Executive Summary

Q3 2024 delivered steady operations: rental and other revenues were $42.4M, GAAP diluted EPS was -$0.11, Core FFO was $11.1M ($0.27/share), and AFFO was $4.8M ($0.12/share), with the dividend covered by AFFO though at a higher payout ratio .
Occupancy improved to 83.4% in-place and 87.0% including signed leases not yet occupied, supported by 141,000 sq ft of leasing and several Q4 commencements; management raised full-year occupancy and same-store cash NOI guidance ranges on stronger leasing momentum .
Sequentially, NOI dipped modestly to $24.6M from Q2, primarily due to the earlier Cascade Station disposition; Core FFO fell slightly to $0.27/share from $0.28/share, and AFFO declined to $0.12/share due to renovation spend and TI deductions tied to near-term lease commencements .
Capital structure de-risking continued: the $50M term loan was repaid using the credit facility; total debt was ~$651M with 82% fixed/effectively fixed and WAM ~2.1 years; Block 83 and City Center (Tampa) remain unencumbered, with financing options under evaluation .
Estimate comparison: S&P Global consensus estimates were unavailable at the time of retrieval, so beat/miss vs Street cannot be assessed (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

Leasing momentum: 141,000 sq ft signed in Q3 (78,000 new, 63,000 renewals), with 131,000 sq ft expected to take occupancy post quarter; CEO highlighted “progression of office real estate fundamentals” and renovations aligning with demand .
Occupancy outlook and same-store cash NOI: In-place occupancy rose to 83.4% (87.0% with signed leases), and guidance ranges for year-end occupancy and same-store cash NOI change were raised on stronger year-to-date leasing .
WeWork extension at Bloc 83: a 28,000 sq ft renewal extension was completed to accommodate a prominent user through Dec 2026, at approximately 6% higher starting rent and effectively no TI, supporting stability at a trophy asset .

What Went Wrong

Revenue and NOI pressure: Revenue of $42.4M was down year-over-year (Q3’23: $44.2M), and NOI fell to $24.6M vs $26.6M in Q3’23, with management citing the Q2 Cascade Station disposition as a driver of sequential NOI decline .
AFFO compression: AFFO per share fell to $0.12, with CFO attributing the largest impacts to a $0.7M TI deduction for a new lease commencing in November and ~$1.0M renovation spend across four properties, pushing the AFFO payout ratio to 86% .
Macro capital markets headwinds persist: office sector capital markets remain suppressed with limited debt availability; while conditions are improving for well-leased properties, refinancing visibility for late-2025 maturities remains early-stage .

Financial Results

Metric	Q3 2023	Q1 2024	Q2 2024	Q3 2024
Rental & Other Revenues ($USD Millions)	$44.214	$44.493	$42.342	$42.371
GAAP Diluted EPS ($)	-$0.05	-$0.06	-$0.14	-$0.11
Core FFO per Share ($)	N/A	$0.33	$0.28	$0.27
AFFO per Share ($)	N/A	$0.22	$0.13	$0.12
Net Operating Income ($USD Millions)	$26.570	$26.749	$24.850	$24.588
Same-Store Cash NOI Change (YoY, %)	N/A	-1.0%	-2.0%	+0.2%
In-Place Occupancy (%)	N/A	83.0%	83.0%	83.4%
Occupancy incl. Signed Not Yet Occupied (%)	N/A	86.0%	87.3%	87.0%
Leasing Activity Signed (000 sq ft)	N/A	191	269	141
Core FFO Payout Ratio (%)	N/A	30%	36%	37%

Note: S&P Global consensus estimates were unavailable at the time of retrieval; therefore, comparisons vs estimates cannot be provided (S&P Global data unavailable).

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Operating Income ($USD Millions)	FY 2024	$101.5–$103.5	$101.5–$102.0	Lowered high end
Interest Expense ($USD Millions)	FY 2024	$34.5–$35.5	$34.0–$35.0	Lowered both ends
Core FFO per Diluted Share ($)	FY 2024	$1.14–$1.18	$1.15–$1.17	Narrowed range (midpoint slightly up)
Net Recurring Straight-Line Rent Adjustment ($USD Millions)	FY 2024	$1.0–$2.0	$0.0–$1.0	Lowered
Same-Store Cash NOI Change (YoY, %)	FY 2024	-2.0%–0.0%	-0.5%–+0.5%	Raised
December 31, 2024 Occupancy (%)	FY 2024	83.5%–85.5%	85.0%–86.0%	Raised
Dispositions ($USD Millions)	FY 2024	$21.0	$21.0	Maintained
G&A ($USD Millions)	FY 2024	$14.5–$15.5	$14.5–$15.5	Maintained (note: ~$4.3M stock comp excluded from Core FFO)
Common Dividend per Share ($)	Q3 2024	N/A	$0.10 declared	Declared

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024 and Q1 2024)	Current Period (Q3 2024)	Trend
Leasing momentum and tenant mix	Strongest quarterly new leasing since pandemic (162k sq ft new in Q2); larger tenants returning; WeWork amendments to take back premium space later in 2024	141k sq ft signed; continued larger tenant interest; weighted avg lease terms ~5 years; renewal concessions roughly 1 month free per lease year, stable YoY	Improving/stable economics
Sun Belt and market fundamentals	Renovations and well-amenitized assets driving leasing; Cascade Station disposition reduced debt	National office availability declined for first time since 2019; Sun Belt leasing recovery highlighted; supply removal via conversions/demolitions supports fundamentals	Macro tailwinds emerging
Occupancy trajectory	In-place 83.0%; signed-not-yet 87.3% (Q2) and 86.0% (Q1); several Q3/Q4 commencements expected	In-place 83.4%; signed-not-yet 87.0%; major Q4 commencements in Phoenix (74k), Raleigh (33k), Orlando (50k), and 42k FRP Ingenuity Drive	Upward trajectory
WeWork exposure	Amendments to take back one floor at Bloc 83 and Terraces later in 2024	28k sq ft renewal extension at Bloc 83 through Dec 2026 with ~6% higher rent and minimal TI	De-risked near-term vacancy
Capital markets/debt	Extended property loans in Q2; reduced total debt with Cascade Station transfer	Repaid $50M term loan via line; no maturities until Oct 2025; exploring financing for trophy assets (Block 83; City Center unencumbered)	Incremental flexibility
Development/redevelopment	Guidance adjusted for WeWork; FRP Ingenuity Drive leased to 100%	Advancing City Center (St. Petersburg) condo redevelopment via partnership approach and site plan approvals	Optionality building
Weather resilience	N/A	Florida portfolio weathered two hurricanes well; quick recovery	Operational resilience

Management Commentary

CEO: “We continue to experience a progression of office real estate fundamentals across our markets… we increased our guidance expectations for year-end occupancy and same store cash NOI change.”
CEO: “Our strategy of renovating and enhancing properties has aligned with leasing demand… we expect to complete renovations at four of our properties… drive future occupancy gains and build on the leasing momentum.”
CFO: “NOI was marginally lower in Q3 than in Q2, primarily a result of the disposition of Cascade Station… Core FFO… lower… driven primarily by the net operating income decrease and marginally higher interest expense.”
CFO: “AFFO was $4.8M or $0.12 per share… largest impact to AFFO was a $700k tenant improvement deduction… four significant property renovations… resulted in a $1M reduction to AFFO.”
CEO: “The total amount of office space available nationally declined in the third quarter… first quarterly decline since 2019… Sun Belt has experienced an outsized leasing recovery.”

Q&A Highlights

WeWork renewal economics: A 28k sq ft extension at Bloc 83 through Dec 2026, ~6% higher starting rent, essentially no TI, accommodating a prominent user; supports high occupancy at a trophy asset .
Occupancy drivers and timing: Significant Q4 commencements across Phoenix (74k sq ft), Raleigh (33k), Orlando (50k), plus 42k at FRP Ingenuity Drive already moving in; balance of commencements early 2025 .
Tenant demand profile: Larger tenants increasingly committing to longer terms; best, renovated space is in demand; face rents healthy; concessions stable (~1 month free per lease year) .
Refinancing path: No maturities for four quarters; two property loans mature in Q4’25; Block 83 financing options under review; CMBS market improving for trophy assets; extension option on the operating line available .
City Center redevelopment monetization: Considering partnership structure contributing land value, limited cash, with participation in sales proceeds; approvals targeted by early 2025 .

Estimates Context

S&P Global consensus estimates for Q3 2024 revenue and EPS were unavailable at the time of retrieval due to request limits, so we cannot determine beats/misses vs Street (S&P Global data unavailable).
Given raised occupancy and same-store cash NOI guidance ranges, sell-side models may need to reflect higher near-term occupancy and lower interest expense, offset by renovation-driven AFFO pressure in Q4 .

Key Takeaways for Investors

Leasing strength and occupancies are inflecting: In-place occupancy up to 83.4% and signed-not-yet 87.0%; Q4/Q1 commencements support further occupancy gains and same-store cash NOI improvement .
Near-term AFFO headwinds are investment-driven: Renovations (~$10M across four assets) and TI cash costs tied to leases commencing imminently depressed AFFO, but position the portfolio for stronger rent and occupancy in 2025 .
Balance sheet flexibility: Term loan repaid; no maturities until Oct 2025; unencumbered trophy assets (Block 83, City Center Tampa) offer financing levers; interest expense guidance trimmed .
WeWork exposure de-risked: Bloc 83 renewal extension at improved economics reduces vacancy drag and maintains high occupancy at a key asset .
Macro backdrop turning supportive: National office availability down quarter-over-quarter for first time since 2019; Sun Belt markets showing outsized leasing recovery; renovated, amenitized assets win .
Sequential prints modestly softer, but trajectory positive: NOI and Core FFO down slightly vs Q2 due to earlier disposition and interest expense, while same-store cash NOI turned positive and occupancy rose .
Catalysts: Q4 commencements, guidance execution on occupancy/SS cash NOI, potential Block 83 financing, City Center redevelopment milestones, and continued leasing wins in Sun Belt markets .

Additional references (Q3 quarter-related press releases): earnings release scheduling and Q3 dividend declared .

City Office REIT, Inc. (CIO)·Q3 2024 Earnings Summary