Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Business
Organization
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. As used herein, “TIER REIT,” the “Company,” “we,” “us,” or “our” refers to TIER REIT, Inc. and its subsidiaries unless the context otherwise requires.
TIER REIT’s vision is to be the premier owner and operator of best-in-class office properties in TIER
1
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. TIER REIT was incorporated in June 2002 as a Maryland corporation and has elected to be treated, and currently qualifies, as a real estate investment trust, or REIT, for federal income tax purposes. As of
March 31, 2017
, we owned interests in
25
operating office properties,
one
non-operating property, and
two
development properties, located in
10
markets throughout the United States.
Substantially all of our business is conducted through Tier Operating Partnership LP (“Tier OP”), a Texas limited partnership. Our wholly-owned subsidiary, Tier GP, Inc., a Delaware corporation, is the sole general partner of Tier OP. Our direct and indirect wholly-owned subsidiaries, Tier Business Trust, a Maryland business trust, and Tier Partners, LLC, a Delaware limited liability company, are limited partners that together with Tier GP, Inc. own all of Tier OP.
2. Basis of Presentation and Significant Accounting Policies
Interim Unaudited Financial Information
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the Securities and Exchange Commission (“SEC”) on February 13, 2017. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted from this report on Form 10-Q pursuant to the rules and regulations of the SEC.
The results for the interim periods shown in this report are not necessarily indicative of future financial results. The accompanying condensed consolidated balance sheets as of
March 31, 2017
, and
December 31, 2016
, and condensed consolidated statements of operations and comprehensive income (loss), changes in equity, and cash flows for the periods ended
March 31, 2017
and
2016
, have not been audited by our independent registered public accounting firm. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary to present fairly our financial position as of
March 31, 2017
, and
December 31, 2016
, and our results of operations and our cash flows for the periods ended
March 31, 2017
and
2016
. These adjustments are of a normal recurring nature.
We have evaluated subsequent events for recognition or disclosure in our condensed consolidated financial statements.
Reclassification
Certain amounts previously reflected in the prior year condensed consolidated statement of cash flows have been reclassified to conform to our 2017 presentation. The
March 31, 2016
, condensed consolidated statement of cash flows reflects within the operating section the single line “change in accounts payable and accrued liabilities” that was previously presented on
two
lines “change in accounts payable” (approximately
$3,000
) and “change in accrued liabilities” (approximately
$16.5 million
). These reclassifications had no effect on the previously reported total liabilities or cash used in operating activities.
Summary of Significant Accounting Policies
Described below are certain of our significant accounting policies. The disclosures regarding several of the policies have been condensed or omitted in accordance with interim reporting regulations specified by Form 10-Q pursuant to the rules and
regulations of the SEC. Please see our consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for a complete listing of our significant accounting policies.
Real Estate
As of
March 31, 2017
, and
December 31, 2016
, the cost basis and accumulated depreciation and amortization related to our consolidated depreciable real estate properties and related lease intangibles were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Intangibles
|
|
|
|
|
Assets
|
|
Liabilities
|
|
|
|
|
|
|
Acquired Above-Market Leases
|
|
Acquired Below-Market Leases
|
|
|
Buildings and Improvements
|
|
Other Lease Intangibles
|
|
|
as of March 31, 2017
|
|
|
|
|
Cost
|
|
$
|
1,570,495
|
|
|
$
|
137,283
|
|
|
$
|
5,004
|
|
|
$
|
(47,595
|
)
|
Less: accumulated depreciation and amortization
|
|
(493,794
|
)
|
|
(66,321
|
)
|
|
(4,226
|
)
|
|
32,343
|
|
Net
|
|
$
|
1,076,701
|
|
|
$
|
70,962
|
|
|
$
|
778
|
|
|
$
|
(15,252
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Intangibles
|
|
|
|
|
Assets
|
|
Liabilities
|
|
|
|
|
|
|
Acquired Above-Market Leases
|
|
Acquired Below-Market Leases
|
|
|
Buildings and Improvements
|
|
Other Lease Intangibles
|
|
|
as of December 31, 2016
|
|
|
|
|
Cost
|
|
$
|
1,579,157
|
|
|
$
|
131,618
|
|
|
$
|
5,005
|
|
|
$
|
(42,537
|
)
|
Less: accumulated depreciation and amortization
|
|
(535,516
|
)
|
|
(70,672
|
)
|
|
(4,107
|
)
|
|
35,651
|
|
Net
|
|
$
|
1,043,641
|
|
|
$
|
60,946
|
|
|
$
|
898
|
|
|
$
|
(6,886
|
)
|
We amortize the value of in-place leases, in-place tenant improvements, and in-place leasing commissions to expense over the initial term of the respective leases. The tenant relationship values are amortized to expense over the tenants’ respective initial lease terms and any anticipated renewal periods, but in no event does the amortization period for intangible assets or liabilities exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the acquired lease intangibles related to that tenant would be charged to expense. The estimated remaining average useful lives for acquired lease intangibles range from an ending date of April 2017 to an ending date of February 2026.
Anticipated amortization associated with acquired lease intangibles for each of the following five years is as follows (in thousands):
|
|
|
|
|
April 2017 - December 2017
|
$
|
2,118
|
|
2018
|
$
|
2,196
|
|
2019
|
$
|
2,213
|
|
2020
|
$
|
2,320
|
|
2021
|
$
|
1,984
|
|
Impairment of Real Estate-Related Assets
For our consolidated real estate assets, we monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable. When such events or changes in circumstances are present, we assess potential impairment by comparing estimated future undiscounted cash flows expected to be generated over the life of the asset including its eventual disposition, to the carrying amount of the asset. In the event that the carrying amount exceeds the estimated future undiscounted cash flows and also exceeds the fair value of the asset, we recognize an impairment loss to adjust the carrying amount of the asset to its estimated fair value. Our process to estimate the fair value of an asset involves using bona fide purchase offers or the expected sales price of an executed sales agreement, which would be considered Level 1 or Level 2 assumptions within the fair value hierarchy. To the extent that this type of third-party information is unavailable, we estimate projected cash flows and a risk-adjusted rate of return that we believe would be used by a third party market participant in estimating the fair value of an asset. This is considered a Level 3 assumption within the fair value hierarchy. These projected cash flows are prepared internally by the Company’s asset management professionals and are updated quarterly to reflect in-place and projected leasing activity, market revenue and expense growth rates, market capitalization rates, discount rates, and changes in economic and other relevant conditions. The Company’s Chief Financial Officer, Chief Accounting Officer, and Managing Director - Asset
Management review these projected cash flows to assure that the valuation is prepared using reasonable inputs and assumptions which are consistent with market data or with assumptions that would be used by a third party market participant and assume the highest and best use of the real estate investment. We had
no
impairment charges for the
three months ended March 31, 2017
. For the three months ended March 31,
2016
, we recorded non-cash impairment charges totaling approximately
$4.8 million
related to the impairment of consolidated real estate assets, primarily related to assets assessed for impairment due to a change in management’s estimate of the intended hold periods.
For our unconsolidated real estate assets, at each reporting date we compare the estimated fair value of our investment to the carrying amount. An impairment charge is recorded to the extent the fair value of our investment is less than the carrying amount and the decline in value is determined to be other than a temporary decline. We had
no
impairment charges related to our investments in unconsolidated entities for the
three months ended March 31, 2017
and
2016
.
In evaluating our investments for impairment, management makes several estimates and assumptions, including, but not limited to, the projected date of disposition (the intended hold period) and sales price for each property, the estimated future cash flows of each property during our estimated ownership period, and for unconsolidated investments, the estimated future distributions from the investment. A change in these estimates and assumptions could result in understating or overstating the carrying amount of our investments which could be material to our financial statements.
We undergo continuous evaluations of property level performance, credit market conditions, and financing options. If our assumptions regarding the cash flows expected to result from the use and eventual disposition of our properties decrease or our expected hold periods decrease, we may incur future impairment charges on our real estate-related assets. In addition, we may incur impairment charges on assets classified as held for sale in the future if the carrying amount of the asset upon classification as held for sale exceeds the estimated fair value, less costs to sell.
Cash, Cash Equivalents and Restricted Cash
We consider investments in highly-liquid money market funds or investments with original maturities of three months or less to be cash equivalents. Restricted cash includes restricted money market accounts, as required by our lenders or by leases, for anticipated tenant improvements, property taxes and insurance, and certain tenant security deposits for our consolidated properties.
We early adopted new Financial Accounting Standards Board (“FASB”) guidance on December 31, 2016, which changes the presentation of our statements of cash flows and related disclosures for all periods presented and accordingly, the following is a summary of our cash, cash equivalents, and restricted cash total as presented in our statements of cash flows for the
three months ended March 31, 2017
and
2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
March 31,
2017
|
|
March 31, 2016
|
Cash and cash equivalents
|
$
|
55,215
|
|
|
$
|
5,532
|
|
Restricted cash
|
7,685
|
|
|
12,756
|
|
Total cash, cash equivalents, and restricted cash
|
$
|
62,900
|
|
|
$
|
18,288
|
|
Accounts Receivable, net
The following is a summary of our accounts receivable as of
March 31, 2017
, and
December 31, 2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
March 31,
2017
|
|
December 31,
2016
|
Straight-line rental revenue receivable
|
$
|
57,871
|
|
|
$
|
68,287
|
|
Tenant receivables
|
3,681
|
|
|
5,047
|
|
Non-tenant receivables
|
935
|
|
|
691
|
|
Allowance for doubtful accounts
|
(1,491
|
)
|
|
(2,566
|
)
|
Total
|
$
|
60,996
|
|
|
$
|
71,459
|
|
Our allowance for doubtful accounts is an estimate based on management’s evaluation of accounts where it has determined that a tenant may not meet its financial obligations. In these situations, management uses its judgment, based on the facts and
circumstances, and records a reserve for that tenant against amounts due to reduce the receivable to an amount it believes is collectible. These reserves are reevaluated and adjusted as additional information becomes available.
Investments in Unconsolidated Entities
Investments in unconsolidated entities consist of our noncontrolling interests in properties. We account for these investments using the equity method of accounting in accordance with GAAP. We use the equity method of accounting when we have significant influence, but not control, of the operating and financial decisions of these investments and thereby have some responsibility to create a return on our investment. The equity method of accounting requires these investments to be initially recorded at cost and subsequently increased (decreased) for our share of net income (loss), including eliminations for our share of inter-company transactions, and increased (decreased) for contributions (distributions). To the extent that we contribute assets to an unconsolidated entity, our investment in the unconsolidated entity is recorded at our cost basis in the assets that were contributed to the entity. To the extent that our cost basis is different than the basis reflected at the entity level, the basis difference is generally amortized over the life of the related asset and included in our share of equity in operations of investments.
For unconsolidated investments that have properties under development, we capitalize interest expense to our investment basis using our weighted average interest rate of consolidated debt. Capitalization begins when we are engaged in the activities necessary to get the property ready for its intended use. We cease capitalization when the development is completed and ready for its intended use or if the intended use changes such that capitalization is no longer appropriate. For the
three months ended March 31, 2017
and 2016, we capitalized interest expense of approximately
$0.4 million
and
$0.1 million
, respectively, for unconsolidated entities with properties under development, which are included in our investments from unconsolidated entities on our condensed consolidated balance sheets.
Other Intangible Assets, net
Other intangible assets consist of below-market ground leases on properties where a third party owns and has leased the underlying land to us. As of
March 31, 2017
, and
December 31, 2016
, the cost basis and accumulated amortization related to our consolidated other intangible assets were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31,
2017
|
|
December 31,
2016
|
Cost
|
$
|
2,978
|
|
|
$
|
11,277
|
|
Less: accumulated amortization
|
(1,102
|
)
|
|
(1,490
|
)
|
Net
|
$
|
1,876
|
|
|
$
|
9,787
|
|
Revenue Recognition
We recognize rental income generated from all leases of consolidated real estate assets on a straight-line basis over the terms of the respective leases, including the effect of rent holidays, if any. The total net increase to rental revenue due to straight-line rent adjustments for the
three months ended March 31, 2017
and
2016
, was approximately
$1.8 million
and
$2.5 million
, respectively. When a tenant exceeds its tenant improvement allowance, this amount is reimbursed to us and recorded as a deferred rent liability, which is recognized as rental revenue over the life of the lease. The total net increase to rental revenue due to this deferred rent for the
three months ended March 31, 2017
and
2016
, was approximately
$0.6 million
and
$1.0 million
, respectively. Our rental revenue also includes amortization of acquired above- and below-market leases. The total net increase to rental revenue due to the amortization of acquired above- and below-market leases for the
three months ended March 31, 2017
and
2016
, was approximately
$0.9 million
and
$1.3 million
, respectively. Revenues relating to lease termination fees are recognized on a straight-line basis amortized from the time that a tenant’s right to occupy the leased space is modified through the end of the revised lease term. For the
three months ended March 31, 2017
and
2016
, we recognized lease termination fees of approximately
$0.1 million
and
$0.6 million
, respectively.
3. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In March 2016, the FASB issued guidance which affects accounting for certain aspects of share-based payments for employees. The guidance requires income statement recognition of income tax effects of the awards when the awards vest or are settled. The guidance also changes the employer’s accounting for forfeitures as well as for an employee’s use of shares to satisfy their income tax withholding obligations. We have elected to recognize forfeitures as they occur. This guidance is effective for
fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption permitted. We adopted this guidance using the modified retrospective approach on January 1, 2017, and recorded a cumulative-effect adjustment of approximately
$0.3 million
to retained earnings to recognize forfeitures as they occur.
In March 2016, the FASB issued amended guidance which simplifies the accounting for equity method investments by removing the requirement that an entity retroactively adopt the equity method of accounting if an investment qualifies for use of the equity method as a result of an increase in the level of ownership or degree of influence. The amendment requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2016, with early adoption permitted. The adoption of this guidance on January 1, 2017, did not have a material impact on our financial statements or disclosures.
New Accounting Pronouncements to be Adopted
In May 2014, the FASB issued guidance to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Lease contracts will be excluded from this revenue recognition criteria; however, the sale of real estate will be required to follow the new model. Expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to this guidance. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2017, with early adoption permitted only as of annual reporting periods beginning after December 15, 2016. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. We are currently evaluating the impact the guidance will have on our financial statements when adopted, but we believe the impact could primarily relate to sales of properties, timing of revenue recognition, and the ability to capitalize certain internal costs.
In February 2016, the FASB issued updated guidance which sets out revised principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The guidance requires lessees to recognize assets and liabilities for operating leases with lease terms greater than twelve months on the balance sheet. The guidance further modifies lessors’ classification criteria for leases and the accounting for sales-type and direct financing leases. New disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases are also required. The guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted and is required to be adopted using the modified retrospective approach. Upon adoption, the Company will recognize a lease liability and a right-of-use asset for operating leases where it is the lessee, such as ground leases and office and equipment leases. We are currently evaluating the impact this guidance will have on our financial statements when adopted.
In June 2016, the FASB issued amended guidance which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different from the current guidance as this will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. Financial assets that are measured at amortized cost will be required to be presented at the net amount expected to be collected with an allowance for credit losses deducted from the amortized cost basis. Generally, the pronouncement requires a modified retrospective method of adoption. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact this guidance will have on our financial statements when adopted.
In August 2016, the FASB issued amended guidance on classification of certain cash receipts and payments in the statement of cash flows. Of the eight types of cash flows discussed in the new standard, we believe the classification of debt prepayment and debt extinguishment costs as financing outflows will impact the Company as these items are currently reflected as operating outflows. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2017, with early adoption permitted and is required to be applied retrospectively to all periods presented. We will continue to evaluate the impact this guidance will have on our financial statements when adopted.
In February 2017, the FASB issued updated guidance that clarifies the scope of asset derecognition guidance, adds guidance for partial sales of nonfinancial assets and clarifies recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2017, with early adoption permitted only as of annual reporting periods beginning after December 15, 2016. We are currently evaluating the impact this guidance will have on our financial statements when adopted.
4. Real Estate Activities
Sales of Real Estate
On January 18, 2017, we sold our Buena Vista Plaza property for a contract sales price of
$52.5 million
, resulting in proceeds from sale of approximately
$47.5 million
. Buena Vista Plaza is located in Burbank, California, and contains
115,000
rentable square feet.
On March 1, 2017, we sold our Three Parkway property for a contract sales price of
$95.0 million
, resulting in proceeds from sale of approximately
$91.9 million
. Three Parkway is located in Philadelphia, Pennsylvania, and contains
561,000
rentable square feet.
On March 13, 2017, we sold our Eisenhower I property for a contract sales price of
$31.4 million
, resulting in proceeds from sale of approximately
$30.8 million
. Eisenhower I is located in Tampa, Florida, and contains
130,000
rentable square feet. We may be entitled to receive an additional
$3.0 million
subject to certain future events.
On March 31, 2017, we sold a
50%
interest in our
95%
interest in the Third + Shoal development property for a contract sales price of approximately
$15.0 million
, resulting in proceeds from sale of approximately
$14.6 million
. Third + Shoal is located in Austin, Texas, and is expected to contain approximately
345,000
rentable square feet when completed.
Properties that have been sold contributed income of approximately
$0.4 million
and loss of approximately
$5.2 million
to our net income (loss) for the
three months ended March 31, 2017
and
2016
, respectively. These amounts exclude any gains on the sales of these properties.
Acquisitions of Real Estate
On January 4, 2017, we acquired the remaining
50.16%
interest in Domain Junction LLC, the entity that owns Domain 2 and Domain 7, increasing our ownership interest in these properties to
100%
, for a combined contract purchase price of
$51.2 million
plus assumed debt of approximately
$40.1 million
. As a result of obtaining a controlling interest in the entity, we recognized a gain of approximately
$14.2 million
from the remeasurement of our previously held equity interest at fair value. Assets acquired and liabilities assumed were recorded at their relative fair values upon consolidation of the properties, and include lease intangible assets of approximately
$16.6 million
and acquired below-market leases of approximately
$9.4 million
. The estimated remaining average useful lives for these acquired lease intangibles range from an ending date of December 2022 to an ending date of February 2026.
Real Estate Held for Sale
As of
March 31, 2017
, and December 31, 2016,
four
of our properties (One Oxmoor Place, Steeplechase Place, Lakeview, and Hunnington) were held for sale. The major classes of assets and obligations associated with real estate held for sale as of
March 31, 2017
, and December 31, 2016, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
March 31,
2017
|
|
December 31, 2016
|
Land
|
$
|
5,481
|
|
|
$
|
5,481
|
|
Buildings and improvements, net of approximately $11.8 million in accumulated depreciation
|
24,848
|
|
|
24,837
|
|
Accounts receivable and other assets
|
657
|
|
|
665
|
|
Lease intangibles, net of approximately $2.1 million in accumulated amortization
|
1,389
|
|
|
1,363
|
|
Assets associated with real estate held for sale
|
$
|
32,375
|
|
|
$
|
32,346
|
|
|
|
|
|
Acquired below-market leases, net of approximately $0.2 million in accumulated amortization
|
$
|
39
|
|
|
$
|
44
|
|
Other liabilities
|
931
|
|
|
899
|
|
Obligations associated with real estate held for sale
|
$
|
970
|
|
|
$
|
943
|
|
5.
Real Estate Under Development
When we are engaged in activities to get a potential development ready for its intended use, we capitalize interest, property taxes, insurance, ground lease payments, and direct construction costs. For the
three months ended March 31, 2017
, we capitalized a total of approximately
$2.2 million
, including approximately
$0.3 million
in interest. For the
three months ended March 31,
2016
, we capitalized a total of approximately
$1.4 million
, which included
no
capitalized interest. These costs are classified as real estate under development on our condensed consolidated balance sheets until such time that the development is complete.
6.
Investments in Unconsolidated Entities
We participate in real estate ventures for the purpose of acquiring and developing office properties in which we may or may not have a controlling financial interest. Our investments in unconsolidated entities consist of our noncontrolling interests in certain properties that are accounted for using the equity method of accounting.
The following is a summary of our investments in unconsolidated entities as of
March 31, 2017
, and
December 31, 2016
(dollar amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership Interest
|
|
Unconsolidated
Investment Balance
|
Entity Name
|
|
Property
|
|
March 31,
2017
|
|
December 31, 2016
|
|
March 31,
2017
|
|
December 31,
2016
|
Domain Junction LLC (1)
|
|
Domain 2 & Domain 7
|
|
100.00
|
%
|
|
49.84
|
%
|
|
$
|
—
|
|
|
$
|
9,770
|
|
Domain Junction 8 Venture LLC (2)(3)
|
|
Domain 8
|
|
50.00
|
%
|
|
50.00
|
%
|
|
18,211
|
|
|
18,093
|
|
TR 208 Nueces Member, LLC (4)
|
|
Third + Shoal
|
|
47.50
|
%
|
|
95.00
|
%
|
|
18,004
|
|
|
—
|
|
COLDC 54 Holdings, LLC (3)(5)
|
|
Colorado Building
|
|
10.00
|
%
|
|
10.00
|
%
|
|
531
|
|
|
711
|
|
GSTDC 72 Holdings, LLC (3)(5)
|
|
1325 G Street
|
|
10.00
|
%
|
|
10.00
|
%
|
|
3,675
|
|
|
3,719
|
|
1301 Chestnut Associates, L.P. (6)
|
|
Wanamaker Building
|
|
1.10
|
%
|
|
60.00
|
%
|
|
—
|
|
|
44,520
|
|
Total (7)
|
|
|
|
`
|
|
|
|
|
|
$
|
40,421
|
|
|
$
|
76,813
|
|
_________________
|
|
(1)
|
On January 4, 2017, we acquired our unrelated third party’s
50.16%
interest in Domain Junction LLC increasing our ownership interest to
100%
, and these properties were consolidated.
|
|
|
(2)
|
All major decisions for this entity are made by the other owner.
|
|
|
(3)
|
We have evaluated our investments in unconsolidated entities in order to determine if they are VIEs. Based on our assessment, we have identified each of these entities as a VIE, but we are not the primary beneficiary, as we do not have the power to direct the activities that most significantly impact the economic performance of these entities. For these VIEs in which we are not deemed to be the primary beneficiary, we continue to account for them using the equity method. The maximum amount of exposure to loss with respect to these VIEs is the carrying amount of our investment. At
March 31, 2017
, these VIEs have total assets of approximately
$274.4 million
and total liabilities of approximately
$184.4 million
.
|
|
|
(4)
|
On March 31, 2017, we sold a
50%
interest in the entity that owns a
95%
interest in Third + Shoal, resulting in this property being deconsolidated as control of this property is now shared.
|
|
|
(5)
|
On April 27, 2017, the Colorado Building and 1325 G Street were sold (at 100%) for a combined contract sales price of
$259.0 million
.
|
|
|
(6)
|
On January 17, 2017, we sold substantially all of our noncontrolling investment in 1301 Chestnut Associates, L.P. At
March 31, 2017
, our remaining
1.1%
interest is accounted for using the cost method and is included in “prepaid expenses and other assets” on our condensed consolidated balance sheet.
|
|
|
(7)
|
Our investment in unconsolidated entities includes basis adjustments that total approximately
$6.0 million
. This amount represents the aggregate difference between our historical cost basis and our equity basis reflected at the joint venture level, which is typically amortized over the life of the related assets and liabilities. Basis differences occur from impairment of investments and upon the transfer of assets that were previously owned by us into a joint venture. In addition, certain acquisition, transaction, and other costs may not be reflected in the net assets at the joint venture level.
|
Our equity in operations of investments represents our proportionate share of the combined earnings and losses of our investments for the period of our ownership. For the
three months ended March 31, 2017
and 2016, we recorded a loss of approximately
$0.3 million
and income of approximately
$0.4 million
, respectively, for our share of equity in operations from our investments in unconsolidated entities.
7.
Notes Payable
Our notes payable, net were approximately
$773.9 million
as of
March 31, 2017
. Approximately
$206.4 million
of these notes payable, net were secured by real estate assets with a carrying value of approximately
$288.4 million
as of
March 31, 2017
. As of
March 31, 2017
, all of our outstanding debt was fixed rate debt (or effectively fixed rate debt, through the use of interest rate swaps), with the exception of approximately
$130.0 million
. As of
March 31, 2017
, the stated annual interest rates on our outstanding debt, ranged from approximately
2.48%
to
6.09%
. As of
March 31, 2017
, the effective weighted average interest rate for our consolidated debt is approximately
3.71%
. For our loan that is in default and detailed below, we incur a default interest rate that is 500 basis points higher than the stated interest rate, which resulted in an overall effective weighted average interest rate of approximately
4.02%
as of
March 31, 2017
, for our consolidated debt and an increase in interest expense for the three months ended
March 31, 2017
, of approximately
$0.6 million
. We anticipate, although we can provide no assurance, that when the property to which such loan relates is sold, or if ownership of this property is conveyed to the lender, the default interest will be forgiven.
Our loan agreements generally require us to comply with certain reporting and financial covenants. As of
March 31, 2017
, we were in default on a non-recourse property loan with an outstanding balance of approximately
$48.2 million
secured by our Fifth Third Center property located in Columbus, Ohio, which has a carrying value of approximately
$32.7 million
as of
March 31, 2017
. A receiver was appointed for this property in March 2016. The loan had an original maturity date of July 2016, and we are currently working with the lender to dispose of this property on its behalf. As of
March 31, 2017
, other than the default discussed above, we believe we were in compliance with the covenants under each of our loan agreements, including our credit facility.
Excluding debt already matured as detailed above, our outstanding consolidated debt has maturity dates that range from April 2019 to June 2022. The following table provides information regarding the timing of principal payments of our notes payable, net as of
March 31, 2017
(in thousands):
|
|
|
|
|
Principal payments due in:
|
|
April 2017 - December 2017
|
$
|
49,224
|
|
2018
|
1,501
|
|
2019
|
381,589
|
|
2020
|
1,670
|
|
2021
|
72,416
|
|
Thereafter
|
275,000
|
|
Less: unamortized debt issuance costs (1)
|
(7,495
|
)
|
Notes payable, net
|
$
|
773,905
|
|
________________
|
|
(1)
|
Excludes approximately
$2.4 million
of unamortized debt issuance costs associated with the revolving line of credit because these costs are presented as an asset on our condensed consolidated balance sheets.
|
Credit Facility
We have a credit agreement through our operating partnership, Tier OP, that provides for total unsecured borrowings of up to
$860.0 million
, subject to our compliance with certain financial covenants. The facility consists of a
$300.0 million
term loan, a
$275.0 million
term loan, and a
$285.0 million
revolving line of credit. The first term loan matures on December 18, 2019. The second term loan matures on June 30, 2022. The revolving line of credit matures on December 18, 2018, and can be extended
one
additional year subject to certain conditions and payment of an extension fee. The annual interest rate on the credit facility is equal to either, at our election, (1) the “base rate” (calculated as the greatest of (i) the agent’s “prime rate”; (ii)
0.5%
above the Federal Funds Effective Rate; or (iii) the LIBOR Market Index Rate plus
1.0%
) plus the applicable margin or (2) LIBOR for an interest period of
one
,
three
, or
six
months plus the applicable margin. The applicable margin will be determined based on the ratio of total indebtedness to total asset value and ranges from 35 basis points to 250 basis points. We have entered into interest rate swap agreements to hedge interest rates on
$525.0 million
of these borrowings to manage our exposure to future interest rate movements. All amounts owed are guaranteed by us and certain subsidiaries of Tier OP. As of
March 31, 2017
, we had approximately
$575.0 million
in borrowings outstanding under the term loans, and
no
borrowings outstanding under the revolving line of credit with the ability, subject to our most restrictive financial covenants, to borrow an additional approximately
$177.1 million
under the facility as a whole. As of
March 31, 2017
, the weighted average effective interest rate for borrowings under the credit facility as a whole, inclusive of our interest rate swaps, was approximately
3.38%
.
8. Fair Value Measurements
Fair value, as defined by GAAP, is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the fair value hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the fair value hierarchy) has been established.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Derivative financial instruments
We use derivative financial instruments, such as interest rate swaps, to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis of the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.
We incorporate credit valuation adjustments (“CVAs”) to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the CVAs associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, we have assessed the significance of the impact of the CVAs on the overall valuation of our derivative positions and have determined that they are not significant. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. Unrealized gains or losses on derivatives are recorded in accumulated other comprehensive income (loss) (“OCI”) within equity at each measurement date. Our derivative financial instruments are included in “prepaid expenses and other assets” and “other liabilities” on our condensed consolidated balance sheets.
The following table sets forth our financial assets and liabilities measured at fair value on a recurring basis, which equals book value, by level within the fair value hierarchy as of
March 31, 2017
, and
December 31, 2016
(in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis of Fair Value Measurements
|
|
|
|
|
Quoted Prices In Active Markets for Identical Items (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
|
Total Fair Value
|
|
|
|
Description
|
|
|
|
|
March 31, 2017
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
2,193
|
|
|
$
|
—
|
|
|
$
|
2,193
|
|
|
$
|
—
|
|
Liabilities
|
|
$
|
(624
|
)
|
|
$
|
—
|
|
|
$
|
(624
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
Derivative financial instruments:
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
1,182
|
|
|
$
|
—
|
|
|
$
|
1,182
|
|
|
$
|
—
|
|
Liabilities
|
|
$
|
(1,652
|
)
|
|
$
|
—
|
|
|
$
|
(1,652
|
)
|
|
$
|
—
|
|
Financial Instruments not Reported at Fair Value
Financial instruments held at
March 31, 2017
, and
December 31, 2016
, but not measured at fair value on a recurring basis include cash and cash equivalents, restricted cash, accounts receivable, notes payable, accounts payable and accrued liabilities, distributions payable, and other liabilities. With the exception of notes payable, the financial statement carrying amounts of these items approximate their fair values due to their short-term nature. Estimated fair values for notes payable have been determined using recent trading activity and/or bid-ask spreads and are classified as Level 2 in the fair value hierarchy.
Carrying amounts of our notes payable and the related estimated fair value as of
March 31, 2017
, and
December 31, 2016
, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
|
Carrying Amount
|
|
Fair
Value
|
|
Carrying Amount
|
|
Fair
Value
|
Notes payable
|
$
|
781,400
|
|
|
$
|
786,182
|
|
|
$
|
834,131
|
|
|
$
|
837,878
|
|
Less: unamortized debt issuance costs
|
(7,495
|
)
|
|
|
|
(7,348
|
)
|
|
|
Notes payable, net
|
$
|
773,905
|
|
|
|
|
$
|
826,783
|
|
|
|
9. Derivative Instruments and Hedging Activities
We may be exposed to the risk associated with variability of interest rates that might impact our cash flows and the results of our operations. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we have used interest rate swaps as part of our interest rate risk management strategy. Our interest rate swaps involve the receipt of variable-rate amounts from counterparties in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Our hedging strategy of entering into interest rate swaps, therefore, is to eliminate or reduce, to the extent possible, the volatility of cash flows.
The following table summarizes the notional values of our derivative financial instruments (in thousands) as of
March 31, 2017
. The notional values provide an indication of the extent of our involvement in these instruments at
March 31, 2017
, but do not represent exposure to credit, interest rate, or market risks.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type/Description
|
|
Notional Value
|
|
Index
|
|
Strike Rate
|
|
Effective Date
|
|
Maturity Date
|
Interest rate swap - cash flow hedge
|
|
$
|
125,000
|
|
|
one-month LIBOR
|
|
1.6775
|
%
|
|
12/31/14
|
|
10/31/19
|
Interest rate swap - cash flow hedge
|
|
$
|
125,000
|
|
|
one-month LIBOR
|
|
1.6935
|
%
|
|
04/30/15
|
|
10/31/19
|
Interest rate swap - cash flow hedge
|
|
$
|
125,000
|
|
|
one-month LIBOR
|
|
1.7615
|
%
|
|
06/30/15
|
|
05/31/22
|
Interest rate swap - cash flow hedge
|
|
$
|
150,000
|
|
|
one-month LIBOR
|
|
1.7695
|
%
|
|
06/30/15
|
|
05/31/22
|
The table below presents the fair value of our derivative financial instruments, included in “prepaid expenses and other assets” and “other liabilities” on our condensed consolidated balance sheets, as of
March 31, 2017
, and
December 31, 2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments:
|
Derivative Assets
|
|
Derivative Liabilities
|
|
|
March 31,
2017
|
|
December 31,
2016
|
|
March 31,
2017
|
|
December 31,
2016
|
|
|
Interest rate swaps
|
$
|
2,193
|
|
|
$
|
1,182
|
|
|
$
|
(624
|
)
|
|
$
|
(1,652
|
)
|
The tables below present the effect of the change in fair value of derivative financial instruments in our condensed consolidated statements of operations and comprehensive income (loss) for the
three months ended March 31, 2017
and
2016
(in thousands):
Derivatives in Cash Flow Hedging Relationship
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized in OCI on derivatives
(effective portion)
|
|
Three Months Ended
|
|
March 31, 2017
|
|
March 31, 2016
|
Interest rate swaps
|
$
|
2,069
|
|
|
$
|
(12,880
|
)
|
|
|
|
|
|
|
|
|
|
|
Amount reclassified from OCI into income
(effective portion)
|
|
Three Months Ended
|
Location
|
March 31, 2017
|
|
March 31, 2016
|
Interest expense (1)
|
$
|
1,246
|
|
|
$
|
1,722
|
|
______________
|
|
(1)
|
Increases in fair value as a result of accrued interest associated with our swap transactions are recorded in accumulated OCI and subsequently reclassified into income. Such amounts are shown net in the statements of changes in equity and offset dollar for dollar.
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount recognized in income on derivatives
(ineffective portion and amount excluded from effectiveness testing)
|
|
|
|
Three Months Ended
|
|
Location
|
March 31, 2017
|
|
March 31, 2016
|
|
Interest expense (1)
|
$
|
30
|
|
|
$
|
—
|
|
_____________
|
|
(1)
|
Represents the portion of the change in fair value of our interest rate swaps attributable to the mismatch between an interest rate floor on our hedged debt and no floor on the index rate in our interest rate swaps which causes hedge ineffectiveness.
|
Amounts reported in accumulated OCI related to derivatives will be reclassified to interest expense as interest payments and accruals are made on our variable-rate debt. During the next twelve months, we estimate that approximately
$2.6 million
will be reclassified as an increase to interest expense.
We have agreements with our derivative counterparties that contain provisions where if we default on any of our indebtedness for at least
30
days, during which time such default has not been remedied, and in all cases provided that the aggregate amount of all such defaults is not less than
$10.0 million
for recourse debt or
$75.0 million
for non-recourse debt, then we could also be declared in default on our derivative obligations.
As of
March 31, 2017
, we had not been declared in default on any of our derivative obligations. As of
March 31, 2017
, the fair value of our derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk related to these agreements, was approximately
$0.6 million
. As of
March 31, 2017
, we have not posted any collateral related to these agreements. If we had breached any of these provisions at
March 31, 2017
, we could have been required to settle our obligations under the agreements at the termination value of approximately
$0.6 million
.
10. Commitments and Contingencies
As of
March 31, 2017
, we had commitments of approximately
$22.9 million
for future tenant improvements and leasing commissions.
We have employment agreements with
five
of our executive officers. The term of each employment agreement ends on February 10, 2020, provided that the term will automatically continue for an additional
one
-year period unless either party provides
60
days written notice of non-renewal prior to the expiration of the initial term. The agreements provide for lump sum payments and an immediate lapse of restrictions on compensation received under the long-term incentive plan upon termination of employment without cause. As a result, in the event we terminated all of these agreements without cause as of
March 31, 2017
, we would have recognized approximately
$13.7 million
in related compensation expense.
11.
Equity
Series A Convertible Preferred Stock
As of December 31, 2015, we had
10,000
shares of Series A participating, voting, convertible preferred stock (the “Series A Convertible Preferred Stock”) outstanding. In connection with the listing of our common stock on the NYSE on July 23, 2015, an automatic conversion of the Series A Convertible Preferred Stock was triggered with the number of shares to be issued not determinable until March 2, 2016, based on the Conversion Company Value, as defined in the Articles Supplementary. On March 2, 2016, based on the Conversion Company Value,
no
shares of common stock were issued, and the shares of Series A Convertible Preferred Stock were canceled.
Stock Plans
Our 2015 Equity Incentive Plan allows for, and our 2005 Incentive Award Plan allowed for, equity-based incentive awards to be granted to our employees, non-employee directors, and key persons as detailed below:
Stock options.
As of
March 31, 2017
and 2016, we had outstanding options held by our independent directors to purchase
8,330
and
12,495
shares of our common stock, respectively, at a weighted average exercise price of approximately
$40.13
per share. These options are all fully vested and have expiration dates that range from July 2018 to June 2022.
Restricted stock units.
We have outstanding restricted stock units (“RSUs”) held by our independent directors. These units vest
13 months
after the grant date. Subsequent to vesting, the restricted stock units will be converted to an equivalent number
of shares of common stock upon the earlier to occur of the following events or dates: (i) separation from service for any reason other than cause; (ii) a change in control of the Company; (iii) death; or (iv) specific dates chosen by the independent directors that range from June 2017 to December 2020. Expense is measured at the grant date based on the estimated fair value of the award and is recognized over the vesting period. Any forfeitures of awards are recognized as they occur.
The following is a summary of the number of outstanding RSUs held by our independent directors as of
March 31, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
March 31, 2016
|
|
Units
|
|
Weighted Average Price per unit
|
|
Units
|
|
Weighted Average Price per unit
|
Outstanding at the beginning of the year
|
39,255
|
|
|
$
|
16.45
|
|
|
28,705
|
|
|
$
|
18.29
|
|
Issued
|
1,917
|
|
|
$
|
18.27
|
|
|
1,695
|
|
|
$
|
14.75
|
|
Converted
|
(12,966
|
)
|
|
$
|
14.78
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding at the end of the period (1)
|
28,206
|
|
|
$
|
17.34
|
|
|
30,400
|
|
|
$
|
18.09
|
|
_____________
(1) As of
March 31, 2017
,
9,709
RSUs held by our independent directors are vested.
On January 26, 2016,
111,063
RSUs were issued to employees with a grant price of
$15.26
per unit. On January 23, 2017,
93,455
RSUs were issued to employees with a grant price of
$18.17
per unit. These units vest on December 31, 2018, and December 31, 2019, respectively, at which time they will be converted into a number of shares of common stock, which could range from
zero
shares to
222,126
shares at December 31, 2018, and
zero
shares to
186,910
shares at December 31, 2019. The actual number of shares of common stock issued will be based on our annualized total stockholder return (“TSR”) percentage as compared to
three
metrics: our TSR on a predetermined absolute basis, the TSR of the constituent companies of the NAREIT Office Index (unweighted), and the TSR of a select group of peer companies. Expense is measured at the grant date, based on the estimated fair value of the award (
$19.18
per unit for the 2016 grants and
$20.95
per unit for the 2017 grants) as determined by a Monte Carlo simulation-based model using the assumptions outlined in the table below. Any forfeitures of awards are recognized as they occur.
|
|
|
|
Assumption
|
|
Value
|
Expected volatility
|
|
24%-26%
|
Risk-free interest rate
|
|
1.15%-1.53%
|
Expected term
|
|
35 months
|
Expected dividend yield
|
|
3.7%-4.5%
|
Restricted stock.
We have outstanding restricted stock held by employees. Restrictions on outstanding shares lapse based on various lapse schedules and range from December 2017 to December 2019. Compensation cost is measured at the grant date based on the estimated fair value of the award and is recognized as expense over the service period based on a tiered lapse schedule. Any forfeitures of awards are recognized as they occur.
The following is a summary of the number of shares of restricted stock outstanding as of
March 31, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
March 31, 2016
|
|
Shares
|
|
Weighted Average Price per share
|
|
Shares
|
|
Weighted Average Price per share
|
Outstanding at the beginning of the year
|
246,805
|
|
|
$
|
20.74
|
|
|
281,905
|
|
|
$
|
22.46
|
|
Issued
|
100,170
|
|
|
$
|
18.17
|
|
|
119,523
|
|
|
$
|
15.19
|
|
Forfeiture
|
(13,179
|
)
|
|
$
|
16.92
|
|
|
(8,406
|
)
|
|
$
|
19.98
|
|
Restrictions lapsed
|
(57,553
|
)
|
|
$
|
25.64
|
|
|
(59,673
|
)
|
|
$
|
25.64
|
|
Outstanding at the end of the period
|
276,243
|
|
|
$
|
18.97
|
|
|
333,349
|
|
|
$
|
19.34
|
|
For the
three months ended March 31, 2017
and
2016
, we recognized a total of approximately
$0.9 million
and
$1.0 million
, respectively, for compensation expense related to the amortization of all of the equity-based incentive awards outlined
above. As of
March 31, 2017
, the total remaining compensation cost on unvested awards was approximately
$6.1 million
, with a weighted average remaining contractual life of approximately
1.7
years.
12. Net Income (Loss) per Common Share
Net income (loss) per common share is calculated using the two-class method, which requires the allocation of undistributed net income between common and participating stockholders. All outstanding restricted stock awards containing rights to non-forfeitable distributions are considered participating securities for this calculation. In periods of net loss from continuing operations, no loss is allocated to participating securities because our participating securities do not have a contractual obligation to share in our losses. The following table reflects the calculation of basic and diluted net income (loss) per common share for the three months ended March 31, 2017 and 2016 (in thousands, except per share data).
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31, 2017
|
|
March 31, 2016
|
Numerator:
|
|
|
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
98,171
|
|
|
$
|
(12,707
|
)
|
Less: net income allocated to participating securities
|
|
(582
|
)
|
|
—
|
|
Numerator for basic net income (loss) per share
|
|
$
|
97,589
|
|
|
$
|
(12,707
|
)
|
Add: undistributed net income allocated to participating securities
|
|
530
|
|
|
—
|
|
Less: undistributed net income re-allocated to participating securities
|
|
(527
|
)
|
|
—
|
|
Numerator for diluted net income (loss) per share
|
|
$
|
97,592
|
|
|
$
|
(12,707
|
)
|
|
|
|
|
|
Denominator:
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
47,511
|
|
|
47,390
|
|
Effect of dilutive securities
|
|
295
|
|
|
—
|
|
Weighted average common shares outstanding - diluted
|
|
47,806
|
|
|
47,390
|
|
|
|
|
|
|
Basic net income (loss) per common share
|
|
$
|
2.05
|
|
|
$
|
(0.27
|
)
|
Diluted net income (loss) per common share
|
|
$
|
2.04
|
|
|
$
|
(0.27
|
)
|
|
|
|
|
|
Securities excluded from weighted average common shares outstanding-diluted because their effect would be anti-dilutive
|
|
37
|
|
|
369
|
|
13. Supplemental Cash Flow Information
Supplemental cash flow information is summarized below for the
three months ended March 31, 2017
and
2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31, 2017
|
|
March 31, 2016
|
Interest paid, net of amounts capitalized
|
$
|
6,782
|
|
|
$
|
9,665
|
|
Income taxes paid
|
$
|
3
|
|
|
$
|
85
|
|
|
|
|
|
Non-cash investing activities:
|
|
|
|
|
|
Property and equipment additions in accounts payable and accrued liabilities
|
$
|
6,176
|
|
|
$
|
7,368
|
|
Development reimbursements in accounts receivable
|
$
|
—
|
|
|
$
|
958
|
|
Liabilities assumed through the purchase of real estate
|
$
|
3,267
|
|
|
$
|
—
|
|
Escrow deposit applied to purchase of real estate
|
$
|
10,000
|
|
|
$
|
—
|
|
Sale of real estate and lease intangibles to unconsolidated joint venture
|
$
|
13,804
|
|
|
$
|
—
|
|
Acquisition of controlling interest in unconsolidated entity
|
$
|
9,770
|
|
|
$
|
—
|
|
|
|
|
|
Non-cash financing activities:
|
|
|
|
|
|
Cancellation of Series A Convertible Preferred Stock
|
$
|
—
|
|
|
$
|
2,700
|
|
Mortgage note assumed (1)
|
$
|
80,000
|
|
|
$
|
—
|
|
Financing costs in accounts payable and accrued liabilities
|
$
|
10
|
|
|
$
|
81
|
|
Unrealized gain on interest rate derivatives
|
$
|
2,069
|
|
|
$
|
—
|
|
Unrealized loss on interest rate derivatives
|
$
|
—
|
|
|
$
|
12,880
|
|
Accrual for distributions declared
|
$
|
—
|
|
|
$
|
8,600
|
|
_________________
(1) The approximately
$80.0 million
mortgage note assumed includes approximately
$40.1 million
of debt assumed when we acquired the remaining
50.16%
interest in our Domain 2 and Domain 7 properties during the three months ended March 31, 2017, and approximately
$39.9 million
of debt associated with our previously held
49.84%
unconsolidated interest in these properties. The properties were consolidated during the three months ended March 31, 2017.