CITY OFFICE REIT, INC. The following discussion and analysis is based on, and should be read in
conjunction with, the condensed, consolidated financial statements and the
related notes thereto of the
As used in this section, unless the context otherwise requires, references to "we," "our," "us," and "our company" refer toCity Office REIT, Inc. , aMaryland corporation, together with our consolidated subsidiaries, includingCity Office REIT Operating Partnership L.P. , aMaryland limited partnership, of which we are the sole general partner and which we refer to in this section as ourOperating Partnership , except where it is clear from the context that the term only meansCity Office REIT, Inc.
Cautionary Statement Regarding Forward-Looking Statements
This quarterly report on Form 10-Q, including "Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition," contains both historical and forward-looking statements. All statements, other than statements of historical fact are, or may be deemed to be, forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward looking statements are not based on historical facts, but rather reflect our current expectations and projections about our future results, performance, prospects and opportunities. These forward looking statements may be identified by the use of words including "anticipate," "believe," "expect," "intend," "may," "might," "plan," "estimate," "project," "should," "will," "result" and similar terms and phrases. These forward looking statements are subject to a number of known and unknown risks, uncertainties and other factors that are difficult to predict and which could cause our actual future results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward looking statements. These risks, uncertainties and other factors include, among others:
• adverse economic or real estate developments in the office sector or the
markets in which we operate;
• changes in local, regional, national and international economic conditions;
• our inability to compete effectively;
• our inability to collect rent from tenants or renew tenants' leases on
attractive terms if at all;
• demand for and market acceptance of our properties for rental purposes;
• defaults on or non-renewal of leases by tenants;
• increased interest rates and any resulting increase in financing or
operating costs;
• decreased rental rates or increased vacancy rates;
• our failure to obtain necessary financing or access the capital markets
on favorable terms or at all;
• changes in the availability of acquisition opportunities;
• availability of qualified personnel;
• our inability to successfully complete real estate acquisitions
or
dispositions on the terms and timing we expect, or at all;
• our failure to successfully operate acquired properties and operations;
• changes in our business, financing or investment strategy or the markets
in which we operate;
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• our failure to generate sufficient cash flows to service our outstanding
indebtedness;
• environmental uncertainties and risks related to adverse weather
conditions and natural disasters;
• our failure to qualify and maintain our status as a real estate
investment trust ("REIT");
• government approvals, actions and initiatives, including the need for
compliance with environmental requirements;
• outcome of claims and litigation involving or affecting us;
• financial market fluctuations;
• changes in real estate, taxation and zoning laws and other legislation
and government activity and changes to real property tax rates and the
taxation of REITs in general;
• uncertaintly regarding the Company's obligations under its floating rate
debt instruments upon discontinuation of LIBOR;
• a material increase in institutional ownership of real estate insecondary markets that could result in, among others, compression of cap
rates and fewer acquisition opportunities being available to the Company;
and
• other factors described in our news releases and filings with the UnitedStates Securities and Exchange Commission (the "SEC"), including but not limited to those described in our Annual Report on Form 10-K for the year endedDecember 31, 2018 under the heading "Risk Factors" and in our subsequent reports filed with theSEC . The forward looking statements included in this report are made only as of the date of this report, and except as otherwise required by federal securities law, we do not have any obligation to publicly update or revise any forward looking statements to reflect subsequent events or circumstances.
Overview
Company
We were formed as a
Revenue Base
As of
Office Leases
Historically, most leases for our properties were on a full-service gross or net
lease basis, and we expect to continue to use such leases in the future. A
full-service gross lease generally has a base year expense "stop", whereby we
pay a stated amount of expenses as part of the rent payment while future
increases (above the base year stop) in property operating expenses are billed
to the tenant based on such tenant's proportionate square footage in the
property. The property operating expenses are reflected in operating expenses;
however, only the increased property operating expenses above the base year stop
recovered from tenants are reflected as tenant recoveries in our statements of
operations. In a triple net lease, the tenant is typically responsible for all
property taxes and operating expenses. As such, the base rent payment does not
include any operating expenses, but rather all such expenses are
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billed to or paid by the tenant. The full amount of the expenses for this lease type is reflected in operating expenses, and the reimbursement is reflected in tenant recoveries. All tenants in our Lake Vista Pointe,FRP Ingenuity Drive , Sorrento Mesa, andCanyon Park properties have triple net leases. Certain tenants at AmberGlen, Superior Pointe, FRP Collection, 2525 McKinnon,Circle Point , The Quad andCascade Station have leases on a triple net basis. We are also a lessor for a fee simple ground lease at the AmberGlen property. All of our remaining leases are full-service gross leases.
Factors That May Influence Our Operating Results and Financial Condition
Business and Strategy
We focus on owning and acquiring office properties in our target markets. Our target markets generally possess what we believe are favorable economic growth trends, growing populations with above-average employment growth forecasts, a large number of government offices, large international, national and regional employers across diversified industries, are generally low-cost centers for business operations, and exhibit favorable occupancy trends. We utilize our management's market-specific knowledge and relationships as well as the expertise of local real estate operators and our investment partners to identify acquisition opportunities that we believe will offer cash flow stability and long-term value appreciation. Our target markets are attractive, among other reasons, because we believe that ownership is often concentrated among local real estate operators that typically do not benefit from the same access to capital as public REITs and there is a relatively low level of participation of large institutional investors. We believe that these factors result in attractive pricing levels and risk-adjusted returns.
Rental Revenue and Tenant Recoveries
The amount of net rental revenue generated by our properties will depend
principally on our ability to maintain the occupancy rates of currently leased
space and to lease currently available space and space that becomes available
from lease terminations. The amount of rental revenue generated also depends on
our ability to maintain or increase rental rates at our properties. We believe
that the average rental rates for our portfolio of properties are generally
in-line or slightly below the current average quoted market rates. Negative
trends in one or more of these factors could adversely affect our rental revenue
in future periods. Future economic downturns or regional downturns affecting our
markets or submarkets or downturns in our tenants' industries that impair our
ability to renew or re-let space and the ability of our tenants to fulfill their
lease commitments, as in the case of tenant bankruptcies, could adversely affect
our ability to maintain or increase rental rates at our properties. In addition,
growth in rental revenue will also partially depend on our ability to acquire
additional properties that meet our investment criteria.
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Our Properties
As ofJune 30, 2019 , we owned 27 office complexes comprised of 65 office buildings with a total of approximately 5.7 million square feet of NRA in the metropolitan areas ofDallas ,Denver ,Orlando ,Phoenix ,Portland ,San Diego ,Seattle andTampa . The following table presents an overview of our portfolio as ofJune 30, 2019 (properties listed by descending NRA by market). NRA Annualized Base Annualized Annualized Base Metropolitan Economic (000s Square In Place Rent per Square Gross Rent per Rent(2) Area Property Interest Feet) Occupancy Foot Square Foot(1) ($000s)
Phoenix, AZ Pima Center 100.0 % 272 96.5 % $ 27.15 $ 27.15 $ 7,122
(21.3% of NRA) SanTan 100.0 % 267 98.6 % $ 27.67 $ 27.67 $ 7,272
5090 N 40th St 100.0 % 175 95.8 % $ 28.96 $ 28.96 $ 4,848
Camelback Square 100.0 % 173 80.8 % $ 29.24 $ 29.24 $ 4,092
The Quad 100.0 % 163 100.0 % $ 28.14 $ 28.39 $ 4,587
Papago Tech 100.0 % 163 100.0 % $ 21.85 $ 21.85 $ 3,556
Denver, CO Cherry Creek 100.0 % 356 100.0 % $ 18.53 $ 18.53 $ 6,591
(18.3%) Circle Point 100.0 % 272 98.8 % $ 17.46 $ 30.36 $ 4,692
DTC Crossroads 100.0 % 189 53.7 % $ 26.24 $ 26.24 $ 2,665
Superior Pointe 100.0 % 151 96.5 % $ 17.66 $ 29.17 $ 2,579
Logan Tower 100.0 % 72 73.3 % $ 21.62 $ 21.62 $ 1,139
Tampa, FL Park Tower 94.8 % 471 93.5 % $ 24.45 $ 24.45 $ 10,761
(18.2%) City Center 95.0 % 241 94.7 % $ 25.40 $ 25.40 $ 5,807
Intellicenter 100.0 % 204 100.0 % $ 23.99 $ 23.99 $ 4,881
Carillon Point 100.0 % 124 100.0 % $ 28.06 $ 28.06 $ 3,485
Orlando, FL FRP Collection 95.0 % 272 84.5 % $ 24.29 $ 26.17 $ 5,575
(12.6%) Central Fairwinds 97.0 % 168 89.5 % $ 24.49 $ 24.49 $ 3,685
Greenwood Blvd 100.0 % 155 100.0 % $ 22.75 $ 22.75 $ 3,527
FRP Ingenuity Drive 100.0 % 125 100.0 % $ 21.50 $ 29.50 $ 2,677
San Diego, CA Sorrento Mesa 100.0 % 296 85.3 % $ 25.19 $ 31.19 $ 6,360
(10.2%) Mission City 100.0 % 286 95.6 % $ 35.14 $ 35.14 $ 9,603
Dallas, TX 190 Office Center 100.0 % 303 89.5 % $ 25.64 $ 25.64 $ 6,960
(10.1%) Lake Vista Pointe 100.0 % 163 100.0 % $ 16.00 $ 24.00 $ 2,613
2525 McKinnon 100.0 % 111 90.4 % $ 28.04 $ 45.04 $ 2,822
Portland, OR AmberGlen 76.0 % 201 96.9 % $ 21.30 $ 23.89 $ 4,151
(5.8%) Cascade Station 100.0 % 128 100.0 % $ 26.37 $ 32.38 $ 3,363
Seattle, WA
(3.5%) Canyon Park 100.0 % 207 100.0 % $ 21.20 $ 29.20 $ 4,384
Total / Weighted Average - June 30, 2019 (3) 5,708 93.4 % $ 24.36 $ 27.00 $ 129,797
(1)
was increased by
equivalent base rent. AmberGlen has a net lease for one tenant which has been
grossed up by
eight tenants which have been grossed up by
Collection has net leases for five tenants which have been grossed up by
on a pro-rata basis.
have been grossed up by
a net lease, which has been grossed up by
Station has net leases for six tenants which have been grossed up by
pro-rata basis.
(2) Annualized base rent is calculated by multiplying (i) rental payments
(defined as cash rents before abatements) for the month ended
by (ii) 12.
(3) Averages weighted based on the property's NRA, adjusted for occupancy
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Operating Expenses
Our operating expenses generally consist of utilities, property and ad valorem taxes, insurance and site maintenance costs. Increases in these expenses over tenants' base years (until the base year is reset at expiration) are generally passed along to tenants in our full-service gross leased properties and are generally paid in full by tenants in our net leased properties.
Conditions in Our Markets
Positive or negative changes in economic or other conditions in the markets we operate in, including state budgetary shortfalls, employment rates, natural hazards and other factors, may impact our overall performance.
Summary of Significant Accounting Policies
The interim condensed consolidated financial statements follow the same policies and procedures as outlined in the audited consolidated financial statements for the year endedDecember 31, 2018 included in our Annual Report on Form 10-K for the year endedDecember 31, 2018 except for the adoption of Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) as outlined in Note 2 of the condensed consolidated financial statements.
Results of Operations
Comparison of Three Months Ended
Rental and Other Revenues. Revenue includes net rental income, including parking, signage and other income, as well as the recovery of operating costs and property taxes from tenants. Rental and other revenues increased$11.0 million , or 36%, to$41.2 million for the three months endedJune 30, 2019 compared to$30.2 million for the three months endedJune 30, 2018 . Of this increase,$2.1 million was from the acquisition ofCircle Point inJuly 2018 ,$1.4 million was from the acquisition of The Quad inJuly 2018 ,$1.2 million was from the acquisition ofGreenwood Blvd inDecember 2018 ,$1.2 million was from the acquisition ofCamelback Square inDecember 2018 ,$1.4 million was from the acquisition ofCanyon Park inFebruary 2019 and$0.2 million was from the acquisition ofCascade Station inJune 2019 . Revenue from Central Fairwinds,Park Tower , Mission City and FRP Collection also increased by$0.1 million ,$0.3 million ,$0.3 million and$0.2 million , respectively, as a result of increased average occupancy over the prior-year period. Partially offsetting these increases, Plaza 25 decreased by$0.7 million due to the sale of the property inFebruary 2019 . The remaining properties' revenues were modestly higher in comparison to the prior-year period primarily as a result of modest mark-to-market increases in rents upon renewal. Other revenues benefited from a one-time payment of$2.6 million received as consideration for the assignment of a purchase contract. The assignment fee originated through our administrative services relationship. Upon adoption of Topic 842, prior year amounts disclosed in rental income, expense reimbursement, and other have been combined into a single line to conform to current period presentation.
Operating Expenses
Total Operating Expenses. Total operating expenses consist of property operating expenses, general and administrative expenses and depreciation and amortization. Total operating expenses increased by$7.0 million , or 27%, to$32.5 million for the three months endedJune 30, 2019 , from$25.5 million for the three months endedJune 30, 2018 , primarily due to the acquisitions described above. Total operating expenses increased by$1.9 million ,$0.9 million ,$0.8 million ,$1.1 million ,$0.7 million and$0.2 million , respectively, from the acquisitions ofCircle Point , The Quad,Greenwood Blvd ,Camelback Square ,Canyon Park andCascade Station properties.Park Tower operating expenses also increased by$0.3 million due to the higher occupancy at that property. Plaza 25 operating expenses decreased by$0.8 million due to its sale inFebruary 2019 . General and Administrative Expenses increased by approximately$1.4 million , of which$1.1 million was the result of one-time expenses and accruals incurred as a result of the assignment fee income earned during the quarter and the balance related to higher payroll costs. The remaining operating expenses were modestly higher in comparison to the prior year primarily due to higher occupancy at the properties. 20
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Property Operating Expenses. Property operating expenses are comprised mainly of building common area and maintenance expenses, insurance, property taxes, property management fees, as well as certain expenses that are not recoverable from tenants, the majority of which are related to costs necessary to maintain the appearance and marketability of vacant space. In the normal course of business, property expenses fluctuate and are impacted by various factors including, but not limited to, occupancy levels, weather, utility costs, repairs, maintenance and re-leasing costs. Property operating expenses increased$2.8 million , or 24%, to$14.5 million for the three months endedJune 30, 2019 from$11.7 million for the three months endedJune 30, 2018 . The increase in property operating expenses was primarily due to the acquisitions described above. The acquisition of theCircle Point , The Quad,Greenwood Blvd ,Camelback Square ,Canyon Park andCascade Station contributed an additional$0.9 million ,$0.3 million ,$0.4 million ,$0.4 million ,$0.2 million and$0.1 million , respectively, in additional property operating expenses.Park Tower operating expenses also increased by$0.2 million due to the higher occupancy at that property. Plaza 25 decreased by$0.4 million due to the sale of that property inFebruary 2019 . The remaining property operating expenses aggregate to a net$0.7 million increase in comparison to the prior-year period. General and Administrative. General and administrative expenses are comprised of public company reporting costs and the compensation of our management team and board of directors as well as non-cash stock-based compensation expenses. General and administrative expenses increased$1.4 million , or 71%, to$3.4 million for the three months endedJune 30, 2019 compared to$2.0 million for the three months endedJune 30, 2018 . Of this increase,$1.1 million can be attributed to the one-time expenses and accruals incurred as a result of the assignment fee income earned during the quarter as described above and the balance of the increase is primarily attributable to higher payroll costs. Depreciation and Amortization. Depreciation and amortization increased$2.8 million , or 24%, to$14.6 million for the three months endedJune 30, 2019 compared to$11.8 million for the three months endedJune 30, 2018 , primarily due to the addition of theCircle Point , The Quad,Greenwood Blvd ,Camelback Square ,Canyon Park andCascade Station properties partially offset by a decrease at Plaza 25 due to the sale of the property.
Other Expense (Income)
Interest Expense. Interest expense increased$2.4 million , or 44%, to$7.8 million for the three months endedJune 30, 2019 , compared to$5.4 million for the three months endedJune 30, 2018 . The increase was primarily due to interest expense related to acquisitions. Interest expense for theCircle Point , The Quad,Greenwood Blvd ,Canyon Park andCascade Station property level debt increased by$0.5 million ,$0.3 million ,$0.3 million ,$0.4 million and$0.1 million , respectively, and the interest on the line of credit increased by$1.1 million as a result of acquisitions funded by our$250 million Unsecured Credit Facility. These increases were partially offset by a$0.2 million decrease in the Plaza 25 debt as a result of its sale and the extinguishment of its property level debt.
Comparison of Six Months Ended
Rental and Other Revenues. Revenue includes net rental income, including parking, signage and other income, as well as the recovery of operating costs and property taxes from tenants. Rental and other revenues increased$16.5 million , or 27%, to$78.3 million for the six months endedJune 30, 2019 compared to$61.8 million for the six months endedJune 30, 2018 . Of this increase,$1.8 million was attributable to the acquisition of Pima Center inApril 2018 ,$4.1 million from the acquisition ofCircle Point inJuly 2018 ,$2.8 million from the acquisition of The Quad inJuly 2018 ,$2.3 million from the acquisition ofGreenwood Blvd inDecember 2018 ,$2.4 million from the acquisition ofCamelback Square inDecember 2018 ,$2.0 million from the acquisition ofCanyon Park inFebruary 2019 and$0.2 million from the acquisition ofCascade Station inJune 2019 . Revenue from Central Fairwinds,Park Tower , Mission City and FRP Collection also increased by$0.4 million ,$0.7 million ,$0.4 million and$0.3 million , respectively, as a result of increased average occupancy over the prior year. Partially offsetting these increases,Washington Group Plaza decreased by$1.7 million due to the sale of the property inMarch 2018 and Plaza 25 decreased by$1.0 million due to the sale of the property inFebruary 2019 . Revenue from DTC Crossroads decreased$0.4 million as a result of decreased occupancy over the prior year andSorrento Mesa also decreased by$1.2 million as a result of the termination fee payment received in the prior year. The remaining properties' revenues were modestly higher in comparison to the prior year primarily as a result of modest mark-to-market increases in rents upon renewal. Other Revenues benefited from a one-time payment of$2.6 million received as consideration for the assignment of a purchase contract. The assignment fee originated through our administrative services relationship. Upon adoption of Topic 842, prior year amounts disclosed in rental income, expense reimbursement, and other have been combined into a single line to conform to current period presentation. 21
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Operating Expenses
Total Operating Expenses. Total operating expenses consist of property operating expenses, general and administrative expenses and depreciation and amortization. Total operating expenses increased by$12.1 million , or 24%, to$63.1 million for the six months endedJune 30, 2019 , from$51.0 million for the six months endedJune 30, 2018 , primarily due to the acquisitions described above. Total operating expenses increased by$1.8 million ,$4.0 million ,$1.9 million ,$1.5 million ,$2.1 million ,$1.0 million and$0.2 million , respectively, from the acquisitions of Pima Center,Circle Point , The Quad,Greenwood Blvd ,Camelback Square ,Canyon Park andCascade Station properties.Park Tower operating expenses also increased by$0.5 million due to the higher occupancy at that property.Washington Group Plaza operating expenses decreased by$0.8 million due to its sale inMarch 2018 and Plaza 25 operating expenses decreased by$1.3 million due to its sale inFebruary 2019 . The remaining operating expenses were modestly higher in comparison to the prior-year period primarily due to higher occupancy at the properties. Property Operating Expenses. Property operating expenses are comprised mainly of building common area and maintenance expenses, insurance, property taxes, property management fees, as well as certain expenses that are not recoverable from tenants, the majority of which are related to costs necessary to maintain the appearance and marketability of vacant space. In the normal course of business, property expenses fluctuate and are impacted by various factors including, but not limited to, occupancy levels, weather, utility costs, repairs, maintenance and re-leasing costs. Property operating expenses increased$5.0 million , or 21%, to$28.4 million for the six months endedJune 30, 2019 from$23.4 million for the six months endedJune 30, 2018 . The increase in property operating expenses was primarily due to the acquisitions described above. The acquisition of the Pima Center,Circle Point , The Quad,Greenwood Blvd ,Camelback Square ,Canyon Park andCascade Station contributed an additional$0.6 million ,$2.0 million ,$0.7 million ,$0.8 million ,$0.7 million ,$0.3 million and$0.1 million , respectively, in additional property operating expenses.Park Tower operating expenses also increased by$0.2 million due to the higher occupancy at that property.Washington Group Plaza decreased by$0.8 million due to the sale of that property inMarch 2018 and Plaza 25 decreased by$0.7 million due to the sale of that property inFebruary 2019 . The remaining property operating expenses aggregate to an overall$1.1 million increase in comparison to the prior-year period. General and Administrative. General and administrative expenses are comprised of public company reporting costs and the compensation of our management team and board of directors as well as non-cash stock-based compensation expenses. General and administrative expenses increased$1.8 million , or 44%, to$5.7 million for the six months endedJune 30, 2019 compared to$3.9 million for the six months endedJune 30, 2018 . Of this increase,$1.1 million can be attributed to the one-time expenses and accruals incurred as a result of the assignment fee income earned during the six months endedJune 30, 2019 as described above and the balance of the increase was primarily attributable to higher payroll costs. Depreciation and Amortization. Depreciation and amortization increased$5.3 million , or 23%, to$29.0 million for the six months endedJune 30, 2019 compared to$23.7 million for the six months endedJune 30, 2018 , primarily due to the addition of the Papago Tech, Pima Center,Circle Point , The Quad,Greenwood Blvd ,Camelback Square ,Canyon Park andCascade Station properties and partially offset by a decrease atWashington Group Plaza and Plaza 25 due to the sale of those properties. Other Expense (Income) Interest Expense. Interest expense increased$4.0 million , or 36%, to$15.3 million for the six months endedJune 30, 2019 , compared to$11.3 million for the six months endedJune 30, 2018 . The increase was primarily due to interest expense related to acquisitions. Interest expense for theCircle Point , The Quad,Greenwood Blvd ,Canyon Park andCascade Station property level debt increased by$0.9 million ,$0.6 million ,$0.5 million ,$0.6 million and$0.1 million , respectively, and the interest on the line of credit increased by$2.0 million as a result of acquisitions funded by our$250 million Unsecured Credit Facility. These increases were partially offset by a$0.2 million and$0.4 million , respective decrease in theWashington Group Plaza and Plaza 25 debt as a result of the sale of those properties and the extinguishment of its property level debt. 22
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Cash Flows
Comparison of Six Months Ended
Cash, cash equivalents and restricted cash were
Cash flow from operating activities. Net cash provided by operating activities increased by$7.2 million to$18.6 million for the six months endedJune 30, 2019 compared to$11.4 million for the six months endedJune 30, 2018 . The increase was primarily attributable to increased operating cash flows from acquired properties. Cash flow to investing activities. Net cash used in investing activities increased by$56.8 million to$38.6 million for the six months endedJune 30, 2019 compared to$18.2 million provided by investing activities for the six months endedJune 30, 2018 . The increase in cash used in investing activities was primarily due to the acquisition ofCanyon Park andCascade Station in 2019. Additionally, we realized lower proceeds from the sale of real estate in 2019 compared to 2018, which included proceeds from the sale ofWashington Group Plaza in 2018. Cash flow from financing activities. Net cash provided by financing activities increased by$49.5 million to$17.6 million for the six months endedJune 30, 2019 compared to$31.9 million used in financing activities in the six months endedJune 30, 2018 . Cash flow provided by financing activities increased primarily due to higher proceeds from mortgage loans payable compared to 2018 and lower repayments of mortgage loans payable compared to 2018. The increase was partially offset by lower proceeds from credit facility in 2019 compared to 2018.
Liquidity and Capital Resources
Analysis of Liquidity and Capital Resources
We had approximately
OnMarch 15, 2018 the Company entered into a$250 million Unsecured Credit Facility, which includes an accordion feature that allows the Company to borrow up to$500 million , subject to customary terms and conditions. The Company's previous secured credit facility was replaced and repaid in full from the proceeds of our Unsecured Credit Facility. Our Unsecured Credit Facility matures inMarch 2022 , and may be extended toMarch 2023 at the Company's option upon meeting certain conditions. Borrowings under our Unsecured Credit Facility bear an interest at a rate equal to the LIBOR rate plus a margin of between 140 to 225 basis points depending upon the Company's consolidated leverage ratio. As ofJune 30, 2019 , we had approximately$150.0 million outstanding under our Unsecured Credit Facility and a$5.3 million letter of credit to satisfy escrow requirements for a mortgage lender. The Company and theOperating Partnership previously entered into the amended equity distribution agreements (collectively, the "EDAs") with the sales agents named therein (collectively, the "Sales Agents"), pursuant to which the Company may issue and sell from time to time up to 8,000,000 shares of common stock and up to 1,000,000 shares of Series A Preferred Stock through the Sales Agents, acting as agents or principals. Pursuant to the EDAs, the shares may be offered and sold through the Sales Agents in transactions that are deemed to be "at the market" offerings as defined in Rule 415 under the Securities Act, including sales made directly on theNew York Stock Exchange or sales made to or through a market maker other than on an exchange or, with the prior consent of the Company, in privately negotiated transactions. The Sales Agents will be entitled to compensation of up to 2.0% of the gross proceeds of shares sold through the Sales Agents from time to time under the EDAs. The Company has no obligation to sell any of the shares under the EDAs and may at any time suspend solicitations and offers under, or terminate, the EDAs. The Company did not make any sales of securities under the EDAs during the six months endedJune 30, 2019 . Our short-term liquidity requirements primarily consist of operating expenses and other expenditures associated with our properties, distributions to our limited partners and distributions to our stockholders required to qualify for REIT status, capital expenditures and, potentially, acquisitions. We expect to meet our short-term liquidity requirements through net cash provided by operations, reserves established from existing cash, proceeds from our public offerings, including under our at the market issuance program, and borrowings under our mortgage loans and our Unsecured Credit Facility. 23
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Our long-term liquidity needs consist primarily of funds necessary for the repayment of debt at maturity, property acquisitions and non-recurring capital improvements. We expect to meet our long-term liquidity requirements with net cash from operations, long-term secured and unsecured indebtedness and the issuance of equity and debt securities. We also may fund property acquisitions and non-recurring capital improvements using our Unsecured Credit Facility pending longer term financing. We believe we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional debt and the issuance of additional equity securities. However, we cannot assure you that this is or will continue to be the case. Our ability to incur additional debt is dependent on a number of factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that may be imposed by lenders. Our ability to access the equity capital markets is dependent on a number of factors as well, including general market conditions for REITs and market perceptions about us.
Contractual Obligations and Other Long-Term Liabilities
The following table provides information with respect to our commitments as ofJune 30, 2019 , including any guaranteed or minimum commitments under contractual obligations. The table does not reflect available debt extension options. Payments Due by Period (in thousands) More than Contractual Obligations Total 2019 2020-2021 2022-2023 5 years Principal payments on mortgage loans$ 715,003 $ 2,692 $ 95,311 $ 203,987 $ 413,013 Interest payments (1) 162,109 15,110 57,650 40,589 48,760 Tenant-related commitments 10,907 5,890 4,418 599 - Operating and financing lease obligations 30,641 316 1,617 1,431 27,277 Total$ 918,660 $ 24,008 $ 158,996 $ 246,606 $ 489,050
(1) Contracted interest on the floating rate debt was calculated based on our
Unsecured Credit Facility balance and interest rate at
Off-Balance Sheet Arrangements
As of
Inflation
Substantially all of our office leases provide for real estate tax and operating expense escalations. In addition, most of the leases provide for fixed annual rent increases. We believe that inflationary increases may be at least partially offset by these contractual rent increases and expense escalations.
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