DEF: City Office REIT Seeks Stockholder Approval for Director Elections, Auditor Ratification, Executive Compensation, and Equity Incentive Plan Amendment

City Office REIT is holding its 2025 Annual Meeting of Stockholders to elect directors, ratify the appointment of KPMG LLP, approve executive compensation, and amend the Equity Incentive Plan.

Summary

• City Office REIT is soliciting proxies for its 2025 Annual Meeting of Stockholders to be held on May 1, 2025.
• The meeting will address the election of six directors, ratification of KPMG LLP as the independent registered public accounting firm, an advisory vote on executive compensation, and an amendment to the Equity Incentive Plan (EIP).
• Throughout 2024, the company completed 806,000 square feet of new and renewal leasing, increasing year-end occupancy.
• The company also completed two property loan renewals and paid off a term loan.
• The Board of Directors recommends voting for all director nominees, ratification of KPMG LLP, approval of executive compensation, and approval of the EIP amendment.
• The Third Amendment to the EIP includes increasing the number of shares available for awards, removing certain individual award limits, and extending the expiration date of the EIP to January 1, 2035.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While there are positive operational achievements, the underperformance of the stock compared to industry benchmarks tempers the overall outlook.

Positives

• The company completed 806,000 square feet of new and renewal leasing in 2024, representing a 35% increase as compared to 2023.
• The company's overall portfolio occupancy increased to 85.4% at the end of 2024, as compared to 84.5% at year-end of 2023.
• The company achieved a 5.9% cash re-leasing spread across 2024.
• The company completed loan renewals on two property mortgages.
• The company continues to focus on improvement to sustainability measures.

Negatives

• The total return for the company's common stock in 2024 was negative 2.7%, underperforming the Dow Jones U.S. Real Estate Office Index which generated a 4.2% total return.
• As of December 31, 2024, the company's five-year total return was negative 41.7%, compared to the Dow Jones U.S. Real Estate Office Index's negative 31.6% total return during the same period.

Risks

• Challenging financing markets may impact the company's ability to refinance property loans.
• Elevated interest rates and challenging investment conditions may impact the company's opportunities for acquisitions, dispositions, and capital recycling.
• General sentiment towards the office sector continues to negatively impact the company's earnings multiples.

Future Outlook

As we head into 2025, we remain focused on positioning our properties to win leasing and drive cash flow over the long term.

Management Comments

• James Farrar, Chief Executive Officer and Director, stated that City Office is well positioned to take advantage of the trends in the office market.
• James Farrar, Chief Executive Officer and Director, noted that the company's strategy has driven solid operating results in 2024.
• James Farrar, Chief Executive Officer and Director, expressed gratitude for ongoing support and investment in the company.

Industry Context

The document notes a sharp reduction in construction of new office buildings coupled with four years of record-setting office building conversions, demolitions and redevelopment, with over 100 million square feet of office buildings removed from inventory since 2021 according to JLL.

Comparison to Industry Standards

• The company's total return for its common stock in 2024 was less than the Dow Jones U.S. Real Estate Office Index.
• As of January 14, 2025, the Dow Jones U.S. Real Estate Office Index was comprised of 21 publicly traded U.S. office REITs.
• The Compensation Committee believes that the Dow Jones U.S. Real Estate Office Index provides an appropriate group of peer REITs with a focus similar to the Company's and represents an appropriate basis for comparison of our total stockholder return.

Related Party Transactions

• The company earned $0.2 million in administrative services performed for SCRE II and its affiliates during the year ended December 31, 2024.
• The amounts earned by the company for administrative services performed for Clarity were nominal during the year ended December 31, 2024.

Stakeholder Impact

• The company's performance and decisions directly impact shareholders through stock value and dividend payments.
• The company's sustainability initiatives aim to create a positive and lasting impact on the environment.
• The company's Human Rights Policy outlines its commitment with respect to the human rights of its directors, officers, employees, vendors and tenants.

Next Steps

• Stockholders are encouraged to vote on the proposals outlined in the proxy statement.
• The company will hold its Annual Meeting of Stockholders on May 1, 2025.
• The Board of Directors will consider the outcome of the advisory vote on executive compensation in future compensation decisions.

Key Dates