Q2 2020 Office Properties Income Trust Earnings Call
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In addition, we'll be discussing non-GAAP numbers during the call, including normalized funds from operation.
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Because certain information required for success conciliation not available without unreasonable effort or at all that's part of gains and losses or harmony targets related to the disposition of really.
No I will turn the call over to David.
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Good morning, welcome to the second quarter earnings call for office properties income Trust.
Listen to our prepared remarks, you will note a recurring theme, which is that our underlying business is performing incredibly well.
Second quarter, we produced normalized.
No that exceeded both consensus.
And our guidance for the quarter.
We generated year over year same property cash NOI growth at 2.5% also above expectations.
Despite the market uncertainty regarding office usage and tenant demand for space. We also had strong leasing activity in the second quarter, completing 642000 square feet, a new one renewal leases for 3.9% Rollup in rent in a weighted average lease term of more than six years.
Our year over year leasing volume was up approximately 12.5% well the broader market was down 44%.
Our consolidated portfolio occupancy increased 10 basis points in comparison to the prior year 20 basis points in comparison to the previous year.
Second quarter recollection remains strong and at the high end of collections for the office sector with 98% a cash rent collected and we have granted minimal right deferral totaling $2.5 million for the month of April through September representing only 88 basis points, a contractual cash rent.
Over the same period.
As a result of the successful completion of opioid disposition program in 2019, our balance sheet remains well positioned to weather the impact of the current economic challenges.
Leverage has been below our target range for the last three quarters, and we have approximately $570 million that liquidity.
In June and July we issued $162 million, a 30 year senior unsecured notes and use the proceeds to pay down or unsecured revolving credit facilities.
We also entered an agreement to sell it for property business Park for $25.4 million under our capital recycling program.
These transactions further support our low leverage and healthy liquidity.
Our distribution to shareholders is also secure that's the second quarter C.A.D. payout ratio was less than 58% and is expected to be below our long term target for the full year.
Turning to acquisitions and capital recycling.
In July we entered an agreement to acquire a single tenant office property in Denver, Colorado for a purchase price of $38.1 million.
Properties, 100% leads to an investment grade rated tenants for 11 and a half years.
We have temporarily pause there capital recycling program. We believe there may be an interesting opportunity to market a handful of properties beginning in the fourth quarter.
While OPI is not forced to sell assets today, we believe it or strategic to physician OPI two opportunistically take advantage of capital should it be available.
[noise] will strengthen both are strong financial profile and stable cash flow that is further supported by our diverse and high credit quality tenant books.
Now turn the call over to Chris to review leasing an operation skirts.
Thank you David and good morning, everyone. We are pleased to report strong second quarter operating activity and outperformance of several market trends given the current economic challenges. We believe these results are a testament to opi's diversified portfolio the quality of our assets and are strong tenant based on government in private sector.
Tenants.
During the second quarter, we completed 642000 square feet of new and renewal leasing with a weighted average roll up in our rent of three 9% a weighted average lease terminals six one years and leasing capital per square foot per least here a $4 and 25.
Year to day or leasing activity has generated a weighted average real hoping around a 4% and a weighted average lease term of five four years.
We ended the quarter was occupancy of 91, 7% of 20 basis point increase over the previous quarter.
Notable leases executed during the quarter include a new 15 year lease with the county in Annapolis, Maryland for 51000 square feet and a roll of <unk> of over 14%.
And Chantilly, Virginia, we signed a seven year renewal with the government contractor occupying 159000 square feet. This tenant fully occupies one of three class a buildings owned by OPI that are located adjacent to the National Reconnaissance office headquarters.
Although our total leasing volume was up 12, 4%, while the router market was down 44% on a year over year comparison.
New leasing volume has lagged free cobot activity.
However, tenant towards the picked up renewal leasing continues to advance and our leasing pipeline remains active with discussions covering to 1 million square feet with roughly 400000 square feet, a current activity that as an advanced stages of negotiation.
As a result, we expect to close up here with the roll up into rent of 3% to 5% and occupancy around 91%, which is an overall improvement to our prior quarters projections.
Across our portfolio request from tenants for changes to their footprint to support flexibility with remote where Kevin minimal.
We believe questions around D densification certain tenants security requirements employee development and collaboration and the need for an office touch point are all considerations supporting the need for maintaining their office footprint.
This has been more evident with Opi's government in government contractors, given their strategic locations and security requirements, where we continued to see renewal activity proceed without a decrease of their footprint as evidenced with or at least in results.
Two or more of the asset management and property management team, we continued to proactively advanced conversations with tenants to discuss their real estate knees, which we believe physicians are properties for long term growth and retention given the active management of these relationships.
Considering the uncertainty created by Coven, we are only comfortable providing guidance on tenant move outs for the remainder of 2020, which we expect to be around 50 basis points of annualized rent.
That said, we do have a known move out at the end of the 2021 first quarter.
Creates an interesting opportunity for OPI it as a property located in Washington D C and accounts for two 8% of annualized rent we had been preparing for this move out for awhile and frankly are excited to get this property back unencumbered.
The property as well located within D. Six capital Hill Submarket as one block from Union station and we're evaluating it for a mixed use redevelopment, which includes the addition of two floors.
We are fine tuning our plan and will provide more detail in the later call, but anticipate the outcome will result in an 8% to 10% cash on cash return on approximately 150 million redevelopment costs and we'll create significant longterm value on the property is delivered in early 2023.
The remains uncertainty around the speed of the economic recovery and long term impact on office generally however, we believe the diversity of our tenant base.
Both geographically and by industry and the financial strength of our tenants will benefit us as we manage through these on certain times.
Nearly 63% of our annualized revenue is derived from investment grade ready to tenants, including almost 39% from the secure government sector.
Further tenants with businesses involved in essential goods or services makeup, 78% of annualized revenue and roughly 95% is considered low risk by industry, all of which helps to drive tenant retention and portfolio stability to sustain us during times of economic volatility.
Before turning the call over to math I wanted to comment on the recent publication of Rmr's inaugural annual sustainability report.
This report highlights the several ESG initiatives advanced across the company and corresponding milestones. Some representative examples include first Opi's Board of Trustees consists of 37% women and earns high recognition by the 2020 women onboard education and advocacy company.
Second energy management programs led by harm are reduced year over year same property energy by four 9%.
And lastly, OPI earn the 2020 energy star partner of the year sustained Excellence award from the EPA and the energy management category.
We are proud of these achievements and fill this is further testament to rmr's expansive well connected and informed real estate operating platform.
I will now turn the call over to map round to provide details on our financial results Matt.
Thanks, Chris and good morning, everyone.
Normalized F F O for the second quarter was 67 $2 million or $1 40 per sure, which beat consensus of $1 34 per share and the high end of our guidance estimate of $1 36 per share for the following reasons and increase in NOI of two per share mainly due to cost savings initiative.
<unk> put in place by RMR in response to the Coven 19 pandemic.
A decrease in G&A expense of two per share mainly due to a decline in our average share price in may and June.
And a decrease in interest expense of one cent per share mainly due to declines in LIBOR in may and June.
Cav for the second quarter was 45 $5 million or 95 per sure which resulted in scav payout ratio of 57, 9%.
In July we declared a 55 per share dividend maintaining our previous level are dividend is well covered and we expect it to be below our target of 75% for 2020.
Rental income property operating expenses and depreciation and amortization all declined as compared to cue to 2019 due to the sale of 29 properties for aggregate proceeds of $666 million since April one 2019.
G&A expense for the second quarter was seven $2 million compared to eight $7 million for the second quarter of 2019.
The decline is mainly the result of lower business management fees paid to RMR due to lower debt levels from property dispositions since April one 2019, and a 25 cent decline in Opi's average share price.
In addition, we incurred higher amounts of legal fees and Q2 2019, resulting from our merger with Sir.
As a reminder, our business management fee is paid based on the lesser of total market capitalization or assets under management and is currently being paid on total market capitalization. We believe this calculation represents a strong alignment of interests with shareholders built into our management contract with RMR.
Interest expense for the second quarter was 25 $2 million compared to 35 $3 million and the second quarter of 2019. The decline is mainly the result of $750 million of unsecured senior note repayments since July one 2019 235 million.
A term loans repaid since April one 2019, and $113 million of secured that repaid in 2020.
Turning to property level results for the quarter for the second quarter same property cash basis, NOI increased to $4 million or two 5% compared to the second quarter of 2019, which beat the high end of our guidance range of one 5%. The increase was driven by an increase in.
Cash received from contractual rent a one $1 million, which is primarily the result of free rent expiring and decreases in property operating expenses.
In total property operating expenses decreased one $3 million, which is made up of one 7 million of cost savings initiatives implemented by RMR in response to the coven 19 pandemic any areas of utilities cleaning and trash removal offset by increases in insurance premiums in real estate tax.
<unk>.
[noise], though real estate taxes have increased OPI has successfully saved over one $5 million from Rmr's real estate tax abatement program in 2020.
While parking income, which represents less than 2% of rental income decreased approximately $500000 on a sequential basis, which was in line with our expectations. The cost savings as a result of Cove at 19 exceeded our expectations and contributed to our same property cash basis NOI growth in excess of R. S.
<unk>.
This is a testament to the conscious and thoughtful efforts to managing expenses by RMR in order to preserve NOI and improved profitability and a period of lower office utilization.
Based on our current forecasts, including estimates of G&A expense, which can be challenging due to the volatility of our share price and Q3, NOI, which the pandemic also makes uncertain, we expect normalized <unk> to be between $1.27 and $1 29 per share for the third quarter of 2020.
And we expect our third quarter same property cash basis, NOI growth to be between 1% and 3% as compared to the third quarter of 2019.
As it relates to the coven 19 pandemic.
Q to rent collections, we're strong with 98% of rent obligations collected and 99% collected after adjusting for granted rent deferrals for the quarter.
As of July 27.
97% of July rent obligations were collected and 98% collected after adjusting for granted rent deferrals for the month.
During our coupon earnings call, we reported that OPI had granted rent deferrals to 18 tenants totaling one $4 million as of July 27th the number of granted request has grown modestly to 23 tenants.
The total amount of rent defer to date is two $5 million, which represents 88 basis points of the contractual cash revenue over the period of April through September.
Generally these deferrals include one month of bass rent in exchange for 12 increased monthly payments be getting in the fall of 2020.
Based on the April accounting guidance related to rent relief. These rent deferrals have not impacted our revenues. However, they are temporarily reducing our cash flows to date no rent has been forgiven or abated.
Our tenant watch lists currently includes 18 tenants of which 11 are not paying the rent obligations and have not been granted rent deferrals. These 11 tenants are mainly building amenity tenants in the health and fitness business and quick service restaurant business and represent 20 basis points of Opi's total square feet and.
Approximately $200000 in monthly contractual rent.
As a result for the second quarter, we recorded revenue reserves of $962 or 66 basis points of Q2 rental income, including $660 of a R and $302000 of straight-line receivables, which is an increase from the previous quarter.
Turning to the balance sheet and capital expenditures <unk>.
In June we issued $150 million of six 375% senior unsecured notes do 2050 and in July we issued and an additional 12 million of these notes in connection with the underwriters exercise of their overallotment option.
These notes can be prepaid without penalty starting in June 2025.
At June 30th we had approximately $575 million of liquid liquidity, including $550 million of availability on our $750 million unsecured revolving credit facility.
At June 30th or net debt to annualize adjusted EBITDA R. E was five nine times, which remains below our target leverage range for the third consecutive quarter.
We currently have $570 million of availability on our revolving credit facility and only $40 million of that maturities until 2022.
Balance sheet remains strong and we have ample liquidity to whether the current disruptions facing the real estate industry.
We spent 21 $9 million on recurring capital during the second quarter, including $10 million on building improvements and 11 $9 million on leasing capital.
As a quarter and we had approximately 61 $7 million of unspent leasing related capital obligations of which 52% represents tenant improvement allowances managed by our tenants and $15 $8 million is leasing capital designated and leases for future years.
Based on our current forecast, we expect 2020 recurring capital expenditures to be approximately $92 million, which is consistent with our forecast shared on our coupon earnings call and down from our initial forecast of $110 million.
Operator that concludes our prepared remarks ready to open the call up for questions.
Yes. Thank you we will now begin the question and answer session.
Well I ask a question you made fresh Star then one on your Touchtone phone.
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At this time, we all pause voluntarily to have some of the roster.
And the first question comes from Brian them, all her with be Riley FBR.
Yes. Good morning, So a couple of questions and that you touched upon that's it and maybe you David can elaborate on.
18 tenants on the watch last 11, not paying seems like.
You know kind of health care fitness <unk> type of tenants, what's going on there I mean, what's the plan those tenants not apply for.
P. P. P dollars are they just not wanting to pay you how are you thinking about a dressing that.
You want to deal with that.
Sure.
One tenant for example has filed for bankruptcy.
In that.
11 tenants that are not paying another example, as a tenant that occupies a gym in one of our buildings in D. C and they've said to us they don't plan to pay rent until kind of D C reopens and things stabilized.
So we're working actively with our tenants.
Some of which though with bankruptcy and just declines in business are really struggling right now.
Okay, and then as far as that comprise like.
What other things were being very careful of is.
<unk>.
Where attended financial condition might be so bad at the end up filing bankruptcy.
We'd rather have.
Delinquent rent that we can file a claim for versus potentially.
Not being in a position to file that quiet.
Got it.
<unk> and kind of moving onto the capital to recycling program and I think you made the comment that it was pause.
But there were a few assets that may be you might be sold or there's an opportunity to potentially sell on the fourth quarter. David as you look out over the next kind of six to 18 months with Kobe and other things going on.
What is your current view as to how that might play out as measured and maybe hundreds of millions of dollars 100, 203 hundred over that period of time, and what kind of Cadbury differential should be expect between what you might acquire.
And what you might be able to sell assets for.
Yeah. Those are those are good questions Brian so.
You know.
I would say during the second quarter.
The only.
Ah.
Potential acquisition opportunities that we have seen has been what I would call very core.
Real estate opportunities.
And Ah pricing for those very core assets really hasn't changed a whole lot.
From pre coke with levels.
There has been very few transactions for what I would call non-core or maybe value at.
We.
We have some opportunities to sell some assets, where we think the future capital is not as economic because we'd like it today and so we have been more focus on.
Looking at our capital recycling program by comparing.
The five year average cash contribution.
From assets, we sell versus assets that we buy.
And what I mean by the five year cash contribution is N O Y minus capital. So we're really looking at.
I would consider C. A D to the company.
And we believe that we can sell properties with a 1% to 2% differential in that five year cash contribution.
That's that's what we're buying.
Is contributing.
100 to 200 basis points more in annualized cash contribution and what we're selling.
So we think we can do this accretively now if we get into the market and we find that there's not attractive bids for what we're selling we won't sell.
But our goal would be over the next 18 months to continue.
Or 300 million dollar.
Annual cat.
Capital recycling program.
So that makes sense.
Yeah, Great and I was gonna ask you about your Denver property that you acquired but I'm a little bit more interested in your comments on the property and year Union.
Nation, and what you might be doing there can you just give us a little bit more color on what that at that currently is how much you might spend.
I think you said it might come back online around 2023.
A little bit more color on that would be really helpful.
Sure.
Chris do you want to address that.
Sure Hey, Brian.
So this is a building noted in Washington D C about a block from Union station, it's largely occupied by the GSA.
Who is going to be relocating to another location to consolidate with other agencies and so.
I'm doing so we've been looking at opportunities and head proactively over the last couple of years purchase density credits.
To grow the building by two floors or kind of close to about 125000 square feet of density credits.
And really this is a fluid process. So we're really focused on I guess, a handful of options one.
Talked about this mixed use option, which includes office retail in some form of maybe multifamily component.
And the other option that we're also focus on is just.
Kind of a single.
Tenant leaves to kind of more of the existing building with the GSA and we're actually in conversations with the GSA for a potential user.
That could take the entire building.
But that's a process we have to go through and it's a competitive bid processed and will still require capital and so that's probably the.
Kind of the lesser NOI play, but lesser risk play and then on the mixed use side again, we would get additional square footage I think we get higher rents and we're also in some active conversations with tenants.
We think could be meaningful for kicking off a project and so.
Timing is is it.
The GSA still vacates by the end of Q1 2021, we should be well positioned to proceed with a desired option.
And anticipate that delivery can happen in early 2023.
Great. Thank you very much.
Thank you and the next question comes from adding a I'll skip with Morgan Stanley.
Hey, guys. Thanks for taking the question I just wanted to ask a little bit more about the assets that you said might be targeted for sale. Unlucky. You said previously you guys don't really need to sell anymore assets lever just sort of below your target and it's been there for awhile now, but so these assets that sort of might come up for sale and <unk>.
Part of the capital recycling these assets, where the fundamentals on the capsule picture has changed meaningfully over the next five years amid cobin over these sort of assets that we're always potentially slated for sale.
And just sort of how the <unk>.
Potential opportunity for more sales kind of came about.
Sure. It's a good question.
The short answer is these are assets that we had targeted for the next phase Castle recycling program.
But put them on paws because of the disruption in the property transaction Martha duty perfect.
So they are not a resolved.
Performance of the properties are not a result of Kobe, but they are assets that we identified.
Probably nine months ago potential capital recycling.
In the fourth quarter.
2090, we opportunistically sold.
Building in Houston.
The headquarter campus for noble energy it wasn't an asset that we were marketing to sell.
But the tenant came to us and basically said, we'd like to buy it.
And they were willing to pay a price for that property that we thought was very high relative to long term brown here <unk>.
Fast forward to a couple of weeks ago notebook being required by Chevron in that building.
Potential will go in Vegas.
And so what we're trying to do it O P. I is physician us to be opportunistic.
And the only way we can be opportunistic.
Is to have properties in the market.
Find out how the market prices those assets and if we find the pricing acceptable we will transact.
If we don't will follow them again and wait.
But I think that is the right strategic moved for the company.
Got it makes sense.
And then I guess just more broadly Ah.
It seems like you guys are becoming very flexible as far as sort of capital allocation priorities.
With with the new sort of development project and and acquisition in Denver I'm. Just wondering like is there any chance that.
You guys could continue to start a shake up that mix and maybe reinvest more capital into buildings that were slated for sale or maybe even if the new buyback sure buybacks or anything like that and just sort of broadly how <unk> and the current environment that we're in has has shifted your capital allocation priorities.
Yeah. It's a good question I wouldn't necessarily say Cove, it has shifted R capital allocation priorities, but <unk>.
<unk> spent 18 months repositioning or balance sheet.
And I'm, putting ourselves in a position, where we could be more strategic with allocated capital.
Cove, it kind of put that on hold.
But again, we want to be opportunistic.
January good returns with our capital we have done across the RMR platform a lot of development and redevelopment. So we have that capability.
And assets that are located in <unk> markets.
Where we believe we can grow rents long term, we would much rather.
<unk> assets than we would stolen bacon.
So I think you will see.
In our portfolio over the next three to five years, we have probably.
Three maybe four potential interesting redevelopment opportunities.
That we are exploring now to be able to position ourselves to make a strategic decisions.
Yeah, that's really helpful and I guess, just one more for me.
The balance sheet isn't really good shape.
Have said I'm just wondering how does how does this environment sort of change your.
Target leverage has it changed it at all.
You guys planning to be sort of more conservative for the next.
Or two and then maybe be willing to let leveraged pick up back to sort of mid to high end of your prior stated ranges.
What does it sorta latest thoughts on how how this environment <unk>.
A extra leverage targets than the available liquidity.
To continue that sort of capital recycle.
Yeah, It's a good question.
We don't have any real interest rate now issue mean equity to take our language. So our primary tool is capital recycling.
So I think.
We haven't changed our guidelines as it relates to target leverage is still right is that 626, 5%.
Fine being modestly below that.
But.
Our ability to be successful with selling assets.
We'll have a big impact.
And how we buy assets and how we address redevelopment.
So I hope that helps.
Answer your question.
Yeah, absolutely. Thank you guys.
Thank you and the next question comes from Michael Carol with RBC capital markets.
Yeah. Thanks, David I Kinda wanted to talk a little bit about your comments about the developments I guess first you said there was bought a handful of developments that you could pursue that's currently in the portfolio.
What's the timing of there and would you need to have a tenant move out like the one in D. C for you to pursue those projects or or what's the expectation.
Sure well we've got.
Chris talked about 20 minutes Avenue.
Which would be probably kick off.
Beginning of the second quarter.
2021.
We have two other buildings that are currently occupied.
Sure one we know the tenant will vacate.
It's been a high growth market.
Where we believe we could substantially grow Rams.
[noise] would likely be something that begins more 2023.
And then we've got an asset.
In the Boston market, where.
We are not sure whether when or if the tenants will vacate but it is located in.
In an area of Boston, where.
We could do a very interesting redevelopment.
But that is probably more <unk>.
2024 2025 so.
These are reasonably well space.
What we think makes a lotta strategic sense for the company.
Okay, and then with the.
Believe is the Doj that's in the mass add building. That's that's moving out I mean do they have a a building that they are planning on moving too I guess, what's the chances that they are a hold over in this day and they're a little bit longer through 2021.
Yeah, it's actually Cif's and they they had been working on a bill to suit for awhile.
We've actually been I guess working with them for the last three years to get them out of the building and so.
We've done short term extensions with them during that time period to accommodate their bill to suit.
Okay, and then is that bill to sue done and ready for them to move in the beginning of next year.
First you want to address that.
Yes. It is complete they're already starting there were any contracted to pay rent on that building and so it's just a function of them phasing out I'm moving over so at this stage. There's no. There's no reason to believe that they would say past lease exploration at the end of Q1.
Okay, and then I guess, Chris dietary correctly and your remarks about that there was a tenant looking at that NASA building. So there is a debate if you want to or if you can leave it to somebody else or pursue this redevelopment.
That's correct I think with either option, it's going to be significant investment I think just to reposition for a full building user for a long term leafs in the neighborhood of 15 plus years or Macy's development.
Is going to require kind of substantial development on either side.
Okay, Yes, and it didn't make an interesting it's an interesting opportunity Mike because clearly.
Doing a government at least for 15 years is a less risky opportunity, but it provides a much lower return and so.
We're just gonna have to address that is boat.
Progress.
Okay and then the government has been awarded that to you yeah. So that there's still waiting on their decision there.
That is correct.
Okay.
And then I guess last one one for me is that the mixed used option I'm, assuming that you would pursue that more on on speculative basis and I guess are you prepared to do that if the market remains a little bit more uncertain like it as today.
First you want to answer them.
I think that yes, I mean, it would be unexpected a basis, but as I noted we're in various levels of conversations with tenants that we believe.
Could help accelerate some leasing on the answer but I think idea all ideally.
If we don't have let's say kind of this GSA user.
Pete up and ready to go we would pursue the mixed use option.
Provides kind of a more attractive yields and I think provides a little bit more certainty around leasing long term.
Than waiting for another large user as a full building occupant.
Mike We think we could mixed use option, we think we could be 50% prelease before shovels her in the ground.
Okay. Thank you.
Thank you and that's that sounds like cat come on any with some of his Ohio.
Hi, good morning.
Just wondering if you guys can provide an update on Technicolor and tailored brands. It looks like Technicolor the annualized revenue in your top 10 list declined debate move two number 13 from number 10.
[noise] curious if that was a function of their their recent restructuring and on tailored brands I know, there's some reporting on store closures and lay off so I'm just curious about any updates.
Yeah, Chris do you want to address that.
Sure.
Technicolor.
Is there restructuring it was a restructuring primarily around that obligations.
And it was <unk>.
Largely impacted kind of it's Europeans parents holdings and so it didn't have a direct impact on the kind of the U S entity side, which is what we have with our lease and so.
That's actually progressed based on the plan submitted and they've received certain approval through various milestones actually is earlier this week and so.
What is going to do with it is going to give them, an additional liquidity and access to capital to implement or manage through their business plan. So I think we feel relatively optimistic based on kind of the restructuring and the approval that their business.
Should should continue kind of as proposed.
Four Taylor brand.
Chris interrupt you for a second you can.
Yeah. So.
Pretending to color.
Separate from their corporate restructure in France.
We did a renegotiation of their rent.
They're lease with us in.
Huntsville, Alabama and that is what resolve it.
And the them dropping from number 10 to number 13.
Okay great.
I'm sorry go ahead with Taylor brands.
Now for Taylor brands.
I guess, a couple of different things one there the news about kind of a potential bankruptcy that they anticipate in Q3, which is something that we're monitoring.
They have furloughs, a lot of their employees and kind of some of the challenges with.
They're brick and mortar stores reopening is just kind of making a little bit more difficult for them to.
<unk> with their current plan, but.
Building.
We have in Houston is our corporate headquarters I think we view that as mission critical we've been having conversations with the local team on kind of any indication about what they might do and I think at this stage.
It's business as usual until I think some of their filing occurs in Q3, and so it's something we're monitoring.
Closely but with no real indication on whether or not.
There might be an impact to the building that we have with them.
Okay. Thank you. So it's helpful and did you guys see any uptick in shorter term renewals in the quarter, maybe from non-government tenants.
It looks like the way Dobesh lease turn them on the news about 5.1 years, but just wondering if not might've been skewed by any larger longterm renewals I know when you're prepared remarks, you mentioned the seven year renewal.
Yeah. So.
Chris.
I guess, there's a couple of short term renewals that we did.
For the quarter and I would say that in both cases, it's consistent with just kind of the environment, where these tenants reside so for example.
We did so we did too short term renewables between three and four years of term.
One of them with with a building a tech company in Austin, Texas. This as a tenant has been in the building for.
10, plus years and over the last I would say two or three renewals has only done three year deal and I think that's consistent with what we see a lot happen in Austin in general.
And so it's not it's not a surprise that they did three year deal and I think when you're dealing with the market like Austin, where rest of grown tremendously over this last cycle.
Whether it is positioned us to do is take advantage of the upside.
And so for example, with this most recent renewal we had a 23% increase.
And our role up and rent and so I think that just kind of shows in this particular case, how there is a benefit.
And then the other building is with the government.
In California, and this renewal was closer to four years and it was really just part of our strategic plan as they put together than our overall kind of global plan for the building long term, but we don't view that as any specific risk with his strategic location.
So and generally.
Yes, we always have some short term renewables.
When we do our corduroy Lucy.
But there's nothing that occurred during the second quarter that we would say is cove 19 impacted because people are trying to evaluate with their space.
Nothing out of the ordinary.
Okay, Great. That's helpful. And then one last one using touched on this earlier, how should we think about <unk> going forward, giving that's been closer to 7 million as lost two quarters. I think you guys had previously guided chew a wider range of $79 million. So just curious how are we should think about that in the back huh.
Do you want to address that please.
Yeah. So the cue to G&A expense was seven $2 million is a covered in my remarks based off where OPI share prices trading currently.
That remains a good run right for Q3 Q for.
Okay. That's it for me thank you.
Thank you.
At this time there are no more questions. So I'd like you were trying to Florida, David last night for the closing comments.
Thank you operator, and thank you for join US today before we disconnect I'd like to think our team's across the RMR platform for their extraction exceptional efferson dedication to our business in the face as the global hardship.
A strong second quarter earnings and operating activity as the result of your dedication an exceptional efforts. So thank you operator that concludes our call. Thank you.
Conference. That's all concluded thank you for attending today's presentation.
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Three.