CIO - Earnings call transcript Q1 2024

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Operator

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

First Quarter 2024 Earnings Conference Call. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference call is being recorded. Instructions]. [Operator my Financial you Secretary. Officer, now the Tony to Chief company's Treasurer pleasure is to introduce Maretic, It and Corporate Mr. you may Maretic, begin.

Anthony Maretic

morning. Good

to discuss release where non-GAAP begin, to Certain to release first reconciliation on and today comparable we would of most company's package. our statements measures package press you website The both or made information expectations earnings their that constitute historical forward-looking based measures. discussed a Before be statements meaning quarter GAAP earnings that today laws. securities will at within directly supplemental can you federal I the reit.com, supplemental view may not and our that or direct beliefs the like financial are include the of fact

Jamie. call. financial between will in in see forward-looking our update turn believes statements cause course quarter will our be statements give the could no statements first material may I now discusses company that forward-looking quarter's company's company filings that upon and assumptions, will made reflected differences SEC expectations the results. release to earnings Chief Please results our the these some I with after for press expectations this these Officer, be we factors such no Jamie any highlights. obligation reasonable Executive the that of review actual achieved. forward-looking forward-looking undertakes call the assurance operational can statements to the The and based the are in Farrar, While disclaimer that over of

James Farrar

since office sector to sector increase in start Overall, with to move observations an more our and demand. reflects fundamentals highlights equilibrium. data is towards our trending last then and office Both own call. national I'd the tenant on the the morning. like tracking Good some

to not recovered first prior U.S. levels. demand to tenant markets has of to quarter. increased requirements an JLL. as according have the compared JLL of reported XX% XX% Active office office the that increase Leasing For XXXX, year-over-year quarter experienced in pre-pandemic nationally

supply and new sublease vacancy side, has year On off continued ago. the rate the sublease additions dropped a from have to decline

has equation converted projects volume on on to ground there increase [ buildings ] improvement pace indicate ground a record. lowest new has XXXX essentially demolition highest net This of of of construction and the ] in halt, with breaking playing quarterly been out expect see of Also, the or demo New appears also our had trends be obsolete runway buildings to conversions the [ own an supply-demand portfolio. a these dynamic although record. improvements within to long we the gradual. We to

square executed renewal During the leases. feet we quarter, new XXX,XXX and of

XXs our a and foot package we Block strong continue amenity Drive a square high-end suites executed strong Within vacancy. health best-in-class floor lease Orlando, an a in FRP square we square we XX,XXX the X in larger feet for leasing, last XX-year XXX,XXX on XX completed Block tenant attract financial Raleigh, of Ingenuity signed XX,XXX with At with tenant. lease property foot the care-related leases. XX.X-year, to demand. At new full

a square quarters. subsequent As commence a of XXX,XXX has new feet result portfolio prior X% will in leases of leasing, our this that signed and healthy or

demand floor that an put X% floor. in high would footprint WeWork guidance potential terraces Center conclusion to Dallas for would momentarily. These buildings, when we completed, leased, Elisabet]. management rent positive back X spaces, shorter-term terraces of would believe third in in early principle increase lease finalized be at XX% new leasing be of an have we over we them for just continue signed our the both current submarket uncertainty in WeWork, emerge in has of of trend engaging which of in our to result our [ our a have with negotiations the to now floor the the bankruptcy. overall diversified with XXXX team leased is net full WeWork at continues are extensive in the leases and the these property with that we square when number been one component demand spaces Ultimately, the will industry. square this they our reduced the XX, Tony If them space. and seems these end backfilled revised floor our yet Similarly, solutions, Preston a expect XX,XXX to would therefore, Our currently back for agreement in The strong estimates fourth from high of in XX longer-term in of pipeline we gravitating recently a get quarter. The tenants reflect discussions the across The portfolio. foot further properties our premium to XXX% be expect larger who After This will quarter rolls at Block XX,XXX foot we expect have evaluating and value. expected discussions quarter Block Dallas' not for is portfolio. a renewals one smaller at at in discuss outcome and Raleigh full we with end. with tenants in but is office place and at

continued Going ourselves primed to We're to will overall income. of forward, the us have look net our grow help this employment bulk position that in investments environment, we've commenced assets leading growth. that to in fortunate key operating best value invested we and are as elevate for certain cities

of of well aligns that already are to them. position we renovated, [ many optimally handful recently ] quality with our This improvements. required a have properties While and demands, these opportunity refresh underway vintage we've a making are tenant newer assets are

conclude summer. we done, the of The now we're building, [ will by constructing is phase of Pima lobby at Scottsdale expect in renovation the ] upgrade North second first amenity our the the end Center and which

has and strong projects, in Our enhanced City downtown for of be is maximization. leasing moves, kicked which City that, construction, that ourselves the finalizing leasing early investing renovated and Office's and Dallas, by property success well-located more we Camelback we've will for and ] fully we Center execution properties [ the Petersburg majority is in of At its positioned value May we're construction, and for a enhancement renovation Uptown St. completed is $X for X We it approximately cash are Waterfront Phoenix's have spent plans to starting commence of approximately we hand that I'll portfolio fall. Further, at [ to flow McKinnon and quarter by anticipate the in our an or call new $X the setting initiated financial conclusion With XXXX already and these long-term vast into renovation off ] completed in will scheduled by program, the to beyond. million renovation XXXX. detail. Corridor property end. now this which this up XXXX anticipate million over anticipate which XXXX results And Tony last, of will expected conclude discuss plan are be to these year. We later in reside

Anthony Maretic

Jamie. Thanks,

share in which is we Our XXXX. was the of income amount was lower We reported or $X.XX the in NOI occupancy. result core quarter quarter. the in $XX.X $XXX,XXX lower as fourth $XX.X was the same FFO the in operating for million the reported marginally than of quarter quarter per quarter. a lower net million, first This fourth first amount as the of

Park quarter. which this in The largest Our per AFFO $X.XX a in well-covered Tower to AFFO was dividend costs of share, quarter at first resulted $X.X was Tampa. $XXX,XXX million improvement or impact tenant

to spec conditioning and program, was the We suites than and total vacancy in vacancy in continue first also a spec quarter in our pace invest suite slower although investment The XXXX. $XXX,XXX. in conditioning at

Moving operational on some to metrics. our of

the Our compared first $XXX,XXX cash was change of first as quarter same-store negative lower X.X% were quarter XXXX. NOI to

of Portland, same-store in Cascade was positive portfolio Excluding a Station X.X%. our rest the

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

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

was EBITDA, including cash debt, net X.Xx. Our restricted to

had XX, our facility. March million approximately authorized $XX of and undrawn we As credit on

We and quarter cash million cash also of of $XX had as restricted end.

total scheduled new a loans principal our as debt for office such, have as lenders. in XXXX, far million markets for balance. The the As And liquidity in challenged. X existing debt we remains maturities $XXX of with priority maturities working is

on impairment value at X. in time. have maturity discussed loan our million we property nonrecourse calls. XXXX, Station rolled recorded off week that Portland that prior The value property we on at The earlier matured asset's in first an In December that $XX equity our Cascade effectively this May

] our reduce to the continue the are transfer the to by [ property [ second principal already of a We prior terms total June. matures the in dispose expect debt in have Orlando, ] balance $XX of deepened million during loan lender in a property which we $XX our and reflected quarter, has that Fairwinds This million. would we guidance. At with that will assumption negotiating been a Central

We that to have effectively intend enter at into a loan agreement We come with will a terms rate. lender to extension. the on X-year the closing swap fix

December. in loan occur to with expected closing be interest there that balance a in Drive the today's loan to a rates, high range. At the expect $XX rate on fixed of Orlando, in X% We Ingenuity May. FRP is million is the matures in Based property on

continue will at take XX,XXX this loan prospects property lease square occupancy is back and the at Jamie of discussions. property to a lease which extension, in As the execution that we lease for mentioned, when we quarter, a positive XXX% first very commences. advance That signed the the to foot

that is of million a million loan corporate our Finally, $XXX matures we which credit $XX have in term facility. September, part

and our able with have to update continue discussions next call. be We group to to provide an expect lending on our

the or downsize this WeWork is per $X.XX Jamie Approximately reduction The tenant's share reflect approximately noncash of the to of $X.X straight-line this core to of guidance $X.XX the impact relates on downsizing the million reducing that of described. XXXX. WeWork in are we write-off Lastly, FFO rent. impact expected guidance

same-store concludes Operator? the in income, open impact the to We respective we'll the and of reflect our remarks That prepared change have FFO, for of this net our and occupancy ranges operating questions. line updated core assumption.

Operator

question first comes the with line today Janney. from Stevenson Rob Our of

Robert Stevenson

biting space to given Jamie, of with of X, WeWork, or issues cetera? them in coming the the this again just now in when bullet, about entering you et versus this solution taking terms not think negotiations back into how deal did having and a occupancy X they're having those and with quality to the year and assets,

James Farrar

analysis. just required from a in story lot on and spot premium thought good no extremely have net take mean as standpoint. Same They're take space back full back to the we they'll us, I a look buildings. for in X it's be our at much We've we X ] X Raleigh will leased in negative where their is Dallas that came the think where So entire good. Dallas. the And X we question. as terraces in at it's remaining a full one portfolio remaining floor we floors in floor. Rents today remaining And a months. rents floors. we having are those and in in the good vacancy basically of building I a way last it be really highest floor, or do one full The in in to these buildings. [ them with consensus Raleigh, going The on

good there. feeling we're really so And

expand We spaces those have potentially tenant one prospects already. of into to

a really setting win rent it's And up to overall the so diversify think ourselves and roll, for everyone. we're I

Robert Stevenson

Okay.

said off [ goes Central How debt incremental here incremental being Fairwinds at the given that the the could about to what that, going are on is second So wind achieve Station some sales? you Cascade on guys I quarter. And cost? thinking asset you pricing-wise books Tony high the in think extension Xs]. point up

that I sales So for table? the not Is still want should within sell that be just on market-wise assets to that's there you'd something portfolio? situation thinking is these the How about the it mean, the asset we days?

James Farrar

The it get to major our driver markets to From prune financing. you is when to portfolio are the term, standpoint, that extremely look our very difficult makes and illiquid. Near it's as exit we'll sense. said, over Yes. time,

careful when looking inevitably the be careful they the ones and position to up, focus we're way of to position the be few is value always create at look between are the assets back really years and on the in open try will, leasing, so and back assets portfolio And kind challenged over position right are few best on to assets best then in assets. that markets So and and our bottom time. prudent our to that next the positioned monetize at it our those pare the portfolio which our positioned win

Robert Stevenson

of net we're year helpful. net for note against That's incremental the leasing that Tony, did back in needed second you half the the any move-outs towards in Okay. the thinking of 'XX? -- last here we first about when me. and one into then quarter And occupancy

Anthony Maretic

Sure.

So just One Collection X tenants of X we about next before, feet to the over expiries which over do role. that is XX,XXX I'll talked our at an significant maybe have in speak really quarters. quickly square renewal, FRP size that expected We QX. that occurs are

other is in we X Crossroad this feet. unknown square And The early DTC at XX,XXX then that do is XXXX, is that that's [ point have which novacates].

have debt. at then we at expected XX,XXX XXXX. occurring Portland Cascade tenant talked both to in which AmberGlen that we've both that a that already with And occurred to the about, vacate Station, ] one about [ related other foot are the has think I QX is is in square One issue is

Robert Stevenson

Okay.

beyond at nothing talked you've about point? So the this stuff that what before

Anthony Maretic

all feet take new. that in to will to they're XXX,XXX we quarters. signed the should over ones move-outs, Yes, offset occupancy known square nothing of have we've X past, These are X and next which highlight the the the spoken by I

Operator

next comes Barry from with question Oxford Colliers. The

Barry Oxford

prepared Tony, the or them kind continued to Great. in doing in remarks going that is this the Or trend a you so of in be going slowing. your less time? just mentioned Is of you're suite be to spec investments a point future? are had that

Anthony Maretic

focus big Barry, XXXX. ours, in It more that. over it's just focused and think We spend, was really higher a in in a a And had we we of I million on spent time. point at $X XXXX.

we're did spending returning is kind XXXX, which that a for normalized more the XXXX, in of we projecting So about half level. amount to

see going saw So along in more think lines QX spend the what I you'll forward. you

James Farrar

And Barry. to add just that, on to

year. across of today, inventory. of we've So the spec about got XX,XXX another by feet end our that the complete got XX,XXX about We've will

under call $X more generate estimates will that's So And it, it's own our very portfolio. XXX,XXX just of that NOI. our impactful because X% feet, of are than million

to and want progress, remaining leased get that then revisit we So the some inventory. see we'll in

Barry Oxford

still the when work? you had started you rents that the anticipated you achieving Are

James Farrar

the Yes. portfolio. Rents generally have held across pretty well

So we're pleased there.

Barry Oxford

Okay.

spec getting on you you're begin still when suites? penciled with had that to out So the return to investments comes the it

James Farrar

reassess see and inventory leased just We feel want got right at we've in time. that We Correct. now. get enough to that then we'll

Barry Oxford

to No, That that. like I seems and smart Right. no move. objections a have

Operator

line Capital next question Our Aditi comes [ from the Markets. of Balachandan RBC ] with

Unknown Analyst

are going? SP-X office-based just the How think with how are exactly discussions I a And taking? general is that tenants What question. long more [ your QX]?

James Farrar

in question, for see say would leasing Thanks the you'd our last it's results quarter. general, the in Jamie. I this and from

longer-term figure to figure So space, the they solution, across lot to things up. downsizing. trending about big still to that really while is. years of the have We've a I'd our a their some positive. There that's which last been worked few And wanting of us, tenants is to has And a wanting those generally most through renewed downsizing obviously, our tenants wanted in shorter-term out say portfolio. renewals markets, have for

of a couple in some years, next on whether but into it offset the there by buildings of will tenants seeing more still Over that longer-term markets relocate being looking we're it's to basis. or be

they than ago. by were is up seeing Friday from Monday midweek our good. actually much mid-week tenants, but We're really utilization pick very quite own a say feeling, are slow, is better I'd slow, trends So year our

direction. So the right trends are moving in

Operator

Rana with question comes Capital next Upal Markets. KeyBanc The from

Upal Rana

you guidance pieces? walk it some Because year. trend to occupancy to downsizing Could do you of X floor here? looks in hasn't the anticipate place consolidate? of you taken XQ occupancy WeWork remainder And us for floors for moving of that through do anticipate the them yet. be the given the like higher So the kind to the you why see And

Anthony Maretic

So good question.

about So talk those. let's

back whereas not This we the have can mentioned, So -- yet. and the anticipate back we would in the when of as are is finalized at before based would outline XX the those floors us of at they're those Jamie WeWork, come be expecting that is midyear, and the balance X going tariffs on floor floor agreements what but the we be just of are year, end when Block given both to come the the year, the assuming a -- of not they're to would of the lease-up end year. received been

year-end that, occupancy. So that we're expecting on occupancy impact an have on will

have include This slip occupancy of the end that of expected to that -- leases little. in occupancy that, we a Block don't feet occupancy, FRP year. QX may new take remarks we Ingenuity the starts X year-end have Beyond those the does take XXX,XXX of all leasing at the prepared see that should square that It positive before and the on so leases of Jamie signed XX. Both is and numbers. highlighted leases impact that his --

And expect so for to yes, terms question, that year. your this the represents the in occupancy of do floor we

Upal Rana

quarter, Okay. then commence Is space co-working XXs you 'XX. case? has helpful. Great. was with last backfilling another Block mentioned changed? the That Or it this And which in early could tenant, WeWork

James Farrar

Yes.

So space. part to we're It's discussions going if pursue still the we're advancing of likely the there. what

and at leased of well what's co-working, already just So couple we're of the which back XX,XXX call the space kind -- it it, WeWork smaller and of feet. is is a got breaking that market. really from up suites, built out stepping being Half just a floor building, then balance under is in the do looking looking we've full at which what in in

-- think view so whatnot call our I and have on on And quarter. timing better a we'll next

Upal Rana

Cascade with to is with view upcoming be its on me. do [ AmberGlen one out, and you Station debt in 'XX. it. exploration last the how property going for next maturity Got Okay. And ] way one its

views your and a whole? as [ are Glen Amber on what maybe maybe ] So Portland

James Farrar

your say leasing are assets whole I'd challenged as and translates market, down that on and Portland a what prospects. most to individual our is views

being location is we're a within extremely So It very isn't but market. challenged good careful it an the sunset there. corridor,

Operator

questions. no I'll Jamie. have We the to further back call turn

James Farrar

joining [indiscernible]. Thanks for

always, questions. please As out feel Goodbye. follow-up you reach if to have any

Operator

everyone, today. you joining you, This concludes may disconnect call, for your our Thank lines. now us and

City Office REIT (CIO) 3 May 242024 Q1 Earnings call transcript