WRE - Earnings call transcript Q1 2018

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Operator

Welcome to the Washington Real Estate Investment Trust's First Quarter 2018 Earnings Conference Call.

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

Before turning over the call 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.

difficulties, on technical line. having are please the stay We

Tejal Engman

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

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

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

Paul McDermott

for momentum FFO grew Thank across GAAP a quarter We and everyone. strong fronts. quarter X.X% We same-store per earnings X.X% We us year-over-year and first results first with good by Thanks multiple cash We by XXXX of basis revenue our year-over-year liquidity office for an occupancy internal flexibility amended Tejal, balance call. to and sequential make share growth. year-over-year morning growth. driving allocation greater on optimal And accelerate XXXX driven strong Street core and grew move finally, by joining growth. on capital September for X.X% expanded NOI conference and facility achieved refinanced cash June NOI you, the X.X% from growth sheet. delivered term plan rental sale solid same-store forward multifamily our gains our we provide of by strengthening decisions. loan X.X% to We to and credit increase to existing to and the and M continued rate

the to update detail performance, our growth for growth operational key an estate. D.C. Washington opportunity REIT drivers real NOI and drivers, our and six of would provide will the Steve financial first our outlook While like Metro context the of I on quarter discuss on strategic within long-term

and begin at and Virginia. lease Rosslyn, opportunity me office Tower Arlington the portfolio with Let our up

have experienced we XXX,XXX square demand availability the XX,XXX Tower of Following for nearly Arlington approximately XXth, the of XXXX. feet acquisition, the at close in square January on of feet

conveniences. an pay a creating suite implanting to solutions for willing to on shared spec We are strategy increased tenants flexible to amenities focused where space a with are market provide premium leasing such speed

XXX% feel occupancy. that example, strategy at spec an We had our to $XX in gross Costar with only Rosslyn is number views among the that Wilson scenic our market the net strategy to Arlington offer will building and Tower premium A effective with where because an have small there achieved tremendous leasing $XX work Tower those, success confident in rent to are have a XXXX As this we Class at And suites according of range. rents Arlington X% data. limited suites

per X% our Additionally, investment and prospects, a future to on top prospects of to XXX we the $XX XXXX. with XXX,XXX lease totaling approximately proposals of expect TI now renovation to for that December another with of achieve are approximately currently Rome flex floors approximately and premium for trading tree the product. Blank complete, active lobby date foot XX% XXX,XXX is the expiration we have are At a leased predominantly XX, Watergate

an law interest firms, from co-working have companies, received and tech associations, We providers.

it other negotiations and space. XXX for providers in ground Virginia, views. and in months. buildings monument also restaurant Tower in Arlington riverfront of XX over Tower We past result is office the the the both Watergate floor Arlington Watergate river are three of panoramic Potomac recalibration service retail recap, with our one To and D.C., enjoys like are operators only XXX and office

unique for replaces two We Tower data. command Washington, exposure. waterfront In region which our metro-centric the enable a Center. Virginia with value on In commodity sale. Virginia, upgrading average Northern proposition. Northern and differentiated create increasing spectacular assets one D.C. such essence, that D.C. be that truly replacing can't office are D.C., remain rent without XXX portfolios materially amenity Views possess its And assets Braddock JLL double-digit held views to our to office attributes we as Washington, office us Metro office iconic replaces Arlington XXXX premiums In Street well-diversified assets overall M in are Metro replicated. is the with single-tenant Watergate according which water the views

assets is an pre-leased of seeing approximately In from demand in reallocation for add to office floor. are second Valley exposure brands one at Village of the derived strong operator $XXX,XXX development see development is Spring floor. Spring where food at are we NOI. ground within service of users continue Our retail, incremental the reduced square XX% XX% XX% a tenant signing portfolio's business stabilized XX% two has our to we to from of office after activity footage. Today, annualized new the Valley And service of variety personal metro. single located office capital our mile Village from expected our NOI The we strong for

major HHGregg better Frederick interest at center vacancy space. interest continues of generate Hagerstown will of it to XX,XXX credit. we vacancy with HHGregg the We showing traffic to have The will XX,XXX entire discounters at range. to as believe the also feet we value receive square the LOI square foot and signed a And in from grocer significant single-user higher feet an provide for square prospects XX,XXX that of in be taking XX,XXX have the

continue year XXXX. in are and this to We expect leases negotiations commencing vacancies with in be released active to both

were multifamily, unit Wellington, our received were appreciated to on able several renovation at the the tour program we Moving pleased to feedback and we positive investors that afterwards.

XXXX. quarter We The unit in XXX unit end, the up renovation had at the at to XX% program complete. to Riverside we program Wellington At is expect left complete, units renovate to renovate and Riverside left Wellington, is while Riverside. second-half renovation now of and at units the ramp XXX Wellington XX%

mid annualized We expected onsite at return to NOI. through additional first-half continue of the with and of add development dollars an Wellington. two million these to renovation ground-up and invested to Trove, a the unit are incremental cost the of the the schedule renovation these that into units stabilized on are And XXXX. continue date construction progressing of program these at XXXX been finally, high we $X.X on teen XXX Combined, programs two have on and to to generate expect assets

Trove to our on Columbia maintain multiple X grown expect of [ph] the A with quarter XXX Units the of creates flows, We points end Since a to unit value-add project, opportunity units, meaningfully renovated over Since by site. which offers multifamily multifamily NOI. Arlington, strategy. our we Pike remain sub price assets, portfolio's to asset will eastern at to recycling offer net market stable at gap deliver overall limited a we Trove office of Wellington in XX%, grow class class consist third with consistent and to multifamily XXXX. this the and South to deliveries. a of and us count is the and the assets. $XXX the value offering phase quarter the The of healthy and strategy of propositions B XXXX, $XXX at contribution Overall, of to A value unites the same Multifamily $XXX have relevated offers committed increased approximately significantly rents. cash first sold began have that its multifamily million XXXX, $XXX we program, REIT net in purchase Washington million our in

assets Our of rental B that meet a targeted class in that criteria multifamily our solid long-term sub markets value-add are proactively with growth located and research prospects. has identified list

levered-to-neutral is off-market exposure. will determine acquisitions originate growing to our evaluate multifamily Our funding sources all the working and team future value-add prudent these path to opportunities most to

opportunity outlook REIT growth D.C. of long-term for for Real with Metro me Let the context conclude Estate. within our Washington

the strategic REIT portfolio of D.C. past is B asset approximately the dollars solid gap the submarkets to environment. is further B all for an challenging located on Estate market over structurally four be Class D.C. generate other our the that Office is rent Add in in growth years, offers year. Rent to Add correlated and in Starting our our versus from income path given to which with Multifamily capital D.C. to our to Class level X.X% are B of B growth within in portfolio B mid billion and D.C. rents hourly rent the Furthermore a to average on a with greatest tracking especially gap. weighted affordability have of Washington year-over-year Class teens earnings These A A average three portfolio portfolio B quarter public Multifamily. ratio three is growth region in first in nearly there Class a which More greater of rent our of high recycling key Class accelerating growth Value metro submarkets we appears Estate Metro the to Real within specifically, between segments or Metro over income than has optimal grow assets REIT Real the outperforming at renovation have a basis. exposure XXXX double this where return Following Overall, Multifamily, now which is them. average are the XX% and average burden units wide Virginia. that positioned fundamentals with gaps in Washington Value continues are XX%

on in rents months remain grown demand continue and second estimates declining Office to B supply have in creates new JLL past the JLL in Class to leases redevelopment by cash data. concessions segment GAAP XX with to by decline incremental continue for quarter. in B and positive by below Leasing and on D.C. vacancy where renewal five Class healthy as dropped The strong class is B constraints. office market Washington B projected according up driven conditions remains the X.X% has XXXX portfolio Office our abatement according D.C. to growth as to XX% over X.X% rent to where rent is vacancy deals to first to net according is JLL. rents trends year X% continue Class both rolled to B Class and seven lower be effective D.C.

For XX% XXXX leases a from XX seen or through tenant in our to at period. months Office XXXX X.X% April square have prior a D.C. in the feet rents Class compared increase XX,XXX in phased and a incentive, below drop free B XX% rent in drop March portfolio, cash we

approximately portfolio. according key value service Class office is held of only tenants of Downtown believe majority and provide Costar XX% vast amenitized in experience Finally space REIT office remains Class well B assets XX% being privately REIT advantages Washington A D.C. competitive with our to owned data. our the We for the and the

have below commodity attract of place the mid-$XX $XX rates assets volume leasing takes to X,XXX gross Class the important D.C. that Furthermore, range. pricing sweet the or of Washington to leases to in it greatest XX% dropped tenants, signed from at square price some large this While note A feet. $XX or pro-forma the in core is at their spot

association per office $XX spending a seen without a A building for space break rents a $XX tangible profit. for not more not for smaller especially if is commodity, and outlay an commodity any returns Class foot for X,XXX We square have for to significant foot an you're or office investment tenants

to and and than Rosslyn And segment by a well a fundamentals located of real third within across enjoyed driven private restoration predominantly Metro demand net first recovering Properties from estate As which the half are markets. to JLL. the Virginia sub office Virginia quarter. absorption, quarter mile These was Silver have nearly greater mile in Its a among tenants recipients able of rent the Rival since line Office JLL. feet Northern experienced Virginia in continue square Virginia biggest Metro and solid. Northern according located absorption B the of and according D.C. sub leasing all growth retail. biggest real the result, XXXX XXX,XXX largest registered further CBRE. positive sector of premium multifamily and lower remains other be occupancy office according to to Northern office XX% in was markets markets market Class is to new relative a attract properties Northern vacancy prerequisite gains estate to in for finally in

year first while approximately of REIT large quarter Virginia the the Virginia. over business the QX, the D.C. leaves and NOI Virginia Northern move has should multifamily a one JLL fiscal technology the CBRE Bill for growth soon, above base is portfolio square from billion and according by net is that within in six our growth for according contractors main only With nearly XX% money, defense sectors data. leases future. XXXX our summarize Spending Approximately Northern estate expect pro-forma our the XX,XXX structural areas of impact contractors budget For or award more XX% our overall the asset To real demand the in portfolio contracts fiscal positioned and of directly year $X.X trillion feet of half March which derived JLL. increased Omnibus to signed to XXXX left months services of all source Washington three XX to in classes. start exposed job to on positively XXXX which $XX well government will accounted of XX% portfolio Pro-forma follow overall in seeing to NOI boost of The

to financial fourth the Steve would the over operating discuss performance quarter. our and Now like I call to turn in to

Steve Riffee

or Thanks, was That's income estate impairment morning to per per the $X.XX quarter of good real to share and first or Paul, million higher Net amortization XXXX. million and diluted in reported everyone. controlling depreciation interest share which interest due than $X.XX attributable $X.X diluted with $X.X lower expense. the mainly

core Metro offsetting over than office estate higher due quarter lease XXX was core NOI rate On A basis points acquisitions higher approximately class prior multifamily we FFO more XXX a XXX per and half operating XXX share Overall prior by expectation including of a As by year-over-year and occupancy and and on first weather tenant same-store portfolio rental properties. Army, basis. share of outperformed our as increased XXXXG, results Virginia. $XXX,XXX points expenses basis termination monthly per to the asset higher and by of multifamily Wellington center first assets $X.XX by strong gains due per driven of new lower multifamily operating gains Navy and of assets across year-over-year XXXXM, and Silver sales Wilson approximately several the Riverside. year-over-year Multifamily all office the real B Same-store XXXX XXXX points XXXX average first and occupancy same-store three Northern basis of higher forecast. classes across rent Our the points as and growth expenses by operating to Notably, our occupancy driven for expenses. properties at Tower X.X% lower same-store grew XXXX basis, building quarter FFO growth and income expansions as the year-over-year compared the up contribution Watergate year-over-year Walker House well quarter including Pennsylvania average Line despite was points rental We well taxes. and XXX class $X.XX the to rates Arlington related in Braddock XXX growth basis NOI and X.X% Center? Boulevard Washington and year-over-year drove occupancy average unit basis operating for commencements as year-over-year in unit of fee delivered Connecticut NOI of our grew D.C.

Gregg in rental quarter. class XXX occupancy first we to former NOI year-over-year average finally, outperform B. due both of the A in decline declined leasing. the related X.X% the was On a related are normal retail the leasing Multifamily basis result quarter spaces retail due And Metro a declines As and points Lisa. of for growth to specialty D.C. lower regions HH mainly rates the same-store XXXX, of note first due compared sequential which holiday XXXX occupancy seasonality in currently specialty in of to the quarter fourth the to to

Moving first the X.X% square the footage we feet square on of only given the for of and year. of office XX% quarter, in remainder we leasing to expiring have office expiring our renewed quarter in rentable the

remains expirations particularly at our and XXXX on XXX. Arlington focus and leasing Our Tower XXXX Watergate lease

key square cash We of expect opportunities. as the be we XXX,XXX XXX% on volumes In signed increases GAAP footage rate quarter. an retained November XX.X% date X.X% feet in Of lumpy quarter the with retail retail, in and on of Kmart these the XXXX, square leasing we deliver square leased to retain remaining achieve of in is of rental and leasing feet our renewals square expirations expiration XXXX. lease XX, XX,XXX feet XX,XXX expiring approximately

right was significantly high that market Currently to believe, vacant opportunity. square space there a higher probability a for years were minimal a is represents tenants first there skewed the NOI is determinate. closely that top the than we tenant and of spreads space negative Kmart releasing of which nearly and such remains vacating of rental retail on our risk lease of represent numbers. quarter long-term due two XX,XX watch feet list, had been retail Kmart renewed the the a While Having that to and the of prior growth at new renew would exercising GAAP of of tenants the their in tenant new list entire lease the than revenues. post lease below dates. to X% leases expiration overall Currently, expiring less XXX% leasing monitors

Now We've from made two core which range turning to to changes our our are remains guidance, FFO guidance guidance, $X.XX. projected we $X.XX to to reaffirming assumption.

multifamily First, have second, expect Street $XX for from of a sale million and to of between X.X% XXXX revised percent; to the therefore we $XX.X now NOI quarter to year now up complete three two to range non-same-store approximately from a NOI same-store quarter million to M and planned June growth we in in September million. X.X% range our $XXX guidance in instead to this project

to moving to continued negotiate sheet sooner. our We forward the strengthen the buyer sale with balance

our expect asset We performance this another negative core non-same-store share out $X.XX to of with share the in mitigate first per of FFO we the the nearly approximately earlier and quarter core relative of penny FFO FFO to impact of three per months previous achieved selling from forecast. share $X.XX portfolio from the core per

quarterly termination expected do higher to we to While expect recovery together not of fees in and approximately NOI guidance, XXXX leased the quarter be provide our million expense quarter higher lower NOI XXXX. quarter $X same-store second than settlements, second of XXXX, we represented due but partly second

our We growth third the waited expect and in thus fourth overall and year growth to expect rebound full be our same-store to NOI quarters accordingly.

plan range balance X.X of XX. the our target sell annualized will on in M June Street the times debt-to-EBITDA net X and by June to of be we our within to sheet, project improve XXXX Moving

credit debt and seven at regards appropriate without the to been balance flexibility term on term loan like also revolving to We've the is years, million, maturity net us secured million, well We also million to guided day. X%, coverage of with million a sales able unsecured the from X.X debt expiration with retain ladder asset term debt $XXX loan we've our term prepayment XXXX legacy end same prepay The greater and fixed de-leveraging flexibility gross With our we've term year service expected having July $XXX manage are ratio debt interest the maturity year facility. year. $XXXX the further five-year as loan, provides to healthy planned to penalties assets five $XXX in rates continues points that would associated Our this an amending and expiring loan. seven-year unencumbered prior basis the if to times entire to the no our loans asset to with sales sheet to a over unsecured to with refinanced unsecured while risk. date. changing five to fit existing expanding interest $XXX its XX term Thereby re-price we've million rate loan with refinancing, there saving accelerate with

and ratio conclude core the with in or funds core for for core of a first me an FAD year approximately representing FAD. We of XX% Let $XX.X ratio XX% tail million distribution FAD available delivered targeting quarter full core tail are XXXX.

core million a our grown began XXXX. basis month $XX our when to from asset XXXX have XX problematic trailing recycling on approximately year-end FAD $XXX XX, at We million March to

in of One the biggest for reduction been annual incentives of the has an that past every years. four improvement drivers tenant year

Street has that long-term support Paul. aim of sale capital plan with and I M now requirements the And our shareholders. XXXX turn do to to will we future call to since we deliver had another over the back that, Our returns decision

Paul McDermott

fiscal in be this days we that metro reform and seen of year most regions asked in prospects HQX road whether pickup would March. on the from two end Bill XXXX largely have leasing Thank Bipartisan D.C. questions or the XXXX not frequently are others these the At in The on we December; time, the or the a tax comments speculative. Omnibus of the February we and at early Budget make you, and Spending Act of passage any Amazon activity following regarding HQX Steve. are winning

prior However, are sustainability dispersed the and tour Prior inhibits region over XXXX been for also the our is agencies the this resolution Budget that The occupancy brokerage in just fiscal authorize naturally and renewal our depend from especially portion economy office a resolution meaningful new and created activity Bipartisan in a operating by metro in significant this continuing has of Historically, the of growth. increase instead will a of for seeing portfolio at to cloud federal act in a expectations past of Omnibus budgets year a of which out Virginia continuing our trade multifamily two the a initiation speed region have XX significant prohibit Congress The previously passed upon the whose are activity outperformed Control the Act has the XX contracts community under definitive moneys significantly over and resolutions XXXX. new private months, quarter. a the the of sector Act budget are DC. weren't and improvement first has Budget uncertainty had Bill, of funded in levels North and we starts Washington impact that continuing having most which and year for of budget positive as controlled spending the lifting in uncertainty now had awarded Spending increased. on departments the increases as years next the

this segments amounts be metro remains growth fiscal awarded at providing the REIT in dynamics already around region and with For we unemployment estate. that expansion government positioned have cycle platform migration their can appropriated business. the serving to likely businesses and for a in private now play D.C. to for amounts they strategically been provide secular which in have net recovery resolved into way believe the with With a been to the the multifamily plans just will retail. as in the clarity region, authorized hiring XXXX XXXX determine within real D.C. X.X%, Washington continued hovering sector stage strongest demand supply is in support

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

Operator

you. Street [Operator Instructions] Reagan Our first go comes with Green from ahead. Jed Thank question Please Advisors.

Jed Reagan

just are budget Hey, translating kind pick you is mentioned good of activity in tangible optimism? it that just would tenant a or the mean morning the towards sense up seeing sort following -- this into passage, that you at is I guys. result of point Paul, more you of say

Tom Bakke

D.C, seen three picked as Jed, Yes. The in activity in Tom. answer Portfolio up. into expansions itself definitely is about that increase of it's short We've the B activity our manifested has XX% our well. has which

So existing I new activity think has both growth up. shown and

starting Virginia our with Arlington I think I as surprised that, new shortly is to as closing in penetrate after that's the well Tower, on were an optimism and just think the segment of got into basic acquisition government lot of the professional contracting much that a we both Northern how users and defense activity sector. with of we as indication and the well business

Jed Reagan

that's Paul, at the to co-working opening you talking in that comments your you're Okay, then And for helpful. mentioned space groups Watergate.

get Just that leasing and curious to done? if your then on guys have you the few you approach sort doing co-working trend and of in-house viewing tenants, your group how general like comments how are you consider of of peers with an co-working concept

Paul McDermott

ask if tech Jed, jump the mean occupancy will this in. you drivers I look real start to co-working and back, were region. quarter, mean of I at I Tom I'll last gains in and the

at We, suites, spec WeWork of think size, turn think like the will has stay. is just it Tom, flexible at I to [indiscernible]. I and looking in private for Facebook to we tenant and location look pay which You I various kind to is are over square here they duration on the co-working think sector the our I that. city. I People a clearly million willing want mean, are flexibility half concepts XXXX, at ninth opened downtown, which WeWork feet largest through their but

Tom Bakke

absorbed. become on more to going think and the able work, to no some for a also or to take we various that to is a and provide And that how been almost landlords, got that growth of right. enough flexible lose that with that think said, if to And to starting exactly doubt that tenants address it's is you for just there's going make to work time. interestingly can't demand we've large going it's That that's grow the in being going project you we of co-working decisions market. lot the a and that's heard be think co-working rapid over of something sort sense that careful demand time for to an I tenants think I I Yes, in in There's in are flexibility, to continue are some against of out think to I some the that get platforms, you've think consulting compete need so, like a you search recently on solution co-working. amenity and you

Jed Reagan

suites, I -- terms on the or mean signing three of two, you open shorter In deals spec flexible of years? shorter are those sign deals to looking

Tom Bakke

Yes, yes.

In there like multifamily pretty fact, is Jed, the and little can the suite bit to see a spec quickly, which move on we decide found hopefully more that and backfill we in and that the -- the one trending It's no parallels how a suite to and business was being us office and changes there of we works some in business benefits capital of investment. how have and year a that is dynamic. we spec is they something have occur programs we found deal to bigger two our what in do in permanent, that or three when date,

Jed Reagan

average show up that I new was last four I in lease believe. a under bit, little we quarter years, saw term your think numbers

leasing you that kind of of some reflective the talking about? is So, of are

Tom Bakke

to set for It's of renewal. a term a some expansions term then and little that bit we are some up terminus shorter longer was going go reflective to it

Jed Reagan

that last the cap your percentage role a just is of rent on have willing co-working? then hard topic, follow-up to with the maybe you're Okay. for And there

Paul McDermott

analyzing so -- of haven't probably done a guys work have some you've We on co-working. good you stats, read lot

and today building XX%. like Tower I if some of in think the to upwards product if could and look got gateway X% a platform be takes on X% you've that at you that think building, there a like flexible amount and it there right can these of feels size. are the lot that XX% demands, co-working, penetration studies maybe emerging up foot markets the asset We that in say building the talent the XXX,XXX -- Arlington that in of the that address a of given of

Tom Bakke

guys. Thanks, great. Okay,

Operator

you. Thank

Stifel. Guinee from with comes question ahead. next Our go John Please

John Guinee

morning. Good here. Guinee John Oh,

question, picture of of and If XX% didn't you me XX. have multifamily, if Tower to in Watergate instead big about multifamily in investing Arlington $XXX invested looks about office, and office your really that and be XX would gone about about to office from you multifamily. instead are XX% XX% being your it million, XXX like ratio Sort would XX

What So FFO, office of you been multifamily, about terms of first sort peer this. did of XX% group have changed would have and sure I'm into probably in invest in realize hit decision picture terms have probably your in And a yourself retail. XX% group of and would would but the to you $X.XX was peer sort office, in to up on invest I office big multiples? analysis guys been or you of multifamily ex different a $X.XX that XX% multiples. ton thereby XX% putting

Paul McDermott

was we it Well, read may portfolio. with our John. the tried the on primarily the sell off, and quality calls portfolio the certainly of two articulate and think in on other the elevate and off think we've that Sure, one first Face-to-Face had the NDRs simultaneously things and risk of I to I objectives one our and

when I Arlington look So a at or from Braddock, Watergate. tower out the trade through XXXX

think of sold the risks quality band I a elevated in off the and portfolio. we've

we just In accomplished we And us, was to I what we portfolio. improve in we've our terms for abandon office capital of were going never allocation to said said think that. we wanted

over XX%. In percentage we are taken increased think we've to contribution terms We've multi-family multifamily. I've going value-add count and of I pursue continue the the to our NOI doubled almost think unit I by since

us it's best to think right what for that. be grow execution the to is help going capital just us now I

be We we XXXX. to selling are we going as mentioned to selling are we continue recalibrate,

that selling the We in the John. office another XX do later and yes, that's I I snapshot the XX day believe my year scrutinize just are be office asset hat is to portfolio percentages, opportunities, a so XX we for other monetization will hang those continuing and wouldn't on our

John Guinee

are [indiscernible] curiosity more and where fully XXX up development XX,XXX if square Okay, than that the second And it unit ones the ground great. is other two be anything, foot then your Kmart, looking are question would what that you and expecting? per XXX you then you loaded parking questions cost what up it units, create your sort structure all opportunity to cost sort unit on at structure of return of costs to for all

Paul McDermott

and by Kmart $X.XX back. Kmart, we paying That that which believe in space way is Well, Frederick, have I love is Maryland, currently in a the $X. Sure. would the lovely to foot the square Kmart a that's market over

been them that stores, lease not the go we happen. to would we this one be short had at would out And they the are so it forecasted going have end And, year. term open. remains we -- to of sure their now, while is So, that hoping of that

they I asset up So in in below that it's market are units are just side XXX is I think door The the mid when all and the loaded rate think the for that a is for over going Wellington, a we and XXX for constructing we Trove, that paying them, are sixes. candidly. on low six think in in that stabilizing that I an

John Guinee

very you Thank much. Wonderful.

Paul McDermott

Thank John. you,

Operator

Baird. next [Operator Rodgers with question Please go ahead. Instructions] Dave W. from Our Robert comes

Dave Rodgers

Yes, good on couple of talked start you XXX,XXX morning. about Maybe questions feet for Arlington off square to Paul, office, a demand of Tower.

think maybe you negotiations building? Is you. fit that Co-working just Little that that one it's Spec not year for office tenants much tenant? And term go next the that. Suite large it available that earlier? XX,XXX had on -- into with deeper I can not sorry you will color mentioned Watergate, sheets working demand? are there then, besides with you at be talk the space, Avenue that in we in feet any square more is about Why or

Tom Bakke

a I'll stab it. Dave, it's Tom. at take

that market as address. space said trend the if mentioned to just miss a you in we demand need I we as this we it. -- So, don't look that are out And have earlier, demand to going really flex you

and Rosslyn that outperform seen was a so, evolve it's out demand think And well. we that [indiscernible] really story. drive only that long what Tower start term a to which on Rosslyn we have proved I presence the us believe into is just going XXXX to the market in Arlington confidence success our be space I saw And is I premiums to we it it as because that in gave market going think expand -- the XXxX us not we -- option but side, help as think is rents. having at flex to And XXXX or we

or close to activity? So, be are going tenants got and breaking in LOI. small are have of they fact of But to do we We XXXk are whatever we that midsized those. up some moving have into the

if the value earlier And with there 'XX, obligation. it we the think of Watergate? to ways to existing small go to lease to have trick the sign we option make that have segment. lease to I we any space What are that midsize Was going being project. on we the the a as Yes, to start is is ensure can what works a add know a ends deal obligation in these got So, that flexible well Watergate, other to address current a end the majority win-win is sure still we've than of to get was the the arrangement question? demand the to the market in up

be the structure so, careful deals but right got those to got we've that we some way. And we've

any still not on those. at of So, we're lease quite

Dave Rodgers

last the about what Then return The the maybe talk unit is program? from impact on Great. renovation you side, maybe the residential strong. can sounds

the same-store your is revenue NOI of on sort portfolio? impact what in residential or that So, having growth

Steve Riffee

So, Dave, this Steve. is

but our we should when at incremental about remaining look be or of we an riverside finished $X.X renovation when waterside million that or already run incremental of at rate NOI. in the what's embedded, So,

Dave Rodgers

Wellington?

Steve Riffee

Yes, sorry. am I and Wellington Riverside…

Dave Rodgers

or… you half that through are way you And that said program about

Steve Riffee

Yes gave… we

Drew Hammond

Roughly half.

Steve Riffee

half. roughly Yes,

under. is I little One think threw out different is we a numbers. One XX%. at

Dave Rodgers

Okay, Thank great. you.

Operator

Please Green ahead. Street Our next question comes from Jed go Advisors. Reagan with

Jed Reagan

right least of or maybe at that in have better the spoken I months bit any a have on bit you just actually Paul a may indicated pricing rates market. be to think you last might they Can down that general three market the you in the in six for recently up D.C. things valuation the trends seen maybe cap sound in quality does guys. perspective somebody kind who a you side of stuff it call to perhaps and Hey in area?

Paul McDermott

Sure, Jed.

let's -- Let's equity a is There capital either probably start side involved on in or the of is since in with investment the capital. debt there lot that on side. no storage the sales

and they us have But, with that talk that's owners to both funds we are cut companies the a out think I and the been the debt But can and debt to on the And met. did Quite last would said the frankly, this think I funds it. are to even extremely do and have for time and And clearly to light call, get low, alluded job we urban now continuing some a this to debt suburban think look be rates trying carry capital I through I thought frankly, going risk sell. yeoman's do we we deal us at help we compete. did we product. off aggressive downturn.

concessions left. So we to to can when we are burn where some these -- off through we of think going plough and we

side, continues D.C. into to equity just that private the is On flow

foreign because mean I state foot, assuming see terms paying a like in is high seen fund, a big funds, pension when worth net can't capital I of on have somebody play value air. We rarified creation pretty $XXXX push that's defensive

Israeli seen and Middle Munich for capital they come New firm We [indiscernible] active, I borough and Eastern a the believe cap in. have law just have XXX through credit at traded XXXX be capital a seen recapped Re York JV MetLife, Eastbank. that's a

I Deerwood seven have foot, you that capital though or the six has So buyers. a been extremely wouldn't on say aggressive. like $XXXX

that's development that's no road. going. wants it's and technology. that markets they And They your have equity where like a They see specific You line they silver chasing toll the to us, allocation, are really asset. like asset us that come probably talked one the to the

color, but lot some One new of service has but the is And big just of we've but getting there. probably upper the should that being things in is that been a that downtown XXs seen downtown around every in quarter isn't vacancy to numbers full X%. pretty tickets mid rents product

partial about to questions there have about there a have were into but that shopped like deliver there definitely of our -- for that. around X our know like that's being an in I I I it. I front We Arlington acquisition up And nosing know bases. probably there. interest we like is people product going so, that's of Tower, going seen

to So, of it. here say would cap front the decline certainly X have say rates ones haven't traded. space X basis exception multifamily I been trying point press definitely the last probably rates Jed, expansion. have cap the I to And maybe really probably we we with over would multifamily is But, like that our most pre-TOPA. has cap months. add But rate X multifamily probably when in a value where XX seen I the only bases someone extraordinary seen are sell downtown is a The down, in those

Jed Reagan

Thanks great. very Okay, much.

Paul McDermott

Jed. Sure,

Operator

back to final like would Mr. turn I call over for remark. Now to McDermott

Paul McDermott

on NAREIT. the to I road forward you you. and Thank we like and as today spending back to at everyone. time you next everyone of thank would look many your Again, time out for get with Thank month

Elme Communities (ELME) 26 Apr 182018 Q1 Earnings call transcript