Office Properties Income Trust · OTC:OPITQ
Office Properties Income Trust — Q4 2018 Earnings Presentation
54 slides from Office Properties Income Trust's earnings presentation, Feb 28, 2019
Slide 1: Fourth Quarter 2018 Supplemental Operating and Financial Data
Government Properties Income Trust Exhibit 99.2 Fourth Quarter 2016 Supplemental Operating and Financial Data All amounts in this report are unaudited.
Slide 2: Table of Contents
TABLE OF CONTENTS On December 31, 2018, Office Properties Income Trust (formerly Government Properties Income Trust, or GOV), or OPI, we, our or us, completed its previously announced merger with Select Income REIT, or SIR, whereby SIR merged with and into a wholly owned subsidiary of GOV, or the Me
Slide 3: Table of Contents (Continued)
TABLE OF CONTENTS (CONTINUED) EXHIBITS PAGE A Consolidated Property Detail 37 B Pro Forma Key Financial Data 42 C Pro Forma Consolidated Statement of Income (Loss) 43 D Pro Forma Consolidated Leverage Ratios, Coverage Ratios and Public Debt Covenants 45 E Pro Forma Calculation of Consolidated Proper
Slide 4: Warning Concerning Forward Looking Statements
WARNING CONCERNING FORWARD LOOKING STATEMENTS THIS PRESENTATION OF SUPPLEMENTAL OPERATING AND FINANCIAL DATA 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 WE USE WORD
Slide 5: Warning Concerning Forward Looking Statements (Continued)
WARNING CONCERNING FORWARD LOOKING STATEMENTS (CONTINUED) • COMPETITION WITHIN THE REAL ESTATE INDUSTRY, PARTICULARLY IN THOSE MARKETS IN WHICH OUR PROPERTIES ARE LOCATED, • THE IMPACT OF CHANGES IN THE REAL ESTATE NEEDS AND FINANCIAL CONDITIONS OF OUR TENANTS, • COMPLIANCE WITH, AND CHANGES TO, FED
Slide 6: Warning Concerning Forward Looking Statements (Continued)
WARNING CONCERNING FORWARD LOOKING STATEMENTS (CONTINUED) • CONTINUED AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY IS SUBJECT TO OUR SATISFYING CERTAIN FINANCIAL COVENANTS AND OTHER CREDIT FACILITY CONDITIONS THAT WE MAY BE UNABLE TO SATISFY, • ACTUAL COSTS UNDER OUR REVOLVING CRED
Slide 7: Corporate Information
One Memphis Place, Memphis, TN Square Feet: 204,694 Primary Agency Occupant: U.S. Courts Office Properties Income Trust 7 Supplemental Operating and Financial Data, December 31,CORPORATE 2018 INFORMATION
Slide 8: Company Profile
COMPANY PROFILE The Company: Corporate Headquarters: Office Properties Income Trust (formerly Government Properties Income Trust, or GOV), or OPI, we, our, or us, is a real estate Two Newton Place investment trust, or REIT, focused on owning, operating and leasing buildings primarily leased to singl
Slide 9: Investor Information
INVESTOR INFORMATION Board of Trustees Donna D. Fraiche Barbara D. Gilmore John L. Harrington Independent Trustee Independent Trustee Independent Trustee William A. Lamkin Elena Poptodorova Jeffrey P. Somers Independent Trustee Independent Trustee Independent Trustee David M. Blackman Adam D. Portno
Slide 10: Research Coverage
RESEARCH COVERAGE Equity Research Coverage B. Riley FBR Bank of America / Merrill Lynch Bryan Maher James Feldman bmaher@brileyfbr.com James.Feldman@baml.com (646) 885-5423 (646) 855-5808 D.A. Davidson & Co. Jeffries & Company, Inc. James Lykins Jonathan Petersen RESEARCH COVERAGE jlykins@dadco.com
Slide 11: Financials
625 Indiana Avenue, Washington, DC 9960Square Maryland Feet: Drive, 160,897 Richmond, VA SquarePrimary Feet: Agency 173,932 Occupant: U.S. Courts Agency Occupant: The Commonwealth of Virginia Office Properties Income Trust 11 Supplemental Operating and Financial Data, December 31, 2018 FINANCIALS 11
Slide 12: Key Financial Data
KEY FINANCIAL DATA (dollars in thousands, except per share data) As of and for the Three Months Ended 12/31/2018 (1) 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Selected Balance Sheet Data:(2) Total gross assets (3) $ 5,613,730 $ 3,847,915 $ 3,866,055 $ 4,008,953 $ 4,045,413 Total assets $ 5,238,583 $
Slide 13: Consolidated Balance Sheets
CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share data) December 31, 2018 (1) 2017 ASSETS Real estate properties: Land $ 924,164 $ 627,108 Buildings and improvements 3,020,472 2,348,613 Total real estate properties, gross 3,944,636 2,975,721 Accumulated depreciation (375,147) (341,
Slide 14: Consolidated Statements of Income (Loss)
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (1) (amounts in thousands, except per share data) Three Months Ended December 31, Year Ended December 31, 2018 2017 2018 2017 Rental income $ 103,656 $ 107,170 $ 426,560 $ 316,532 Expenses: Real estate taxes 12,306 12,962 49,708 37,942 Utility expenses 5,935
Slide 15: Consolidated Statements of Income (Loss) (Continued)
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (CONTINUED) (dollars in thousands) (1) See Exhibit C on page 43 for a pro forma consolidated statement of income (loss) as if the Merger had occurred on October 1, 2018. (2) We recorded an adjustment of $2,830 to reduce the carrying value of an office propert
Slide 16: Consolidated Statements of Cash Flows
CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) Year Ended December 31, 2018 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (21,884) $ 12,090 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 66,685 52,427 Net amortizat
Slide 17: Consolidated Statements of Cash Flows (Continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (dollars in thousands) Year Ended December 31, 2018 2017 CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of mortgage notes payable (3,708) (11,909) Repayment of unsecured term loan (162,000) — Proceeds from issuance of senior notes, after discounts —
Slide 18: Debt Summary
DEBT SUMMARY (1) As of December 31, 2018 (dollars in thousands) Coupon Interest Principal Maturity Due at Years to Rate (2) Rate (3) Balance (4) Date Maturity Maturity Unsecured Floating Rate Debt: $750,000 unsecured revolving credit facility (5) (8) 3.578% 3.578% $ 175,000 1/31/2023 $ 175,000 4.1 (
Slide 19: Debt Summary (Continued)
DEBT SUMMARY (CONTINUED) As of December 31, 2018 (dollars in thousands) (1) The data presented excludes two mortgage notes with an aggregate principal balance of $82,000 which are secured by three buildings owned by two unconsolidated joint ventures in which we own 50% and 51% interests. See page 24
Slide 20: Debt Maturity Schedule
DEBT MATURITY SCHEDULE (1) As of December 31, 2018 (dollars in thousands) Unsecured Unsecured Secured Floating Fixed Rate Fixed Rate Year Rate Debt (2) Debt (2) Debt (2) Total (3) 2019 $ — $ 350,000 $ 12,054 $ 362,054 2020 300,000 (4) 400,000 75,707 775,707 2021 — — 14,420 14,420 2022 88,000 (4) 600
Slide 21: Leverage Ratios, Coverage Ratios and Public Debt Covenants
LEVERAGE RATIOS, COVERAGE RATIOS AND PUBLIC DEBT COVENANTS As of and for the Three Months Ended 12/31/2018(1) 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Leverage Ratios: Total consolidated debt (2) / total gross assets (3) 59.0% 56.1% 55.4% 56.4% 55.9% Total consolidated debt (2) / total market capita
Slide 22: Capital Expenditures Summary
CAPITAL EXPENDITURES SUMMARY (1)(2) (dollars and sq. ft. in thousands, except per sq. ft. data) For the Three Months Ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Tenant improvements (3) $ 5,450 $ 2,293 $ 3,854 $ 2,843 $ 9,358 Leasing costs (4) 5,635 1,831 1,626 1,986 1,745 Building impr
Slide 23: Property Acquisition and Disposition Information Since January 1, 2018
PROPERTY ACQUISITION AND DISPOSITION INFORMATION SINCE JANUARY 1, 2018 (dollars and sq. ft. in thousands, except per sq. ft. data) ACQUISITIONS: Weighted Average Purchase Remaining Date Number of Purchase Price (1) / Lease Percent Acquired City and State Buildings Sq. Ft. Price (1) Sq. Ft. Term (3)
Slide 24: Investment in Unconsolidated Joint Ventures
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES (dollars in thousands) Unconsolidated Joint Ventures: OPI Investment Percent Leased Weighted OPI at December 31, Number of Square at December Average Lease Joint Venture Ownership 2018 Office Buildings Location Feet 31, 2018 Term (1) Prosperity Metro Plaza
Slide 25: Calculation of Consolidated Property NOI and Cash Basis NOI
CALCULATION OF CONSOLIDATED PROPERTY NET OPERATING INCOME (NOI) AND CONSOLIDATED PROPERTY CASH BASIS NOI (1)(2) (dollars in thousands) For the Three Months Ended For the Year Ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 12/31/2018 12/31/2017 Calculation of Consolidated Property NOI and
Slide 26: Calculation of Same Property NOI and Cash Basis NOI
CALCULATION OF SAME PROPERTY NOI AND CASH BASIS NOI (1)(2) (dollars in thousands) For the Three Months Ended (3) For the Year Ended (4) 12/31/2018 12/31/2017 12/31/2018 12/31/2017 Reconciliation of Consolidated Property NOI to Same Property NOI: Rental income $ 103,656 $ 107,170 $ 426,560 $ 316,532
Slide 27: Calculation of EBITDA and Adjusted EBITDA
CALCULATION OF EBITDA AND ADJUSTED EBITDA (1)(2) (dollars in thousands) For the Three Months Ended For the Year Ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 12/31/2018 12/31/2017 Net income (loss) $ (57,695) $ (449) $ 29,695 $ 6,565 $ (17,991) $ (21,884) $ 12,090 Add (less): Interest ex
Slide 28: Calculation of FFO and Normalized FFO
CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO AVAILABLE FOR COMMON SHAREHOLDERS (1)(2) (amounts in thousands, except per share data) For the Three Months Ended For the Year Ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 12/31/2018 12/31/2017 Net income (loss) available for
Slide 29: Definitions of Certain Non-GAAP Financial Measures
DEFINITIONS OF CERTAIN NON-GAAP FINANCIAL MEASURES Consolidated Property NOI and Consolidated Property Cash Basis NOI We calculate Consolidated Property NOI and Consolidated Property Cash Basis NOI as shown on page 25 and Same Property NOI and Same Property Cash Basis NOI on page 26. The calculation
Slide 30: Portfolio Information
PORTFOLIO INFORMATION Stevens Center, Richland, WA Square Feet:Office 140,152 Properties Income Trust 30 Agency Occupant:Supplemental Department Operating and of FinancialEnergy Data, December 31, 2018
Slide 31: Summary Consolidated Same Property Results
SUMMARY CONSOLIDATED SAME PROPERTY RESULTS (1) (dollars and sq. ft. in thousands) For the Three Months Ended (2) For the Year Ended (3) 12/31/2018 12/31/2017 12/31/2018 12/31/2017 Consolidated buildings (end of period) 91 91 90 90 Total sq. ft. (4) 10,974 10,937 10,904 10,868 Percent leased (5) 94.1
Slide 32: Occupancy and Leasing Summary
OCCUPANCY AND LEASING SUMMARY (1)(2) (dollars and sq. ft. in thousands, except per sq. ft. data) As of and for the Three Months Ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Consolidated buildings (end of period) 247 164 164 166 167 Total sq. ft. (2) 31,900 (3) 17,046 17,046 17,332 17,49
Slide 33: Tenant Diversity and Credit Characteristics
TENANT DIVERSITY AND CREDIT CHARACTERISTICS (1) As of December 31, 2018 Percentage of Total Annualized Rental Income (2) Tenant Industry Tenant Credit Characteristics (3) (4) (4) (4) TENANT DIVERSITY AND CREDIT CHARACTERISTICS TENANT DIVERSITY (1) The data presented includes the SIR leases assumed i
Slide 34: Tenants Representing 1% or More of Total Annualized Rental Income
TENANTS REPRESENTING 1% OR MORE OF TOTAL ANNUALIZED RENTAL INCOME (1) As of December 31, 2018 (dollars in thousands) Annualized % of Total Annualized Tenant Credit Rating (2) Rental Income (3) Rental Income (3) 1 U.S. Government Investment Grade $ 179,620 25.6% 2 State of California Investment Grade
Slide 35: Lease Expiration Schedule
LEASE EXPIRATION SCHEDULE (1) As of December 31, 2018 (dollars and sq. ft. in thousands) Number of Expiration of Cumulative Annualized Rental % of Cumulative Year (2) Leases Expiring Leased Square Feet (3) % of Total % of Total Income Expiring (4) Total % of Total 2019 107 3,203 11.0% 11.0% $ 90,837
Slide 36: Exhibits
EXHIBITS 75 Pleasant Street, Malden, MA Square Feet: 125,521 Occupant: Department of Education, Commonwealth of Massachusetts Office Properties Income Trust 36 Supplemental Operating and Financial Data, December 31, 2018
Slide 37: Exhibit A Consolidated Property Detail
EXHIBIT A CONSOLIDATED PROPERTY DETAIL(1) As of December 31, 2018 (dollars and square feet in thousands) Annualized Year Built or No. of Rentable Rental Undepreciated Depreciated Date Most Recent Property City, State Buildings Sq. Ft. % Leased Income (2) Carrying Value Carrying Value Acquired (3) Re
Slide 38: Exhibit A Consolidated Property Detail (Continued)
EXHIBIT A CONSOLIDATED PROPERTY DETAIL (CONTINUED) (1) As of December 31, 2018 (dollars and square feet in thousands) Annualized Year Built or No. of Rentable Rental Undepreciated Depreciated Date Most Recent Property City, State Buildings Sq. Ft. % Leased Income (2) Carrying Value Carrying Value Ac
Slide 39: Exhibit A Consolidated Property Detail (Continued)
EXHIBIT A CONSOLIDATED PROPERTY DETAIL (CONTINUED) (1) As of December 31, 2018 (dollars and square feet in thousands) Annualized Year Built or No. of Rentable Rental Undepreciated Depreciated Date Most Recent Property City, State Buildings Sq. Ft. % Leased Income (2) Carrying Value Carrying Value Ac
Slide 40: Exhibit A Consolidated Property Detail (Continued)
EXHIBIT A CONSOLIDATED PROPERTY DETAIL (CONTINUED) (1) As of December 31, 2018 (dollars and square feet in thousands) Annualized Year Built or No. of Rentable Rental Undepreciated Depreciated Date Most Recent Property City, State Buildings Sq. Ft. % Leased Income (2) Carrying Value Carrying Value Ac
Slide 41: Exhibit A Consolidated Property Detail (Continued)
CONSOLIDATED PROPERTY DETAIL (CONTINUED) (1) EXHIBIT A As of December 31, 2018 (dollars and square feet in thousands) Annualized Year Built or No. of Rentable Rental Undepreciated Depreciated Date Most Recent Property City, State Buildings Sq. Ft. % Leased Income (2) Carrying Value Carrying Value Ac
Slide 42: Exhibit B Pro Forma Key Financial Data
PRO FORMA KEY FINANCIAL DATA AS IF THE MERGER HAD OCCURRED ON OCTOBER 1, 2018 EXHIBIT B (dollars in thousands, except per share data) As of and for the Three Months Ended December 31, 2018 As Reported Pro Forma Selected Balance Sheet Data: Total gross assets (1) $ 5,613,730 $ 5,613,730 Total assets
Slide 43: Exhibit C Pro Forma Consolidated Statement of Income (Loss)
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (LOSS) AS IF THE MERGER HAD OCCURRED ON OCTOBER 1, 2018 EXHIBIT C (amounts in thousands, expect per share data) For the Three Months Ended December 31, 2018 Sale of OPI ILPT SIR Pro Forma OPI SIR Shares (1) Adjusted SIR Distribution (2) Adjusted Adjustments
Slide 44: Exhibit C Pro Forma Consolidated Statement of Income (Continued)
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (LOSS) EXHIBIT C AS IF THE MERGER HAD OCCURRED ON OCTOBER 1, 2018 (CONTINUED) (dollars in thousands) (1) The adjustment represents the effect on interest expense related to the application of net proceeds from our sale of 24,918,421 SIR common shares to rep
Slide 45: Exhibit D Pro Forma Leverage Ratios, Coverage Ratios and Covenants
PRO FORMA CONSOLIDATED LEVERAGE RATIOS, COVERAGE RATIOS AND EXHIBIT D PUBLIC DEBT COVENANTS AS IF THE MERGER HAD OCCURRED ON OCTOBER 1, 2018 As of and for the Three Months Ended December 31, 2018 As Reported Pro Forma Leverage Ratios: Total consolidated debt (1) / total gross assets (2) 59.0% 59.0%
Slide 46: Exhibit E Pro Forma Consolidated Property NOI and Cash Basis NOI
PRO FORMA CALCULATION OF CONSOLIDATED PROPERTY NOI AND CONSOLIDATED PROPERTY CASH BASIS NOI (1) AS IF THE MERGER HAD OCCURRED ON OCTOBER 1, 2018 EXHIBIT E (dollars in thousands) For the Three Months Ended December 31, 2018 Sale of OPI ILPT SIR Pro Forma OPI SIR Shares Adjusted SIR Distribution Adjus
Slide 47: Exhibit E Pro Forma Same Property NOI and Cash Basis NOI
PRO FORMA CALCULATION OF SAME PROPERTY NOI AND SAME PROPERTY CASH BASIS NOI (1) EXHIBIT E AS IF THE MERGER HAD OCCURRED ON OCTOBER 1, 2018 (dollars in thousands) For the Three Months Ended December 31, 2018 Sale of OPI ILPT SIR Pro Forma OPI SIR Shares Adjusted SIR Distribution Adjusted Adjustments
Slide 48: Exhibit F Pro Forma EBITDA and Adjusted EBITDA
PRO FORMA CALCULATION OF EBITDA AND ADJUSTED EBITDA (1) AS IF THE MERGER HAD OCCURRED ON OCTOBER 1, 2018 EXHIBIT F (dollars in thousands) For the Three Months Ended December 31, 2018 Sale of OPI ILPT SIR Pro Forma OPI SIR Shares Adjusted SIR Distribution Adjusted Adjustments Pro Forma Net loss $ (57
Slide 49: Exhibit G Pro Forma FFO and Normalized FFO
PRO FORMA CALCULATION OF FFO AND NORMALIZED FFO ATTRIBUTABLE TO THE COMPANY (1) EXHIBIT G AS IF THE MERGER HAD OCCURRED ON OCTOBER 1, 2018 (amounts in thousands, except per share data) For the Three Months Ended December 31, 2018 Sale of OPI ILPT SIR Pro Forma OPI SIR Shares Adjusted SIR Distributio
Slide 50: Exhibit H SIR Summary Consolidated and Same Property Results
SIR SUMMARY CONSOLIDATED AND SAME PROPERTY RESULTS EXHIBIT H (dollars and sq. ft. in thousands) For the Three Months Ended For the Year Ended Consolidated 12/31/2018 12/31/2017 12/31/2018 12/31/2017 Leasable buildings (1) 99 100 99 100 Total sq. ft. (2) 16,538 16,956 16,538 16,956 Percent leased (3)
Slide 51: Exhibit I Pro Forma Summary Same Property Results
PRO FORMA SUMMARY SAME PROPERTY RESULTS (1) EXHIBIT I (dollars and sq. ft. in thousands) For the Three Months Ended For the Year Ended OPI 12/31/2018 12/31/2017 12/31/2018 12/31/2017 Leasable buildings 91 91 90 90 Total sq. ft. (2) 10,974 10,937 10,904 10,868 Percent leased (3) 94.1 % 95.0% 94.0% 95
Slide 52: Exhibit J SIR Occupancy and Leasing Summary
SIR OCCUPANCY AND LEASING SUMMARY EXHIBIT J (dollars and sq. ft. in thousands, except per sq. ft. data) As of and for the Three Months Ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Leasable buildings (1) 99 99 100 100 100 Total sq. ft. 16,538 16,538 16,956 16,956 16,956 Square feet lease
Slide 53: Exhibit K Pro Forma Leasing Summary
PRO FORMA LEASING SUMMARY EXHIBIT K (dollars and sq. ft. in thousands, except per sq. ft. data) For the Three Months Ended December 31, 2018 OPI SIR Pro Forma Leasing Activity (Sq. ft.): (1) New leases 117 — 117 Renewals 407 24 431 Total 524 24 548 % Change in GAAP Rent: (2) New leases 1.8% —% 1.8%
Slide 54: Exhibit L SIR Capital Expenditures Summary
SIR CAPITAL EXPENDITURES SUMMARY EXHIBIT L (dollars in thousands) For the Three Months Ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Tenant improvements (1) $ 1,109 $ 3,318 $ 6,671 $ 1,734 $ — Leasing costs (2) 893 211 308 571 3,160 Building improvements (3) 1,261 1,464 660 385 1,330 Rec
Office Properties Income Trust — Q4 2018 Earnings Presentation on 6ix