PKST - Earnings call transcript Q2 2024

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Operator

Greetings, and welcome to Peakstone Realty Trust Second Quarter 2024 Earnings and Webcast Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Mikayla Lynch, Senior Vice President, Corporate Finance and Strategy. Thank you, Ms. Lynch, you may begin.

Mikayla Lynch

you. Thank thank XXXX us Earnings and Trust's Peakstone for Quarter Second Call you afternoon, for joining Realty Good and Webcast. posted the our we investor today, an supplemental release, Earlier and presentation to at Investors website on page www.pkst.com. earnings updated Relations Please at any of statements ir@pkst.com use on company team by reach the our the note this with to forward-looking out Investor questions. Please webcast. may forward-looking. not historical are considered Statements are made facts which on include statements this call and harbor Section covered are variety date or except publicly or applicable underlying filed events data any with after methods, assumptions information, the any call, risks significantly by quarterly on new purposes company statements for intends safe Litigation as annual forward-looking provisions. Furthermore, all uncertainties, in law. recent update contained are those Section statements unknown to the the of may changes revise complying Exchange XXXX assumptions XX-K the affected our any forward-looking and and of and provisions factors, reflect The the or subject and XXE to Form other including, and a cause limitation, changes safe company's actual this by SEC. We in to as statements future to amended the Form with statements Securities the to obligation and differ subsequent harbor Act for could reports changes is events in Act than forward-looking the factors risks, views be statement and by or Reform any forward-looking applicable forward-looking statements required be as our most making Act XXA control, for Private in reflect about current Securities known of and amended expressed of XXXX in that XX-Q numerous that Securities without beyond of those disclaim contained of of circumstances future results of XXXX, these those report on

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

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

On the CFO. over Javier call and that, and Bitar, call With CEO the Mike to President; I'll hand are today Escalante, Mike.

Michael Escalante

thank joining call and for afternoon, our Good you today.

Over past our strategic optimizing portfolio executed we several by our to quarters, a balance the balance accumulating substantial have while plan and optionality. on cash composition, provide strengthening sheet our

on unsecured pleased these investments, operational diversified level, industrial a that key have As is solid our bank the Javier does our successes term maturity our group's for us proforma grow. later sheet metrics amendment to with years important balance in things flexibility lowers our costs, provides flexibility a increased credit facility. This value foundation of It out details are with we us. several time. us and along successfully business over amendment reflects It and provide increased portfolio, this the to pushes from shareholder a XXXX extended milestone provides and loan believe will make testament plan to At to endorsement will build long-term growth it well-leased to amendment XXXX. our high in additional remarks. closing we amended his and and for borrowing X revolver which a with

Turning to portfolio. our

in representing for XX,XXX segment of requirements. Disposition million. years, years, stability in near-term XX.X% rollover buildings our significant this credit a Mechanicsburg, economic the $X.X with industrial X next X these sale tenancy X.X% capital with with approximately square Pennsylvania, for minimal other the occupancy, continued quarter high-quality located newer of provide one assets minimal combined and of feet property totaling segments segments, office the ABR of wealth continue to Our and X

segment sales first Importantly, of the year, other half approximately million. the for totaled $XX.X

sales of year. properties, continue the advanced the and progress we the for in addition, several significantly balance to this of In will other segment dispositions segment we

our achieve we re-leasing demonstrate ability quarter, to activity continued positive leasing to and This strong spreads.

and of takes for XX% escalations executed foot at the annual a This X-year we resulting re-leasing square Samsonite In rental XXXX, extension our a December Industrial the GAAP in market we segment, includes rent and cash fair 'XX in spread. Florida. and announced XXX,XXX rate fourth annual finalized property Jacksonville, X, X% increase quarter escalations, our X.XX% effect in extension and

June this this was financial property of recorded spread, Clearly, X which equal no-cost the further X-year with expiring our Largo, extension per transaction the the the was value growth. In enhance I commenced our base previously will internal to the the solid XX,XXX-square-foot executed segment, finalized re-leasing will Javier? for In XX% new review a the at lease foot Given turn extension the at lease. Columbus, an executed this value that X.X-year rent industrial lease segment, fair previously to in rent Other when Florida. extension asset. With property a floor the a market not at square to rent, executed, generate and results. strong period a call is lease XX% we was Office we Spectrum which GAAP cash in that, over lease XXX,XXX Javier Ohio, will

Javier Bitar

results was million. approximately basis, or a on XXXX. basis. of share approximately diluted AFFO sharing a in through approximately lease Total by The million, lease to But diluted and on FFO, increase common segment, X.X%. grown a compared highlights XXth $XX.X attributable as Thanks, fully was million, by approximately or sale. Same-store cash preexisting $X.X $X.XX shareholders share a loss fully quarter. $XX.X million few $X.XX NOI was $XX.X the abatement noncash segment a our Industrial per period same-store to Net like was $X.XX cash a of $X.X $XX by of $XX.X was pending impairment year. same or other X.X% NAREIT, NOI would last a defined and the for per have for revenue year million approximately November this financial per Mike. for in to I'd abatement the rent of to million approximately related inclusive was NOI quarter million begin our share, continues

on to Moving balance sheet. our

are revolver, quarter growth As extension Mike years strong $XXX we and Subsequent million $XXX and years. position loan our million The dates down and facility the for facility of $XXX sheet X.X and end, a the given on amended of The is completed term extension, follows: maturity this now credit loan XXX of term end, high-quality maturity liquidity XXXX. our SOFR-based ample mentioned, million leaves terms the amendment execute to with the spreads facility million points. now revolver to to term a to rates support balance quarter of simultaneously maturity $XXX and $XXX to great $XXX closing have total of portion were were July our initiatives. Key with loan million to we to used portfolio. a a a in a and from our X at pay facility us the comprised extended we million remains flexibility term basis facility date term as loan. cash which industrial credit of XXX applicable ranging credit XXXX. are average April weighted The The from the

X.XX%. our now a swaps the effective ratio, debt XXXX. average of fixed million expire purchased swaps entire Based rate our July on effective consolidated rate quarter through XXX% average interest Subsequent swaps. we current of our when weighted our July current X, interest July inclusive to current X, X.XX%, X.XX%, of weighted through facility forward is XXXX, of XXXX, of weighted a our at X-year current rate interest million $XXX leverage X, at our is of end, rate $XXX Given swaps outstanding for average rate

X.XX%. valuation industrial now the rate of for for certain are at included $XXX previously. an these would to able assets X.XX%. provides additional X-year current rather in to than amended The our also the calculation. These X-month facility we now forward improved are as X% term variable swaps, a We we debt extension. that our cap pleased I When assets was were impacts SOFR a like borrowing at closing the result purchased swap million financial of base period rate X% valued discuss an approximately

have of for of of interest debt of debt million, connection of million consolidated the on As in closing incurred important of that note $XXX interest unhedged the interest with income consolidated average EBITDAre the of million interest are revolver debt amended for cash million, to offset cash expense net $X.X cash. $XXX balance income of X.Xx. extension, the range approximately X.Xx, in this the used of term, earning normalized million net associated liquidity costs. our to of ratio $XXX generated that in $XX interest as facility transaction the of of all extension, X% The total and we $X.X of of available income reflecting the facility net majority more debt unsecured and previously normalized capacity reduction reflecting approximately we with the one-time million, to closing near than utilization our interest $XXX approximately approximately the the of X/XX, prior million, $XXX follows: ratio was end, and our earned million to said, of to savings approximately second rate With weighted quarter. It's $XXX $XXX cash cash million, the the quarter secured X.XX% cash of second and prospective the EBITDAre approximately proforma $XXX proforma metrics the at million quarter. Accordingly, the income. In down in pay credit million interest portion

September $X.XXX For Trustees $X.XXX Board the October of third on in per holders July. approved record to a XX. paid a share, share of the dividend quarter payable XX on of second dividend common per quarter, we And of

that, pass to call basis, be dividend company Board the all Mike. to will the continue future back dividends quarterly will While on of a expects I decisions made Trustees. With to continue by paying the

Michael Escalante

you, Javier. Thank

with execute industrial, achieved and as our for We relentless segment The our we shareholder evolving to with the the on portfolio to credit will amended other providing the to we've company plan is that key maximize momentum credit growth laid eliminating flexibility value. are towards the out, growth about strengthening Overall, facility to we build aspect facility. pursuit balance amended financial grow. our our the the continue seek a opportunities and on sheet, reflects excited

the take analysts. from operator over turn the to now to a will Operator? questions few call We

Operator

Instructions] Josh first the [Operator America. of of question Dennerlein line Bank with The comes from

Farrell Granath

Josh. And on the what I off, guess into start This questions. I is does a targeting is? just Farrell me target forward how how play you're financing remind thinking new to leverage kind of can you had leverage? or looking your And into few Granath behalf of about your

Michael Escalante

Javier?

Javier Bitar

our that in over bit remarks. We're long we've Xx a we're long -- the the with the basis, to segment. Farrell, to interest I a as term income with sales a on of utilization respect term, a result the execute the mentioned other We'll on debt-to-EBITDA to yes, mentioned continue lost a proforma up on on X.Xx paydown. program as of cash targeting our

to that makes continue term, on and focus over the sense. we'll strong reaching ratio So balance long debt-to-EBITDA our a sheet,

Farrell Granath

also, consider wondering expirations if on, you when and to re-leasing Great. the Office? coming that in the And the the segments, the about I extensions either segment. different segment re-leasing in Other could the was comment also the thinking and lease guess, thinking was the noticed other when I you Industrial about how strategy bucket there up or versus I

Michael Escalante

Office on very has, is the next of years. both The think, have the rollover And little both specifically, side. in good rollover office the only X% I right, in X we core our Industrial and news segments,

So there. activity of there's a not lot

translate basis, which is been some and the that, do. set we've and for you those had other recovery assets. a more As might the much our of rapid -- to -- facilitate were was believe, other we to And into the exposure, the hopeful was we up we to a it segment we expect, sale renewals, would going on all identified other able be way effectuate higher we segment that to most be that happily, that able going of

Farrell Granath

it you I When keep also, And the rates? mentioned could a believe what Was then vacant And asset? the quarter, you're of in one seeing it wasn't sale update you one of cap that either, that track a last rolling basis. guys you last if about one me. I guess, Great. you mentioned on terms for property. of

Michael Escalante

said we I'm the asset one quarter. you -- sorry, in only So sold

Farrell Granath

the the or Sorry, -- property.

Javier Bitar

in others. quarter was did correct, have year. during we that this an Yes, one the asset And sale had near-term April a expiration of it in

Operator

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

Anthony Hau

NOI change in amount on portfolio like months days? commitment four NOI the or revolver? Was it calculate was did maximum rate? the Or the what use XX behind and capitalization XX reducing curious, they on Just reason the to the months last --

Javier Bitar

we rate. annualized, from transition rate Yes, the well our Hi, the on in result we facility, change We it go-forward us Anthony. in quarter a we a which used cap improved Industrial, valuations did for use prior and Industrial. -- on toward will the capitalization basis as serve

Office it capacity. on and cap didn't execute in X% at excess on went to the rate. accordion to a X-K and And leverage the do $X.X on the the have the We XX%. accordion note from At strategic cap up sense fee that plan. the we pay we X% utilize side, up you'll non-utilization ability rate back our side growth a to continue have as an billion, Industrial to to at make was we office the as for side point, was a leverage capacity XX%, -- we'll this Also, percentage for filed, the

Anthony Hau

like Got the for anytime that you to want? the option? exercise conditions just Or certain you. have and upsize you And the to you that there exercise option just accordion, can meet are facility

Javier Bitar

have member we compliance, obviously, approve. to have banks to and would then, Well, be the in

Anthony Hau

Mike, color that saw this quarter, you for that. Can curious you. meaningfully provide I any drop just -- is caused this the the for maybe tenancy investment-grade And tenants some which portfolio? on

Michael Escalante

the back relative think don't to depending core result meaningfully, segment. happening but sales -- the I is you Yes. forth of around some other bit their portfolio are tenants little what mean of example. and cusp some We side on a certain a ratings fluctuate do the the an by that of to inside the tend as know on of I on of BBB-, as part

Anthony Hau

Yes.

it So it referring Industrial, XX% I like say, the to XX% this I and... went went was from right, from to fact -- think quarter, for that

Michael Escalante

Yes.

related that going. and could -- be I that be to related to think So coming hardware could restoration

on that it at is a end, within this depending quarter and think time going in in but on what's the out to marketplace. I they tend first happened the quarter actually move the

Anthony Hau

does versus how today watch tenant like like year And Okay. ago? compare your a list

Michael Escalante

awful credit you and of tenancy. had we as our and time I again, Well, an for spend some we've looking time. monitoring And XXX% managing know, quite lot collections think,

and this going making it tenant all We on I as de really don't part look minimis, just it We every what's a understand we I so... of So our call policies there. we at watch that list. single receivables -- call And time, think, are sure procedures. point, almost at the our quite small,

Anthony Hau

last And just question...

Michael Escalante

a -- I the words also anything. thing. to I is to saying so not go don't either jinx by that I in believe want good universe putting as far

Anthony Hau

I believe that, too.

to seeing we increase X terms Is like that all? What for the buyer's are you're changed office ground you guys compared still that on like the the more -- for Has that appetite ago. bit of Just pool me. at seeing in Last today single-tenant assets? time last ] the a same? dark you question [ mentioned spoke, months

Michael Escalante

Yes.

board. you've question way broader You that's say significant there marketplace -- not And for across the net think is the in was I I guess leased amount that the properties interest generally, -- was just that assets. would sort my is of I I the that described statement, believe you a interesting. a necessarily statement of

buyers last the certainly I our we will, showing burgeoning they're of to years. bid said that was larger. relative what very that were you think up I out, believe And had, lists larger couple the that still if time the side, I had last on getting few and

Javier Bitar

correction to back Let Farrell. me one make

years that that shorter We one of have On term. did a longer-term a we was that was asset, asset term. did held-for-sale the X-plus sell, asset

to that. wanted just I So clarify

Operator

the now the Ladies gentlemen, would end to turn like we and to the question-and-answer have comments. closing reached for of session. over I management floor

Michael Escalante

have the achievement, Thank you, portfolio in in credit news Again, specifically the with Thank the we've suggesting we happy since good stay we've your And this listed joining on excited year looking achieve. future. over as to the everyone, our think to very been April, forward time. about quarter. forward Very we the and we moving for just tuned. for side, able what last been you so company

Operator

teleconference. today's concludes This

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

Peakstone Realty Trust (PKST) 8 Aug 242024 Q2 Earnings call transcript