I N V E S TO R P R E S E NTATION M A R C H 2 0 1 8 N YS E : CIO F - - PowerPoint PPT Presentation

I N V E S TO R P R E S E NTATION

N YS E : CIO

M A R C H 2 0 1 8

FORWARD-LOOKING STATEMENTS

This presentation contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A

• f the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain statements contained in this

presentation, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward- looking statements within the meaning of the federal securities laws and as such are based upon City Office REIT, Inc. (“CIO” or the “Company”) and its current beliefs as to the outcome and timing of future events. There can be no assurance that actual forward-looking statements, including projected capital resources, projected profitability and portfolio performance, estimates or developments affecting the Company will be those anticipated by the Company. Examples of forward-looking statements include those pertaining to expectations regarding our financial and operating performance, including under metrics such as market rental rates, national or local economic growth, estimated replacement costs of our properties, projected capital improvements, expected sources of financing, expectations as to the timing of closing of acquisitions, dispositions, or other transactions, the expected operating performance of anticipated near-term acquisitions and dispositions and descriptions relating to these expectations, including, without limitation, anticipated net operating income yield, cap rates and the Company’s projections for its performance in future periods. Forward-looking statements presented in this presentation are based on management’s beliefs and assumptions made by, and information currently available to, management. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “believe,” “could,” “project,” “predict,” “hypothetical,” “continue,” “future” or other similar words or expressions. All forward-looking statements included in this presentation are based upon information available to the Company on the date hereof and the Company is under no duty to update any of the forward-looking statements after the date of this presentation to conform these statements to actual

• results. The forward-looking statements involve a number of significant risks and uncertainties. Factors that could have a material adverse effect on

the Company’s operations and future prospects are set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, including the sections entitled “Risk Factors” contained therein. The factors set forth in the Risk Factors section and otherwise described in the Company’s filings with SEC could cause the Company’s actual results to differ significantly from those contained in any forward-looking statement contained in this presentation. The Company does not guarantee that the assumptions underlying such forward-looking statements are free from

• errors. Unless otherwise stated, historical financial information and per share and other data is as of December 31, 2017.

Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company’s business, financial condition, liquidity, cash flows and results could differ materially from those expressed in any forward-looking statement. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. 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. Use caution in relying on past forward-looking statements, which were based on results and trends at the time they were made, to anticipate future results or trends. 2

EXECUTIVES AND BOARD OF DIRECTORS

3 John McLernon, Chairman Jamie Farrar, CEO & Director William Flatt, Director Mark Murski, Director Stephen Shraiberg, Director John Sweet, Director

BOARD OF DIRECTORS

JAMIE FARRAR, CHIEF EXECUTIVE OFFICER



Over 20 years of real estate, private equity and corporate finance industry experience



Completed the acquisition of approximately $2.0 billion of real estate since 2011



Prior experience with a family office focused on real estate and hospitality and the private equity group of the TD Bank

GREG TYLEE, CHIEF OPERATING OFFICER & PRESIDENT



Over 20 years of diverse real estate experience that includes acquisitions of income-producing properties as well as high-rise development



Involved in real estate transactions, incl. development and management, with a combined enterprise value of over $2.0 billion



Former President of Bosa Properties Inc., a prominent real estate development company with over 400 employees

TONY MARETIC, CHIEF FINANCIAL OFFICER, SECRETARY & TREASURER



Over 20 years of experience, including over 15 years of experience in senior financial and operational roles, of which 12 years were spent within the real estate industry



Former Chief Operating Officer and Chief Financial Officer of Earls Restaurants Ltd., a multi-national hospitality company



Held financial management positions with a U.S. based senior living real estate company and Bentall Kennedy

✓ ✓ ✓ ✓ ✓ ✓ Indicates Independent Director

COMPANY OVERVIEW

(1) Except for SSNOI, which is as of December 31, 2017, all other information is as of December 31, 2017 adjusted for the expected disposition of Washington Group Plaza in March 2018 (2) For a more detailed description of same store cash NOI for the year ended December 31, 2017, please see our Q4 2017 Supplemental Financial Information package, available on our website (3) Annualized base rent is calculated by multiplying (i) rental payments (defined as cash rents before abatements) for the month ended December 31, 2017 by (ii) 12

44

Buildings

4.1%

2017 SSNOI (2)

7

Markets

4.7 yrs

Avg Lease Term

4.6mm SF

Total NRA

$95.6mm

ABR (3)

88.5%

Occupancy

$25.19

Annualized Gross Rent /SF 4

% OF PORTFOLIO NRA DENVER, CO PORTLAND, OR DALLAS, TX ORLANDO, FL TAMPA, FL PHOENIX, AZ 4% 21% 12% 12% 23%

CURRENT MARKETS (1)

City Office invests in high-quality office properties in mid-sized metropolitan areas with strong economic fundamentals, primarily in the Southern and Western United States

13% SAN DIEGO, CA 15%

WHY CIO MARKETS?

• 1. NATION-LEADING OFFICE DEMAND DRIVERS (1)

Square Feet (in Millions)

(1) Source: SNL Financial, as of February 1, 2018. Gateway markets represent New York, NY, Boston, MA, Chicago, IL, Los Angeles, CA, San Francisco, CA and Washington, D.C. (2) Source: CoStar Property, as of Q4 2017. Construction deliveries represent Class A&B office building deliveries over 50,000 SF in CIO current markets, excluding Boise, ID (3) As of December 31, 2017 for the trailing 12 months. For REITs under coverage by Deutsche Bank Equity Research – North America. Ranking based on weighted average year over year non- seasonally adjusted job growth rate for each REIT under coverage (4) Includes all acquisitions since IPO; represents the weighted average cap rate for each year of announced, projected year one cap rates at the time of acquisition

5

• 2. NEW SUPPLY BELOW HISTORICAL AVERAGES (2)
• 3. ATTRACTIVE MARKET CHARACTERISTICS
• 4. OUTSIZED RETURN & GROWTH POTENTIAL

8.3% 7.5% 7.6% 7.2% 7.5% 2014 2015 2016 2017 Avg. ✓ Diverse employment base with national and international employers ✓ Educated workforce ✓ Low-cost center for businesses to operate ✓ Strong and stable demand generators such as state capitals or university proximity ✓ Live, work, play environments; attractive to millennials ✓ CIO continues to be ranked #1 in market exposure to job-related demand in Deutsche Bank’s REIT Job Tracker (3)

3.3% 4.4% 7.9%

Gateway Markets National Avg CIO Markets

2.7% 3.7% 6.9%

Gateway Markets National Avg CIO Markets % PROJECTED POPULATION GROWTH 2018 - 2023 % PROJECTED EMPLOYMENT GROWTH 2018 - 2023

• 5

10 15 20 25 30 35 40 45

CONSTRUCTION DELIVERIES IN CIO MARKETS 1977 - 2017 ANNOUNCED POST-IPO PROJECTED ACQUISITION CAP RATES (4) AVG

OUR STRATEGY

DISCIPLINED REAL ESTATE UNDERWRITING

6



Focus on properties valued between $25-100 million



Less competition from larger institutional investors



Leverage local partner and property manager relationships to source acquisition opportunities and efficiently operate



Build on existing infrastructure in our current markets

INVEST WHERE WE HAVE AN ADVANTAGE



High credit tenancy, below market in-place rents and acquisition prices below replacement cost



Average acquisition size of $47.6 million post-IPO



Detailed underwriting process and due diligence; confront adverse findings during acquisition diligence



Passed on $1.3 billion of potential transactions in Q4 2017 and 2018 YTD for which a detailed underwriting was completed

CIO’s strategy is to produce attractive returns through a focused acquisition strategy and increasing property cash flows

April 2014 IPO Q4 2014 Q4 2015 Q4 2016 Q4 2017

PROVEN GROWTH STRATEGY

7

(1) As of December 31, 2017, adjusted for the expected disposition of Washington Group Plaza in March 2018 (2) Represents total revenue on a pro forma basis for the City Office Predecessor for the year ended December 31, 2013 and for the trailing 12 months ended December 31, 2017 (3) Financings subsequent to IPO, as of December 31, 2017 (4) Represents implied asset value at IPO plus acquisitions at cost, and does not include impact of dispositions or expected dispositions

OVER $1 BILLION IN TOTAL REAL ESTATE ACQUIRED

$307 Million $1.1 Billion



Multiple buildings in all markets creating significant economies of scale



Increased net rentable square footage to 4.6 million from 1.9 million at IPO (1)



Operating revenue increased to $106.5 million from $32.6 million at IPO (2)



Increased average annualized base rent per SF to $23.37 from $17.95 at IPO (1)

EFFICIENT ACCESS TO CAPITAL

TOTAL REAL ESTATE (4) $387 Million $559 Million



$289 million in common stock follow-on offerings



$112 million Series A preferred stock offering



$342 million in property-level debt financings (3)



~$100 million ATM program in place $816 Million

VALUE CREATION & EMBEDDED VALUE

(1) Expected to close in March 2018. Customary conditions to closing remain outstanding, and there can be no assurance that the terms and timing of the disposition, if any, will meet our expectations (2) Estimated accounting gain on sale based on an approximately $37 million net book value as of December 31, 2017 (3) Calculated using estimated allocated equity value at IPO and using estimated closing costs; actual IRR may vary depending on actual net proceeds and closing costs (4) Calculated using estimated allocated equity value at IPO; IRR prorates initial equity value, cash flows from the property and final distribution based on the square footage of the two assets sold divided by the total square footage of the five buildings that initially comprised the AmberGlen property

8

EMBEDDED VALUE EXAMPLE - LAND HOLDINGS



Land holdings at three properties in Tampa, Orlando and San Diego



29 acres of prime, developable land



Management conservatively estimates aggregate market value at

• ver $14 million, equating to over $0.38 per share in value

WASHINGTON GROUP PLAZA – BOISE, ID



Under contract for $86.5 million (1)



Greater than $45 million anticipated net gain on sale (2)



Expected IRR of ~22.0% (3)



~5.8% anticipated disposition cap rate



Renovations to common areas and mechanical systems



Implemented significant operating expense savings



Increased NRA by 23,000 SF through re-measurement



Completed significant leasing transactions, including 148,000 SF, 10-year lease to St. Luke’s Hospital



Two largest tenants competed to acquire property

Prudent capital recycling: CIO’s three dispositions are expected to generate in excess of $70 million of gains

PRIOR ASSET SALES



Corporate Parkway – Allentown, PA



51.0% IRR and $15.9 million gain



AmberGlen – Portland, OR



~17.0% IRR and $9.2 million gain for CIO’s 76% ownership (4)

Washington Group Plaza

EMBEDDED VALUE EXAMPLE - FRP INGENUITY DRIVE



Acquired in 2014 at an elevated 9.0% cap rate as a single tenant building with a portion of the building subleased and a portion unused



Completed 78,470 SF lease transaction (63% of NRA) to multi-tenant the building and extend lease term to 10 years on that portion



Solidified the property’s future cash flow and repositioned the entire property for a superior market valuation

$18,541 $2,500 $900 $300 $22,241

$14,000 $16,000 $18,000 $20,000 $22,000 $24,000

Q4 2017 Adjusted NOI Acquisitions Occupancy Increase WGP Redeployment Pro Forma NOI

Property Market Project Type Expected 2018 Costs Park Tower Tampa, FL Repositioning ~ $9.5 million Plaza 25 Denver, CO Repositioning ~ $3.0 million FRP Ingenuity Drive Orlando, FL Repositioning ~ $1.0 million Total Repositioning ~ $13.5 milion Superior Pointe Denver, CO Value Enhancing ~ $1.9 million DTC Crossroads Denver, CO Value Enhancing ~ $1.3 million Central Fairwinds Orlando, FL Value Enhancing ~ $0.6 million AmberGlen Portland, OR Value Enhancing ~ $0.3 million Total Value Enhancing ~ $4.1 million Total Repositioning and Value Enhancing ~ $17.6 million

PATHWAY TO INCREASED OCCUPANCY AND NOI

9

(1) Total 2017-2018 project costs ~ $11.3 million (2) Total 2017-2018 project costs ~ $3.2 million (3) Total 2017-2018 project costs ~ $1.7 million (4) Value enhancing costs include $2.0 million of capital expenditures to upgrade properties and $2.1 million

• f tenant improvements and leasing commissions associated with strategic leasing transactions

Focus on Small Group of Assets with Lower Occupancy Bridge to Increased NOI – Quarterly Basis

Note: All figures are estimates and the adjustments have been rounded to the nearest hundred

• thousand. There are no assurances that these events will occur and City Office makes no

representation as to the time period over which increases in NOI, if any, will occur. If any of the underlying assumptions were to fail to materialize on the terms City Office expects, there could be a material impact on the Company’s NOI in future periods (1) NOI as reported in our Q4 2017 Supplemental Financial Information package, less termination fee income (2) Assumes $138.5 million of incremental acquisitions at a 7.25% cap rate. $138.5 million represents midpoint of 2018 property acquisition guidance of $210 million to $240 million, less $86.5 million of acquisitions associated with Washington Group Plaza redeployment (3) Represents an assumed occupancy increase from 87.7% to 91.5%. 91.5% is the midpoint

• f 2018 guidance of 90% - 93% year end occupancy. NOI derived using Q4 2017 average

annualized gross rent of $24.41 per SF less estimated operating expenses (excluding taxes and insurance) of $6.00 per SF (4) Assumes that Washington Group Plaza is sold for $86.5 million at a projected 5.8% cap rate and that $86.5 million is redeployed in a property acquisition at a 7.25% cap rate

2018 Repositioning and Value-Enhancing Costs

(1) (2) (3) (4) (1) (3) (2) (4)

Property Market NRA (000's) Q4 2017 Occupancy Planned Vacancy Renovation in Progress Desirable Space Leasing Prospects Washington Group Boise, ID 581 81.3% ✔ ✔ Park Tower Tampa, FL 473 83.4% ✔ ✔ ✔ ✔ DTC Crossroads Denver, CO 189 71.7% ✔ ✔ ✔ ✔ Plaza 25 Denver, CO 196 53.3% ✔ ✔ ✔ FRP Collection Orlando, FL 272 66.6% ✔ ✔ Logan Tower Denver, CO 71 82.7% ✔ ✔ Total 1,782 75.6% Balance of Portfolio 3,422 94.0%

Renovation in Progress Transitional Vacancy Pending Disposition (In thousands)

10

EXECUTION AND PIPELINE



Two buildings in Phoenix, AZ



$33.3 million / 162,748 SF



7.5% anticipated year one cap rate



Located in desirable Tempe submarket, with over $8.0 million recently invested in exceptional creative suite buildouts



Advanced acquisition pipeline with over $700 million of potential investment opportunities (1)



Concentrated in CIO current markets and potential expansion markets of Salt Lake City and Seattle



Focus on ~7.0% + cap rates; potential upside through below market rental rates

PAPAGO TECH – OCTOBER 2017



Two-building property in Scottsdale submarket of Phoenix, AZ



$56.5 million / approximately 270,000 SF



Year one anticipated cap rate in excess of 8%



Excellent freeway frontage and access, large functional floorplates and high parking ratio have helped to attract high quality credit tenants at nearly 100% occupancy

(1) As of March 1, 2018 (2) Acquisition is subject to a variety of closing conditions, including the successful completion of our due diligence, and may not close on the terms or timing we expect, or at all

SCOTTSDALE PROPERTY– UNDER CONTRACT (2)

RECENT COMPANY HIGHLIGHTS

11

FOURTH QUARTER 2017



Core FFO of $0.31 per share and AFFO of $0.21 per share



2017 full year Same Store Cash NOI increased 4.1%, as compared to 2016



Executed approximately 278,000 square feet of new and renewal leases during the quarter, including approximately 95,000 square feet of new leases or extension terms that commence in 2019 and beyond



Raised gross proceeds of $72.5 million in a December 2017 offering of common stock



Closed on the $33.3 million acquisition of Papago Tech in Phoenix, AZ



Closed on the $47.0 million 10-year property financing for Mission City with a fixed interest rate of 3.8%

RENOVATIONS IN PROGRESS AT PARK TOWER IN TAMPA, FL



Extensive multi-million dollar renovation of the building’s façade, lobby and amenities



Marketing efforts gaining traction, with eight new leases signed since September 2017, including six of seven recently completed spec suites



Increase in occupancy from 79.8% at September 30, 2017 to 88.7% as of March 1, 2018, including leases signed but not yet in occupancy



Most recent asking rents of $27.00 per SF, increased from $23.50 per SF at acquisition in November 2016

Park Tower, Rendering

Tenant / Parent Credit Rating (S&P / Moody's) Property Tenant since NRA (000s) % of Net Rentable Area State of Colorado Department of Health Aa2 Cherry Creek 1993 319 6.9% United Healthcare Services, Inc. A+ 190 Office Center 2008 198 4.3% Ally Financial Inc. BB+ Lake Vista 2008 163 3.5%

• H. Lee Moffitt Cancer Center

A3 Intellicenter 2008 155 3.4% Toyota Motor Credit AA- SanTan 2011 133 2.9% Kaplan, Inc. 2 BB+ FRP Ingenuity Drive 2008 125 2.7% GSA US Attorneys Office 3 AA+ Park Tower 1998 108 2.3% Paychex, Inc.

• Carillon Point

2009 98 2.1% Planar Systems, Inc.

• AmberGlen

2002 72 1.6% Vical, Inc.

• Sorrento Mesa

2002 68 1.5% Total 1,439 31.2%



Approximately 45.8% of CIO’s base rental revenue is derived from tenants that are government agencies, investment grade companies or their subsidiaries (1)



Portfolio in-place occupancy of 88.5% (1)



Benefit from low in-place rental rates with weighted average gross rental rate per square foot of $25.19 (1)

TOP TEN TENANTS OF OUR PROPERTIES (1)

TENANT PROFILE

(1) As of December 31, 2017, adjusted for the expected disposition of Washington Group Plaza in March 2018 (2) Lease is to Kaplan, Inc. which is a subsidiary of Graham Holdings Company (3) The credit rating indicated is for the United States Government

12

LEASE EXPIRATIONS



Stable, long-term tenancy profile with well-staggered expirations



4.7 year weighted average remaining lease term (1)

LEASE MATURITY SCHEDULE (2) – DECEMBER 31, 2017

(1) As of December 31, 2017 adjusted for the expected disposition of Washington Group Plaza in March 2018 (2) Percentage represents the square footage of the leases divided by the total square footage of the portfolio, as of December 31, 2017 adjusted for the expected disposition of Washington Group Plaza

13 11.5% 9.2% 7.7% 7.5% 15.5% 11.7% 8.7% 6.0% 3.7% 14.9% 3.6%

0% 5% 10% 15% 20% 25% 30% Vacant & Contracted 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 & Thereafter

GROWTH-ORIENTED BALANCE SHEET

 Conservative debt structure at favorable interest rates as of December 31, 2017 ▪

44.8% leverage

▪

4.2% weighted average interest rate

▪

93.2% fixed rate debt

▪

6.2 year average debt maturity

 $150 million authorized under the Secured Credit Facility  ~$50 million net proceeds expected to be received in March 2018 from Washington Group Plaza sale

DEBT MATURITY SCHEDULE ($000S) – DECEMBER 31, 2017

14

(1) $9.0 million of indebtedness attributable to non-controlling interests (2) $494.5 million represents the principal debt balance as of December 31, 2017 before deferred financing costs

Debt Balance: $494.5 million (1)(2)

$0 $100,000 $200,000 $300,000 $400,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

$65,790 Interest Rate: 3.83% $88,583 Interest Rate: 4.34% $46,845 Interest Rate: 3.73% $50,465 Interest Rate: 4.25% $91,694 Interest Rate: 4.61% $151,100 Interest Rate: 4.05%

$32,290 Washington Group Plaza - under contract for sale $33,500 Secured Credit Facility

45% 42% 40% 49% 45%

0% 10% 20% 30% 40% 50% 60% Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

STRONG AND STABLE PERFORMANCE

QUARTERLY COMMON DIVIDENDS PAID

(1) Net Debt to Enterprise Value calculated as CIO share of debt less CIO share of unrestricted cash divided by market value as of quarter end (2) Assumes that (i) $210 million - $240 million of properties are acquired in the second and third quarters of 2018, (ii) Washington Group Plaza is sold in March 2018, (iii) CIO does not raise capital or repurchase shares in 2018, and (iv) no material changes to portfolio property performance

2018 GUIDANCE (2)

15

$0.235 $0.235 $0.235 $0.235 $0.235

$0.00 $0.05 $0.10 $0.15 $0.20 $0.25 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017

CORE FFO / SHARE NET DEBT TO ENTERPRISE VALUE (1)

$0.23 $0.26 $0.21 $0.19 $0.31

$0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017



Property acquisitions of $210 million - $240 million



December 31, 2018 occupancy of 90.0% - 93.0%



2018 Core FFO of $1.08 - $1.13 per diluted share



Q4 2018 Core FFO of $0.31 - $0.34 per diluted share



Represents 12% increase over Q4 2017 Core FFO, removing the impact of termination fee income



Expected dividend coverage on an AFFO basis in Q4 2018

FULLY DEPLOYED

High Quality Properties with Strong Tenants

COMPANY HIGHLIGHTS

16



Well-located office properties in amenity-rich and transit-oriented locations



Over 45% of CIO’s base rental revenue is derived from tenants that are government agencies, investment grade companies or their subsidiaries (1)



Staggered lease maturities with a 4.7 year weighted average remaining lease term (1)



Core markets are located in high growth areas within the Southern and Western US



National leaders in employment growth and population growth



CIO’s three dispositions are expected to generate in excess of $70 million of gains (2)



Full year 2017 same store cash NOI growth of 4.1%, compared to 2016 (3)



Conservative leverage profile with Net Debt / Enterprise Value of 44.8% (3)



Primarily fixed rate debt with a weighted average interest rate of 4.2% (3)



6.2 year average debt maturity (3)



Predictable earnings model with built-in rental rate growth



Management has an average of over 20 years of experience with approximately $2.0 billion of real estate acquisitions since 2011



Internalized management team in February 2016

Proven Value Creation and Markets Positioned for Growth Strong Balance Sheet with Consistent Cash Flow Generation Experienced and Committed Management

(1) As of December 31, 2017, adjusted for the expected disposition of Washington Group Plaza (2) Corporate Parkway was sold in June 2016, two buildings at AmberGlen were sold in May 2017 and Washington Group Plaza is expected to be sold in March 2018 (3) As of December 31, 2017

APPENDIX: PROPERTY OVERVIEW

17

(1) For Superior Pointe, FRP Ingenuity Drive, Lake Vista Pointe, and Sorrento Mesa the annualized base rent per square foot on a triple net basis was increased by $12, $8, $8, and $5 respectively, to estimate a gross equivalent base rent. AmberGlen has a net lease for one tenant which has been grossed-up by $7 on a pro rata basis. FRP Collection has net leases for three tenants which have been grossed up by $8

• n a pro-rata basis. 2525 McKinnon has net leases for seven tenants which have been grossed up by $16 on a pro-rata basis.

(2) Annualized base rent is calculated by multiplying (i) rental payments (defined as cash rents before abatements) for the month ended December 31, 2017 by (ii) 12. (3) Averages weighted based on the property’s NRA, adjusted for occupancy

Metropolitan Area Property Date Acquired Economic Interest NRA (000s SF) In Place Occupancy Annualized Base Rent per SF Annualized Gross Rent per SF1 Annualized Base Rent2 (000s) Largest Tenant by NRA Park Tower Nov-16 94.8% 473 83.4% $23.90 $23.90 $9,423 GSA US Attorneys Office City Center Apr-14 95.0% 241 94.2% $24.56 $24.56 $5,576 Kobie Marketing, Inc. Intellicenter Sep-15 100.0% 204 100.0% $22.90 $22.90 $4,661

• H. Lee Moffitt Cancer

Center Carillon Point Jun-16 100.0% 124 100.0% $26.83 $26.83 $3,332 Paychex, Inc. Cherry Creek Apr-14 100.0% 356 100.0% $18.10 $18.10 $6,438 State of Colorado Department of Health Plaza 25 Jun-14 100.0% 196 53.3% $20.44 $20.44 $2,130 NTT America Inc. DTC Crossroads Jun-15 100.0% 189 71.7% $25.28 $25.28 $3,428 ProBuild Holdings, Inc. Superior Pointe Jun-15 100.0% 149 84.8% $16.44 $28.44 $2,079 KeyBank National Association Logan Tower Feb-15 100.0% 71 82.7% $20.13 $20.13 $1,176 State of Colorado Governor's Energy Sorrento Mesa Sep-17 100.0% 385 87.5% $23.04 $28.04 $7,754 VICAL, Inc. Mission City Sep-17 100.0% 286 87.0% $34.03 $34.03 $8,460 InnovaSystems International SanTan Dec-16 100.0% 267 99.0% $26.66 $26.66 $7,034 Toyota Motor Credit 5090 N 40th St Nov-16 100.0% 176 87.5% $28.03 $28.03 $4,312 Bar-S-Foods Co. Papago Tech Oct-17 100.0% 163 98.0% $20.12 $20.12 $3,210 Regional Acceptance Corp. 190 Office Center Sep-15 100.0% 303 92.1% $24.02 $24.02 $6,709 United Healthcare Services, Inc. Lake Vista Pointe Jul-14 100.0% 163 100.0% $15.00 $23.00 $2,450 Ally Financial Inc. 2525 McKinnon Jan-17 100.0% 111 97.2% $26.54 $37.72 $2,871 The Retail Connection FRP Collection Jul-16 95.0% 272 66.6% $25.30 $26.40 $4,579 GSA - PEO STRI (US Dept of Defence) Central Fairwinds Apr-14 90.0% 168 88.5% $24.13 $24.13 $3,593 Fairwinds Credit Union FRP Ingenuity Drive Nov-14 100.0% 125 100.0% $21.00 $29.00 $2,615 Kaplan, Inc. Portland, OR (3.9%) AmberGlen Apr-14 76.0% 201 96.0% $19.47 $21.98 $3,760 Planar Systems, Inc. Total / Weighted Average - Excluding Assets Held for Sale 3 4,623 88.5% $23.37 $25.19 $95,590 Boise, ID (11.2%) Washington Group Plaza Apr-14 100.0% 581 81.3% $17.67 $17.67 $8,341

• St. Lukes Regional

Medical Center Total / Weighted Average - December 31, 2017 3 5,204 87.7% $22.78 $24.41 $103,931 Denver, CO (18.5%) Orlando, FL (10.8%) Tampa, FL (20.0% of NRA) Dallas, TX (11.1%) San Diego, CA (12.9%) Phoenix, AZ (11.6%)

APPENDIX: FINANCIAL HIGHLIGHTS

18

(in thousands, except per share data) Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 INCOME ITEMS NOI 19,273 $ 14,057 $ 14,483 $ 15,787 $ 12,778 $ Same Store Cash NOI Growth (3.6%) 4.1% 19.1% 0.7% 5.1% Adjusted Cash NOI (CIO share) 18,450 $ 13,779 $ 14,125 $ 14,497 $ 12,641 $ Net (loss)/income per share- fully diluted (0.09) $ (0.12) $ 0.27 $ (0.11) $ (0.21) $ Core FFO / Share 0.31 $ 0.19 $ 0.21 $ 0.26 $ 0.23 $ AFFO / Share 0.21 $ 0.16 $ 0.17 $ 0.20 $ 0.17 $ EBITDA (CIO share) 17,603 $ 12,531 $ 12,856 $ 13,947 $ 11,125 $ Annualized dividend 0.94 $ 0.94 $ 0.94 $ 0.94 $ 0.94 $ Dividend yield 7.2% 6.8% 7.4% 7.7% 7.1% CAPITALIZATION Common shares 36,012 30,262 30,257 30,257 24,382 Unvested restricted shares 307 302 302 304 269 Common units 40 Total shares and units 36,319 30,564 30,559 30,561 24,691 Weighted average shares and units outstanding 31,193 30,562 30,563 29,804 24,689 Share price at quarter end 13.01 $ 13.77 $ 12.70 $ 12.15 $ 13.17 $ Market value of common equity 472,511 $ 420,861 $ 388,101 $ 371,312 $ 325,174 $ Total Series A preferred shares 4,480 4,480 4,480 4,480 4,480 Liquidation preference per preferred share 25.00 $ 25.00 $ 25.00 $ 25.00 $ 25.00 $ Aggregate liquidation preference 112,000 $ 112,000 $ 112,000 $ 112,000 $ 112,000 $ Net debt - CIO share 473,550 $ 509,835 $ 339,568 $ 347,019 $ 353,121 $ Total enterprise value (including net debt ) 1,058,061 $ 1,042,696 $ 839,669 $ 830,331 $ 790,295 $ DEBT STATISTICS AND RATIOS Total principal debt (CIO share) 485,465 $ 527,959 $ 406,863 $ 397,079 $ 366,332 $ Weighted average maturity 6.2 years 5.2 years 6.7 years 6.5 years 5.3 years Average interest rate 4.2% 4.1% 4.2% 4.3% 4.1% Fixed rate debt as percentage of total debt 93.2% 77.3% 100.0% 100.0% 86.0% Adjusted interest coverage (CIO share) 3.1x 2.9x 2.9x 3.2x 3.7x Fixed charge coverage (CIO share) 2.1x 1.9x 1.8x 2.0x 2.1x Net debt/annualized adjusted EBITDA 6.7x 8.1x 6.6x 6.1x 6.9x LEASING STATISTICS In-Place occupancy 87.7% 88.7% 90.1% 90.2% 91.0% Weighted average remaining lease term 4.7 years 4.7 years 5.0 years 5.2 years 5.2 years

APPENDIX: FFO, CORE FFO AND AFFO

19

(in thousands, except per share data) Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 Net (loss)/income attributable to common stockholders (2,920) $ (3,630) $ 8,208 $ (3,313) $ (5,080) $ (+) Depreciation and amortization 12,499 9,449 9,148 10,498 9,345 (-) Net gain on sale of real estate property

• (12,116)
• (-) Operating Partnership unitholders' non-controlling interest
• (5)

9,579 5,819 5,240 7,185 4,260 Non-controlling interests in properties: (+) Share of net income 78 52 3,104 168 111 (-) Share of FFO (261) (245) (286) (373) (303) Funds from Operations ("FFO") 9,396 $ 5,626 $ 8,058 $ 6,980 $ 4,068 $ (+) Stock based compensation 241 259 352 827 649 (-) Change in fair value of contingent consideration

• (2,000)
• (+) Acquisition costs
• 353

(+) Change in fair value of earn-out

• 500

Core FFO 9,637 $ 5,885 $ 6,410 $ 7,807 $ 5,570 $ (+) Net recurring straight line rent adjustment (255) 114 104 (129) 328 (+) Net amortization of above and below market leases (213) (53) (80) (3) 159 (+) Net amortization of deferred financing costs 419 366 325 315 277 (-) Net recurring tenant improvements and incentives (1,125) (627) (426) (253) (565) (-) Net recurring leasing commissions (1,442) (379) (551) (1,281) (998) (-) Net recurring capital expenditures (457) (272) (446) (431) (568) Adjusted Funds from Operations ("AFFO") 6,564 $ 5,034 $ 5,336 $ 6,025 $ 4,203 $ Core FFO per common share and unit 0.31 $ 0.19 $ 0.21 $ 0.26 $ 0.23 $ AFFO per common share and unit 0.21 $ 0.16 $ 0.17 $ 0.20 $ 0.17 $ Dividends per common share and unit 0.235 $ 0.235 $ 0.235 $ 0.235 $ 0.235 $ Core FFO Payout Ratio 76% 122% 112% 90% 104% AFFO Payout Ratio 112% 143% 135% 116% 138% Weighted average common stock and common units outstanding 31,193 30,562 30,563 29,804 24,689

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