City Office REIT Reports Decline in Revenue and Profitability in Third Quarter 2024

City Office REIT, Inc. reported a challenging third quarter for 2024, with significant declines in revenue and profitability compared to the same period in 2023. For the three months ended September 30, 2024, rental and other revenues totaled $42.4 million, a decrease of $1.8 million (4%) from $44.2 million in the prior year. This decline was attributed to the disposition of the Cascade Station property, lower occupancy rates at certain properties, and write-offs related to WeWork leases. For the nine months ended September 30, 2024, total revenues also fell by $5.6 million (4%) to $129.2 million.

Operating income for the third quarter was $6.2 million, down from $8.3 million in the same quarter of 2023. The company reported a net loss of $2.5 million for the third quarter, compared to a net income of $130,000 in the prior year. For the nine-month period, the net loss reached $6.6 million, a stark contrast to the net income of $487,000 recorded in 2023. The net loss attributable to common stockholders for the third quarter was $(4.5 million), compared to $(1.9 million) in the same period last year.

Total assets decreased to $1.475 billion as of September 30, 2024, down from $1.511 billion at the end of 2023. Total liabilities also saw a reduction, amounting to $727.7 million, down from $738.7 million. Notably, debt levels decreased to $648.2 million from $669.5 million, reflecting the company's efforts to manage its leverage.

The company experienced a loss on deconsolidation of $1.5 million related to the Cascade Station property, which was deconsolidated following an assignment in lieu of foreclosure agreement. This property had a net carrying value of $17.9 million and a mortgage loan of $20.6 million at the time of deconsolidation.

Operating expenses for the third quarter increased slightly to $36.2 million, up from $35.9 million in 2023, driven by higher general and administrative costs and property operating expenses. Interest expenses rose to $8.6 million, primarily due to higher interest rates.

As of September 30, 2024, the company had approximately $25.9 million in cash and cash equivalents, down from $30.1 million at the end of 2023. The company continues to focus on its strategy of acquiring and operating office properties, although it faces challenges from evolving market conditions, including increased inflation and interest rates, which have impacted tenant retention and leasing activity.