Executive Summary

Q2 2024 in line with company plan but softer sequentially: revenues fell to $42.3M and GAAP diluted EPS was ($0.14); Core FFO/share declined to $0.28 as Q1 benefited from a $0.9M termination fee that did not repeat .
Leasing momentum accelerated: 269k sf executed (162k sf new), the company’s highest new leasing quarter since the pandemic; in-place occupancy 83.0% and 87.3% including 241k sf of signed-not-commenced leases, setting up a 2H occupancy tailwind .
Balance sheet de-risking: addressed remaining 2024 property-level maturities, transferred Cascade Station to lender (reduced debt by ~$20.6M), extended two Orlando loans, and plans to repay a $50M term loan in September; net debt/EBITDA at 7.0x with $92M undrawn revolver and $43M cash + restricted cash .
Guidance reiterated: full-year 2024 Core FFO/share range maintained at $1.14–$1.18 after Q1 cut for WeWork rightsizing; management expects occupancy to rise in each of the last two quarters as signed leases commence .
Catalysts: conversion of signed-not-commenced leasing to cash flow, potential CMBS financing on unencumbered assets (e.g., Block 83), and progress on St. Petersburg mixed-use opportunity; risk skew includes an expected 72k sf AmberGlen move-out in early 2025 and Phoenix/Portland market dispersion .

What Went Well and What Went Wrong

What Went Well

Record new leasing since the pandemic: “we signed 162,000 square feet of new leases during the second quarter…highest quarter of new leasing in our company’s history” (CEO) .
Occupancy tailwinds: 241k sf of signed-not-commenced leases boosted “occupied plus SNC” to 87.3%, with management expecting occupancy to increase in each of Q3 and Q4 .
Maturities addressed and liquidity preserved: transferred Cascade Station (reduced debt by ~$20.6M), extended two Orlando loans, and plans to pay down a $50M term loan; $92M revolver availability and $43M cash/restricted cash .

What Went Wrong

Sequential earnings pressure: Core FFO/share fell to $0.28 from $0.33, chiefly due to lower occupancy and absence of a $0.9M Q1 termination fee at Block 23 that did not recur in Q2 .
WeWork rightsizing impacts: taking back a floor at Dallas Terraces and one at Raleigh’s Bloc 83 in 2H24; guidance had been reduced in Q1 by ~$1.8M Core FFO for expected WeWork downsizing (about $0.04/share, including ~$0.02 non-cash) .
Same-store pressure persisted: Same Store Cash NOI decreased 2.0% YoY for Q2 (reflecting lower portfolio occupancy YoY) .

Financial Results

Metric	Q2 2023	Q1 2024	Q2 2024	S&P Global Consensus
Rental & Other Revenues ($MM)	$44.604	$44.493	$42.342	N/A (unavailable)
GAAP Diluted EPS ($)	($0.06)	($0.06)	($0.14)	N/A (unavailable)
Core FFO per Share ($)	—	$0.33	$0.28	N/A (unavailable)
AFFO per Share ($)	—	$0.22	$0.13	N/A (unavailable)
Same Store Cash NOI YoY (%)	—	(1.0%)	(2.0%)	—

Notes:

Q/Q drivers: Q2 Core FFO/share decline primarily from lower occupancy and the $0.9M Q1 termination fee at Block 23; Q2 AFFO also reflected ~$1.0M tenant improvement deduction (Mission City) and ~$1.0M renovation-related deduction .
Company stated results “tracked our previously issued guidance” and reiterated full-year guidance .

KPIs and Balance Sheet

KPI	Q1 2024	Q2 2024
In-place Occupancy (%)	83.0%	83.0%
Occupancy incl. Signed-Not-Commenced (%)	86.0%	87.3%
Signed-Not-Commenced (sf)	172k	241k
Total Leasing Activity (sf)	191k (110k new)	269k (162k new)
Renewal Cash Rent Change	—	+4.3%
Same Store Cash NOI YoY	(1.0%)	(2.0%)
Debt (Balance Sheet, $MM)	$668–669	$649–652 (principal outstanding ~$652.4)
% Fixed / Effectively Fixed	91.1%	~90.0%
Wtd. Avg. Interest Rate	4.8%	5.0%
Wtd. Avg. Maturity (yrs)	~2.3	~2.3
Net Debt / EBITDA	6.6x	7.0x
Liquidity	~$97M undrawn revolver; $43M cash+restricted cash	~$92M undrawn revolver; $43M cash+restricted cash

Non-GAAP payout (common)

Q1 2024: FFO payout 33%; Core FFO payout 30%; AFFO payout 45% .
Q2 2024: FFO payout 40%; Core FFO payout 36%; AFFO payout 78% .

Guidance Changes

Metric	Period	Previous Guidance (Q1 2024 update)	Current Guidance (Q2 2024)	Change
Core FFO per fully diluted share	FY 2024	$1.14 – $1.18	Reiterated $1.14 – $1.18	Maintained
Net Operating Income	FY 2024	$101.5M – $103.5M	Reiterated	Maintained
G&A	FY 2024	$14.5M – $15.5M	Reiterated	Maintained
Interest Expense	FY 2024	$34.5M – $35.5M	Reiterated	Maintained
Net Recurring Straight-Line Rent Adj.	FY 2024	$1.0M – $2.0M	Reiterated	Maintained
Same Store Cash NOI change	FY 2024	(2.0%) to 0.0%	Reiterated	Maintained
Dec. 31, 2024 Occupancy	FY 2024	83.5% – 85.5%	Reiterated	Maintained
Dispositions	FY 2024	$21.0M (Cascade Station transfer)	Reiterated	Maintained
Common Dividend	Quarterly	$0.10/share (declared; Q2 paid 7/24)	$0.10/share (Q3 declared 9/13)	Maintained

Context: Initial FY24 Core FFO/share guidance was $1.18–$1.22 in February; reduced to $1.14–$1.18 in May to reflect WeWork downsizing (approx. $0.04/share hit, incl. ~$0.02 non-cash). Q2 reiterated the updated ranges .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2023, Q1 2024)	Current Period (Q2 2024)	Trend
Leasing momentum	Pipeline >200k sf; improving activity into 2024	Record new leasing since the pandemic: 162k sf new; total 269k sf	Improving
Occupancy trajectory	2024 occupancy expected to end higher; late-year weighted commencements	83.0% in-place; 87.3% incl. SNC; expect occupancy to rise in Q3/Q4	Improving
WeWork restructuring	Expect to take back one floor at Dallas Terraces and one at Bloc 83; Q1 guidance cut ~$1.8M	Lease amendments executed; floors to return in 2H24; WeWork to remain ~78k sf total	Clarified/contained
Phoenix submarket	Mixed/softer market in prior commentary	“Really strong” pickup; ~70k sf of commenced leases in Phoenix	Improving
Spec suites	2023 heavy spend; 2024 spend to ~half of 2023; ~80k sf inventory (Q1)	Inventory down to ~48k sf; building another ~32k sf; strong interest	Positive absorption
Debt/liquidity & CMBS	Office debt liquidity challenged; plan to work with lenders	2024 maturities addressed; CMBS “starting to open up”; exploring Block 83 financing	Gradual improvement
Asset strategy/portfolio pruning	Intend to prune at right time; market illiquidity noted	Cascade Station transferred; continue to position best assets to win leasing	Active de-risking
St. Petersburg City Center optionality	—	Advanced discussions to redevelop standalone parking garage into mixed-use with high-rise condos (profit participation)	New optionality

Management Commentary

“We reported today that new leasing activity increased to 162,000 square feet and total leasing activity increased to 269,000 square feet. In fact, this was the highest quarter of new leasing in our company’s history.” – James Farrar, CEO .
“Our results this quarter continue to track our expectations. Accordingly, we reiterated all aspects of our prior guidance this quarter.” – James Farrar, CEO .
“Our net operating income in the second quarter was $24.9 million…lower…as a result of lower occupancy and a $900,000 termination fee recognized in the first quarter at Block 23.” – Anthony Maretic, CFO .
“We view the debt transactions this quarter as an upgrade to our balance sheet as we have addressed all near-term maturities…our next property level debt maturity is not until October 2025.” – Anthony Maretic, CFO .
“We are in advanced discussions with a highly regarded developer [for St. Petersburg City Center]…contributing the parking garage land and participating in future development profits.” – James Farrar, CEO .

Q&A Highlights

Move-outs/occupancy: Only one known >30k sf move-out over the next four quarters (72k sf at AmberGlen at end of Jan 2025); targeting ~84.5% YE occupancy, potentially higher .
Debt approach: Planning to repay $50M term loan in Sept; monitoring rate path; exploring CMBS for unencumbered Block 83; indicative CMBS spreads ~275–300 bps over reference rate .
Market color: Phoenix momentum broadening across submarkets; tech sublease still slower but other industries picking up; spec suite inventory leasing down to ~48k sf .
Central Fairwinds rate swap: Swap was a lender requirement at closing (effective fixed 7.68%) .
Timing of signed-not-commenced: Expect Q2 to be the occupancy floor for the year with Q3/Q4 commencements driving improvement .

Estimates Context

S&P Global consensus estimates for Q2 2024 EPS and revenue were unavailable at time of analysis due to API rate limits; therefore, we cannot quantify beats/misses vs consensus for this quarter. We attempted to retrieve: Primary EPS Consensus Mean and Revenue Consensus Mean for Q2 2024 and Q1 2024 but did not receive values (S&P Global) due to “Daily Request Limit…Exceeded.”
Given the absence of consensus data, we anchor to company guidance: management stated results “continue to track our previously issued guidance,” reiterating all components for FY 2024 .

Key Takeaways for Investors

Leasing inflection: highest new leasing since the pandemic with 269k sf total activity; 241k sf of signed-not-commenced supports sequential occupancy gains in 2H24 .
Earnings cadence: Q2 Core FFO/share down to $0.28 from $0.33 on lower occupancy and non-repeat of Q1 termination fee; AFFO impacted by TIs and renovation spend but still covered the $0.10 dividend (78% AFFO payout) .
De-risked near-term maturities: property-level 2024 debt addressed; term loan repayment planned; CMBS window opening may unlock financing on unencumbered assets (Block 83) .
Market dispersion: Phoenix strengthening, while Portland remains challenging; management actively manages exposure (Cascade Station exit, AmberGlen risk in early 2025) .
Guidance steady: FY24 Core FFO/share reiterated at $1.14–$1.18 after Q1 WeWork cut; mgmt expects occupancy to rise in Q3/Q4 as SNC leases commence .
Optionality: St. Petersburg mixed-use opportunity could create value via land contribution and profit participation; updates expected later in the year .
Trading lens: Watch for commencements timing, leasing of returned WeWork floors (Dallas/Raleigh), Phoenix absorption, and any CMBS execution—key catalysts for narrowing NAV discount and stabilizing cash flows .

Citations

Q2 2024 8-K and Exhibit 99.1 press release: .
Q2 2024 press release: .
Q2 2024 earnings call transcript: .
Q1 2024 8-K and press release: . Q1 call transcript: .
Q4 2023 8-K and press release: .
Dividends press releases (Q2 and Q3): .

City Office REIT, Inc. (CIO)·Q2 2024 Earnings Summary