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Section 1: 8-K (8-K)

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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): May 8, 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 2.02                                 Results of Operations and Financial Condition.
 
On May 8, 2018, TIER REIT, Inc. released supplemental information regarding its financial results and operations for the quarter and the period ended March 31, 2018, by posting to its website its First Quarter 2018 Supplemental Operating and Financial Data and issued a press release announcing its financial results for the first quarter of 2018. The supplemental information and press release are included as Exhibit 99.1 and Exhibit 99.2 to this report and are incorporated herein by reference.
The information included in this Item 2.02, including Exhibit 99.1 and Exhibit 99.2, is being furnished pursuant to Item 2.02 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 liabilities of that section, nor shall the information be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01.                              Financial Statements and Exhibits.
 
(d)                                 Exhibits.

99.1    First Quarter 2018 Supplemental Operating and Financial Data

99.2    Press release, dated May 8, 2018
                        




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: May 8, 2018
By:
/s/ Hannah Q. Wrenn
 
 
Hannah Q. Wrenn
 
 
Chief Accounting Officer
 
 
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1

393397685_tierreitsupplemental18coverq.jpg




Supplemental Operating and Financial Data
For the Quarter Ended March 31, 2018

393397685_tierrgbfullcolora04.jpg

About the Company
    
TIER REIT, Inc. is a publicly traded (NYSE: TIER), self-managed, Dallas-based real estate investment trust focused on owning quality, well-managed commercial office properties in dynamic markets throughout the U.S. TIER REIT’s vision is to be the premier owner and operator of best-in-class office properties in TIER1 submarkets, which are primarily higher density and amenity-rich locations within select, high-growth metropolitan areas that offer a walkable experience to various amenities. Our mission is to provide unparalleled, TIER ONE Property Services to our tenants and outsized total return through stock price appreciation and dividend growth to our stockholders.
As of March 31, 2018, we owned interests in 18 operating office properties with approximately 6.7 million rentable square feet, one non-operating property with approximately 331,000 rentable square feet, and two development properties that will consist of approximately 669,000 rentable square feet. As of March 31, 2018, our operating properties are located in six markets throughout the United States.
Board of Directors
 
Executive Officers and Senior Management
Richard I. Gilchrist
 
Scott W. Fordham
Chairman of the Board and Independent Director
 
Chief Executive Officer and Director
 
 
 
Scott W. Fordham
 
Dallas E. Lucas
Chief Executive Officer and Director
 
President and Chief Operating Officer
 
 
 
R. Kent Griffin, Jr.
 
James E. Sharp
Independent Director
 
Chief Financial Officer and Treasurer
 
 
 
Thomas M. Herzog
 
William J. Reister
Independent Director
 
Chief Investment Officer and Executive Vice President
 
 
 
Dennis J. Martin
 
Telisa Webb Schelin
Independent Director
 
Chief Legal Officer, Executive Vice President, and Secretary
 
 
 
Gregory J. Whyte
 
Hannah Q. Wrenn
Independent Director
 
Chief Accounting Officer
 
 
 
 
 
R. Heath Johnson
 
 
Managing Director - Asset Management
 
 
 
 
 
Dean R. Hook
 
 
Senior Vice President - Information Technology and Property Management
 
 
 
 
 
Company Information
 
 
Corporate Headquarters
 
Website
 
Trading Information
 
Investor inquiries should be directed to:
5950 Sherry Lane, Suite 700
 
www.tierreit.com
 
Trading Symbol: TIER
 
Scott A. McLaughlin
Dallas, Texas 75225
 
 
 
New York Stock Exchange
 
Senior Vice President - Investor Relations
 
 
 
 
 
 
at 972.483.2400 or
 
 
 
 
 
 
ir@tierreit.com
 
 
 
 
 
 
 

Research Coverage
 
 
 
 
 
 
 
 
 
 
BMO Capital
 
Janney Montgomery Scott LLC
 
JMP Securities
 
J.P. Morgan Securities
 
 
John Kim
 
Robert Stevenson
 
Mitch Germain
 
Anthony Paolone
 
 
212.885.4115
 
646.840.3217
 
212.906.3546
 
212.622.6682





Supplemental Operating and Financial Data
For the Quarter Ended March 31, 2018
Table of Contents
Overview and Highlights
 
Overview
1

Financial Highlights
2-3

Consolidated Balance Sheets
4

Consolidated Statements of Operations
5

Calculations of FFO and Additional Information
6

Calculations of EBITDAre
7

Unconsolidated Entities Financial Summary
8

Same Store Analysis
9

Schedule of Properties Owned
10

Portfolio Analysis
11

Components of Net Asset Value
12

Significant Tenants
13

Industry Diversification
14

 
 
Leasing
 
Leasing Activity
15-16

Lease Expirations
17-18

Occupancy Trends
19

 
 
Capital Expenditures
 
Leasing Cost Summary
20

Development, Leasing, and Capital Expenditures Summary
21

 
 
Other Information
 
Potential Future Development and Redevelopment Sites
22

Summary of Development Activity
23

Properties Under Development
24-26

Acquisition and Disposition Activities
27

Summary of Financing
28

Principal Payments by Year
29

Definitions of Non-GAAP Financial Measures
30-31


Forward-Looking Statements
This supplemental operating and financial data report contains forward-looking statements within the meaning of the federal securities laws relating to the business and financial outlook of TIER REIT, Inc. that are based on current expectations, estimates, forecasts, and projections and are not guarantees of future performance. Statements contained herein may be impacted by a number of risks and uncertainties, including the company’s ability to rent space on favorable terms, its ability to address debt maturities and fund its capital requirements, its intentions to acquire, develop, or sell certain properties, the value of its assets, its anticipated capital expenditures, and other matters. 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. Actual results may differ materially from those expressed in these forward-looking statements, and you should not place undue reliance on any such statements. A number of important factors could cause actual results to differ materially from the forward-looking statements contained in this document, as well as other factors described in the Risk Factors section of TIER REIT, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017. Forward-looking statements in this document speak only as of the date on which such statements were made, and we undertake no obligation to update any such statements that may become untrue because of subsequent events.





Overview
For the Quarter Ended March 31, 2018

Property Results
Occupancy at March 31, 2018, was 89.4%, an increase of 30 basis points from December 31, 2017.
68,000 square feet leased - 56,000 square feet of renewals, 1,000 square feet of expansions, and 11,000 square feet of new leasing.
By early January 2018, One & Two Eldridge Place and Three Eldridge Place (collectively known as the “Eldridge Properties”), located in Houston, Texas were fully operational following Hurricane Harvey. During the first quarter of 2018, we provided rent abatements of $3.9 million to tenants as a result of the hurricane. These rent abatements were offset by $3.3 million of business interruption insurance proceeds received during the quarter and $0.2 million of estimated saved expenses. We anticipate we will receive remaining business interruption insurance proceeds in subsequent quarters.
Real Estate Activity
On January 4, 2018, we acquired a 96.5% initial economic interest in Domain Point for a contract purchase price of $73.8 million (at 100%). We own a 90% interest in the entity that owns Domain Point. Domain Point is located in Austin, Texas, adjacent to our other Domain office properties and includes two buildings with 240,000 rentable square feet (combined).
On February 13, 2018, we sold our 500 East Pratt property for a contract sales price of $60.0 million. 500 East Pratt is located in Baltimore, Maryland, and contains 280,000 rentable square feet.
On February 22, 2018, we sold our Centreport Office Center property for a contract sales price of $12.7 million. Centreport Office Center is located in Fort Worth, Texas, and contains 133,000 rentable square feet.
On March 27, 2018, we sold our Loop Central property for a contract sales price of $73.0 million. Loop Central is located in Houston, Texas, and contains 575,000 rentable square feet.
On March 30, 2018, we acquired the remaining 50% interest in our Domain 8 property for a contract purchase price of $92.8 million, which includes the assumption of $44.9 million of mortgage debt. Domain 8 is located in Austin, Texas and contains 291,000 rentable square feet.
Capital Markets Activity
On January 18, 2018, we amended our existing multi-bank unsecured credit facility. The amendment provides for an increase in total unsecured borrowings under the credit facility from $860 million to $900 million, with the ability to further increase total borrowings by up to an additional $300 million in the aggregate subject to certain requirements. The revolving line of credit was increased to $325 million and the maturity date was extended from December 2018 to January 2022, and can be extended one additional year subject to certain conditions and our payment of an extension fee. The maturity date of the $300 million term loan was extended from December 2019 to January 2025 and there was no change to the June 2022 maturity date of the remaining $275 million term loan.
On February 7, 2018, our board of directors authorized a distribution of $0.18 per share of common stock for the first quarter of 2018, which was paid on March 29, 2018.
Subsequent Events
On May 4, 2018, our board of directors authorized a distribution of $0.18 per share of common stock for the second quarter of 2018, which will be paid on June 29, 2018.
Development on Domain 12 commenced in May 2018. Domain 12 will contain 320,000 rentable square feet and is located in Austin, Texas, adjacent to our Domain 11 development property.


Supplemental Operating and
Financial Data
393397685_tierrgbfullcolora04.jpg
1Q’18
Page 1



Financial Highlights
(in thousands, except per share data, effective rent data, percentages, and number of properties)
 
 
 
 
 
 
 
 
 
 
 
 
 
31-Mar-18
 
31-Dec-17
 
30-Sep-17
 
30-Jun-17
 
31-Mar-17
Portfolio Summary:
 
 
 
 
 
 
 
 
 
 
Total operating office properties
 
18

 
20

 
20

 
19

 
25

Rentable square feet (100%) (operating properties)
 
6,657

 
7,405

 
7,405

 
7,114

 
7,908

Rentable square feet (own %) (operating properties)
 
6,633

 
7,260

 
7,260

 
7,114

 
7,517

Occupancy %
 
89.4
%
 
89.1
%
 
88.3
%
 
88.5
%
 
90.2
%
Executed % SF leased
 
89.6
%
 
89.7
%
 
89.0
%
 
89.1
%
 
90.9
%
Economic % SF leased
 
86.1
%
 
84.4
%
 
82.4
%
 
80.3
%
 
83.2
%
Average effective rent/square foot
 
$
32.55

 
$
30.33

 
$
29.58

 
$
29.12

 
$
28.49

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
31-Mar-18
 
31-Dec-17
 
30-Sep-17
 
30-Jun-17
 
31-Mar-17
Financial Results:
 
 
 
 
 
 
 
 
 
 
Revenue
 
$
54,143

 
$
54,626

 
$
50,920

 
$
54,552

 
$
56,363

Property related expenses
 
(13,155
)
 
(14,131
)
 
(13,170
)
 
(13,930
)
 
(14,690
)
Real estate taxes
 
(8,754
)
 
(8,512
)
 
(8,439
)
 
(8,753
)
 
(8,560
)
Property management fees
 
(85
)
 
(51
)
 
(49
)
 
(72
)
 
(60
)
NOI
 
$
32,149

 
$
31,932

 
$
29,262

 
$
31,797

 
$
33,053

Base rent
 
$
35,118

 
$
34,122

 
$
36,002

 
$
38,629

 
$
41,371

Free rent
 
$
(1,304
)
 
$
(1,570
)
 
$
(2,288
)
 
$
(3,022
)
 
$
(2,730
)
Net income (loss) attributable to common stockholders
 
$
8,390

 
$
(9,875
)
 
$
(8,041
)
 
$
4,031

 
$
98,171

Diluted income (loss) per common share (1)
 
$
0.17

 
$
(0.21
)
 
$
(0.17
)
 
$
0.08

 
$
2.04

FFO attributable to common stockholders
 
$
9,889

 
$
19,020

 
$
15,885

 
$
18,735

 
$
18,298

Diluted FFO per common share
 
$
0.20

 
$
0.39

 
$
0.33

 
$
0.39

 
$
0.38

FFO attributable to common stockholders, excluding certain items
 
$
19,494

 
$
19,374

 
$
16,508

 
$
19,766

 
$
19,474

Diluted FFO, excluding certain items, per common share
 
$
0.40

 
$
0.40

 
$
0.34

 
$
0.41

 
$
0.41

Adjusted EBITDAre
 
$
28,203

 
$
26,321

 
$
26,181

 
$
27,558

 
$
28,126

 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
47,645

 
47,554

 
47,550

 
47,536

 
47,511

Weighted average common shares outstanding - diluted
 
48,300

 
48,207

 
48,160

 
47,875

 
47,806

 
 
 
 
 
 
 
 
 
 
 
Selected Additional Trend Information:
 
 
 
 
 
 
 
 
 
 
Renewal % based on square feet
 
64
%
 
30
%
 
83
%
 
53
%
 
78
%
Distributions declared on common shares
 
$
8,626

 
$
8,612

 
$
8,612

 
$
8,611

 
$
8,606

Annualized distribution yield (2)
 
3.9
%
 
3.5
%
 
3.7
%
 
3.9
%
 
4.1
%
_______________________________
(1) In periods of net loss from continuing operations there are no dilutive securities and diluted loss per common share is calculated using weighted average common shares outstanding - basic as the denominator.
(2) Based on the closing price of our common stock as of the last day of the associated period.
Notes:
Occupancy % represents the total square footage subject to commenced leases as of the reporting date as a percentage of the total rentable square feet (at our ownership interest).
Executed % SF leased represents the total square footage subject to commenced leases plus the square footage for currently vacant space that is subject to executed leases that have not commenced as of the reporting date as a percentage of the total rentable square feet (at our ownership interest).
Economic % SF leased represents the total square footage subject to commenced leases as of the reporting date adjusted to exclude the square footage associated with leases receiving rental abatements as a percentage of the total rentable square feet (at our ownership interest).
Average effective rent represents 12 times the sum of the monthly contractual amounts for base rent and the pro rata budgeted operating expense reimbursements, as of period end, related to leases in place as of period end, as reduced for free rent and excluding any scheduled future rent increases, as adjusted for our ownership interest, divided by the total square footage under commenced leases at period end.
This section includes non-GAAP financial measures, which are accompanied by what we consider the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”). Quantitative reconciliations of the differences between the non-GAAP financial measures presented and the most directly comparable GAAP financial measures are shown on pages 6-7. A description of the non-GAAP financial measures we present and a statement of the reasons why management believes the non-GAAP measures provide useful information to investors about the Company’s financial condition and results of operations can be found on pages 30-31.

Supplemental Operating and
Financial Data
393397685_tierrgbfullcolora04.jpg
1Q’18
Page 2



Financial Highlights (continued)
(in thousands, except stock prices, percentages, and ratios)
 
 
 
 
 
31-Mar-18
 
31-Dec-17
 
30-Sep-17
 
30-Jun-17
 
31-Mar-17
Selected Balance Sheet Items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total book value of real estate
 
$
1,430,355

 
$
1,275,953

 
$
1,325,536

 
$
1,339,693

 
$
1,270,510

 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
10,183

 
$
13,800

 
$
10,959

 
$
28,763

 
$
55,215

 
 
 
 
 
 
 
 
 
 
 
Unconsolidated cash and cash equivalents
(at ownership %)
 
$
282

 
$
1,435

 
$
2,495

 
$
5,082

 
$
1,104

 
 
 
 
 
 
 
 
 
 
 
Restricted cash
 
$
12,565

 
$
8,510

 
$
13,323

 
$
10,953

 
$
7,685

 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
1,688,999

 
$
1,581,138

 
$
1,581,288

 
$
1,580,776

 
$
1,561,423

 
 
 
 
 
 
 
 
 
 
 
Mortgage debt
 
$
280,689

 
$
191,339

 
$
191,694

 
$
192,043

 
$
206,400

 
 
 
 
 
 
 
 
 
 
 
Revolving credit facility and term loans
 
$
612,000

 
$
610,000

 
$
598,000

 
$
595,000

 
$
575,000

 
 
 
 
 
 
 
 
 
 
 
Unconsolidated debt (at ownership %)
 
$
16,239

 
$
52,377

 
$
43,572

 
$
40,931

 
$
30,027

 
 
 
 
 
 
 
 
 
 
 
Total liabilities
 
$
1,001,439

 
$
903,567

 
$
889,465

 
$
873,915

 
$
849,702

 
 
 
 
 
 
 
 
 
 
 
Capitalization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares of common stock outstanding
 
47,656

 
47,623

 
47,552

 
47,542

 
47,526

 
 
 
 
 
 
 
 
 
 
 
Restricted stock units outstanding
 
356

 
228

 
228

 
238

 
233

 
 
 
 
 
 
 
 
 
 
 
Shares of restricted stock outstanding
 
265

 
181

 
291

 
291

 
276

 
 
 
 
 
 
 
 
 
 
 
 
 
48,277

 
48,032

 
48,071

 
48,071

 
48,035

 
 
 
 
 
 
 
 
 
 
 
High stock price
 
$
20.51

 
$
20.72

 
$
19.50

 
$
18.61

 
$
18.80

 
 
 
 
 
 
 
 
 
 
 
Low stock price
 
$
17.04

 
$
18.83

 
$
16.67

 
$
15.96

 
$
16.67

 
 
 
 
 
 
 
 
 
 
 
Average closing stock price
 
$
19.01

 
$
19.71

 
$
18.39

 
$
17.17

 
$
17.87

 
 
 
 
 
 
 
 
 
 
 
Closing stock price
 
$
18.48

 
$
20.39

 
$
19.30

 
$
18.48

 
$
17.36

 
 
 
 
 
 
 
 
 
 
 
Market capitalization (1)
 
$
892,159

 
$
979,372

 
$
927,770

 
$
888,352

 
$
833,888

 
 
 
 
 
 
 
 
 
 
 
Total debt (2)
 
$
908,928

 
$
853,716

 
$
833,266

 
$
827,974

 
$
811,427

 
 
 
 
 
 
 
 
 
 
 
Net debt (3)
 
$
898,463

 
$
838,481

 
$
819,812

 
$
794,129

 
$
755,108

 
 
 
 
 
 
 
 
 
 
 
Total capitalization
 
$
1,801,087

 
$
1,833,088

 
$
1,761,036

 
$
1,716,326

 
$
1,645,315

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
31-Mar-18
 
31-Dec-17
 
30-Sep-17
 
30-Jun-17
 
31-Mar-17
Ratios:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOI margin % (4)
 
59.4
%
 
58.5
%
 
57.5
%
 
58.3
%
 
58.6
%
 
 
 
 
 
 
 
 
 
 
 
Normalized fixed charge coverage (5)
 
3.00

 
2.83

 
2.86

 
3.12

 
2.98

 
 
 
 
 
 
 
 
 
 
 
Normalized interest coverage (5)
 
3.13

 
2.94

 
2.97

 
3.25

 
3.13

 
 
 
 
 
 
 
 
 
 
 
Net debt/adjusted annualized estimated full period EBITDAre from properties owned at period end (5)
 
8.34x

 
7.96x

 
7.83x

 
7.10x

 
7.29x

Net debt/adjusted annualized estimated full period EBITDAre from properties owned at period end, including development properties (5) (6)
 
7.67x

 
7.47x

 
7.45x

 
6.67x

 
6.95x

 
 
 
 
 
 
 
 
 
 
 
 
(1) Market capitalization is equal to outstanding shares (common stock, restricted stock, and restricted stock units, as if converted) times the closing price of our common stock as of the last day of the associated period.
(2) Includes book value of mortgage debt, the revolving credit facility and term loans, and unconsolidated debt (at ownership %).
(3) Total debt less cash and cash equivalents and unconsolidated cash and cash equivalents (at ownership %).
(4) NOI margin % is equal to NOI divided by revenue.
(5) See page 7 for more detailed information.
(6) Includes estimated stabilized NOI for development properties, to the extent of percentage of completion of the respective developments based on spend to date.

Supplemental Operating and
Financial Data
393397685_tierrgbfullcolora04.jpg
1Q’18
Page 3



Consolidated Balance Sheets
(in thousands, except share and per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31-Mar-18
 
31-Dec-17
 
30-Sep-17
 
30-Jun-17
 
31-Mar-17
Assets
 
 
 
 
 
 
 
 
 
 
 
 
Real estate
 
 
 
 
 
 
 
 
 
 
 
Land
 
$
156,577

 
$
139,951

 
$
140,959

 
$
141,010

 
$
142,776

 
Land held for development
 
45,059

 
45,059

 
45,059

 
45,059

 
45,059

 
Buildings and improvements, net
 
1,177,433

 
1,061,418

 
1,122,072

 
1,145,496

 
1,076,701

 
Real estate under development
 
51,286

 
29,525

 
17,446

 
8,128

 
5,974

 
Total real estate
 
1,430,355

 
1,275,953

 
1,325,536

 
1,339,693

 
1,270,510

 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
10,183

 
13,800

 
10,959

 
28,763

 
55,215

 
Restricted cash
 
12,565

 
8,510

 
13,323

 
10,953

 
7,685

 
Accounts receivable, net
 
76,385

 
81,129

 
82,737

 
62,413

 
60,996

 
Prepaid expenses and other assets
 
14,238

 
28,112

 
20,115

 
16,399

 
18,163

 
Investments in unconsolidated entities
 
31,314

 
31,852

 
33,977

 
25,530

 
40,421

 
Deferred financing fees, net
 
3,426

 
1,387

 
1,735

 
2,089

 
2,442

 
Acquired above-market leases, net
 
288

 
419

 
543

 
659

 
778

 
Other lease intangibles, net
 
110,245

 
86,628

 
90,547

 
92,431

 
70,962

 
Other intangible assets, net
 

 

 
1,816

 
1,846

 
1,876

 
Assets associated with real estate held for sale
 

 
53,348

 

 

 
32,375

Total assets
 
$
1,688,999

 
$
1,581,138

 
$
1,581,288

 
$
1,580,776

 
$
1,561,423

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage debt
 
$
280,689

 
$
191,339

 
$
191,694

 
$
192,043

 
$
206,400

 
Unsecured term loans
 
575,000

 
575,000

 
575,000

 
575,000

 
575,000

 
Unsecured revolving credit facility
 
37,000

 
35,000

 
23,000

 
20,000

 

 
Unamortized debt issuance costs
 
(2,156
)
 
(6,801
)
 
(7,308
)
 
(7,799
)
 
(7,495
)
 
Total notes payable, net
 
890,533

 
794,538

 
782,386

 
779,244

 
773,905

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
76,144

 
81,166

 
78,174

 
64,412

 
51,813

 
Acquired below-market leases, net
 
27,684

 
17,942

 
19,462

 
20,653

 
15,252

 
Other liabilities
 
7,078

 
7,567

 
9,443

 
9,606

 
7,762

 
Obligations associated with real estate held for sale
 

 
2,354

 

 

 
970

Total liabilities
 
1,001,439

 
903,567

 
889,465

 
873,915

 
849,702

Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
 

 

 

 

 

 
Convertible stock
 

 

 

 

 

 
Common stock, $.0001 par value per share, 382,499,000 shares authorized
 
5

 
5

 
5

 
5

 
5

 
Additional paid-in capital
 
2,610,288

 
2,609,540

 
2,609,361

 
2,608,260

 
2,607,071

 
Cumulative distributions and net loss attributable to common stockholders
 
(1,936,561
)
 
(1,936,960
)
 
(1,918,473
)
 
(1,901,820
)
 
(1,897,240
)
 
Accumulated other comprehensive income (loss)
 
10,479

 
4,218

 
257

 
(274
)
 
1,026

 
Stockholders’ equity
 
684,211

 
676,803

 
691,150

 
706,171

 
710,862

 
Noncontrolling interests
 
3,349

 
768

 
673

 
690

 
859

Total equity
 
687,560

 
677,571

 
691,823

 
706,861

 
711,721

Total liabilities and equity
 
$
1,688,999

 
$
1,581,138

 
$
1,581,288

 
$
1,580,776

 
$
1,561,423

 
 
 
 
 
 
 
 
 
 
 
 
Common stock, number of shares issued and outstanding
 
47,655,669

 
47,623,324

 
47,552,014

 
47,542,066

 
47,525,725

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Supplemental Operating and
Financial Data
393397685_tierrgbfullcolora04.jpg
1Q’18
Page 4



 
Consolidated Statements of Operations
 
(in thousands, except share and per share amounts)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
31-Mar-18
 
31-Dec-17
 
30-Sep-17
 
30-Jun-17
 
31-Mar-17
Revenue
 
 
 
 
 
 
 
 
 
 
 
Rental income
 
$
51,941

 
$
52,362

 
$
47,333

 
$
51,554

 
$
53,299

 
Straight-line rent and lease incentive revenue
 
591

 
978

 
2,280

 
2,026

 
2,028

 
Above- and below-market rent amortization
 
1,276

 
1,032

 
1,075

 
880

 
908

 
Lease termination fees
 
335

 
254

 
232

 
92

 
128

 
Total revenue
 
54,143

 
54,626

 
50,920

 
54,552

 
56,363

Expenses
 
 
 
 
 
 
 
 
 
 
 
Property related expenses
 
13,155

 
14,131

 
13,170

 
13,930

 
14,690

 
Real estate taxes
 
8,754

 
8,512

 
8,439

 
8,753

 
8,560

 
Property management fees
 
85

 
51

 
49

 
72

 
60

 
Total property operating expenses
 
21,994

 
22,694

 
21,658

 
22,755

 
23,310

 
Interest expense
 
7,705

 
7,534

 
7,516

 
7,397

 
7,938

 
Interest rate hedge ineffectiveness expense (income)
 

 
(262
)
 
8

 
(29
)
 
30

 
Amortization of deferred financing costs
 
404

 
883

 
882

 
867

 
812

 
Total interest expense
 
8,109

 
8,155

 
8,406

 
8,235

 
8,780

 
General and administrative
 
5,503

 
4,956

 
5,157

 
5,626

 
5,707

 
Asset impairment losses
 

 
5,250

 

 

 

 
Real estate depreciation and amortization
 
24,500

 
23,655

 
23,653

 
22,557

 
24,431

 
Depreciation and amortization - non-real estate assets
 
116

 
133

 
132

 
95

 
98

 
Total expenses
 
60,222

 
64,843

 
59,006

 
59,268

 
62,326

 
Interest and other income
 
45

 
88

 
170

 
783

 
318

 
Loss on early extinguishment of debt
 
(8,988
)
 

 

 

 
(545
)
Loss before income taxes, equity in operations
 
 
 
 
 
 
 
 
 
 
 
of investments, and gains
 
(15,022
)
 
(10,129
)
 
(7,916
)
 
(3,933
)
 
(6,190
)
 
Benefit (provision) for income taxes
 
(195
)
 
(171
)
 
(202
)
 
149

 
(244
)
 
Equity in operations of investments
 
287

 
32

 
67

 
6,556

 
(256
)
Income (loss) before gains
 
(14,930
)
 
(10,268
)
 
(8,051
)
 
2,772

 
(6,690
)
Gain on sale of assets
 
12,014

 
384

 

 
1,262

 
90,750

Gain on remeasurement of investment in unconsolidated entities
 
11,242

 

 

 

 
14,168

Net income (loss)
 
8,326

 
(9,884
)
 
(8,051
)
 
4,034

 
98,228

 
Noncontrolling interests
 
64

 
9

 
10

 
(3
)
 
(57
)
Net income (loss) attributable to common stockholders
 
$
8,390

 
$
(9,875
)
 
$
(8,041
)
 
$
4,031

 
$
98,171

 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
47,645,050

 
47,553,564

 
47,549,635

 
47,536,320

 
47,510,915

Weighted average common shares outstanding - diluted (1)
 
48,299,882

 
47,553,564

 
47,549,635

 
47,875,418

 
47,806,069

 
 
 
 
 
 
 
 
 
 
 
 
Basic income (loss) per common share
 
$
0.18

 
$
(0.21
)
 
$
(0.17
)
 
$
0.08

 
$
2.05

Diluted income (loss) per common share (1)
 
$
0.17

 
$
(0.21
)
 
$
(0.17
)
 
$
0.08

 
$
2.04

 
 
 
 
 
 
 
 
 
 
 
 
Distributions declared per common share
 
$
0.18

 
$
0.18

 
$
0.18

 
$
0.18

 
$
0.18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
In periods of net loss there are no dilutive securities and diluted loss per common share is calculated using weighted average common shares outstanding - basic as the denominator.

Supplemental Operating and
Financial Data
393397685_tierrgbfullcolora04.jpg
1Q’18
Page 5



Calculations of FFO and Additional Information
(in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 Three Months Ended
 
 
31-Mar-18
 
31-Dec-17
 
30-Sep-17
 
30-Jun-17
 
31-Mar-17
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
8,326

 
$
(9,884
)
 
$
(8,051
)
 
$
4,034

 
$
98,228

Noncontrolling interests
 
64

 
9

 
10

 
(3
)
 
(57
)
Net income (loss) attributable to common stockholders
 
8,390

 
(9,875
)
 
(8,041
)
 
4,031

 
98,171

Adjustments (1):
 
 
 
 
 
 
 
 
 
 
 
Real estate depreciation and amortization from consolidated properties
 
24,500

 
23,655

 
23,653

 
22,557

 
24,431

 
Real estate depreciation and amortization from unconsolidated properties
 
391

 
391

 
289

 
131

 
566

 
Real estate depreciation and amortization - noncontrolling interest
 
(433
)
 

 

 

 

 
Impairment of depreciable real estate assets
 

 
5,250

 

 

 

 
Gain on sale of depreciable real estate
 
(12,014
)
 
(384
)
 

 
(7,975
)
 
(90,750
)
 
Gain on remeasurement of investment in unconsolidated entities
 
(11,242
)
 

 

 

 
(14,168
)
 
Noncontrolling interests
 
297

 
(17
)
 
(16
)
 
(9
)
 
48

FFO attributable to common stockholders
 
9,889

 
19,020

 
15,885

 
18,735

 
18,298

 
 
 
 
 
 
 
 
 
 
 
Adjustments (1):
 
 
 
 
 
 
 
 
 
 
 
Severance charges
 
19

 

 

 
451

 

 
Interest rate hedge ineffectiveness expense (income) (2)
 

 
(262
)
 
8

 
(29
)
 
30

 
Loss on early extinguishment of debt
 
8,988

 

 

 

 
545

 
Default interest (3)
 
602

 
616

 
616

 
609

 
602

 
Noncontrolling interests
 
(4
)
 

 
(1
)
 

 
(1
)
FFO attributable to common stockholders, excluding certain items
 
$
19,494

 
$
19,374

 
$
16,508

 
$
19,766

 
$
19,474

 
 
 
 
 
 
 
 
 
 
 
Recurring capital expenditures (1)
 
$
(6,192
)
 
$
(6,109
)
 
$
(10,271
)
 
$
(5,135
)
 
$
(6,616
)
Straight-line rent adjustments (1)
 
$
(1,349
)
 
$
(2,088
)
 
$
(3,757
)
 
$
(2,507
)
 
$
(2,391
)
Above- and below-market rent amortization (1)
 
$
(1,245
)
 
$
(1,032
)
 
$
(1,075
)
 
$
(871
)
 
$
(919
)
Amortization of deferred financing costs (1)
 
$
436

 
$
915

 
$
918

 
$
984

 
$
822

Amortization of restricted shares and units
 
$
1,000

 
$
1,071

 
$
1,077

 
$
1,023

 
$
910

Depreciation and amortization - non-real estate assets
 
$
116

 
$
133

 
$
132

 
$
95

 
$
98

 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
47,645

 
47,554

 
47,550

 
47,536

 
47,511

Weighted average common shares outstanding - diluted
 
48,300

 
48,207

 
48,160

 
47,875

 
47,806

 
 
 
 
 
 
 
 
 
 
 
Diluted FFO per common share
 
$
0.20

 
$
0.39

 
$
0.33

 
$
0.39

 
$
0.38

Diluted FFO, excluding certain items, per common share
 
$
0.40

 
$
0.40

 
$
0.34

 
$
0.41

 
$
0.41

 
 
 
 
 
 
 
 
 
 
 
 
From August 28, 2017 through March 31, 2018, we provided rent abatements to tenants at the Eldridge Properties as a result of Hurricane Harvey. Rent abatements were as follows: $3.9 million (Q1’18), $5.1 million (Q4’17), and $1.9 million (Q3’17). These rent abatements were offset by business interruption insurance proceeds of $3.3 million (Q1‘18) and $6.2 million (Q4’17), net of a deductible and estimated saved expenses.
 
(1) Includes our pro rata share of consolidated and unconsolidated amounts, including for our period of ownership of properties sold.
(2) Interest rate swaps are adjusted to fair value through other comprehensive income (loss). 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 (income) within “interest expense” on our consolidated statements of operations. We adopted new accounting guidance on January 1, 2018, that eliminates the requirement to separately measure and report hedge ineffectiveness expense (income).
(3) 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.
 
For additional information regarding the non-GAAP measures, see pages 30-31.

Supplemental Operating and
Financial Data
393397685_tierrgbfullcolora04.jpg
1Q’18
Page 6



Calculations of EBITDAre
(in thousands, except ratios)
 
 
 
 
 
 Three Months Ended
 
 
31-Mar-18
 
31-Dec-17
 
30-Sep-17
 
30-Jun-17
 
31-Mar-17
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
$
8,326

 
$
(9,884
)
 
$
(8,051
)
 
$
4,034

 
$
98,228

 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
 
 
 
Interest expense - consolidated
7,705

 
7,534

 
7,516

 
7,397

 
7,938

 
Interest expense - unconsolidated entities
360

 
338

 
335

 
77

 
160

 
Interest rate hedge ineffectiveness expense (income) (1)

 
(262
)
 
8

 
(29
)
 
30

 
Amortization of deferred financing costs - consolidated
404

 
883

 
882

 
867

 
812

 
Amortization of deferred financing costs - unconsolidated entities
32

 
32

 
36

 
117

 
10

 
Total interest expense
8,501

 
8,525

 
8,777

 
8,429

 
8,950

 
 
 
 
 
 
 
 
 
 
 
 
Tax provision (benefit) - consolidated
195

 
171

 
202

 
(149
)
 
244

 
Tax provision - unconsolidated entities
14

 
1

 

 
5

 
1

 
Depreciation and amortization - consolidated
24,616

 
23,788

 
23,785

 
22,652

 
24,529

 
Depreciation and amortization - unconsolidated entities
391

 
391

 
289

 
131

 
566

 
Impairment losses

 
5,250

 

 

 

 
Gain on sale of real estate
(12,014
)
 
(384
)
 

 
(7,975
)
 
(90,750
)
 
Gain on remeasurement of investment in unconsolidated entities
(11,242
)
 

 

 

 
(14,168
)
EBITDAre
18,787

 
27,858

 
25,002

 
27,127

 
27,600

 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
Loss on early extinguishment of debt
8,988

 

 

 

 
545

 
Non-cash write-off (recoveries), net of tenant receivables

 
19

 
(742
)
 
(20
)
 
(19
)
 
Rent abatements (recoveries), net, due to Hurricane Harvey (2)
409

 
(1,556
)
 
1,921

 

 

 
Severance charges
19

 

 

 
451

 

Adjusted EBITDAre
28,203

 
26,321

 
26,181

 
27,558

 
28,126

 
 
 
 
 
 
 
 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
 
 
EBITDAre from properties disposed before period end
(2,504
)
 
5

 
11

 
(1,625
)
 
(2,229
)
 
Full quarter EBITDAre adjustment for acquired properties
1,223

 

 

 
2,024

 

Adjusted estimated full period EBITDAre from properties 
owned at period end
$
26,922

 
$
26,326

 
$
26,192

 
$
27,957

 
$
25,897

 
 
 
 
 
 
 
 
 
 
 
Fixed charges
 
 
 
 
 
 
 
 
 
 
Interest expense
$
8,501

 
$
8,525

 
$
8,777

 
$
8,429

 
$
8,950

 
Interest rate hedge ineffectiveness (expense) income (1)

 
262

 
(8