Peakstone Realty Trust Reports Fourth Quarter and Full Year 2023 Results
- Peakstone Realty Trust (PKST) successfully executed its strategic disposition plan, selling 11 properties for gross proceeds of $336 million, resulting in a significant leverage reduction.
- The company reported revenue of approximately $254.3 million for full year 2023, with a net loss attributable to common shareholders of approximately $(557.9) million, or $(15.50) per basic and diluted share.
- Peakstone Realty Trust (PKST) improved its leverage ratio to 6.2x from 7.7x based on Net Debt to Normalized EBITDAre (Consolidated), showcasing a positive financial trend.
- The company ended the year with $392 million in cash on hand and $159 million of available undrawn capacity under the revolving credit facility, providing a total liquidity of approximately $551 million.
- Peakstone Realty Trust (PKST) reported Same Store Cash NOI of approximately $189.4 million for full year 2023, representing a 3.6% increase compared to 2022, demonstrating growth in operational performance.
- The company paid a dividend of $0.225 per common share for the quarter ended March 31, 2024, showcasing a commitment to rewarding shareholders.
- Peakstone Realty Trust (PKST) will host a webcast to present the fourth quarter results on February 22, 2024, providing investors and analysts with an opportunity to gain insights into the company's performance and future outlook.
- The company reported a net loss of $(557.9) million for full year 2023, which may raise concerns among investors about the company's financial health and sustainability.
- Peakstone Realty Trust (PKST) experienced a decline in total revenue from $416.5 million in the prior year to $254.3 million for full year 2023, indicating a significant drop in top-line performance.
- The decrease in AFFO from $190.7 million in the prior year to $118.1 million for full year 2023 may signal challenges in generating operational cash flows for the company.
- The company's net loss per basic and diluted share increased from $(11.41) in the prior year to $(15.50) for full year 2023, reflecting a negative trend in earnings per share.
- Peakstone Realty Trust (PKST) experienced a decrease in Same Store Cash NOI growth rate from 4.5% in the fourth quarter to 3.6% for full year 2023, potentially indicating a slowdown in operational performance.
Insights
Peakstone Realty Trust's (PKST) disposition of $336 million in assets and the deleveraging of their balance sheet are indicative of a strategic shift towards liquidity and risk mitigation. The significant reduction in leverage, from a 7.7x to 6.2x Net Debt to Normalized EBITDAre ratio, reflects a conservative approach to financial management. This deleveraging process, combined with a stable liquidity position of approximately $551 million, positions PKST to better withstand potential economic downturns and interest rate fluctuations. The focus on the industrial segment, which exhibits full occupancy and longer weighted average lease terms, suggests an alignment with current market trends favoring industrial real estate due to the e-commerce boom.
However, the reported net loss of approximately $(557.9) million for the year, despite being partially offset by non-cash charges and asset sales gains, raises concerns about the underlying profitability of the portfolio. Investors should monitor whether the shift in portfolio composition and reduction in leverage will translate into improved net income figures in the future. The reduction in annual revenue year-over-year is also noteworthy, as it reflects the impact of the strategic disposition program and may affect dividend sustainability, despite the current maintenance of a $0.225 per common share dividend.
PKST's strategic focus on the industrial real estate segment is well-founded, considering the industry's robust demand driven by e-commerce and supply chain dynamics. The 100% occupancy rate in their industrial segment and the favorable releasing spreads (31% GAAP and 11% cash for industrial leases) underscore the strength of this asset class. These releasing spreads, significantly above industry norms, suggest that PKST is capitalizing on the market's appetite for industrial spaces and achieving rent increases upon lease renewals or new leases.
The office segment, while still highly occupied, shows a longer weighted average lease term (WALT) than the industrial segment, which may signal stability but also a slower response to changing market rents. The 'Other' segment's lower occupancy rate (82.4%) and shorter WALT (approximately 2.6 years) could indicate potential vulnerabilities or repositioning opportunities.
Investors should consider the geographic distribution of PKST's portfolio and tenant credit ratings, as these factors influence the resilience and growth potential of the trust's income streams. The substantial portion of annualized base rent coming from investment-grade tenants or those with equivalent ratings provides a layer of security for the revenue base.
The improvement in PKST's leverage ratio and the restructuring of its debt profile, with 90% of the debt stack fixed at favorable rates, demonstrate a proactive approach to capital management. The absence of material debt maturities until late 2025 affords the company time to further stabilize and grow its portfolio without the immediate pressure of refinancing. This strategic positioning is particularly prudent given the current interest rate environment, where locking in lower rates can significantly impact long-term debt servicing costs.
Additionally, the agreement with AIG to facilitate the disposition of properties securing the AIG Loans without regard to the original release prices indicates a flexible and opportunistic approach to debt management. This could potentially lead to a more favorable resolution of these liabilities, enhancing PKST's financial flexibility. Investors should view these developments positively, as they reflect a management team that is actively working to optimize the company's balance sheet in a manner that supports both current operations and strategic growth initiatives.
- Property Dispositions for Full Year 2023 Totaling
- Meaningful Deleveraging of Balance Sheet
- Significant Leasing Activity at Favorable Releasing Spreads
"In 2023, we demonstrated our ability to execute on our objectives to reduce leverage and evolve our portfolio towards the Industrial segment," said Michael Escalante, CEO. “Against the challenges of the current economic environment, we successfully sold 11 assets, enabling a significant leverage reduction, and we achieved strong, positive leasing activity for our portfolio. We ended the year with ample liquidity, a debt stack that is nearly
Fourth Quarter 2023 Highlights
-
Revenue of approximately
$63.1 million -
Net loss of approximately
$(21.8) million $(19.9) million $(0.55) -
Adjusted Funds from Operations (“AFFO”) of
$0.80 -
Same Store Cash Net Operating Income (“Same Store Cash NOI”) of approximately
$48.2 million 4.5% increase compared to the same quarter last year. -
Completed 1.05 million square feet of new leases and lease extensions at weighted-average GAAP and cash releasing spreads of
26% and9% , respectively. -
Sold two office properties for gross proceeds of
$27.2 million -
Paid a dividend of
$0.22 5
Full Year 2023 Highlights
-
Revenue of approximately
$254.3 million -
Net loss attributable to common shareholders of approximately
$(557.9) million $(15.50) -
AFFO of
$2.99 -
Same Store Cash NOI of approximately
$189.4 million 3.6% increase compared to 2022. -
Sold 11 properties for gross proceeds of
$336 million -
Closed the year with
$392 million $159 million $551 million - Improved leverage ratio to 6.2x from 7.7x based on Net Debt to Normalized EBITDAre (Consolidated).
Portfolio
As of December 31, 2023, the Company’s wholly-owned portfolio (i) consisted of 71 properties located in 24 states, (ii) was
The Company’s three segments had the following characteristics as of December 31, 2023:
-
Industrial: This segment (i) comprised 19 industrial properties, and (ii) was
100% leased with a WALT of approximately 6.7 years. -
Office: This segment (i) comprised 35 office properties, and (ii) was
98.8% leased with a WALT of approximately 7.6 years. -
Other: This segment (i) comprised 17 properties (12 of which secure the Company’s AIG and AIG II portfolio mortgage loans (the “AIG Loans”)), and (ii) was
82.4% leased with a WALT of approximately 2.6 years.
Transaction Activity
The Company executed on its strategic disposition plan as follows:
-
During the fourth quarter, the Company sold (i) one office property in the Office segment for gross proceeds of
$21.4 million $2.5 million $5.8 million $2.0 million -
For the year ended December 31, 2023, the Company sold eleven properties for gross proceeds of
$336 million $29.2 million -
Subsequent to year-end, on January 31, 2024, the Company sold one “held-for-sale” property in the Office segment for a sales price of
$30.0 million
Leasing Activity
During the fourth quarter, the Company completed 1.05 million square feet of new leases and lease extensions in the Industrial and Office segments as follows:
-
Industrial Segment: 932,000 square feet consisting of (i) a 5-year lease extension totaling 817,700 square feet in
Jacksonville, FL , and (ii) a 10-year early lease extension totaling 114,300 square feet inWhippany, NJ . The weighted-average GAAP and cash releasing spreads for these two leases were31% and11% , respectively. -
Office Segment: 114,300 square feet consisting of (i) a 7.7-year new lease totaling 82,800 square feet in
Largo, FL , and (ii) a 9.4-year new lease totaling 31,500 square feet inScottsdale, AZ. The weighted-average GAAP and cash releasing spreads for these two leases were15% and3% , respectively.
Financial Results
Revenue
In the fourth quarter, total revenue was approximately
Net (Loss) Income Attributable to Common Shareholders
In the fourth quarter, net loss attributable to common shareholders was approximately
For the year ended December 31, 2023, net loss attributable to common shareholders was approximately
AFFO
In the fourth quarter, AFFO was approximately
For the year ended December 31, 2023, AFFO was approximately
Same Store Cash NOI
In the fourth quarter, Same Store Cash NOI was approximately
For the year ended December 31, 2023, Same Store Cash NOI was approximately
Balance Sheet
As of December 31, 2023, the Company had
As of December 31, 2023, the Company’s total consolidated debt was approximately
During the fourth quarter, the Company entered into an agreement with affiliates of AIG Insurance with respect to the Company’s two non-recourse AIG Loans, which are secured by 12 of the 17 properties in the Other segment. The agreement is intended to facilitate the disposition of the mortgaged properties without regard to the original release prices and support the repayment of the AIG Loans.
Dividends
The Board of Trustees approved a dividend for the quarter ended March 31, 2024 in the amount of
As previously announced, the Company paid a dividend for the fourth quarter in the amount of
Fourth Quarter 2023 Earnings Webcast
PKST will host a webcast to present the fourth quarter results on Thursday, February 22, 2024 at 5:00 p.m. Eastern Time. To access the webcast, please visit https://investors.pkst.com/investors/events-and-presentations/events/event-details/2024/Fourth-Quarter-2023-Earnings-Call/default.aspx at least ten minutes prior to the scheduled start time to register and install any necessary software. A replay of the webcast will be available on the Company’s website shortly after the initial presentation. To access by phone, please use the following dial-in numbers. For domestic callers, please dial 1-877-407-9716; for international callers, please dial 1-201-493-6779.
About Peakstone Realty Trust
Peakstone Realty Trust (NYSE: PKST) is an internally managed real estate investment trust (REIT) that owns and operates a high-quality, newer-vintage portfolio of predominantly single-tenant industrial and office properties. These assets are generally leased to creditworthy tenants under long-term net lease agreements with contractual rent escalations and are situated in primarily high-growth, strategic coastal and sunbelt markets.
Additional information is available at www.pkst.com.
Cautionary Statement Regarding Forward-Looking Statements
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
The forward-looking statements contained in this document reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: general economic and financial conditions; market volatility; inflation; any potential recession or threat of recession; interest rates; recent and ongoing disruption in the debt and banking markets; tenant, geographic concentration, and the financial condition of our tenants; competition for tenants and competition with sellers of similar properties if we elect to dispose of our properties; our access to, and the availability of capital; whether we will be able to refinance or repay debt; whether work-from-home trends or other factors will impact the attractiveness of industrial and/or office assets; whether we will be successful in renewing leases as they expire; future financial and operating results, plans, objectives, expectations and intentions; our ability to manage cash flows; dilution resulting from equity issuances; expected sources of financing, including the ability to maintain the commitments under our revolving credit facility, and the availability and attractiveness of the terms of any such financing; legislative and regulatory changes that could adversely affect our business; our ability to maintain our status as a REIT and our Operating Partnership as a partnership for
While forward-looking statements reflect our good faith beliefs, assumptions and expectations, they are not guarantees of future performance. The forward-looking statements speak only as of the date of this document. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes after the date of this document, except as required by applicable law. We caution investors not to place undue reliance on any forward-looking statements, which are based only on information currently available to us.
Notice Regarding Non-GAAP Financial Measures. In addition to
PEAKSTONE REALTY TRUST CONSOLIDATED BALANCE SHEETS (Unaudited; in thousands, except units and share amounts) |
|||||||
|
|
||||||
|
December 31, 2023 |
|
December 31, 2022 |
||||
ASSETS |
|
|
|
||||
Cash and cash equivalents |
$ |
391,802 |
|
|
$ |
233,180 |
|
Restricted cash |
|
9,208 |
|
|
|
4,764 |
|
Real estate: |
|
|
|
||||
Land |
|
231,175 |
|
|
|
327,408 |
|
Building and improvements |
|
1,968,314 |
|
|
|
2,631,965 |
|
Tenant origination and absorption cost |
|
402,251 |
|
|
|
535,889 |
|
Construction in progress |
|
8,371 |
|
|
|
1,994 |
|
Total real estate |
|
2,610,111 |
|
|
|
3,497,256 |
|
Less: accumulated depreciation and amortization |
|
(550,552 |
) |
|
|
(644,639 |
) |
Total real estate, net |
|
2,059,559 |
|
|
|
2,852,617 |
|
Investments in unconsolidated entity |
|
— |
|
|
|
178,647 |
|
Intangible assets, net |
|
29,690 |
|
|
|
33,861 |
|
Deferred rent receivable |
|
63,272 |
|
|
|
79,572 |
|
Deferred leasing costs, net |
|
19,112 |
|
|
|
26,507 |
|
Goodwill |
|
78,647 |
|
|
|
94,678 |
|
Right of use assets |
|
33,736 |
|
|
|
35,453 |
|
Interest rate swap asset |
|
26,942 |
|
|
|
41,404 |
|
Other assets |
|
27,446 |
|
|
|
31,877 |
|
Real estate assets and other assets held for sale, net |
|
50,211 |
|
|
|
20,816 |
|
Total assets |
$ |
2,789,625 |
|
|
$ |
3,633,376 |
|
LIABILITIES AND EQUITY |
|
|
|
||||
Debt, net |
|
1,435,923 |
|
|
|
1,485,402 |
|
Distributions payable |
|
8,344 |
|
|
|
12,402 |
|
Due to related parties |
|
573 |
|
|
|
1,458 |
|
Intangible liabilities, net |
|
16,023 |
|
|
|
20,658 |
|
Lease liability |
|
46,281 |
|
|
|
46,519 |
|
Accrued expenses and other liabilities |
|
78,229 |
|
|
|
80,802 |
|
Liabilities of real estate assets held for sale |
|
539 |
|
|
|
— |
|
Total liabilities |
|
1,585,912 |
|
|
|
1,647,241 |
|
Commitments and contingencies (Note 13) |
|
|
|
||||
Perpetual convertible preferred shares |
|
— |
|
|
|
125,000 |
|
Noncontrolling interests subject to redemption; zero and 61,788 units as of December 31, 2023 and December 31, 2022, respectively |
|
— |
|
|
|
3,812 |
|
Shareholders’ equity: |
|
|
|
||||
Common shares, |
|
36 |
|
|
|
36 |
|
Additional paid-in capital |
|
2,990,085 |
|
|
|
2,948,600 |
|
Cumulative distributions |
|
(1,076,000 |
) |
|
|
(1,036,678 |
) |
Accumulated deficit |
|
(827,854 |
) |
|
|
(269,926 |
) |
Accumulated other comprehensive income |
|
25,817 |
|
|
|
40,636 |
|
Total shareholders’ equity |
|
1,112,084 |
|
|
|
1,682,668 |
|
Noncontrolling interests |
|
91,629 |
|
|
|
174,655 |
|
Total equity |
|
1,203,713 |
|
|
|
1,857,323 |
|
Total liabilities and equity |
$ |
2,789,625 |
|
|
$ |
3,633,376 |
|
PEAKSTONE REALTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited; in thousands, except share and per share amounts) |
|||||||||||||||
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue: |
|
|
|
|
|
|
|
||||||||
Rental income |
$ |
63,058 |
|
|
$ |
75,893 |
|
|
$ |
254,284 |
|
|
$ |
416,485 |
|
Expenses: |
|
|
|
|
|
|
|
||||||||
Property operating expense |
|
7,232 |
|
|
|
9,357 |
|
|
|
29,090 |
|
|
|
52,451 |
|
Property tax expense |
|
5,079 |
|
|
|
6,065 |
|
|
|
21,523 |
|
|
|
37,317 |
|
Property management fees |
|
421 |
|
|
|
589 |
|
|
|
1,813 |
|
|
|
3,496 |
|
General and administrative expenses |
|
11,551 |
|
|
|
11,532 |
|
|
|
42,962 |
|
|
|
38,995 |
|
Corporate operating expenses to related parties |
|
178 |
|
|
|
284 |
|
|
|
1,154 |
|
|
|
1,349 |
|
Real estate impairment provision |
|
25,373 |
|
|
|
35,275 |
|
|
|
409,512 |
|
|
|
127,577 |
|
Depreciation and amortization |
|
12,138 |
|
|
|
41,323 |
|
|
|
112,204 |
|
|
|
190,745 |
|
Total expenses |
|
61,972 |
|
|
|
104,425 |
|
|
|
618,258 |
|
|
|
451,930 |
|
Income before other income (expenses) |
|
1,086 |
|
|
|
(28,532 |
) |
|
|
(363,974 |
) |
|
|
(35,445 |
) |
Other income (expenses): |
|
|
|
|
|
|
|
||||||||
Interest expense |
|
(16,415 |
) |
|
|
(16,501 |
) |
|
|
(65,623 |
) |
|
|
(84,816 |
) |
Debt breakage cost |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(13,249 |
) |
Other income (expense), net |
|
5,498 |
|
|
|
(355 |
) |
|
|
13,111 |
|
|
|
(943 |
) |
Net loss from investment in unconsolidated entity |
|
— |
|
|
|
(9,993 |
) |
|
|
(176,767 |
) |
|
|
(9,993 |
) |
Net gain (loss) from disposition of assets |
|
4,507 |
|
|
|
(43,767 |
) |
|
|
29,164 |
|
|
|
(139,280 |
) |
Goodwill impairment provision |
|
(16,031 |
) |
|
|
(135,270 |
) |
|
|
(16,031 |
) |
|
|
(135,270 |
) |
Transaction expenses |
|
(412 |
) |
|
|
(13,724 |
) |
|
|
(24,982 |
) |
|
|
(22,386 |
) |
Net loss |
|
(21,767 |
) |
|
|
(248,142 |
) |
|
|
(605,102 |
) |
|
|
(441,382 |
) |
Distributions to redeemable preferred shareholders |
|
— |
|
|
|
(2,516 |
) |
|
|
(2,375 |
) |
|
|
(10,063 |
) |
Preferred units redemption |
|
— |
|
|
|
|
|
(4,970 |
) |
|
|
— |
|
||
Net loss attributable to noncontrolling interests |
|
1,878 |
|
|
|
22,071 |
|
|
|
54,555 |
|
|
|
39,714 |
|
Net loss attributable to controlling interests |
|
(19,889 |
) |
|
|
(228,587 |
) |
|
|
(557,892 |
) |
|
|
(411,731 |
) |
Distributions to redeemable noncontrolling interests attributable to common shareholders |
|
— |
|
|
|
(45 |
) |
|
|
(36 |
) |
|
|
(178 |
) |
Net loss attributable to common shareholders |
$ |
(19,889 |
) |
|
$ |
(228,632 |
) |
|
$ |
(557,928 |
) |
|
$ |
(411,909 |
) |
Net loss attributable to common shareholders per share, basic and diluted |
$ |
(0.55 |
) |
|
$ |
(6.34 |
) |
|
$ |
(15.50 |
) |
|
$ |
(11.41 |
) |
Weighted average number of common shares outstanding, basic and diluted |
|
36,054,940 |
|
|
|
35,999,203 |
|
|
|
35,988,231 |
|
|
|
36,057,825 |
|
PEAKSTONE REALTY TRUST |
Funds from Operations and Adjusted Funds from Operations |
(Unaudited; in thousands except share and per share amounts) |
FFO and AFFO are non-GAAP financial measures that we believe are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). FFO is defined as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains and losses from sales of depreciable real estate assets, adding back impairment write-downs of depreciable real estate assets, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships, joint ventures and preferred distributions. Because FFO calculations exclude such items as depreciation and amortization of depreciable real estate assets and gains and losses from sales of depreciable real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), they facilitate comparisons of operating performance between periods and between other REITs. As a result, the Company believes that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of the Company's performance relative to its competitors and a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities. It should be noted, however, that other REITs may not define FFO in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently than the Company does, making comparisons less meaningful.
Additionally, the Company uses AFFO as a non-GAAP financial measure to evaluate the Company's operating performance. AFFO excludes non-routine and certain non-cash items such as revenues in excess of cash received, amortization of share-based compensation net, deferred rent, amortization of in-place lease valuation, acquisition-related costs, financed termination fee, net of payments received, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, write-off transaction costs and other one-time transactions. FFO and AFFO have been revised to include amounts available to both common shareholders and limited partners for all periods presented.
AFFO is a measure used among the Company's peer group. The Company also believes that AFFO is a recognized measure of sustainable operating performance by the REIT industry. Further, the Company believes AFFO is useful in comparing the sustainability of its operating performance with the sustainability of the operating performance of other real estate companies.
Management believes that AFFO is a beneficial indicator of its ongoing portfolio performance and ability to sustain its current distribution level. More specifically, AFFO isolates the financial results of the Company's operations. AFFO, however, is not considered an appropriate measure of historical earnings as it excludes certain significant costs that are otherwise included in reported earnings. Further, since the measure is based on historical financial information, AFFO for the period presented may not be indicative of future results or the Company's future ability to make or sustain distributions. By providing FFO and AFFO, the Company presents information that assists investors in aligning their analysis with management’s analysis of long-term operating activities.
For all of these reasons, the Company believes the non-GAAP measures of FFO and AFFO, in addition to net income (loss) are helpful supplemental performance measures and useful to investors in evaluating the performance of the Company's real estate portfolio. However, a material limitation associated with FFO and AFFO is that they are not indicative of the Company's cash available to fund distributions since other uses of cash, such as capital expenditures at the Company's properties and principal payments of debt, are not deducted when calculating FFO and AFFO. The use of AFFO as a measure of long-term operating performance on value is also limited if the Company does not continue to operate under its current business plan as noted above. FFO and AFFO should not be viewed as a more prominent measure of performance than net income (loss) and each should be reviewed in connection with GAAP measurements.
Neither the SEC, NAREIT, nor any other applicable regulatory body has opined on the acceptability of the adjustments contemplated to adjust FFO in order to calculate AFFO and its use as a non-GAAP performance measure. In the future, NAREIT may decide to standardize the allowable exclusions across the REIT industry, and the Company may have to adjust the calculation and characterization of this non-GAAP measure.
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net loss |
$ |
(21,767 |
) |
|
$ |
(248,142 |
) |
|
$ |
(605,102 |
) |
|
$ |
(441,382 |
) |
Adjustments: |
|
|
|
|
|
|
|
||||||||
Depreciation of building and improvements |
|
16,330 |
|
|
|
22,336 |
|
|
|
72,273 |
|
|
|
113,191 |
|
Amortization of leasing costs and intangibles |
|
9,140 |
|
|
|
13,037 |
|
|
|
40,318 |
|
|
|
77,926 |
|
Impairment provision, real estate |
|
12,138 |
|
|
|
41,323 |
|
|
|
409,511 |
|
|
|
127,577 |
|
Equity interest of depreciation of building and improvements - unconsolidated entity |
|
— |
|
|
|
4,643 |
|
|
|
24,623 |
|
|
|
4,643 |
|
(Gain) Loss from disposition of assets, net |
|
(4,507 |
) |
|
|
43,767 |
|
|
|
(29,164 |
) |
|
|
139,280 |
|
Company's share of loss on sale of unconsolidated entity |
|
— |
|
|
|
3,558 |
|
|
|
— |
|
|
|
3,558 |
|
FFO |
|
11,334 |
|
|
|
(119,478 |
) |
|
|
(87,541 |
) |
|
|
24,793 |
|
Distribution to redeemable preferred shareholders |
|
— |
|
|
|
(2,515 |
) |
|
|
(2,375 |
) |
|
|
(10,063 |
) |
Preferred units redemption charge |
|
— |
|
|
|
— |
|
|
|
(4,970 |
) |
|
|
— |
|
FFO attributable to common shareholders and limited partners |
$ |
11,334 |
|
|
$ |
(121,993 |
) |
|
$ |
(94,886 |
) |
|
$ |
14,730 |
|
Reconciliation of FFO to AFFO: |
|
|
|
|
|
|
|
||||||||
FFO attributable to common shareholders and limited partners |
$ |
11,334 |
|
|
$ |
(121,993 |
) |
|
$ |
(94,886 |
) |
|
$ |
14,730 |
|
Adjustments: |
|
|
|
|
|
|
|
||||||||
Revenues in excess of cash received, net |
|
(204 |
) |
|
|
(5,199 |
) |
|
|
(7,953 |
) |
|
|
(15,407 |
) |
Amortization of share-based compensation |
|
2,437 |
|
|
|
3,433 |
|
|
|
10,063 |
|
|
|
9,573 |
|
Deferred rent - ground lease |
|
428 |
|
|
|
433 |
|
|
|
1,724 |
|
|
|
1,951 |
|
Unrealized loss (gain) on investments |
|
(35 |
) |
|
|
15 |
|
|
|
17 |
|
|
|
195 |
|
Amortization of above/(below) market rent, net |
|
(406 |
) |
|
|
(923 |
) |
|
|
(1,240 |
) |
|
|
(2,205 |
) |
Amortization of debt premium/(discount), net |
|
133 |
|
|
|
103 |
|
|
|
419 |
|
|
|
409 |
|
Amortization of ground leasehold interests |
|
(98 |
) |
|
|
(98 |
) |
|
|
(389 |
) |
|
|
(372 |
) |
Amortization of below tax benefit amortization |
|
377 |
|
|
|
377 |
|
|
|
1,494 |
|
|
|
1,494 |
|
Amortization of deferred financing costs |
|
1,041 |
|
|
|
993 |
|
|
|
3,632 |
|
|
|
3,544 |
|
Amortization of lease inducements |
|
— |
|
|
|
79 |
|
|
|
150 |
|
|
|
537 |
|
Loss on debt breakage costs — write-off of deferred financing costs |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,771 |
|
Company's share of amortization of deferred financing costs- unconsolidated entity |
|
— |
|
|
|
3,740 |
|
|
|
31,061 |
|
|
|
3,740 |
|
Company's share of revenues in excess of cash received (straight-line rents) - unconsolidated entity |
|
— |
|
|
|
(257 |
) |
|
|
(2,207 |
) |
|
|
(257 |
) |
Company's share of amortization of above market rent - unconsolidated entity |
|
— |
|
|
|
(58 |
) |
|
|
(532 |
) |
|
|
(58 |
) |
Write-off of transaction costs |
|
— |
|
|
|
— |
|
|
|
115 |
|
|
|
28 |
|
Employee separation expense |
|
1,855 |
|
|
|
— |
|
|
|
4,096 |
|
|
|
72 |
|
Transaction expenses |
|
412 |
|
|
|
13,724 |
|
|
|
24,982 |
|
|
|
22,386 |
|
Impairment provision, goodwill |
|
16,031 |
|
|
|
135,270 |
|
|
|
16,031 |
|
|
|
135,270 |
|
Debt breakage costs |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,249 |
|
Other income - proration adjustments for dispositions |
|
(1,587 |
) |
|
|
— |
|
|
|
(1,587 |
) |
|
|
— |
|
Preferred units redemption charge |
|
— |
|
|
|
— |
|
|
|
4,970 |
|
|
|
— |
|
Impairment provision, investment in unconsolidated entity |
|
— |
|
|
|
— |
|
|
|
129,334 |
|
|
|
— |
|
Write-off of Company's share of accumulated other comprehensive income - unconsolidated entity |
|
— |
|
|
|
— |
|
|
|
(1,226 |
) |
|
|
— |
|
AFFO available to common shareholders and limited partners |
$ |
31,718 |
|
|
$ |
29,639 |
|
|
$ |
118,068 |
|
|
$ |
190,650 |
|
FFO per share, basic and diluted |
$ |
0.29 |
|
|
$ |
(3.09 |
) |
|
$ |
(2.40 |
) |
|
$ |
0.37 |
|
AFFO per share, basic and diluted |
$ |
0.80 |
|
|
$ |
0.75 |
|
|
$ |
2.99 |
|
|
$ |
4.81 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding - basic and diluted EPS |
|
36,054,940 |
|
|
|
35,999,203 |
|
|
|
35,988,231 |
|
|
|
36,057,825 |
|
Weighted-average OP Units |
|
3,404,247 |
|
|
|
3,537,654 |
|
|
|
3,472,770 |
|
|
|
3,537,654 |
|
Weighted-average common shares and OP Units outstanding - basic and diluted FFO/AFFO |
|
39,459,187 |
|
|
|
39,536,857 |
|
|
|
39,461,001 |
|
|
|
39,595,479 |
|
PEAKSTONE REALTY TRUST |
Net Operating Income, including Cash and Same Store Cash NOI |
(Unaudited; in thousands) |
Net operating income ("NOI”) is a non-GAAP financial measure calculated as net (loss) income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding equity in the earnings of our unconsolidated real estate joint ventures, general and administrative expenses, interest expense, depreciation and amortization, impairment of real estate, gains or losses on early extinguishment of debt, gains or losses on sales of real estate, investment income or loss and termination income. Net operating income on a cash basis (“Cash NOI”) is net operating income adjusted to exclude the effect of straight-line rent and amortization of acquired above-and below market lease intangibles adjustments required by GAAP. Net operating income on a cash basis for our Same Store portfolio (“Same Store Cash NOI”) is Cash NOI for properties held for the entirety of all periods presented, with an adjustment for lease termination fees to provide a better measure of actual cash basis rental growth for our Same Store portfolio. We believe that NOI, Cash NOI and Same-Store Cash NOI are helpful to investors as additional measures of operating performance because we believe they help both investors and management to understand the core operations of our properties excluding corporate and financing-related costs and non-cash depreciation and amortization. NOI, Cash NOI and Same Store Cash NOI are unlevered operating performance metrics of our properties and allow for a useful comparison of the operating performance of individual assets or groups of assets. These measures thereby provide an operating perspective not immediately apparent from GAAP income from operations or net income (loss). In addition, NOI, Cash NOI and Same Store Cash NOI are considered by many in the real estate industry to be useful starting points for determining the value of a real estate asset or group of assets. Because NOI, Cash NOI and Same Store Cash NOI exclude depreciation and amortization and capture neither the changes in the value of our properties that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our properties, all of which have real economic effect and could materially impact our results from operations, the utility of NOI, Cash NOI and Same Store Cash NOI as measures of our performance is limited. Therefore, NOI, Cash NOI and Same Store Cash NOI should not be considered as alternatives to net (loss) income, as computed in accordance with GAAP. NOI, Cash NOI and Same Store Cash NOI may not be comparable to similarly titled measures of other companies.
Our calculation of each of NOI, Cash NOI and Same Store Cash NOI is presented in the following table for the three months and full year ended December 31, 2023 and December 31, 2022 (dollars in thousands):
|
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Reconciliation of Net Loss to Total NOI |
|
|
|
|
|
|
|
|
|||||||||
|
Net loss |
|
$ |
(21,767 |
) |
|
$ |
(248,142 |
) |
|
$ |
(605,102 |
) |
|
$ |
(441,382 |
) |
|
General and administrative expenses |
|
|
11,551 |
|
|
|
11,532 |
|
|
|
42,962 |
|
|
|
38,995 |
|
|
Corporate operating expenses to related parties |
|
|
178 |
|
|
|
284 |
|
|
|
1,154 |
|
|
|
1,349 |
|
|
Real estate impairment provision |
|
|
12,138 |
|
|
|
41,323 |
|
|
|
409,512 |
|
|
|
127,577 |
|
|
Goodwill impairment provision |
|
|
16,031 |
|
|
|
135,270 |
|
|
|
16,031 |
|
|
|
135,270 |
|
|
Depreciation and amortization |
|
|
25,373 |
|
|
|
35,275 |
|
|
|
112,204 |
|
|
|
190,745 |
|
|
Interest expense |
|
|
16,415 |
|
|
|
16,501 |
|
|
|
65,623 |
|
|
|
84,816 |
|
|
Debt breakage costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,249 |
|
|
Other (income) expense, net |
|
|
(5,498 |
) |
|
|
355 |
|
|
|
(13,111 |
) |
|
|
943 |
|
|
Loss from investment in unconsolidated entities |
|
|
— |
|
|
|
9,993 |
|
|
|
176,767 |
|
|
|
9,993 |
|
|
(Gain) loss from disposition of assets |
|
|
(4,507 |
) |
|
|
43,767 |
|
|
|
(29,164 |
) |
|
|
139,280 |
|
|
Transaction expenses |
|
|
412 |
|
|
|
13,724 |
|
|
|
24,982 |
|
|
|
22,386 |
|
Total NOI |
|
$ |
50,326 |
|
|
$ |
59,882 |
|
|
$ |
201,858 |
|
|
$ |
323,221 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cash NOI Adjustments |
|
|
|
|
|
|
|
|
|||||||||
|
Industrial: |
|
|
|
|
|
|
|
|
||||||||
|
Industrial NOI |
|
|
12,651 |
|
|
|
13,564 |
|
|
|
49,649 |
|
|
|
53,477 |
|
|
Straight Line Rent |
|
|
(69 |
) |
|
|
(135 |
) |
|
|
(344 |
) |
|
|
(1,018 |
) |
|
In-Place Lease Amortization |
|
|
(97 |
) |
|
|
(93 |
) |
|
|
(384 |
) |
|
|
(369 |
) |
|
Deferred Termination Income |
|
|
— |
|
|
|
(36 |
) |
|
|
(24 |
) |
|
|
(39 |
) |
|
Industrial Cash NOI |
|
|
12,485 |
|
|
|
13,300 |
|
|
|
48,897 |
|
|
|
52,051 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Office: |
|
|
|
|
|
|
|
|
||||||||
|
Office NOI |
|
|
28,748 |
|
|
|
37,320 |
|
|
|
118,439 |
|
|
|
230,967 |
|
|
Straight Line Rent |
|
|
(595 |
) |
|
|
(4,784 |
) |
|
|
(9,046 |
) |
|
|
(12,207 |
) |
|
In-Place Lease Amortization |
|
|
(200 |
) |
|
|
(702 |
) |
|
|
(306 |
) |
|
|
(1,346 |
) |
|
Deferred Termination Income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Deferred Ground/Office Lease |
|
|
433 |
|
|
|
433 |
|
|
|
1,739 |
|
|
|
1,945 |
|
|
Other Intangible Amortization |
|
|
377 |
|
|
|
377 |
|
|
|
1,494 |
|
|
|
1,495 |
|
|
Inducement Amortization |
|
|
— |
|
|
|
79 |
|
|
|
150 |
|
|
|
537 |
|
|
Office Cash NOI |
|
|
28,763 |
|
|
|
32,723 |
|
|
|
112,470 |
|
|
|
221,391 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Other: |
|
|
|
|
|
|
|
|
||||||||
|
Other NOI |
|
|
8,927 |
|
|
|
8,998 |
|
|
|
33,770 |
|
|
|
38,777 |
|
|
Straight Line Rent |
|
|
460 |
|
|
|
264 |
|
|
|
1,461 |
|
|
|
634 |
|
|
In-Place Lease Amortization |
|
|
(108 |
) |
|
|
(128 |
) |
|
|
(549 |
) |
|
|
(489 |
) |
|
Deferred Termination Income |
|
|
— |
|
|
|
(508 |
) |
|
|
— |
|
|
|
(2,779 |
) |
|
Deferred Ground/Office Lease |
|
|
(5 |
) |
|
|
— |
|
|
|
(15 |
) |
|
|
5 |
|
|
Other Cash NOI |
|
|
9,274 |
|
|
|
8,626 |
|
|
|
34,667 |
|
|
|
36,148 |
|
|
Total Cash NOI |
|
$ |
50,522 |
|
|
$ |
54,649 |
|
|
$ |
196,034 |
|
|
$ |
309,590 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Same Store Cash NOI Adjustments |
|
|
|
|
|
|
|
|
|||||||||
|
Industrial Cash NOI |
|
|
12,485 |
|
|
|
13,300 |
|
|
|
48,897 |
|
|
|
52,051 |
|
|
Cash NOI for recently acquired properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Cash NOI for recently disposed properties |
|
|
— |
|
|
|
(1,147 |
) |
|
|
(307 |
) |
|
|
(4,570 |
) |
|
Industrial Same Store Cash NOI |
|
|
12,485 |
|
|
|
12,153 |
|
|
|
48,590 |
|
|
|
47,481 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Office Cash NOI |
|
|
28,763 |
|
|
|
32,723 |
|
|
|
112,470 |
|
|
|
221,391 |
|
|
Cash NOI for recently acquired properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Cash NOI for recently disposed |
|
|
(515 |
) |
|
|
(6,725 |
) |
|
|
(2,986 |
) |
|
|
(109,144 |
) |
|
Lease termination adjustment |
|
|
(918 |
) |
|
|
— |
|
|
|
(918 |
) |
|
|
(8,303 |
) |
|
Inducement adjustment for non-same store property |
|
|
— |
|
|
|
(79 |
) |
|
|
(150 |
) |
|
|
(537 |
) |
|
Office Same Store Cash NOI |
|
|
27,330 |
|
|
|
25,919 |
|
|
|
108,416 |
|
|
|
103,407 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Other Cash NOI |
|
|
9,274 |
|
|
|
8,626 |
|
|
|
34,667 |
|
|
|
36,148 |
|
|
Cash NOI for recently acquired properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Cash NOI for recently disposed |
|
|
(851 |
) |
|
|
(517 |
) |
|
|
(2,302 |
) |
|
|
(4,159 |
) |
|
Other Same Store Cash NOI |
|
|
8,423 |
|
|
|
8,109 |
|
|
|
32,365 |
|
|
|
31,989 |
|
|
Total Same Store Cash NOI |
|
$ |
48,238 |
|
|
$ |
46,181 |
|
|
$ |
189,371 |
|
|
$ |
182,877 |
|
PEAKSTONE REALTY TRUST |
Annualized Base Rent, Investment Grade, and Normalized EBITDAre |
“Annualized base rent” or “ABR” means the contractual base rent excluding abatement periods and deducting base year operating expenses for gross and modified gross leases as of December 31, 2023, unless otherwise specified, multiplied by 12 months. For properties in the Company's portfolio that had rent abatement periods as of December 31, 2023, we used the monthly contractual base rent payable following expiration of the abatement.
“Investment grade” means an investment grade credit rating from a NRSRO approved by the
“Normalized EBITDAre” is a non-GAAP supplemental performance measure to evaluate the operating performance of the Company. Normalized EBITDAre, as defined by the Company, represents EBITDAre (as defined by NAREIT), modified to exclude items such as acquisition-related expenses, employee separation expenses and other items that we believe are not indicative of the performance of our portfolio. Normalized EBITDAre also excludes the Normalized EBITDAre impact of properties sold during the period and extrapolate the operations of acquired properties to estimate a full quarter of ownership (in each case, as if such disposition or acquisition had occurred on the first day of the quarter). We may also exclude the annualizing of other large transaction items such as termination income recognized during the quarter. Management believes these adjustments to reconcile to Normalized EBITDAre provides investors with supplemental performance information that is consistent with the performance models and analysis used by management and provides investors a view of the performance of our portfolio over time. However, because Normalized EBITDAre is calculated before recurring cash charges, including interest expense and income taxes, and is not adjusted for capital expenditures or other recurring cash requirements of our business, its utility as a measure of our liquidity is limited. Therefore, Normalized EBITDAre should not be considered as an alternative to net income, as computed in accordance with GAAP. Normalized EBITDAre may not be comparable to similarly titled measures of other companies. Please refer to the Supplemental Report for the definition of Normalized EBITDAre (Consolidated).
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Investor Relations:
ir@pkst.com
Source: Peakstone Realty Trust
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