CIO - Earnings call transcript Q4 2024

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Operator

Good morning, and welcome to the City Office REIT, Inc. Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions] It is now my pleasure to introduce you to Tony Maretic, the company's Chief Financial Officer, Treasurer and Corporate Secretary. Thank you. Mr. begin. may you Maretic,

Anthony Maretic

morning. Good

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

we believes these for to these filings disclaimer the material release fourth undertakes between forward-looking quarter company's can and company give The . any and the the update see no of forward-looking will in Although we in based in our differences that with assurance Please company that that statements cause expectations results. such that are the forward-looking forward-looking actual press statements course made no statements this assumptions, obligation earnings call. be reflected could reasonable upon achieved. factors SEC expectations the statements

will over of after review Officer, turn some I'll our highlights. the now to call I Chief quarter's results Farrar, the Jamie. discusses operational Executive our Jamie financial

James Farrar

pre-pandemic Sunbelt have and way volume. high-quality Good XXXX for dynamics office office the over fourth marked of in was a volume at for morning. the well years, of locations. XXXX office quarter After levels. increasingly led space. absorption great reflected markets country, of sector. Supply-demand the leasing for Overall, XX% challenging XX% last quarter a positive leasing particularly favorable point few buildings macro the pre-pandemic of Across fourth environment turned the clear the net performed over in turning have volume

estimates by by has office since office have addition, shrunk while COVID, In companies X%, X%. headcount actually of the footprint grown collectively onset that our JLL their using

desirable properties should demand dynamics return office to at steadily the As continues, strengthen.

XX combined discussed has XXXX, a to This, these and office number solid years. The of for record is office lowest net effect translates the new throughout demolitions we've properties. construction trends the increasingly with footing is redevelopments it inventory. decreasing conversions, As last been in industry of

markets will benefit from all office fundamentals. and not However, improving properties these

in materials, You investor may have Sunbelt tables. note in out non-Sunbelt our our split markets our we and portfolio

Sunbelt Our trends. markets employment due these in and continue believe properties will predominantly are to their we located favorable demographic to outperform and

will greatest also of We believe spaces amenitized leasing modern and share draw the forward. that going

years spent we at X XXXX, Since impactful completed in calls, upgrades discussed making efforts are properties, amenities of property significant to have we enhancing few seats. last prior As ready-to-lease on working. our the properties. clearly investing have spec These our upgrades and

Phoenix, and in XXXX most Pima Our Dallas projects St. in at City are completed Center XXXX Center large in Downtown and Petersburg. recently

We The today. planned Phoenix. we've over in a represented the feet leased resulted XX these Block also well of as as capture Also, one have additional feet improvements constructed in at of this to square The amenity occupancy is enhancement rents. XXX,XXX period, to drive growing project increase efforts XX% These results modern in XXXX. XX% over suites spec proactive over strong during year XXX,XXX and are new leasing XXXX. signed leases which have renewal of square goal

robust year cash X.X% the a Over we realized the roll-up course full of also renewal. rent XXXX, upon

poised our is the increased currently existing space rates and until demonstrates to for the assets specific XX,XXX square Terrace to with aligns XX% XXXX, the our lease quality XXXX. signed square higher extended space space also is by foot grow existing the We space tenant's at that The what in expansion Dallas. for have fourth a and XX,XXX quarter. expanded new tenant's XX,XXX from premium are foot rents Turning through how well tenant the highlights for rate This rental square properties. property pay. negotiated lease than rental feet The thesis

in selling investing price as for We a The XXX,XXX property that win decision by of to submarket was Superior to property smaller to disposition The a million. to would compared $XX of sell Northwest Moving leasing by elected we gross transaction. Subsequent challenging driven the unencumbered sale try more year-end, Pointe, was debt. Superior largely to considerable by the sale sold in property Denver. our value foot square we view achieve amounts Pointe to submarket. a a

track land Florida, Moving from to for expectations. St. demolition retail the Petersburg, our has and potential allow city appeal development. site continue periods the XXX garage The received in have to our St. all downtown approval of now of Petersburg, a water-facing we new the plan application plans was redevelopment redevelopment office. includes Center The site for and and stand-alone to at City approximately unanimous condos The XX,XXX feet parking of approval expired. square residential multi-use

development plans a experienced who would project's agreements leading responsible advance and to with continue We be very the for developer execution.

conditions, further However, number progress are subject on to some updates any of Center remains beyond our which on calls. future our of redevelopment control. of a City We'll provide

And we last our in release, earnings for me, introduced guidance XXXX. for press

cash creation long-term Our value focus remains management in growth XXXX asset opportunities. on through flow and active driving leasing,

results range fourth on quarter core with annualized is FFO share effectively guidance basis. in our Our per an line

and signed we leases is momentum, as have take occupancy in expectation will occupancy Our and we continue same-store leasing results. improvements that future

FFO per growth this share drive will expect We over time. core

overall guiding growth during we markets. occupancy is that While will expected XXXX, across primarily that to occur increase Sunbelt are our

creation leasing dynamics markets these have potential. As discussed strongest value and earlier, the

more to that, results the financial discuss our to detail. over turn in call Tony With I'll

Anthony Maretic

Jamie. Thanks,

the $XX.X Our amount is in we Higher million, than which in of third increase. higher net driver primary was NOI the the quarter. $XXX,XXX quarter income operating fourth was reported a the occupancy

quarter. was offset by by in to interest occupancy, $XX.X We reported $X.XX Core primarily we million Similar third but higher of the amount for share expense. fourth marginally the quarter. $XXX,XXX increase higher also FFO per or higher the the FFO core NOI, was than reported driven

improvement fourth quarter and costs per AFFO $X.X share. largest or commissions. to elevated Our The of was efforts, leasing $X.XX $X.X was success AFFO tenant our a The a million leasing a Terraces. impact in million foot property on lease Jamie in square that The million described significant leasing at resulted fourth underway to AFFO. the renovations commission reduction XX,XXX $X.X the quarter

to We real suites on closed impacted fourth million the in was noncash in spec an the also estate end. which price impairment conditioning. after invested $XXX,XXX of $X.X Net income Superior quarter vacancy Pointe, sales of by reflect charge quarter

of our metrics. on some Moving operational to

XX increase the signed XXXX. Raleigh, There compared occupancy. of increase The trended quarter the continues $XXX,XXX of NOI cash quarter. in as or fourth contributor fourth to NOI where same-store as that take as Our higher largest to X.X% a materially leases was healthy to Bloc was

Our quarter the quarter. occupancy prior an portfolio XX.X%, increase at of ended the from full X points percentage

XX.X%, of leases have signed feet square was that inclusive not commenced. XXX,XXX occupancy of the Our yet

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

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

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

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

matures in be. ability maturity we can That which Our covenants in option XXXX XXXX. as days in to extend compliance to to XX comfortably exercised are it we long November the to facility credit remain be as projected with our prior August, with an debt November

renewal. As that such, exercise a to we discussions option expect and continue on

Tampa both Boulevard Greenwood only in The loans quarter. in debt XXXX. in the for maturities We X property mature and have Orlando in fourth

We begun update to have next expect discussions call. an provide quarter's on and

Bloc also We XX City properties, and high-value unencumbered. have are completely in Raleigh, Center two in Tampa that

in see markets. to improvements continue debt We

are financing improving potential As liquidity trending despite terms back, comes recently. higher interest rates long-term

to assets to given XXXX place our this liquidity expect We debt some unencumbered increase of backdrop. on in

anticipating the me, but in disposition Superior dispositions. a assumes And to lastly an guidance same-store Despite no the year, portfolio we anticipating increase overall as Jamie in Denver, known occupancy described. year. in half first the XXX,XXX of increase by prior feet largely we square leasing are with Overall, non-Sunbelt Jamie growth our XXXX X.X% markets are to have The provided by properties other NOI a healthy for compared year-end, in X.X% acquisitions guidance. the range includes two cash Pointe of vacates mentioned, driven that totaling as recent Sunbelt momentum in the our we of our or in

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

Operator

comes Upal Instructions] Rana first KeyBanc. from with question [Operator Our

Upal Rana

So the in currently was I What characterize you wanted behind to reasoning Pointe. the Superior is kind about it? transaction the of disposition of selling could the market And talk terms how market? of

James Farrar

the for Thanks Sure. question.

is real bag top are markets, Denver and of we've a in kind including some of other in our value creation grow a some lot and rents the in respect. ability really prepared thrust kind that the of remarks, as Sunbelt for markets And mixed So in there's slower. indicated to

could that a And invest the high of terms looked we bit long weren't upon, execute lease challenged thrilled. not we a changing what for a of capital. it's Superior, So When wanted see didn't we to where it's a and place we time, vacancy. at submarket, we

we to were the the create best and submarkets to So markets one best exit our efforts really opted and that focus value. on going

what overall, illiquid. for mean they completely markets seeing we have were of office terms are In capital significantly I the improved.

market, smaller we're also be case transactions more point see interest Superior would to now asset of top starting smaller just transaction. assets the starting interest. you're buyers, the assets, So and there's the for in to But investor see in best our

think market that's the say to in terms is improving we going I'd continue. liquidity, and of So definitely

Upal Rana

Okay. the I quarter. portfolio you you Great. maybe Sunbelt noticed And this total that, behind to? then color some occupancy and that That broke guys the was reason add helpful. in occupancy out Any can

James Farrar

Yes.

create markets. are look a going when time, If lost we -- in where bit going gets it to you be the again, over Sunbelt high-growth to our think, portfolio. to at most back you value And it's

occupancy it growth to going Sunbelt think the thought significant to we few over both. years provide as So well see growth. you're rent as helpful And was next we

Upal Rana

category assets -- do maybe suggest in you those other could that -- sale? in Okay. then are for And those that for the think four does consideration that potentially this

James Farrar

I in didn't a beyond asset. guess is a We guidance. tough almost I market. say really needs I any Superior It's Portland what to mean ignored. it's would put dispositions tiny our be

we see different. market. in don't is significant And so value that Seattle

We Our a point, location. good way of asset. a leased Pfizer. tenant. one great to It's some That's asset very it's there, think that, find we'll exiting. it's at great a It's a

of. Denver advantage but at a had a one Center slower term, of So portfolio. our take I The whole little ways success markets term. of it's Denver, don't respect to value. We've Circle will Point. looking has mixture. that Tech of Its that's bit as in of slower. longer a near creating at with lot it's We're improve, a And market been a kind think then been capital

to activity seeing starting leasing up We pick are there.

markets that get in best to going create trying we're overall, So to they how are expand we're time. around we over do our certainly grow value but or arms

Upal Rana

tenants. it then office the on Great. d be makes any for give X is color your on exposure. that, Do It would last about And X.X% U.S. Okay. your have if you And as And helpful. this of of expectations any seems lease attorney's can for be in given your me would 'XX? the GSA just the you have expiration on like that -- you portfolio.

James Farrar

Sure.

So effectively, it's in our Park building. Tower

It's top stats. believe. the floors, the nailed I seven You've

phenomenal views, of at the great So lease Their location. rules 'XX. end

can that's the they we're what their with discussions say utilized heavily too where I But is having at to natural some land. going early them. point So of space. to It's say

can uncertainty around be some logical long obviously, it. that like advance they'd there to it's that term, So we there's until but

Operator

next from Oxford Our Colliers. with question comes Barry

Barry Oxford

you opportunities? secondly, distressed with how Jamie, I'm Or rate any not acquisition cap as opportunities? look, playing at do your acquisition are cost number seeing look you Barry, the And one, of opportunities, capital? in you the then balance distressed

James Farrar

we buying luck I assets ones and past going value-add then know don't want we going So we've that's of we do the overall, in properties are amounts taking them. value to up had necessarily be I over lot years. creating monetizing haven't and those seeing lenders to turning what them and distressed although to if yet assets in the over a pick then that huge of next are X sales. Barry, back seen think own,

not pickup portfolio, which forward translates completely. for the value But for at assets. next that renovations, other higher So and within capital our something we it's our I right work assets now, leasing through year, level, improvements, closed those some to we as see NOI the asset put look opportunities best of good

now right will that's external really would focus so the I come And where is down say, our road it is if makes internally. growth sense.

Barry Oxford

do do it? you how Jamie, your And you Great. space? at look spec want Do more of to

James Farrar

Phoenix, in feet as Tampa now. XX,XXX it of about lot got we've So A right well. is

I up. think of Phoenix would as be activity out picked our list. of right all has It of as far top leasing now our markets significantly

have that successful next based spec far in leased. we're good right what So and actually we're most think We're in we as there planning phase to the kind do as we're where that of on we feeling going going demand. be the of XXXX now getting to suites

think call for location, build that's a probably be on or find so two, still we I rents, smaller little doing suites. those we'll out, better we time. the next If on you I the over right at the So particularly a can great in we give more question color build right product we're getting but

Operator

with from Kucera Markets. Lucid Capital Our comes next question Craig

Craig Kucera

to it utilize use? of as about curious or I'm Yes. expecting the office to buyer that the longer term convert point. Are for potentially another they Superior

James Farrar

the is it of and they build going then to office. in as was So invest understanding are office. a out a my lot significantly maintain it property, And family amenities

Craig Kucera

Changing are any no transfers? it. your . mentioned dispositions, contemplating gears, you you Got there's guidance, in lender but

Anthony Maretic

have maturing at property And both that loans in that advancing we the at quarter. year, So Boulevard the both, one leased. this with discussions two point, of XXX% started on fourth agreement we are is end the this

are And other discussions a the are going, little of starting on an discussions stage. more those So advanced loans. then

we have are the guidance point, maturing are at we that mortgages this year. any not including our dispositions, in assets this assumed So with that making

James Farrar

discussions to could long Tony extend in and That's that jump which actually Just the well. with agreement of pick that is and And potential balance leased in raised down are submarket space take position a the on you a that to a Mary to add up. point. Boulevard long-term we tenant on good come as some of The space to basis, that term. mentioned a started asset us very to Lake and back with because

example been an one where past. asset the it's So it's in

be I of utilization think lack that that completely talked bit we've of could had about a little changed.

Craig Kucera

it. Got

large mentioned will commenced, 'XX, not of the the known but begin rent half in paying the vacates do anticipate when you first XXXX? You but in lease,

Anthony Maretic

spread -- that through lot mentioned. feet, you Phoenix. So the they're we XXX,XXX in pretty The evenly A square is as year. of have out

up. As Jamie talked it the picking And some about of spread -- but market year. that's end the been till is

long still tenant figuring deal a the improvement year. Dallas the will that's have timing We of in how work later in work. We're the

spread. evenly pretty it's So

Craig Kucera

Great. Okay.

give condo look up Just of guidance? one And or more what impact for is you Can that on any any . the anticipated me. that I 'XX, just us wanted St. color about in like? a Petersburg. guidance to or talk might start there's follow to sales at economics deal there the might there given

James Farrar

There is no the in guidance. impact

rolling on way more who will touch the and is So where soon We stage. a partner on maybe the project give little development details the been about leading can too developer, experienced that, many very has the project change at late forward. structure, garage just the way going are a at we too that economics we in and point the that, a yet. we're contemplating parking share development can't our then It's color. to certain a It's of early when talk we think provide our economics. But hope derisked participating we is

Operator

you closing now to We no over any currently remarks. questions hand for more Thank back have Jamie will very I much.

James Farrar

updating quarter. to today. you We Goodbye. joining forward you look Thank for further next

Operator

our today. very you Tony, much, Thank being our conference and speakers Jamie for call. concludes That

disconnect lines. now may You your

City Office REIT (CIO) 20 Feb 252024 Q4 Earnings call transcript