Second-quarter earnings swung to a loss for a San Diego-based real estate investment trust that owns a collection of office buildings largely concentrated in Honolulu.
Pacific Office Properties Trust Inc. reported a negative $7.8 million in “funds from operations” during the April-June period, compared with a positive $870,000 in the same quarter last year.
Pacific Office also reported a net loss of $2.7 million, up from a $1.2 million loss in the same year-over-year period, in a financial report released Friday.
The company, like other real estate investment trusts, emphasizes that funds from operations is a better reflection of financial health compared with net income.
Funds from operations is a rough equivalent to operating income in the REIT industry, which enjoys special tax benefits dealing in real estate. The measure excludes property depreciation and such things as tenant allowances, renovation expenses, leasing commissions and gains or losses from property sales.
Pacific Office said extraordinary items that hurt second-quarter earnings included $10 million in forgiven debt related to delinquent loans for two buildings restructured earlier this year.
The company also recognized a $3.3 million impairment charge related to a third building, Sorrento Technology Center in San Diego. Pacific Office recently stopped making debt service payments on a loan secured by the building, which it wholly owns. The loan is in default, though Pacific Office said it is negotiating to modify the loan.
Pacific Office, which was founded by local commercial real estate investor Jay Shidler, owns 24 office properties mostly with joint-venture partners. The company wholly owns six properties, including five in Honolulu.
The five wholly owned Honolulu buildings are Waterfront Plaza, Davies Pacific Center, the Pan Am Building, First Insurance Center and Clifford Center.
Shares of Pacific Office stock on the American Stock Exchange closed on Monday at $1.04, up 4 cents from Friday’s closing price. Friday’s price was a 52-week low that occurred before Pacific Office released its earnings report.
