WRE - Earnings call transcript Q3 2017

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Operator

Welcome to the Washington Real Estate Investment Trust Third Quarter 2017 Earnings Conference Call.

As a reminder, today's call is being recorded.

Before turning call over to the Company's President and Chief Executive Officer; Paul McDermott, Tejal Engman, Vice President of Investor Relations, will provide some introductory information. Ms. Engman, please go ahead.

Tejal Engman

morning good and you everyone. Thank non-GAAP our Please financial and today in are contain call such note adjusted G. as that FAD, that measures, core FFO, will NOI, defined conference core as measures EBITDA Reg FFO, use SEC financial information periodic Please and these earnings of filed reports of on Investor furnished to available regarding website our the supplement page refer or both most GAAP of measures release for and financial our further and our to the to them our definitions results. recent and press to non-GAAP with our reconciliation our Please Securities also some Litigation this during Private forward-looking Act. call are note that Reform the statements within statements

Vice we release with risks, Form Please Executive update earnings refer statements to for Chief Officer; through Pages President may Accounting our Chief certain and of are be unfold. undertake them Hammond, SEC Tom differ President, the Chief and Executive Drew McDermott, as Vice disclosure. Forward-looking Steve with me risks XX-K results today's Chief and to actual and our Treasurer. Finance other Officer of a will Paul We factor statements complete and and and Officer; our cause unknown no Vice along President Executive Participating filings. and Vice President, XX Shiflett, President in Riffee, risk call X in actual involve Bakke, refer Kelly known Financial Operating Officer; and to in Controller; events duty made press that remarks factors Such uncertainties today as these of materially.

call the turn over to to like Paul. I'd Now,

Paul McDermott

XXXX, diluted third of Year-to-date driven X.X% Apartments joining gains quarter quarter, In NOI Center, the REIT in and XX.X% quarter for good our of same year retail grew Gaithersburg, points quarter prior year-over-year. morning over on on end, earnings office, quarter by the occupancy NOI in core for year-over-year average by million same-store period we’ve third to Thank you, X.X% Multifamily grew FFO grown conference XX singed basis third occupied. $XX.X a the closed X.X% and X.X% $X.XX us to the XXX call. House and by of letter Metro Thanks shares we X.X% over Alexandria, by XXXX sale everyone. a third the Subsequent XX.X% for Washington ended quarter to Walker Tejal and Virginia. Maryland, growth. at sell we intent drove and Braddock same-store

XX% underwrote Riverside XXX want In an addition, acquired approximate at over last the XXX year. representing units we increase units the approval new Apartments, to we develop when we asset

Braddock the the and to completed deal XXX, riverfront where this office acquisition exceed Braddock Center end House within the disposition and Washington Metro The range Watergate of which upside sales Center capital iconic million. outset. office our principle previous an are of expect of Potomac we Walker of two out assets year, aggregate, metro-centric we of urban into a sources our XXXX we D.C. sale structure the are the $XXX of capital In building top from value the was allocating are created suburban for Assuming Metro realizing asset of in recently

a to portfolio, XXX. sale our enhancement tenants. while result last to the Braddock at re-allocate GSA Furthermore, to on also enables asset we mid-size at growing with lease Center USDA goal into square deal supporting value our large reduces As Watergate Braddock a and capital exposure the us to of Metro from the Monetizing asset tenants now capital focus leasing we small revenue NOI thus a Moreover, XXX,XXX have asset FFO, quarter. are signing maximized significantly quality. foot improving by

negligible maintaining to continue sale, tenants for and this remains key Washington office REIT. a portfolio will which Following our on GSA focus exposure, sector differentiator private

office momentum remaining Moving to business is at XX.X% our and solid experience well-occupied its continues overall vacancies. on portfolio on fundamentals, leasing to

quarter, that In are training another or have the square current XXX,XXX with footage square proposals have and prospects. the of we addition or XXX,XXX we negotiations. another next of under feet or feet roll to This approximately square LOI, currently lease XX,XXX third of times the our over months. square is signed of X.X We leases feet we over XX touring square vacancies feet total impending that XXX,XXX tenants in

momentum unique and Our Building Watergate showcasing driven we at partly by are positive the redevelopment XXX. the such is Navy leasing assets Army projects as

yesterday that in the XX% competitive approximately D.C. vacancy remaining incentives lower associations, the office a law through creating trade environment that rents firms, non-profits, Class several A We prospects to us Army Building and have offering government while tenant product Navy leased and push enables are competing to relative with chasing the affairs

and we Watergate seeing Our blank for level. with providers the amenity space consulting and are XXX media are the negotiating actively from good room firms companies several for ground interest

typical demand space the This portfolio in also to being of Washington the of benefits and square a year-to-date grow Washington approximately conscious of D.C. sectors $XX X,XXX from in square is has D.C. absorbed net rents with it as as According to median growing well foot. approximately capitalize data, office office Our feet office have full on profile plus strategically of footage leased mid-sized, service value from tenants. small positioned demand to a CVRE

foot is where for Importantly, it average target same-store tenant is size is feet portfolio, rent D.C. the year-to-date service. the and the deal $XX the office average X,XXX also square our of approximately profile per full approximately

Class JRL data, further supply mid-XXs A service pressure for into Class to the the outperforming market space feet foot, D.C. square on market to the rents been converted concern be of has A occupancy, at currently at million existing in put with converted per above growth yet is price front, large. oversupply office commodity Value downward priced year. mid-XXs concessions, product than is X.X the or per office and to a of there feet product rent square could full this the foot that products $XX On on two million according

that reality levels that their with foot When consider rents, term they to reluctant developers will cutting as have the as making value effect the $XX on that space. that is significantly on been deal we effect for also to decrease well incentives that rent face of aggressive cut the long-term year rents have have products compete tenant had lower is leases. with to to own, increased of net logical, competitive promoted interest, them While $XX existing the per per seen in nominal, but structures rents

XX% to these Street, that from such as below the the would gains. scenarios to M typical end which as which drop XX,XXX of square home we the and directly Hyatt, conclude retail as the space. the nominal new thriving restaurant, consider the multiple M at offered would corridor, the on are of Fairmont, At street and occupancy Georgetown, small phase End which asset. opened of as repositioning a the Street is rent hub tenants need West value market building newly seen To heart connects finest user D.C. office, to Park as and the we the the some is Nobu CBD XXXX We this and well across Ritz-Carlton, aggressively a tenant have D.C.’s not hotels feet spectrum redevelopments of to reprice aggressive even for deals the continue XX% to

and activity have major with We recently seen shortlisting their redevelopment from as consulting firm on XXXX firms law asset law firms only one list. the final

continue to we will are ability execute a to confident pursue our in our to strategy, options redevelopment we While for maximize value shareholders. all

growth NOI this assumptions Spring time our year excellent We our activity for Village. same-store development are at on the have increasing seen and retail second new Valley

floor are of with for personal users seeing demand the two floor. local business for ground finalizing the are and and variety from regarded We commitments second service retailers highly a

vacancy space the and at HHGregg strong are announced simultaneously is a for further an in discount from to thereby which options federal But second while quarter, As the vacancy been are pickup There Hagerstown, feet portion interest we risk. square a interest optimize given HHGregg of for activity divide of users. we vacancy, a store rents notable on has the last exploring retailer department also from crossing. reducing at NOI negotiating XX,XXXX the seeing

on vacancies power of was centers. A be of third retail our third in and driven quarter released NOI shadow Approximately community XXXX. as grocery strong provide of XX% stabilizing approximately driven center. drive well to or our was anchor, the XX% a NOI We quarter Class by by which that grocery effect as traffic and And have retail expect neighborhood both centers shopping levels centers, anchor,

of and portfolio region’s driving between strategy $XXX the the comparing well assumptions same B the willing at to data, continues and we market Delta that as Furthermore, to market on unit points NOI markets where a for within raising across our gap are by premium of also to Finally, we fundamentals. is to reported According unit are outperformance Class Delta. finishes year, A a by pay the third in grown contributing points of and rents same-store relative the $XXX our our average A work assets programs year-over-year, to to rents also B quarter multi-family tenants is renovation Class understanding at Class Associates’ basis growth relative basis the to some In average assets. $XXX XXX portfolio our rents Class our our rental upgrades our versus for of to wide A the our second renovation favorably per XXX B gap. approximately north unit, time is have sub B this Multifamily growth B

rental rents region’s in Class as to As we reported of XXX Delta. grown Class average relative year-over-year have XX basis third by quarter, the by a points result, points A the A basis growth

us limited sub-markets near research strong are grow at proprietary to existing prospects and where and of expertise growth assets develop new sub our combination portfolio, excited supply. Class and development market in about rents a operational We the Multifamily a A value to with enables of offering long-term and

over new exceeded They to our experience at respectively. XXX Wellington units units developing at of XXX Our developing our expanded XX Riverside initial team and in combined years units product and units in XXX the new XXX has of apartments, region. underwriting Multifamily have

nodes. density centers to solve have real development transportation able and growth because in high around housing job and for our We greater been a increase need

units in the have multifamily Approximately in units Virginia. our Walker a XX% located of are also share sale located X,XXX growth. deliver development representing and another approximately of of development House, a will are when units of our portfolio which reach XX% Virginia, pipeline we our both XX% organic Following projects, Northern Northern X,XXX approximately in we that

We Northern Maryland. using create D.C. significantly leaks on Virginia, to are bullish continues or which the in prospects for office growth jobs

authorization spending Northern Virginia. our for growth XXXX in and portfolio bill, growth XX was derives the has sectors, which proposes office the bipartisan the job This and percent Virginia of For in Virginia. NOI to XX% August multifamily, retail compared passed business increased XXXX, approximately D.C. and support professional financial approximately may defense well services if Moreover, of and XX% from Maryland in fiscal using comprised drive year XX% in of XX% Northern assets months greater bodes suburban activity located Washington X.X% of of economic office which Northern and approximately received XX% levels in with

months XXXX. XX% the average XXXX added in XX growth region XX-year September Our that ended is between jobs region's representing and XXXX, growth the job than higher XX,XXX

Index, share jobs According at new XX% trajectory Importantly, from current rate employment this double points accounted of and Washington the advance strength groceries month is all Leading area XX.X% performance services the professional Institute, XXXX. region XXXX forecast to growth to economic months and significantly did January the Washington above has six research the Fuller base. and in now solid which the at it XXXX. since their gains business metro sustained growth economic jobs into economy XXXX in of registered to designed eight the The of to product each for overall continued

like would call quarter. regional support financial to favorable, that macroeconomic discuss and performance growth turn our a environment over the additional internal already momentum provide created have Now expect we to the to I the in Steve to to operating We third

Steve Riffee

from diluted share Year-to-date, Thanks in below $XX.X XXXX, income good sale quarter Paul. year-over-year the transaction per XXXX. which or by $XX.XX morning the we Maryland of per XXXX have of gain of million office have revenue-led reported due third was and everyone. same in quarter core We same-store of higher included $XX.X of diluted $X.XX expenses, of period, driven lower portfolio. months the third million in recognition And first NOI quarter second versus Net nine revenues suburban $X,XX the income of third per prior FFO of compared by year diluted net to share growth $X.XX a of the million grown a $X.X NOI X.X%. or the X.X% the share, combination to same-store of

We out to then of improving by NOI and are growth commodity the us. quality metro-centric while have assets quality that achieved recycling performing assets Riverside portfolio this such as our and XXX, for of Watergate well suburban Apartments

core is distribution, in for ratio. previously core favorable funds core was or us full achieve $XX.X year million the quarter on FAD payout available track a forecasted which low-XX's, FAD FAD, approximately our to core to Third payout mid-XX's ratio putting

grew sequential quarter, On of primarily the quarter. gains revenues as year-over-year third X.X% average due in and lower office lower NOI as second multifamily same-store termination were reimbursements rental office, in in fees same-store a retail to higher multi-family. revenues quarter, primarily while occupancy third the growth well Our same-store was by basis, in lease driven growth lower than

midsize a of second of Starting rest G quarter a same-store renewal new with at higher of classes driven and a As XXX compares portfolio Eye all in basis well rental grew our expenses Army new of XX% X.X% Silver typically base. Center Line and where by in expansion commencements the maintenance third three of feet rents quarter the term XX,XXX lease the space offered Street, across to foot. greater already over growth $XX of office, spread as the our and third favorably at core sequentially the the approximately Boulevard. We Wilson represents points per year new tech project and mid-to-upper year both the the term were asset the early across A M per this square $XX gains. to $XX with improvements, committed to foot occupancy has XXXX, by occur properties, such of foot per Street, office $X.XX per and as XXXX XXXX Street, Class half tenant was that per of majority do tenant quarter, in XXXX expected basis, of On year. which across by office as tenant office XX.X% product points sequential our driven D.C. office and small growth achieved out comparable as roll occupancy a X.X% which office signed XXXX, strong repair drove proportion normal costs by Navy average leases renewal Class including we leased We basis. on utility released. despite are expenses in a grew XX ending basis partially which known A of higher GAAP year-over-year XXXX percent move basis tenant rent users, in been NOI We leases than and ups Building, office seasonality, occupancy cash same-store usual Washington on with Approximately We the

we leases on cash basis increases even XX% a below of GAAP achieved and new For XX.X% larger XX,XXX on a basis. square feet,

we renewal of XX.X% signed approximately on XXXX of leases on XX,XXX the In third roll of and feet achieved cash quarter GAAP office a addition, basis. in ups XX.X% and basis rent a square

of office leases the XX,XXX in we're All feet renewed size. square below

months XX ups Excluding tenets looking expect to portfolio square we feet. the the encouraging over the leases for the prospects leased of asset, is to for roll are rent our XX,XXX next expiring office office sell, below XX%

a a X.X% are As lease to next and rent that X% these continue could positive the to releasing in months office on typically are long-term cash strengthen expirations in escalators positively basis overall annual leases and be spreads basis. mark-to-market Notably, a that have nature. result, the XX on GAAP our for portfolio on of

same-store a overlook, with leasing terminations of the well to commencements all on impact on average NOI lease declines, as year-over-year offsetting retail, Moving basis basis rent by third as these average XX HHGregg offset of the points Gateway XXX specialty points quarter income outs. rose grew approximately sequentially year-over-year and at move X.X% occupancy occupancy fee growth

test We center a leases. And to some use versus shopping some pop indications lead of are that these of long-term there to capitalizing location. on tool may the as ups retailers are

with space vacancies on was approximately in tenant on feet Our drove XX.X% We leased were XX% XX% GAAP activity square cash leases. XXXX. rollups to GAAP incentives end and portfolio new of incentives good and on standard Renewals and grow the leases. retail occupancy on leased basis a slightly up at paid We a renewals XX,XXX opportunity and quarter retail no were X.X% on basis. cash new and higher on

XXX quarter our Multifamily, we same-store basis leases expected was rent and points unit ended points XX Riverside. basis third the higher XXXX, assumptions XX.X% growth portfolio and at points. was the at leases per with by and growth. X.X% year the previously basis we third than XXX XXX renovated Finally units raising over XX.X%. same-store grew one to Same-store driven same-store NOI same-store renewal for grew at up contributed NOI of Multifamily. units third This quarter, In new occupied On a the Wellington occupancy overall quarter basis, XX the full

As had at units at Wellington to end, to XXX a units and at Riverside. XXX result quarter renovate left left we renovate

We programs renovation XXXX. dollars invested teen these have been two to on date assets expect generate to mid-to-high early continue cost continue return XXXX to these that through at and the a and into

one are $X.XX $X.XX, do range to assume of quarter FFO acquisitions Now turning previous we guidance further not maintaining guidance. XXXX. to tightening range per $X.XX to core $X.XX to We and of the XXXX midpoint guidance the only in share. remaining, With diluted our a from

to Metro XXXX we disposition was end Braddock of the Center mentioned, which top expect of million. before range, our Paul assumed the $XXX closes sale As exceed previously assuming year-end,

to We growth raised X% the by range are of growth third Overall of and a same-store proxy X% supported to quarters. from of assumptions. X% higher to X.XX%. office NOI the be a in will a from Our assume expenses guidance same-store slightly fourth previous range NOI expectations to X.XX% X.X%. a following considering X.XX% range previous is

range same-store our a X.XX% NOI range and retail X.XX% to to quarter X%. raising row growth growth are We X.XX% the for assumptions between previous now to from expect second in a of

well is of as tenant bankruptcies, Our stronger and impact retail stable absorbing growth as watch retail resilient the HHGregg Offenbachers despite reflects our the fundamentals. disclosed region's list, previously and it outlook our

We to NOI X.XX% consecutive previous $XX approximately $XX.XX million considering $XX.XX multifamily, million. the million. G&A And to $XX between million. expected from expected a raise our to for remains rental assumptions outperformance. raising to of to non-same-store $XX.X is between growth range same-store dispositions. of timing led range as assumed are a growth to renovation properties from well In the to Interest million, several of is million is $XX.X contributing to growth expense $XX to A a certain and at Class anticipated NOI non-same-store range B, million second and expected unit Office quarter is also and multifamily from X% $XX.XX X.X%. projected Class million revenue NOI Multifamily our range

capital plans we to the opportunities. for and add quarter, sheet In to flexibility XXXX and on and redevelopment focuses pursue of further us Our value development our third approximately million our price $XX we opportunities to maintaining opportunistically at are which value strength have proceeds creation of pursuing. our should ATM position balance gross plan the realize advantage $XX.XX, program of raised take through average growth

our times, now better will Assuming And on below to range target X.X the our EBITDA six Paul. to end expect adjusted I times. that over year the call dispositions to turn net our with close year-end, six to than by debt is which of we back we

Paul McDermott

you Thank Steve.

occupancy had rent performance year-to-date region significantly operational on quarter outperformed strong Our growth. and this and our

to risk opportunities We profiles. proprietary capital strategically submarkets risk creation in region, allocate are adjusted to offer in growth growth lower best research our us exiting that and assets the using value higher with the while

contributed Riverside experiencing capital the Line successful center, growth today. redevelopment to suburban with acquisitions as well have allocation the XXX commodity and Silver our Looking sale of assets, to Wellington, conjunction of significantly the back, of our are of we Watergate the

the continue risk we XXX. developments programs drivers, We steadily to redeveloped unit Building Valley Army are Navy multifamily generate and within Wellington ability renovation high multiple the in up and returns to be confident multi-family, growth NOI at the Spring as Watergate new development and harvest our and the to adjusted Riverside. including at the redeveloped The ground

NOI to We growth us these to optimal creation class returns. embedded drivers value years. the they our in pursue as deliver over enhance risk continue external five opportunities, adjusted asset offers particularly next multifamily continue expect and to we that Moreover,

The benefits reform for budget believe and are federal we of to market realizing our resolution of upside driven up. the is downside subsequently to that working addition the on both research capital if there passed passing. fundamentals, picks In congressional the more and the activity the legislative potential allocation, drafting legislation tax a clearing than Republicans Senate House path

real a correlation As historically and around in volume strong result, gear passed Congress our a up activity in region been economy. legislation net may regional has There absorbs reform. of between real tax by estate our the

Just in momentum our renewed optimism for legislative and there fundamentals growth. is last our would further increased augment that week region’s improve the

the Operator, would call open I like Now ahead. to please go answer your to questions.

Operator

be Instructions] from proceed the Robert Our line your this session. Thank of we Baird. a question you. time question. W. [Operator at Ladies comes and first conducting with Rodgers from will question-and-answer gentlemen, Please Dave

Dave Rodgers

good yes everybody. morning Hi,

different Just wanted you is at prepared three portfolio. stands Where on entire quickly kind Watergate specific spaces in of leasing that two give mix the your the assets or where been? beginning portfolio. maybe categories to did about Paul in us the Watergate, in what’s of and ask terms of on feedback the comments One

Paul McDermott

Tom. Hey Dave it’s

on positioned is have terrace three lobby And package we only almost finishing and lobby, water complete one up if buildings there. been levels city. its as a the the sort in And of activity new part XXXX. a own sort should early as that of roof on are this and Let me of new currently a the stands renovation amenity address done guest it really unique in to Watergate try that. of

probably express that. we I companies, or five in think six or XX,XXX media larger interest had users

Rome there, coverage. through You remember is then that got in some we've additional Blank XXXX and

time, to we've about So obviously feel we And leased but up it. got get we'd sooner. like confident

Drew Hammond

And address for the people now lease. leased place And we're are have as XX% said in future Tom those at we to that time today.

Dave Rodgers

regard second Board be you just that? Advisory market that suppose with heard the more you announce But space don't are to Company, getting I about to there. May Great. interest space some I increased chatter ready you're activity about any you're as talk in anything. more seeing can closer and more

Tom Bakke

Paul West our strategy asset at only of is type This so market as of to two XXXX see itself Georgetown, sort sort is to the the has to playing and the Yes is there with in of go said getting more of attractive. sort where options Street basically unique out. M been all very really over CBD. between the And and by dynamic another and demand

at as end law the couple consulting a users. significant city have probably for unique have the city. commute enjoyable interest that firms, this because and firms users the west out primarily been they the business, getting most from efficient and their locate of a look and the in is shown of And So in to place

A also And both sort for looking of closer price upgrade be would point. pay high A- basic more so to we've from looking to and the approach and that interest end priced and had for up users willing at a some renovations that

Dave Rodgers

like spend of year And that asset the Paul exceed chime last looks side your more looks equation, be Should too, to back going already expect continue it we stock in your lot for matching you’re sales, of issued spending point the suggesting you can is slightly in which like you've goal got see that deleverage where just then largely you've unless they'll given to looks though of the capital to this the development a should a acquisitions development is or pipeline. May something kind target see good ATM Great. equity in at the else and the Steve that? like even comes obviously the expect below your up. but it's to to of we you

Steve Riffee

ahead Well, our of development Dave, we’re spend. way

sheet the we’ve what little think even to I we are continuing bit strengthen value is creation additional So balance a do further pursue tried because opportunities. to

of going end to EBITDA six. assuming the at X of to below a debt We're to comfortable by to So year. said We've closes net end we’re everything X.X. we're operating going adjusted

do development think say trying is I I – guidance million. do would create one for not to the not – under thing I ahead we're kinds for but We're of we've that capacity would and year, just created So mean to giving to do $XX overhangs. it next is I things spends next but stay of our year probably

So well think ahead stay we I that. of

Dave Rodgers

Thank you.

Operator

Advisors. line question proceed comes Jed Street Reagan Our next Green question. with of from from the Please your

Jed Reagan

Hey, good morning, guys.

picking that of portfolio? market to You fundamentals leasing talked about is or a more or your indicative wide changes activity recently that's tenant in up pretty healthy office pipeline. Would say you specific

Tom Bakke

again Tom It’s Jed.

to from XXX,XXX, available look assets some bit a a XXX,XXX attract foot that we that prospects, market that unique it's for any obviously time. the those market some long I'd and think that's are do think bread and butter of to are number. significant XXX think our law we've DC good and really say just XXXX to else the are so so that's numbers, the some love has haven't the large nobody seen been activity. But a because seen little But those and just really seeing I Watergate activity in adding I they portfolio, firms I adds and because interesting

are looks. So getting lot these of assets a

Jed Reagan

terms Hey, changes in seeing or it of your asking rents, space concessions. rents

Tom Bakke

that the we're A they're seeing whereas concessions is continue B think the moving comment space our the to way. Yeah, way I there move other

TI I've free I seen think some rent. A comps and where all-in is recently

per move the terms, granted seen terms into TI up out, fifteen the $XXX and foot rent stretching free range. $XXX starting you're seeing to Now, to but of year I've

had give we deal XX, I'll butter. which And number a than had and We floor our full space, our you floor that Now TI deal building. come we only that’s less Connecticut, we made example do an a opportunity available on B we deals which and of deal made doing but XX-K at a on sort are bread an we XXXX just did, a $XX. around that B solid to normally was

So a A and between of that's difference the there's – B. example an

Jed Reagan

a that fifteen you on year deal. would mentioned year $XXX ten deal or be

Tom Bakke

to fifteen out going get probably That's years. to

Jed Reagan

Well.

there's more be it’s mean dispositions question early the how but year team, the and on Just picking are And non-core about know follow up? thinking are plan. there capital I a sales you next a I about could for you for up that still

Steve Riffee

this is We're give Steve. we're doing Hey, yet. to portfolio not But guidance, management. Jed, ready asset always

in is the that that that forward year. of we get updating look we of guidance at source one bit everybody to to look next on We giving of capital. closer terms little a always options for So as

Jed Reagan

related And can that Braddock offer on any pricing. Okay. you color to

Steve Riffee

that this point we this we'll a Well, to we're because guided little when not what more with do again provide we're and year in time the further proceeds trying total for at said All time. to are not along deal is we've the greater is done had than that the going last be updates.

Jed Reagan

for Metro for seeing you're or last Paul opportunity product then here Okay, for the the maybe in across maybe perhaps. DC fair and looking investor how Any you for enough. one is the set changes pricing demand environment And guys? acquisitions

Paul McDermott

Sure.

the with year, – lot coming up. a year definitely think quarter back DC. into So a much halt pretty let's that first last of coming time this come election a in capital we We to go saw the Jed. And

it partly was defensive part I a think playing. reallocation of

out were to of I I think sales there. to right you the kind investment community, pretty think now it's flat talk if

We're There’s that I been is interest me classes The in going of the the into aggressive looking the a target Jed. then with just increase the but seeing seeing the haven't thirds coming chasing product flattening to actually yields. start I foreign think safe at pretty of probably capital. it's it. where out would the the based moving the people we’re value market. haven say interest in, on are bond people on that’s any talking significant park with capital structure DC year that seen hit capital. volume piece I rental underwriting is definitely I end, I two kind think what's slowdown in add community. kind is right amount a that's those will we playing strategy approach retrading most we're last to But core and other of is getting of that's slippery. across certainly brokerage rates, been we're now the in kind back DC assumptions leverage And also in capital on little the value-add/core of kind seeing to seeing in asset some capital some of and to over Jed. weeks deal they're of as think that capital the here – core two plus but We're

Jed Reagan

Okay. That’s helpful.

deals of in of terms anything the retrading some changing of there material prices? mentioned being terms the You in recent retraded

Paul McDermott

in think I really financing think it's been really I guys just I been around market. – said And guys like swap are – are just these it's related. these

just we're that phenomenon recent a just hearing. that's So

until little due people As you around grab done obviously have hard. nimble bit Most financing to end, up. until went just more trying people edges – specked And approach of floating to They've they probably these a commitments these we're of year seeing were they some yield. diligence. most the

So…

Jed Reagan

Got helpful. it. you. Thank That’s

Paul McDermott

Thanks, Jed.

Operator

Instructions] from Our James. line of proceed Bill with the your next question. Please comes Crow Raymond [Operator question with

Bill Crow

you. Two guys. questions for quick morning, Good

you talk I are dead those multiple you've completely retailers First chasing not of interest? the retails guess, category you seeing most got if what all, Can about Where are in space. just kind your tenants of in?

Tom Bakke

Hey, Bill. It’s Tom.

these the speaking you’re HHGregg spaces. think… So, of I – And

Bill Crow

Correct.

Tom Bakke

fairly active. Yeah, we operators discount –

You’re did Gateways. all everywhere. these power centers now – in plans, than And not, we're power are are needle market to new all down and are these but we're still and the of are very the expansion users – and or of or sort And aggressive. moving into there grocery we their has grocers into these entertain sort pretty looking the then hearing that to certain centers slowed of primary users of sort believe the looking other are the talking Those in home then goods the Grocers, entrants that all venue. seeing positions. And it quasi some other – much this sector in the boxes. types for

Bill Crow

helpful. that's right, All

on headquarter and to the be the question, on search to that be this second market. Second seems Thoughts might be DC top within of Amazon but where everybody’s it minds, shortlist. the seems in

Paul McDermott

Virginia like we come DC, Well, our Maryland multiple XXX be estimation from Bill, and could bids on had in submissions of the into a probably both and mid teens Amazon. that went

Bill Crow

am just I to asking Paul, handicap. Yeah,

location most the We’re within would using practical market. be the best

Paul McDermott

a They retail. – We workforce lot access to Northern site, out off the road. this state a Virginia there. and will toll good of transportation, have presence is out our I infrastructure, Silverline It’s their educated sense. amenitized sponsored CIT heavily probably think observation retail there. be out good a what coming good like the makes It just

Bill Crow

Thanks time. enough. for Fair your

Paul McDermott

you. Thank Bill. Sure,

Operator

question comes proceed Capital the line of from your next Lucas with One question. Chris Securities. from Please Our

Chris Lucas

to I you're Good morning too close everyone. Paul, home. hope That's wrong.

Paul McDermott

Chris. sorry, Sorry,

Chris Lucas

million color I I end missed the can But That's on questions One, little the a guys talked, all right. I you that? provide front call. the impairment two The on of Steve $X had. apologize maybe just that you

Steve Riffee

Well when straight land a an just buildings. of value you calculate a not price versus book sales up it's impairment, and

estimated So rents assumed primarily write TIs. straight and unamortized what of our line impairment projections off an is of

Chris Lucas

see strength that to Are sort going next And continue at given sounds to great. opportunities sheet the that then new up the particularly Paul, criteria. lack portfolio looking that market within now like, be might Okay, year, this fit right seems that of of point? you’re there opportunities the also you start into balance at the to something development your

Paul McDermott

Army them, both at Wellington we the Wellington now. finished have initially seven than the on And approximately at Sure, we and up Riverside. aware The ground completing Well Riverside Navy. renovation works we units both and leasing out of and NOI And we Spring drivers, right on the if finishing mean completing everybody I Watergate, think renovation they're Valley, not the in Cris is have I but we're on – the renovations to additional more unit now, out underwrote. on address and XXX then the Riverside development

some I our probably And two. are one think at redevelopment more retail at we least looking residential that development on FAR have or center assets. a we additional potential of opportunities then

Chris, still that seeing redevelopment we we have – potential. acquisition are still also opportunities We think

kind unplug value of to in of I the is existing add alluded I top not capital that to this really of NOI. it lot They're DC on think looking it a and do looking to earlier place NOI.

these have to that So will pretty Washington to XXXX. tracking healthy see continue XX I going probably our deals think to ability do REIT I think going into we've and we're pipeline are a for continue a to Chris XX been months. to

Chris Lucas

Okay. don’t then rate touched And if know last question, roughly. you cap on I for guys House this Walker the

Paul McDermott

Upper Gaithersburg, five, which exceeded our expectations for Maryland.

Chris Lucas

it. I appreciate your. Thank terrific. That's

Kelly Shiflett

Chris. Thanks,

Operator

line of next comes Michael your Please proceed from Our the question. SunTrust. with from Lewis question

Michael Lewis

when why fully can’t tax that you, – and as I even come you. basis. I about I at I effect. had I’ve that actually [indiscernible]. correlation I just obvious But you sure an I needed question things as think I Hi. place anything. look between at not Thank is, to this specifics because it’s takes driven understand But seen Paul, talked have that really question. of asked maybe I that it’s in one think an reform, and those am on too the

that company of You an single every and every single impact incidence. can maybe healthcare [indiscernible]

maybe kind know, normal? has than thoughts that? on correlates so, what’s becomes that and I this just driver on And even your you curious demand why am stronger of

Paul McDermott

to if Sure, wants Michael, I’ll else jump in. anybody kick off and let

of right at lobbyists, touches to accounting and by drag passed had new what reform, of the a but it touches at right law in start business legislation interests, firm, to way to if legislative see I takes “shadow a a already look people some it in it are tax right associations. look lot seeing in I yes and mean reps pick Congress swing mount area, spaces when be So space, associated the services yes space” or we will of with these get office building bill spaces ask all existing now, professional the slight a firms, special coming when And in think asking and now. their nice DC, activity were tenant that up. the we larger now has tax seeing about fundamentals you in own some reform. probably worst within on years, the process We're XX you will off firms they're legislative that up which we're

more see seat people that right special We it need now we're office table in dynamic interest those to bodies we it’s the So, more more up want think political environment just and takes where space. at groups in given very and showing polarizing. coming just the people

a but this REIT’s that have So that’s was would think impact said that to have I going Washington portfolio. region for liked do for earlier, to this upside have I fundamental and

Tom Bakke

their is there because up these just a the maybe gearing a firms consulting Paul firms, as in law based lot and firms, Michael here lot tax big of And nationally here. trying to up national out and firms and ramping they're of And are this hear some tax going accounting about lot be we DC. expertise a practices of roll talked of to of

Michael Lewis

Thanks guys. [Indiscernible]. recently I Well,

Operator

Please Our next your question with comes from Blaine Fargo. proceed the Wells line with question. of Heck

Blaine Heck

so. room new to or it I agreement take Media on Paul months and was there? the extended that tenant with give disclosure morning. Tom, largest color at When eight actually lease. was right? lease another Good stage, there on the like And Atlantic look looks that blank or a Thanks. can going you just your little regarding what's for an Is on term

Paul McDermott

So the is of lease XXXX. the expiration actual end

lease they've much We a basis back the bit couple added that most will For spaces of a of master because space, backstop there's lease a the get we that just end blended sell on to building have little to schedule. from to XXXX earlier. of maturity the a – the of it a

Blaine Heck

take so, that space looking a that Media still for a guys Atlantic you there to backs longer of Or release? into term? is are Okay, long chance kind tenant guess, a for I turns the another up,

Paul McDermott

Now, we want to backfill that.

In and us earlier owner it previous released the master of get to fact, the mutually lease. beneficial then it's let for

Blaine Heck

most you year-over-year from give Steve guess said of is a mean as I Okay, in more then little same occupancy you year-over-year helpful. bit I portfolio can in to the office and NOI the due store just basis QX the QX. to flip on difference And and color Silverline. a

last. around of quarter amount And give fees quarter reimbursement? third So still any the higher this the term versus be the effect can it then in you and seem of decrease would NOI just last detail the would looking second, much at the than maybe year

Steve Riffee

Sure.

in just put our year perspective. same-store. We've this twice overall let's it raised on So guidance

we've raised and – so And same-store that quarter. this guidance again overall

things So gotten into opposed than to slightly have year consideration, worse. it's so anything if better, – the quarterly prior always okay, taking comps, as

first occupancy that are last along two gain had of in normalized The the of in the third relative did we of have reimbursement we the year fees more in said expense a significantly all – in and the more comps terms the of second quarter. quarters that to occupancy the year-over-year half we've first terms bigger the year, quarter term and

little the the we more So bit Blaine, more one quarter quarter for year fourth just that the all this year. other. so – it hit than we're been was And et so then guidance so a took bit December a back if are they and is more anything than the last a We quarter we is had expenses – comp little seasonal it mildest And cetera. fourth seasonal in about ago, if you winter up that to basically basically normal. the higher, a assuming all we've think got

all So no major year. what is I there don't guiding we've been from deterioration think

schedule. think slightly we’re I ahead of

Blaine Heck

basis at I mean year-over-year. just the XXX still points is up was occupancy – the I Okay, looking

in So fair we into – something and similar Thanks second saw but that but what quarter, might have translated first guys. to enough.

Paul McDermott

Blaine. Thanks,

Operator

call back closing There like to questions further in management other queue. the for comments. to hand are no over I'd

Paul McDermott

you like look more Good time many NAREIT thank month. forward to Dallas everyone. afternoon at to time for next would Thank of spending you and with we your I in again today everyone

Operator

of time This I spending again. would time like today's many Thank does you thank you. to conclude for your forward today, with everyone teleconference. looking to

Elme Communities (ELME) 27 Oct 172017 Q3 Earnings call transcript