SAN DIEGO PORTFOLIO ACQUISITION S E P T EMB ER 2 0 1 7 San Diego, CA
FORWARD-LOOKING STATEMENTS Certain statements contained in this presentation, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements within the meaning of the federal securities laws and as such are based upon City Office REIT, Inc. ( “City Office” or the “Company” ) and its current beliefs as to the outcome and timing of future events. There can be no assurance that actual future developments affecting the Company will be those anticipated by the Company. Examples of forward-looking statements include projected capital resources, projected profitability and portfolio performance, estimates of market rental rates, projected capital improvements, expected sources of financing, expectations as to the timing of closing of acquisitions, dispositions, or other transactions, the expected operating performance of anticipated near-term acquisitions and descriptions relating to these expectations, including without limitation, the anticipated net operating income yield and capitalization rates. Forward-looking statements presented in this presentation are based on management ’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “ma y, ” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward- looking statements involve risks and uncertainties (some of which are beyond the Company ’s control) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: changes in the real estate industry and in performance of the financial markets; competition in the leasing market; the Company’s ability to forecast accurately the barriers to entry and competition in the markets in which it operates; the Company’s ability to assess risks associated with entering into new markets; the completion of the Qualcomm Stadium urban infill site redevelopment; the demand for and market acceptance of our properties for rental purposes; the amount and growth of our expenses; tenant financial difficulties and general economic conditions, including interest rates, as well as economic conditions in our geographic markets; defaults or non-renewal of leases; risks associated with joint venture partners; the risks associated with the ownership and development of real property, including risks related to natural disasters; risks associated with property acquisitions, the failure to acquire or sell properties as and when anticipated; the outcome of claims and litigation involving or affecting the Company; our failure to maintain our status as real estate investment trust, or REIT; and other risks and uncertainties detailed in the Company ’s news releases and filings with the Securities and Exchange Commission, including but not limited to the Company ’s reports on Form 10-K, Form 10-Q and Form 8-K in the Company ’s SEC filings. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company ’s business, financial condition, liquidity, cash flows and results could differ materially from those expressed in any forward- looking statement. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. Any forward-looking statements speak only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Use caution in relying on past forward-looking statements, which were based on results and trends at the time they were made, to anticipate future results or trends.
ACQUISITION HIGHLIGHTS C I T Y O F F I C E R E I T ( “ C I O ” ) H A S A C Q U I R E D A $ 1 7 4 . 5 M I L L I O N , 6 6 9 , 6 5 3 S F T E N - B U I L D I N G P O R T F O L I O W E L L - L O C A T E D I N S A N D I E G O , C A . C I O B O U G H T D I R E C T L Y F R O M S E L L E R I N A C O N F I D E N T I A L , O F F M A R K E T T R A N S A C T I O N . ▪ T h i s p o r t f o l i o p r o v i d e s C I O w i t h i m m e d i a t e s c a l e a n d d i v e r s i f i c a t i o n i n S a n D i e g o , a h i g h l y d e s i r a b l e c o a s t a l m a r k e t w i t h h i g h b a r r i e r s t o e n t r y a n d s i g n i f i c a n t i n s t i t u t i o n a l i n v e s t m e n t d e m a n d ▪ A c q u i r e d a t v e r y s t r o n g m e t r i c s : ➢ A p p r o x i m a t e l y 7 . 4 % p r o f o r m a n e t o p e r a t i n g i n c o m e y i e l d , i n c l u s i v e o f e s t i m a t e d c l o s i n g c o s t s , r e s e r v e s f o r p l a n n e d c a p i t a l i m p r o v e m e n t s a n d t h e c o s t o f t h e l a n d p a r c e l ➢ $ 2 6 1 / S F a c q u i s i t i o n b a s i s v s . a p p r o x i m a t e l y $ 4 0 0 / S F r e p l a c e m e n t c o s t ▪ S u b s t a n t i a l i n c o m e g r o w t h o p p o r t u n i t i e s : ➢ R e m e a s u r e m e n t p o t e n t i a l , a s e x i s t i n g l e a s e s a r e ~ 3 7 , 0 0 0 S F b e l o w B O M A S F ( u p s i d e a s l e a s e s r o l l ) ➢ 8 8 % o c c u p a n c y , a b i l i t y t o d r i v e a d d e d i n c o m e t h r o u g h l e a s e - u p o f t h e v a c a n c y ➢ O n a v e r a g e , r e n t s a r e a p p r o x i m a t e l y 8 % b e l o w c u r r e n t m a r k e t r a t e s ➢ P o r t f o l i o i n c l u d e s a n e x c e p t i o n a l l y l o c a t e d 5 . 0 a c r e d e v e l o p m e n t l a n d p a r c e l 1
Mission City ACQUISITION SUMMARY San Diego Portfolio The ten-building portfolio located in San Diego, CA (the ❖ “San Diego Portfolio”) is comprised of Mission City Corporate Center (“Mission City”) and the Sorrento Mesa portfolio (“ Sorrento Mesa”) Mission City is a four-building, 285,095 SF, Class A office ❖ campus located in the Mission Valley submarket Sorrento Mesa is a six-building, 384,558 SF, Class B office ❖ and flex complex located in the Sorrento Mesa submarket Sorrento Mesa Sorrento Mesa also contains a very well-located, 5.0 ❖ acre development land parcel Aggregate Portfolio Metrics Purchase $174.5 M / $261 PSF price Portfolio 669,653 SF size Expected ~7.4% combined pro forma NOI yield Estimated ~$400 PSF replacement cost Occupancy 88% at close 2
Key Metrics ACQUISITION DETAIL Mission City 4 Buildings Property 285,095 SF size Mission City is a four-building, 285,095 SF, Class A office ❖ campus located in the Mission Valley submarket 14 Tenants Central location within the San Diego MSA, excellent ❖ freeway access, proximity to workforce and executive 1990-2007 Year built housing and strong corporate presence The complex is multi-tenanted to a diversified rent roll of Occupancy ❖ 88% tenants primarily in the financial, tech, healthcare, legal at close and insurance industries Mission City Lease Expiration Schedule as of August 31, 2017 100.0% 80.0% 60.0% 40.0% 27.9% 24.8% 23.4% 20.0% 9.8% 8.9% 4.5% 0.8% 0.0% Vacant 2017 2018 2019 2020 2021 2022+ 3
ACQUISITION CHARACTERISTICS Mission City Well-Located Real Estate: Exceptional location in the heart of Mission Valley, the epicenter of San Diego’s transformation into a modern “live, work, p lay ” city ➢ Walkable amenities with a broad assortment of restaurants and shops; within a mile of one million SF of retail and restaurant amenities ➢ Excellent access to five major freeways and within walking distance from the San Diego Trolley, San Diego’s “light rail” tran sit system ➢ Immediately adjacent to Qualcomm Stadium (formerly home to the San Diego Chargers), a 232-acre urban infill site that is poised to ➢ be redeveloped as part of a master planned mixed-use community including office, retail and multifamily residential Diverse Tenant Profile: 88% occupied by tenants in the financial, tech, healthcare, ➢ legal and insurance industries; in-place rents approximate market rates Each building in the campus offers a different floorplate, ➢ appealing to a wide variety of users Attractive Building Features: Class A buildings with updated common areas ➢ Attractively landscaped campus with excellent opportunity ➢ to upgrade and add leading amenity package Central covered parking structure with 3.4/1,000 parking ratio ➢ Energy Star certified ➢ 4
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