City Office REIT Plunges to $110.85M Loss Amid Asset Sales, Merger Costs

TL;DR

**CIO is shedding assets and bleeding cash, making the $7.00/share merger a necessary, albeit low, exit for shareholders.**

AI Summary

City Office REIT, Inc. reported a significant net loss of $110.85 million for the nine months ended September 30, 2025, a substantial increase from the $6.98 million net loss in the same period of 2024. This was primarily driven by a $102.2 million impairment of real estate related to the Phoenix Portfolio. Rental and other revenues decreased to $37.275 million for the three months ended September 30, 2025, down from $42.371 million in the prior year, and to $121.876 million for the nine months, down from $129.207 million. Total assets declined from $1.455 billion at December 31, 2024, to $1.067 billion at September 30, 2025, largely due to the sale of real estate properties. Debt was significantly reduced from $646.972 million to $398.359 million, reflecting strategic dispositions. The company also incurred $3.093 million in merger and transaction-related costs during the nine months ended September 30, 2025, following the definitive merger agreement with MCME Carell Holdings, LP for $7.00 per share in cash, which was approved by stockholders on October 16, 2025. Cash provided by operating activities decreased from $49.98 million in the first nine months of 2024 to $38.709 million in the same period of 2025.

Why It Matters

This filing reveals City Office REIT is undergoing a significant strategic shift, marked by substantial asset dispositions and a pending acquisition by MCME Carell for $7.00 per share. For investors, the massive $102.2 million impairment charge and the overall net loss of $110.85 million signal a challenging market for office REITs and a potential undervaluation of assets prior to sale. The reduction in debt by over $248 million is a positive for balance sheet health, but the declining revenues reflect a shrinking portfolio. The competitive landscape for office properties remains tough, and this merger could offer an exit for existing shareholders, albeit at a price reflecting recent market pressures.

Risk Assessment

Risk Level: high — The company reported a net loss of $110.85 million for the nine months ended September 30, 2025, primarily due to a $102.2 million impairment of real estate. This significant impairment, coupled with declining rental revenues from $129.207 million to $121.876 million year-over-year, indicates substantial challenges in its core business and asset valuation. The pending merger, while offering an exit, is subject to customary closing conditions, and any failure could leave shareholders exposed to continued operational losses.

Analyst Insight

Investors should carefully evaluate the $7.00 per share cash offer from MCME Carell, considering the significant impairment charges and ongoing operational losses. Given the substantial net loss and declining revenues, accepting the merger offer appears to be the most prudent course of action for common stockholders to realize value and avoid further market exposure.

Financial Highlights

debt To Equity

N/A

revenue

$121.876M

operating Margin

N/A

total Assets

$1.067B

total Debt

$398.359M

net Income

-$110.85M

eps

N/A

gross Margin

N/A

cash Position

N/A

revenue Growth

-5.67%

Revenue Breakdown

Key Numbers

• $110.85M — Net loss attributable to the Company (for the nine months ended September 30, 2025, up from $6.98M in 2024)
• $102.2M — Impairment of real estate (recognized on the Phoenix Portfolio during Q2 2025)
• $7.00 — Per share acquisition price (offered by MCME Carell Holdings, LP)
• $398.359M — Total Debt (as of September 30, 2025, down from $646.972M at December 31, 2024)
• $1.067B — Total Assets (as of September 30, 2025, down from $1.455B at December 31, 2024)
• $121.876M — Rental and other revenues (for the nine months ended September 30, 2025, down from $129.207M in 2024)
• $267.977M — Net proceeds from sale of real estate property (for the nine months ended September 30, 2025)
• $3.093M — Merger and transaction-related costs (incurred for the nine months ended September 30, 2025)
• 40,363,640 — Common Stock Shares Outstanding (as of November 4, 2025)

Key Players & Entities

• City Office REIT, Inc. (company) — registrant
• MCME Carell Holdings, LP (company) — buyer in merger agreement
• MCME Carell Merger Sub, LLC (company) — buyer in merger agreement
• Phoenix Portfolio (company) — group of properties sold
• Pima Center (company) — property held for sale
• Superior Pointe (company) — property sold in January 2025
• New York Stock Exchange (regulator) — exchange where CIO and CIO.PrA are traded
• Securities and Exchange Commission (regulator) — regulatory body
• City Office REIT Operating Partnership, L.P. (company) — Maryland limited partnership

FAQ

Risk Factors

• Significant Net Loss and Impairment Charges [high — financial]: The company reported a net loss of $110.85 million for the nine months ended September 30, 2025, a substantial increase from $6.98 million in the prior year. This was primarily driven by a $102.2 million impairment of real estate related to the Phoenix Portfolio.
• Declining Revenues [medium — financial]: Rental and other revenues decreased to $121.876 million for the nine months ended September 30, 2025, down from $129.207 million in the same period of 2024, indicating a contraction in core business operations.
• Reduced Asset Base [medium — financial]: Total assets declined from $1.455 billion at December 31, 2024, to $1.067 billion at September 30, 2025, primarily due to the sale of real estate properties, which impacts future revenue-generating capacity.
• Merger and Transaction Costs [low — financial]: The company incurred $3.093 million in merger and transaction-related costs during the nine months ended September 30, 2025, associated with the definitive merger agreement with MCME Carell Holdings, LP.
• Impact of Real Estate Portfolio Sales [medium — market]: The strategic dispositions of real estate properties, while reducing debt, also led to a significant decrease in total assets and contributed to the decline in rental revenues.
• Decreased Cash Flow from Operations [medium — operational]: Cash provided by operating activities decreased from $49.98 million in the first nine months of 2024 to $38.709 million in the same period of 2025, suggesting a weakening operational cash generation.

Industry Context

The office REIT sector is navigating a challenging environment characterized by evolving work-from-home trends and increased tenant demand for flexible office solutions. Companies are facing pressure to adapt portfolios, manage occupancy rates, and maintain rental income amidst economic uncertainties and shifting corporate real estate strategies.

Regulatory Implications

As a publicly traded company, City Office REIT, Inc. is subject to SEC regulations and reporting requirements, including the accurate disclosure of financial performance and risk factors. The pending merger also brings scrutiny regarding transaction disclosures and shareholder approvals.

What Investors Should Do

1. Monitor the closing of the MCME Carell Holdings, LP merger.
2. Analyze the impact of the Phoenix Portfolio impairment on future valuations.
3. Assess the sustainability of operating cash flow post-dispositions.

Key Dates

• 2025-10-16: Stockholders approved the definitive merger agreement with MCME Carell Holdings, LP. — This approval paves the way for the acquisition of the company at $7.00 per share in cash, marking a significant transition for the company.
• 2025-09-30: End of the nine-month period for reporting financial results. — Key financial figures such as net loss, revenue, assets, and debt are reported as of this date.
• 2024-12-31: End of the fiscal year 2024. — Provides a baseline for comparison of assets and debt levels at the beginning of the reporting period.

Glossary

Impairment of real estate

A reduction in the carrying value of a real estate asset on the balance sheet when its fair value is less than its book value, often due to market conditions or specific property issues. (A significant $102.2 million impairment charge on the Phoenix Portfolio heavily impacted the company's net loss for the period.)

Merger and transaction-related costs

Expenses incurred by a company in connection with a merger, acquisition, or other significant corporate transaction, such as legal fees, advisory fees, and integration costs. (The company incurred $3.093 million in such costs related to its pending merger with MCME Carell Holdings, LP.)

Definitive merger agreement

A legally binding contract between two companies outlining the terms and conditions of a merger or acquisition. (This agreement with MCME Carell Holdings, LP, approved by stockholders, will result in the company being acquired.)

Strategic dispositions

The sale or disposal of certain assets or business units by a company as part of a plan to improve its financial performance, focus on core operations, or reduce debt. (The company engaged in strategic dispositions, leading to reduced debt and assets, but also impacting revenues.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, City Office REIT, Inc. has experienced a significant deterioration in profitability, reporting a net loss of $110.85 million versus a much smaller loss of $6.98 million, largely due to a substantial real estate impairment. Revenue has also seen a decline, with rental and other revenues falling from $129.207 million to $121.876 million for the nine-month period. While total assets have decreased from $1.455 billion to $1.067 billion, this is largely a result of strategic property sales, which have also led to a significant reduction in total debt from $646.972 million to $398.359 million.

Key Financial Figures

• $0.01 — nge on Which Registered Common Stock, $0.01 par value 6.625% Series A Cumulative

Filing Documents

• cio-20250930.htm (10-Q) — 2817KB
• cio-ex31_1.htm (EX-31.1) — 15KB
• cio-ex31_2.htm (EX-31.2) — 15KB
• cio-ex32_1.htm (EX-32.1) — 10KB
• cio-ex32_2.htm (EX-32.2) — 9KB
• 0001193125-25-270904.txt ( ) — 9959KB
• cio-20250930.xsd (EX-101.SCH) — 1193KB
• cio-20250930_htm.xml (XML) — 1811KB

Financial Statements

Financial Statements 1 Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 1 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024 2 Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2025 and 2024 3 Condensed Consolidated Statements of Changes in Equity for the Three and Nine Months Ended September 30, 2025 and 2024 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 6 Notes to the Condensed Consolidated Financial Statements 7 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 26 Item 4.

Controls and Procedures

Controls and Procedures 27 PART II. OTHER INFORMATION 27 Item 1.

Legal Proceedings

Legal Proceedings 27 Item 1A.

Risk Factors

Risk Factors 27 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 29 Item 3. Defaults Upon Senior Securities 29 Item 4. Mine Safety Disclosures 29 Item 5. Other Information 29 Item 6. Exhibits 30

Signatures

Signatures 31 Table of Contents

FINANCI AL INFORMATION

PART I. FINANCI AL INFORMATION

Finan cial Statements

Item 1. Finan cial Statements Condensed Consolid ated Balance Sheets (Unaudited) (In thousands, except par value and share data) September 30, 2025 December 31, 2024 Assets Real estate properties Land $ 146,309 $ 190,372 Building and improvement 839,998 1,169,793 Tenant improvement 121,483 163,569 Furniture, fixtures and equipment 236 1,368 1,108,026 1,525,102 Accumulated depreciation ( 207,015 ) ( 251,956 ) 901,011 1,273,146 Cash and cash equivalents 21,347 18,886 Restricted cash 17,935 15,073 Rents receivable, net 40,904 52,311 Deferred leasing costs, net 22,154 25,291 Acquired lease intangible assets, net 23,873 34,631 Other assets 4,225 23,744 Assets held for sale 35,784 12,588 Total Assets $ 1,067,233 $ 1,455,670 Liabilities and Equity Liabilities: Debt $ 398,359 $ 646,972 Accounts payable and accrued liabilities 29,008 34,535 Deferred rent 6,896 7,010 Tenant rent deposits 5,143 7,257 Acquired lease intangible liabilities, net 3,844 6,301 Other liabilities 5,396 16,879 Liabilities related to assets held for sale 8,134 2,176 Total Liabilities 456,780 721,130 Commitments and Contingencies (Note 9) Equity: 6.625 % Series A Preferred stock, $ 0.01 par value per share, 5,600,000 shares authorized, 4,480,000 issued and outstanding as of September 30, 2025 and December 31, 2024 112,000 112,000 Common stock, $ 0.01 par value, 100,000,000 shares authorized, 40,363,640 and 40,154,055 shares issued and outstanding as of September 30, 2025 and December 31, 2024 403 401 Additional paid-in capital 444,355 442,329 Retained earnings 55,172 179,838 Accumulated other comprehensive loss ( 1,880 ) ( 713 ) Total Stockholders' Equity 610,050 733,855 Non-controlling interests in properties 403 685 Total Equity 610,453 734,540 Total Li

properties

properties ( 39 ) ( 99 ) ( 236 ) ( 382 ) Comprehensive loss attributable to the Company $ ( 3,847 ) $ ( 6,673 ) $ ( 112,017 ) $ ( 9,729 ) The accompanying notes are an integral part of these condensed consolidated financial statements . 3 Table of Contents Condensed Consolidated State ments of Changes in Equity (Unaudited) (In thousands) Number of shares of preferred stock Preferred stock Number of shares of common stock Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total stockholders' equity Non- controlling interests in

properties

properties Total equity Balance —December 31, 2024 4,480 $ 112,000 40,154 $ 401 $ 442,329 $ 179,838 $ ( 713 ) $ 733,855 $ 685 $ 734,540 Restricted stock award grants and vesting — — 204 2 249 ( 59 ) — 192 — 192 Common stock dividend distribution declared — — — — — ( 4,036 ) — ( 4,036 ) — ( 4,036 ) Preferred stock dividend distribution declared — — — — — ( 1,855 ) — ( 1,855 ) — ( 1,855 ) Contributions — — — — — — — — 24 24 Distributions — — — — — — — — ( 161 ) ( 161 ) Net (loss)/income — — — — — ( 1,670 ) — ( 1,670 ) 171 ( 1,499 ) Other comprehensive loss — — — — — — ( 646 ) ( 646 ) ( 19 ) ( 665 ) Balance —March 31, 2025 4,480 $ 112,000 40,358 $ 403 $ 442,578 $ 172,218 $ ( 1,359 ) $ 725,840 $ 700 $ 726,540 Restricted stock award grants and vesting — — — — 903 ( 60 ) — 843 — 843 Common stock dividend distribution declared — — — — — ( 4,036 ) — ( 4,036 ) — ( 4,036 ) Preferred stock dividend distribution declared — — — — — ( 1,855 ) — ( 1,855 ) — ( 1,855 ) Contributions — — — — — — — — 35 35 Distributions — — — — — — — — ( 290 ) ( 290 ) Net (loss)/income — — — — — ( 105,366 ) — ( 105,366 ) 57 ( 105,309 ) Other comprehensive loss — — — — — — ( 488 ) ( 488 ) ( 12 ) ( 500 ) Balance —June 30, 2025 4,480 $ 112,000 40,358 $ 403 $ 443,481 $ 60,901 $ ( 1,847 ) $ 614,938 $ 490 $ 615,428 Restricted stock award grants and vesting — — 5 — 874 ( 60 ) — 814 — 814 Common stock dividend distribution declared — — — — — — — — — — Preferred stock dividend d

properties

properties Total equity Balance —December 31, 2023 4,480 $ 112,000 39,938 $ 399 $ 438,867 $ 221,213 $ ( 248 ) $ 772,231 $ 402 $ 772,633 Restricted stock award grants and vesting — — 216 2 42 ( 45 ) — ( 1 ) — ( 1 ) Common stock dividend distribution declared — — — — — ( 4,015 ) — ( 4,015 ) — ( 4,015 ) Preferred stock dividend distribution declared — — — — — ( 1,855 ) — ( 1,855 ) — ( 1,855 ) Distributions — — — — — — — — ( 444 ) ( 444 ) Net (loss)/income — — — — — ( 589 ) — ( 589 ) 135 ( 454 ) Other comprehensive income — — — — — — 1,763 1,763 26 1,789 Balance —March 31, 2024 4,480 $ 112,000 40,154 $ 401 $ 438,909 $ 214,709 $ 1,515 $ 767,534 $ 119 $ 767,653 Restricted stock award grants and vesting — — — — 1,139 ( 56 ) — 1,083 — 1,083 Common stock dividend distribution declared — — — — — ( 4,015 ) — ( 4,015 ) — ( 4,015 ) Preferred stock dividend distribution declared — — — — — ( 1,855 ) — ( 1,855 ) — ( 1,855 ) Contributions — — — — — — — — 442 442 Distributions — — — — — — — — ( 104 ) ( 104 ) Net (loss)/income — — — — — ( 3,752 ) — ( 3,752 ) 125 ( 3,627 ) Other comprehensive loss — — — — — — ( 478 ) ( 478 ) ( 3 ) ( 481 ) Balance —June 30, 2024 4,480 $ 112,000 40,154 $ 401 $ 440,048 $ 205,031 $ 1,037 $ 758,517 $ 579 $ 759,096 Restricted stock award grants and vesting — — — — 1,140 ( 56 ) — 1,084 — 1,084 Common stock dividend distribution declared — — — — — ( 4,015 ) — ( 4,015 ) — ( 4,015 ) Preferred stock dividend distribution declared — — — — — ( 1

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View this 10-Q filing on SEC EDGAR