Second Quarter Net Income of $0.16 Per
Share
Second Quarter Normalized FFO of $0.60 Per
Share
Completed 288,428 Square Feet of Leasing in
the Second Quarter for a 13.5% Increase in Rents
Occupancy was 95.0% at Quarter End, Up 80
Basis Points Year Over Year
Announced Agreement to Acquire First Potomac
Realty Trust for Approximately $1.4 Billion
Government Properties Income Trust (Nasdaq:GOV) today announced
its financial results for the quarter and six months ended June 30,
2017.
David Blackman, President and Chief Operating Officer of GOV,
made the following statement:
“Government Properties Income Trust achieved solid leasing
results during the second quarter of 2017. We entered into new and
renewal leases for over 288,000 square feet of space for rents that
were 13.5% higher than previous rents for the same space. We also
announced our planned strategic acquisition of First Potomac Realty
Trust and began to implement our long term financing and business
repositioning plans associated with that acquisition by raising
$494 million of net proceeds from the sale of common equity and the
issuance of $300 million aggregate principal amount of senior
unsecured notes due 2022.”
Results for the Quarter Ended June 30, 2017:
Net income determined in accordance with U.S. generally accepted
accounting principles, or GAAP, was $11.7 million, or $0.16 per
diluted share, for the quarter ended June 30, 2017, compared
to net income of $16.8 million, or $0.24 per diluted share, for the
quarter ended June 30, 2016. The weighted average number of
diluted common shares outstanding was 71.1 million for both the
quarter ended June 30, 2017 and 2016.
Normalized funds from operations, or Normalized FFO, for the
quarter ended June 30, 2017 were $42.4 million, or $0.60 per
diluted share, compared to Normalized FFO for the quarter ended
June 30, 2016 of $43.4 million, or $0.61 per diluted
share.
Reconciliations of net income determined in accordance with GAAP
to funds from operations, or FFO, and Normalized FFO for the
quarters ended June 30, 2017 and 2016 appear later in this
press release.
Results for the Six Months Ended June 30, 2017:
Net income determined in accordance with GAAP was $19.1 million,
or $0.27 per diluted share, for the six months ended June 30, 2017,
compared to net income of $34.2 million, or $0.48 per diluted
share, for the six months ended June 30, 2016. The weighted average
number of diluted common shares outstanding was 71.1 million for
the six months ended June 30, 2017, and 71.0 million for the six
months ended June 30, 2016.
Normalized FFO for the six months ended June 30, 2017 were $82.3
million, or $1.16 per diluted share, compared to Normalized FFO for
the six months ended June 30, 2016 of $87.7 million, or $1.23 per
diluted share.
Reconciliations of net income determined in accordance with GAAP
to FFO and Normalized FFO for the six months ended June 30, 2017
and 2016 appear later in this press release.
Leasing, Occupancy and Same Property Results:
During the quarter ended June 30, 2017, GOV entered into
aggregate new and renewal leases for 288,428 rentable square feet
at weighted (by rentable square feet) average rents that were 13.5%
above prior rents for the same space. The weighted average (by
rentable square feet) lease term for leases entered into during the
quarter ended June 30, 2017 was 7.2 years. Leasing concessions
and capital commitments for new and renewal leases entered into
during the quarter ended June 30, 2017 were $2.5 million, or
$1.19 per square foot, per weighted average lease year. Our leasing
during the quarter ended June 30, 2017 included approximately
236,000 square feet executed with government tenants for a weighted
average (by rentable square feet) of 8.1 years, rents that were an
average 15.0% higher than prior rents for the previous space and
leasing concessions and capital commitments of $0.85 per square
foot, per weighted average lease term.
As of June 30, 2017, 95.0% of GOV’s rentable square feet at
properties classified as continuing operations was leased. This
compares with 95.1% as of March 31, 2017 and 94.2% as of
June 30, 2016. Occupancy for properties classified as
continuing operations and owned continuously since April 1,
2016, or same properties, was 94.8% as of June 30, 2017, which
compares with 94.5% as of June 30, 2016. Same properties net
operating income, or NOI, increased 0.9% and same properties cash
basis NOI, or Cash Basis NOI, decreased 0.5% for the quarter ended
June 30, 2017 compared to the same period in 2016.
Reconciliations of net income determined in accordance with GAAP
to NOI and to Cash Basis NOI for the quarters ended June 30,
2017 and 2016 appear later in this press release.
Recent Acquisition Activities:
As previously announced, in June 2017, GOV entered a merger
agreement to acquire all of the outstanding common shares of First
Potomac Realty Trust (NYSE:FPO) for an aggregate transaction value
of approximately $1.4 billion, including $11.15 per FPO common
share in cash and the repayment or assumption of FPO debt. As part
of the FPO Transaction, GOV will acquire FPO's full property
portfolio, which includes 39 office and industrial properties (74
buildings) with 6,454,382 rentable square feet, including two joint
venture properties which are 50% and 51% owned by FPO. This
transaction is subject to the approval of at least a majority of
FPO's common shares and other customary conditions and is expected
to close prior to year end 2017.
Recent Disposition Activities:
As previously disclosed, in March 2016, GOV entered an agreement
to sell an office property (one building) located in Falls Church,
VA with 164,746 rentable square feet. GOV agreed to extend the
closing date for this sale and increased the sale price by
$225,000, which it received as a non-refundable deposit. The
contract sale price is now $13.5 million, excluding closing costs
and GOV expects this transaction to close in the third quarter of
2017.
Recent Financing Activities:
On July 5, 2017, GOV sold 25,000,000 of its common shares in an
underwritten public offering at a price to the public of $18.50 per
share. In connection with this offering, GOV granted the
underwriters a 30 day option to purchase up to an additional
3,750,000 GOV common shares at a price of $18.50 per share. On July
28, 2017, the underwriters partially exercised this purchase option
for 2,907,029 GOV common shares. The aggregate net proceeds from
these sales will be approximately $493.8 million, after payment of
the underwriters' discount and other offering expenses. GOV used
part of the proceeds from these sales to repay amounts outstanding
under its revolving credit facility and GOV expects to use the
remaining proceeds to finance, in part, the FPO transaction. In the
event the FPO transaction is not consummated, GOV expects to use
the remaining proceeds from these sales for general business
purposes.
Also, in July 2017, GOV issued $300.0 million of 4.000% senior
unsecured notes due 2022 in an underwritten public offering. The
net proceeds from this offering of approximately $295.4 million,
after payment of the underwriters' discount and other offering
expenses, are expected to be used to finance, in part, the FPO
transaction. In the event the FPO transaction is not consummated on
or prior to December 31, 2017, or the related merger agreement is
terminated on or at any time prior to that date, GOV will be
required to redeem any notes issued pursuant to this offering then
outstanding at 101% of the principal amount of such notes plus
accrued and unpaid interest.
Conference Call:
On Tuesday, August 1, 2017, at 11:00 a.m. Eastern
Time, President and Chief Operating Officer, David Blackman, and
Chief Financial Officer and Treasurer, Mark Kleifges, will host a
conference call to discuss GOV’s second quarter 2017 results.
The conference call telephone number is (877) 328-1172.
Participants calling from outside the United States and Canada
should dial (412) 317-5418. No pass code is necessary to access the
call from either number. Participants should dial in about 15
minutes prior to the scheduled start of the call. A replay of the
conference call will be available through Tuesday, August 8, 2017.
To hear the replay, dial (412) 317-0088. The replay pass code is
10110426. A live audio webcast of the conference call will also be
available in a listen only mode on GOV’s website, at
www.govreit.com. Participants wanting to access the webcast should
visit GOV’s website about five minutes before the call. The
archived webcast will be available for replay on GOV’s website
following the call for about one week. The transcription,
recording and retransmission in any way of GOV’s second quarter
conference call are strictly prohibited without the prior written
consent of GOV.
Supplemental Data:
A copy of GOV’s Second Quarter 2017 Supplemental Operating and
Financial Data is available for download at GOV’s website,
www.govreit.com. GOV’s website is not incorporated as part of
this press release.
GOV is a real estate investment trust, or REIT, which primarily
owns properties located throughout the United States that are
majority leased to the U.S. Government and other government
tenants. GOV is managed by the operating subsidiary of The RMR
Group Inc. (Nasdaq:RMR), an alternative asset management company
that is headquartered in Newton, Massachusetts.
Please see the pages attached to this news release for a
more detailed statement of GOV’s operating results and financial
condition and for an explanation of GOV’s calculation of FFO,
Normalized FFO, NOI and Cash Basis NOI and a reconciliation of
those amounts to amounts determined according to GAAP.
WARNING CONCERNING
FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS STATEMENTS THAT CONSTITUTE FORWARD
LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. ALSO,
WHENEVER GOV USES WORDS SUCH AS “BELIEVE”, “EXPECT”, “ANTICIPATE”,
“INTEND”, “PLAN”, “ESTIMATE”, “WILL”, “MAY” AND NEGATIVES OR
DERIVATIVES OF THESE OR SIMILAR EXPRESSIONS, GOV IS MAKING FORWARD
LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON
GOV’S PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING
STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR.
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN
OR IMPLIED BY GOV’S FORWARD LOOKING STATEMENTS AS A RESULT OF
VARIOUS FACTORS. FOR EXAMPLE:
- MR. BLACKMAN'S STATEMENTS REGARDING
GOV'S QUARTERLY LEASING ACTIVITIES AND INCREASED RENTS MAY IMPLY
THAT SIMILAR RESULTS WILL BE ACHIEVED IN THE FUTURE. HOWEVER, GOV
CANNOT BE SURE THAT ITS RENTS WILL REMAIN AT CURRENT LEVELS OR
INCREASE IN THE FUTURE OR THAT GOV WILL REALIZE SIMILAR OR IMPROVED
LEASING RESULTS IN THE FUTURE.
- GOV HAS AGREED TO ACQUIRE FPO AND
EXPECTS THE FPO TRANSACTION TO CLOSE PRIOR TO DECEMBER 31, 2017.
THE CLOSING OF THE FPO TRANSACTION IS SUBJECT TO CUSTOMARY
CONDITIONS, INCLUDING APPROVAL BY THE HOLDERS OF AT LEAST A
MAJORITY OF FPO'S OUTSTANDING COMMON SHARES. GOV CANNOT BE SURE
THAT SUCH CONDITIONS WILL BE SATISFIED. ACCORDINGLY, THE FPO
TRANSACTION MAY NOT CLOSE PRIOR TO DECEMBER 31, 2017 OR AT ALL, OR
THE TERMS OF THE FPO TRANSACTION MAY CHANGE.
- THE APPROVAL OF THE FPO TRANSACTION BY
THE HOLDERS OF AT LEAST A MAJORITY OF FPO'S OUTSTANDING COMMON
SHARES MAY BE SOLICITED BY A PROXY STATEMENT WHICH MUST BE FILED
WITH THE SEC. THE PROCESS OF PREPARING THE PROXY STATEMENT IS TIME
CONSUMING. ACCORDINGLY, GOV CANNOT BE SURE THAT THE FPO TRANSACTION
WILL BE CONSUMMATED WITHIN A SPECIFIED TIME PERIOD OR AT ALL.
- GOV HAS ENTERED INTO AN AGREEMENT TO
SELL ONE PROPERTY AND EXPECTS THIS TRANSACTION TO CLOSE IN THE
THIRD QUARTER OF 2017. THIS TRANSACTION IS SUBJECT TO CONDITIONS.
THESE CONDITIONS MAY NOT BE MET AND THIS TRANSACTION MAY NOT OCCUR,
MAY NOT CLOSE IN THE THIRD QUARTER OF 2017 OR THE TERMS MAY
CHANGE.
- THE UNDERWRITERS HAVE PARTIALLY
EXERCISED THEIR PURCHASE OPTION FOR 2,907,029 GOV COMMON SHARES AND
THIS PURCHASE IS EXPECTED TO BE COMPLETED ON AUGUST 3, 2017.
HOWEVER, THIS PURCHASE IS SUBJECT TO CONDITIONS CUSTOMARY IN
TRANSACTIONS OF THIS TYPE AND THE PURCHASE MAY BE DELAYED OR MAY
NOT OCCUR.
- GOV CURRENTLY EXPECTS THE PROCEEDS FROM
ITS RECENT COMMON SHARE AND SENIOR NOTES OFFERINGS TO BE USED,
(DIRECTLY OR INDIRECTLY BY REPAYMENTS AND DRAWINGS UNDER ITS
REVOLVING CREDIT FACILITY) TO PARTIALLY FINANCE THE FPO
TRANSACTION. IN THE EVENT THE FPO TRANSACTION IS NOT CONSUMMATED,
GOV EXPECTS TO USE THE NET PROCEEDS FROM THE COMMON SHARE OFFERING
FOR GENERAL BUSINESS PURPOSES. IF THE FPO TRANSACTION IS NOT
CONSUMMATED ON OR PRIOR TO DECEMBER 31, 2017, OR THE RELATED MERGER
AGREEMENT IS TERMINATED ON OR AT ANY TIME PRIOR TO THAT DATE, GOV
WILL BE REQUIRED TO REDEEM THE NOTES ISSUED PURSUANT TO ITS RECENT
NOTES OFFERING AT 101% OF THE PRINCIPAL AMOUNT OUTSTANDING PLUS
ACCRUED AND UNPAID INTEREST.
THE INFORMATION CONTAINED IN GOV’S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER “RISK FACTORS” IN
GOV’S PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER
IMPORTANT FACTORS THAT COULD CAUSE GOV’S ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE STATED IN OR IMPLIED BY GOV’S FORWARD LOOKING
STATEMENTS. GOV’S FILINGS WITH THE SEC ARE AVAILABLE ON THE SEC’S
WEBSITE AT WWW.SEC.GOV.
YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING
STATEMENTS.
EXCEPT AS REQUIRED BY LAW, GOV DOES NOT INTEND TO UPDATE OR
CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
Government Properties Income
Trust
Condensed Consolidated Statements of
Income
(amounts in thousands, except per share
data)
(unaudited)
Three Months Ended June
30, Six Months Ended June 30, 2017 2016
2017 2016 Rental income $ 69,887 $ 64,061 $
139,183 $ 127,672 Expenses: Real estate taxes 7,941 7,566
16,118 15,219 Utility expenses 4,172 3,673 8,778 7,847 Other
operating expenses 15,187 13,266 29,179 26,177 Depreciation and
amortization 20,663 17,985 41,168 36,309 Acquisition related costs
— 64 — 216
General and administrative (1)
5,086 4,008 9,048 7,534 Total expenses 53,049 46,562 104,291 93,302
Operating income 16,838 17,499 34,892 34,370 Dividend income
303 363 607 363 Interest income 67 10 128 16 Interest expense
(including net amortization of debt premiums and discounts and debt
issuance costs of $808, $747, $1,615 and $1,219, respectively)
(13,963) (10,314) (27,544) (19,678) Gain on early extinguishment of
debt — — — 104 Gain on issuance of shares by Select Income REIT 21
16 21 16 Income from continuing operations before income taxes and
equity in earnings of investees 3,266 7,574 8,104 15,191 Income tax
expense (25) (35) (43) (50) Equity in earnings of investees 8,581
9,400 11,320 19,334 Income from continuing operations 11,822 16,939
19,381 34,475 Loss from discontinued operations (145) (126) (289)
(275) Net income $ 11,677 $ 16,813 $ 19,092 $ 34,200
Weighted average common shares outstanding (basic) 71,088 71,038
71,083 71,034 Weighted average common shares outstanding (diluted)
71,119 71,061 71,109 71,046 Per common share amounts (basic
and diluted): Income from continuing operations $ 0.17 $ 0.24 $
0.27 $ 0.49 Loss from discontinued operations $ —
$
— $ — $ — Net income $ 0.16 $ 0.24 $ 0.27 $ 0.48
(1) General and administrative expenses include estimated
business management incentive fee expense of $893 for both the
three and six months ended June 30, 2017.
Government Properties Income
Trust
Funds from Operations and Normalized
Funds from Operations (1)
(amounts in thousands, except per share
data)
(unaudited)
Three Months Ended
June 30, Six Months Ended June 30, 2017
2016 2017 2016 Calculation of Funds from
Operations (FFO) and Normalized FFO: Net income $ 11,677 $ 16,813 $
19,092 $ 34,200 Add: Depreciation and amortization 20,663 17,985
41,168 36,309 FFO attributable to SIR investment 17,149 17,887
29,553 36,345 Less: Equity in earnings of SIR (8,207) (9,383)
(10,818) (19,240) FFO 41,282 43,302 78,995 87,614 Add: Acquisition
related costs — 64 — 216 Estimated business management incentive
fees (2) 893 — 893 — Normalized FFO attributable to SIR investment
17,407 17,887 31,997 36,362 Less: FFO attributable to SIR
investment (17,149) (17,887) (29,553) (36,345) Gain on early
extinguishment of debt — — — (104) Gain on issuance of shares by
SIR (21) (16) (21) (16) Normalized FFO $ 42,412 $ 43,350 $ 82,311 $
87,727 Weighted average common shares outstanding (basic)
71,088 71,038 71,083 71,034 Weighted average common shares
outstanding (diluted) 71,119 71,061 71,109 71,046 Per common
share amounts: Net income (basic and diluted) $ 0.16 $ 0.24 $ 0.27
$ 0.48 FFO (basic and diluted) $ 0.58 $ 0.61 $ 1.11 $ 1.23
Normalized FFO (basic) $ 0.60 $ 0.61 $ 1.16 $ 1.24 Normalized FFO
(diluted) $ 0.60 $ 0.61 $ 1.16 $ 1.23 Distributions declared per
share $ 0.43 $ 0.43 $ 0.86 $ 0.86
(1) GOV calculates FFO and Normalized FFO as shown above. FFO is
calculated on the basis defined by The National Association of Real
Estate Investment Trusts, or NAREIT, which is net income,
calculated in accordance with GAAP, plus real estate depreciation
and amortization and the difference between FFO attributable to an
equity investment and equity in earnings of an equity investee but
excluding impairment charges on real estate assets, any gain or
loss on sale of properties, as well as certain other adjustments
currently not applicable to GOV. GOV's calculation of Normalized
FFO differs from NAREIT's definition of FFO because GOV includes
the difference between FFO and Normalized FFO attributable to GOV’s
equity investment in Select Income REIT, or SIR, GOV includes
business management incentive fees, if any, only in the fourth
quarter versus the quarter when they are recognized as expense in
accordance with GAAP due to their quarterly volatility not
necessarily being indicative of GOV’s core operating performance
and the uncertainty as to whether any such business management
incentive fees will be payable when all contingencies for
determining such fees are known at the end of the calendar year,
and GOV excludes acquisition related costs expensed under GAAP,
gains on issuance of shares by SIR and gains on early
extinguishment of debt. GOV considers FFO and Normalized FFO to be
appropriate supplemental measures of operating performance for a
REIT, along with net income and operating income. GOV believes that
FFO and Normalized FFO provide useful information to investors
because by excluding the effects of certain historical amounts,
such as depreciation expense, FFO and Normalized FFO may facilitate
a comparison of GOV's operating performance between periods and
with other REITs. FFO and Normalized FFO are among the factors
considered by GOV's Board of Trustees when determining the amount
of distributions to its shareholders. Other factors include, but
are not limited to, requirements to maintain GOV's qualification
for taxation as a REIT, limitations in GOV’s credit agreement and
public debt covenants, the availability to GOV of debt and equity
capital, GOV's expectation of its future capital requirements and
operating performance, GOV’s receipt of distributions from SIR and
GOV’s expected needs and availability of cash to pay its
obligations. FFO and Normalized FFO do not represent cash generated
by operating activities in accordance with GAAP and should not be
considered as alternatives to net income or operating income as an
indicator of GOV's operating performance or as a measure of GOV’s
liquidity. These measures should be considered in conjunction with
net income and operating income as presented in GOV's Condensed
Consolidated Statements of Income. Other REITs and real estate
companies may calculate FFO and Normalized FFO differently than GOV
does.
(2) Incentive fees under GOV’s business management agreement
with The RMR Group LLC are payable after the end of each calendar
year, are calculated based on common share total return, as
defined, and are included in general and administrative expenses in
GOV’s condensed consolidated statements of income. In calculating
net income in accordance with GAAP, GOV recognizes estimated
business management incentive fee expense, if any, in the first,
second and third quarters. Although GOV recognizes this expense, if
any, in the first, second and third quarters for purposes of
calculating net income, GOV does not include such expense in the
calculation of Normalized FFO until the fourth quarter, when the
amount of the business management incentive fee expense for the
calendar year, if any, is determined. Net income includes $893 of
estimated business management incentive fee expense in both the
three and six months ended June 30, 2017.
Government Properties Income
Trust
Calculation and Reconciliation of
Property Net Operating Income (NOI) and Cash Basis NOI
(1)
(amounts in thousands)
(unaudited)
Three Months Ended June
30, Six Months Ended June 30, 2017 2016
2017 2016 Calculation of NOI and Cash Basis
NOI (2): Rental income (3) $ 69,887 $ 64,061 $
139,183
$
127,672 Property operating expenses (27,300) (24,505) (54,075)
(49,243) Property net operating income (NOI) 42,587 39,556 85,108
78,429 Non-cash straight line rent adjustments included in rental
income (3) (1,104) (435) (2,404) (584) Lease value amortization
included in rental income (3) 617 425 1,244 732 Non-cash
amortization included in property operating expenses (4) (121)
(121) (242) (242) Cash Basis NOI $ 41,979 $ 39,425 $ 83,706 $
78,335
Reconciliation of Net Income to NOI and Cash Basis
NOI: Net income $
11,677
$ 16,813 $ 19,092 $ 34,200 Loss from discontinued operations 145
126 289 275 Income from continuing operations 11,822 16,939 19,381
34,475 Equity in earnings of investees (8,581) (9,400) (11,320)
(19,334) Income tax expense 25 35 43 50 Gain on issuance of shares
by SIR (21) (16) (21) (16) Gain on early extinguishment of debt — —
— (104) Interest expense 13,963 10,314 27,544 19,678 Interest
income (67) (10) (128) (16) Dividend income (303) (363) (607) (363)
Operating income 16,838 17,499 34,892 34,370 General and
administrative 5,086 4,008 9,048 7,534 Acquisition related costs —
64 — 216 Depreciation and amortization 20,663 17,985 41,168 36,309
NOI 42,587 39,556 85,108 78,429 Non-cash amortization included in
property operating expenses (4) (121) (121) (242) (242) Lease value
amortization included in rental income (3) 617 425 1,244 732
Non-cash straight line rent adjustments included in rental income
(3) (1,104) (435) (2,404) (584) Cash Basis NOI $ 41,979 $ 39,425 $
83,706
$
78,335
Reconciliation of NOI to Same Property
NOI (5)(6): Rental income $ 69,887 $ 64,061 $
139,183 $ 127,672 Property operating expenses (27,300) (24,505)
(54,075) (49,243) Property NOI 42,587 39,556 85,108 78,429 Add
(less): NOI of properties not included in same property results
(2,635) 54 (8,693) (2,182) Same property NOI $ 39,952 $ 39,610 $
76,415 $ 76,247
Calculation of Same Property Cash Basis
NOI (5)(6): Same property NOI $ 39,952 $ 39,610 $
76,415 $ 76,247 Add: Lease value amortization included in rental
income (3) 391 426 849 732
Less: Non-cash straight line rent
adjustments included in rental income (3)
(933) (436) (1,844) (469) Non-cash amortization included in
property operating expenses (4) (121) (121) (242) (242) Same
property Cash Basis NOI $ 39,289 $ 39,479 $ 75,178 $ 76,268
(1) GOV calculates NOI and Cash Basis NOI as shown above. The
calculations of NOI and Cash Basis NOI exclude certain components
of net income in order to provide results that are more closely
related to GOV’s property level results of operations. GOV defines
NOI as income from its rental of real estate less its property
operating expenses. NOI excludes amortization of capitalized tenant
improvement costs and leasing commissions because GOV records those
amounts as depreciation and amortization. GOV defines Cash Basis
NOI as NOI excluding non-cash straight line rent adjustments, lease
value amortization and non-cash amortization included in other
operating expenses. GOV considers NOI and Cash Basis NOI to be
appropriate supplemental measures to net income because they may
help both investors and management to understand the operations of
GOV’s properties. GOV uses NOI and Cash Basis NOI to evaluate
individual and company wide property level performance, and GOV
believes that NOI and Cash Basis NOI provide useful information to
investors regarding GOV’s results of operations because they
reflect only those income and expense items that are generated and
incurred at the property level and may facilitate comparisons of
GOV’s operating performance between periods and with other REITs.
NOI and Cash Basis NOI do not represent cash generated by operating
activities in accordance with GAAP and should not be considered as
alternatives to net income or operating income as an indicator of
our operating performance or as a measure of GOV’s liquidity. These
measures should be considered in conjunction with net income and
operating income as presented in GOV’s Condensed Consolidated
Statements of Income. Other REITs and real estate companies may
calculate NOI and Cash Basis NOI differently than GOV does.
(2) Excludes one property (one building) classified as
discontinued operations.
(3) GOV reports rental income on a straight line basis over the
terms of the respective leases; as a result, rental income includes
non-cash straight line rent adjustments. Rental income also
includes expense reimbursements, tax escalations, parking revenues,
service income and other fixed and variable charges paid to GOV by
its tenants, as well as the net effect of non-cash amortization of
intangible lease assets and liabilities.
(4) GOV recorded a liability for the amount by which the
estimated fair value for accounting purposes exceeded the price GOV
paid for its investment in RMR common stock in June 2015. A portion
of this liability is being amortized on a straight line basis
through December 31, 2035 as a reduction to property management
fees, which are included in property operating expenses.
(5) For the three months ended June 30, 2017 and 2016, same
property NOI and same property cash basis NOI are based on
properties GOV owned as of June 30, 2017 and which it owned
continuously since April 1, 2016, excluding one property (one
building) classified as discontinued operations.
(6) For the six months ended June 30, 2017 and 2016, same
property NOI and same property cash basis NOI are based on
properties GOV owned as of June 30, 2017 and which it owned
continuously since January 1, 2016, excluding one property
(one building) classified as discontinued operations.
Government Properties Income
Trust
Condensed Consolidated Balance
Sheets
(amounts in thousands, except share
data)
(unaudited)
June 30,2017
December 31,2016
ASSETS Real estate properties: Land $ 269,410 $
267,855 Buildings and improvements 1,652,535 1,620,905 Total real
estate properties, gross 1,921,945 1,888,760 Accumulated
depreciation (320,005) (296,804)
Total real estate properties, net
1,601,940 1,591,956 Equity investment in Select Income REIT 477,233
487,708 Assets of discontinued operations 12,534 12,541 Acquired
real estate leases, net 108,927 124,848 Cash and cash equivalents
12,907 29,941 Restricted cash 344 530 Rents receivable, net 47,717
48,458 Deferred leasing costs, net 21,251 21,079 Other assets, net
82,256 68,005 Total assets $ 2,365,109 $ 2,385,066
LIABILITIES AND SHAREHOLDERS’ EQUITY Unsecured revolving
credit facility $ 155,000 $ 160,000 Unsecured term loans, net
547,511 547,171 Senior unsecured notes, net 647,584 646,844
Mortgage notes payable, net 26,991 27,837 Liabilities of
discontinued operations 81 45 Accounts payable and other
liabilities 64,479 54,019 Due to related persons 5,361 3,520
Assumed real estate lease obligations, net 9,423 10,626 Total
liabilities 1,456,430 1,450,062 Commitments and
contingencies Shareholders’ equity: Common shares of
beneficial interest, $.01 par value: 150,000,000 and 100,000,000
shares authorized, respectively, 71,195,178 and 71,177,906 shares
issued and outstanding, respectively 712 712 Additional paid in
capital 1,473,936 1,473,533 Cumulative net income 115,420 96,329
Cumulative other comprehensive income 42,350 26,957 Cumulative
common distributions (723,739) (662,527) Total shareholders’ equity
908,679 935,004 Total liabilities and shareholders’ equity $
2,365,109 $ 2,385,066
A Maryland Real Estate Investment Trust with
transferable shares of beneficial interest listed on the
Nasdaq.
No shareholder, Trustee or officer is
personally liable for any act or obligation of the Trust.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170801005677/en/
Government Properties Income TrustChristopher Ranjitkar,
617-219-1410Director, Investor Relations
Government Properties Income (NASDAQ:GOV)
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