CXP - Earnings call transcript Q2 2019 | Columbia Property Trust, Inc.

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Operator

Good afternoon, and welcome to the Columbia Property Trust Second Quarter 2019 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Matt Stover, Director of Investor Relations. Please go ahead, sir.

Matt Stover

welcome conference second call. and Property XXXX everyone, investor Trust afternoon, to quarter the Columbia Good

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

filed supplemental Form file Investor this XX-Q results of Relations audio our Our quarterly our released X-K. with be this can website an tomorrow. available afternoon this which were on the call by section on SEC found We our and SEC and the in package, on be with time will the this afternoon, of replay

A on are in could XXXX cause number other Statements call materially Form operating expected actual future results today’s to forward-looking results those discussed involve events that of those differ anticipated, including and section our XX-K. uncertainties. of made statements from the factors regarding and Factors Risk risks

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

can During financial found will this certain measures discuss financial in Reconciliations call, to financial GAAP our also measures. supplemental data. comparable non-GAAP we be

turn With to the that, pleasure it’s Nelson my to over call Mills.

Nelson Mills

to everyone Thank we value. quarter shareholder second continues to on you, made year call. enhance the and significant welcome, Matt, the initiatives during be our for and XXXX to a Columbia very progress strong

barrier coastal As located position some exciting in have a neighborhoods most many portfolios in to of markets. you of of know, office entry sector we high the one best the the within

properties by dynamic roster quality productivity creativity. that work seeking of testament the are companies our that offer as location, impressive and environment properties structural their home that most a in portfolio to tenants The is choosing strategic amenities our demand and modern are Our locations. fosters of and a features

in opportunities in have to detail see and a the be result, some will the but we as while we’re do already results growth the And new sector, projects future. As producing growing continue Jim designed we a we well metrics embedded new our financial few in to also office leasing of results solid minutes. existing ahead. a into growth only properties, also value-add have produce pipeline our Not of more strongest

reflects a This key result is focus ingredients. enviable value and position our shareholder of creation two relentless on

First, there’s and our investment strategy. focus disciplined

repositioning produce growth. We tenants have unique that location top a rent selection asset to market-leading approach and to attract and continues

who to Second, we also team continue have generate motivated results. a and highly talented

to manage XXX at the leased. for new XXX% difficult lease quarter’s While a our leasing additional the second we Huntington Boston, quarter to the quarter. to by brought healthy in leasing lease Avenue on that improve it’s rate, an building headlined which did top Francisco also two XX,XXX for XX% feet last contribute to San square lease during floors spread

there continues to growth assertive opportunities their in team occupancy generating Our high and properties. in be creative revenue

space. during In for intent this very Columbia’s Market conference a have surpassed made progress the XX% lease feet XX,XXX at and with letters We’ve differentiated creating shareholders a entries, quarter. during leases renovated we strategic the private another new property attractive to Washington, conditions. event last square example most substantial and stunning at recently, rooftop a there Square deck Square great feet. continue for with leased iconic and in market two years have of center is square to Market but rate varying approach value several high-end including D.C., of XXX,XXX the the over new to We make enhancements property small

Fortune as Square of Market the more on XXX. for its XX are its than solidified Hill, a recent has hub position tenants Capitol half now in to critical lobbyist Net proximity its rents With and foot should square square drivers again growth rents. per foot year of $XX same-store property next in and key one versus NOI approaching This this of be our are expiring $XX the year. is per leases

significant And ways demonstrate, value example returns our we’re to and generate this financial in incremental portfolio. unlock constantly another investments seeking new can within our portfolio

they including Sometimes West these projects expansions lobby Street existing in Circle ahead Palo executed modest buildings. of But at Alto, University we fourth such Manhattan. addition and of evaluating possible in leasing other are more potential also role upgrade some at a ambitious small as as XXX building a of XXth we’re East projects, the

imminent While hard as working to there’s them and uncover advance attractive front, are on teams nothing appropriate. to our any that opportunities

couple a also projects. undertaking development new previously, announced As of very attractive we’re

keen adjacent interest XXX New companies. tenants. dynamic hubs development prospective corner strong and This Union attractive the Estate underway from City other design building’s and the XXth at on one located and property Street Square and Broadway well of Park now to is Our of drawing Partners efficient experiencing is most tech at interest is from Real active York Broadway location Normandy with well the The transportation city. as its live-work-play in unique as we’re

office which Street and to second York City attractive to and New opportunity XXX highly presents in development underserved create is project capture purchase. rates. were in This very a desirable contract Our great a building under rental highly appealing Tribeca, space Church is neighborhood also boutique and

a well this In addition including underway a investment significant and Avenue, deck. space, build in is WeWork’s they’re XXX Madison roof of the out making

we fourth could as there’s collect While of cash a building parts WeWork won’t the rents of begin this the and/or customers as occupying chance year. mid-XXXX, early quarter its that until

like now of provide focused quickly I’d an update each on to our three markets.

New York. with Let’s start

in is Yards especially This is in development way. city’s New issues new supply downtown Midtown. New substantial the Upper some creating Hudson York overall in adding to supply in

South to very creative other that which new not our compete our properties space to unique properties, more directly demand and supply does remains the with Midtown and However, tech appeal tenants seeking strong. continue have media,

the can fully though conditions favorable in rents market, by and are now we as with These landlord four leased almost on high-quality buildings. the market. we’re San supply. the over at growing and in strong the available invested to strong we’re at/or XXX years to contributions and Valley each growing Silicon well properties close are tight making And Street, capitalizing our XXX% Francisco undeniably right we’ve XXX space our is of markets are California, today, the to and much below as leased XXX out Circle NOI. Market Main University demand Even at most get

is on with Turning is a favorable but eventually to performance. now Washington, still what market, bundling Square, a will approach D.C. as a Market the to tailored have Amazon building key driving HQX impact sluggish for

areas, spec years, well some desirable as recognize building Nationals. transformed added X,XXX leased this At the another on right again neighborhood we to of as its approach. that this suites, in announced move the Atlanta. Glenlake with we built the sale appeal M rate In possible and a XX.X% what’s in couple industry even April, quarter D.C. millennial-friendly is Three into of the like XX Parkway shared we increasingly a & proving Tenants strategic a now One Over completed we’ve past in the market Washington raised Street, common building. challenging of

expect foot net property. successful of the quarterly the our $XXX highest per ever Central at we the our square sales remaining in of repositioning following million As nearly on district and one Atlanta’s Perimeter proceeds of generated And call, This achieved last prices the mentioned our to manner and proceeds we markets. present continues Center through Atlanta opportunity disciplined another sale property to diligence a redeploy Columbia quarter. the third the process move in our due target now close Lindbergh buyer will in with will into our

talented positioning which the is strong second the new creation direct quarter summary, ongoing embedded strategic well given as What team. most the and value years of portfolio, of find come a growth underway. additional In our exciting we’ve are still work as result positioned well has projects our to we uniquely that over the our accomplished our is hard

seeking rest exceptionally While and we value. enhance out can prospects you Columbia positioned were new create that our to to shareholder assured further stop opportunities today, additional won’t

With going for our turn the year. in that, over and to share more results detail call updated I’m our to Jim outlook the to discuss

Jim Fleming

Thank for and you, thank all, today. joining us you, Nelson,

was at growth expect year NOI second X% normalized XX%. of We’re of and with we Columbia and same-store same-store growth FFO expectations performance quarter NOI line our to continuing of a same-store X.X%. to in This per $X.XX to have full-year share continue strong with

second occupancy climbed our mentioned, XX,XXX another feet Nelson leased vacancy result, square X.X% XX.X%. we low despite and a the to quarter in As another and as rollover limited

to realization last embedded XX% quarter. some growth existing similar spreads, drove basis GAAP Continued cash leasing strong of opportunities portfolio a XX% in both basis, a on our and on

in due to the assets debt-to-adjusted-EBITDA net Our of to X.X June gross ended down strengthened X.X from net of down in estate primarily March with XX.X%, times, further balance from XX.X%. We and the April. sale sheet ratio debt real times Glenlake

than we year XXXX the becomes until no unencumbered $X billion of have properties. of mortgage and $XX debt more debt due, JV-related We maturities when million have

investment allows development both as own strength us the financial Our our to redevelopment best well shares. opportunities repurchase as to value-add seek and

very the We’re and we didn’t make the during with quarter. any investments selective

we’re later pursuing fruition this year. the will to that Although hopeful of opportunities come some today we’re

but continue this we to didn’t We shares repurchases believe and this our compelling is later we buy stock to also make expect share year. any quarter, that a value

be our for to original percentage for to our that’s the our XX%, expires August our cash now up to Due way, timing range activity, put in our XX% outlook $X.XX, shares. from and the NOI and to $X.XX raising in a expect of of The at continuing G&A million XX%. including XX% on up upcoming of strong of continued year-end remain we’re outlook to our we to million from place $XX XXX count XXXX. $X.XX. to in outlook leasing $XX XXXX to new consistent of repurchase raising clarity of up plan FFO to the corporate Due weighted anticipated Lindbergh again remaining million elements sale, performance authorization normalized the from authorization September meeting. expense strong to average to $X.XX we share are By of also XX%, lease diluted our We but Board to same-store share and X% our full-year outlook $X.XX more $X.XX growth

high-single to we last we of we XXXX, this XX% can again accomplished of produce Looking the course, growth On same-store generated digit NOI year. ahead year what top we further growth. think and

and team another opportunities. hard on we our many and our reflecting work In strong growth quarter summary, positioning unique experienced value-creation capitalizing had of our and the

and Nelson take be now to pleased your questions. would I

Operator

[Operator Malhotra Instructions] comes your Vikram from with Morgan Stanley. And first question

is open. line Your

Vikram Malhotra

for taking Thanks question. the

the sold last asset what of sort would our on And we what’s of July. the the time if in Can assets maybe what’s would guess Lindbergh the sale. you in on describe spoke longer? sort guidance one I XQ, first had look taking in close own I it NAREIT, Just – mid-quarter taking – assumed like?

Nelson Mills

Sure.

On the hi, for your – Thanks Vikram. This is part Nelson. question. first

relatively a project. it’s On the complex question, first part of that

Kevin with one that think has buyer been the ground is major lease I working sticking point through the and MARTA. team with

And required those. were good on approvals We were that there. so there made progress

being is We close but probably expect resolved. very being we It next contract. that to contingencies, under is some to The it those month. financing deal subject all expect to close do are

expect this it but of certainly, – summer terms In we to get close.

of Jim, guidance, in we what assume there? do terms

Jim Fleming

transaction so we bit with probably Vikram, end. started $X.XX the timing, Yes. last various raised the time. at of We opportunities, to last were still, reason $X.XX. would We transaction higher to raised it $X.XX I enough little time end. say, a off variable trying didn’t I We probably we and we to last Yes. on is our the have end this little $X.XX we bit it And quite the guidance think but raise – but leave time, room time. that ourselves for a more and for – it $X.XX we lower raised

model it month. affect in expect. what in We’re and does FFO our by to assuming August $X.XXX that or It that’s $X.XX July closes we per

And in there is some so there. variability

the well. have portfolio But we also performing very

little a NOI we expected. lease bit had than some rate we’re in We’ve know, growth. same-store good higher you As had

expected. performing comment little and I And of the bit better that so say than the would a are also other portfolio parts

Vikram Malhotra

Okay.

increase? then of out GAAP to $X.XXX I mean, just GAAP that, eventually sale, $X.XX, but – at So so FFO the translate and said should from into the least higher on it’s some of lease rate drive the cash push clarify then you the that

Jim Fleming

Vikram. right, That’s

So $X.XX some by by pushed would delayed get more, if Lindbergh our the own up it to FFO were we a month. – $X.XXX expect some then sale would more to be to continuing would

Vikram Malhotra

next progress just or And development talk just Okay. what one, potential around are prospects last you six then of any can are projects? tenants the types of new timing-wise seeing baking sort over the months? about you there? you in What And

Nelson Mills

is a under up this Square Its all, Park below the marketing an XXX venture process. It’s So just feet. on in XX,XXX XX-XX Normandy. ground we’re first like of early Broadway, days Union doing with development

all, vertical and working couple construction, of the terms months. and – the In now here doing first prior raised foundations been next in the has of we’re building of it’ll go

things So underway on and well the construction in are side, progress.

From fintech candidates, interest, interest. been of a buzz from quite generated but well. It’s others lot tech primarily as of the lot there’s marketing standpoint, and a a and a

I about began serious to think discussions expectation. have we will ground, once the of more that interest becomes the we building And more bring leasing the out that’s tangible.

it’s So, to process. still interest yes, but expect fairly the early strong we in be and

We expect it that property deliver late to next year.

that’s out. Church, a little further XXX On

at and obviously we’re be next same looking so players, at there close hedge of and acquisition. of our yet options type months, have couple be tech, the forth design bit the and design, further also out. to a on could media, that. to early marketing tenants; even but architectural but could be that’s construction, expectation We is in that little and funds various sort similar do fintech, a – the but But financial and candidates, team for that looking already We’ll

next very So about come to stage, prospects, the the more but excited we both quarters. are feel over early few

Vikram Malhotra

or view? And no there’s XXX, like in just initial proposals initial, interest, still your out it’s any or there’s there anything no very initial still it’s on early

Nelson Mills

of interest, strong Yes, lot a lookers.

paper We’re at not this with point. swapping anybody

Vikram Malhotra

Okay.

Okay, thanks guys.

Nelson Mills

you. Thank

Jim Fleming

Thanks, Vikram.

Operator

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

line Your is open.

John Kim

afternoon. good Thanks,

Nelson Mills

John. Hi,

John Kim

five top the or in year They top development you the do you sales. is of asset could a and tenant It’s that be Madison so XXX when How tenant WeWork about entered comfortable conceivable. today. XX feel situation?

Nelson Mills

just case building but WeWork. DC, in the a occupy building remind Francisco one In well. in comfortable, case out is building lease. DC, leases quite then Madison early full very And small largest of fully the next. have in XXX,XXX It’s year, is in Manhattan. full One San Francisco of and is San to They with those in to feet utilized, expect So occupied that everybody, we one New space. lease, three building York, and they’re this WeWork the are doing leases and XXX the – late

But all own their The some the some they’re lease their work actually doesn’t start XXXX. wholly-owned it understand fill out with part of are building, their until hard plans if least at We space. mid to of not of the or building of subsidiaries. at people

in interested So the very they’re the and to get into excited property very space.

in all through property. each to and So we’ve – in of representing high addition demand WeWork also three on lease combination have explained enhancement three of those as many a which parent includes credit, a letter credit of of but past, properties, all revenue we each guarantees the significant that, on on months on

So our comfort. that further enhances

and well about good doing feel they’re no, But we very that.

our there those that’s see, some properties from today, do several of – we I they’re to no but three anymore about our far markets. doing where but our to They time, are As in time as we’ll more, just mean, properties. active all of plans inquire there’s of

John Kim

there then or as metrics operational share any the on profitability? are as assets two with could you And far them occupancy that

Nelson Mills

I have just don’t them. – details on of have lot we hear a what we that don’t from

utilization We’re get as fully know, our those full properties that regular – understanding in we or basis. they’re but high far touch utilized, they’re And data and on we on they’re them is a with demand as don’t in that. regular that updates

John Kim

fair you’d you in market the of about Is to share the given be say use you proceeds Francisco talked potential San With repurchase. focused a little sale Lindbergh really recently? bit haven’t one invested that that of including in Center, it

Nelson Mills

of reason approach lease a lack we continues And buy able We’d not been over same market, but markets disciplined years – to It strongest in likes it’s the a been that on, we in been And again, the We’d there. for We’ve like there, like Yes, We’d our to have to focused John. for space is haven’t on There’s more be it since We’ve last of property there. active. keeping time very properties been the competitive and a own anything focused do. it’s bought very trying. everybody period. in we’re but four while, been like dozens one have not the we’ve very underwriting more market. to there. more to to to we a that country. our else

So we’re very pricey trying these but competitive again, it’s and days. very

Jim Fleming

disciplined add, pretty you this. And as John, just would – about would we’re I I know,

measured. pretty We’re

of lot we’re for now. do over we’re in that where to time. value-add We right hard are just looking But still things some at look and we couple about have and a for done we’re haven’t that, find looking We a good those acquisitions opportunities mainly doing we are of so markets. hopeful

John Kim

on can quarter? more the color Final came this question from cash spreads me from provide some you is where

Jim Fleming

San substantial Francisco. some what’s They will we much in were Very not stuff is quarter role numbers floors been vacant those strong John, X.X small. than Really spreads. years, do be counted space there but that believe in they very there some it’s more substantial small higher D.C. that the Those to top most than that’s Huntington rents XX at by the Boston will two over be Francisco of They XXX last in and next going at in I roll-ups. roll-ups. and lease have stuff that San is did say we were in were some been the had We for similar had but leases. months to the so and before way.

trend continue. the think we So will

This fairness, leases. is pretty in it small some quarter though

John Kim

it. Got

Okay. Jim. thanks Thanks, Nelson, See you.

Nelson Mills

John. Thanks,

Jim Fleming

Thanks, John.

Operator

Sheila comes question McGrath next Evercore. with Your from

open. is line Your

Sheila McGrath

afternoon. Good Yes.

what compare your with did how expectations? the plans Boston you for rent that long-term that final the upper achieved are in mentioned, stabilized to And on your floors you’re that Now building? that leasing

Nelson Mills

fully now. so yes, Hi, leased it’s Sheila,

second the of the expectation. of expectation, terms your was above it our original part In original question,

We As while the a to up rents lobby. for Jim brought in got get it. said, eventually we’ve did takes some us We to pretty space leased. ask the improvements little on it and held good the We retail.

you we’re But as So done. couple outcome it with that get very know, to us pleased there. the took years a of

it do it’s time In property get do leased now. that to time Boston. is We of property, in only from for We it. – the we prospects get about inquiries own terms fully

– in for being and given only and That to some expectations our the unofficial time the market. in keep There’s nothing and nothing on a selling year. fourth to said, time. Boston property the is There’s we the stabilized market continues consider. that remains do it consider We opportunities It be we nature from market. given number, interest in look might property might this tabs is we

saying Boston exit. look we expectations we could It’s that’s might whether not not, something it’s the we we’re leased. now fully it’s not that that or but never in not So sell there more in to guidance, to the something but do

Sheila McGrath

us And to can that discussions any the on And to there’s nothing have Great. if progress on on update news report you you date then Okay. leasing you there, renewal a City? us expect remind bit the at on could Jersey more at that? little

Nelson Mills

Yes.

it’s building. option think this – through Pershing So lease is has Pershing end there tenant, the of with XX% lease That in the building range, most the of a renewal the I XXX,XXX that about over feet. but in That’s building of years, expires is two year. that the just

discussions in good months. been progress. We’ve several for have we So made

and with about that we feel renewed good get them the very hopeful terms. We’re to

the them bit place. We of and contraction. to expect for back this in road from flexibility give think bit existing we last mentioned the take their expect a down time, some do a in more little I rents up a roll from we maybe slight space call But

that get up of a but on it, for to end a hope of vast couple negotiations, majority flexibility. the But taking we space, the give the is report So next we they’ll have we keep longer-term at floors them least as to more to do more news bulk quarter. from good expect result their to may just

one. So done hopeful very are but these till but are on they never that deals done we’re

Sheila McGrath

question And for Okay. me. last

expirations? that the previously know mentioned Times what’s in York may be cash us that York. when Building you doesn’t the update but at could on property sublease there Columbia’s if wondered market some happening and impact You space, just at I are underutilizing New are when that tenants on that their their New space flow lease

Nelson Mills

Sure.

anything and So Verizon leased that They’re space majority the now their with and they their of both not in of are but building, forth. plans is business actually preoccupied. usage have so do and space, to the Yahoo! by just cases, the contracted Snap not

the So further news six have lease, we Snap is than in even good Verizon out remaining about is that. years the

option several any be user, So a have there’s percentage affect space manage has in more another in line And that opportunity want between, direct in swap there and years, us could Verizon direct you’re credit that at if good if doesn’t not tenant right, it sublease this for want there got meaningful to earlier we but tap longer-term way prospect, long-term already, take only we credit another have to may be to good existing a of that have we’re leases we back credit. small but going we we’ll an manage same and cash good years. or out to and flows we win-win we for of we’re our tenant, so to terms but some at for space several there could the the more these an leases a walking of time, occupancy, building, place it bit prefer

to We’re only out. opportunity. those compelling a swap going It’s

in we’re period gets shorter, but driver that but years on that. few a on as As it’s shorter gets meantime, we’ll more six lease in years little that, the seat it – the get focused a now

Sheila McGrath

Great. you. Thank

Operator

comes your Mitch JMP Germain And question Instructions] with next Securities. from [Operator

open. Your line is

Mitch Germain

guys, Hey good afternoon.

around down stock. below I the Some you your stock bought the thoughts time back leverage came is last mean X% buyback. bit. Obviously, a on

that good You’re as here? implying a view north not of of Why a capital rate. X% use cap

Jim Fleming

of it as view we Mitch, good capital. a use do

money I number we something we a as put sources we to discuss we of where earlier, liquidity, quarter. want back lot of We a be didn’t factors It we result meet things. in. buy details, our where buy this for uses our getting this we with certainly look capital, our at would at each tell believe of these shares was It’s the into We Board. you any we of consider look Board And you’re is of in. our and look do we look number where all later we what value we kind at every the – quarter said on of is I buybacks, at a this going really time of to compelling. know, as agree a to we Without you As and do shares with balance expect sheet with year.

Mitch Germain

this as gotten on that to know the we the I full I think the Have last terms outlay Street’s quarter you the for Church that you What’s I guys? Okay. of closer asked I exactly but mean yet? of contract. JV. agreed cash question to haven’t

Nelson Mills

So we have some there, options Mitch.

and co-GPs that, are with also – majority in our we of position. then LP So an we we today, interest to Normandy hold addition in

the half up the vast Columbia, and advance property the is the own budgeting, it and and best term, in teed property to would that, of contracting, road. And syndicating of on firm we the then be and we of bit construction the to we’ll little to own choose market bulk We, but plan, including But we contracts test the we’ll near The there. the maybe on we syndicate it. if controlling property, with it Normandy. maybe down the we plan have options position GP like go close today. it, control the even further of getting book. to the plan maintain the own position, we’re along So a market part and the to, time LP the even majority feel That’s the

Mitch Germain

Got know Pittsburgh confusion the last you. with question. there around quarter Last I guidance. some regards to was

the is sort the assuming there in to regards – with maybe some guidance Jim, here? decline you a Or in fully is of are back part sale? of So year Pittsburgh

Nelson Mills

range there tell Yes. scenarios and can will Mitch, do have to range different on I intentionally, you the do assuming that and of number the we we’re a of that try a Pittsburgh remainder we for year. so but that we’re accommodate

Lindbergh so sell that in and those model basic in we’ll August, or we’ve got. are assuming the We’re July assumptions

Mitch Germain

Thank you, guys.

Nelson Mills

Appreciate Mitch.

Operator

currently to Mills for this are There turn I’ll call Nelson time. questions closing at the no remarks. further back

Nelson Mills

everyone’s the All our the progress Thank that participation attention the on story to and our questions. call appreciate look your updating you opportunity for and few in we we’re you. thankful really we a interest for We right. story, on your appreciate It’s time. and tell quarters. you and particularly next your forward great to over Thank again

Operator

today’s webinar. concludes This

now may You disconnect.

Columbia Property Trust (CXP) 25 Jul 192019 Q2 Earnings call transcript