PKST - Earnings call 2 2023 | Peakstone Realty Trust

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Operator

Greetings, and welcome to the Peakstone Realty Trust Second Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Investor Relations to begin.

Unknown Executive

Thank you. Good morning, everyone, and welcome to Peakstone Realty Trust Second Quarter 2023 Earnings Call and Webcast. an Investors supplemental at page posted presentation updated www.pkst.com. we the to on today, earnings and release, investor Earlier our website

on company making the which are Please of be by historical facts on of provisions of use considered not those all call for this forward-looking. these contained are are in harbor company XXXX The this statements note purposes made for webcast. by include forward-looking Act may and forward-looking Statements Reform intends safe Private statements the the covered the statements Litigation combining statements safe to Securities for harbor these and statements with provisions. forward-looking

and risks, may beyond those in expressed views including, to Furthermore, future numerous and are of quarterly by than a events uncertainties, affected XX-Q variety the report risks cause differ changes recent on significantly most our forward-looking and limitation, are any factors Form unknown to without the report Form annual assumptions circumstances in actual will XX-K that statements SEC. forward-looking and with our on results or that current statements control, company's those be filed the about subject in contained and reflect known

changes applicable or required the disclaim of as underlying other to assumptions future date We new methods, except revise or of call, by information, publicly obligation after any reflect to or update events factors statements this forward-looking changes in late. data or

certain from financial adjusted EBITDA, operations, EBITDAre, adjusted on operations, the Additionally, refer such measures funds this call, funds as may EBITDAre. non-GAAP company from to and

company's to numbers the of SEC. reconciliation tabular GAAP non-GAAP filings most the with comparable currently the a measures financial in find can You these

and Chief Escalante, today Chief Officer. On Executive Michael the Javier are Bitar, Officer; Financial call

hand I'll With Mike. over the to that, call

Michael Escalante

XXXX Thank review with with Javier And look the our financial welcome closing comments of Trust and an results by we and begin Peakstone then achievements I'll providing you, future. sheet. follow Quarter a our the key will as Call to return second overview Second quarter. of to Webcast. balance Earnings and during to I'll Realty and subsequent our finally,

had executing on the We in and preferred our very NYSE deleveraging our progress shares listed and our made disposition We and meaningful strategy. quarter. a redeemed shares active

results were charges, related to quarter impacted nonrecurring financial listing. for and our asset related However, impairments the noncash to primarily by office expenses the

to million. parent totaling up Overall, XX.X leased, our properties, years term guarantors [ REIT our or $XXX of lease have rents continues had non-guarantor from quarter. a high-quality, portfolio average last of XX.X% their base million end performance. consisted XX% tenants, annualized ABR or XX portfolio the applicable, industrial weighted or and was At portfolio an X.X approximately rating. ] deliver of newer-vintage quarter, entities approximately investment-grade our with as The square office and of wholly-owned the consistent of feet XX%

During the business quarter, successfully balance we continuing our our execute plan. strengthened sheet to by

savings of As by on to million to Shares redemption international generates These a distributions. approximately previously Preferred $XXX preferred A issued $XX disclosed, third-party investor. our annual we cash were shares million Series par. and hand redeem at The held in used

for the an at X.X% gross million, average of gross X cash approximately rate proceeds sold properties $XXX disposition $XXX assets. proceeds We the office for to million bringing cap year-to-date totaling stabilized

by property quarter. portfolio X.X consolidated Following to the leverage for of the improved the our during quarter, a redemption this turn and sales improving X.Xx,

start target Since closer and of to to our we these our cash X.Xx net EBITDA. for near-term to of we are capital our concentration as a X go-forward have reduced for we're and from office our improved turn Xx by debt allocate of aligned with strategy. X.Xx, flexibility us the our result over dispositions moving leverage year, the to holding maximum The uses affords prudently

our X.X segment, quarter In and X with segments. WALT XX our economic XXX% million of ended We consists occupancy Turning the a totaling years. which of square to properties feet. approximately Industrial

see to sound continue our fundamentals We in industrial markets.

to East and property robust Coast is volumes, strong demand top these benefit to in these activity properties in Charleston. ports. markets of the As Norfolk, New stemming is port we from an this U.S. the fundamentals example, our own ABR XX% New approximately which will Jersey segment volume activity. economic Savannah, believe are in growth ports for and of our growth space we markets, Many Container driver important and generated are proximate industrial of properties ports realizing York by exhibiting an continue and notably container from

this the Industrial in for regarding Jacksonville our market segment in Our continue we late. Samsonite dialogue segment in nearest an a with and of the tenant lease fourth renewal. XXXX. that quarter This of X% leasing of have ABR, experienced expires is a activity noting expiration accounts to meaningful lease Jacksonville, active It's worth which potential asset has

opportunities, industrial high-quality appropriate, we additional, enhance investment evaluating intend assets further to acquire team to portfolio industrial composition. our actively when Our and is

We square Now consists limited of X.X our second rollover WALT years. segment This stability X.X which segment, XX% to to million approximately turning and the near-term quarter XX provide feet. a continues ended totaling properties with with Office exposure. of economic occupancy

less X.X%. XXXX. account Office in expiring in in for We of expiring ABR remaining Leases XXXX leases X% segment for have than no lease and only XXXX expirations account

fundamentals prospects building our and are prospects. optimistic contains is we the about market. occupancy like quarter San this demand at key by in located X.X% currently, Economic Class at Terraces And Copley Point to modern our XX,XXX A lease prior re-leasing highway excellent segment foot with prominently specifications of Office in intersection at from Diego. the We This a the declined property the visibility. a in square due expiration and

our starting upticks We're side also stability as believe we see we're prioritize due in to tenants green office the following Largely moving in-office shoots markets, RFPs. positioned office our provide forward. assets occupancy differentiated tour demand by the daily are Across increases on well ongoing activity physical to continued in to encouraged attributes, work. and some with

age XX% segment Office of building specifications markets, years, leasing experiencing competitive ABR amenities, and are from many is and offer market-leading net generated office and Sunbelt our average advantage. is superior which fundamentals. of which properties XX coastal generally strong a or offer our Our migration Over

And headquarters, XX% costly or replicate. as critical R&D, our functions buildings center finally, over to and contain center, corporate which labs essential difficult such demand data of operations, are

our Other by protection. to totaling Turning X.X downside square properties approximately encumbered properties provide are XX own of loans segment. We these that XX feet. nonrecourse million

point, the basis properties We is. in as determine the evaluate vacant a disposed of X X or capital on to to additional that during best properties them quarter. segment invest way continue to to whether the maximize sell value, remaining the case-by-case we To

manage to properties in our Finally, in provide Board program flexibility worth own sheet, the XX of and which future. addition Trustees venture XX to sourcing subsequent million our also approved office the a X balance that to mentioning diversify XX% to joint It's to additional end, offer in buildings. contains at-the-market or options efficient mechanism quarter the segments, capital a interest $XXX access we a capital

With that, Javier let to results. me turn financial the call Javier? our to over review

Javier Bitar

year quarter, XXXX. X properties million. NOI the Mike. quarter million, total the to to in was and XX was prior primarily change in $XX.X of half The the $XX.X revenue disposition Thanks, same due the compared XXXX, and properties of was in total the In second first

employee Stock million $X noncash noncash per write from a expenses quarterly charge primarily approximately share, from shareholders from the hold estate interest to attributable in listing $XXX.X to attributable approximately similar common had X losses costs related vacancies investment JV initial and our will following: impairments debt $XX.XX million preferred nonrecurring a company's segment joint million selling assets to due segment expense, related shares the loss the of in $XX.X $X shares to continue amortization. anticipate periods, million $XXX.X or the recoverability loss real have redeemed $XX.X to had million the the anticipated was of expenses of year. relating of and of estimated net to that of assets. changes on off million issuance venture, and severance. to Net office remainder And and for primarily potential impacted of We resulting Exchange, X the We prices also million, New consisting deferred depreciation other we transaction for our $XX.X now the to York

negative note that share. was Please diluted a or quarter the million excluding would $XX.X $XX.X per approximately $X.XX and FFO negative million diluted nonrecurring basis. basic a fully per expenses, approximately have of million on the $XX.X share second or $X.XX been for FFO

annual per onetime was in $XX approximately was which and prior on approximately termination $X.XX quarter fully represents X.X% increase the excluding same-store year. received cash $XX.X basis basis same a diluted million the of after share on or AFFO NOI million, a fee an a

sheet. balance our to on Moving

we on capacity June $XXX credit and million available of our million. on million approximately hand As $XX of in $XXX XX, approximately for facility XXXX, cash revolving of total liquidity had

We assets more to also liquidity $XXX capacity we or than our by add available unencumbered have facility the to million. could that increase

million In regard facility and approximately total our debt. consolidated $XXX secured our on of to debt balance billion, consolidated $X.XX credit was the debt, consisting

as of money holding is are in flexibility X%. the range cash cash significant We our million going the provides $XXX it and market of earning in portion accounts a forward in interest us maximum

inclusive outstanding exercised. of was Net our was average swaps, Approximately volatility. assuming consolidated all debt rate rate maturity billion. approximately cash X.X years, of has effect the term of are of near-term fixed interest to interest extensions debt to $X.X total exposure rates, limiting Weighted inclusive available our our XX%

of effect the X.XX% rate rate swaps million, a fixed a rate have variable combined. interest The and our rate debt maturity with average the interest swaps Including of of XXXX. rate interest notional was $XXX amount for weighted July date

as $XXX EBITDAre of XXXX preferred improving plus balances. of end debt the on XXXX. preferred as current quarter normalized a the The year-end and from in improvement net X.Xx small portfolio to a sales X.Xx was resulting cash by resulted offset in consolidated our total X.Xx, quarter debt our preferred reduction of for plus from and in of from our million redemption change proceeds And

matures one property of segment, the $XX.X small we in XXXX, September. million secured For loan Industrial our remainder have which in

pay ability maturity We proceeds cash the the facility. revolving loan or available credit to our with at on hand from have off

segment, of maturity. we have II AIG no facility that, loan loan, balance the is Other approximately we'll Beyond $XXX until our in have including million million maturing a our our end term and of at mortgage $XXX material which and debt XXXX,

Finally, for as XXXX. to XX, amount shareholders we record July per distribution of second XXXX, in the of common paid share $X.XXX XX, on of quarter, the June a

While dividends frequency be the to quarterly amount Trustees. Board all will dividend including on a company expects made forward, going of and pay decisions, the by basis

closing will to back the Now over remarks. I Mike turn for call

Michael Escalante

Thanks, Javier.

leverage. to of execute continue our Our on continue positive team's differentiators our sales operate our cycle-tested as portfolio, be experience the we assets and property and quality to reduce

focus with to cost continue will on strengthening we as and more sheet a forward, to rating achieve our goal an we capital soon Looking as investment-grade balance the favorable can. of

the deleveraging We pace upper we that the our are close target. we achieving about goal, and optimistic are will of to hit at end which

a We have market. continue positive on to the outlook industrial

I remain and further composition shift deploy continues when sector. industrial capital to appropriate, in the accretively intend previously, time. allocation and a capital As team to our strategy assess lean portfolio to over to disciplined mentioned investment opportunities our industrial We committed we into

Despite the degrees strategy us and is our maximize on positions our for volatility execute of environment, some believe varying we portfolio macroeconomic our markets well shareholders. resilient stable, to value capital to and high-quality in

at Investors Investor over the a to to section the ir@pkst.com our from We'll out take Relations at now pkst.com. with team few turn reach website it analysts. Operator? to visit questions any of operator questions our Please or

Operator

And of America. with Instructions] of Dennerlein question first Joshua our [Operator from the line Bank comes

Joshua Dennerlein

And general last what's sales. asset today? talking were I you then for -- what are there -- else the office appetite mostly on guess, when we curious setting office... just you Just and out met, marketing

Michael Escalante

thanks Josh, us. joining Yes, for

guidance not sales, to you a given moment. look guidance We're the uncertainty life we're date. So pretty know. We're And you at to quantity well cycle as active in marketplace. the at of of going the the early later we're in our really provide and giving timing

marketplace. million market $XXX of look you quarter, the worth at levels pretty million as And know, when sales are surprised the our roughly by think we've this been attractive did last access us that, in clearing total. that terms in we I of But on pricing at you all to ability execute $XXX to

sharpshooters buyers understanding a the banks. of aligned and as very So key I to our very they exactly financing, there side element is relationships we're the keen the sure financing -- how out buyer our is is local if think that been on debt very, process going part we have debt Many with And local and of the buyers, that difficult equation. been have one we've process transaction. the in you play making we regional will, as community long-standing

that worked So has our favor. in

tell on know So I of a and it's pretty if lot you, don't our we've pace at lot I handholding good to I and part able would been a -- guess a of execute diligence there. today

Joshua Dennerlein

Okay. thinking so have expiring Appreciate just about you that then of XX% leases next year. the color. And portfolio, the

portfolio XX% expiring next of the Just or year.

kind with tenants, point? are Just conversations this any going move-outs those curious how of known at

Michael Escalante

I Yes.it's- hit we our think in as of commentary. directly kind that

might have But our a we think we of segment-by-segment the XXXX. was so I You right? talked which the really about X.X% we Industrial on key openly is one missed exposure segment don't piece Samsonite at it. -- through basis, it look that transaction,

And that about tenant. I on the in is in there And Jacksonville discussion industrial that going we what's we're are what told with market excited overall. think active very we you

only office the expiring under just we have X.X% through X% or segment, XXXX. On

office We picking think the has leasing I And the pipeline of shoots. mentioned properties notion green for been up.

And you're so is mentioned past. referring we're in about to as pretty is really And our segment happy the where Other we've in that our that. exposure

see as We have a where rollover, transparency and our in supplement, it as of in, I to guess, you'll out. specifically lot that called that's clarity

And a moving promises tenants. there. those in with can actively think fair regard. of we're in that number No But discussions actively to we we're what see do I engaged

Operator

Securities. line final Hau the our Anthony question And with from comes of Truist

Anthony Hau

particularly Josh's for the Other on building can It X on you want would be and pipeline Just the up about Huntsville in segment, provide those to II. leasing KBR great if Westgate some the follow color pieces? question

Michael Escalante

of every we're portfolio. be. property as providing can in percentage don't places really the many just go the do generally level size And We're of possibly because engaged that specific did We not in that property actively there. say just our and guidance. on the of for I'll it ABR into Samsonite we as we just detail

So sorry, Anthony, on that one.

Anthony Hau

the How when JV cost is worries. off? No And also performing? reach financing that for portfolio workspace does burn

Javier Bitar

JV, the financing had there. on we the that loss is yes, and loss of to Anthony, depreciation. a Most related amortization of

will of costs, that million financing the quarter, we amortization and have likely the in end through year. of Within $XX.X the continue about the

may lag you in the As noted quarter we the Q, are on a of have JV. with our X reporting

acquire occurred of that that in put in financing was year. initial place the So to September portfolio last

those and -- So costs were incurred upfront.

from months to XX occur. see next amortization September, the over you'd So September that

would occur in fourth that us, quarter. the For

end So similar should we've that our prepared said what amortization in is remarks through of amount you expect the year. to the a flowing of see

Anthony Hau

portfolio does occupancy like spreads terms how And growth. Okay. NOI performing like the in or like like or lease of like

Michael Escalante

we're what don't we not of I flow. would if wanted out I that know flow flow, else through flow to a of the think to add you cash the agreed as portfolio add the continuing to reserves just that positive us to result The lender would because thing that anything with anticipated. that? is of that cash you lines positive continue on that tell contractually, we I we to only does course, there's along produce of cash

Javier Bitar

I No, all Yes. that's we provide. think can

Anthony Hau

to XX in can question a assets. last leased my the bit about in are office years X in all interest maybe like whereas you little or had overall the And I terms noticed get talk more the from term, of quarter, ones is, the portfolio XXX% segment those like in assets were sold and that sold maybe ones all pricing the Okay. maybe vacant. lease other the you

Michael Escalante

Yes.

bit little on you're property information the looking So sales. a little a and more for sales

Anthony Hau

Yes. Yes.

Michael Escalante

end. our on little scratchy this is a Unfortunately, communication bit

other on the you global think on the WALT. you to portfolio, were vacant that they a What relative a I office more And Other out term only pointed information quarter, longer to -- provided really relative the basis. we've cases So really a assets. assets generally correctly -- second the were of X in

the in got think that's can you. I specifically. I more We've give the probably best detail queue

Javier Bitar

-- the note added you'll proceeds you of each by X the gives information asset Note asset on one in sales to table We've a of for Q. queue, that Yes, that the those. there's for

Michael Escalante

Does that Anthony? answer your question,

Anthony Hau

Yes, it for see, I didn't does. out. to but that pointing thanks really

Michael Escalante

Yes.

Operator

Mr. concludes the session. remarks. the closing like for to to turn Escalante I'd question-and-answer This call back

Michael Escalante

operator. will our forward joining appreciate for to today you, achieving our your And you to Thank I everyone progress next X time. and we us now. updating during our roughly on look webcast, goals months from quarterly

So again, thank you it. Appreciate for your And... time.

Javier Bitar

Thank you.

Michael Escalante

Bye-bye.

Operator

This concludes conference. today's

time. participation. your you may Thank at You this your disconnect lines for

Peakstone Realty Trust (PKST) 8 Aug 232023 Q2 Earnings call transcript