I N V ES TOR P R ES EN TATION N Y S E: CIO FORWARD LOOKING - - PDF document

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I N V ES TOR P R ES EN TATION N Y S E: CIO FORWARD LOOKING - - PDF document

I N V ES TOR P R ES EN TATION N Y S E: CIO FORWARD LOOKING STATEMENTS 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


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I N V ES TOR P R ES EN TATION

N Y S E: CIO

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FORWARD LOOKING STATEMENTS

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. (or the “Company”) and its current beliefs as to the outcome and timing of future events. There can be no assurance that actual future developments affecting the Company will be those anticipated by the Company. Examples of forward-looking statements include projected capital resources, projected profitability and portfolio performance, estimates of market rental rates, projected capital improvements, expected sources

  • f financing, expectations as to the timing of closing of acquisitions, dispositions, or other transactions, the

expected operating performance of anticipated near-term acquisitions and descriptions relating to these expectations, including without limitation, the anticipated net operating income yield. Forward-looking statements presented in this presentation are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve risks and uncertainties (some of which are beyond the Company’s control) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: changes in the real estate industry and in performance of the financial markets; competition in the leasing market; the demand for and market acceptance of our properties for rental purposes; the amount and growth of our expenses; tenant financial difficulties and general economic conditions, including interest rates, as well as economic conditions in

  • ur geographic markets; defaults or non-renewal of leases; risks associated with joint venture partners; the

risks associated with the ownership and development of real property, including risks related to natural disasters; risks associated with property acquisitions, the failure to acquire or sell properties as and when anticipated; the outcome of claims and litigation involving or affecting the Company; the ability to satisfy conditions necessary to close pending transactions; our failure to maintain our status as real estate investment trust, or REIT; and other risks and uncertainties detailed in the Company’s news releases and filings with the Securities and Exchange Commission, including but not limited to the Company’s report on Form 10-Q and Form 8-K in the Company’s SEC filings. 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 statements speak 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

  • bligation 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.

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City Center, St. Petersburg, FL

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AmberGlen, Portland, OR

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› Focused on creating stockholder value through a targeted acquisition strategy and internal cash flow growth › City Office REIT owns 2.4 million square feet of office properties at March 31, 2015. Our properties are generally: › Well located within each market in either the central business district (CBD) or leading submarkets › Located in vibrant, growing markets with strong leasing fundamentals › Occupied by a high percentage of quality credit tenants › In good condition having undergone substantial capital improvements › Managed by leading local operating groups › Experienced management team; strong alignment of interests with management and Board of Directors

  • wning ~13% of CIO

› Completed $82.3 million IPO in April 2014 › Completed $53.3 million offering in December 2014 › Initiated $0.94 per share annualized dividend distribution

Corporate Overview CITY OFFICE REIT (NYSE: CIO)

City Office REIT owns quality office properties in high growth markets primarily in the Southern and Western United States.

CITY O FFICE RE I T

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SEATTLE BOISE SALT LAKE CITY PORTLAND DENVER DALLAS AUSTIN SAN ANTONIO HOUSTON ORLANDO TAMPA PHOENIX

CORPORATE STRATEGY PRIMARY TARGET MARKETS

Focused Acquisition Strategy

› Concentrated on thriving markets with leading economic fundamentals › Well located Class A and B office properties in both the CBD and key amenity rich, transit-oriented suburban locations › High percentage of credit tenants with stable rent rolls › Purchase price at a material discount to replacement cost › Acquisition prices generally between $20 to $50 million; a less competitive market segment › Typical target acquisition cap rates between 7.0% and 9.0%

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Central Fairwinds, Orlando, FL

CORPORATE STRATEGY

Internal Cash Flow Growth Initiatives

› Contractual rental rate escalations › Lease-up portfolio vacancy (~133,000 SF of vacancy at March 31, 2015) › Implement cost savings and cost management programs › Create additional value through lease term extensions

CITY O FFICE RE I T

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Salt Lake City, UT

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Focused on Markets with Desirable Attributes for Office Real Estate

› Strong economic fundamentals and demographics › Growing population trends › Diverse employment base with national and international employers › Educated workforce › Low-cost centers for businesses to operate › State capital or university concentration › Demonstrated recovery in local real estate conditions

PRIMARY TARGET MARKETS

% JOB GROWTH FROM JUNE 2009 TO MARCH 2015 PROJECTED POPULATION GROWTH ESTIMATES FROM 2010 TO 2020

Source: U.S. Bureau of Labor Statistics. Source: SNL Financial LLC.

San Antonio, TX

14.8

Houston, TX Austin, TX

16.9

Dallas, TX

16.3

Orlando, FL

16.4

Tampa, FL

10.5

Seattle, WA USA Denver, CO

11.3

Phoenix, AZ Portland, OR

11.6 12.3 10.3 10.3 7.9 6.4

Job Growth (%)

Houston, TX

7.1

0.0% 25.0% 5.0% 10.0% 20.0% 15.0%

Population Growth (%)

Gateway Markets

17.7

Orlando, FL

17.6 22.8

Austin, TX Salt Lake City, UT

13.3

Phoenix, AZ

14.8

San Antonio, TX

1 7.4

Boise, ID

15.9

Denver, CO

16.9

Seattle, WA

13.1

Dallas, TX

15.9

USA Tampa, FL

7.1 10.5

Portland, OR

10.7 12.4

Denver, CO 25.0% 20.0% Gateway Markets

22.0

0.0% 5.0% 15.0% 10.0%

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High Quality Properties Positioned for Stable Income and Capital Appreciation

› Current portfolio occupancy of 93.7% › Weighted average lease term of 4.6 years › Desirable tenant profile; 48.7% of base rental revenue derived from government agencies (predominantly state credit), investment grade or their subsidiaries › Favorable rental growth characteristics › ~2.6% contractual base rental rate escalations over the next three years › Benefit from low in-place rental rates. Weighted average gross equivalent rental rate of $19.88; significantly lower than required rents to support new development › Attractive implied real estate cost base, materially below estimated replacement cost

Deployed IPO and Offering Proceeds into Four Accretive Transactions for $90 million at an 8.2% Weighted Average Capitalization Rate

› Plaza 25, a 196,803 sq.

  • ft. office complex in the heart of Denver’s Greenwood Village acquired for

$25.1 million › Lake Vista Pointe, a 163,336 sq.

  • ft. office property in Dallas’ rapidly growing Lewisville submarket

acquired for $28.4 million › Florida Research Park, a 124,500 sq.

  • ft. office property in Orlando’s Central Florida Research Park

acquired for $26.5 million › Logan Tower, a 69,968 sq.

  • ft. office property in Denver, Colorado acquired for $10.5 million

Materially Enhanced Portfolio Operational Metrics

› 38% increase in portfolio’s annualized base rent since December 31, 2013 › In-place occupancy increased from 89.4% to 93.7%

Strengthened Balance Sheet

› Closed $61 million of long-term financing at a weighted average fixed interest rate of 4.4% › Completed a 4.3 million share offering for $53.3 million

Commenced Attractive Dividend Distribution

› Declared quarterly dividend distribution at a $0.94 annualized rate

Strong Acquisition Pipeline

› Identified over $200 million of available office properties representing approximately 1 million square feet

PORTFOLIO FUNDAMENTALS * EXECUTION SINCE IPO

* As of March 31, 2015.

CITY O FFICE RE I T

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PROPERTY OVERVIEW *

Property Metropolitan Area Year Built / Last Major Renovation Economic Interest Owned by City Office NRA (000s SF) In Place Occupancy Annualized Base Rent per SF Largest Tenant by NRA Washington Group Plaza Boise, ID 1970 - 1982/2012 100.0% 558 89.4% $17.10 AECOM Technology Corporation Cherry Creek Denver, CO 1962 - 1980/2012 100.0% 356 100.0% $16.86 State of Colorado Department of Health AmberGlen Portland, OR 1984/2002 76.0% 353 95.6% $15.76 Planar Systems, Inc. City Center Tampa, FL 1984/2012 95.0% 241 93.7% $23.15 RBC Capital Markets Plaza 25 Denver, CO 1981/2006 100.0% 197 92.4% $20.17 Recondo Technology, Inc. Corporate Parkway Allentown, PA 2006 100.0% 178 100.0% $17.66 Dun & Bradstreet, Inc. Central Fairwinds Orlando, FL 1982/2012 90.0% 167 74.1% $25.68 Fairwinds Credit Union Lake Vista Pointe Dallas, TX 2007 100.0% 163 100.0% $13.50 Ally Financial Inc. Florida Research Park Orlando, FL 1999 100.0% 125 100.0% $19.50 Kaplan, Inc. Logan Tower Denver, CO 1983/2014 100.0% 70 95.1% $18.51 State of Colorado Gernor’s Energy Total / Weighted Average: 2,408 93.7% $18.14

* As of March 31, 2015.

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Tenant or Ultimate Parent** Credit Rating (S & P / Moody’s) Tenant Since NRA % of NRA State of Colorado AA- 1993 318,999 13.2% Dun & Bradstreet, Inc. (NYSE: DNB) BBB- 2006 178,330 7 .4% Ally Financial Inc. (NYSE: ALLY) BB+ 2008 163,336 6.8% AECOM Technology Corporation (NYSE: ACM) BB 1970 143,828 6.0% Graham Holdings Company (NYSE: GHC) BBB 2008 124,500 5.2% Idaho State Tax Commission AA+ 1992 111,381 4.6% Planar Systems, Inc. (Nasdaq GM: PLNR)

  • 2002

109,729 4.6% Cascade Microtech, Inc. (Nasdaq GM: CSCD)

  • 1997

65,123 2.7% Recondo Technology, Inc.

  • 2012

48,094 2.0% Fairwinds Credit Union

  • 2010

39,431 1.6% Total 1,302,751 54.1%

TENANT PROFILE *

Top Ten Tenants

Corporate Parkway, Allentown, PA

* As of March 31, 2015. ** The top ten tenant list includes the actual tenant or its parent company.

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DEBT MATURITY LADDER

Conservative Debt Structure at Favorable Interest Rates

Secured, fixed rate debt of $189.7M

1 – As of March 31, 2015.

Weighted average interest rate of

4.26%

1

Average debt maturity of over 6 years

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LEASE EXPIRATIONS

1 – As of March 31, 2015.

PORTFOLIO LEASE EXPIRATIONS (% OF NRA) 1

Vacant & Contracted 2022 2018 2016 2024 2020 2015 2023 2019 2017 2025+ 2021 0.0% 25.0% 5.0% 10.0% 20.0% 15.0% 6.3% 14.6% 10.6% 12.4% 10.3% 9.4% 2.1% 13.6% 2.0% 0.1% 5.0% 13.7%

DEBT MATURITY LADDER

2018 2020 2022 2023 2019 2024 2025 2017 2021 $34,156 Interest Rate: 3.85% $25,052 Interest Rate: 4.38% $35,460 Interest Rate: 4.36% $95,000 Interest Rate: 4.34% 2016 2015 0.0% $100,000 $120,000 $20,000 $40,000 $80,000 $60,000

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CITY O FFICE RE I T

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› Acquired in June 2014 for $25.1 million ($128 PSF) › Net rentable area of 196,803 square feet with 92% in-place occupancy › Acquired at an 8.1% capitalization rate on year 1 projected NOI › $19.74 weighted average gross rents; at acquisition approximately 10% below market › $3 million of capital improvements completed since 2007 › Denver is the 18th largest Metro Area by population with 2.95 million people and third in population

growth between 2010 and 20121

› Greenwood Village submarket’s overall vacancy has declined from 17.6% in 2011 to 9.7% at present.

Rental rates have increased by 10.4% over the same period

› Average household income of approximately $110,000 within a 3 mile radius1

ACQUISITION – PLAZA 25

Multi-Tenant Office Building in Denver, CO Market Characteristics

Plaza 25, Denver, CO

1 – Source U.S. Census Bureau.

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Lake Vista Pointe, Dallas, TX

› Acquired in July 2014 for $28.4 million ($174 PSF) ›

Net rentable area of 163,336 square feet

Acquired at a 7.8% capitalization rate on year 1 projected NOI

› Fully occupied by Ally Financial, Inc. (NYSE: ALLY) until 2021 › $13.50 NNN rents with $0.50 annual increases › Financed with an $18.5 million mortgage fixed at 4.28% for 10 years › Close proximity to DFW International Airport and several of Dallas’ major transportation hubs › Dallas/Fort Worth is the 4th largest Metro Area with 6.7 million residents and is a leading market for

employment growth

› The Lewisville submarket has been an absorption leader over the last ten years and is favorably positioned

as Dallas continues to expand

› Average household income of approximately $92,550 within a 3 mile radius

ACQUISITION – LAKE VISTA POINTE

Well Located Office Building in Dallas, TX Market Characteristics

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CITY O FFICE RE I T

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ACQUISITION – FLORIDA RESEARCH PARK

Class A Office Building in Orlando, FL

› Acquired in December 2014 for $26.5 million ($213 PSF) › Net rentable area of 124,500 square feet with 100% in-place occupancy › Acquired at an ~9.0% capitalization rate on year 1 projected NOI › Class A property with high-end finishings, one of the highest parking ratios in the submarket and backup

generators capable of running the entire building 24/7

Market Characteristics

› Orlando is experiencing some of the highest job growth in the country › Well located real estate within the Central Florida Research Park, one of the largest research parks in the

United States

› Located adjacent to the University of Central Florida; second largest university in the country by enrollment

with over 60,000 students

› Property surrounded by Fortune 500 tenants with excellent highway connectivity and amenities

Florida Research Park, Orlando, FL

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Logan Tower, Denver, CO

› Acquired in February 2015 for $10.5 million ($150 PSF) ›

Net rentable area of 69,968 square feet

Acquired at an 8.0% capitalization rate on year 1 projected NOI

› $18.08 gross in-place rents. Approximately $5.00 per square foot below the $23.00 market rate › Recently renovated and in good condition with upgraded corridors, mechanical systems, elevators

and lobby

› Denver is the 18th largest Metro Area with 2.95 million residents and third in population growth between

2010 and 2012

› Located in the Uptown Submarket of Downtown Denver with favourable local demographics and a young,

educated population

› Average household income of approximately $1

10,000 within a 3 mile radius

ACQUISITION – LOGAN TOWER

Well Located Office Building in Denver, CO Market Characteristics

1 – Source U.S. Census Bureau.

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CITY O FFICE RE I T

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James Farrar, Chief Executive Officer & Director

› Over 15 years of real estate, private equity and corporate finance industry

  • experience. Completed approximately $1.5 billion of acquisitions

and divestitures

› Acquired over $500 million of real estate since December 2010 › 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 15 years of diverse real estate experience that includes acquisitions of

income-producing properties as well as high-rise development

› Involved in real estate transactions including development and management

with a combined enterprise value of approximately $1.7 billion

› Former President of Bosa Properties Inc., a prominent real estate development

company with over 400 employees

Anthony Maretic, Chief Financial Officer, Secretary & Treasurer

› Over 15 years of experience in senior financial and operational roles, of

which 10 years were spent within the real estate industry

› Former Chief Operating Officer and Chief Financial Officer of Earls

Restaurants Ltd., a multinational hospitality company

› Previously the Chief Financial Officer of a $230 million U.S. based senior

living real estate company

› Held a variety of financial management positions with Bentall Capital LP

EXECUTIVE MANAGEMENT TEAM

John McLernon, Chairman Samuel Belzberg William Flatt Mark Murski Stephen Shraiberg

BOARD OF DIRECTORS

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Experienced and Committed Management Clearly-Defined Acquisition Strategy Attractive Market Characteristics High-Quality Office Platform Investment Grade Tenants

› Experienced management with over $2 billion of completed real

estate transactions

› Strong alignment of interests; Management and the Board of

Directors own ~13% of City Office REIT on a fully diluted basis

› Ideal time for a focused acquisition strategy concentrated on

thriving markets

› $20–$50 million purchase size results in less competition from

public REITs and institutional investors

› Proven ability to execute. Completed four quality acquisitions post-

IPO at an 8.2% average cap rate

› Target markets with strong economic fundamentals, rapidly growing

populations and a diverse employment base

› Low-cost centers for businesses to operate, state capitals or

university concentration

› Well located real estate within each market › Diverse and staggered lease expirations › Significant capital investments completed › High-quality tenants › Almost half of base rental revenue derived from tenants that are

government agencies, investment grade or their subsidiaries

HIGHLIGHTS

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C I T Y O F F I C E R EI T, I N C . E: investorrelations@cityofficereit.com | T: 604 806 3366 Suite 2600, Vancouver, BC V6E 3C9 1075 West Georgia St,