TIER Tier Reit, Inc.

Net Loss for Fourth Quarter 2018 of $(0.52) per diluted common share FFO, Excluding Certain Items, for Fourth Quarter 2018 of $0.42 per diluted common share

Net Loss for Full Year 2018 of $(0.10) per diluted common share FFO, Excluding Certain Items, for Full Year 2018 of $1.61 per diluted common share

Domain 10 development approximately 60% leased

2019 outlook provided

TIER REIT, Inc. (NYSE: TIER), a Dallas-based real estate investment trust that specializes in owning and operating best-in-class office properties in select U.S. markets, today announced financial and operating results for the fourth quarter and full year ended December 31, 2018.

Fourth Quarter & Full Year 2018 Highlights

• Recognized a net loss of $(0.52) per diluted common share for the fourth quarter and a net loss of $(0.10) per diluted common share for the full year 2018
• Reported Nareit-defined Funds from Operations (FFO) attributable to common stockholders of $0.37 per diluted common share for the fourth quarter and $1.94 per diluted common share for the full year 2018
• Reported FFO, Excluding Certain Items, attributable to common stockholders of $0.42 per diluted common share for the fourth quarter and $1.61 per diluted common share for the full year 2018

“We are pleased to report our fourth quarter and full year results,” stated Scott Fordham, Chief Executive Officer of TIER REIT. “We delivered our Domain 11 and Third + Shoal developments to tenants for build out last year, with both projects nearly 100% leased. We also commenced development of Domain 10, which is approximately 60% leased, including 145,000 square feet leased to an expanding Fortune 100 Domain tenant. With tenant demand for space within The Domain remaining strong, including a current pipeline of over 500,000 square feet of prospective tenants, we believe we have the opportunity to create additional value through development in 2019, with our Domain 9 development representing our next near-term project.”

“As a result of significant capital looking for high-quality properties in Austin,” continued Mr. Fordham, “our Third + Shoal joint venture has begun marketing the property for sale this week, potentially allowing us to capitalize on the value created.”

Fourth Quarter & Full Year Financial Results

For the fourth quarter of 2018, net loss attributable to common stockholders was $(27.8 million), or $(0.52) per diluted common share, as compared to a net loss attributable to common stockholders of $(9.9 million), or $(0.21) per diluted common share, for the fourth quarter of 2017. For the full year 2018, net loss attributable to common stockholders was $(5.0 million), or $(0.10) per diluted common share, as compared to net income attributable to common stockholders of $84.3 million, or $1.75 per diluted common share, for 2017.

For the fourth quarter of 2018, Nareit-defined FFO attributable to common stockholders was $20.1 million, or $0.37 per diluted common share, as compared to $19.0 million, or $0.39 per diluted common share, for the fourth quarter of 2017. For the full year 2018, Nareit-defined FFO attributable to common stockholders was $99.4 million, or $1.94 per diluted common share, as compared to $71.9 million, or $1.50 per diluted common share, for 2017.

For the fourth quarter of 2018, FFO attributable to common stockholders, excluding certain items, was $23.1 million, or $0.42 per diluted common share, as compared to $19.4 million, or $0.40 per diluted common share, for the fourth quarter of 2017. For the full year 2018, FFO attributable to common stockholders, excluding certain items, was $82.1 million, or $1.61 per diluted common share, as compared to $75.1 million, or $1.57 per diluted common share, for 2017.

Property Results

Our occupancy at December 31, 2018, was 90.3%, reflecting an increase of 20 basis points from September 30, 2018.

We leased 143,000 square feet during the fourth quarter of 2018, which included 127,000 square feet of renewals, 3,000 square feet of expansions, and 13,000 square feet of new leasing.

During the fourth quarter of 2018, we recognized $3.5 million of business interruption and other insurance proceeds as a result of Hurricane Harvey, which included $2.4 million that was previously expected to be recognized in 2019.

Real Estate Activity

Plaza at MetroCenter, a 361,000 square foot office property located in Nashville, Tennessee, was sold on October 31, 2018, for a contract purchase price of $51.3 million.

Domain 11 and Third + Shoal began operations during the fourth quarter of 2018. Domain 11 and Third + Shoal are both located in Austin, Texas. Domain 11 is approximately 98% leased, and Third + Shoal is approximately 100% leased.

Development on Domain 10 commenced in October 2018. Domain 10 will contain 300,000 rentable square feet and is located in Austin, Texas, adjacent to our other Domain properties. Domain 10 was approximately 48% leased as of December 31, 2018, and increased to approximately 60% leased subsequent to December 31, 2018.

Capital Markets Activity

On November 2, 2018, our board of directors authorized a distribution of $0.18 per share of common stock for the fourth quarter of 2018, that was paid on December 27, 2018.

During the three months ended December 31, 2018, we issued 130,172 shares of common stock under our at-the-market equity offering programs, for proceeds of $3.0 million, net of commissions and issuance costs, resulting in total net proceeds from equity offerings for the year of $137.9 million.

Subsequent Events

On January 31, 2019, we sold One & Two Eldridge Place and Three Eldridge Place (collectively, the “Eldridge Properties”), which are located in Houston, Texas, and contain 824,000 combined rentable square feet. In addition to the contract sales price of $78.4 million, we expect to receive additional insurance proceeds related to the loss, damage, and destruction suffered because of Hurricane Harvey and its aftermath, including a claim for the loss in value attributable to the storm. However, the ultimate timing and amounts to be collected for the remaining claims are currently undetermined.

On February 6, 2019, our board of directors authorized a distribution of $0.18 per share of common stock for the first quarter of 2019, which will be paid on March 29, 2019.

2019 Outlook

We have issued our 2019 outlook to reflect management’s view of current and future market conditions, including assumptions such as acquisition and disposition activity, rental rates, occupancy levels, operating and general and administrative expenses, weighted average diluted shares outstanding, and interest rates.

Our 2019 outlook and assumptions are as follows:

2019 Outlook Projected net income (loss) per diluted common share   $(0.35) - $(0.27) Adjustments: Real estate depreciation and amortization $1.75 Impairment of depreciable real estate assets $0.01 Noncontrolling interest   $(0.01) Projected Nareit FFO per diluted common share $1.40 - $1.48   Projected FFO, excluding certain items, per diluted common share $1.40 - $1.48   Assumptions used in 2019 outlook above: Dispositions $78mm - $225mm Strategic acquisitions $0mm - $200mm Same store cash NOI growth 2.5% - 3.5% Same store NOI growth 0.5% - 1.5% Straight line rent and lease incentive revenue $15.0mm - $16.5mm Above- and below-market rent amortization $4.5mm - $5.5mm General & administrative expenses, excluding certain items $20.5mm - $21.5mm Year-end occupancy 90.5% - 92.5% Weighted average common shares outstanding - diluted 54.7mm  

Supplemental Information

A copy of our Supplemental Information regarding our financial results and operations for the quarter ended December 31, 2018, is available on our Investor Relations website at www.tierreit.com/ir, or by contacting our Investor Relations department by email at ir@tierreit.com.

Conference Call

A conference call will be held on Tuesday, February 12, 2019, at 11:00 a.m. Eastern time/10:00 a.m. Central time to discuss matters pertaining to this release. Callers in the U.S. or Canada may join the conference call by dialing 877.407.0789.

A live, listen-only webcast and subsequent replay will also be available on our Investor Relations website at www.tierreit.com/ir.

About TIER REIT, Inc.

TIER REIT, Inc. is a publicly traded (NYSE: TIER), self-managed, Dallas-based real estate investment trust focused on owning quality, well-managed commercial office properties in dynamic markets throughout the U.S. Our vision is to be the premier owner and operator of best-in-class office properties in TIER1 submarkets, which are primarily higher density and amenity-rich locations within select, high-growth metropolitan areas that offer a walkable experience to various amenities. Our mission is to provide unparalleled, TIER ONE Property Services to our tenants and outsized total return through stock price appreciation and dividend growth to our stockholders.

For additional information regarding TIER REIT, please visit www.tierreit.com or call 972.483.2400.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws relating to the business and financial outlook of TIER REIT that are based on our current expectations, estimates, forecasts and projections and are not guarantees of future performance. These forward-looking statements include discussion and analysis of the financial condition of us and our subsidiaries, including our ability to rent space on favorable terms, our ability to address debt maturities and fund our capital requirements, our intentions to acquire, develop, and sell certain properties, the value of our assets, our anticipated capital expenditures, the amount and timing of any anticipated future cash distributions to our stockholders, and other matters. Words such as “may,” “will,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “outlook,” “would,” “could,” “should,” “objectives,” “strategies,” “opportunities,” “goals,” “position,” “future,” “vision,” “mission,” “strive,” “project,” “begin,” “potential” and variations of these words and similar expressions are intended to identify forward-looking statements.

Actual results may differ materially from those expressed in these forward-looking statements, and you should not place undue reliance on any such statements. Factors that could cause actual results to vary materially from those expressed in forward-looking statements include changes in real estate conditions and in the capital markets, as well as the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and in our other filings with the Securities and Exchange Commission. Forward-looking statements in this press release speak only as of the date on which such statements were made and, except as required by law, we undertake no obligation to update any such statements that may become untrue because of subsequent events.

    TIER REIT, Inc. Consolidated Balance Sheets (in thousands, except share and per share amounts)   December 31, 2018 December 31, 2017 Assets Real estate Land $ 154,422 $ 139,951 Land held for development 36,830 45,059 Buildings and improvements, net 1,132,428 1,061,418 Real estate under development   41,404     29,525   Total real estate 1,365,084 1,275,953 Cash and cash equivalents 30,741 13,800 Restricted cash 6,141 8,510 Accounts receivable, net 67,335 81,129 Prepaid expenses and other assets 11,376 28,112 Investments in unconsolidated entities 32,746 31,852 Deferred financing fees, net 2,756 1,387 Lease intangibles, net 101,372 87,047 Assets associated with real estate held for sale   —     53,348   Total assets $ 1,617,551   $ 1,581,138   Liabilities and equity Liabilities Notes payable, net $ 714,755 $ 794,538 Accounts payable and accrued liabilities 91,548 81,166 Acquired below-market leases, net 22,651 17,942 Other liabilities 11,116 7,567 Obligations associated with real estate held for sale   —     2,354   Total liabilities   840,070     903,567   Commitments and contingencies Equity Preferred stock, $.0001 par value per share; 17,500,000 shares authorized, none outstanding — — Convertible stock, $.0001 par value per share; 1,000 shares authorized, none outstanding — — Common stock, $.0001 par value per share; 382,499,000 shares authorized, 53,839,766 and 47,623,324 shares issued and outstanding at December 31, 2018 and 2017, respectively 5 5 Additional paid-in capital 2,749,106 2,609,540 Cumulative distributions and net loss attributable to common stockholders (1,977,969 ) (1,936,960 ) Accumulated other comprehensive income   3,409     4,218   Stockholders’ equity   774,551     676,803   Noncontrolling interests   2,930     768   Total equity   777,481     677,571   Total liabilities and equity $ 1,617,551   $ 1,581,138       TIER REIT, Inc. Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except share and per share amounts)   Three Months Ended Twelve Months Ended December 31, 2018   December 31, 2017 December 31, 2018   December 31, 2017 Rental revenue $ 55,552   $ 54,626   $ 218,517   $ 216,461   Expenses Property operating expenses 12,862 14,131 51,674 55,921 Real estate taxes 8,625 8,512 35,682 34,264 Property management fees 76 51 338 232 Interest expense 5,752 8,155 29,371 33,576 Asset impairment losses 38,146 5,250 41,564 5,250 General and administrative 5,777 4,956 21,785 21,446 Depreciation and amortization   24,452     23,788     101,036     94,754   Total expenses 95,690 64,843 281,450 245,443 Interest and other income 140 88 784 1,359 Loss on early extinguishment of debt — — (8,988 ) (545 ) Gain on troubled debt restructuring — — 31,006 — Gain on sale of assets 14,904 384 26,828 92,396 Hurricane-related loss   (3,000 )   —     (3,000 )   —   Income (loss) before income taxes, equity in operations of investments, and gain on remeasurement of investment in unconsolidated entities (28,094 ) (9,745 ) (16,303 ) 64,228 Provision for income taxes (197 ) (171 ) (834 ) (468 ) Equity in operations of investments 431 32 718 6,399 Gain on remeasurement of investment in unconsolidated entities   —     —     11,090     14,168   Net income (loss) (27,860 ) (9,884 ) (5,329 ) 84,327 Noncontrolling interests   81     9     308     (41 ) Net income (loss) attributable to common stockholders $ (27,779 ) $ (9,875 ) $ (5,021 ) $ 84,286   Weighted average common shares outstanding - basic 53,621,536 47,553,564 50,233,663 47,537,758 Weighted average common shares outstanding - diluted 53,621,536 47,553,564 50,233,663 47,882,642   Basic net income (loss) per common share $ (0.52 ) $ (0.21 ) $ (0.10 ) $ 1.76 Diluted net income (loss) per common share $ (0.52 ) $ (0.21 ) $ (0.10 ) $ 1.75   Comprehensive income (loss): Net income (loss) $ (27,860 ) $ (9,884 ) $ (5,329 ) $ 84,327 Other comprehensive income (loss): unrealized gain (loss) on interest rate derivatives   (11,857 )   3,963     (1,634 )   5,262   Comprehensive income (loss) (39,717 ) (5,921 ) (6,963 ) 89,589 Comprehensive (income) loss attributable to noncontrolling interests   75     4     308     (43 ) Comprehensive income (loss) attributable to common stockholders $ (39,642 ) $ (5,917 ) $ (6,655 ) $ 89,546       Calculations of FFO and FFO, Excluding Certain Items (in thousands, except per share amounts)   Three Months Ended Twelve Months Ended December 31, 2018   December 31, 2017 December 31, 2018   December 31, 2017 Net income (loss) $ (27,860 ) $ (9,884 ) $ (5,329 ) $ 84,327 Noncontrolling interests   81     9     308     (41 ) Net income (loss) attributable to common stockholders (27,779 ) (9,875 ) (5,021 ) 84,286

Adjustments:

Real estate depreciation and amortization from consolidated properties 24,390 23,655 100,671 94,296 Real estate depreciation and amortization from unconsolidated properties 356 391 747 1,377 Real estate depreciation and amortization - noncontrolling interests (963 ) — (2,722 ) — Impairment of depreciable real estate 38,146 5,250 41,564 5,250 Gain on sale of depreciable real estate (14,904 ) (384 ) (26,828 ) (99,109 ) Gain on remeasurement of investment in unconsolidated entities — — (11,090 ) (14,168 ) Noncontrolling interests   809     (17 )   2,105     6   FFO attributable to common stockholders 20,055 19,020 99,426 71,938    

Adjustments:

Severance charges — — 127 451 Interest rate hedge ineffectiveness income (1) — (262 ) — (253 ) Loss on early extinguishment of debt — — 8,988 545 Gain on troubled debt restructuring — — (31,006 ) — Hurricane-related loss 3,000 — 3,000 — Default interest (2) — 616 1,599 2,443 Noncontrolling interests   (1 )   —     5     (2 ) FFO attributable to common stockholders, excluding certain items $ 23,054   $ 19,374   $ 82,139   $ 75,122   Weighted average common shares outstanding - basic 53,622 47,554 50,234 47,538 Weighted average common shares outstanding - diluted 54,536 48,207 51,125 47,883 Net income (loss) per common share - diluted $ (0.52 ) $ (0.21 ) $ (0.10 ) $ 1.75 FFO per common share - diluted $ 0.37 $ 0.39 $ 1.94 $ 1.50 FFO, excluding certain items, per common share - diluted $ 0.42 $ 0.40 $ 1.61 $ 1.57

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We provided rent abatements and concessions to tenants at the Eldridge Properties as a result of Hurricane Harvey through the second quarter of 2018. The rent abatements and concessions were offset by business interruption and other insurance proceeds, net of a deductible and estimated saved expenses as detailed below:

                                    Rent abatements $ — $ (5,116 ) $ (4,683 ) $ (7,037 ) Business interruption and other insurance proceeds, net $ 3,462 $ 6,221 $ 7,876 $ 6,221  

(1) Interest rate swaps are adjusted to fair value through other comprehensive income (loss). However, because our interest rate swaps do not have a LIBOR floor while the hedged debt is subject to a LIBOR floor, the portion of the change in fair value of our interest rate swaps attributable to this mismatch is reclassified to interest rate hedge ineffectiveness income. We adopted new accounting guidance on January 1, 2018, that eliminates the requirement to separately measure and report hedge ineffectiveness income.

(2) We had a non-recourse loan in default that subjected us to incur default interest at a rate that was 500 basis points higher than the stated interest rate. The ownership of this property was conveyed to the associated lender in August 2018.

        Same Store NOI and Same Store Cash NOI (in thousands, except property count and percentages) Three Months Ended Twelve Months Ended December 31, 2018   December 31, 2017 December 31, 2018   December 31, 2017 Same Store Revenue: Rental revenue (1) $ 48,426 $ 45,828 $ 173,979 $ 166,129 Less: Lease termination fees   (135 )   (254 )   (1,121 )   (461 )   48,291     45,574     172,858     165,668     Same Store Expenses: Property operating expenses (less tenant improvement demolition costs) 11,464 10,525 42,673 39,537 Real estate taxes 7,483 7,629 28,629 28,876 Property management fees   25     25     101     91   Property expenses   18,972     18,179     71,403     68,504   Same Store NOI - consolidated properties 29,319 27,395 101,455 97,164 Same Store NOI - unconsolidated properties (at ownership %)   1,330     794     —     —   Same Store NOI $ 30,649   $ 28,189   $ 101,455   $ 97,164     Increase in Same Store NOI 8.7 % 4.4 %   Same Store NOI - consolidated properties $ 29,319 $ 27,395 $ 101,455 $ 97,164 Less: Straight-line rent revenue adjustment (484 ) (754 ) (158 ) (5,149 ) Above- and below-market rent amortization   (1,117 )   (1,121 )   (3,817 )   (3,883 ) Same Store Cash NOI - consolidated properties 27,718 25,520 97,480 88,132 Same Store Cash NOI - unconsolidated properties (at ownership %)   1,023     44     —     —   Same Store Cash NOI $ 28,741   $ 25,564   $ 97,480   $ 88,132     Increase in Same Store Cash NOI 12.4 % 10.6 %   Reconciliation of net income (loss) to Same Store NOI and Same Store Cash NOI Net income (loss) $ (27,860 ) $ (9,884 ) $ (5,329 ) $ 84,327

Adjustments:

Interest expense 5,752 8,155 29,371 33,576 Asset impairment losses 38,146 5,250 41,564 5,250 Tenant improvement demolition costs 26 25 195 267 General and administrative 5,777 4,956 21,785 21,446 Depreciation and amortization 24,452 23,788 101,036 94,754 Interest and other income (140 ) (88 ) (784 ) (1,359 ) Loss on early extinguishment of debt — — 8,988 545 Gain on troubled debt restructuring — — (31,006 ) — Gain on sale of assets (14,904 ) (384 ) (26,828 ) (92,396 ) Hurricane-related loss 3,000 — 3,000 — Provision for income taxes 197 171 834 468 Equity in operations of investments (431 ) (32 ) (718 ) (6,399 ) Gain on remeasurement of investment in unconsolidated entities — — (11,090 ) (14,168 ) Net operating income of non-same store properties (4,561 ) (4,308 ) (28,442 ) (28,686 ) Lease termination fees (135 ) (254 ) (1,121 ) (461 ) Same Store NOI of unconsolidated properties (at ownership %)   1,330     794     —     —   Same Store NOI 30,649 28,189 101,455 97,164 Straight-line rent revenue adjustment (484 ) (754 ) (158 ) (5,149 ) Above- and below-market rent amortization (1,117 ) (1,121 ) (3,817 ) (3,883 ) Cash NOI adjustments for unconsolidated properties (at ownership %)   (307 )   (750 )   —     —   Same Store Cash NOI $ 28,741   $ 25,564   $ 97,480   $ 88,132     Operating properties 16 14 Rentable square feet (% owned) 5,911 5,446

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Our Domain 8 property is reflected as unconsolidated and at the prior year ownership percentage of 50% for the comparable periods presented above. Domain 8 became operational in the third quarter of 2017 and we acquired full ownership on March 30, 2018.

(1) We provided rent abatements and concessions to tenants at the Eldridge Properties as a result of Hurricane Harvey through the second quarter of 2018. These rent abatements and concessions were offset by business interruption and other insurance proceeds recognized, net of a deductible and estimated saved expenses. The timing difference between rent abatements and concessions provided and business interruption and other insurance proceeds recognized for the Eldridge Properties was a significant driver to the increase in Same Store NOI and Same Store Cash NOI in 2018 as compared to 2017. Excluding the Eldridge Properties, the increase to Same Store NOI would have been approximately 1.4%, and the increase to Same Store Cash NOI would have been approximately 4.1% for the three months ended December 31, 2018, as compared to the same period in 2017. Excluding the Eldridge Properties, the increase to Same Store NOI would have been approximately 1.7%, and the increase to Same Store Cash NOI would have been approximately 8.7% for the year ended December 31, 2018, as compared to the year ended December 31, 2017.

Non-GAAP Financial Measures

We compute our financial results in accordance with accounting principles generally accepted in the United States of America (GAAP). Although Funds from Operations and Funds from Operations, excluding certain items, are non-GAAP financial measures, we believe that these calculations are helpful to stockholders and potential investors and are widely recognized measures of real estate investment trust performance. We have provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measure in tables included in this press release.

Funds from Operations (FFO)

Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting alone to be insufficient for evaluating operating performance. FFO is a non-GAAP financial measure that is widely recognized as a measure of a REIT’s operating performance. We use FFO as defined by the National Association of Real Estate Investment Trusts (Nareit), which is net income (loss), computed in accordance with GAAP, excluding gains (or losses) from sales of property and impairments of depreciable real estate (including impairments of investments in unconsolidated entities that resulted from measurable decreases in the fair value of the depreciable real estate held by the unconsolidated entity), plus depreciation and amortization of real estate assets, and after related adjustments for unconsolidated entities and noncontrolling interests. The determination of whether impairment charges have been incurred is based partly on anticipated operating performance and hold periods. Estimated undiscounted cash flows from a property, derived from estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges for depreciable real estate are excluded from net income (loss) in the calculation of FFO as described above, impairments reflect a decline in the value of the applicable property that we may not recover.

We believe that the use of FFO, together with the required GAAP presentations, is helpful in understanding our operating performance because it excludes real estate-related depreciation and amortization, gains and losses from property dispositions, and impairments of depreciable real estate assets, and as a result, when compared period to period, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, which are not immediately apparent from net income. Factors that impact FFO include fixed costs, yields on cash held in accounts, income from portfolio properties and other portfolio assets, interest rates on debt financing, and operating expenses.

We also evaluate FFO, excluding certain items. The items excluded relate to certain non-operating activities or certain non-recurring activities that may create significant FFO volatility and affect the comparability of FFO across periods. We believe it is useful to evaluate FFO excluding these items because it provides useful information in analyzing comparability between reporting periods and in assessing the sustainability of our operating performance.

FFO and FFO, excluding certain items, should not be considered as alternatives to net income (loss), or as indicators of our liquidity, nor are they indicative of funds available to fund our cash needs, including our ability to make distributions. Additionally, the exclusion of impairments limits the usefulness of FFO and FFO, excluding certain items, as historical operating performance measures since an impairment charge indicates that operating performance has been permanently affected. FFO and FFO, excluding certain items, are non-GAAP measurements and should be reviewed in connection with other GAAP measurements. Our FFO and FFO, excluding certain items, as presented may not be comparable to amounts calculated by other REITs that do not define FFO in accordance with the current Nareit definition, or interpret it differently, or that identify and exclude different items related to non-operating activities or certain non-recurring activities.

Same Store NOI and Same Store Cash NOI

Same Store NOI is equal to rental revenue, less lease termination fee income, property operating expenses (excluding tenant improvement demolition costs), real estate taxes, and property management expenses for our same store properties and is considered a non-GAAP financial measure. Same Store Cash NOI is equal to Same Store NOI less non-cash revenue items including straight-line rent adjustments and the amortization of above- and below-market rent. The same store properties include our operating office properties not held for sale and owned and operated for the entirety of both periods being compared and include our comparable ownership percentage in each period for properties in which we own an unconsolidated interest that is accounted for using the equity method. We view Same Store NOI and Same Store Cash NOI as important measures of the operating performance of our properties because they allow us to compare operating results of properties owned and operated for the entirety of both periods being compared and therefore eliminate variations caused by acquisitions or dispositions during such periods.

Same Store NOI and Same Store Cash NOI presented by us may not be comparable to Same Store NOI or Same Store Cash NOI reported by other REITs that do not define Same Store NOI or Same Store Cash NOI exactly as we do. We believe that in order to facilitate a clear understanding of our operating results, Same Store NOI and Same Store Cash NOI should be examined in conjunction with net income (loss) as presented in our consolidated financial statements and notes thereto. Same Store NOI and Same Store Cash NOI should not be considered as an indicator of our ability to make distributions, as alternatives to net income (loss) as an indication of our performance, or as a measure of cash flows or liquidity.

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TIER REIT, Inc.Scott McLaughlin, 972.483.2465smclaughlin@tierreit.com