PKST - Earnings call transcript Q4 2024

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Operator

Greetings, and welcome to Peakstone Realty Trust's Fourth Quarter 2024 Earnings Webcast Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr. Steve Swett, Investor Relations. Thank you, Mr. Swett.

begin. may You

Stephen C. Swett

updated looking thank out Trust and Earlier joining for at and us we page the Good our our on Quarter are cause you Relations Investor statements uncertainties webcast. which XXXX Realty include statements, website an supplemental making release, forward Fourth an Please team at Webcast. presentation Earnings looking Peakstone expectations today's to on ir@pkst.com based posted that to Investors on with statements reach afternoon, are www.pkst.com. earnings for any investor materially. to not that Call that questions. The today, and Such and facts forward company actual will be risks differ historical any involve results could

our on SEC. annual business, please For further a see Form with the and to report subsequent filings discussion of related XX-K our risks

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

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

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

Michael Escalante

XX% The thank total nearly quarter strategic and ABR afternoon, our plan call of an company advancing today. for fourth comprising joining extremely shift successful Good ABR. industrial. and had significantly With our towards year, portfolio full you our industrial now to our

of achieved capabilities. And infill and or divested and operating enter the strong or another the We industrial step with operational favorable Over significant of space the $XXX coverage, storage XX-property fundamentals credit including entire noncore and requirements. movement excited course amendment storage million. low of the of for characterized spreads, assets, in the materials highlighting IOS maximizes with were constraints, the activity This took elimination other outdoor ownership, premier have we a We the portfolio by our strength to leasing subsector a minimal IOS million structure for compelling equipment. CapEx is our subsector. year, leasing display, properties IOS and pivotal building-to-land of fragmented low we of our strengthening acquired the which segment. $XXX ratio capital facility. yard extension We supply

complement the has management assets, tenant which to include IOS asset responsibilities. The the assets potential types infill traditional opportunities enhances stabilize manufacturing acquired profile. and This similar shareholder unique long-term the growth our lease we dynamics, With our a significantly properties. IOS expertise, team's opportunity Premier these mark-to-market light assets, Importantly, structures IOS in in warehouse XX% drive subsector we growth of types X properties. believe with on industrial yields redevelopment will share portfolio concentrate which asset and our and distribution as portfolio investment IOS fourth strategy to incremental market profiles, quarter company's substantial the we achieve These we value. for plan sustained the

assets assets in the XX dispositions. completing very goal In we our stated milestone. that disposing that our important achieved segment, year-end of we to Turning XXXX. the sold quarter, our segment other fourth pleased I'm by of this remaining

total properties. of office X $XXX we properties segment year, XX a other the and for For XX including segment sold million, assets

operations. our that are reasons have so functions to contain property our newer key been successful are that the of office generally One and dispositions is buildings vintage central office tenant

approximately accounted purchasing we they types XXXX, and gross of many expressed interest in lease, have of closing our properties purchases tenants of attributes, for the been tenant disposition transactions. these successful in these proceeds. XX% our In Given have

focus our on as engaging we maintain potential XXXX, As to will in of tenants buyers continue divest we noncore strong properties. assets with a

term of segment feet a sold basis activity. We leases were had to square the spreads, for minimize with total costs strong and and average of potential cases, sales leasing on GAAP favorable years results. cash these by marked anticipated We Moving leased leases X.X approximately were a of lease these achieved XX% XXX,XXX a a to leasing the other XX% strategically shortly year a re-leasing to successful assets proceeds on date. were after basis. Several maximize we and structured that completed. incurred out-of-pocket the In prior sale weighted leases

and the highlights activity our solid for market. properties for in Our the continued leasing the reflects our year operational demand strong expertise

our following a XXX XXXX, and a of year-end. acquisition, industrial key and at As X activities our result the total characteristics leasing We segments, office. of disposition properties portfolio owned in had in reported

and repositioning. properties XX properties for portfolio are we which operating have Our designated of X redevelopment properties, or consisted redevelopment

includes assets. These portfolio and in and industrial roughly segment XX states, made of traditional markets. up XX% operating XX locations properties properties concentrated XX coastal industrial and IOS Our XX Sunbelt markets span XX

Our segment our the XX% at XX% from XXXX. accounts beginning Industrial ABR, up ABR for nearly now of total of

with XX% and investment-grade of investment-grade years mark-to-market opportunity. X.X Looking X the XX% assets XX% WALT approximately a potential a are years XXX% at assets XX% properties our traditional a opportunity. with WALT IOS tenancy, leased leased XX specifically, tenancy, mark-to-market And XXX% our of a industrial IOS potential are and

only years. over portfolio capital expiring near-term ABR This office includes XX segment rollover newer with near-term age segment years. investment-grade and These the next average XX of XXXX limited the with in buildings years leased Office of X also XX% segment XX% operating tenancy and and X% WALT properties, requirements. have XX% has minimal expiring a Our of an are are which with X.X generally

range. industrial portfolio in to redevelopment encompassing states IOS X usable of X% stabilized Our X.X% yields consists segment acres targeted across assets, X XX the with

our over activity. Additional call our and results in who Javier, supplemental. With financial details the to turn Javier? are capital will will provided that, about markets review I redevelopment quarterly our properties

Javier Bitar

or to million, year. highlights revenue Industrial $XX.X approximately or for was approximately million. $X.XX Same-store abatement the ended Thanks, to was Mike. per begin continuing was and X.X% approximately lease, And a by in Industrial $XX.X I'd like the rent NOI per approximately $XX sharing was Total same-store November share XXth segment fully results $X.XX of financial shareholders $X.XX and grown a in $XX segment year Net a $XX or income a few onetime which to our compared basis. AFFO last by share these increase reimbursement by diluted cash cash a primarily per same-store on the XXXX, quarter. approximately million, for diluted million of NOI impacted quarter of cash for attributable was items, million, fully was reversal a would common pre-existing on But NOI share. $XX.X a same have non-tenant was X.X%. income. approximately million, FFO NOI our basis.

XXXX, million, NOI $X.XX and $XXX.X or on for share $XXX.X a was portfolio fully diluted full AFFO overall per approximately million. approximately basis the year was For same-store cash

sheet. Moving on to our balance

was total approximately of XX, million, $XXX December and revolver of cash capacity. consisting available As liquidity

revolver million cash approximately in Available balance, restricted was $XXX $XX interest the was Our excluding million. cash, quarter. $X.X of we and income approximately approximately earned capacity million,

of Before structure reviewing the metrics, let further year. the me debt our first debt through you throughout evolution walk

XXXX, on a successful amendment strengthening began structure key with credit focused of we we our and initiative facility. our capital As extension being the

utilized borrowing base. In facilitate making to support to to at and EBITDAre bank essential this which retained favorable and the asset dispositions quarter, among assets, start effect date executing swaps will on and net near-term cash fixed weighted we The effect a also effective of SOFR of and IOS of both the entered of the our term growth our mature further the feature of new our converting this into to a the forward incorporated the end first deleveraging and $XXX industrial credit continue assistance mentioned They our the of with plus of SOFR we based continue extension growth with allowing highly loan our X.Xx updated with half end is valuation swaps our X.XX%. amendment connection the enable normalized the we we term new excess IOS and to extended supportive debt covenants, our matures And term we our the needs the maturity XXXX. and amendment, interest in earlier. XXXX, operational including of new notional be Mike amendment, extension. at maturities accordion of The consolidated facility have amendment of July our in leverage quarter, fixed of things, points basis X.Xx with plan, borrowing the existing in loan. resulted average cost year. of second X, which beneficial the other XXXX over more the properties from of swaps, starting secure from the for strategies. In this During interest July a year, Proceeds the to the us $XXX group, at portfolio and to were reduced financing on rate amount our $XXX year to our in engagement These to million inclusive on to the IOS strategic our acquire manage and lenders X, rate, million. executed third XXX loan at floating competitive to assured Through is a banking million fourth XXXX, $XXX partners. In option our added priced base. swaps to quarter, take million a a the rate utilize

balance associated of we following million. $XXX of the all which the assets, remaining sales On secured AIG debt the side, a debt, other had segment extinguished

we X.XX%. totaling our loans million maturing added XXXX interest $XXX mortgage by These with properties in loans maturing X are of X Additionally, a at average X industrial and separate XXXX. secured rate weighted traditional in

were debt $X.X X.Xx. Including in secured XX% After for and debt in at debt our our of remainder year-end weighted swaps, debt year-end EBITDAre As our $X rate a cash, our and debt average rate the was credit facility net debt outstanding fixed interest of with ratio as actions, metrics debt billion secured approximately unsecured unsecured our billion our of and was billion result to debt. the and all these mortgage follows: normalized interest was deducting of nonrecourse $X.XX net X.X%. on our was total effect

we per common dividend $X.XXX of payable on fourth quarter, as XX for that a For XX, share share first holders XX. and the in the on dividend to on is announced, $X.XXX amount approved record Board the common previously of of January April of per the a March Trustees quarter paid

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

Michael Escalante

Javier. you, Thank

disciplined Looking we a maintaining to focused remain our ahead, debt levels. on approach

credit Our well asset revolving adjust sales. proceeds noncore to facility flexibility to from debt down are through we positioned pay as needed, and provides the it

strategic capital portfolio to growth seek improve Additionally, we flexibility have as advantage competitive providing IOS the our expand a to pursue further with acquisitions, we our us and trajectory.

and growth creation, look forward ahead. long-term are confident and driving value in ability We successful our year to continue to another we

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

Operator

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

Farrell Granath

I your you have in portfolio. to also traditional at you're way either get mix comments when having price there what few differential you on seeing industrial that type already appetite the looking acquisitions first leaning? of properties a of type in wanted IOS or And one or that the are market? a your in Is forward also, competition

Michael Escalante

Thanks good you. to for Farrell. us, joining It's hear

So find most as IOS. really sit we mix today, related here compelling that the we to is

the the have, they in that there. And going at traditional there's when think rates just there. a then better come I industrial, are on closer gap IOS look dynamic in still we're I still embedded finding you a there's cap portfolios, to would overall, IOS While -- growth say, certainly

So primarily, assets. that IOS the we're is saying investing focus our industrial, but for on moment, overall, the we're in

Farrell Granath

capital inbounds. the on just recycling And and following if was the I are Okay. comment curious office focus up any direct you about on also receiving portfolio. your

appetite, turned seeing office a around bit You're lighter. any as further the news especially little has

Michael Escalante

you mean mean lighter, I By better?

Farrell Granath

Yes.

Michael Escalante

Okay. Yes.

the marketplace things of that today level, of already are much a location are seeing there's guess I in a interest at in I then to that local in and/or as sharpshooters, prices our you presence the last that think appeal think look things we're we're local XX% to in X very at coming take from them. And I out finding are property. finding think the at thing that an from -- we tenants seeing, outs existing I in proceeds what were year, came there. What really have be the specific to specialists users who terms of the and of gross tenants over -- one is we're do able if second to

tenants. Fortune institutional an XXX the we significant there's ability And of exists So the more they terms are differential to or to that of investors cost the investors. at tenants to arbitrage the traditional larger, in have investors, credit creditworthy finance which of tenants have, types projects a that an

are themes. So say the would those I X

everyone to that at think significant, there. side office is demand a come to with I the back publicized largely least hopeful return is going

Farrell Granath

Great. for more one And just me.

thinking more growth going comments few side, noticed up negotiations push rates a on Is more of out made to any kind and how expirations on Just internal focus coming the you lease on I more are in that renewals? lease XXXX the about and -- able key escalators new further the being and those lease going? forward years. And

Michael Escalante

activity in has in will, of in have a good. The where shape are we we portfolio, way, acquisition the and those our quite redevelopment. out IOS is So if ground-up as some you X the form, sixth we subsegment, asset been opportunities or repositioning actively leasing assets identified the redevelopment

animal. So have in existing that, with a some that's different I discussions coming have some along years. that of tenants we of our couple lease with up the think the next But sort expirations who of

we're think itself. both excited embedded within I term the growth lease in rents also on terms we're pretty ends, just then rate about of and the what nominally uplift in the seeing

underway of stay and those ahead our marketplace lot of So properties. us, for are of most interest the of but work a got definitely We've lot a in projects tuned. and

Operator

line of Goldsmith the from comes question with Next UBS. Michael

Michael Goldsmith

like a we Like you the it pay going to how relates or comments release about proceeds investments? indicate It down continued to question think investment. could press the First should Other bit to the using color the be from to versus targeted on you're sale about guys repayment we are using how from this? get IOS debt of Just seems segment. to how make debt little how -- trying more be think you thinking the

Javier Bitar

to majority off or proceeds AIG Javier. of the the pay sales it's from dedicated The X/X debt. Michael, the almost were

got -- a But we're part So approximately really debt cash of a the we as you bit up We're to to $XX Even result And there. itself. up to our the as saw that the balance our increase fully slightly. smaller there. The leverage the we leverage. acquisition. X.Xx. though, loan did continue was in proceeds go second did complete sales million the levered And on for X.Xx it improved of of there focus over a basis, extinguished also balance, year. one off filings, we'll down net-net paid We as on acquisition quarter the to

proceeds be strengthening looking going So a approach, we'll -- we'll really on look sales -- and from leverage and the sheet at forward focused growth. at balanced balance on also

Michael Goldsmith

follow-up, assets. as divesting And assets as as some traditional Or does noncore assets you to sounds industrial of you're the like it at assets? noncore also define that office continuing Do well? a look include the

Michael Escalante

Yes.

I and coverage. way, up you think Michael, the -- for in joining picking us by thanks us, I appreciate

when in exposure if things I the look are rollover on pretty weight our think returns and coming world, today's those the out maximizing you exposure, think a from approach really certainly, And of value. the is office, that heavy sorts of perspective, CapEx our put I office. at

that, I be perspective, that larger of if the from asset would component will. think our noncore pool, So you that

Michael Goldsmith

to And just renew? it. And XXXX. your starting you Are likely what set last those one just the in your to Do tenants? is of tenants to XX% for conversations Got like ABR sense maybe how have a are one of have me. industrial current with you conversations? expire are

Michael Escalante

the growth to to been have have get that exposure relative Yes. in to but we see, discussion we don't there. probably but enough We -- have rollover, want don't really the we

little we're of We're there bit quite everything early. hearing but it's far, timing. been positive, still terms not in so a has And

Operator

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

Anthony Hau

other job Congrats on XXXX. selling guys in fantastic the segment you and a done

Just question you, one for quick Javier.

quarter, in proceeds the the the But -- the $XXX supplemental You paying mentioned that of the was down million. third an loan AIG other segment balance sale like outstanding loan, went of of when the check towards X/X I had AIG from right?

you what the like can help curious me Just gap? -- bridge

Javier Bitar

Yes.

end of range, I at it $XXX The I I X/X. I -- was But was just the the of the were the quarter. in $XXX you year, started in we think believe think third the think look balance range. we I at million if the million million beginning said $XXX generally

Anthony Hau

went Got you. down the mentioned million paying loan. But of you $XXX towards that X/X AIG

So from how go do they -- yes.

Javier Bitar

I'm $XXX sorry. million That's for It meant say. to what up to total proceeds I was sales the year.

Anthony Hau

Got you.

more a makes lot Okay. That sense.

Okay.

Javier Bitar

Yes, yes.

Sorry about that.

Anthony Hau

-- Where you your guys to want you by year-end? mid What like net like it debt I think guys EBITDA think you Xs. now to do right do worries. is be No

Michael Escalante

that we've we And to a quoted would last year, that, we time of that aiming be down think since ratio. for as listed evidence X:X the I X.X. we got

joint you we've last right end think, back, look at billion year, I of exited we listing if really the to and sold really other years. the ABR time, moved segments. We've leading of that as attached $X X done we before the up of we've to completed at the this Anthony, We of the the in we've venture, the assets everything then the pushed industrial percentage mean, I and sale over indicated. joint office venture, that's same the

in record -- we of But have think going proven I we nothing linear. We the to So our reducing the be essence, on -- eyes is balance leverage. ball a to, very have in us on number. continued order have have growth tools we all do seen of with type commitment And the that a deleveraging. to to effectively it. think, deliver the a And tools you've track I

Anthony Hau

in interest those office you question. you just marketing demand started of in portfolio? are what guys one assets? And like curious seeing just or Have the Okay. And buyer last terms

Michael Escalante

on us, this has talked jaundiced. -- more properties inbound about inquiries. getting and than past it the that Yes. I know just buyers to that these person. I in don't that and that it, in I this are we would but still market, I going markets debt the we are little feels we've say a year in the to have think know feel positive we're Farrell on are mean, referred to calls bit we portfolio it is have what see I necessarily. The don't going bring as past. properties

somebody on of days couple that, allow XX% to will maybe a most heard year. I the CMBS offerings a the of the basis think sort XX%. something from last in said quote was I conduit the pushing that's norm last that up in of

of side, and in buyer's So effect that think the holds. there is for going that forth I on the going debt sort push loosening into some demand forward will if

Operator

Thank you. This concludes teleconference. today's

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

Peakstone Realty Trust (PKST) 20 Feb 252024 Q4 Earnings call transcript