PGRE - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Paramount Group Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded today, February 14, 2019. I will now turn the call over to Jacques Cornet, with ICR.

Jacques Cornet

good and operator, you, morning. Thank should By quarter to fourth access earnings now, release everyone XXXX and our information. have the supplemental Both heading the the the found Quarterly website be Paramount in of Investors Financial www.paramount-group.com. at Results section can Information under

today of laws. statements within federal be the Some will forward-looking of meaning comments the our securities

could expect, to numerous usually similar Therefore, in future expect. our to phrases interpreting relying other materially on the a are which you use filings more of risks statements, impact SEC we could operating you or uncertainties refer results and by the risks results of should exercise that discussion subject detailed should, and to caution cause them. financial words from what our Forward-looking identified such for differ and that as actual will, are We condition.

over isolation call, Management and have Officer information. I'll Treasurer; measures the the performance. supplemental be non-GAAP measures President, we most A questions. believe Wilbur call and provide With Company; we be turn quarter measures, call these for available Albert. our then to and Brindley, reconciliation prepared opening operating and will release open in to which President the some we fourth Financial in directly our will that, Chairman, earnings call Peter as Albert Vice today, Hosting the Chief we will evaluating not and Behler, of Officer remarks Vice accordance Leasing. These in Company's the President, Executive Paes, the can measure During Chief financial and with Executive our is Executive the GAAP or should our of GAAP. XXXX a comparable to results in substitute useful discuss considered

Albert Behler

posted fourth year. by financial growth cash good and core and period the We compared XX.X% share, another measures was with and detail. will quarter second in year last double-digit in the same-store growth. for quarter per FFO all morning, out Same-store consecutive full FFO NOI Jack, performance NOI quarter XXXX strong cash operating Core with the you, of everyone. performance. financial our full per year a excellent $X.XX to our closed very XXXX We to Thank fourth year Wilbur the share. year our $X.XX review same greater for bringing up XX.X% was up

addition progress in our business In we significant during financial plan XXXX. strong to the made performance, executing

Eye completed at an program, new price and $XXX that the in venture fund per by partner over same-store Here on at are us. share points share, We original space of leased by will highlights. the our some of XX.X%, our enabled us. managed our All Sutter to XX%. increase below us our of of of mark joint leasing X We closed ahead positive proceeds million guidance XX% X, of be into feet XXX new buyback of significantly over this by cash XXX opportunistically $XX.XX where in equity. last and markets to two $XXX a basis square to weighted XXX million sold million of occupancy well capital leased we New and basis is DC; fully now commitments, York a debt initial Sutter XXXX full Street just $XXX leased. We pricing for Washington, Pennsylvania those XXX San announced in acquisition $XX the at our increase previously a around combined leased Avenue XXX back XX% stabilized point redeployed brought We of And including week, we average in shares Street X.X which million buying buildings for from million. of NAV. portfolio, million driven a closing took Fund our with Francisco

acquisition. A $XXX XX $XXX per time We Street $XXX from the at Class years Recall, asset opportunity into XX at and month One The this One increased this. is ownership leased, selling foot. was Washington and this XXX we a on have process we redeploy we Both square Beale is Francisco done a to But of for Front minute and record capital per few pricing again San a basis recycle once spend in and me foot. ago, square foot. found square per Beale at and acquired basis. not and for assets at portion Waterview currently our CBD Virginia under-rented. received a in under-rented back, of attractive acquired Let XX% an sold were stabilized first Front surrounding XX very thought them Sutter, the our a Rosslyn,

roll XX addition, and near-term was Front One had leased. XX% only Beale significant In

outperformed attractive and an bear good add asset. limiting in chose to these said, and assets this about bring with well these capital we look a managing leasing asset, equity check can to stabilized our strength square and the feel acquiring with being our with creation, value. do fees we generate bring to through are That to are cost venture of the XX joint acquisitions, foot same mindful our at of When have and once shareholders the basis thereby by We Sutter. our boosting over to for returns we partner per value for no prospect both again, for we paying where $X,XXX others product

As whether said or in back we stock. our will it buying prudently past, opportunistically capital is we acquisitions have the for deploy

consistent. extensively, and will acquisitions mutually decisions capital not do remain discuss Our view and approach has as allocation we share buybacks and We exclusive.

views based returning to for future allocation prudently between investing while capital should shareholders, Going capital growth. decisions forward, balance be investors long-term expect appropriate to and an on our

perspective. that each our XXXX. you fundamentals Midtown. me very velocity strongest of markets, let for give leasing represented strong, While details Underlying will in New XXXX Peter remain my momentum in into York carried provide on has year the and

second million feet. for year, a result, a excess X increased since lowest level rate now is at absorption the As consecutive availability net positive square in as has its at XXXX, of

XX our XXX year-end was since we of In New XXXX, XXXX. share leased We concentrated in Leasing these Sixth leasing. XX% this two in activity than Avenue XXXX over XXXX and West Sixth points was only buildings leased Today, have fair more New XX square leased. basis Avenue and York are leased was in XXX,XXX XX.X% Street. XX.X%, West XXnd Street leased XX.X% occupancy feet Last York, buildings; driving gotten XXnd respectively. by year, at and

have Leasing asset headwinds, continued has of square robust now financial real continued is be top space astounding by for concessions, enormous XXX% limited multi-tenanted Mountain activity The accomplishment. in XXXX have have in velocity in on a growth. Supply it. momentum on we now New years, office two just that XXXX leased, we signed York leasing New to York announced services tenants rent XXX,XXX Broadway. and Capital we square increasing Our this witnessed an the yet feet into at New floors foot X.X million as lid not to couple a kept

presence robust, only activity, XXXX. positive market, market. which and, record Midtown have is year, we will tech velocity pressure signs positive, seeing for XX% is of forecast dynamic this it of the undoubtedly a the in the lows accounted in firms great rents. is upward absorption job as are Furthermore, stabilized All put more on is East. concessions of now at New Unemployment making the continued this office growth highest However, and promising. very increase XX% services, York since Leasing tech continue and top represent the city, using solidifying for some hub last financial their to the

portfolio those advantage and New on location, management. well-positioned York, constructive in of a is to had have and we take New testament remain are York our trends. our to direct tremendous success We The product, leasing

of X.X excited a high York's in as San are in most feet about square are market Gold, leased feet supply Francisco, discerning with recent acquisition In of here Sutte. tenants. opportunities XXX,XXX attracting on we positive market to the mark-to-markets about XXXX, XX% The New on roughly basis. including LEED at our square Our to our we all CBD, Class A remain properties, remains of the all cash in constrained XXX the and million continues evident which cylinders. fire demand continue In

Our from San Francisco now points is year-end. basis XX% portfolio leased, XXX up over

in to largest scale landlords. year-end, today for couple Class rate of city's year we the office still of recycled product additions past one see A of upward XXX pressure from on have rents, That the the prior and the which our up we is X.X% XX Over and were Sutter. CBD. availability like are we in an capital of opportunistically XX% With the years, Beale CBD the at increase we why

terms We both at have properties, roll rate. of leasing both opportunities in and

position. Our years. in In portfolio well over a few positioned growth the here Washington, DC, remain we generate strong to is very next

next the the will our Given report few leasing years. do to the but reflect limited just have available much the and three not We In our card we like over lease portfolio to over quality have do market. our space, and lease, success years. past portfolio, the on closing, we I'd to think outperform what continues roll continue of

for been have square over calendar a that four over X.X or little public leased square have Over annually. now million over feet we feet We years. million time, X.X

block large all vacancies. of backfilled have We our

of We NOI by our X.X% grown cash same-store growth, annually. consecutive including FFO growth average of core X.X%, double-digit have compounded two earnings delivered years

higher stabilized have have assets, investments into proceeds XXX We excluding million of fund and those sold recycled investments. yielding

their That reducing staggering public stay our said, our office the significantly business achievements, process, run or have costs peers, shareholder yet that maturities. NAV. and us CBD opportunistically $X.X our our reward to whom for continue back these we Notwithstanding and refinanced debt, accomplishments. tout matter We below we own bought value borrowing of markets have $XXX creation. other of fixing significantly focused billion have In each and our stock will can million long-term of for to the

some lease, accounting As and terminated impacted recently look earnings forward XXXX, presents in will to earnings the FFO be core sales, which Henri asset Bendel's by changes dilution our cover additional tremendous we to from the with insights on earnings With a will that, our call in for give our the turn to opportunity detail. will creation. leasing. greater guidance Wilbur Peter I us value rules,

Peter Brindley

a good one exceeding a morning. year, productive goal margin. our ago. the wide very year Thanks, was Albert, portfolio leased, year, the XXX points our leasing At and by basis of XXXX from up We end XX.X% had

production not leased a fourth serve also through X During to feet XXX,XXX feet the which reduce roll, only to immediate the address is leased. vacancy X.X% square near-term we approximately currently This square annum more but year our portfolio, with very the manageable XXXX. than further end per lease in expiring million quarter, the year-end

Let's in XX% portfolio highlights leased XXX points by at was review year-over-year. New our year-end, basis York, up market. the Beginning

to through annum square more positioned leasing During rate our feet, historic result more feet is new New feet expiring leased. in many record respects. square activity. XXX,XXX we year-end a approximately York continue with Midtown Midtown's bringing fourth strengthen to very by of XXXX. in in of leased velocity the of approximately million than X.X% total quarter, decade. an new this per availability XXXX well The remains square XXX,XXX set XX The year-to-date recording its a portfolio XX.X%, lowest level than fundamentals leasing

contributed addition, consecutive of absorption In feet. Midtown's million X positive of square year second activity this leasing excess to in

market. All factors the health Midtown of these reinforce of the

more certainly We share ahead. captured of progress in we our expect And have results. evidenced demand our tenant the than by as year further leasing fair

a New subsequent In mentioned, signed foot fact, quarter-end. year and lease XX.X with as to square XXX,XXX we Capital, Mountain Albert

no to bringing XXX% two building feet has measuring a Capital of building more X.X achievement the . leased. Mountain small square Broadway, portion than at floors million XXXX New the leased is the top That office for

where have to we expires portfolio, vacancy of on reminder, lease our blocks in as up our in December Barclays XXXX XXXX, Avenue York New table turned leased attention large that in which, of Now we lease have expiration Americas the our XXXX. a shows successfully XX, the

of that ramping quality block, XX% at space XXXX interest, basis undoubtedly efficient prospective the Francisco, the large we resonate for up In the confident points plates, which opportunity garner the significant this Avenue and size floor will We our marketing with have will of been block building, tenants. the of of this particularly location. boasts the given leased, ended are up Americas XXX its and year-over-year. central year and San

total of XXXX than XX% the A which we product XXX leasing year-over-year San XXXX every product continue Francisco's to bringing of leases A activity to increase, square CBD. basis Francisco supply, of of square X.X%. in given for tech for expectation Vacancy in Class fourth more average record During fundamentals leased leased. the XXX,XXX XX positive in for companies. the CBD the office rents down asking San will strengthen our and rents in quarter, approximately square is to feet, One level. with blocks are set XXX,XXX feet in Francisco to XXX,XXX CBD. the XX% on XX with a remains and absorption continue Market limited excess signing feet, further San were Net increase decline, large in year-over-year to up especially At robust demand Plaza, leased. that It points Class the our continues space leasing we

leased a last remains floor significant XX.X% We we San in with the at company forward XX.X% we progress year have full rents from tenants availability. At year lease We and and currently premier Front, to the occupancy we among property with to progress. in to achieve Street, leased make One financial on for During ahead. highest ago. quarter, our remaining services a Market our Beale executed are high the fourth One up look in vacancy. demand ended continues the from the Francisco. At interest year XX continued XX.X%, the significant at continue

building. fourth an the During technology at all lease effectively tenant renewed eliminated we in the roll XXXX building the existing which expanded square by XX,XXX quarter, approximately feet them and

of - our dynamic Lobby past tech by with the base we Renovation transacting with base process the securing floors we have During in of year, the repositioning the Equinox and tenants. commencing building began building the

XX the rent of get beginning We XXX,XXX the significant have to we year throughout at the Beale's next is the stage space expect floors, San square foot have which located XX vacates largest set Shield growth back block the marketing the over big uppermost space, availability Blue realized the of of is the in and for block This when on of block XXXX Francisco months. property.

$XX a highly space. this virtually well activity in column-free Given it includes view the XX have foot, level a and desirable is the floors in-place is as market. below high we which its already that We Beale's to physical opportunity space of per of current create rent surprising up value on of roughly attributes, not heart District, the the additional South lease location tremendous as square Financial

of plus Lastly, in portfolio. XX% have addition opportunity the as roll to Sutter Front San Similar building availabilities the latest currently the are Street, Francisco, scheduled take roll. next occupied, we roughly is The by as the One are three leases in-place in well now XXX are half we to the we excited the XX and well years. Beale, to at of the positioned to advantage

a only our also of ended of Turning in new for with turn the we Wilbur, in who will the discuss the XXXX to DC, DC. we portfolio the premier the is financial availabilities. of This from leased. demand our quality XX% Despite location, DC, to Washington, influx summary, supply testament to With will over of the tenants limited submarkets attract core I but the to not that results. properties call continue

Wilbur Paes

were Financial once the Peter. quarter for results operating again strong. Thanks and very

in sector-leading quarter. and This $X.XX of the growth was driven again up share per by once FFO core same-store was year's cash the XX.X% NOI from increase prior $X.XX Our XX.X% share, GAAP. per for quarter XX.X% fourth

points quarter from In same-store the bit. occupancy current Bendel, termination addition, from income both the ahead NOI leased X.X% ended cash, up basis rate and year the same-store our included XX.X%, was in more Henri guidance. XXX XX.X% on of $X.XX the a GAAP, growth of that well prior-year. Full-year of original with We a

with basis square Our also We leased, renewal the current impacted points; basis over square current up is mark-to-markets foot San leased, short-term up basis and Francisco by term weighted lease Washington is New leased portfolio leased, in-place cash now XX XX% feet points; up XXX quarter. impacted XX% York at mark-to-markets for in the XX% also which XXX,XXX The X.X% XXX the is and and quarter rents, average quarter the XX,XXX GAAP. XX% were points.

our $XX $XXX million ended the million For Well, we million a repurchased with X XX.X% our square not were but and at and had October. even year stock currently $XX.XX our NAV, average December, in opportunistically buyback which of shares XXXX, markets bringing below mark-to-markets On over repurchased total per share, million more the last our GAAP. price is we and announced to we XX.X% only aggressively feet cash that weighted in our additional turbulent leased we call, below and share significantly shares, worth is an $XX trading. where of of

balance five weighted a XX% our our of is years. our was has rate to fixed interest The of weighted just and X.X%. of at sheet, floating remaining Turning of outstanding under quarter interest is debt end debt rate X.X%. weighted average of $X.X a interest and maturity at rate billion average has weighted average and a XX% average X.X%

maturing debt beyond are and XXXX that, laddered. our no have fourth We of quarter well the until maturities

outlook for Our XXXX remains solid.

square lease for to XXX,XXX the to expect We year. feet XXX,XXX

We to expect includes same-store XX% lease X% due terminated and growth our impacted be the impact to once negatively to by which cash NOI XX%, between of expect which XXX points the lease Bendel's recently again occupancy leased share of was X% the same-store of Bendel's basis we Henri Henri and termination.

the X.X%. cash lower to earnings been have XXXX. same-store XXXX Notwithstanding positive our X.X% expect when XXXX, of termination, Excluding NOI in impact would compared growth FFO to outlook we be do to core for this

the rates. XXXX at nearly core allocation capital mid at and FFO impacted decision a sell back including by X% of factors, stabilized earnings Our buy cap X% to our our core number assets rates are cap in stock

per in a solely XXXX. are the JV of share benefit higher due of assets; in Washington with by XXX and expense, positive debt from XXX rent; XXXX; than This were or to we XXXX, capital the to per change share buybacks a per deploy FAS opportunities. per $X.XX and and $X.XX $X.XX capitalizing share midpoint. interest our incremental $X.XX costs, share of to the $X.XX or a represents February on lower from earnings that, per connection the prior termination internal to due interest repurchases some FFO higher and aggregating This sale We budget on in XXX acquisition of a following; for lower of XXXX. share X% items, earnings in accounting debt allocation share to view from share earnings G&A highlighted income, or due share to something and not higher our These per value at per it between the to mutually items, lower the an from continue income, share $X.XX X.X% for XX% an $X.XX we for. in not trade burn capital share $X.XX which which per Based increase for share leasing two do our interest Sutter exclusive, rent $X.XX we in typically per X%; will a of expect factors whether following per acquisition count per we XXXX is Street lower NOI Albert acquisition from $X.XX share primarily for decrease will is highlighted $X.XX dilution Street; do Sutter decrease short-term the decrease $X.XX as $X.XX call, a of share NOI be per shareholder the prudently, long-term of in $X.XX growth Having DC costs; in off said earnings a core is gladly creation. same-store offset of in outlook earlier, the straight-line and the cash from of including as resulting more decisions above resulting due share, share of free rules

found and at we detail schedule in out XXXX million. our and can have for We yet on leases our for that, guidance commenced, website both package, now questions. $XX.X investor the open of at supplemental Furthermore, building rent which of www.paramount-group.com. our free not our have signed laid lines which updated deck With sits the please be blocks more Operator, in

Operator

line question your with Please of Jason Instructions] with Green [Operator Evercore. proceed from first coming the question. Our is

Jason Green

the Can leaving we space, that will Barclays marketing the space? at point this ramping up that be clear at infer by of the Barclays it's

Albert Behler

space. Behler. Albert Barclays is XXX% this not It's - that clear leaving the it's Well, is

in model As know of when the they these exactly their went last for make from their even time. moment the don't the investors in past, from because other ahead works we tenants know us business decisions experiences public, some we how of financial know who really services

is Peter of but have this So space, option landlord a as can there bit will efforts a we, an in still and Barclays started proactive in more marketing that little course, tell stay you detail.

Peter Brindley

engaged with they floor for what here already We tenants well large has extremely plates, this amounts of for like third-party It's are is Jason, space. of Yes, located. when tenants many feel very prospective which It is large offering our are looking space. compelling. in seeking instances we've block

as And as this so will well be this we space. of think said, of the marketing ramp of that the block block we, attributes up of we space received very

Jason Green

buyback. And then question a just the on

of far, is $XX You've where was million is still infer that done pricing off million $XX.XX that buyer on remaining so first $XXX far the which million a from $XXX today? where pricing the $XX million with at too today. isn't Can around done shares you're we

Albert Behler

remaining the is million approved the by Board. Well, $XX

are arose, that in outcome. we was and successful aggressive, figures want very stay balanced where in our as successful. I quarter, It We our - fourth see We the opportunity think the consistent were from can approach. a here and was you to very

point commit at So don't I anything in time. to to want this

We are investing opportunistically the be staying will future and and balanced we watching in and or growth. stock consistent markets back buying

Operator

of from Morgan line proceed the questions. Malhotra comes Vikram question next with Please with Stanley. your The

Vikram Malhotra

Just the Barclays work? want does you? on they that notify be to option would color specific Just helpful. have Is clarify time a there renewal anymore to space. How

Peter Brindley

of oftentimes deals place pursuant an had as get end a has the That Vikram, said, Morgan took know discussing XXXX - option. to tenant We been with period we Albert has exercised the And all these that time it's deal Peter. lease. don't toward of elapsed. their that

in terms So are we don't of yet what have just intentions Barclays total beyond from XXXX. clarity their

said, we're We have marketability around. certainly tenants we've prospective we the space. discussions block this And very with interested as in good we this We third-party feel not now them, now in block. said, but engaged of are of have also as about with waiting are who

Vikram Malhotra

And just on space. that

are to to to and have you them - to have leave there the you'd white-box large it advance in similar et it? space to or that like do cetera is you'd and lease completely need then So - someone sign - possible do like it have other then

Albert Behler

this a Well, for you sign leasing could in is well. in outlined It's and potentially leased this the getting The in only probable is my leases. because successful as early unique as that is not at market Midtown, we remarks, entire been big users. various with on would are financial TAMI be the advance. space have XXXX, here most broken unique different point, activity that's and in here quite where floors, we we And catering to And services, tighter, I that users, big some would also lease opportunity a had up will floor of outcome as this assume, at really but this I plates, space. space, place have XXX%

Vikram Malhotra

then may. just if I last And question,

we've Bendel of and I at just competing since availabilities the maybe around how the Henri much call - year. that an offer what you of of would timing, give update, have Can to Just to the sort start heard the the spend prospects, are - but capital space space, you cetera? Xth et sort us given Avenue on it the other space, shouldn't news

Albert Behler

just the we we And It's Henri quarter even what very gave - this think getting their a last I I early would to mean, the the Bendel this outcome at back. doors. to with about Bendel. closed outcome the space earlier It's excited are be but regard point, little in too early to predict news

for we when that a opportunities of it's tenant public being Even substantially I you're to because a the even recall went public, depressed we an market will the so mentioned value a tremendous of think, that's in I to, below and to be one think company this market, the rate. to opportunity in bring we opportunity generate referring current as might market retail - income You the had think where create growth.

Vikram Malhotra

know on $XX depressed I well, or just $XX rate, below, when average think And like you on was I this that, mean, a say foot. we well

think grade If to a even wide you grade of able venture space, what on at range do this the you given be a you would sort per where at were to just location, garner foot?

Albert Behler

would Vikram. can for We at make $X.X gross good if a which X,XXX it's the simple. feet, you it The entire million very floor, would the is currently rent space question, about just Yes, was and ground lease XX% square keep in you rent be we venture for the - partner. in and mind, double would market today's would environment, - we to expect joint have public would only we even because a accounted the company,

Operator

proceed of from comes Heck Please questions. question with your next The Fargo. Wells Blaine the with line

Blaine Heck

you profile about And point? With that this like at Thanks. that at are to guys Is match share that even investments Good do available can maybe for grow to investment during year? Bendel versus like move there Henri really morning. the how Albert, internal XX% looks you that it pretty trades thinking still out. repurchasing this despite out it shares? a your NAV. think you the - price investment any guys consensus capital desire discount real is what in up almost a there Company of repurchasing little what How this the growth about looks using year solid but shares a estate see solid

Albert Behler

as as for I time. will investing and back looking as future for earlier buying stock also looking remarks when my growth it's had well appropriate before, we be opportunistically at out in Yes, mentioned and

opportunity in you the fourth buying As when quarter. could see from was the the were we there very aggressively results,

of you advantage companies have I because took public of during of might only very, buy look what it keep think that But you like and - much and one watching mind who can the on but million, the also basis. holidays $XX so of few daily have buyback we the programs it's it are to limits a in carefully. the you very not

and if those and an the replacement through opportunities built look the where a Sutter, well in equity value years. at that's limited can refurbishments at below our looking of you and and over the doing we so one are have we time of our asset to - partners have relationships we same and that market investment finding use create leasing where we increase asset PGRE, of own and chance managing the last with value that buy XX can opportunities the XXX doing We at Company limit so, cost,

Wilbur Paes

- you That to XX% Blaine, imply that's question, a mean I has $XX, with that that NAV to mean, not consensus. I trading a want I started would discount the questioning just add $XX at consensus one we're share. our at accurate.

Blaine Heck

wrong the to to mentioned follow-up I Sutter, number. on, you way either guess, have I that. - on XXX just But so Maybe moving -

creation in-place far the about for Can talked - rent into of maybe Peter you is? prospects think there. just on the - roll and rents get upcoming detail any what into up as as you You get the value the mark-to-market lease prospects,

Albert Behler

liked to tenants, it and Peter over - the create and a improvements already period. working all when mid XXXX to X%, on the an then an company next get previous zero asset generated period fantastic developed managing we in just, was value same and the to the over maybe building, as Sutter, as deck, San asset, Yes, let tremendous the apply at in with Paramount kind expertise, on at gets if tenants public It's has bought would that kind the ground is Avenue, me remind it's is the which asset in it's the multiple getting property we but portfolio, Park look of holding a bought it is It if and that a look in - start first, about a over equity photo, PLC - hands you everyone management I ready upgraded. and Blaine. location a XX time as of our holding can vintage XXX not might Francisco to only of and well the been, we we have This by - XXX unfortunately, same Fifth aged about Peter? and time. asset the team the Central on you had typical like we as that are

Peter Brindley

about certainly There opportunity rolling Yes, add only three the your in we've immediate It roughly user. very years. creative but over the the vacancy, we got that not building excited I would this to next will appeal property. half are is

with experience property. have this we vintage so And

we We plan appeal. how have have clear think We very on here. success to a may even

came Our first proposal from XXX very, very established firm. Fortune a well

a looking creative as everybody type what of So of to sort creative you bit might user. your of in for think typical is addition

estate we think of love broad prospective to a the itself. attributes tenants the here. of we So real very universe appeal We

a and clear We very plan and we're up running. have

Operator

with The your comes of Deutsche the from next Please line Bank. Johnston question Derek questions. proceed with

Tom Hennessy

is This Derek actually Hennessy Johnston. Tom for

achieved? that mean shown mentioned to you York really, progress, negative I significant has mark-to-markets. Could what concessions, strong the stabilized be New possibly As velocity, think nothing you CBD, will a achieving the but to to and there is point it's where with explain lag driving you leasing really the trends been that higher

Albert Behler

the It out absent there it of seems play had cycles. have strong pointed be year, absorption I think to robust leasing We while. in positive think in momentum Midtown very I best have and these we York seen I a my very and many takes it's a New remarks velocity. I Yes, and that

in have that and momentum have assets and Midtown swan Avenue upcoming lot Avenue gives a for And it as on office XXX I'm Fifth a XXX us upward if rents think Xth we - as result looking unless an a Third. black well event, growth expirations and low job will great with at of the our will especially, I result opportunity think on XXXX, I positive and in pressure unemployment. We very that

Wilbur Paes

mark-to-markets. to just the want about question add to Tom, your I

you have to mark-to-markets and If we that you're reported our XXXX, for full know statistics mark-to-market the the that XX.X%. should we reported was referring that year

being So as that we weak characterize don't mark-to-market. a

just that short referring quarter impacted the X.X%, we mark-to-market. that included that a so you're term, it so square that the on to If the rent, XXX,XXX was in XX,XXX current lease in-place extended highlighted activity foot at of New the fact a foot York at - square

on in to New little if very So well exclude mark-to-markets you into were a were York, that, double-digits. activity our

Tom Hennessy

there quarters, generally lower rent we of Is spreads noticing the other that that are that to quarters. a anything first seasonality? than be the one in three things the the And seem in little is, fourth drives

Albert Behler

- of negotiated especially done early say No, but wouldn't seasonality there there's York the in is is the New here being of by typical York, in New quarter. there reports end we executed normally nothing it more XXXX. the basically see - you spaces That is large in year, in the the New otherwise, announce done we it I had no when very with fourth quarter, and had these then got historically leases and we these over in could in Mountain lease,

Operator

with is Feldman from next Instructions] [Operator Bank proceed of line America. The Please of with your questions. question the James

James Feldman

the that on - talk for retailers It like would the would be you lease, depth mark-to-market, just interested? get are demand sounds Bendel guess how of a out about you what fantastic space? just that more I can many there but

Albert Behler

answer. Jamie, but question, good it's very a to it's hard

who a the I great world say. location, to other you lots would from market, location. most that demands good that we we We on stronger to location of I'm are - had, in can it's venture call, a best in get very for As giving expect, names use find of we tenants probably that have in one the a very not this location. but confident wanted

James Feldman

nothing being there's assume I And XXXX for your guidance it in back-filled?

Wilbur Paes

Correct.

James Feldman

Okay. And then...

Wilbur Paes

time by earnings lease not lease XXXX. you GAAP is, the benefit gets to intended the even then it, space space to lease recognizing the even up its any possession the in and if Because point were use, you tenant if and to in the it, you're out Jamie, build tender for were you

James Feldman

that is back? you space, what think Barclays the mark-to-market mean, for do asking versus for then, are And come it be I kind where that rents you assuming the space, what will does of And today?

Albert Behler

I think that the around final where and X% be taking mid are than We high that X% $XX, than rate somewhere in asking will higher the today, where we should we the be mean, should be to about - more rent the rent.

James Feldman

And what kind of CapEx do you think need? you

Albert Behler

regular that late. than of tend longer as XX XX-year we for CapEx about spaces, XX leases very often be experienced $XX have lease. - the years, it it's these of a little Well, to XX Most for large a we to these

expect lesser little TI on a should the extension. one So second

goes gets that years TI. beyond XX anything So lesser

a TIs. XX-year lease So in $XXX about $XXX average for think to in you might

Wilbur Paes

as reported initial because include you XX% we if year, rent. the the initial of percentage XX% Jamie, we leasing I And quarter-over-quarter have look, in that trended look we to the rent at a of in as of consistent basically out on statistics and mean, average a commissions it TIs percentage

James Feldman

Are expand? there in tenants to any the looking building

Albert Behler

you in news for get space, in you the see lease Yes. close normal and to XX% giving an a a But again, XXXX names. mentioned the to so that at leased, giving or leased it for tenants landlord. Once that's momentum, in take occupancy. earlier - more looking XX% we We remember, in not are we call - high good that market leased to is more have here Peter are opportunity that that's have good you are that's tenants and to already I momentum a - where the you building XXX% XXX%, a quarters. XXX% XXXX mean I the - had normally

James Feldman

us talking remind And space - you're that floors is on? can you what

Peter Brindley

then some through and two and floors are eight nine, there it's grade… Jamie, six, below

James Feldman

sorry. All - right. And then, you

Albert Behler

ground with something New We their their the access have street tenants, access the San be in higher and The to well from That's the the like in to that again, to have larger we floors own news as as lowest like the second branding, getting their that tenants ability space is, there good to Francisco, own York see tie the seems floor floor also, space. into level. would demand.

we with this unique that's that have opportunity So a location.

to could street difference think, making So branding I and here. a access be space, straight from that big the

James Feldman

And there pretty opportunity like retail kind much starting then, that, conversion no, it's or in the of or, all any like floor, more office? second to it's anything is

Albert Behler

one the we extended another reason Well, tenants, that's why short-term. it of we left only

So and on floor an well as to the have ground as opportunity floor. something potentially on with the retail do second we access

James Feldman

And in Francisco. you explaining did job capital great how investments San you've a value-add into redeployed then

that markets assets outside the you're what's mean, the you likelihood actually I understanding Our Francisco? some in San other market going York. New your is, come see more to see of we on buying in of

Albert Behler

Well, be very we will cautious.

As be at are York, another attractive the York would it we buy I market, cautious about this you And point if again, and something New very mentioned would think has to values pretty at full. this New would before, only in value I be we point. think and

James Feldman

the New rates and your in What's thought and valuations trend? cap York on

Albert Behler

the a Europeans with buyers I to amount It because there annum. issues stable equity We very think cost is in a of time dollar. hedging have the it's of difficult lost them about basis points to liquidity XXX because of tremendous couple markets. XXX per the a

have a takes out good the lot So the competition of but that of strength equation, market. still the in you

actually more think liquidity market because more rates and in going stable. up financing being the cap I available of aggressive the mezzanine not pretty because will the rates getting be interest substantially

James Feldman

you interested more just finding they're pretty from for all markets? actually West or Coast - question fund in you Are interested Are now, your your me. finding last they your are partners right investors, or across

Albert Behler

for foreigners, I more San heavy little in And interested across would away, bit and Francisco. San are say of to not interested it's Francisco the then comfortable there exotic markets. still and many for same all and closer the San are they - further hot reasons. but investors a they are different more is all in are and on Francisco, with investors other markets very

think proposition New a York, I certain it's with good value assets.

equity is relatively be Washington the - so because many, small. are many investors assets that DC by check can bought And and smaller

tremendous compared DC that's in So get the values you quite Washington, is to us markets. that other for

Operator

the reached now to turn the Albert I'll Behler We've call the of over you. remarks. question-and-answer end for session. Thank closing

Albert Behler

first on in our to spring. update Thank our an results you today. continued look providing all us we We quarter when report for progress forward the joining Goodbye.

Operator

This concludes conference. today's

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

Paramount (PGRE) 15 Feb 192018 Q4 Earnings call transcript