Q3 2020 Washington Real Estate Investment Trust Earnings Call
[music].
Officer, Paul Mcdermott, any Hopkins, Vice President of Investor Relations.
In real estate.
Yes.
Trust third quarter 2020, <unk> earnings conference call.
As a reminder, today's call is being recorded.
Third quarter earnings conference call.
Over to the company.
Please note that forward looking statements may be made during <unk>.
Baseball Mcdermott.
Such statements involve known and unknown uncertainties.
Felicia.
Okay, that's related to the effects of the ongoing COVID-19 pandemic.
Me. Please go ahead.
Actual results to differ materially.
Yeah.
We undertake no duty to update them as actual events unfold.
[laughter].
It was probably these risks.
And please note that forward looking statements.
So the GAAP and non-GAAP financial measures.
Oh, no I know.
Well, our most recent earnings press release and financial.
Because the ongoing COVID-19 pent up.
And can be found on the Investor Relations page of our web site.
Second we undertake no duty to update them.
They will be Paul Mcdermott.
Actually refer these risks.
Second of officer.
Reconciliations of the GAAP and non-GAAP.
President and Chief Financial Officer.
All are available in our most recent.
President and General counsel.
Okay.
Drew Hammond.
Yesterday can be found at <unk>.
Okay.
Definitely.
Sure.
But.
Good luck.
Dissipating in todays call with me will be Paul Mcdermott.
I'd like to turn the call over to Paul.
Yeah, The officer, Steve Riffee.
Thank you Amy.
Okay. Thanks.
Good morning, everyone.
Actual officer.
And I hope everyone.
Her butter.
That said healthy.
Good that in general account.
Your being with.
Cannon, Vice President Chief accounting.
From our corporate headquarters in Washington D.C.
President and head of research.
[noise] working.
Shall I would like to turn the call over to Paul.
Oh Gee more social distancing.
Thank you Amy.
60 protocols in place.
I hope everyone.
Very happy to be back together on a voluntary basis.
I suppose today.
I watch technology has been incredibly effective and that's helped us be six.
I see.
Well work them remotely.
Alongside many others.
So too.
It was really more social distancing.
Your question.
Other safety protocols in place.
We released our earnings.
Very happy to be back.
2020.
Jerry basis.
Our results were largely in line with our.
Sibley effective and that's helped us.
Polio continues to demonstrate.
Smoke.
Stable credit performance.
The two.
We absorbed the near term impact of the pandemic.
Last evening.
While uncertainty remains regarding how protracted this economic downturn will be.
Results were largely in line with our.
The bolster our long term strategic growth plan.
Actually used to Devon.
The operating environment improve.
The performance as we absorbed the near term impact.
Okay.
Well the pandemic.
Our portfolio with a long term vision.
Cranes regarding how protracted this economic downturn will be.
From a capital allocation.
Action to bolster our long term strategic growth plan.
Person spark consistently above national averages and our suburban expansion through the assembly portfolio acquisition.
I'm familiar with a long term vision and this focus.
Our operating environment has changed drastically over the past seven months.
Yes.
We swiftly adjusted.
Family collections are consistently above national average.
The prepared our commercial properties for reentry by upgrading ventilation filters.
It's performing well.
Its cleaning protocols.
Our operating environment has changed.
<unk>.
Drastically over.
Algea protective shield.
We swiftly adjusted to the demands.
Yes.
The market.
We have.
[music].
Prepared or commercial properties for reentry by upgrading ventilation filters.
Hi, Jane.
[noise] implemented enhanced.
Infertile agreements.
Okay and then.
To support their financial position.
Plus.
Cash flow to me.
LG and protective shield.
Unfortunately.
To many others.
Thanks.
Her since then.
Stop in material and represent.
[music].
Diligently with tenant.
Of less than a penny per share.
[noise] impact.
Her 2021.
Backing to arrange deferral.
Well uncertainty remains regarding how protracted this eventual recovery will be.
We are confident in our ability to absorb the near term impact.
Dr.
While preserving our long term growth opportunities.
Less than a penny per share.
Yes.
<unk> grew 2021.
Our portfolio and local economy.
One remains regarding how protracted this eventual recovery will be.
On collection performance.
Are you confident.
In our ability to absorb.
So later on this call.
While preserving our long term growth topic.
Opportunities.
And the.
Are you seeing reason.
Par multifamily residents.
First.
Our concentrated in industry sectors.
Continued to show results.
Slowest job losses.
We attribute our strong collections performance.
Of local job losses for office using sectors in the Washington Metro region.
In fact at the composition of our office.
Oh office.
With me.
[noise] sector, losing more than 4%.
<unk>.
Of the total workforce year over year.
Through.
According to <unk>.
Yes.
Its job losses.
45%.
<unk>.
Multifamily residents.
For office using sectors in the Washington Metro region.
That's it.
And has been limited.
And.
With no off.
So the surfaces.
Losing more just.
For men.
Thanks.
For information so.
Before.
Year over year.
Furthermore.
B L a.
Or half of our professional and business services.
<unk> percent.
Government contractors.
And then.
Which is a key differentiator.
Our office tenant.
Okay.
Our.
[noise] off.
And.
Hey, some tenants.
Cinema business or.
[noise] programs, which.
Hmm.
<unk> significantly.
[noise] sector job.
We believe in our region.
Furthermore.
The other major.
Or <unk>.
Hi, Barry.
The business services.
Overall.
Our government contractors.
The second reason, we are confident in our near term outlook and long term growth for us.
Yeah.
Okay.
He is intense.
'cause it continues.
Its important programs, which.
Straightaway.
Which could significantly.
Hi, Mike.
For stability in our region compared to other major.
Forfeited multifamily portfolio.
Overall.
Well during the pandemic.
The second reason we're confident.
And and supply fundamentals over the long term.
<unk>.
Is the continued.
Jim Metro region.
[noise] demonstrated.
I can have a shortage.
Good portfolio.
It's been accumulating over many years.
Value oriented multifamily.
Okay, and affordability crisis is only getting worse.
With that.
Has the cost of homeownership continues to rise.
Fundamental.
For the long term.
For median income earners.
Sure region has.
Uh huh.
Just again how they.
Renter cohort.
That has been accumulating over many years.
Work supply.
As well as.
Over 95% of the multifamily units that have been constructed.
And from ownership.
For the past seven years are unaffordable for renters.
Triples for media.
$75000 per year or less.
But the largest renter cohort.
57%.
Or served by new supply.
Metro Renter base.
Over 95% of the multifamily units.
Set of wash reach units are affordable.
It's a seven years are unaffordable for renters.
Rent to income ratio.
<unk> thousand dollars.
Okay.
<unk>.
Lower.
On a segment which comprises.
Also driving our long term demand fundamentals.
Yes.
Okay is that 80% of our multifamily portfolio.
75% of wash reach units.
Okay.
Our affordable.
Job growth, it's the strongest and job losses.
To income ratio of 30% or low.
Virginia has mission critical cyber and technology jobs.
Fundamentals.
Somebody programs continue to grow.
Faulty family portfolio.
Market technology jobs.
Oh yeah.
Third the more expensive mark.
It's the strongest.
Using technology jobs.
I have been the lowest.
Endemic.
Northern Virginia.
Police its annual tech.
Cyber and technology job.
Blair this month.
Programs continue to grow.
UBS top tech market.
Market of technology jobs compared to more.
Yes.
Works markets, which are losing technology job.
Second in the nation.
Mike.
Based on the present.
Sorry released its annual.
I mean.
Or 30 market report.
[music].
Earlier this month.
He's the best combination of modern office rents.
Sounds good.
With a growing high tech.
Labor pool.
Central for growth.
Hi Tech sector leasing.
Sure Frank.
In Northern Virginia.
Sanction.
<unk> is expected to increase.
In Brazil.
So many quarters.
With more than 1.5 million square feet of active requirements and the pipeline.
Of modern office rent.
Oh, sorry.
With a growing high tech labor pool.
The third reason, we're able to absorb.
Through leasing.
The impact of the pandemic.
Yeah.
While preserving our long term growth opportunities.
With more than 1.5 million.
Sophie.
So long term capital allocation.
And the pipeline.
Jun proved and de risked our portfolio ahead of this downturn.
The reason, we are able to absorb.
Suburban multifamily portfolio.
[noise] Bendel.
Which we acquired last year.
Like long term growth opportunity.
Oh as.
He says our research.
For extra.
Okay.
Yes.
So long term capital allocation.
Hi qualities.
Jim proved and de risked our portfolio ahead of this down.
The reduction in the perceived benefits.
Bourbon multifamily port.
That's been the pandemic.
<unk>, which we acquired last year.
The real opportunity to continue to grow rents.
Yeah.
Suburban asset.
Yes.
Despite challenging market conditions.
The quality schools offered in our suburban market.
Well credit loss to date.
Okay and with the reduction in the perceived benefits.
85%.
During the pandemic.
Oh I last year.
I just provided the rare.
Yes.
Opportunity.
Acs retail assets.
At our suburban asset.
All amount of retail we've retained.
Condition.
We collected 95%.
The experience.
For actual retail brands.
Centseight.
The third quarter.
We do too.
<unk> retail tenants in our off.
Our retail and ally last year.
Our retail portfolio includes a combination of assets in transit oriented locations.
None of retail we retain.
<unk> and mix.
And I could 90.
Expectation potential.
Contractual retail rent.
<unk>.
During the third quarter.
<unk> said neighborhood.
Okay, putting retail tenants.
At worst neighborhood.
Ladies.
Our retail portfolio includes accommodation of the asset.
Transit oriented locations.
Lease maturity.
Bonds redevelopment and Ms.
<unk>.
Six densification potential.
Working.
As well as.
Well Senator risk.
As graded neighborhood.
Strong and stable collection rates.
Its neighborhood.
And limited near term lease.
Our office portfolio is also well.
Tenets have their own private.
Well, we did average.
Which has become increasingly essential.
Yes.
During the pandemic.
His exposure to co working.
Additionally.
No single tenant risk.
<unk> of our office.
Strong.
Yes.
And Sable collection rate.
Northern Virginia.
[noise] limited near term lease X.
Algae and government technology.
Export tenets have their own private.
Fuel growth.
Which has become.
You bet.
Basically essential during the pandemic.
Tim making remain slower than normal.
Over half.
We are well positioned to ones.
Absolutely.
Since making accelerates.
Where the Virginia.
Quality move in ready.
Technology and government technology are expected to continue to fuel growth.
He said that he.
Over the years ahead.
Yes, excellent momentum prepared them.
[laughter] decision, making remains.
Yes.
Thanks norm.
Putting Watergate 600.
Especially the ones.
10 tower.
Once you accelerate.
On center.
It's high quality moving.
Yes.
Yes.
If that cost effective.
And pricing.
I see and adaptive.
First speculative leasing on.
So when in this environment.
An excellent momentum.
Yeah.
Pandemic.
Our in our best assets, including Watergate 600.
Federal election.
<unk> power.
And while we are not predicting the outcome.
We believe.
Didn't has a potential catalyst.
Hello.
Both spring alignment.
The space.
Between the executive and legislative branches of government.
Yes.
Historically.
Finally.
That's alignment occurs.
Learn the results of.
Sales in this past which has.
If you're not predicting the outcome.
See greater office absorption for Washington DC.
The results.
Hi, Bobby.
<unk>.
And law firms ramp up.
Give and legislative branches of government.
Jim legislation.
Historically.
Well, we are not relying on this call.
Or less.
Yeah.
This isn't.
<unk>.
In the past.
Represent.
Hi, Ted.
[music].
Got it.
As.
Correlated.
Washington D.
Office absorption for Washington DC.
Each other.
The lobbyists and law firms and ramp up.
All in all.
<unk> and implementing changing let.
Okay.
Just.
Our portfolio over the near term.
And not relying on.
Potential over the long term.
Does that represent.
[noise] entity for further transformation.
In Washington, DC office market.
Before I turn the call over to Steve.
Mark.
I'd like to briefly discuss recent.
Good.
S.G. program develop.
<unk> value of our portfolio over the near term.
They have a pandemic.
Both potential over the long term.
Next time to take our eye off.
Bourbon transformation.
Often goal.
Forward.
All the aspects of our business.
Call over.
Our strength in it.
Just like to briefly discuss.
It's the long term.
Yes.
We're also critic.
Excellent.
<unk> says over the near term.
In the midst of a pandemic.
We were honored.
Right now is not the time.
The best corporate responsibility program.
Bond term goal.
And Maryland by nine.
All of our business that.
The award recognizes our robust.
Yes Ci program.
The.
We are also critical.
No problem.
Recently implemented.
Yes.
Excellent.
Wash rates commitment.
We were honored.
To our local communities.
Thus corporate responsibility program and DCM.
Sure.
Maryland by nine.
Every diversity.
More recognizes over.
<unk>.
Yes.
I belong in Council.
To help the company continuously evolve.
Recently implemented.
<unk>.
It's a wash rates.
Workplace for all individual.
Local communities.
We look forward to updating.
Right.
Our soldiers.
Earlier this year.
Their plans.
For the war.
We continue to promote a workplace.
Josh inclusion.
The full potential of all individual.
The company continues.
[music].
First of all.
For value.
Sales and even more welcoming workplace.
I'll turn it over.
That's true.
Just to review our collection.
Look forward to updating.
She.
Our summers as we execute our plans.
And al.
10, you to promote a workplace that engages the full potential of all individual.
One.
And were equity.
Right.
<unk> core value.
Dust collection performance.
Now.
Our third quarter.
Yeah.
<unk>.
The fee.
No.
The broader collection.
In performance.
As well.
I'm sorry.
Our.
The quarter results.
Further strengthen our balance sheet.
Our multifamily collections continue to be <unk>.
Hi, and good morning, everyone.
Fine It's a testament.
I.
<unk>.
Discussing.
Probably up credit.
Our form.
The resilience of the Washington Metro economy.
With an outlook for the remainder.
That 99%.
Her fellas.
Ashwin contractual rents during the third quarter.
We further strengthened our balance sheet.
<unk> through the first three weeks of October.
It's continued to be excellent.
True.
Just Paul outlined.
We have offered.
<unk> customer.
Okay.
In portfolio credit.
Financially impacted.
Washington Metro economy.
And only $58000.
Hi, Chris.
The family rent remains outstanding year to date.
At quarter end, our rent collections.
Three multifamily collection performance.
We are in line with our quarterly trend.
National averages.
We have offered.
Paul highlighted.
If it's to resident.
We attribute our outperformance in part.
By the pandemic.
Our exposure to industries.
<unk> thousand dollars.
These price.
The big family rent remains outstanding year to date.
The supporting industries.
Our monthly multifamily collection performance.
Turning point.
To track above national averages.
Well the way that.
As Paul highlighted.
Yeah and economic sectors.
Our alper.
Our spies.
Par.
That's weighted to the industry.
Right and.
He's been the most impact.
Just from during this crisis.
But in very high collection rate.
This exposure to under.
Well cash flows.
Please.
So the impact of.
The industries our residents are employed.
If the metro market.
Closure is most heavily weighted.
At the at leisure and hospitality.
It's an unexpected.
It shouldn't help.
Slides.
Okay and retail sales.
[noise] slated to the industry.
Present over 75% of Washington Metro job loss.
Please turn around.
55%.
Cash flows.
Cool job losses nationally through August.
Southern 19.
Three sectors comprise.
Approximately.
Okay.
I think in same primarily to the leisure and hospitality.
80% of our office tenant.
Okay.
Fixture.
And retail sales.
We are experiencing.
Represent over 75%.
Cash flows.
I think the metro job losses, but only 55%.
I think the commercial.
Abbas.
Office and retail collections improved during the third quarter.
System.
Prepared the already strong performance in the second quarter.
Mr and only 8% of our office.
The buzzing trend.
Mr.
We collected.
Sure thing.
7% of cash rents from office tenant.
Inflows.
Third quarter.
As price.
<unk>, 99% of contractual rent.
Switching to commercial.
Threat that has been deferred.
<unk> collections.
<unk> as a.
During the third quarter.
Yeah.
Okay compared to already strong performance in the second.
For the same period in September.
Yes, we do the stabilizing trend.
Right.
We collected.
Family resident industry mix.
Cash rents from office.
Tenants.
During the third quarter.
Let's say that to the.
Yeah, I mean, 9% of contractual rent.
Send the U.S. overall.
So that has been done.
All experienced limited credit boss.
Her twentyth our collections.
Since October.
Three to defer a net $1.4 million of Red for office.
Oh boy.
Yes, and we expect to collect 80% of that deferred rent by year end 2021.
They are more weighted to.
The song economic sectors.
These amounts have not grown significantly since the second quarter. When we had worked through most of these arrangements.
Year to date.
Retail comprise.
For a net $1.4 million of rats.
Well, we thought kind of struggled the most.
That's like 80% of that.
Steve.
<unk>.
Year end 2021.
In the quarter.
But the balance thereafter.
Our preferred route our collection rate was approximately 95% during the third.
After or when we had worked through most of these arrangement.
Agreed to defer in that $1 billion up.
6% of kind of why your today.
And when do you expect to collect 50% of that rent by year end 2021.
8% of cash rents in the third quarter.
We only deferred.
Our deferred rent.
Hey, Brent.
Our collection rate was approximately 95.
You know why impact.
<unk>.
It's less than a penny per share.
Yeah.
Our year end 2021.
And that $1 million of rent.
We have not incurred material credit losses related to cold at night King.
That rent by year end 2021.
We incurred approximately one penny per share of bad debt.
The deferred a small portion of rent.
Actually attributable to COVID-19.
Well they have cash in Hawaii impact.
But the balance sheet.
The per share.
We're pleased to report.
Hi, everyone.
<unk> address upcoming debt maturity needs.
We have not incurred material credit losses related to come at night.
Okay.
Thank you.
Liquidity position.
Quarter, we incurred approximately one penny per share.
<unk> dollar.
Thanks.
Her tenure Green bond.
Next and it was primarily attributable to COVID-19.
There are no girl Green bond.
The balance sheet.
It demonstrates our commitment to sustainability goals.
Keep upcoming debt maturity.
Sales in Graham sort of.
<unk> strength.
The Assembly port.
<unk>.
<unk>.
As well as LEED silver certification for true.
$350 million.
Please turn.
Green bond.
A way to elevate operations.
And see the wash reach sustainable.
In bond.
So we are raising the bar for the entire value add multifamily sector.
Which now includes achieving Graham certification for the Assembly.
Our opportunity.
As well as LEED silver certification for true.
In the country to achieve Ram certification.
Okay.
For existing multifamily property.
Since two the wash REIT sustainability standard.
September Thirtyth.
The bar for the entire value add multifamily.
Hours of liquidity.
They softened locked investment.
It executed tenure Green bond this quarter.
In cities.
So we will have no debt maturing until the fourth quarter of 2022.
She re M. certification.
Sure.
Just staying multifamily property.
Anthony our liquidity.
As of September Thirtyth.
We have approximately.
Good access.
$20 million of liquidity.
Markets.
Following the closing of the executed 10 year Green bond this quarter.
Yeah.
Yes, we will have no debt maturing until the fourth quarter of 2022.
And be a two.
<unk> period.
Cynthia Moody's respectively.
<unk> strengthening our liquidity.
Expect to continue to remain well within our bank and bond covenants.
To access.
Let's have access to the mostly Undrawn line of credit if needed.
Yes, thats and eliminated secured debt.
Secured debt on our balance sheet.
Excellent great ratings.
Right.
Flexibility.
But.
So we continue to improve our portfolio.
That would be a moody's respectively.
Our third quarter financial performer.
Then you to remain well within our bank and bond covenants.
It's been going economic disruption.
That's an undrawn line.
We reported core FFO of 36 cents.
And Oh secured debt on our balance sheet, which allows.
The prior year.
So as we continue to improve our portfolio.
<unk>, 9% and 3.6% for the third quarter and year to date periods.
Hi, Eric.
GAAP basis.
Given the.
0.1, and 2.9% respectively on a cash basis.
Core FFO of 36 cents.
My same store NOI decreased.
Compared to the prior year.
Three year on a GAAP and cash.
Yes, why declined 4.9.
Last fall.
And 3.6% for the third quarter and year to date periods.
Operating environment that we're in.
It's a 4.1 and 2.9% respectively on a cash basis.
And lease rate growth due to.
My same store NOI.
HM.
Hi.
This value oriented unit.
Year over year on a GAAP and cash.
It's for suburban properties increased 1.1% during the third quarter on a blended basis.
Ashford and the operating environment that we're in.
Base increase.
In our suburban portfolio continues to outperform and occupancy.
Gross lease rates.
Okay great.
It's been properties declined by 2.9% on a blended basis.
The oriented unit.
Lease rates for our urban properties declined by 4.6% on a blended basis.
<unk> percent during the third quarter on a blended basis.
Gross lease rates.
Police rates increase.
Let's say, 1.7% on a blended basis during the third quarter.
Gross lease rates.
Freights declined 3.1% on a blended basis.
Thats on a blended basis.
During the quarter.
Yes.
Our average same store occupancy dip.
It's a 4.6.
<unk> increased back to 94% at quarter end.
In total.
But urban rents were generally under more.
1.7% on a blended basis during the third quarter.
[noise] compared to national averages.
Find 3.1% on a blended basis.
Yes.
During the quarter.
Operating portfolio occupancy.
Yep Yep.
So it's true.
Thats, an increased back to 94%.
That is an initial lease up was 94.6% at September thirtyth up from 94.3.
Modest.
Make sense.
Some paired to national averages.
Uh huh.
This and other major gateway market.
Kind of wide declined 4.9% on a GAAP basis, and 3.7% on a cash basis.
Okay.
Driven by.
Probably deliver property that is an initial lease up.
Couple of known and expected move outs.
September Thirtyth.
Its losses related to Carbonite team.
<unk> three per se.
Parking income increased by about 24% compared to the second quarter.
4.9.
Okay and parking increase.
For some 3.7.
He starts monthly parking contract cancellations.
<unk> and.
Full re entry has been delayed.
Next a couple of known annex.
Excluding the decline in parking income and credit loss related to COVID-19.
Next I'll parking income increased by about 24 hours.
Would've increased.
Slightly.
This quarter.
Year over year base.
Her hit parking increased we have experienced monthly parking contract cancellation.
Hey Center.
And as full re entry has been delayed.
Approximately $300000 on a GAAP basis.
And then parking income and credit loss related to Covance.
It's been primarily.
Third quarter same store office NOI would have increased.
Receivables due from retail tenants.
It's impacted because it 19 deemed uncollectible.
Please.
Ceased at our residual retail center.
Yeah.
Which we reported as other.
And retail tenants.
There are $300000 on a GAAP basis.
That's fair.
It's $270000 on a cash basis.
'cause it 19.
So early.
By higher credit loss.
<unk> committee or velocity and touring was hit by the economic shut down.
Boston, because it 19 deemed.
I'm from square feet of office renewals and <unk> 8000.
Probably.
<unk>.
<unk> office.
Sales and 19000 square feet of new office leases.
[noise] chair.
6000 square feet of new retail leases during the quarter.
Okay.
Yeah, we achieved.
Turning to leasing activity.
17.6.
Anything was hit by the economic shut down.
Six and 3.4% on a cash basis for office renewal.
<unk> 8000.
Sales person.
With retail renewals.
Basis, a negative 3.9% on a cash basis.
Those leases.
Supposedly.
6000 square feet of new retail leases.
Pretty soon.
Yes.
60.4% on a GAAP basis and three point.
The increases.
On a cash basis.
As for retail renewals.
On that basis.
<unk> remained relatively flat.
This person.
<unk> GAAP and cash basis.
Hello.
Just to be totally.
Sales, 10% on a GAAP basis, a negative 3.9% on a cash basis.
Commercial properties reduced operating cost by approximately 680.
Just 4% on a GAAP basis and three point.
Yeah.
8%.
Yeah.
The cash basis for retail renewals.
No.
Sales and remain relatively flat.
So the $850000 the cost savings recognizing the second quarter was primarily related.
[noise] racial cost saving initiatives at our commercial properties reduce.
For space is being utilized at our office.
Yes.
Yes.
$80000 net of tenant recoveries during.
30% of our office spaces are being utilized.
HM.
Some of the tenants.
<unk> savings compared to the.
That's even though utilization by head count remained slower.
In the second quarter.
This call is required us to clean the entire office.
Okay.
Yeah.
<unk> expenses.
Even if only a few employees are using.
Hi, this is being utilized on or off.
To continue to benefit from operational cost savings into office.
Office.
This is.
Just as.
As we turn to normalized utilization.
Okay.
However, we anticipate operational cost savings will stabilize ahead of hitting normal.
Protocols requirements.
They should levels.
This entire office space, even if only a few employees are using.
Our financial outlook.
And expect to continue the benefit.
Good.
Operational cost savings into office spaces.
We went through our previously issued.
Stacy.
Hey outlook in April.
Debate.
Due to the volatile macro environment.
Utilize ahead of hitting normal.
They did the Carbonite team.
Racial levels.
While uncertainty remains surrounding the magnitude of the pandemic and the durability of recovery. We are now seven months into the pandemic.
Sure at least last evening.
<unk> ability to forecast the impact that could have a 19.
Okay 20 outlook in April.
Okay.
Due to the volatile macro environment.
Well economic stability.
They related to Carbonite team.
During downturns.
While uncertainty remains.
During 2012.
Magnitude of the pandemic in the durability of recovery.
This Russia and 2021.
The pandemic.
Third.
I feel better about our ability to forecast.
Our guidance for 2021 today.
Yes, Alex at 20.
We believe the growth in quarterly FFO that was originally expected in 2020.
<unk> expenses Metro region during downturn.
And 2021.
Right, so I'm afraid of doing 2020.
And sort of 20 to 21.
Integration.
In the case.
Instead of economic disruption in 2020.
Still uncertain overall about the extent.
We're not providing guidance.
Duration.
For today.
But the pandemic.
We believe the growth in quarterly FFO that was originally.
Makes sense, stating.
Actually 20.
And there are 2020 guidance.
During two quarters.
It's a core FFO per share range of one dollar and 44 cents per share to $1.46 cents per share.
However, we are.
Yeah, that's our multifamily in Hawaii.
<unk>.
It is from $59.25 million to $59.75 million non same store NOI.
The exciting.
Well it's true.
In 2020 guidance.
26.75.
Share range.
<unk> 0.2 $5 million.
And for share to one dollar.
So wide to range from $81.5 million to $82 million.
And fly to range from $59.25 million.
$12 million.
Seven $5 million.
So you previously expected significant multifamily growth in 2012.
From 26.75.
It could be deferred until the second half of 2021 and thereafter.
Office NOI to range from 81 point.
You can see increased.
$2 million.
During the quarter.
Or some other kind of wide to range from 11.5.
<unk> properties.
$5 billion.
Just allowed us to maintain occupancy well growing rents.
Actually expected significant multifamily growth in 2020 for growth, there's no likely going to be deferred until the second half.
It's one resident retention.
Yeah.
As more of our residents are choosing.
I can see increased.
Just to to our multifamily operators in the region.
Supported by strong demand for our suburban properties.
It was very strong at 63% during the third quarter.
And preserving our seasonal rent roll.
Suburban averaged 58%.
I'll tell you the outperformed the Washington Metro market.
5% during the third quarter.
<unk>.
Yeah, well above the Washington Metro urban.
That's relative to our multifamily operators in the region.
Total portfolio retention was 58% during the third.
Wrong at 63% during the third quarter.
Overall average.
The Washington Metro suburban average.
Okay.
<unk> percent.
Well, we are experiencing more pricing power and occupancy growth in our suburban submarkets.
Into Metro urban average.
At sponsoring this to pricing strategies during the quarter.
The portfolio retention was 58% during the third.
Production volumes rebounded from March lows and trended 40 per.
40%.
[music].
At above prior year levels during the third quarter and remained above prior year levels through October.
I can see growth in our suburban submarkets.
Forward.
Some markets.
We're focused on keeping occupancy as strong as possible.
Yes, Sir.
Throughout the winter months in advance of the.
For an application volumes rebounded from March lows and trended 40 per 40%.
Excuse to lease up.
On the levels during the third quarter.
In 2021.
Our year levels.
Oh great.
Yeah.
And 2022.
Going forward.
[laughter] lease up continues to be in line.
I see.
Uh huh.
Sorry.
Got a pandemic extract.
Technician.
Okay.
But to answer the expected live.
And just elaborate face to the smoke.
Uh huh.
Trove lease up.
Continues to lease up.
When social distancing measures drew on site Turing to a halt.
Up for growth in 2022.
<unk> success converting virtual tours into signed leases during the early summer months.
Our post onset of the pandemic.
Yeah.
For stabilization to the first quarter of 2022.
The smell.
<unk> fourth quarter 2021.
Probably so.
We now expect to incur a loss.
Distancing measures drew on site.
Sales in dollars in 2020.
Well, we had much success.
Starting virtual tours and.
See occupancy.
Starting the early summer months.
Pushed our expectations.
On to commercial.
Yes.
Pettitte improvement build outs.
22.
Sales for near term lease.
For 2021.
We continued to progress on interrupt.
US between 400.
We have approximately 39000 square feet signed leases.
The fifth.
Is that rent coming.
X-ray keeping occupancy.
<unk> thousand square feet of those signed leases to commence by year end.
Once the commercial.
Although physical tours had paused they resumed toward the end of the second quarter.
Good.
Now I'll traffic.
Interrupted.
Throughout the third quarter.
We still have approximately 39000.
Okay that make levels.
Since find leases that have not yet rent coming.
So decision making continues to be slow.
It does.
The pace of phase three entry is slower than originally anticipated.
Sequel tours had pause.
That week.
Yes, they resumed toward the end of the second quarter.
So James.
<unk> craft.
Smelling a near term phase.
The third quarter.
The free.
Yeah, It remains well below pre pandemic levels.
Have reopened and if the trend continues.
We're also making continues to be slow.
The station.
The pace of pace re entry.
The current gradual pace.
Hey that picked up in recent weeks as some tenants have reassessed reopening strategies.
So many included.
Are you seeing a near term phase.
That's.
That's.
Korea.
That said have been impacted by the current economic disruption.
Have reopened.
As Paul mentioned.
[noise] continues.
Doherty of this leasing.
Just utilization.
The car during the second half of 2012.
And to kill pace.
Quality space, we are leasing momentum had been the strongest.
So no expectation.
I suspect.
20 included.
Yeah.
It's a little bit offices.
<unk>.
Since the continued to be somewhat offset.
Yes.
Current economic.
Revenue.
<unk>.
Lease renewals and.
Sure.
Next.
The majority of this leasing was it.
[music].
It's good to occur during the second half of 2020.
Subside risk of our internal leasing asked.
I think momentum had been the strongest.
Let's see to remain stable.
Spec.
Yeah.
For speculative leasing assumptions.
Since the continued to be somewhat offset.
Putting cost savings of approximately 500.
Lease renewals next.
In towers during the fourth.
It's minimal commercial.
Don't is net of expenses associated.
Thats limiting the downside risk.
Country.
Let's turn to leasing.
The things that we expect to pass along.
Given seed to remain stable through year end.
GSK, including lease.
Thanks.
Texas.
We expect to achieve.
It was $23.5 million to $24 million.
It's 100.
Six.
And $5000.
Six and 37.5 to 37 point.
Net of expenses associated with preparing our buildings for reentry.
Yeah.
And the cost savings.
Our initial capital expenditure expert.
Thanks.
Functions, including lowering developments.
DNA, including lease.
Its development expenditures to range from 30.
$65 million to $24 million.
Right.
<unk> and interest expense to range from 37.5.
Renovation pipeline remains intact.
<unk>.
The program remains just.
As mentioned on previous calls.
This allows for rent increases to deliver the appropriate.
That's correct.
<unk>.
Taxes, including lowering developed.
Right.
On Sunday.
Clearly all of our future innovation potential.
They range from 30.
Performing suburban assets.
Yes.
Which will likely recover sooner.
Sure.
<unk> urban markets.
Ovation pipeline remains intact the program remains.
<unk>.
We remain.
Just.
Spark it allows for rent increase.
Race to deliver the appropriate.
<unk> ability to navigate these uncertain times.
Clean.
Near term.
Yes all of.
Painting, the operational flexibility.
Our fungus performing suburban assets.
Our long term growth.
That's actually recover sooner.
Breeding conditions improve.
I don't suppose pandemic.
And with that I'll now turn the call back over.
Conditions remain highly uncertain, we feel confident in our ability to navigate these uncertain times.
Well, we are operating in a challenging environment.
Some flexibility.
We remain confident.
Cluster.
<unk> ability.
Her for growth.
[noise] actively manage.
Operating conditions improve.
It's certainty.
And with that I'll now turn the call back over to Paul.
Of our assets.
While we.
Thanks.
Like others are dealing with it.
An unprecedented pandemic.
Thanks.
In a challenging environment.
That can execute.
We remain confident.
Gently strengthening the balance sheet.
He managed.
Maintaining value.
Certainty.
Well as preserving.
During the.
From growth opportunities.
And by assets.
At our current.
A week.
Yeah.
Like others.
We believe that we offer.
Unprecedent.
Our value proposition for investors.
All right.
7% dividend yield.
Putting the balance sheet.
Old that we're covering.
You mean value.
Strong liquidity position.
Long term growth.
Renovation pipeline.
At our current.
And we'll be reactivated.
We offer.
Admissions approved.
Our value prop.
[music].
For investors.
Long term growth.
With a 7% dividend yield.
We would like to open the call.
Yes, we are covering.
Two questions.
A strong liquidity position.
Development and renovation pipeline.
[music].
Question.
Yeah.
And we'll be reactivated.
Yeah.
Good.
Pat.
The Peru.
But for me to tell the indicate your line is.
Term growth story.
You May press.
Okay.
<unk>.
I would like to open the call.
If your question.
All right.
And for participants using speaker equipment, it may be necessary to pick.
Yes.
Yup.
Christian.
Before pressing.
In blood on your telephone keypad.
Our first.
For me.
As you know we're in.
[music].
Andy Your line.
Yes.
And is that.
Well Fargo. Please.
You May press Star two.
Great.
This is like Kevin.
Thanks, Good morning.
Yeah.
So Paul I think last quarter or maybe the quarter before when I asked about the investment.
Yes.
Ms market.
In Florida.
Talked about how the transaction side of things.
My first.
Facilitate really slow.
Yes.
Are you seeing any signs of an increase in transactional volume and if so is there.
Thanks, Good morning.
Figure out what the effect on pricing.
It's been both in.
<unk>.
[music].
Multifamily and office.
Excellent sales market.
Talked about how the transaction side of things.
This multifamily Blaine.
Seen any signs of an increase in transactional volume and if so.
<unk>.
Wayne.
Her out what the.
The urban and suburban.
Yes and.
And I'll I'll start with.
A DC proper.
Mm.
<unk>.
You know.
Let's start with a multifamily Blaine.
And some deceleration.
And with.
Downtown, but the but the big challenge really has been tow boat.
It's still hurting downtown investment sales.
Start with.
And it's really.
With the proper.
The for those who wanted to close.
Yes, definitely there has been some deceleration.
The the Achilles heel to two that execution.
Been tope.
<unk> in the suburban markets in multifamily.
Sales.
That seems to be the.
The hottest product right now, particularly in northern Virginia.
Yeah, it's probably really become.
I would say.
Achilles heel to two that execution.
The.
I would say in the.
Im where we thought it was a very hot market.
Hi.
Definitely.
We saw tremendous.
Product right now, particularly in northern Virginia.
Probably in January and February of this year.
No our observation and let's go back to the end of the.
A static period.
I thought it was a very hot market.
It is.
We definitely.
Right now.
The tremendous.
Two agency lending.
Some cap rate compression probably in January and February of this year.
I think the cap rates right now I don't like to put all my eggs and the cap rate basket, just because are they based on actual occupancy actual collections tax adjusted are you.
Yeah, Thanks to agency lending.
Having T three t. wanting.
Great compression.
But.
I think the cap rates right now I don't like to put all my eggs and the cap rate basket just because.
Become more aggressive.
Occupancy actual collections.
Two.
Adjusted are you.
And.
Each well.
Family space.
Anything T three into wanting.
You know when we talked in the second quarter.
Seen underwriting.
At zero to negative.
The since labor day, probably become more aggressive.
To probably between just any underwriting feedback we've got between one and 3%.
Sure.
And just in terms of capital.
And where.
I think as we talked about the Odyssey index. The core funds are kind of gone.
Rode a negative.
We're definitely seeing 10 31 activity.
Translated to probably between.
[music].
Just on the underwriting feedback we've got between one and 3%.
A value add to core plus the money I mean debt is the real.
Talk about the.
Our daughter here.
The core funds are kind of gone.
Looking in the multifamily space for.
10 31 activity.
Hi ours.
With.
Oh, 11% to 12% Levered.
As with good collections.
And that predicated on just over.
Plus the money.
<unk> percent debt.
This is the real.
Net.
Kind of Super Charger here.
Works or are really looking in the multifamily space for.
[music].
Okay, 6% Unlevered IR ours.
Exactly.
11% to 12%.
Different story Blaine.
I'll start in the suburbs.
2% debt.
Pity that we're seeing out there is really.
Net out.
From the core plus capital.
In the in the multifamily space.
Longer dated wall.
Office.
And or shorter dates with a retention story.
Same.
That capital is probably solving for an 11 to 13 or a 12 to 14 levered.
From the core plus capital.
Due to 65%.
For longer dated wall.
There you know under the preference promote structures are usually looking for about a 6% prep.
With a with an overall 12% target.
On an 11 to 13 or a 12 to 14 levered.
I don't see it in the mainstream brand now and I think you know when we when we look at.
And promote structures are usually looking for about a 6%.
You know even downtown the bigger deals are falling short on pricing.
And these folks are really I don't believe.
We just don't.
Yeah.
Main street, right now and I think.
The next two years.
When we look at.
Dr.
Yeah.
They're probably taking face rates.
Deal.
Banning them.
Even downtown the bigger deals are falling short on pricing.
You know a continued bid ask gap like we talked about last time.
Tremendous amount of growth for the next few years.
See a.
The commercial sector.
Kicking tires.
They are probably taking face rates.
Discounting them.
I think that we just see a lot of portfolio managers.
A continued bid ask gap like we talked about last time.
Chasing I think sizes.
Very relevant because it looks like the capital markets, especially the local.
Lots of fact, finding.
Helping those loans in that.
We just.
$50 million total loan value.
Three mode, but not a lot of serious capital.
Lending on the best of the best.
Don't think sizes.
Out there, but I think.
This meant because it looks like the capital markets, especially the local.
You know it kind of four.
Wrapping those loans in that.
Rates are.
$50 million total loan value.
So.
Yeah.
Companies are only lending on the best of the best.
To see.
Assesses out there, but I think.
Marketplace, right now and that.
And.
From sellers that have queues.
Kind of four.
And probably needed to get the product traded sooner rather than later.
Accretive.
And my final comment would be you know just foreign capital definitely thing.
Well or financing I'm.
Foreign capital back bidding.
Back into the market place right now and that.
Sale.
Yeah.
And they're looking at they're also looking for longer term walls, but there.
Chronic traded sooner rather than later.
Operating partner.
It would be you know just foreign capital definitely thing.
A little pick up.
A lot of foreign capital back bidding looking around they think DC is on sale.
Just a couple of.
Now looking at they're also looking for longer term walls.
Listing on the multifamily side.
Through a local operating partner.
Market or are there also value add deals in this.
Yeah.
Yes, what's the pricing differential between the two and then.
That's great commentary there.
If deals are you mostly focused on northern Virginia are you looking at.
Focusing on the multifamily.
Upper and Maryland as well.
Placing more core deals on the market or are there also value add deal.
The last and I'll work my way backwards.
Sure.
These men.
District right now.
Looking at deals are you mostly focus.
They only 13% of our NOI stream.
I don't think.
Heartland as well.
Seeing any transactions in the district.
Let me, let me start with.
That's because of Copa.
With my way backwards.
But looking for certainty of execution on closing.
You know the district is.
Wished out there restrictions to year end.
Annualized stream.
That won't.
I don't think.
More protracted.
Transactions.
The December 31st.
My earlier comments because of Copa.
Given some of the the occupancy and concessionary issues that are dealing with.
You know DC pushed out their restrictions.
But you are probably having a.
Nothing to say that that won't.
Fit ask.
More protracted.
I have.
As we get to December 31st.
Suburbs right now.
Yeah the.
Oh, I think northern Virginia.
Occupancy and concessionary issues that are dealing with.
The the job market with.
I think that you are probably having a.
Tracking that is definitely seeing more.
More deals and.
[music].
Value add deals.
Up to.
And I think your.
You know.
I think northern Virginia.
Last year at this time I believe when we were.
The the job market.
You did on the assembly portfolio and people were.
Good thing more.
Bourbon.
Or more deals and.
A walk up I mean.
Deal.
As one of the hottest products with the out there right now and.
Last year at this time I believe when we were.
Cost.
Signed and sealed and executing on the assembly portfolio people work.
It's not if.
Urban.
And they are going to grow rents and I think they brought that rent growth.
I'd like to that's out there right now.
For more than.
It's being price.
That.
Above.
Ben.
Placement costs.
There for some time like I said I mean there.
Value add capital that.
Play to win the deal.
Matt, it's when they're going to grow rents.
Two.
I think theyve brought that rent growth.
Theme, playing a lot of core capital.
More than.
Around those deals that right now.
That have been operating out there for some time like I said I mean there.
Inside.
Rent.
At this.
It's up probably to win the deal.
This trickle taking on board.
Beginning of year two.
The acquisition of land or maybe the asset.
Blayne lot of core capital sniffing around those deals there right now.
Let's let's let's look at our development pipeline right now I mean, we have 767 units shovel ready.
Hi.
Market, we know very well.
As at risk.
We've got our litmus test has been the excellent renovation work that we've done.
That is probably what we'd look at first and foremost.
Now, let's look at our development pipeline right now I mean, we have.
Have to go out and.
See already embedded in our portfolio.
Very well.
Some multifamily assets that have.
The excellent renovation work that we've done.
That is.
And construction deals right now.
As you know we have covered land plays that we don't.
That would be submarket by Submarket.
In our portfolio.
Yes.
As well as.
So we really.
The assets.
Try to play and a draft off of our affordability gaps.
Broken Conns.
So.
Right now.
I haven't seen any broken construction deals right now in northern Virginia.
Submarket by Submarket.
[laughter].
But there are markets.
We.
So as you know we really.
[music].
Ill try to play.
I'm sorry capital.
Eight off of our affordability gaps and.
Okay, that's great color.
I haven't seen any broken construction deals right now in northern Virginia.
Thanks.
That we wouldn't look at.
Paul You mentioned this a little bit in.
We.
We'd be in line with.
Four years ago, when we were looking at a pretty subdued office environment in DC and I think the hope was that.
And that's great color.
The White House and Congress.
Maybe.
Sales being passed and thus drive demand for office, but.
I think Paul you mentioned this a little bit in.
Different reasons that didn't really pan out like it has in past elections.
And looking at a pretty.
You know who knows what happens in this election, but as we.
Okay was that.
We'd been at the White House and Congress.
Hi, Allison.
Yes.
There's an argument that we actually could see a surge in office demand.
Yes.
This time around.
I think a bunch of different reasons that didn't really pan out like it has in past elections now you know who knows what happens in this election, but it's.
I think you said is eroded and on on the point of that and that.
Yeah.
It's an argument that we actually could.
Beers have been different for a variety of reasons in terms of prior trends.
What's the difference.
And so.
Okay.
Our our.
Sure happy to answer that Blaine I think you said is eroded and on.
Is the opportunity for more of a.
Yeah.
Typical relationship between.
A variety of reasons in terms of.
The government in terms of legislative and executive within the party that really hasn't exist.
For years.
It is.
Okay and.
As do reach alignment.
Meant that there is the opportunity for more of a.
May allow that to revert back more to the historical pattern.
Uh huh.
We point out typically does.
Executive within the party that really hasn't exists.
Slate of bills that are passed and then increase lobbying and legal precedent that DC.
Operative.
And higher absorption.
Stance, if there is a line that.
May allow that to revert back more to the historical pattern, which we point out typically does.
Our next question is from Anthony.
Of Legislative Bills that are passed and then increase lobbying and legal precedent that DC.
Thanks.
That results in higher absorption.
When I think about your markets you've got.
Got it let's hope so.
On the office side.
But the law firms and government and some companies as the big space users and then you have the smaller.
Anthony.
Hi folks.
Uh huh.
Conns and lobbyists.
Hi, Han please proceed.
So just wondering if you have a sense.
Hi, good morning.
Smaller tenants or any initial thoughts.
Thank.
Just whether you see them trying to.
Sorry.
[music].
The law firms and government and some companies.
There's big space users and then you have.
Border.
Yes.
Just what you're seeing in terms of there.
Lobbyists.
Our process right now.
Some stuff just wondering if you have a sense says.
Stan.
Just.
And any initial thoughts as to whether you see them trying.
Hi.
Andrew.
Our portfolio our own Ics.
Work in a more remote.
Actually it's kind of litmus test.
Forward or just.
[music].
Just on what you're seeing in terms.
Hi, there.
Are the ones that are back in the office right now.
Yeah Tony.
Okay that makes sense.
I would.
Because.
So.
You know for 12 to 15 people.
Our port.
Our own.
On.
The variance in our own portfolio as kind of the witness.
And they.
A lot of them don't necessarily have the technology infrastructure to support working from home.
That may.
If you look at our portfolio I think we.
For 12 to 15.
In the 5500 square foot range on that smaller tenant scale and.
There.
I don't know.
Yeah.
Necessarily have the technology infrastructure to support working from home.
Very focused on making it work in the footprint that they have.
Hi, rich.
Larger tenants.
5500 square foot range on that smaller tenants.
[music].
It's.
You know other other reasons are the ones, we're not seeing.
Some of them, yes, we've we've worked with.
We.
With a lot of them are.
[music].
We are very focused on making it work in the footprint that they have.
That.
But larger tenant.
Our discussions are folks that are actively trying to put together a workforce strategy.
I'm not seeing.
And we're starting to see some folks I wouldn't say, it's a trend, but we're definitely seeing some folks.
So.
Looking at longer term deals because there.
Oh gosh in our.
Missions.
Typically.
And realize they can probably capitalize on.
<unk>.
Free rent clauses.
We're starting to.
Et cetera.
Yes.
I wouldn't say, it's a trend, but we're definitely seeing some folks.
And then visionaries, but definitely.
Deals because there.
Opportunity Opportunistically.
Mission.
Looking at their workforce strategy with probably a longer vision than some of the smaller tenants that were that were dealing with.
Got it and what's happening.
I wouldn't call them visionaries, but definitely.
Opportunity.
Or just utilization there.
Looking at.
I think we've had good traction.
At probably a longer vision than some of the smaller tenant.
Okay.
But for that we're dealing with.
Other other office folks youve.
Happening.
The.
Yeah.
Discussed with.
Yes.
We have experienced.
<unk>.
A lot of folks looking for shorter duration leases.
I think we've had good traction.
No.
Thanks.
Flexibility.
Everybody else.
That.
Yeah.
That was kind of a neatly fit into this space plus box, which is.
Skus with.
Roughly 3% of our our NOI right now.
For.
[noise] shorter duration leases.
See as more decision makers come back.
Yes.
You know, we will continue to see our space plus inquiries grow.
To this.
First deal literally Tony that we did during the pandemic.
Of our our NOI right now.
King.
Hum.
That could come into space, plus and kind of get their own identity.
It's come back.
More importantly controlled.
We continue to.
Protocols within their own environment.
Freeze grow.
And.
We think that Thats.
Literally Tony that we did during the pandemic.
Throughout the balance of 2020 and going into 2021.
And the space, plus and kind of get their own identity.
Forward to reporting on a on that further as we.
[noise] protocols within their own environment.
So we think that that's.
And then.
So we're going to get traction.
You talked a lot about and gave a lot of color on that.
20 and going into 2021.
Beating.
And and.
On the debt.
Looking forward to reporting on a on that further as we.
That could be.
As we progress through that.
To find capital to redeploy elsewhere.
And then just last question.
Tony were always a I'm not trying to.
Transaction environment.
Question, but I think as you know.
You are on.
Opportunistic.
Yeah.
In how we allocate capital.
Could be.
And so if we.
<unk> capital to.
Opportunity to monetize an asset.
Tony were always a I'm not trying to.
Yeah.
Trying to Dodge your question, but I think as you know.
We're always looking at recycling I think we've.
How we allocate capital.
Good stewards of our investors' capital and.
Opportunity to monetize an asset.
The whats being bought in what's being sold I still think.
Yeah.
Advantage of it.
With a.
Always looking at recycling I think we.
The family and office.
The good.
And office a lot of that.
And.
A lot of that sales market is being driven by.
Being bought and what's being sold.
Community.
Thanks.
So.
A.
This we'd have to have kind of the glass slipper.
The family and office.
We would look at it if it opportunistically made sense for us.
A lot of that sales market is being driven by.
Tony.
The lending community.
So.
It's from Chris Lucas with capital one securities.
Kind of the glass slipper, but of course, we would we would look at it if it opportunities.
Yes.
Question, Paul which is just getting its counterintuitive.
Yes.
Okay.
Yeah.
Thank you.
You have a couple of.
Thanks, Tony.
Infill retail properties we've heard.
Next question is from Chris Lucas with capital one.
Yeah.
Please proceed.
Hi, good high quality infill and major markets is really creating at.
Sort of a follow up.
Pre Cobra cap rates are even lower.
Yeah.
If you adjust for end of life.
It is but.
We do have a couple.
Whether or not.
Nice infill retail properties.
We heard.
Come apart.
A lot of retail that's traded.
Basically.
The state has traded at <unk>.
It would be something you'd look to monetize in this environment.
It is really creating at.
<unk>.
You know sort of pre Cobra cap rates are even lower.
Pretty good if you adjust for end of life.
PD myself.
Just curious.
Hi, Chris.
Yeah.
And.
You know.
Always.
You have to come apart.
And for business as.
[noise] Valley.
Any.
It would be.
Should be but.
Size and.
You know I look at a couple of those assets and one that you mentioned Tacoma I mean, that's directly on the purple line.
On this.
Hi, Chris.
We have some what I would consider good cash flow and covered land plays.
Any.
But if somebody thinks that they are.
It could be but.
You know worth more fully.
Fully developed as a mixed use asset.
And Tacoma.
We take a look at it.
Finally on the Purple line.
Spring Valley.
We have some what I would consider.
In addition on that.
Third place.
And.
What he thinks that they are.
That's complete.
You know worth more.
On a relative basis.
Asset.
Of course, we would take a look at it.
Our risk just in terms of.
Really.
Pandemic cap rates I mean, we were as you know pretty comfortable with the high fixed cap rate that we achieved on our portfolio the 75% of our.
So we're doing well there on her on a relative basis.
But we havent.
Yep.
We havent really tested the waters.
But.
Pre pandemic cap rate.
If someone didn't come in with a compelling offer that we've we've been take a hard look at.
Our portfolio the 75% of our.
Steve just on the guidance.
Hi last year.
But we haven't.
Good quarter.
We havent really tested the waters.
For the quarter.
For some.
Your NOI guidance were.
Didn't come in with with a compelling offer that we've.
Kind of curious as to what.
Netted in guidance and if there's something specific that I'm not missing or that.
As you're aware of that we should be aware.
Got it.
<unk>.
Fourth quarter.
Yes, the guidance sort of.
Yeah I saw your note Chris and thanks. Thanks for the question I'm glad you asked.
Thanks.
And.
We were looking at total NOI guidance.
That brings.
Yes.
Yes.
Find all the pieces there is something you're probably missing because.
Perfect and I'm eager to not Miss.
As to guidance on J M. Because we sold at mid year, but did it contributed about 1 million three.
I saw your note Chris.
The sale and when I think you were looking at total number is that.
I think when you were looking at total NOI guidance.
Okay you got.
Yes, there is.
Okay.
Probably missing because.
You may have missed that.
His update guidance on J M.
It's about.
Mid year, but did it contributed about a million three.
So the first time that we have given guidance in the Covance world. When we look at the office sector I would say probably the two things that are a little bit.
Okay you guys.
At birth, and say commercial or office.
It may have been.
Yes.
You know in terms of.
Fading less recoveries of operating expenses.
For if you look at.
This quarter.
You know obviously this.
Our experis and we're probably being a little conservative we're a little nervous about projecting bad debt. So we're a little heavier.
That.
<unk> point on our bad debt projections, probably.
So were office.
Multifamily honestly, what we've experienced so far.
Operating expenses.
On the multifamily side.
We are.
And we're probably being a little conservative we're a little nervous about projecting bad debts.
Pretty the feel.
It's a you know on our bad debt projections products.
The rest of the quarter.
Multifamily honestly, what we've experienced so far.
Yeah, I mean a blended.
On the multifamily side.
Gross rents of one 1.7%.
Hey, doubts in our in our rents.
He is.
I mean, we started to feel.
Well, the data and all that and all the gateway markets.
Through the rest of the quarter.
It's winter months.
But when we look at what's happening in other gateway markets.
Going through there were really happy.
You know a gross rents of one.
Its maturity ladder, so that it's really a.
Is.
Wade into the spring and summer months.
We're looking at all the data and all that and all the gateway market.
But conservative in that front and obviously.
So were being a little bit conservative.
Just for a second to.
So really happy.
[music].
In terms of our original guidance too we finally reestablished it.
It's really a.
If you recall, we talked about a lot of things that we're going to be building up.
We're just being maybe a little bit.
Potentially so that we would in very strong in 2020 and have a lot of momentum going into 2021, well that you know what would that be we had suspected.
We finally reestablished it.
That have now been pushed.
Recall, we talked about a lot.
That would be under negotiations pushed out.
Just say 20 sequentially, so that we would in various.
We also had.
Because we.
Okay.
Without rent increases during the strong spring months into the summer.
Lease commencements.
The multifamily Reds.
As you know out too.
They've had a lot of that growing by the fourth quarter.
Vishay has pushed out.
And that our value add renovation program, which we had would have build up by then so.
Because we.
Think perspective.
We look at our original guidance.
Us into the summer.
Yes.
As we were freezing multifamily risk.
Only two cents a share behind year to date.
Selling by the fourth.
From where we originally planned to be.
But our value add renovation.
The build for the fourth quarter.
I would have build up by then so.
Okay.
Obviously, we can't predict the.
[music].
<unk>.
The extension ongoing duration of the pandemic.
The new guidance.
The question of when not if.
Yes.
Growth is coming because.
ER behind year to date.
Is that we have.
Are you from where we originally planned to be.
We are still at our best assets, where there is interest.
Yes.
So in our mind.
If you look at our multifamily.
Predict.
But we'll get we're going to get a chance to go back to the strong leasing seasons and hopefully have rental increases this year.
Rick.
In Turkey, and hopefully again.
Discuss.
The resume.
She has.
In our office portfolio are still at our best assets, where there is interest.
Yes, it delivered right before the pandemic.
Yes, you know, we'll get we're going to get a chance to go back to the strong leasing seasons and hopefully have rental.
So as that continues to lease up and then even a lot more growth than that in 2022.
Income.
Considering when it got started.
No.
So I mean, that's our perspective in terms of.
We delivered right before that.
Fourth quarter to the early winter.
It's slower on lease up but we've got pretty good growth in 21, just as that continues to lease up and then even a lot more growth than that in 2000.
Good.
Me too.
[music].
Considering when it got started so I mean, that's our perspective in terms of.
The phone keypad, if you would like to ask.
Quartered until the early winter.
Just.
Our.
None that if there's any.
In terms of guidance.
Right.
Yes.
Okay, great. Thank you Steve appreciate it that's only I'm sure.
Good.
As a reminder.
Okay, no questions coming into Q I would like to.
Good question, we love.
Well for closing comments.
[music].
If there is any final.
Thank you.
Again, I'd like to thank everyone for taking the time to join us today.
Hi.
We appreciate your continued support and we look forward to talking with you at they read.
No questions coming in.
For the month.
I would like to.
Turning it back over to Paul for closing comments.
And positive and have a good day.
Again, I'd like to thank everyone for taking the time to join us today.
Today's conference you may disconnect your lines at this time and thank you for your participation.
I'm with you it may read and over the coming weeks and months.
So thank you please stay healthy and positive and have a good day.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.