Q4 2019 Earnings Call
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I would now like the hand, the conference over to your Speaker today, Adam While E V. P. C. L. Please go ahead.
Thank you operator, good morning, everyone welcome to American assets Trust fourth quarter and year end 2019 earnings call.
Good afternoon earnings release supplemental supplemental information were furnished to the Securities and Exchange Commission on form 8-K, but are now available in the Investor section of our website American assets Trust Dot com.
A telephonic replay and on demand webcast will also be available for this call over the next week.
During this call we will discuss non-GAAP financial measures, which are reconciled to GAAP financial results in our earnings right.
Additional information.
We will also be making forward looking statements based on our current expectations.
These statements are subject to risks and uncertainties discussed in our S E filing.
Cautioned not to place undue reliance on these forward looking statements actual events could cause results to differ materially from these forward looking statements. We undertake no duty to update.
And with that I'll turn the call overt Ernest Rady, our chairman and CEO to begin the discussion our fourth quarter and year end 2019 results first.
Thanks, Adam and good morning, everybody and thanks for joining us.
I look back at the past several years and reflect on our financial operational successes and in particular, our performance has ranked us amongst the best in class Enrique I take comfort knowing that maintaining our disciplined strategy was instrumental in our creating shareholder wealth.
And I've asked them, Adam while who's been with this 15 years and that's done a great job. One is our recently appointed and well qualified chief operating officer.
Provide the four primary elements that have [noise] driving toward disciplined strategy I believe that Adam together wouldn't Bob and our top notch management team had been crucial to our execution of this strategy I'll turn the call back over to add them now and I will certainly be available.
Quick question and answer at the again, our prepared remarks, Adam. Please thanks, Ernest hazardous was mentioning we believe our results have been driven by four key elements first having an irreplaceable portfolio of primarily premier coastal west coast assets and high barrier to entry infill markets with strong demographics innovate.
And then the path of growth.
Second, having a sensible financial strategy and balance sheet strength, what they well laddered maturity schedule ample liquidity in a target net debt to EBITDA ratio of 5.5 times or less.
Third having a best in class operational platform, where we are vertically integrated and with expertise in all facets of real estate investment management in development.
And fourth and perhaps the single most important element of our success is our people.
We're fortunate to have a cohesive seasoned executive team.
Average industry tenure of almost 30 years, there's been working together on average for almost 15 years. Each executive team member has a significant experience and capabilities across the real straight sector various asset classes.
With that we're pleased to report for the calendar year ended December 30, Onest 2019, we have earned approximately a 5% growth in AFFO per share over the prior year.
Weve impressively increased our AFFO per share dividends per share and EBIT offer eighth consecutive year each year since we went public in 2011.
We believe there is much more success an opportunity to come.
On behalf of all of US at American assets Trust. We thank you for your can competence and allowing us to manage your company and we look forward to your continued support.
I'll now turn it over to Bob Barton, our executive Vice President and CFO to discuss fourth quarter and year end results and then as Steve said, our VP of office properties to discuss the positive momentum in our office leasing.
Bob.
Good morning, and thank you Adam.
Last night, we reported fourth quarter 2019, Fs, though a 56 cents per share and net income attributable to common stockholders of 22 cents per share for the fourth quarter, bringing our year end 2019 up that flow to the low end of our guidance range at $2.20 for AFFO share.
Yeah.
Still a healthy 5% growth on F that for over 2018.
Let's jump right into the fourth quarter highlights we ended up short of our guidance midpoint by approximately two cents of EFO, primarily due to two things first.
Multifamily was down approximately 1.5 cents about that FFO for the quarter and secondly, we had a bad debt expense of approximately half a cent of FF FFO per share related to a retail tenants in our household multi family project.
Which we were required to reserve to new accounting rules.
Let me give you a little bit more color on the multifamily.
We were on track and on budget through Q3 of 29 team.
Late in Q4, 2019, we saw that both or San Diego and Portland multifamily were not performing up to our internal projections for San Diego.
Approximately half a penny of SFR related to lower than expected revenues, resulting from a lower average occupancy percentage and higher rent and rent incentives.
And approximately another half a penny related to higher operating expenses.
For a hassle on eight apartments in Portland, Oregon, approximately half a penny related to lower base rents and higher lease incentives to maintain a consistent occupancy.
We took a close look at the fourth quarter multifamily results in depth and tightened our corporate operating model, even more conservatively for 2020.
And we still believe that we're comfortably within our published 2020 guidance range.
$2.38 to $2.46 per FFO share a 10% growth in EFO at the midpoint.
Turning to our fourth quarter results Eflow decreased approximately.
Once said to 56 cents per FFO per share compared to the third quarter.
The fourth quarter results include the following activity.
First lawyer comments rental payments received in the fourth quarter increased FFO per share by approximately a penny about that FFO.
Secondly, San Diego and for the multifamily properties.
A combination of a decrease in base rent increase in operating real estate tax expenses decreased AFFO per share by approximately 1.5 cents.
Of EFO thirdly.
How slow retail tenant write off as previously mentioned decreased FFO per share by approximately half a penny.
For the seasonality of operations that embassy suites, coupled with the ongoing renovation work decreased FFO per share by approximately a penny in the fourth quarter.
And finally interest income earned on excess cash on hand, and a reduction of the income tax expense.
Increased AFFO per share by approximately a penny per FFO share.
Now as we look at or no.
Balance sheet and liquidity at the end of the fourth quarter.
We had approximately 449 million in liquidity comprised of approximately 99 million of cash and cash equivalents.
[noise] can 350 million of availability under our line of credit.
Leverage, which we measure in terms of net debt to EBITDA was 5.6 times.
Our focus is to maintain our net debt to EBITDA at 5.5 times are below.
Lastly, as previously mentioned, we are maintaining or 2020 guidance range of $2.38 to 246 per share with a midpoint of $2.42 per FFO share.
We're estimating or Q1, 20, 20-F AFFO per share to be 58 cents per EFO share.
Our estimate appears to be a penny lower than the current Bloomberg consensus of 59 cents per FFO share.
This is due to a more conservative view in our corporate operating model of the multifamily in Q1 2020.
Based on Q4 2019 multifamily operating results.
We are still well within our guidance range for 2020 in fact as Steve will comment on shortly we've had good leasing success is in our office portfolio in Q4, 2019 and into Q1 2020, including the Lloyd District in Portland, Oregon, and Torrey Reserve campus and so on the Beach Corporate Center.
San Diego, which further strengthens our guidance range I will now turn the call over to Steve Center, a vice President of office properties Steve.
Good morning, and thank you Bob.
Good experience strong net absorption in rent growth coupled with significant stabilization through key renewals our office portfolio ended the quarter at approximately 95% leased with only 10% of the office portfolio expiring through the end of 2021.
On a comparative basis, we increased occupancy by 594 basis points year over year.
City Center Bellevue is 99% leased but we continue to expand and extend our existing customers at much higher rates, we've seen rest climbed by over 45% in the last two years.
Portland has also been very strong for us our Lloyd District office buildings are now 100% leased we've seen rents increased nearly 20% the last two years.
Similar to the 830 building we are currently Redeveloping. The 710 building at Oregon Square at 33000 square foot building that will be delivered in early 2021.
In addition, due to increased demand from our existing customers and other tenants that are in the market. We are evaluating additional office buildings on the two remaining blocks in Oregon square.
At first in Maine, we have succeeded in renewing the IRS lease for 64000 square feet with a rent increase of approximately 20%. We also expect to renew the veterans benefits administration lease for 68000 feet with a rent increase of approximately 19% by the end of this month.
In San Francisco Landmark is 100% leased to Google on Autodesk, most customers are making significant investments in their spaces. The market remains very strong, especially for larger blocks of space at one beach, we've intentionally let lower rent leases expire and we're in the process of Redeveloping. The building, which includes the addition of a 4000 square foot elevator serve roof.
Top deck with panoramic views of Alcatraz in the Golden Gate Bridge, the fully renovated approximately 102000 square foot building will provide an 85000 square foot contiguous block of space to be delivered in early 2021, we expect net rent increases of approximately 50% once completed.
And Bob reminds me that you're still expecting approximately 10% growth in our overall FFO in 2020. Despite this building being at the during the renovation period.
Finally, we made great progress in our San Diego portfolio, which now stands at approximately 92% leased in climbing versus the overall class eight market at 89% leased our newest acquisition employee comments has been a tremendous success. It was 88% leased on acquisition, 95% leased less than two weeks later with an internally sourced tenet.
And as of year and it was 99% leased rates over 10% of of our initial underwriting edition.
We expect to break ground on building three in the third or fourth quarter of this year, if not sooner as we respond to and are optimistic about large block offer large block RFP is currently in the UGC market.
Direct vacancy in class a buildings and UGC is just 2.9% with significant new demand driven by both life science and technology users. This bodes well not only for our building three at lawyer comments, but for our Torrey point Torrey Reserve buildings, just north and del Mar Heights, We recently signed a 33000 square foot lease with a publicly traded life Science company at Torrey play.
For most of the floor space that 80 occupies so we will be relocating to Torrey point later this year that move coupled with pending tenant expansions will take Torrey point to approximately 94% leased.
Thats a lot of crossing our specs. We program has been a great success. The property now stands at 95% leased and should approach, 98%, if two pending leases or side operate on not sure I'll now turn to call over two questions.
Thank you as a reminder to ask a question you need to press Star then one on your telephone to withdraw your question. Please press the pound Keith Please standby, we compile the culinary roster.
Our first question comes from the line of Craig Smith with Bank of America. Your line is now open.
Thank you good morning, great.
Greg.
Yes, I wanted to see the here a little more about Torrey point.
By year end 2020, what do you think the lease rate is and what do you think the occupancy is.
I will be at 94% as I as I said in her comments and.
The deals were doing right now are north of $5 a foot so we're hitting our targets.
Okay, I, but I mean, it will how will they be.
In the space or I guess, just believed they will be okay.
Okay. Thank you very much and then secondly.
Do you have a rough estimate or indication on the development redevelopment yields for the retail pipeline.
Craig we've done some preliminary back of the napkin numbers.
But we don't we're not ready to publish those I can tell you that there they exceed our weighted average cost of capital.
We're.
We're pleasantly.
We're.
The numbers that we've seen thus far we're impressed with we're just waiting for Jerry Gammieri, who heads our construction and he is going throughout the buyout now so we want to get some hard numbers before we publish any firm numbers.
Okay. Thank you.
Thanks, Greg.
Thank you. Our next question comes from the line of handles same Justine Mizuho. Your line is now open.
Hey, good morning out there.
Good morning.
So earns maybe for you I'm curious on your thoughts for the portfolio here near term you previously mentioned growth getting larger that the key initiative and early last year, you seem to be inclined to add more multifamily.
More recently, it's been a lot more enthusiasm in office I guess I'm curious today, given the opportunities in front of you.
What what you're seeing what you're most excited about what perhaps more likely.
In terms of expanding the portfolio and then how would you fund and then Oh, sorry for the multipart question, but I would you be inclined to.
Acquire assets at lower yield even cursed them upfront dilution. If there was a strong growth story and potentially a strong IR.
Here, you've got the whole question out there [laughter].
And I'll debate.
Yes.
That's a great question you know some you should have been an attorney.
As far as retail goes.
Retail doesnt have the same.
Below that has had in prior years, we're doing extremely well and retail and we're very happy with the retail we have but the prices of the retail that are their quality that we would like have not come to a range that in tysons that.
As far as office goes and also.
As far as residential goes residential is priced for perfection and we have some issues.
Recounted earlier by Bob in our own portfolio number one.
Portland is not as strong as we'd like and we've got some repositioning to do in our San Diego portfolio, which we are working on and which is affecting our results that we think these results will eventually be satisfactory if not more than satisfactory. We've had very good fortune, thanks to Steve and his team in acquiring.
Office that is been either undermanaged.
And or is in a position.
And they can the path of growth.
And so we continue to look at those opportunities and we've made several bids in that regard and we've been.
I would be it and then how we would finance it out.
When we get there, but I'll tell you one thing and it will not be in the backs of our existing sorry stockholders it will be accretive, but we won't consider it we love our existing stockholders some of whom are family and we wouldn't.
To hurt their wellbeing, so thats a great question and thank God I could remember on quick question [laughter]. It's risky comprehensive. Thank you had del Peter interest.
Thanks, guys and one more if I could maybe on Portland, specifically, obviously the multifamily port. So there has been a bit channels I think supply continues to be part of the challenge Im curious if you are more inclined to maybe lighten up there and then maybe on the office developments that you're considering starting the too that you mentioned what type of pre leasing levels would be required before you.
Start and what type of yields should.
Should we be thinking about thank you as far as the Portland, Hasler, we would not consider selling it first of all the placement.
Is probably 25% to 35% more than our costs second of all that.
That those apartments have created a presence for us in that community that has resulted in our office being very successful as our office continue to be successful, it's likely that the apartments will become more successful so too too.
Get off the train now would be a major mistake as far as Preleasing goes on the two projects you've asked about San Diego is not a pre leasing market. If I was going to be attendance in say two or Hoyer Commons and we haven't broken ground and I had a lease with another building and I signed a lease with us and for some.
The reason or other we didn't start construction that would be something that would be difficult to explain so we've kind of breaking ground and then we'll hope to be pre leasing San Diego is not a pre leasing market.
It's common knowledge, how how tight the San Francisco market is four blocks of space.
We're not in a position yet to even offer.
A adequate rendering of what we have a half coming out, but we think we have coming up is going to be elegant and we'll work on pre leasing, but we won't pre lease at the expense of rental rate.
Got it got and can I clarify one thing the comments earlier on Torrey point appreciated that.
Are those embedded in the current guide for 2020 or should we be thinking ahead of that as potential upside. The 2020, maybe even 2021. Thank you.
No the results as Steve is talking about.
Where he sees a going is better than our guidance.
For Torrey point.
Just as a matter of curiosity, we're moving here.
Two Torrey point, Qatar space got at least here and were occupying less space over there. So it's in the current economic move for us and an economic move for the company will be more efficient and at net lower cost in less space.
Got it.
It's a win win.
Okay. Thank you I'll yield.
Thank you had very good very good questions and if you need a reference to become an attorney I'm willing to be you're referencing.
Thank you.
Thank you. Our next question comes on the line of Michael Carroll with RBC capital markets. Your line is now.
Hey, Mike.
Hey.
Hey, Bob can you talk a little bit about your the multifamily portfolio I guess, what specifically drove the weakness versus your expectations and in Portland in San Diego was it supplier was that something else.
Maybe I'll take that you went ticked up this is for San Diego in San Diego, The fourth quarter is usually at leasing market.
And in one project in particular.
We are in the process of repositioning and it's a major repositioning it's a great locations at the buildings old and we've got to updated.
Second evolve.
My mistake and that management was overloaded with all the.
Make means requires we've now separated those too and I think that going forward at least a year from now you'll be.
Results in the meantime, we are focused on doing the best we can and I think you'll be please.
Mike Let me, let me add to that.
From two perspectives, one on a same store basis, we were down 6% quarter year over year in the fourth quarter.
That was primarily due to increase the rental expenses and increase in real estate taxes. So the question that comes up as well what about prop 13 doesn't that limited where there was a bond measure that was passed earlier this year that we got the bill with late in the fourth quarter.
And so thats why we had like a 10% increase in real estate taxes this year versus the cap under prop 13, which is generally 2%.
And then when you look at.
The budget versus actual.
Where where we.
Fell short was it.
Of approximately one and a half sense in the multifamily.
Was in Sandy in San Diego again, the upper operating expenses that we also had a softening of the rent.
Compared to our expectation in the fourth quarter and then in Portland, We had more lease incentives, which reduced the revenue coming in.
And if theres less.
We had more lease incentives try to maintain a consistent occupancy in Portland. So that's that's really.
The answer to your question, but these are great properties and they can and will do better and we are focused on it and you will be please.
Sincerely hope.
Okay, and then the the bonds that increased taxes is that a recurring things should we expect that to occurring in 2022.
Yes, yes, that's it.
Yes that was passed in I think laden in 2019.
Mid mid to late 2019, and we're expecting that going forward, but weve you know our guidance that we issued.
Allows for any differences.
Like that Theres Theres, a leeway in there within that range. So we're very comfortable with the current guidance.
Okay, Bob that there's no way were.
So and if anything we're going to try and under promise and over deliver as we have for the last years, which have resulted in consistent growth because that a fair statement you must be an attorney.
[laughter] Handhelds high Yeah, I know that's true Weve, maybe the last thing we want to do our credibility is so important and so the last thing we want to do is over promise and so when when we miss something like that that that really bothers us and we want to understand why what the impact is going forward.
Okay. So we're very comfortable with the 2020 guidance where it is.
Okay.
Is there needs to make changes to the same store guidance provided last quarter I know the multifamily guide right now 3% to 5% growth.
I mean should we expected to be lower than that.
No I think we're okay for now and that are imminent are internally.
[music].
They are the multifamily expectation was even higher than that and in our.
Our guidance, we brought it down to three and a half so I think way, we're fine where it is right now we'll see a little bit a drop in Q1, and then we expect to see that pick up and for the year. We should end up at three and a half from where I'm sitting today, we're going to work hard to over deliver.
And on the other hand in one major project in San Diego Theres, a major repositioning going on which will improve the value of the property in that started with the sewer and the rooms and the painting in the landscaping and that's that's something that we ought to do in the short run that may.
Not.
The outcome may not be unpleasant, but in the long run it's a giant winter.
Okay.
And then last one from me can you talk about maybe Steve about the one beach renovation I guess, what's the expected budget of that project.
Is there another tenant building and can you commenced construction on that until that tenant moves out.
There is a tenant on the third floor and we're going to due to construction around them. So we're we're set up to do that.
In terms of the scope.
I think the budgets around.
I think probably not okay fair enough until we know I don't we haven't got fully bought out yet isn't bought out and we don't even or a building permit we do not have a building permit yet at this point, we're in the city for permitting and we're not even out on the street yet fully tendering costs. We've got some preliminary cost, but we're not that was Jerry yemi who's responsible for the can.
Production and as you know San Francisco May take its time delivery is a building permits but in the ended law will be worthwhile. Unfortunately, the market is strong enough to absorb all the difficulties that.
Municipality puts in our way.
Well, we actually once we actually have numbers included in our operating Capex for 2020. So I mean, we factored in approximately 22 million for operating Capex for the building on top of that you have some T.I.s leasing commissions, but that's all in the guidance that we provided in Q3 19. So.
But is not bought out yet so no. It's not those your best estimate that's relatively conservative that's right.
Okay, great. Thank you.
Thanks, Mike.
Thank you. Our next question comes from the line of Rich Hill with Morgan Stanley. Your line is now open.
Hey, good morning, guys just want to make sure I understand your expectations for same store NOI in 2020.
I believe on the call.
Last quarter.
You did provide some guidance are you are you maintaining your multifamily views or should we think about that coming down a little bit.
No. We are currently maintaining our multifamily views as well along with all the other sectors that we provided in our Q3 guidance.
Got it adds if that changes we will let you know and I'd like got to add to that the advantage of being diversified is there some upside.
In the multifamily and there's some downside there is also upside in retail and downside, an upside and office and downside the portfolio as a whole I believe will perform as Bob is projected and we hope that too.
Over deliver rather than under problem or whatever.
Got it.
So on on the bad debt on the retail space could you give us any ideas if that rent is above or below market.
Chris if you want to.
Sullivan.
Thats our grocer there so their rent is about market, they're just going through some some struggles.
I think though they'll get through it.
Kind of comes down to an issue of body counts in the Lloyd center weather patterns and at the grocery business. That's a bit of the struggle there I think Doug but to answer that question there their rents is about market.
It's it's an important amenity for for that project and so were.
You would have to say nursing them along.
And as that.
Area as that Lloyd district becomes more mature they will have a business. They have a business will have rent in the meantime, it's important that we keep them there as an amenity for that people for the folks in the area.
Got it in earnest you've alluded to this a few different times, but like you have a high quality portfolio, but but small.
And there is volatility from quarter to quarter, but as you think about speaking to investors and the sell side analyst community.
Right just to sort of think about your company, particularly with the leasing velocity that you have going on about where this is going not quarter to quarter, but maybe over the next 12 to 24 months.
What was the question again.
Over the next 24 month, if we're fortunate we'll have another lower lower your comments.
In our portfolio and we will not be small thus we are today.
For the we'll be able to grow and having more diversified and growing portfolio and that's that's the strategy that we're pursuing and we hope for successful added if not the existing portfolio will continue to produce results.
That have built well for the stockholders over the last eight years into the public.
Got it. Thank you guys that's it for me.
Thank you thank you rich.
Thank you. Our next question comes from the line of Daniel is more with Green Street Advisors. Your line is now open.
Good morning to anything.
Everyone. Good morning.
Across your office portfolio can you maybe discuss the trend in concessions across your markets and expectations for leasing economics in 2020.
[music].
The economics continue to improve.
San Francisco is very strong we're bullish there Bellevue is right behind it in terms of the rent growth and even though were 99% lease we continue to find opportunities to expand and.
Raise rents expand our existing customers and raise rents.
Portland has been a pleasant surprise, it's performing really well.
And we're out of space and we have growing customers. So we're bullish there and then San Diego is really turn turned the corner as well vacancy is coming in and we're seeing life science and tech users.
Being forced out of Torrey pines, and UGC to the benefit of Delmar Heights, and so our Torrey reserve and slot of each properties are doing really really well. So it's just getting better.
And then I guess, just two big picture question earn as you mentioned not wanting to do any financing on the back to shareholders and not to be too to Larry that's a word.
But I was just hoping if you can clarify whether or not accretive.
FFO or in a de or just maybe able to a point of clarification. There. Our focus is always on building wells.
So.
What we would like to do if possible is acquire something that would be accretive.
And that's what I mean by knock on effects of the so.
We're not going to get big by taking the value.
Listing stockholders have and diluting the to make an acquisition just for the sake of the larger we would like to be larger.
Also like to be accretive.
That's that's what we're shooting for over the next.
Bob is.
Chomping at the bid.
Hey, Danny from a from a financial perspective.
Both the earnings growth and Avi growth is important to us into the shareholders. So when we get from an acquisition standpoint.
Look at it from an earnings growth perspective from debt metrics make sure we maintain a low.
Balance sheet leverage and then also from a Navy perspective, we look at the average of our research analysts and Navy. We look at we also have a higher bar internally that we publish each year that we measure against and so from a from an earnings perspective, we want.
To make sure that FF Mo is delivering in excess of.
6%.
On a cap rate basis.
And growing from an Unlevered IR our basis he wanted to make sure we're over 6%.
For the class a plus properties that were looking looking at.
And when we look at a development.
From a financial perspective, you know the rule of thumb has historically been obviously get as much as you can but you take a look at your weighted average cost of capital, which ours has been let's say in 18 and now it's somewhere between 4.85% and you want to add at least 200 basis points to that so you're over about.
7%, we would hope will be hopeful to get.
Somewhere between a range of 6.5% to 8% return on cost on on that development. So we want to we you know the earnings growth and the wealth creation, which is represented by the Navy growth to the extent that we we dip in the Navy growth on the short term, we want to make sure that.
We recoup dead end Navy dilution short term.
Within a three year period, and then start growing and creating well for our shareholders I'm sure that convinced that with all the metrics we have to overcome that Bob places in our path that whatever we acquire will be valuable to the stockholders going forward.
That's helpful. Thanks, and just just one last one I know we chatted about this before but can you give any updated thoughts on the split roll proposition 13 about initiative and any potential impact to your California office portfolio.
The answer we always say is that I think to a certain extent and maybe to a great extent that leases protect us from the short term.
Operation proposition 13, and if proposition 13 were to pass it may decrease values and that would give us an opportunity to make some additional acquisitions. So the way I put it as of chips going there.
Job is to catch a fewer stores on the way down.
Weve, Danny we've actually gone through our portfolio looked at the increase in our retail ended our office.
And again in the first year, we don't think Theres an impact because the majority if not all of our leases.
Passat onto the tenant I think the real issue is as long term in terms of what's your end Avi.
And and for that reason, what we're doing is that when we look at an acquisition because it's a 50 50 chance over the next seven years, whether or not something like that passes we've we're adding on our terminal or reversionary cap rate when we underwrite we're adding another 20 basis points to the.
To address that at Avi.
Or valuation issue on the front end.
And of course, what we see in the marketplace as the properties are trading.
Very well the prices.
Our.
Please somewhat astonishing so that leads me to wonder what our properties would be worth if they were market and it certainly in my opinion not reflected in the prices the stock at current levels.
Great. That's helpful. Thank everyone I.
Thank you Danny.
Thank you. Our next question comes from the line of Todd Thomas with Keybanc Capital markets. Your line is now open.
Hi, Todd.
Hi, Thanks, good morning.
In first question in terms of the guidance it sounds like the office leasing is driving incremental growth beyond what you've previously anticipated and and the office leasing in the quarter was strong it was almost two cents a share of FFO.
Can you can you help us understand where that leasing slots into the 2020 bridge that you previously had provided and Bob you talked a little bit about the the move and the lease at Torrey point.
Can you quantify that upside in 2020 in 2021.
Yes, I can't quantify that right now to other numbers in front of me.
But Steve Steve you want to talk anymore about that.
In terms of that.
Performance at Torrey point.
I'd focus on the two expanding tests in the loses that we've got aside from ours, we're doing a market deal.
The leases that were expanding or actually.
Higher than the rent that we've got projected for ourselves so.
It's a good outcome at Torrey point, we've got great customers there.
Growing customers, obviously and.
It's a really good outcome.
It took us a while to get there, but once we got there waiting was worthwhile and the construction was worthwhile and we're glad to have that we have and we're going to be living there as a matter of fact, so we're looking forward to.
To living within.
Todd.
In terms of our guidance that we issued for same store office in Q3, I think we had 14% increase in same store office cash NOI. So I mean, we're comfortable I don't have.
All the leasing sick recent leasing success is factored into that.
But.
We're confident with the range that we have out there.
Got it the there was there was 14 cents of FFO growth, though attributable to for specific office assets.
And it sounds like some of the leasing.
Or the or some of the leasing that you're expecting.
Materialize here.
Could could push that little bit higher is that is that fair.
That's fair Im hopeful.
But okay. Please don't count on it we've had the experience of.
Not delivering two cents and we don't want to make that mistake again. So please don't put that in your numbers, let's let's have a pleasant surprise don't don't push up the Bloomberg number.
Got it and then back to two investments.
Ernest you're talking about trying to find another lower your comments, but you had previously talked about.
Doubling the size of the portfolio over a number of years I'm. Just curious if you could step back maybe and talk about some of the acquisition opportunities that you're you're seeing more broadly out there.
Sure we've looked at at least two significant investment opportunities and metrics that Bob.
I doubt.
We couldn't meet them, so we got a bit.
And so we have to find something that we're we have the good fortune to acquire that meets the metrics Bob I would line and there are opportunities out there and theres lots of money out there. So we'll just have to keep looking.
Initially, we'll find Sunday is not the portfolio will continue to produce returns, which we think will be more than adequate.
We'd like to be quite a bit more than adequate.
And in terms of some of the markets that your year end today.
When you look at the geographic.
You know opportunity set say that you're sort of focused on where do you where do you think youre likely to see.
Most attractive opportunities potentially surface.
We've looked at all the markets that we're in.
And we've made.
Bids in two of the markets and so I can't tell you what's going to happen in the future other than we do see the opportunities that come up because we are a factor in each of those marketplaces and we'll continue to look at the opportunities and hopefully we're fortunate to get one that makes sense for existing stockholders.
Okay and just last question for me I was just curious if you could comment on on bookings at the embassy suites Hotel have you seen any any impact at all from.
Travel bans or reduce tourism and travel is there anything changing there at all.
Waikiki beachwalk or anything along those lines.
As as it relates to any impact from China or the Corona virus.
We haven't heard of that we're seeing that.
We just talked with semi and who is our general manager and does an outstanding job at the embassy suites for us.
So we we.
We have 40% of our customers come from Asia, and the majority, that's really Japan, and I would say that less than one per cent comes from China, and Thats really like the one off its not wholesale but there has not been.
We have not had any visitors are customers from from China.
Recently, and it's interesting to note Simeon we shared with me earlier this week that there are oil there only.
10 airports that has in the U.S. that have this.
Infra red or scanning device that can see your temperature and one of them is in Honolulu Airport and so what they'll do is they'll stop your quarantine. If you go through that but we haven't seen any any impact from that we are you know and the impact last year was in as severe as we.
Thought.
On on the embassy suite from the sprawling painting.
We do have the refresh going on in April and May I believe.
We hope to be all wrapped up with this sprawling painting and refresh project at the embassy suites by the end of June Thats or that's our goal. So weve of the two towers that are there the front one called the.
Hello Tower, which is closest to the ocean is completely done on this falling and painting the back tower closest to the mouth. The mountains is about three fourths of the way.
Completed.
And.
So I think we're underway close to that we won't see what the impact is till we get to April or may, but we're very.
Hopeful on that is it safe to say Bob in your opinion, the worst is over and that we're approaching the finish line and the furniture is either shipped or being shipped.
And this is all completed.
The refurbishing has done indicating that as this falling does done we're going to have the number one performing embassy suites and the world on a continuing basis.
I Love these lawyers.
Yes, that's that's true I mean is as such it may think about that Theres theres only two hotels.
In Waikiki that are on fee.
And this is one of them and it is in such a sweet spot anybody that said the Hilton Hawaiian.
Village walks through Waikiki, Beachwalk, which is where our retail is.
Is the podium for the hotel you got the Trump tower right next door people walk come through that this is this is main and main a very it's an asset that will continue to grow and continue to enhance wealth.
Thanks, Todd Okay, great. Thank you.
Thank you. This concludes today's question and answer session I would now like to turn the call low tech honestly for closing remarks.
Again.
Weve.
Pollutants heights for the two cents differential but it doesn't affect the overall value of our multi billion dollar property and I hope investors look at this not in the short run and what happened over this last quarter, but the performance that we've had over the last eight years, where we've earned our stockholders a return of 12.
To 13% and we hope to continue that trend and we hope to continue to earn the confidence of all our stockholders and again. Thank you for your interest and we'll look forward to chatting with you next quarter.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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