City Office REIT (CIO) AI Stock Analysis

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City Office REIT

(NYSE:CIO)

58Neutral

City Office REIT's stock score reflects a company with a solid balance sheet but facing significant challenges in revenue and profitability. The technical indicators show stability but also potential caution due to near-overbought conditions. Valuation concerns arise from a negative P/E ratio, despite a strong dividend yield. The earnings call offers a cautiously optimistic outlook, with growth expected in strategic markets, balancing some of the financial and operational challenges.

Positive Factors

Financial Performance

Same-store cash NOI increased 3.3% year-over-year, as a result of strong leasing.

Market Position

The portfolio is in better than average markets in the Southwest and Southeast with highly amenitized buildings.

Negative Factors

Debt Levels

The company has an above average debt level at approximately 79% debt-to-total market capitalization including preferred.

Impairment Charges

The company incurred an impairment of $8.5 million on the sale of a property in Denver, CO.

City Office REIT (CIO) vs. S&P 500 (SPY)

Market Cap

$201.79M

Dividend Yield8%

Average Volume (3M)181.81K

Price to Earnings (P/E)―

Beta (1Y)1.41

Revenue Growth-4.45%

EPS Growth-147.11%

CountryUS

Employees20

SectorReal Estate

Sector Strength78

IndustryREIT - Office

Share Statistics

EPS (TTM)-0.63

Shares Outstanding40,358,240

10 Day Avg. Volume173,888

30 Day Avg. Volume181,812

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)1.18

Price to Cash Flow (P/CF)2.80

P/FCF Ratio2.20

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$6.25

Price Target Upside25.00% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering2

City Office REIT Business Overview & Revenue Model

Company DescriptionCity Office REIT, Inc. (CIO) is a real estate investment trust focused on acquiring, owning, and operating high-quality office properties located in some of the strongest office markets in the United States. The company primarily invests in metropolitan areas in the Southern and Western United States, emphasizing markets with strong economic fundamentals and growth potential. CIO aims to provide value to its shareholders through strategic property acquisitions and active asset management.

How the Company Makes MoneyCity Office REIT makes money primarily through the rental income generated from leasing its office properties to a diverse range of tenants. The company's revenue model is built on acquiring and managing a portfolio of office buildings in economically vibrant markets where demand for office space is strong. CIO generates income through long-term lease agreements, which provide a stable and predictable cash flow. Additionally, the company seeks to increase property value through strategic upgrades and active management, which can lead to higher occupancy rates and rental rates. The REIT structure also allows City Office to benefit from tax advantages, as it must distribute at least 90% of its taxable income to shareholders in the form of dividends, providing an attractive yield to investors.

City Office REIT Financial Statement Overview

Summary

City Office REIT faces challenges with declining revenues and profitability, but it maintains a solid balance sheet with no debt and strong equity positions. While cash flow generation is stable, the company must address revenue issues to ensure long-term financial health.

Income Statement

Neutral

City Office REIT shows a declining revenue trend, with revenue dropping to zero in the latest period. The company has experienced significant fluctuations in net income, moving from a profit to a loss. The EBIT and EBITDA margins were strong historically but cannot be assessed for the latest period due to the lack of revenue.

Balance Sheet

Positive

City Office REIT maintains a strong equity position, with a debt-to-equity ratio improving significantly as total debt was eliminated. The equity ratio remains robust, indicating financial stability. However, the return on equity has been volatile, reflecting inconsistent net income performance.

Cash Flow

Positive

The company demonstrates stable operating cash flow, with a positive free cash flow indicating good cash generation. However, the inability to grow free cash flow significantly and the reliance on past performance for stability may pose risks if revenue does not recover.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
171.13M	179.10M	180.49M	164.04M	160.84M
	Gross Profit
101.67M	109.10M	112.75M	106.04M	102.53M
	EBIT
18.68M	31.27M	35.25M	33.23M	31.47M
	EBITDA
75.16M	94.26M	97.75M	90.55M	91.84M
	Net Income Common Stockholders
-25.10M	-2.68M	25.20M	484.39M	-21.84M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
18.89M	30.08M	28.19M	21.32M	25.30M
	Total Assets
1.46B	1.51B	1.57B	1.60B	1.16B
	Total Debt
646.97M	669.51M	890.60M	653.65M	677.24M
	Net Debt
628.09M	639.43M	862.41M	632.33M	651.94M
	Total Liabilities
721.13M	738.74M	771.26M	730.92M	739.42M
	Stockholders Equity
733.86M	772.23M	802.83M	869.62M	416.93M
Cash Flow		Free Cash Flow
58.86M	57.22M	97.11M	65.03M	52.13M
	Operating Cash Flow
58.86M	57.22M	106.68M	73.22M	59.92M
	Investing Cash Flow
-40.29M	-41.34M	-47.05M	-17.38M	-27.80M
	Financing Cash Flow
-28.01M	-16.75M	-57.63M	-59.53M	-73.69M

City Office REIT Technical Analysis

Technical Analysis Sentiment

Negative

Last Price5.00

Price Trends

50DMA

5.10

Negative

100DMA

5.19

Negative

200DMA

5.29

Negative

Market Momentum

MACD

0.02

Negative

RSI

49.97

Neutral

STOCH

53.72

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CIO, the sentiment is Negative. The current price of 5 is below the 20-day moving average (MA) of 5.06, below the 50-day MA of 5.10, and below the 200-day MA of 5.29, indicating a bearish trend. The MACD of 0.02 indicates Negative momentum. The RSI at 49.97 is Neutral, neither overbought nor oversold. The STOCH value of 53.72 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CIO.

City Office REIT Risk Analysis

City Office REIT disclosed 60 risk factors in its most recent earnings report. City Office REIT reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

City Office REIT Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CUZ	68 Neutral	$4.37B	87.20	0.98%	4.92%	6.71%	-45.29%
KRC	63 Neutral	$3.58B	16.96	3.87%	7.20%	0.53%	-1.38%
Sector *	61 Neutral	$4.44B	16.16	-3.31%	11.40%	5.81%	-21.40%
BXP	60 Neutral	$10.51B	668.36	0.23%	6.49%	4.10%	-92.47%
CIO	58 Neutral	$201.79M	―	-2.35%	8.00%	-4.45%	-147.11%
HIW	55 Neutral	$2.92B	28.87	4.27%	7.37%	-0.98%	-32.02%
SLG	52 Neutral	$3.82B	644.15	0.71%	5.98%	5.12%	―

* Real Estate Sector Average

Performance Comparison

CIO

City Office REIT

5.00

0.55

12.36%

BXP

Boston Properties

60.42

0.64

1.07%

CUZ

Cousins Properties

26.03

3.90

17.62%

HIW

Highwoods Properties

27.13

3.49

14.76%

KRC

Kilroy Realty

30.00

-2.87

-8.73%

SLG

SL Green Realty

50.63

-0.71

-1.38%

City Office REIT Earnings Call Summary

Earnings Call Date: Feb 20, 2025 | % Change Since: -1.77% | Next Earnings Date: May 2, 2025

Earnings Call Sentiment Neutral

City Office REIT showed strong leasing momentum, property upgrades, and strategic market focus, particularly in Sunbelt regions. However, financials were impacted by non-cash impairment charges and higher interest expenses. The sentiment is cautiously optimistic, with a focus on growth in favorable markets.

Highlights

Leasing Volume and Rent Growth

Overall leasing volume in Q4 2024 was over 90% of pre-pandemic volumes, with the Sunbelt markets at 95%. City Office REIT saw a 35% increase in new and renewal leases over 2023, and a 5.9% cash rent roll-up upon renewal.

Property Upgrades and Occupancy

Completed significant property upgrades at nine properties and constructed 231,000 square feet of modern spec suites, with over 75% leased. Portfolio occupancy increased to 85.4%, a two percentage point increase from the prior quarter.

Financial Performance

Net operating income in Q4 was $25.5 million, $900,000 higher than Q3, and core FFO increased by $600,000 to $11.7 million. Same-store cash NOI increased by 3.3% compared to Q4 2023.

Disposition of Superior Point

Sold Superior Point in Denver for $12 million, a strategic decision to exit a challenging submarket and focus on value creation in stronger markets.

Redevelopment Plans in Saint Petersburg

Received unanimous approval for a redevelopment site plan in downtown Saint Petersburg, including 164 residential condos and 78,000 square feet of retail and office.

Lowlights

Non-Cash Impairment Charge

Recorded an $8.5 million non-cash impairment charge related to the sale of Superior Point.

Interest Expense Impact

Higher interest expense marginally offset the NOI increase in Q4 2024.

AFFO Impacted by Leasing Costs

AFFO was $4.3 million, impacted by $2.3 million in lease commissions and $1.3 million in property renovation costs.

Vacancies in Non-Sunbelt Markets

Two known vacates totaling 102,000 square feet in non-Sunbelt properties expected in the first half of 2025.

Company Guidance

During the City Office REIT, Inc. fourth-quarter 2024 earnings call, the company provided guidance for 2025, focusing on driving long-term cash flow growth. They reported a fourth-quarter net operating income (NOI) of $25.5 million, up $900,000 from the third quarter, with core funds from operations (FFO) at $11.7 million or $0.28 per share. Despite two known vacates in non-Sunbelt properties totaling 102,000 square feet, they anticipate an increase in overall portfolio occupancy driven largely by leasing momentum in Sunbelt markets. The company expects a 2.5% to 4.5% increase in same-store cash NOI compared to the previous year. As of December 31, 2024, their portfolio occupancy was 85.4%, with signed leases yet to commence potentially increasing it to 87.6%. The call also highlighted a significant lease expansion in Dallas with a 17% higher rental rate and the sale of a property in Denver for $12 million. Looking ahead, City Office REIT intends to focus on leasing, active asset management, and value creation opportunities, with core FFO per share growth expected over time.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.