CXP - Earnings call transcript Q2 2018 | Columbia Property Trust, Inc.

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Operator

Good day, and welcome to the Columbia Property Trust Second Quarter 2018 Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Matt Stover. Please go ahead.

Matt Stover

afternoon, good and you, everyone. Thank second Welcome investor Columbia Trust XXXX call. to the conference Property quarter

On me Vice call our Executive Financial the with and senior Officer; and Mills, Officer; Jim Chief management President team. Fleming, members Executive other President Chief today and of are Nelson

Our released the website our and in file with this our which X-K. supplemental package, of results be Relations found section on were SEC Form can on afternoon quarterly the Investor on

afternoon. our filed with XX-Q SEC this also We the

A be copy the on and also a materially we'll factors to today's Risk other Form our actual expected results website results those number from Factors time cause XXXX an will call remarks XX-K. future Additionally, today's discussed are prepared on operating this and and of section providing statements events could in differ forward-looking of replay Statements including by shortly that anticipated, call those involve our be the made regarding tomorrow. after of available uncertainties. risks audio

statements this expectations, as this us information call. made on to and no available information beliefs as at well discussed Forward-looking on Columbia to assumptions update based conference obligation any undertakes time. current are

also comparable data. be we'll non-GAAP call, this Nelson turn to measures Mills. that, Reconciliations found to the certain During I'll measures. GAAP in financial With our discuss financial can financial supplemental call over

Nelson Mills

to strong everyone the and capitalize you efforts Trust we're It's future solid today. leasing Gateway shareholder estate position Approximately, on the a us focused and results. now one yield The an South Francisco. coastal within here assets of joining SoMa transformation Matt, additional and attractive ahead success assembled in our the three of real the sector. on of cities, as Property we've financial San value. Francisco last D.C. located for of XX% at to Manhattan over of to portfolios Midtown all, We're opportunities New specifically such several time Washington, you, Columbia financial office thank and our and districts high City, in create years Thank continue in the Best and barrier San exciting the markets as York the are positioned entire in best is submarkets in portfolio

for rates meeting continues have targeted boutique renovated with approach neighborhoods with and pace to market's what demand services. the leasing floor demand couple our flexible, well across quarterly a our newly a these exactly tenant and our offer efficient want. As portfolio portfolio. competitiveness This The tenants strong space, exciting at we creative and That attractive built attendant position a space. attractive amenities evident grow, translated performance. terms to by to for they competitive We've has in located is space is of

full our will again year We The for earlier. year rate has our Jim a up from lease generated are now we of raising portfolio FFO share moment, a year sharply per XX% $X.XX share, reached a ago. $X.XX up normalized XX%, As in guidance. from

growth NOI the X.X% in Our to same-store from accelerated first up quarter. XX.X%,

headquarters Brands' expires square XXX,XXX the commitment, the in leased second Inspire Glenlake, including of at which Rubbermaid's Newell also We feet XXXX. replacing quarter, majority in

coming great reporting very our addressing and have proactively the in long-term on quarters. expirations next expirations highly we're front couple We're focused portfolio. forward to We of look years, in but few making across on the success progress the that

a a primarily with proactive resulted rate single that When XX-year by is to opportunities Street XXst strengthen Medical XXX in during to This campaign occupancy. sale gross the Xs we We Manhattan. ahead. a learned not that in an downtime in leasing XXXX, which This of enabled East exit sales capacity reshape was of with lease our the building cap with price the NYU million. occupied further tenant. center capture achieve sale The in proceeds this us continue building from the no Langone Midtown innovative our acquired quarter renew, full we to to almost $XXX.X tenant low in a portfolio would launched

growth balance and significant we XX%. commence. leverage in near-term our some of feet expirations scheduled NOI a leasing Columbia finished next. strong remains XXX,XXX year gap feet this leased way square we do further signed the have growth to very driving below even hallmark The of and leases our economic and strong the percentage Our of with with occupancy in current opportunities earnings. XXX,XXX vacancy between expire to sheet little have with that, will narrow top quarter and starting square We lease of and On a of number more

substantial achieve of for that to space. majority vast increases rent expect We the

In to our XXX is San ways indicated estimate create Street earlier, stop in of embedded our just rents never we another. in on current XX% in purchased I we are But and to a tenants. appeal iconic it. Financial This will that is XXX this range Street tower same-store office evident seeking in industry-leading average and example. today is Enhancing value. of in-place XXXX market be rates. California broad And one year. revitalized We Manhattan East District FFO growth XXst Francisco's below fact, this as net growth rental NOI quickly

roll term XX% with building tenants, good remaining all We the digit at to average building of with The small- of leased have rent over six high-quality triple the an years. is to outs. released mid-sized credit majority now

South XXX example to in Midtown Park leasing A drive building South is Another success. repositioned Manhattan's we've Avenue district.

floors in the first acquired floor available. XX This lease quarter, we signed of the the full expirations in another we back three years. would just quarter knew leaving through XX get lease, building we XXXX, we one When

those We XX leased a XX rent. in floors, of have substantial rolls now up

momentum sheet our track and Looking will to our enable success. ahead, record continue and balance us

want their delivering hard these cash We and thank are acquisition to proactive commitment, to our to I All creativity identifying on team continuing compelling demand, in capturing flows. and for leasing. results. focused and enhancing toward work properties attract targets, and our innovative geared grow ongoing

Dave member and terrific a our of have improving very that it We the to even committed senior To to further. team Cheikin. newest welcome end, leadership, I'm pleased we're

As President Estate Initiatives, to regions years most leadership bring for excited We're real and million Properties, Dave as he $XX have out to properties Senior alongside teams further in also of and of the New Dave where our portfolio. past board. for nationwide. will will Real with Vice Boston estate. in office the Brookfield be Washington, He'll head spent York our on York XX oversaw our office leadership provide portfolio D.C. operational direct Boston based recently he our of Dave proven provide operation the oversight York, company's square-foot and our New very commercial innovation Strategic those the and New markets. will of

we're to call the create excited hard in results markets. over establish accomplished. tell, and as value can The you our ahead. now about we've with to Columbia generating to we're the and turn many what best As keep Jim. working We'll And opportunities operator the I'll that,

James Fleming

next leaders had position reflect of during reloaded portfolio further Thank our leased growth lease as perspective. rollover our excellent balance up percentage, we've today from the factors strong in in with the years. two another guidance ahead. portfolio, teams local we're measures and raising us sheet. and of and ranges NOI strength FFO. the quarter, Nelson our you, few for limited These XX% our the the foundation our We're growth our and the basis sector capabilities quarter one Nelson. We another of same-store leasing mentioned, These provide now office for And a as points our year-end an our across growth XX

our economic percentage. We this lease have a Currently, between from occupancy gap percentage shrinking earlier. and quarter meaningful XX a point an is points X-percentage but at still down our spread,

and should is portfolio annual have is revenue of square our another lifting drive our most desirable another economic XX% today's to has and of been heavy for to forecast But $XX At over lease, of this which of XX% accomplished. with available year-end XXX,XXX the current attractive in leased, XX%, Our feet occupancy buildings. level. space much we most million

which year and leases more leasing in XXXX, capitalize half for also opportunity square We the second expiring teams of ups. have roll lease of feet XXX,XXX creates on this to our

proceeds improve the East with And pay to of prepay billion XXX has notice our recently sheet net quarter of Glenlake one continued of debt our mortgage is entire now We less the than which in sale gained the balance XX% Street gross debt. will unencumbered loan down our of portfolio. October, ended with $X to mortgage than Our We to assets. used only more in from XXst with properties. most us leave

we've Our year to XXXX. be down the debt-to-EBITDA X.Xx. said Xx expect previously ratio And full for to is as around it we

could stock to we million million share guidance range also we're our available XX% on again second normalized opportunities XX% of and our now that over can position. growth recent opportunistic will rising XXX Now our reflects FFO year-to-date, with share the further hard NOI raising raising our under in as current continue for growth we stock of on expect same-store years, buyers outlook share assets so to see new good Based range repurchased level more. through a year, repurchases, lot shares. outlook over now XX%. to $X.XX. And work given After a AFFO very quarter's our now We're to growth of the of And repurchase reloaded With our full attractive a we've and even balance sheet, quarter year-end XXXX XX% fall we've past XX% count very of in remain the our levels. to to a robust several for This of we year percentage execution good are still this of the to we build million range balance the XX%. of a strong $XXX That seek a rest we success. results our to lease $XX invest strong we reducing $X.XX authorization. sheet,

of forward to with to please the little great We take our cash value your today. leasing that, sheet near-term have be open and growth a questions. believe at updating earnings will We happy provides We in also portfolio. and and the you high-quality you balance flows Nelson look solid risk, progress again could on very stock end Operator, And a our I if and strong October. lines.

Operator

[Operator Instructions]. Sheila And McGrath of question first Evercore. our from comes

Sheila McGrath

Is higher. year-end original that's better your driving going Manhattan guidance, revision that on Just properties a what's than from expectations? on question and NOI doing up or in same-store that up lease occupancy your the

James Fleming

-- of this -- in really had a we sort with is had I itself. on the is positive quarter had leasing success -- in terms second build we've The revenues. we've And quarter -- thanks, Sheila, guess Jim. the of

add, as XX%. XX%. buy a that could to a we XX% up below percentage, it have lease the over we'll would something think of some value terms that could bit I that's drop it little a range provide because gotten although know that opportunity. we just drop of to In think We more bit you And don't

just we've number. it over And ahead we time thought was up at moved that mid-year raise time. to and So go

slower X% and terms between to a the In NOI, year. X% it up, in quarter. in of started were We're XX% little this close same-store second again, first We quarter. bit the

for We about we be know in on lease our high better. to the year the based little even at what expect a had been, half of what previous range maybe commencements the end second

go we was to range so and And right ahead now. it that raise appropriate thought

trending direction. just are things So positive a in

Sheila McGrath

contemplating the Nelson, Atlanta us an the plans -- And some on could redevelopment? point? there then update give Okay, for assets, great. sales your was wondering an both on Madison Avenue you're thoughts I your if update if And, on you at

Nelson Mills

Sheila. Thanks, Sure.

Glenlake. -- So twin campus. Glenlake Greenlake one a is properties. for It's if we One the two leased, is building recall fully Three multitenant. Atlanta the and properties, you have One properties,

remain Good shape. great lease term. average Some remaining -- good

a was XXX% in that building XXXX. is Newell to We Rubbermaid. other The expiration -- leased

we of And XX% However, the to lease active prospects have have of XX%, about rest we released it. that property.

that Glenlake dispose property confident is one the at some a could So great shape. price for we We're in point. off great

some it AT&T Right the we did, going don't we the of we to leased we're already that happen the took looking that AT&T couple NoMad is -- South. of of property. this took right other building properties. have this we Madison, property price which path, they well we're leaving. at attractive either to And an a are at turn and able XXX-year certainly considering for of it If attract. be what the in Midtown about to could is to sell. we work building price, If on is the that -- early early the are old spring. we over expect to is in great that actively And an are we full years property for and that XXX got not And a also single that that consider -- exploring demand user, AT&T. could got out out, down both the If we should appears market come remaining are of property, area explore done that near in we're -- go we that And if there we we a a And on of those property outcome. we these be But we'd back a empty might end that release multitenant considering And one, There marketing path. possession -- It planned now, out options. The basis. see on doesn't year. But then releasing. some rehab area, so it'd year. nice plenty proven to leasing X.X it there, we've But Lindbergh tenant options -- other demolition. feel demand should

we'll month so next we'll the or think decide, know. certainly determination take, let you make path we'll which and in I a we'll exactly

Operator

next Malhotra comes question of from Our Vikram Stanley. Morgan

Vikram Malhotra

a for for the to maybe are some capital just the conversations certain where search you've -- add talked Maybe projects. in Can development that value update NAREIT turning in potential types and prior -- at you you as just I deployment. opportunities? capital about in providing also but us of path guess the

Nelson Mills

Vikram. Yes,

fundamentals is for there markets. tight market our three works as we doing. win a much and how also the pursuing it our also softer a in in And market it's all in fundamentals properties challenging for are that that a that Very competitive well project very but given is is team as markets, it's D.C., great. of acquisitions. are So you competitive actively it's continues Francisco -- opportunities to always. of San terms a difficult can But particularly imagine price demand at soft there, environment to us. be the

the We're think looking Fundamentals that there softer opportunities we the a could of are opportunities in sense of capital Again, Manhattan. in be probably as -- But quite couple these very some most it's I parts in competitive perhaps bit last Manhattan opportunity some market. think several there. and front years. on is the not And we either. active. at

primarily We core-plus on are to focus value to add. going

into And As opportunities. we very we've have feel It's stable we explained, a well-leased to portfolio. very with very some growth we blend little need that roll.

a those. development are So couple there we determined of in from In those It's those -- interesting we exploring certainly There couple to partner to potential core-plus on also are a city. you focused pursue a cases as anything we place would developer. of the alluded, with capable add. if we're but value be

prudent be couple we're So opportunities patient. we'll a we're we do of be and disciplined coming up able -- and the to think options. have to always, as we We're pick think quarters. to going in some going But

Vikram Malhotra

one Okay. maybe And for then Jim.

aggressive, Just on some the maybe maybe 'XX. want I'm similar given the of the success my to early in -- of get pace be into to at Is and growth the could price sense of getting an to early of too leasing -- like of Seems numbers. very pace sort sense just same-store -- a that NOI kind the potentially part? 'XX. uptick

James Fleming

if of even even excluded NYU That's as maybe I that question, same-store that XX% that up guidance less XXX. from NYU NOI question. to it'll would've do expected to growth to But that -- course, can. as a a it building are so but But of sell the higher we we year. -- did it. slightly this I expect to year this range not level. I'm at lease somewhere year. NOI, than But But our at And XX% next we the We the included sell down early the going try beginning got we be because Vikram. an it. answer pin year, precisely we'd It's to I'll good we've had best

could at low least are at next high looking single-digits double-digits year. it this like to So be numbers point. That's the what

So leading That's core growth in our good, year. again, lot growth and markets. this really very of solid very next a year

Vikram Malhotra

one a just some And on clarification would to Great. Okay. XXXX Potentially you comment assets, selling made. the Atlanta you of need those?

James Fleming

been our in possible able look at reposition very that fortunate the the possible, years we basis it's Vikram, been -- GAAP assets. if we've We've see of and with not is one off. that. those our too tax base to far portfolio this without you to you can might do having It's XX-K, through

could for be a So be big do might some I one it for us gains we a think issue there but of those there and that's don't would it properties. possibility.

Operator

comes from John Markets. Capital Our next question Kim BMO of

John Kim

on East XXst, an like XXX At had looks the you this quarter. asset impairment

Your the XX-Q net compare quoted I'm the just that $XXX price of quoted in that million. to million to trying $XXX sales a was press?

James Fleming

Yes. along of then sale you got NYU. lease the to over when point, was the capital And we capital the we that $XX XXXX. when fourth booked quarter to we've Thanks, we There John. way. may of the And some There that recall. signed in had this been with project million dispersing we capital committed was

But You or haven't had yet funded. the million it was that about $XX there financials seen not was $XX million because already booked. been

may capital were other back transfer But with in if There that know number you don't any be I on piece comment some things credited be of factored. transaction haven't that's tax other it, you costs. the to connection the to want one and had that the sale. a Nelson. So and

that but to you have then subtract capital. said have XXXs unfunded We net, low

Nelson Mills

That's right.

John Kim

Okay.

saying unfunded the difference is million numbers. And between commitments million two you're $XX a taxes? capital roughly the $XX is rest there's So and

Nelson Mills

Transfer cost. taxes,

John Kim

Okay.

Nelson Mills

Yes.

John Kim

quarters. Your contributed specifically as cash the know been were assets very quarter. positive slightly as rent spreads I recent to spread? it's in far negative this What leasing

James Fleming

we the chunk been parent be about, would thought did. similar replace Exactly. lease Arby's this company And was And signed a We the That a think at thought rent, quarter big for it's would Newell while. John, was we with of we Brands, Arby's biggest I telegraphing a Inspire and we've lease, the Glenlake. it. we

on think, that maybe one that or so a quarter. was was, cash this a pretty was and and one It negative flat I So driver single-digits GAAP was the biggest basis. X% -- positive on that basis,

again, -- about think across we're expecting. it quarter. are was portfolio the property But from that we're varies XX% that's -- same-store excuse -- had But on We still core below do a So average the flat course, of pretty market net rents. that's to not flat with market, spreads why what this that's leasing property. NOI we in-place me, about

John Kim

year a Nelson, Okay. quarters the more haven't ago this still it you were be And happen? -- markets. in I than now, that off to that bought reasons pricing discussing ago is you in much of one some going recently? think think potentially might cooling you your of few is Do

Nelson Mills

John. right, we no for in as pricing. D.C., Certainly office in some ever that's San strong cooling market think in I sight. would Francisco, expect is The we see cooling product.

absorbed. continues lot on so to of there's based up be just the well pretty far. -- prices there haven't a held market have We but It to a challenging supply fundamental's, be

I I moved been focused, It pick we submarkets. the some see some some few case. purchaser, we're have or [indiscernible] know to movement that over we've thinking there. pricing. Manhattan, in in of opportunities don't to softening, the has at certain it very some some Midtown not slightly lower think think translates favor there's be next spreads pricing. quarters how there exactly so. but be But evidence in Certainly, South continues in could some could to hoping, things But we I the up the we're better last year are been strong, seen that

markets competitive sure. always So for

John Kim

to from be feed you'll Cheikin anything strategic experience to initiatives, run David relationships the there specifically at Brookfield? company of hiring and is focusing recent his for on The

Nelson Mills

in very markets. capable, the Dave Well, have a reputation He York excited experienced, certainly, Boston we're great onboard. very and is has and New to particularly

things be our Hoover all with really operations to at direct and various experience He that, But lot level did got get future lot our and combined the some he office Kevin do beyond creative from and those obviously a really creative Dave portfolio. He's services brings running national and proactive We're and an to around innovative So could Downey, expirations That's an there, the he'll tenant some things everything aspects. of from to of oversight of and Kevin of management and point of him opportunities leasing. has sort calling standpoint. impact Dave there, of at leasing to ideas interesting properties Downey. He for Brookfield. of lot really on future great have a we and some ways a there. other

we're excited. been excited So jumped already very early to very us He's a an for with having impact, He's so have in, weeks. onboard. him couple of

John Kim

to Okay. typical guys this that be Or taxes? transfer you did upon And XXst. for seller that? just the Is you paying how for or did up split East agree one paying follow XXX on it

James Fleming

is state most It in from is, in New to most York jurisdictions. some varies that jurisdictions. case -- the is but John, state, it and in It

Operator

follow from a Evercore. up question is Sheila McGrath of next Our

Sheila McGrath

On income quarter? in fees just or more income, quick other of questions. Couple lease other what were termination there this was

James Fleming

space were are there particular, that XXX have -- about for finding retail better time. And space. lease from some lease excited there terminated. had were time termination We Park fees quarter. Avenue user We at to we do in one But termination -- those South. lease this some Sheila, was we had fees. a that We

Sheila McGrath

a little. down then asset, NOI And Boston great. the Okay, the went

going long-term for was that one the just Boston? in what Just asset on plans asset And with are what there?

James Fleming

floors We buttoned else I'd at the is up. to leasing don't the we've will some gotten on that. back I tell have everything look leases you everything comment done. Sheila, did gotten I X Yes, can't done top there. so know. NOI. but I We've

really why for I right top the out pulled to But working some is activity. what at bit. at -- the related -- NOI it I figuring are getting expenses, look operating floors on have look is to and a user little back probably We the to have hard

Nelson Mills

good Sheila a recently more lease. a for got future Great as plans, about We've do shape. in talking floors But couple while. some And terms we've been have been done some that fundamentals being the but renovations there. Jim of there. floors we Bay to Beautiful that of short done patient I of been said, through. in we've a get those property. We holding out absorbed. think There's in Back in And traffic And get softer is area, lot order. for a good rate we'll

far it's in As Boston. asset as -- the only

We It's market. right in a terrific Boston focused are now. not

forever. do But We out interest that in haven't to ruled property time. it unsolicited from get time some we

the consider no at do it so but this selling plans there price, So time. are we'd right at to

Sheila McGrath

was the one Okay. Park And floor on end How then only could lease on give just retail? one I'm left. the tenant there is, just have your Avenue one And up forma? wondering pro you if was did And last what was staples? that XXX the is comparing last last now are South. floor? that plans a for success story. the you to That at rents good term the question activity us, And the how

Nelson Mills

Okay.

on to high-XXs $XX-ish, have we our we rents, Roughly, mid-XXs exceeded the lower for few and as -- all the high of $XX top. floors top first we our forma. acquisition floors gotten know, on And you on for low-XXs on as $XXX as pro floors through XXs So did had the the expectations the high mid-floors. underwritten below to the we've that,

have -- we've better line been And and as with TIs have favorable expectations. So in rent sort rents done well. that's sure. With on of true. been for the free concessions

that's all So well. going

We money more have bit the on little originally anticipated. spent a property than

tracking bit and been that. little For little And, see those better some we're overall, pro we're I a we doing than on forma. of windows. you'll work, do our recently, more than precise guess, of But replacing on spent terms cost, some you in budgeted return there to who've original a

So it's been a hit.

space, it's it been of And a think right, we pretty then a moved terms terms We prospect will enhance Staples solid good You're property. retail now in enhance great success. And out. has and the will have do there. rates, good the

of So hope next come that in to we couple months. more the on

Operator

This to question-and-answer for turn conference Mills back the concludes would our session. closing over I like any Nelson remarks. to

Nelson Mills

your questions. all time and your to in We you Thank we look And particular your participation again today, all you Thank so seeing you. soon. much. forward appreciate

Operator

The conference has now concluded. presentation. attending Thank you today's for

You may disconnect. now

Columbia Property Trust (CXP) 26 Jul 182018 Q2 Earnings call transcript