CIM Commercial Trust Corporation (NASDAQ: CMCT and TASE: CMCT-L) ("we",
"our", “CMCT”, “CIM Commercial”, or the "Company"), a real estate
investment trust ("REIT") that primarily acquires, owns, and operates
Class A and creative office assets in vibrant and improving metropolitan
communities throughout the United States, today reported operating
results for the three months ended March 31, 2019.
First Quarter 2019 Highlights
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Annualized rent per occupied square foot1 on a same-store2
basis increased 4.8% to $43.99 as of March 31, 2019 compared to $41.99
as of March 31, 2018; annualized rent per occupied square foot1
across all properties was $46.24 as of March 31, 2019.
-
Our same-store2 office portfolio was 93.6% leased as of
March 31, 2019 compared to 92.9% as of March 31, 2018.
-
During the first quarter of 2019, we executed 33,308 square feet of
leases with terms longer than 12 months, of which 32,576 square feet
were recurring leases executed at our same-store2 office
portfolio, representing same-store2 cash rent growth per
square foot of 21.6%.
-
Net income attributable to common stockholders was $287,631,000, or
$6.30 per diluted share, for the first quarter of 2019 compared to net
loss attributable to common stockholders of $(3,026,000), or $(0.07)
per diluted share, for the first quarter of 2018.
-
Same-store2 office segment net operating income3
("NOI") increased 1.3%, while same-store2 office
cash NOI3 increased 9.0%, for the first quarter of 2019
from the corresponding period in 2018.
-
Funds from operations (“FFO”) attributable to common stockholders4
was $(14,120,000), or $(0.31) per diluted share, for the first quarter
of 2019, inclusive of $25,071,000, or $0.55 per diluted share, in loss
on early extinguishment of debt, compared to $10,122,000, or $0.23 per
diluted share, for the first quarter of 2018.
Management Commentary
David Thompson, CEO of CIM Commercial Trust Corporation stated, “The
increase in our net income was primarily driven by asset sales as part
of our program to unlock embedded value in our portfolio and improve
trading liquidity of our common stock. Further, our same-store NOI
growth was again driven by higher average rent per square foot, which
reflects both the strength of our portfolio and our markets. We believe
we have an embedded growth opportunity as we increase below market rents
to market, with further growth potential from accretive acquisitions as
well as select redevelopment and build-to-suit opportunities."
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1
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Annualized rent per occupied square foot represents gross monthly
base rent under leases commenced as of the specified periods,
multiplied by twelve. This amount reflects total cash rent before
abatements. Where applicable, annualized rent has been grossed up by
adding annualized expense reimbursements to base rent. Annualized
rent for certain office properties includes rent attributable to
retail.
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2
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Please see our definition of "same-store properties" on page 10.
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3
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Please see our reconciliations of office, hotel, lending, and total
segment NOI to net income starting on page 11.
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4
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Please see page 8 for a reconciliation of net income (loss)
attributable to common stockholders to FFO attributable to common
stockholders and a discussion of the benefits and limitations of FFO
as a supplemental measure of operating performance.
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Program to Unlock Embedded Value in Our Portfolio and Improve Trading
Liquidity of Our Common Stock
As part of our previously announced program to unlock embedded value in
our portfolio, enhance growth prospects and improve the trading
liquidity of our common stock, we sold six properties, entered into a
purchase and sale agreement to sell an office property located in
Oakland, California that is expected to close in the second quarter of
2019 and are negotiating the sale of an office property in Washington,
D.C. Further, as a matter of prudent management, after evaluating each
asset within our portfolio as well as the intrinsic value of each
property, we are negotiating the sales of additional properties. We
intend to use the net proceeds from these asset sales (other than to the
extent used to pay down debt) and a substantial portion of our
unrestricted cash balances and or funds from our revolving credit
facility to return capital to holders of our Common Stock. We currently
expect such return of capital to take the form of a special cash
dividend payable to all holders of our common stock. Further, we have
been informed that our principal stockholder intends to liquidate. The
liquidation may include, among other things, the distribution of certain
of the shares of our common stock owned by it to certain of its
investors. We believe that these actions will improve the trading
liquidity of our common stock and make our common stock eligible for
inclusion in several indices.
Financial Highlights
As of March 31, 2019, our real estate portfolio consists of 15 assets,
all of which are fee-simple properties. The portfolio includes 13 office
properties (including two development sites, one of which is being used
as a parking lot), totaling approximately 2.1 million rentable square
feet, and one hotel, with an ancillary parking garage, which has 503
rooms. We also operate a lending business.
Net income attributable to common stockholders was $287,631,000, or
$6.30 per diluted share of common stock, for the three months ended
March 31, 2019, compared to net loss attributable to common stockholders
of $(3,026,000), or $(0.07) per diluted share of common stock, for the
three months ended March 31, 2018. The increase is primarily
attributable to the gain on sale of real estate of $377,581,000, a
decrease of $3,518,000 in depreciation and amortization, a decrease of
$2,986,000 in interest expense not allocated to our operating segments,
a decrease of $891,000 in general and administrative expense not
allocated to our operating segments, and a decrease of $361,000 in asset
management and other fees to related parties not allocated to our
operating segments, partially offset by $66,200,000 in impairment of
real estate, $25,071,000 in loss on early extinguishment of debt, a
decrease of $3,410,000 in net operating income of our operating
segments, and an increase of $517,000 in redeemable preferred stock
dividends declared or accumulated.
FFO attributable to common stockholders5 was $(14,120,000),
or $(0.31) per diluted share of common stock, for the three months ended
March 31, 2019, compared to $10,122,000, or $0.23 per diluted share of
common stock, for the three months ended March 31, 2018. The decrease in
FFO attributable to common stockholders5 is primarily
attributable to $25,071,000 in loss on early extinguishment of debt, a
decrease of $3,410,000 in NOI6 of our operating segments, and
an increase of $517,000 in redeemable preferred stock dividends declared
or accumulated, partially offset by a decrease of $2,986,000 in interest
expense not allocated to our operating segments, a decrease of $891,000
in general and administrative expense not allocated to our operating
segments, and a decrease of $361,000 in asset management and other fees
to related parties not allocated to our operating segments.
Segment Information
Our reportable segments during the three months ended March 31, 2019 and
2018 consisted of two types of commercial real estate properties,
namely, office and hotel, as well as a segment for our lending business.
Net income attributable to common stockholders was $287,631,000, or
$6.30 per diluted share of common stock, for the three months ended
March 31, 2019, compared to net loss attributable to common stockholders
of $(3,026,000), or $(0.07) per diluted share of common stock, for the
three months ended March 31, 2018, which represents an increase of
$290,657,000, or $6.37 per diluted share of common stock. Total segment
NOI6 was $24,815,000 for the three months ended March 31,
2019, compared to $28,225,000 for the three months ended March 31, 2018.
____________________________
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5
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Please see page 8 for a reconciliation of net income (loss)
attributable to common stockholders to FFO attributable to common
stockholders and a discussion of the benefits and limitations of FFO
as a supplemental measure of operating performance.
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6
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Please see our reconciliations of office, hotel, lending, and total
segment NOI to net income starting on page 11.
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Office
Same-Store7
Same-store7 office segment NOI8 increased 1.3% on
a GAAP basis and increased 9.0% on a cash basis for the three months
ended March 31, 2019 compared to the three months ended March 31, 2018.
The increase in same-store7 office segment NOI8
was primarily due to increases in rental revenue at certain of our
properties as a result of increases in rental rates and an increase in
real estate tax reimbursements at one of our properties in Oakland,
California due to real estate tax refunds that reduced such
reimbursements during the first quarter of 2018, partially offset by an
increase in real estate taxes at certain of our properties in California
due to real estate tax refunds related to prior years recognized during
the first quarter of 2018 and at certain of our Washington, D.C.
properties due to increases in such properties' assessed values.
At March 31, 2019, the Company’s same-store7 office
portfolio was 92.9% occupied, an increase of 30 basis points
year-over-year on a same-store7 basis, and 93.6% leased, an
increase of 70 basis points year-over-year on a same-store7
basis. The annualized rent per occupied square foot9 on a
same-store basis was $43.99 at March 31, 2019 compared to $41.99 at
March 31, 2018. For the three months ended March 31, 2019, the Company
executed 32,576 square feet of recurring leases at our same-store7
office portfolio, representing same-store7 cash rent growth
per square foot of 21.6%.
Total
Office segment NOI8 decreased to $19,732,000 for the three
months ended March 31, 2019, from $22,548,000 for the three months ended
March 31, 2018. The decrease was primarily attributable to the sale of
three office properties and a parking garage in Oakland, California, the
sale of an office property in Washington, D.C., and the sale of an
office property in San Francisco, California, all in March 2019 and an
increase in real estate taxes at certain of our properties in California
due to real estate tax refunds related to prior years recognized during
the first quarter of 2018 and at certain of our Washington, D.C.
properties due to increases in such properties' assessed values,
partially offset by increases in rental revenue at certain of our
properties due to increases in rental rates, and an increase in real
estate tax reimbursements at one of our properties in Oakland,
California due to real estate tax refunds that reduced such
reimbursements during the first quarter of 2018.
Hotel
Hotel segment NOI8 was $3,881,000 for the three months ended
March 31, 2019, compared to $3,940,000 for the three months ended
March 31, 2018.
Lending
Our lending segment primarily consists of our SBA 7(a) lending platform,
which is a national lender that primarily originates loans to small
businesses in the hospitality industry. Lending segment NOI8
was $1,202,000 for the three months ended March 31, 2019, compared to
$1,737,000 for the three months ended March 31, 2018. The decrease was
primarily due to an increase in interest expense as a result of the
issuance of the SBA 7(a) loan-backed notes in May 2018.
Debt and Equity
During the three months ended March 31, 2019, we issued 305,474 Series A
preferred units, with each Series A preferred unit consisting of one
share of Series A preferred stock and one warrant to purchase 0.25
shares of our common stock, resulting in net proceeds of
approximately $6,984,000. Net proceeds represent gross proceeds offset
by costs specifically identifiable to the offering of the Series A
preferred units, such as commissions, dealer manager fees, and other
offering fees and expenses.
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7
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Please see our definition of "same-store properties" on page 10.
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8
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Please see our reconciliations of office, hotel, lending, and total
segment NOI to net income starting on page 11.
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9
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Annualized rent per occupied square foot represents gross monthly
base rent under leases commenced as of the specified periods,
multiplied by twelve. This amount reflects total cash rent before
abatements. Where applicable, annualized rent has been grossed up by
adding annualized expense reimbursements to base rent. Annualized
rent for certain office properties includes rent attributable to
retail.
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During the three months ended March 31, 2019, we repaid the outstanding
borrowings on our revolving credit facility using cash on hand and net
proceeds from the asset sales completed in March 2019, and we terminated
our two remaining interest rate swaps, which had an aggregate notional
value of $120,000,000. Such swaps were in the money at the time of their
termination and we received aggregate termination payments, net of fees,
of $1,302,000. We expect the revolving credit facility to remain in
place following our program to unlock embedded value in our portfolio
and improve trading liquidity of our common stock.
On March 1, 2019, in connection with the sale of three office properties
and a parking garage in Oakland, California, we legally defeased the
related mortgage loans with an aggregate outstanding principal balance
of $205,500,000 at such time, using proceeds from the sale.
On March 1, 2019, in connection with the sale of an office property in
Washington, D.C., we prepaid the related mortgage loan with an
outstanding principal balance of $46,000,000 at such time, using
proceeds from the sale.
On March 14, 2019, in connection with the sale of an office property in
San Francisco, California, a mortgage loan with an outstanding principal
balance of $28,200,000 at such time, was assumed by the buyer.
Dispositions
On March 1, 2019, we sold 100% fee-simple interests in three office
properties and one parking garage, all in Oakland, California, to an
unrelated third-party and recognized an aggregate gain of $289,779,000.
On March 1, 2019, we sold a 100% fee-simple interest in one office
property in Washington, D.C. to an unrelated third-party and recognized
a gain of $45,710,000.
On March 14, 2019, we sold a 100% fee-simple interest in one office
property in San Francisco, California to an unrelated third-party and
recognized a gain of $42,092,000.
Dividends
On February 20, 2019, we declared a quarterly cash dividend of $0.125
per share of our common stock, which was paid on March 25, 2019 to
shareholders of record at the close of business on March 6, 2019.
Further, we declared a quarterly cash dividend of $0.34375 per share of
our Series A preferred stock, or portion thereof for issuances during
the period from January 1, 2019 to March 31, 2019, which was paid on
April 15, 2019 to shareholders of record at the close of business on
April 5, 2019.
About CMCT
CIM Commercial is a real estate investment trust that primarily
acquires, owns, and operates Class A and creative office assets in
vibrant and improving metropolitan communities throughout the United
States. Its properties are primarily located in Los Angeles and the San
Francisco Bay Area. CIM Commercial is operated by affiliates of CIM
Group, L.P., a vertically-integrated owner and operator of real assets
with multi-disciplinary expertise and in-house research, acquisition,
credit analysis, development, finance, leasing, and onsite property
management capabilities (www.cimcommercial.com).
FORWARD-LOOKING STATEMENTS
The information set forth herein contains "forward-looking statements."
You can identify these statements by the fact that they do not relate
strictly to historical or current facts or discuss the business and
affairs of CIM Commercial on a prospective basis. Further, statements
that include words such as "may," "will," "project," "might," "expect,"
“target,” "believe," "anticipate," "intend," "could," "would,"
"estimate," "continue," "pursue," "potential", "forecast", "seek",
"plan", or "should" or the negative or other words or expressions of
similar meaning, may identify forward-looking statements.
CIM Commercial bases these forward-looking statements on particular
assumptions that it has made in light of its experience, as well as its
perception of expected future developments and other factors that it
believes are appropriate under the circumstances. These forward-looking
statements are necessarily estimates reflecting the judgment of CIM
Commercial and involve a number of risks and uncertainties that could
cause actual results to differ materially from those suggested by the
forward-looking statements. These forward-looking statements are subject
to risks, uncertainties and other factors, including those associated
with (i) CIM Commercial's ability to consummate the sales of properties
currently targeted for sale, (ii) the extent to which capital is
returned to stockholders, if at all, and the timing thereof, (iii) the
timing, manner, and nature of the liquidation and winding up of CIM
Commercial's controlling stockholder, and (iv) general economic, market
and other conditions. For a further list and description of the risks
and uncertainties inherent in forward-looking statements, see CIM
Commercial's Annual Report on Form 10-K for the fiscal year ended
December 31, 2018.
As you read and consider the information herein, you are cautioned to
not place undue reliance on these forward-looking statements. These
statements are not guarantees of performance or results and speak only
as of the date hereof. These forward-looking statements involve risks,
uncertainties and assumptions. In light of these risks and
uncertainties, there can be no assurance that the results and events
contemplated by the forward-looking statements contained herein will in
fact transpire. New factors emerge from time to time, and it is not
possible for CIM Commercial to predict all of them. Nor can CIM
Commercial assess the impact of each such factor or the extent to which
any factor, or combination of factors may cause results to differ
materially from those contained in any forward looking statement. CIM
Commercial undertakes no obligation to publicly update or release any
revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events, except as required by law.
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CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES
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Consolidated Balance Sheets
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(Unaudited and in thousands, except share and per share amounts)
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March 31, 2019
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December 31, 2018
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(Unaudited)
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ASSETS
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Investments in real estate, net
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$
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667,965
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$
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1,040,937
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Cash and cash equivalents
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299,429
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54,931
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Restricted cash
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11,738
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22,512
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Loans receivable, net
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72,413
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83,248
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Accounts receivable, net
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5,904
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6,640
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Deferred rent receivable and charges, net
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46,625
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84,230
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Other intangible assets, net
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8,813
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|
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9,531
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Other assets
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15,471
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18,197
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Assets held for sale, net
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58,216
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|
|
22,175
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TOTAL ASSETS
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$
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1,186,574
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|
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$
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1,342,401
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LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY
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LIABILITIES:
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Debt, net
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$
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165,550
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$
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588,671
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Accounts payable and accrued expenses
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|
13,072
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|
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41,598
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Intangible liabilities, net
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|
2,359
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|
|
2,872
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Due to related parties
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|
9,105
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|
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10,951
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Other liabilities
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|
11,331
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|
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16,535
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Liabilities associated with assets held for sale, net
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41,861
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|
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28,766
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Total liabilities
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243,278
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|
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689,393
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COMMITMENTS AND CONTINGENCIES
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REDEEMABLE PREFERRED STOCK: Series A, $0.001 par value; 36,000,000
shares authorized; 1,481,243 and 1,480,043 shares issued and
outstanding, respectively, at March 31, 2019 and 1,566,386 and
1,565,346 shares issued and outstanding, respectively, at December
31, 2018; liquidation preference of $25.00 per share, subject to
adjustment
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33,789
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35,733
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EQUITY:
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Series A cumulative redeemable preferred stock, $0.001 par value;
36,000,000 shares authorized; 1,677,786 and 1,669,881 shares issued
and outstanding, respectively, at March 31, 2019 and 1,287,169 and
1,281,804 shares issued and outstanding, respectively, at December
31, 2018; liquidation preference of $25.00 per share, subject to
adjustment
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41,541
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31,866
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Series L cumulative redeemable preferred stock, $0.001 par value;
9,000,000 shares authorized; 8,080,740 shares issued and outstanding
at March 31, 2019 and December 31, 2018; liquidation preference of
$28.37 per share, subject to adjustment
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229,251
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229,251
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Common stock, $0.001 par value; 900,000,000 shares authorized;
43,795,073 shares issued and outstanding at March 31, 2019 and
December 31, 2018
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44
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44
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Additional paid-in capital
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789,578
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790,354
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Accumulated other comprehensive income
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—
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1,806
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Distributions in excess of earnings
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(151,570
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)
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(436,883
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)
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Total stockholders' equity
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908,844
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616,438
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Noncontrolling interests
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663
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|
837
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Total equity
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909,507
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|
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617,275
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TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK, AND EQUITY
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$
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1,186,574
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$
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1,342,401
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CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES
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Consolidated Statements of Operations
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(Unaudited and in thousands, except per share amounts)
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Three Months Ended March 31,
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2019
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2018
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(Unaudited)
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REVENUES:
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Rental and other property income
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$
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33,581
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$
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35,144
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Hotel income
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9,804
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9,689
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Interest and other income
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3,892
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3,461
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47,277
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48,294
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EXPENSES:
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Rental and other property operating
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20,253
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17,916
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Asset management and other fees to related parties
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5,886
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6,211
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Interest
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4,045
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|
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6,633
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General and administrative
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|
1,788
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|
|
3,376
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Transaction costs
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|
44
|
|
|
—
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Depreciation and amortization
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|
9,630
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|
|
13,148
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Loss on early extinguishment of debt
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|
25,071
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|
|
—
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Impairment of real estate
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|
66,200
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|
|
—
|
|
|
|
132,917
|
|
|
47,284
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|
Gain on sale of real estate
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|
377,581
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|
|
—
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INCOME BEFORE PROVISION FOR INCOME TAXES
|
|
291,941
|
|
|
1,010
|
|
Provision for income taxes
|
|
318
|
|
|
388
|
|
NET INCOME
|
|
291,623
|
|
|
622
|
|
Net loss (income) attributable to noncontrolling interests
|
|
174
|
|
|
(4
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)
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NET INCOME ATTRIBUTABLE TO THE COMPANY
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|
291,797
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|
|
618
|
|
Redeemable preferred stock dividends declared or accumulated
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|
(4,162
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)
|
|
(3,645
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)
|
Redeemable preferred stock redemptions
|
|
(4
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)
|
|
1
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
|
$
|
287,631
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|
|
$
|
(3,026
|
)
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NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS PER SHARE:
|
|
|
|
|
Basic
|
|
$
|
6.57
|
|
|
$
|
(0.07
|
)
|
Diluted
|
|
$
|
6.30
|
|
|
$
|
(0.07
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)
|
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
|
|
|
|
|
Basic
|
|
43,795
|
|
|
43,785
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|
Diluted
|
|
45,736
|
|
|
43,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES
Funds
from Operations
(Unaudited and in thousands, except per
share amounts)
We believe that FFO is a widely recognized and appropriate measure of
the performance of a REIT and that it is frequently used by securities
analysts, investors and other interested parties in the evaluation of
REITs, many of which present FFO when reporting their results. FFO
represents net income (loss) attributable to common stockholders,
computed in accordance with generally accepted accounting principles
("GAAP"), which reflects the deduction of redeemable preferred stock
dividends accumulated, excluding gains (or losses) from sales of real
estate, impairment of real estate, and real estate depreciation and
amortization. We calculate FFO in accordance with the standards
established by the National Association of Real Estate Investment Trusts
(the "NAREIT").
Like any metric, FFO should not be used as the only measure of our
performance because it excludes depreciation and amortization and
captures neither the changes in the value of our real estate properties
that result from use or market conditions nor the level of capital
expenditures and leasing commissions necessary to maintain the operating
performance of our properties, all of which have real economic effect
and could materially impact our operating results. Other REITs may not
calculate FFO in accordance with the standards established by the
NAREIT; accordingly, our FFO may not be comparable to the FFOs of other
REITs. Therefore, FFO should be considered only as a supplement to net
income (loss) as a measure of our performance and should not be used as
a supplement to or substitute measure for cash flows from operating
activities computed in accordance with GAAP. FFO should not be used as a
measure of our liquidity, nor is it indicative of funds available to
fund our cash needs, including our ability to pay dividends.
The following table sets forth a reconciliation of net income (loss)
attributable to common stockholders to FFO attributable to common
stockholders:
|
|
Three Months Ended March 31,
|
|
|
2019
|
|
2018
|
|
|
(in thousands)
|
Net income (loss) attributable to common stockholders
|
|
$
|
287,631
|
|
|
$
|
(3,026
|
)
|
Depreciation and amortization
|
|
9,630
|
|
|
13,148
|
|
Impairment of real estate
|
|
66,200
|
|
|
—
|
|
Gain on sale of depreciable assets7
|
|
(377,581
|
)
|
|
—
|
|
FFO attributable to common stockholders
|
|
$
|
(14,120
|
)
|
|
$
|
10,122
|
|
FFO attributable to common stockholders per diluted share
|
|
$
|
(0.31
|
)
|
|
$
|
0.23
|
|
____________________________
|
7
|
|
In connection with the sale of certain properties during the three
months ended March 31, 2019, we recognized $25,071,000, or $0.55 per
diluted share, in loss on early extinguishment of debt primarily
related to the defeasance and prepayment of mortgage loans
collateralized by such properties. Such loss on early extinguishment
of debt is not included in the adjustment for the gain on sale of
depreciable assets presented in the table above.
|
|
|
|
|
|
|
CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES
Earnings
Per Share
(Unaudited and in thousands, except per share
amounts)
Earnings per share ("EPS") for the year-to-date period may differ from
the sum of quarterly EPS amounts due to the required method for
computing EPS for the respective periods. In addition, EPS is calculated
independently for each component and may not be additive due to rounding.
The following table reconciles the numerator and denominator used in
computing our basic and diluted per-share amounts for net income (loss)
attributable to common stockholders for the three months ended March 31,
2019 and 2018:
|
|
Three Months Ended March 31,
|
|
|
2019
|
|
2018
|
Numerator:
|
|
|
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
287,631
|
|
|
$
|
(3,026
|
)
|
Redeemable preferred stock dividends declared on dilutive shares
|
|
492
|
|
|
—
|
|
Diluted net income (loss) attributable to common stockholders
|
|
$
|
288,123
|
|
|
$
|
(3,026
|
)
|
Denominator:
|
|
|
|
|
Basic weighted average shares of Common Stock outstanding
|
|
43,795
|
|
|
43,785
|
|
Effect of dilutive securities—contingently issuable shares
|
|
1,941
|
|
|
—
|
|
Diluted weighted average shares and common stock equivalents
outstanding
|
|
45,736
|
|
|
43,785
|
|
Net income (loss) attributable to common stockholders per share:
|
|
|
|
|
Basic
|
|
$
|
6.57
|
|
|
$
|
(0.07
|
)
|
Diluted
|
|
$
|
6.30
|
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES
Reconciliation
of Net Operating Income
(Unaudited and in thousands)
We internally evaluate the operating performance and financial results
of our real estate segments based on segment NOI, which is defined as
rental and other property income and expense reimbursements less
property related expenses and excludes non-property income and expenses,
interest expense, depreciation and amortization, corporate related
general and administrative expenses, gain (loss) on sale of real estate,
gain (loss) on early extinguishment of debt, impairment of real estate,
transaction costs, and provision for income taxes. For our lending
segment, we define segment NOI as interest income net of interest
expense and general overhead expenses. We also evaluate the operating
performance and financial results of our operating segments using cash
basis NOI, or "cash NOI". We define cash NOI as segment NOI adjusted to
exclude the effect of the straight lining of rents, acquired above/below
market lease amortization and other adjustments required by GAAP.
Segment NOI and cash NOI are not measures of operating results or cash
flows from operating activities as measured by GAAP and should not be
considered alternatives to income from continuing operations, or to cash
flows as a measure of liquidity, or as an indication of our performance
or of our ability to pay dividends. Companies may not calculate segment
NOI or cash NOI in the same manner. We consider segment NOI and cash NOI
to be useful performance measures to investors and management because,
when compared across periods, they reflect the revenues and expenses
directly associated with owning and operating our properties and the
impact to operations from trends in occupancy rates, rental rates and
operating costs, providing a perspective not immediately apparent from
income from continuing operations. Additionally, we believe that cash
NOI is helpful to investors because it eliminates straight line rent and
other non-cash adjustments to revenue and expenses.
To facilitate a comparison of our segments and portfolio between
reporting periods, we calculate comparable amounts for a subset of our
segments and portfolio referred to as our “same-store properties.” Our
same-store properties are ones which we have owned and operated in a
consistent manner and reported in our consolidated results during the
entire span of the periods being reported. We excluded from our
same-store property set this quarter any properties (i) acquired on or
after January 1, 2018; (ii) sold or otherwise removed from our
consolidated financial statements on or before March 31, 2019; or (iii)
that underwent a major repositioning project we believed significantly
affected its results at any point during the period commencing on
January 1, 2018 and ending on March 31, 2019.
|
CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES
|
Reconciliation of Net Operating Income (Continued)
|
(Unaudited and in thousands)
|
|
Below is a reconciliation of cash NOI to segment NOI and net
income for the three months ended March 31, 2019 and 2018.
|
|
|
|
Three Months Ended March 31, 2019
|
|
|
Same- Store Office
|
|
Non- Same- Store Office
|
|
Total Office
|
|
Hotel
|
|
Lending
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash net operating income excluding lease termination income
|
|
$
|
12,510
|
|
|
$
|
7,029
|
|
|
$
|
19,539
|
|
|
$
|
3,881
|
|
|
$
|
1,202
|
|
|
$
|
24,622
|
|
Cash lease termination income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Cash net operating income
|
|
12,510
|
|
|
7,029
|
|
|
19,539
|
|
|
3,881
|
|
|
1,202
|
|
|
24,622
|
|
Deferred rent and amortization of intangible assets, liabilities,
and lease inducements
|
|
2
|
|
|
191
|
|
|
193
|
|
|
—
|
|
|
—
|
|
|
193
|
|
Straight line rent, below-market ground lease and amortization of
intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Straight line lease termination income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Segment net operating income
|
|
12,512
|
|
|
7,220
|
|
|
19,732
|
|
|
3,881
|
|
|
1,202
|
|
|
24,815
|
|
Interest and other income
|
|
|
|
|
|
|
|
|
|
|
|
319
|
|
Asset management and other fees to related parties
|
|
|
|
|
|
|
|
|
|
|
|
(5,249
|
)
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
(3,463
|
)
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(1,117
|
)
|
Transaction costs
|
|
|
|
|
|
|
|
|
|
|
|
(44
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
(9,630
|
)
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
(25,071
|
)
|
Impairment of real estate
|
|
|
|
|
|
|
|
|
|
|
|
(66,200
|
)
|
Gain on sale of real estate
|
|
|
|
|
|
|
|
|
|
|
|
377,581
|
|
Income before provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
291,941
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
(318
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
291,623
|
|
Net loss attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
174
|
|
Net income attributable to the Company
|
|
|
|
|
|
|
|
|
|
|
|
$
|
291,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CIM COMMERCIAL TRUST CORPORATION AND SUBSIDIARIES
|
Reconciliation of Net Operating Income (Continued)
|
(Unaudited and in thousands)
|
|
|
|
Three Months Ended March 31, 2018
|
|
|
Same- Store Office
|
|
Non- Same- Store Office
|
|
Total Office
|
|
Hotel
|
|
Lending
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash net operating income excluding lease termination income
|
|
$
|
11,475
|
|
|
$
|
9,681
|
|
|
$
|
21,156
|
|
|
$
|
3,938
|
|
|
$
|
1,726
|
|
|
$
|
26,820
|
|
Cash lease termination income
|
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
Cash net operating income
|
|
11,481
|
|
|
9,681
|
|
|
21,162
|
|
|
3,938
|
|
|
1,726
|
|
|
26,826
|
|
Deferred rent and amortization of intangible assets, liabilities,
and lease inducements
|
|
876
|
|
|
510
|
|
|
1,386
|
|
|
2
|
|
|
—
|
|
|
1,388
|
|
Straight line rent, below-market ground lease and amortization of
intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
11
|
|
Straight line lease termination income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Segment net operating income
|
|
12,357
|
|
|
10,191
|
|
|
22,548
|
|
|
3,940
|
|
|
1,737
|
|
|
28,225
|
|
Asset management and other fees to related parties
|
|
|
|
|
|
|
|
|
|
|
|
(5,610
|
)
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
(6,449
|
)
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
(2,008
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
(13,148
|
)
|
Income before provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
1,010
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
|
(388
|
)
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
622
|
|
Net income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
Net income attributable to the Company
|
|
|
|
|
|
|
|
|
|
|
|
$
|
618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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