City Office REIT (CIO) Q2 2024 earnings summary

Executive summary

• Achieved record new leasing activity in Q2 2024 with 162,000 sq ft of new leases and 269,000 sq ft total leasing, the highest since the pandemic began.

• Owns 5.6 million sq ft across 56 buildings in high-growth Sun Belt markets, with 83% occupancy as of June 30, 2024.

• Rental and other revenues for Q2 2024 were $42.3 million, with a GAAP net loss attributable to common stockholders of $5.6 million, or ($0.14) per diluted share.

• Strategic property upgrades and value-enhancing initiatives are underway, including advanced discussions for a mixed-use redevelopment in St. Petersburg.

• The company continues to face headwinds from work-from-home trends, higher interest rates, and inflation impacting leasing and capital costs.

Financial highlights

• Q2 2024 net operating income was $24.9 million, down $1.8 million sequentially due to lower occupancy and absence of a prior quarter's $900,000 termination fee.

• Core FFO for Q2 was $11.5 million ($0.28/share), AFFO was $5.3 million ($0.13/share), and dividend declared was $0.10 per share.

• Net loss attributable to common stockholders was $5.6 million, compared to $2.5 million loss in Q2 2023.

• Same Store Cash NOI declined 2.0% year-over-year in Q2 2024, primarily from lower occupancy.

• Debt outstanding as of June 30, 2024, was $652.4 million, with 90% at fixed or effectively fixed rates and a weighted average interest rate of 5.0%.

Outlook and guidance

• Full year 2024 guidance reiterated, with Core FFO per share guidance of $1.14–$1.18 and NOI expected at $101.5M–$103.5M.

• Year-end occupancy projected at 83.5%–85.5%, with expectations for occupancy to increase as signed leases commence.

• Guidance reflects uncertainty from work-from-home trends, inflation, and potential WeWork lease modifications.

• No significant new move-outs expected, with only one known large tenant (72,000 sq ft) scheduled to depart in early 2025.

• The company believes it has access to multiple sources of capital for long-term liquidity needs but acknowledges potential constraints from market conditions.