Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to the City Office REIT, Inc.

First Quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. this is reminder, recorded. a as conference being call And [Operator Instructions].

Thank my It Officer, you Secretary. you pleasure to now begin. Treasurer Mr. may Tony Corporate Financial introduce Chief to is Maretic, company's Maretic, and you. the

Tony Maretic

morning. Good

will both direct non-GAAP package. Before website discussed to comparable and The be view first earnings at we release measures press package can our quarter you release you earnings their like include where and to begin, of most would financial our GAAP I that a to reconciliation cioreit.com supplemental today supplemental information directly measures.

made discuss within fact today may Certain Securities meaning beliefs statements historical are statements forward-looking Federal that the or that expectations or constitute on of company's based not the the Laws.

expectations are forward-looking these can in While will assumptions these we believes are based no reasonable achieved. the statements assurance that be give expectations that such upon reflected company

for and update material in press Please filings of results. statements with see course quarter and to statements undertakes first the The SEC be may that earnings forward-looking that the this our actual forward-looking company disclaimer no company's the between call. in forward-looking factors obligation could any release statements the made differences cause

of our financial Chief highlights. operational will Jamie I discusses some review results after the Executive our Farrar; quarter's Officer

I to will over now turn Jamie. the call

Jamie Farrar

Good joining today. thanks morning, for and

quarter, expectations our NOI this expectations FFO per track our core of last results same-store Since our and earnings have operations performance. call guidance, positive cash of aspects February, in of terms our With strong per at continued to reiterated end share growth. we've including the and all share we

new an call, competitive premium development. markets Phoenix, our and Center I advantage. is property an Sunbelt the On in platform banking the volatility adjacent last from broader sector, benefiting considerable which Pima entertainment in highlighted our our enduring provides Despite

available its due the call, and land an perspective, in lowest location. St. influx focus entertainment of its unique among generate new X%. real growth strong metrics From and the approximately restaurants vibrant driven Florida. market waterfront Center CBD I Downtown, has combined with population at very want on St. An economic has Pete continues Petersburg, vacancy rates in estate limited this Petersburg lifestyle to country to the and City values. venues property downtown, our St. to On office

in healthy In addition, have year-over-year, by rents QX, increased a X%.

building situated near waterfront and City signed views leases. and is various occupied used including committed when Our Marina XX% restaurants, has direct Center It developments. and and water mixed is shops, today the

may also development. be garage residential parking Our sits suitable a location, which for prime future on

at we're great City with the stage that unlocking amenitized associated early in locations. value, of While an potential Center case a Sunbelt tailwinds is study

approximately utilization outperformance March, Relating Both the Raleigh I and higher. to end our from Tampa would our exceeded of to our portfolio, utilization workstations discuss XX% being when pre-pandemic provided portfolio-wide tenant continues we to days. of across and our Overall, same of levels Investor offices Presentation factoring in these results that or over estimate To have towards dramatically markets, increased new like are a the At these the levels next Sunbelt utilization at approximately time year. travel, shows range It chart XX% utilization last that in we've that sick highlight low vacation, occurred noteworthy May time. the is the trend trending space were which XX% XX%. utilized. this,

Our over activity greater will translate expectation in time. leasing our to that cities increasing levels is utilization

well that of with start our seeing prospective leverage are industry, amenitized newer not outperform. tenants we We're that higher best new to In continuing are building properties are capitalized. compete financial options. terms of as locations by position investors leasing, of buildings the leasing the scrutinize evaluating Across also in many their ownership the to owned when and

don't have owners In and of today's share improvements. to the environment, fund required tenant capital capability these a growing

As will the help position enhance to that occupancy strong levels. progresses, year we our financial believe

level continue leasing we and portfolio. further advance activity to our property to cash spec execute Also, flow, suites renovations across and

free XX,XXX suites. square months, feet new either During but We which feet time leases we under in only burn but the realized rent spec benefit our started later as off. will and construction for these XX,XXX be suites be We've we're spec over full have or square XXX,XXX this signed currently are investments of in of will suites over from the program, advancing the extent is leased square last year. feet, this XX initial inventory, built periods

debt the industry. particular, commercial we industry, position recent continue the have to regional office banking estate our We commercial important continue conditions optimally success, to anticipate very real sector. banks impacted The these rates availability across in that headwinds. sector and active and that combination we of mindful market the volatility interest the long-term capital portfolio has also providers for estate challenges and for to take real are and will While steps smaller rising challenging been broader of

Given the backdrop operate we important particularly conservatively. it's to conditions, these of believe

announced for of our share. per $X.XX that annualized $X.XX quarterly an today that to we've rate end, reduced we dividend To per share

share expected of component This position reduction may use best result to of which return. in continue and will to mentioned I on investments retention an annually, We did important we total dividend the the challenging assessing This dividend include take we to decision shareholder value, the conditions incremental the of Board As has portfolio reduce operating into is cash believe ourselves. last pragmatically each our leverage been our not strategically million appropriate call, the earnings or $XX the purchases. adjustment our and to enhance reviewing lightly, to quarter direction. is

and to market a manner. operate evaluate conditions and in So in strategic will summary, cautious we continue

the they Sunbelt Our initiatives we to will ensure liquidity, pursue premium opportunities and our as core flexibility a maintain with portfolio, arise. provide us enhance

future over to I'll and to progress look Tony the our our updates forward discuss to I on results. hand Maretic providing call

Tony Maretic

Jamie. Thanks,

than the increase are still This a quarter. recently lease-up. constructed our at is Block and reported gains quarter first the higher first income operating $XX.X the we $XXX,XXX is was primarily the in million, occupancy and result XX fourth which generation in XX properties, which net amount undergoing Block of Our

We and than higher reported which lower in $X.XX or of The were quarter. higher primarily costs increases. drivers $XX interest million of G&A, which decrease the fourth operating per share, core the was FFO that income $XXX,XXX offset net

largest suites share. the conditioning Our first $X.XX part plan. a $X.X in AFFO our in spec The is million quarter The vacancy was of share. investment which investment was $X.X $X.XX first quarter or key per business in and was ready-to-lease to conditioning, per continuing vacancy total AFFO or and suites spec million impact

metrics. of to some our on Moving operational

XX, quarter line $XXX,XXX XX, positive Tower our to NOI higher in was cash of same-store largest expectations first change quarter compared the Our have at year-over-year Park XXXX. due Block as with first and to increases occupancy. X% Block the higher or

feet have ended XX.X%, Our leases including XXX,XXX our square yet the of of that signed as quarter at occupancy commenced; not XX.X% end. was portfolio occupancy quarter

Our was XX total debt million. March $XXX of as

Our low high loans at net was and X.Xx. the quality had maturities cash debt are both by of EBITDA in relatively smaller properties We leverage two levels. these secured fall restricted to including of XXXX

our XXX respect last to of and property Office Center are on disposition potential discussions With mentioned our all I our the explore of continue options lender. in conference with to the call, we that

our to we and property, the decline property We lender, event is advantageous debt to impact approximately expect to on $XX us. total which were the position. In have non-recourse by that would an financial million of be property would level we would the improve the We net anticipate immediate to dispose EBITDA on our positive our modestly. there debt debt

of March as on million we as of As facility. XX, approximately $XXX liquidity, far our undrawn credit our availability had

We along source financeable properties of cash also liquidity. an additional had as of a $XX million quarter cash and end, unencumbered restricted with as

call and we first two last discussed we debt-related liquidity, future to transactions, us earnings. give into rate visibility our quarter, our during enhance As better executed in fluctuations our reduce exposure which the

Following facility quarter total end. fixed swap expansion rate interest was effectively as debt of those over of transactions our credit XX% and

capital quarter structure, end. million also program Related we that $XX repurchase approved Board announced subsequent to today share to a our new our

any completed have We to-date. not repurchases

intention to and added any evaluate other cash. uses versus weigh of market is continually or liquidity Our conditions repurchases

last guidance to issued Last, we continue we that track ranges the XXXX quarter.

and the Operator? for prepared line questions. concludes we up remarks will open That our

Operator

you. Instructions]. Thank [Operator

Our of go Rob, Please Janney. open. line Stevenson Rob comes ahead. first is your from question

Rob Stevenson

than and this how morning, think at liquidity? it that? just are Is guys. in place share of Good how the about thinking the your size you about where Jamie, that? plan Is new about point are we you that you How repurchases than more be you guys it less the should upper thinking of board that? you and million $XX thinking do sort can legitimately given end put is and

Jamie Farrar

question, the Rob. for Thanks

cap overall. market is top of mind for So shrinking our us

it So a we're additional that we're consider to point. our then we going options in liquidity view as all building us, we'll this have is for making decisions, as that but of future we mind and first tool at and priority keep

Rob Stevenson

Okay. at sell the other thinking you question you there of off assets price? about assets And is are the on the mean, could versus dispositions your substantial money you've where guys stock implied fairly that I dividend of turning the the where probably on the in your besides at this rate some via cap spread keys is potential the I saved and are guess XXX, that point, between given

Jamie Farrar

dispositions market us, that's now right to somewhat for loans. driven and the on market primarily the Top and really get banking and of being mind is Rob, from acquisitions is inability an closed frozen

concerned of but so when So open, it's are ourselves not better. to as time conditions ideal positioning disposing be down as we're assets those be far the and road to options keep market it'll we're an

Rob Stevenson

you're for out, new that I And mean or dividend be there sort think the earnings? first then, for there? trying dividend where for on about in payout is Is just How we quarter Tony, rate the to minimum should have you'll about be that? rules where room XXXX. to of additional your be likely thinking $X.XX figure taxable where be given versus to I Okay. you'd that is

Tony Maretic

good a Yes. question, That's Rob.

above. level minimum some estimates, there. little cushion our above is new It's beyond the gives where our us For is. a just XXXX dividend bit It

the grow. minimum. not net need depreciation additional do amount to kind And more if we to to we if that our in some have it's ability little the years future continues of a accelerate have So income absolute bit to lower

Operator

Thank you.

line your Oxford Our Barry, is comes open. Colliers. of Barry next ahead. go from Please question

Barry Oxford

me, three maybe going what's XQ, particular on do of had Pointe, came which would you buildings? in North. out for the of a of taking thanks XX.X%. And a then guys, down and at XQ to matching the there occupancy to Real kind drop Denver quick, XQ comment those XXX be in XQ question. Tech that kind going on Superior Hey Jamie, from in and to to just is, buildings up particular, bit drops, looking want three

Tony Maretic

morning, Good it's so -- Yes. can and and so that I in here. question Barry, quarter Tony this -- tackle

Barry Oxford

great, Great, Okay. great, great.

Tony Maretic

quarter Yes. The you during the within the vacates two mentioned. that were largest buildings

a at was there's XX,XXX had was during Tech This at known departed on tenant XX,XXX And foot during in vacate. the building about it there that other our XXXX Phoenix that was So foot then quarter. the calls. We the a also tenant previous Denver square quarter. a square talked vacated

were those the largest drivers decrease. two were So -- of that

Barry Oxford

over next see move-outs? as you far of do the What as known quarters couple Right.

Jamie Farrar

Sure.

So Page breaks a our of it deck that schedule got we've kind of XX on down.

we so next the roughly rolling four foot over have square quarters. And XXX,XXX

are two just which actually a Office actually the that that greater known unknown known are we've largest leaves at vacates, five, feet which which Two approximately that vacates foot vacates feet are Cascade XX,XXX property If Station is known XXXX XX,XXX expiry. rolling. renewals. of XXX us square is one point, has in is days. is square about, And aside One of at And in you Center, this Portland. square those than of at recent five tenant two our signed those a just XXX,XXX put and tenants are talked

Barry Oxford

TIs kind Great. one, less two Okay. new they current at look When for more tenants to on taking you starting leases space Great. just re-upping space of needs the negotiations? have are that leases on then into creep or are -- their and you fronts, signing that noticed

Jamie Farrar

tenants, questions in seeing the cases, flight we're is smaller larger what options, where seeing on quality couple we're properties, Barry, America quality that. they more is to to their with looking Corporate move we're there, the downsizing different the can, to assessing higher tenants much consistency renewals. many seeing really a What So with of

properties, case so but with And a positioned well our that we're very few are of have suburban number a a are where is seeing downsize XXX also the we you're overall. that perfect

smaller the most are on And so I think our size portfolio of tenants.

about total. in have XXX tenants We

is XX,XXX size average feet. about I The six. think the median's about

the so have we're much vacate through seeing roles, stability. larger I get have But think and we we more we're going of roles to in And downsize. as few larger once higher a these a near-term,

leasing the In is right terms now space. best TIs, what's of highest quality

so out there's very costs and the we're What and a and TIs on that's And been building those. factoring leasing is increasing space, rates leasing increased. into seeing really that's because return what's have suite best what's spec our what high healthy have we're at program quality

And to we're trying advantage much compelling. mask a for in is the rents so properties that take little properties, economics, very tougher It's still of are the lower. high on where quality but

Operator

you. Thank [Operator Instructions].

open. your question Riley. next B. from comes Craig go line is Craig, Our Kucera of Please ahead.

Craig Kucera

an what anticipating we in specs incremental down spending program million is the anticipating. at that in Yes. quarter and guys. vacancy call a you of between little up was $XX Are first slowing the Thanks, good still out that were all? or reconditioning XXXX, and suite morning, Tony,

Tony Maretic

a Good and That's morning, good observation. very a Craig. question good

And end to year, intention of number maybe the slowdown by expecting and of bit get obviously that is to so our the But there's invest there pace we're subject and program, program. the to construction still permitting to to little properties in little that that's the is but in the a are bit a us the effectively to margins, in down delays, no on committed which what invest happened we QX of still slowed activity.

Craig Kucera

looking the preferred, as on just think equation lot the at to that I more also XX.X% appreciate the deal Great. color now is it's also more but Okay. trading the but XX% well? me, buyback, potentially And call it Board traded, one obviously for coming the a to the is thinly

Jamie Farrar

have both purchase common flexibility we So and preferred. to

so going potential we observed and a And you're forward, decisions that factor what is well. saying in has as as been

Operator

back for have over We Farrar, hand Jamie remarks. further no to Thank you. currently closing questions. I'll any CEO,

Jamie Farrar

Goodbye. you Thanks for our on joining quarter. next today. We progress look forward to updating

Operator

Thank and Ladies gentlemen, today's this call. for joining. you concludes

disconnect lines. may You now your

City Office REIT (CIO) 5 May 232023 Q1 Earnings call transcript