Growth1 Portfolio Snapshot Market Commentary1 1 Based on Moody’s Analytics, Bureau of Labor Statistics, CoStar Portfolio Strategy, and JLL as of 4Q’17


 
26 Charlotte’s central location, affordable living costs and young, educated workforce make it a banking and finance hub 13.0% Class A vacancy, up from 9.6% in prior year YoY: 2.1% Class A rent growth / 1.1mm SF net absorption 4Q’17: 7.4% Class A rent growth / <0.1mm SF net absorption 0.9mm SF under construction, ~65% pre-leased Five-year forecast of 3.1% avg. annual rent growth Charlotte Bank of America Plaza Office-Using Employment & Population Growth1 Portfolio Snapshot Market Commentary1 1 Based on Moody’s Analytics, Bureau of Labor Statistics, CoStar Portfolio Strategy, and JLL as of 4Q’17 for the Charlotte CBD Bank of America Plaza


 
27 Nashville Office-Using Employment & Population Growth1 Nashville's economic diversity, mix of private and public industry, and low costs of business fuel office demand 6.4% Class A vacancy, up from 3.6% in prior year YoY: 2.1% Class A rent growth / 1.1mm SF net absorption 4Q’17: 0.0% Class A rent growth / 0.2mm SF net absorption 1.3mm SF under construction, ~39% pre-leased Five-year forecast of 1.4% avg. annual rent growth Plaza at MetroCenter Portfolio Snapshot Market Commentary1 1 Based on Moody’s Analytics, Bureau of Labor Statistics, CoStar Portfolio Strategy, and JLL as of 4Q’17 Plaza at MetroCenter


 
Forward-Looking Statements This presentation contains forward-looking statements, including discussion and analysis of the financial condition of us and our subsidiaries and other matters. These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on their knowledge and understanding of our business and industry. Words such as “may,” "will," “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “outlook,” “would,” “could,” “should,” “objectives,” “strategies,” “opportunities,” “goals,” “position,” “future,” “vision,” “mission,” “strive,” “project” and variations of these words and similar expressions are intended to identify forward-looking statements. We intend that such forward-looking statements be subject to the safe harbor provisions created by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. We caution you not to place undue reliance on forward-looking statements, which reflect our management's view only as of the date of this presentation. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. Factors that could cause actual results to differ materially from any forward-looking statements made in the presentation include but are not limited to: (i) market disruptions and economic conditions experienced by the economy or real estate industry as a whole and the local economic conditions in the markets in which our properties are located; (ii) our ability to renew expiring leases and lease vacant spaces at favorable rates or at all; (iii) the inability of tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business; (iv) the availability of cash flow from operating activities to fund distributions and capital expenditures; (v) 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; (vi) the availability and terms of financing, including the impact of higher interest rates on the cost and/or availability of financing; (vii) our ability to strategically acquire, develop or dispose of assets on favorable terms or at all; (viii) our level of debt and the terms and limitations imposed on us by our debt agreements; (ix) our ability to retain our executive officers and other key personnel; (x) unfavorable changes in laws or regulations impacting our business or our assets; and (xi) factors that could affect our ability to qualify as a real estate investment trust. The forward-looking statements should be read in light of these and other risk factors identified in the “Risk Factors” section of our most recent Form 10-K, as filed with the Securities and Exchange Commission. The modeling, projections, analyses, and other forward-looking information prepared by CoStar Portfolio Strategy, LLC (“CoStar”) and presented herein are based on financial and other information from public and proprietary sources, as well as various assumptions concerning future events and circumstances that are speculative, uncertain and subject to change without notice. Actual results and events may differ materially from the projections presented. All CoStar materials set forth herein (“CoStar Materials”) speak only as of the date referenced and may have materially changed since such date. CoStar does not purport that the CoStar Materials herein are comprehensive, and, while they are believed to be accurate, the CoStar Materials are not guaranteed to be free from error, omission or misstatement. CoStar has no obligation to update any of the CoStar Materials included in this document. All CoStar Materials are provided “as is,” without any guarantees, representations or warranties of any kind, including implied warranties of merchantability, non-infringement, title and fitness for a particular purpose. To the maximum extent permitted by law, CoStar disclaims any and all liability in the event any CoStar Materials prove to be inaccurate, incomplete or unreliable. CoStar does not sponsor, endorse, offer or promote an investment in the securities of TIER REIT, Inc. You should not construe any of the CoStar Materials as investment, tax, accounting or legal advice.


 


 
High-quality portfolio Proven execution Significant value creation opportunities INVESTMENT RATIONALE Flexible balance sheet Focused strategy Experienced management team ir@tierreit.com www.tierreit.com 972.483.2400 Austin + Dallas + Houston + Charlotte + Nashville + Atlanta + Denver


 
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