Q4 2020 Columbia Property Trust Inc Earnings Call

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Good afternoon, and welcome to the Columbia Property Trust fourth quarter 'twenty 'twenty Conference call all participants will be in a listen only mode. After today's presentation, there will be the opportunity to ask questions.

Please note. This event is being recorded on the.

I'd like to turn the call over to Matt Stover Director of Investor Relations. Please go ahead Sir.

Thank you operator, and thank you everyone for joining us on our fourth quarter 2020, Columbia property Trust Investor Conference call.

On the call with me today on Nelson Mills, President and Chief Executive Officer, Jim Fleming Executive Vice President and Chief Financial Officer, Jeff <unk>, Executive Vice President and Chief Investment Officer, and other members of our senior management team.

Released the results this afternoon, and our quarterly supplemental package, which can be found on the Investor Relations section of our website and on file with the SEC on form 8-K, We also filed our 10-K with the SEC. This afternoon and audio replay of this call will be available by this time tomorrow.

Statements made on today's call regarding expected operating results and other future events are forward looking statements that involve risks and uncertainties and number of factors could cause actual results to differ materially from those anticipated, including those discussed and the risk factors section of our form 10-K, which includes specific risks pertaining to COVID-19 for.

And we're looking statements are made based on our current expectations assumptions and beliefs as well as the information available to us at this time and.

Columbia undertakes no obligation to update any information discussed on this conference call.

During this call. We will also discuss certain non-GAAP financial measures and reconciliations to comparable GAAP financial measures can be found on our supplemental financial data with that I'll turn the call over to Nelson Mills.

Thank you, Matt and thank you everyone for joining today's call I'll.

I'll begin with a quick look back at 2020 and discuss some of our more recent accomplishment.

And then provide our thoughts on 'twenty and 'twenty, one and beyond.

Jeff will walk us through the growth opportunities throughout our portfolio and Jim will share additional financial details around our fourth quarter results and our outlook for the new year.

2020 was undeniably a transformative year that brought about many challenges new perspectives and greater awareness for our society and our industry.

And the pandemic has challenged our fundamental practices and perception around how we live and work.

For Columbia, and the past year underscore the stability of our portfolio and resiliency of our platform.

And I am proud of our team's performance.

We took advantage of this disrupted year could further enhance the health and safety of our tenants.

To improve communication and services across our portfolio.

And to adopt technology and improved operational practices.

And the further nailed our integrated platform and much of which arose from our acquisition of normally the last year.

All the while we maintain seamless operations and delivered solid financial performance throughout 2020.

In fact, despite the unforeseen challenges of the pandemic, we achieved 2020 normalized <unk> of a dollar of 52 per share.

Same store cash NOI growth of eight 7% and a year and leased rate of 95, 6% of.

All of which are at or above our pre COVID-19 full year guidance range as issued last February.

Our rent collections were also strong throughout the year.

98% of total rents and 99% of office rents.

Estimate to the quality of our tenant roster and the desirability of our properties.

This level of stability and the face of unprecedented challenges across the industry is the reflection of the resilience of our strategy.

E.

The attractiveness of our properties and location.

And our team success and partnering with so many dynamic forward thinking companies call our property is home.

During the fourth quarter, we leased 34000 square feet and positive rent spreads.

Through mid February of this year, we at least another 59000 square feet, including 47000 square feet and the San Francisco market had double digit positive cash leasing spreads.

We are expecting a bit of a pullback and our cash flow metrics for 'twenty and 'twenty one.

Jim will provide more detail on a few minutes, but this is partly a result of the asset sales, we completed last year and.

Partly due to our more conservative expectation about leasing pace during the current environment.

However.

Even though the leasing activity was dismally low and 2020.

And we expect relatively light transaction levels for the next few months.

We are seeing green shoots of activity.

Tours with prospective tenants are on the rise and existing tenants are beginning to focus on reentering. This day with many contemplate renewal reconfiguration and door expansion options.

For leases negotiated and executed thus far and.

Rental rates and other terms have held up relatively well and we expect that to continue.

And the challenges of this pandemic recede. We believe we are very well positioned for strong leasing results and cash flow growth.

And the moment, Jeff will walk us through some of the leasing opportunities we're addressing today, along with others that we'll bring online over the next several quarters.

We will soon and deliver new state of the art construction.

And as well as the renovated and vintage of product and highly desirable neighborhood.

In addition, we had the opportunity to really attractive space and existing property the substantial embedded rent roll up potential.

These opportunities reflect our unique approach to value creation, which relies on assembling terrific properties and ideal location.

And producing cutting edge workplace experiences for discerning tenants for.

For example, and New York City, the portfolio, we've assembled and Midtown South and West Chelsea is the perfect match for the Tech and media firms they continue to try and expand and those markets.

Simply put if youre looking for investment exposure to the expanding demand by tech and media and Manhattan.

Our portfolio and strategy the liver.

We're also well situated and San Francisco, Washington, D C and Boston with Great location flexible floor plan and allow for social distancing and <unk>.

State of the art systems, such as touchless stores and mobile amenity accent.

Last month, we announced the installation of new air purification system, including bipolar ionization across our portfolio.

This important and Tommy effort reflects our longstanding commitment to providing our tenants with the safe and healthy Workspaces and it's part of the comprehensive program, we have implemented to prepare for the comfortable and safe return of employees for the office.

Our success and creating workplaces and attract forward thinking growth companies is reflected in our dynamic tenant roster, which includes the companies such as Twitter snap.

Rocky sign.

And the firm.

The company, whose history of success is driven by the culture of collaboration and innovation.

Even during periods of the weak leasing activity across the entire office sector, we're still seeing demand from growing tenants for a differentiated space like ours.

That said as the world continues to react to the pandemic and its the after effects, we recognize the what companies need and want is evolving.

Alongside of the technology and practices, we have implemented to prepare of buildings for tenants return to the office spaces.

We're also responding to shifting demand drivers with more flexibility and innovation.

This includes implementing new technology resources.

Targeted and amenity offerings and.

And the workplace the assistant.

And a deck of lease terms.

We believe the pandemic has accelerated many shifts and the landlord and tenant relationship they were already in progress and we.

We believe that our success and is always lies and understanding and anticipating the drivers.

We are committed to providing and workplace experience that meets the demands of today's top companies.

Before I hand, the call to Jeff to tell us more about the growth opportunities that lie ahead.

Ill highlight our important needs from January net Connie Moore of longtime Columbia Director has been elected chair of our board.

Connie brings 40 years of tremendous industry experience, having served as CEO of BRL properties.

And several executive positions and the security capital group.

And is the former chair of near Inc.

The range, we're past the county from our former longtime chair John Dickson, who remains of independent director for Columbia.

I want to thank John for his many years of services of our board chair.

The positioning held through of kind of a tremendous progress and transformation for Columbia property Trust.

Dating back to before of public listing in 2013.

We're very grateful for John's leadership, and pleased that he will remain a director.

And related news.

Carmen Bauza now feels trani his previous position as chair of our Board investment Committee and we.

We look forward to benefiting from the strength of <unk>.

Aspectant and experienced both of them and bring to the respective leadership positions on our board.

In closing, we are well prepared to perform for our shareholders amid the ongoing challenges and we're excited about the opportunities that lie ahead for 'twenty and 'twenty, one and beyond.

We're going to stick to what we do best off.

Optimizing our portfolio of attractive well located properties.

While demonstrating flexibility creativity and service and meeting our tenants' evolving needs.

This has been our proven approach for many years.

But it is essential during unprecedented times such as these.

And the months and years ahead of this demand will undoubtedly reveal of further flight to quality and the shift toward more flexible terms and office as a service.

Columbia is uniquely positioned and committed the capturing this evolving demand while maintaining one of the most attractive portfolios and tenant roster and the sector.

With that I'll turn it over to Jeff to discuss our near term growth opportunities.

Thank you Nelson and thank you everyone for joining the call today.

As you know for many years our team, let's proceed and the investment strategy centered on developing and operating property.

The strong appeal, the fastest growing tenants and our selected markets.

We look for undervalued assets and prime neighborhoods and exhibit.

Pacific physical characteristics, and we can redevelop or reposition into compelling workplace environments with modern systems.

Access to the desirable amenities and where we can then deliver a highly tailored and it service experience.

We've demonstrated the success of the strategy by attracting some of the highest growth and most dynamic tenants and the world two of properties, including tenants such as Twitter Doctor sign Amazon Snap pitch book and Oracle just to name a few.

As we acquired the strategy to future growth opportunities. We are doing so through our pipeline of active development and redevelopment projects totaling one 9 million square feet spread across five assets.

At share this pipeline totals 640000 square feet and will represent a 13% expansion to the current size of our in service portfolio.

Each of these properties and a different stage of the development cycle with anticipated deliveries starting in the third quarter of 2021 and.

Standing over the next three to three and a half years.

We estimate this growth pipeline once the deliberate and stabilized and has the potential to add between 40 and $50 million of incremental NOI contribution based on today's market fundamentals.

In addition, and as I will touch on in a minute or two.

And some opportunities to drive additional growth beyond 2021 earnings guidance by releasing certain blocks of space that will be coming back to the loss in 2021.

Never before I touch on lease rollover I would first like to provide a quick update on each of the projects and we have coming online and near term or and the planning stages.

First set of Nokia on Broadway is the trophy quality creative office building and an ideal.

Work City Midtown South location.

And the building is designed with the latest health and wellness features necessary to accommodate the new way of working and it.

And this COVID-19 environment.

Construction is slated for completion in July and tenant tour activity has picked up significantly in recent weeks with.

We currently have lease proposals out the tenants taking space ranging from 40000 square feet and over 100000 square feet.

While we don't have any leases that are imminent the level of activity. We are experiencing is strong and we remain confident that 799 is positioned to perform at the very top of the market as we look the lease up the building and the months ahead.

Another growth driver for the company is 80 M Street in Washington, D C Capitol Riverfront District.

We're taking and innovative environmentally friendly mass timber approach with our three for vertical expansion above what is currently of seven story of steel and concrete structure.

We believe the new space, and you're adding and some of the most unique and attractive space available anywhere in the D. C market at this time the.

The project timeline remains on schedule and on budget.

We should be complete by mid 2022 and.

And as you may recall, we pre leased 60% of the 105000 square feet of new space.

Third $1 49, Madison Avenue is a 122000 square foot office property located at the corner of 30 seconds of Madison and the Nomad section of the Midtown South.

And now positioning this building for weeks at the following last year's negotiated and lease termination and deal with we work. This newly renovated property offers high quality of creative office space with the flexibility to accommodate a variety of tenant profiles and.

And we'll be positioned to attract tenants at rents ranging in the $70 per square foot we.

We expect to have the space ready for occupancy and late 2021.

In addition to our active development pipeline. We also have two longer term projects and the development of Q.

Terminal warehouse and one on one Franklin both located in New York City.

At terminal warehouse, we and our co development partner and completed the building design are for.

And the lies in the construction management and bidding process and the euro documenting a new one point to building and construction loan to refinance the original acquisition financing.

We expect the formally commenced the redevelopment of this historic one 2 million square foot property and July after wrapping up the remaining pre development task.

One of the one Franklin is slightly behind terminal and the building design and pre development phase as we intentionally slowed down the project in order to gauge the post COVID-19 market condition and tailor our development program Accordingly.

Team is looking forward to pushing one of the one franklin into a higher gear at the appropriate time and hopefully very soon.

Together. These five projects will represent the material expansion of and quality upgrade to Columbia is current in service portfolio and will position us to deliver on the next leg of earnings growth and value creation for the company shareholders.

Now moving the leasing for the.

The past several quarters, we've talked about below market rollout of opportunities and our expiring leases.

Bleeding cash rollouts of eight 9% and 2020 and 15, 4% so far and in 2021.

Don't have much direct vacancy to address and the portfolio given our current 96% leased occupancy rate.

However, we do have some specific blocks of space that will be coming back and glass through lease expirations in 2021.

As of July one Amazon Web services will be consolidating out of 90000 square feet at University Circle and Palo Alto.

AWS is paying us a blended rate of $79 per square foot net rents and we expect to release the space and a 10% plus rollout for that amount.

Also as previously announced on July one we will be taking back the 174000 square feet. The states from Pershing and our 95 Columbus Avenue property in Jersey City, New Jersey for.

We're currently making important capital improvements to the building lobby and other common areas as the as required under the Pershing lease renewal and in order to maximize our potential to attract new tenants to this block of space.

And third also in July we will take back 54000 square feet of space currently occupied by the law firm Mintz Levin and our market square property and Washington D C.

In connection with the lease rollover and and additional under 20000 square feet of current vacancy and other and near term lease roll you're initiating of capital improvement plan to activate the lobby arrival experience enhance the outdoor plaza and ground level retail areas and to address other com.

On an area of upgrades that are needed to position the states for at least the new tenants.

So to conclude I share and Nelson and sentiment and they're focused strategy and the hard work and of our team helped to produce strong results and 2020.

The stage is now set for Columbia to push forward with the new chapter of growth.

We will seek to further capitalize on our portfolio of Premier assets continued to leverage the resources of our vertically integrated platform for value creation and by securing new external growth opportunities that will present themselves as we emerge from the effects of the pandemic.

Optimistic about the future and look forward to updating you on our progress to drive earnings growth and value creation and the quarters ahead.

I'll now hand, the call over to Jim.

Thank you, Jeff and we appreciate everyone joining us today.

Despite the unprecedented market turbulence and 2020.

And we produced solid results capped by the fourth quarter performance reported today.

I'm proud of the work, we've been doing and Columbia, which helped us meet or exceed our pre pandemic guidance ranges.

As all of you know where and the challenging business environment.

Very few people are using their office space.

<unk> is creating problems for retail and service businesses in and around the office buildings.

Fortunately less and 5% of our revenues come from these users and.

And overall, we've collected 98% of our 2020.

But we have had some smaller delinquencies.

And as a result.

We made the decision at the end of 2020, the place nine tenants on the cash accounting basis.

This resulted in the reduction in SSO, and GAAP NOI and the fourth quarter of about <unk> <unk> per share.

Mostly from the write off of straight line rents.

Youll see this reflected and our SFO.

Same store NOI growth and even out of the leverage for the quarter as measured by our debt to EBITDA ratio.

However, even with this adjustment.

Full year of 2020 performance was very strong.

In fact, we generated fourth quarter normalized <unk> of 32 cents.

Just below the 30 <unk> of the year earlier.

For the full year 2020, this brought our normalized debt facility to $1 52.

Exceeding the range, we provided a year ago this month.

And consistent with the higher range of $1 51 to $1 50 for provided in October.

We also were able to grow our fourth quarter same store NOI based on cash rents of five 7%.

That brought our full year growth to eight 7% consistent with the 8% to 10% range provided with our last earnings release.

And only slightly below our original 2020 guidance range.

We're proud of this growth during one of the most difficult years for real estate markets in recent memory.

And our team leased 34000 square feet during the fourth quarter for.

And our full year total to just over 260000 square feet.

And also mentioned.

Already and of the year through the February.

We've released an additional 59000 square feet.

Each of it and the San Francisco market.

Our leasing during the fourth quarter came with an average new term of six years.

And re leasing spreads of 5% on the cash basis, and 21% on the GAAP basis.

And then underscoring the below market nature of much of our available space.

We ended the year with the lease percentage of 95, 6% within the original 95 to nine 7% outlook range. We initially provided for 2020.

Our collections have remained robust with nearly 98% of total rents collected for the fourth quarter, including 99% of office rents.

January and February are trending and the same direction.

We've already collected 97% of total January rents on.

And over 90% of total of February rents.

Both of which are on pace with our collections in recent months.

As you heard from both Nielsen and Jeff our strong performance throughout 2020.

Both operationally and financially.

As a direct result of our unique portfolio of high quality tenant roster and the <unk>.

Good work of our team.

Our balance sheet remains solid with strong liquidity and that allows us to take the patient approach to value creation that Jeff outlined.

We ended the year with more than $90 million and cash.

Plus access to 540 million of additional funds under our revolving credit facility.

For the fourth quarter.

On the leverage metrics were elevated temporarily.

As we place the number of retail tenants on the cash accounting basis.

And as a result, our net debt to adjusted EBITDA ratio stood at eight times at year end.

And our fixed charge coverage ratio was three four times.

However, our net debt to real estate assets ratio stood at 31, 4%.

And we continue to have more than the $4 billion of unencumbered properties.

The only debt maturities prior to the next year on modest loans and on all share on set of 99 Broadway and terminal warehouse.

Turning to our outlook as we discussed last year, we knew 2021 results would be lower year over year.

Partly due to the dispositions we completed in 2020, which gave up some near term cash flow as a reminder, we sold out of Pittsburgh assets early in 2020.

And we sold out of Pasadena property at the end of the first quarter and.

And we sold the 45% interest and $2 21 main street in San Francisco to all the launch and the fourth quarter.

All the time, we expect out of development and redevelopment projects will generate cash flows to replace the cash flows from these dispositions.

But we believe we will start to receive those revenues and 2022.

As Jeff mentioned, we will take back of 174000 square feet from Pershing and Jersey City at mid year and at the same time, we will take that 90000 square feet on the Amazon Web services and Palo Alto.

We believe both of these spaces will lease at the same or better rates.

But given COVID-19 where and.

Dissipating the just will take a few months, which will temporarily reduce cash flow and 2021 and.

In addition in 2020, we received the termination payment from we work at 149 Madison equal the 10 months rent.

Once the building is leased for a full year it should generate even more revenue.

But we do not expect much revenue until 2022.

Given that backdrop based on the information we have today and assuming current expectations around the pandemic remains stable.

Our new and normalized <unk> guidance range for 2021 and is $1 23 to $1 30.

We're also providing our expectations for same store NOI growth on a cash basis of negative 3% to 5%.

And the year end occupancy range of 90% to 95%.

We anticipate full year, corporate G&A of $33 million to $35 million.

As we discussed earlier on today's call, we have multiple leasing and re leasing opportunities that should begin to drive cash flows over the coming year.

<unk> 790, non glad way 149 Madison.

The person space and Jersey City.

University Circle and Palo Alto.

And the newly created space at 80 M Street in D C.

And our entire team is excited to execute on these growth opportunities.

In conclusion, despite the severe challenges for 2020 brought to the global economy.

Columbia property Trust performed well for.

<unk> results.

And that were largely consistent with or even better than our pre pandemic outlook.

This is the reflection of the unique portfolio, we've assembled over the course of many years.

Our top notch tenant roster.

And the resiliency and determination of our entire team.

Looking ahead, we're excited about the many growth opportunities.

Both near term and long term.

And we look forward to updating you on our progress with that operator. Thank you.

Could please open the lines, we'd be happy to take questions.

Yes, Sir and ladies and gentlemen, if you wish to ask a question. Please press star and the number one on your telephone.

Again, if you wish to.

Ask the question that's part one and that's helpful.

Phone.

For all of our first question do we have there and Mark Shaw from Morgan Stanley Your and your line is open.

Our contract and the question Hi, Good evening could you.

And if you walk us through sort of some of the big leases.

How are you doing the known move outs now for this year.

Maybe just if you could give us a little bit more detail on.

You know more holistic UX your expectation for lease up and eat.

And you sort of early prospects you have.

And and the Mark to market you referenced and then just so we have a.

And of a more holistic picture given kind of the nature of the the volume of the move outs could you also just given the sense of sort of any known move outs for the first half of 'twenty two.

Yes, sure Vikram I'll start and then Jeff and Jim can can weigh in.

Thanks for the question.

So.

Most of these these these move out the Jim referenced.

No the one bit of disappointment and maybe surprised from last quarter of it.

As the Amazon Web services 90000 feet and Palo Alto.

And we had indicated and the last couple of quarters, we were hopeful.

And certainly not certain but we were hopeful they might stick around for a year or two short term as it turns out they.

And they are not.

And that space will become available mid year this year.

That's the bad news the good news is it was well under market rents and that property has always performed quite well and we think the demand will be there. So we're pretty confident given that released it and a bit of a roll up on.

And then.

Jeff touched on several of the other of the Pershing space was known and again.

We think the bogey there in terms of the rents we need to achieve and that is that space and <unk>.

The city is relative.

The relatively low, but we are confident and be able to meet that as well of those where the known <unk>.

Move outs, Jeff touched on several.

The projects that are coming on line 799 Broadway.

Which has a substantial amount of tours and activity and some of some pretty keen interest from smaller and larger users of like so we're pretty optimistic.

That.

Later this year, we will have some significant leasing there.

That's kind of the headline.

There are other spaces around as well 149, and Madison 115000 feet and nomad here if the.

The redevelopment and we've taken back from the work we.

We expect to have activity on that later this year.

And then just various spots around the portfolio again, good high quality space overall were still well leased I think 8% of our of our portfolio is.

Rolling during 2021.

But it's but it's all pretty good space and in most cases, we anticipate rollout opportunities even and even in this post post COVID-19.

The environment as far as 2022, Jim perhaps you have that.

What are some of the.

The total volume and the major components of the of the terminations and 22.

Absolutely so.

Vikram and <unk>.

2021, as we as you know we've identified.

A fair amount of space. It does the 300000 square feet and we've talked about between Pershing and.

On the web services, and the law firm and D C, which of the which of the the large ones. We don't have anything else to us.

Of note and 2021 that where we know theyre going to move out of really that any other significant explorations. So all the 300000 really of 2022 much lighter.

For the whole new and used for both from the first half we have.

About fifth well over 50000 square feet of net.

And move outs.

And one is and Boston and one is at market square and DC, each about 25000 feet and.

And both cases, we believe the rental rates will be able to achieve will be at or better.

And what the expiring rents are so those are all seem pretty okay right now.

The big items Tonight there.

Okay, Great and then just on the development projects.

We have a little bit more visibility on one of them, but can you just remind us sort of where have.

Asking rents are underwritten rents under it and where they attended and sort of force being under or is it just you know amid COVID-19 and what are your expectation for.

For further and ease up.

Yeah. So so vikram, it's really difficult to say as you know there's there's been.

Logan from leasing transaction volume, but we had enough discussions with tenants and perspective tenants and we've seen enough for one of the marketplace, we're starting to get the medication.

So.

New construction well located new construction of like 799 of course all.

You know all shifts are going to drop a bit with the sinking tide us but.

New property like that a well located property like that.

Maybe maybe it's single digit percentage dropped I mean, I'm not sure we're pretty hopeful we will get close and close to our pre COVID-19 ask on that.

And on average throughout the building so that's.

$130 plus range plus range and gross rents for that type of property right. Its a unique property well located state of yard and new et cetera. That's one of the spectrum on the other the spectrum.

And more commodity space, if you think about.

Mid block buildings mid floors within the building.

And some of the acquired or Submarkets.

Those those will suffer.

More significantly and this in this environment for.

Actually we don't have a lot of that.

But those could be and the near term 20, 30% drops and net effective rents I mean that wouldn't be it wouldn't be surprising. Unfortunately, we don't have we don't have a lot of that so.

It's it's hard to say, we're encouraged by the green shoots, we're seeing and and activity.

And the <unk>.

Particularly in the tech and media areas and so we're pretty hopeful yes, there will be some decline there will be of pullback but.

We think for for good quality properties.

It's going to be.

The.

Reasonably within range of what we were shooting for.

Okay.

The pace the pace the pace of leasing is going to be a bit slower right. It's just kind of take of yeah, it'll take a while longer to really get back and action.

And that's a that's a pretty big component of of of our.

Our guidance for 'twenty, one just a bit slower pace.

Great and then just one last one for me.

Could you clarify with.

And the Capex that you mentioned, some incremental Capex and you know all of it.

The debt, maybe more one time, but just where where do you see where will the fad payout trend towards year end.

And given sort of these move outs and maybe some incremental capex.

Sure Vikram.

And as you know.

As you can see of <unk> last year was developed Homesites and we had a dividend of <unk> 84 cents, which is a very healthy ratio of it'll be.

We think the <unk> fab this year will be on.

Around the same level and as.

And our.

The dividend.

But thats the temporary phenomenon really yet.

More of a function of cash flow there and it is the capex because of lot of this capex is development, we will be spending development dollars.

But that really doesn't factor into the quarter and full calculation.

So there are some we've got some capital projects to finish up debt, but really about the.

The biggest amounts of capital are going to be driven by development.

And that's really I'd say what relates to watch as the.

The cash flow, we do think as we said we do think cash flow is kind of increase all the time.

We do have some really good space available for lease were just being conservative and how we are.

And that for guidance, it's possible, we could lease it faster in 2021 and get some more revenue I think it's likely that we will get significant revenue.

And 2022, starting with 149, Madison and the pushing space Amazon Web services et cetera, followed later by and some of these and other projects, but I think.

I think the way we look at it I think we're in good shape for now in terms of the dividend I think the.

Fab will grow overtime, and I think we'll Uh huh.

We feel that the dividend will be well covered all the time.

Great. Thanks, so much.

Okay.

Our next question will be do have Sheila Mcgrath from every client ISI Sheila Your line is open.

And thank you get high.

Hi, and had a question on Amazon Web services can you remind us of are they exiting <unk>.

And tire space there and.

Where they might be going.

They are Sheila so I think they gave some serious thought to extending extending that lease at least for a year or two.

But ultimately decided not to accommodation of.

Work from home and the near term and as you can imagine they have.

On.

Other campus options and that region right. So it's as we understand it we don't have all of the details of course, but as we understand it combination of work from home and.

And consolidating into some other some of the larger campuses.

Going to be their solution. So.

It was 90000 feet and.

And.

And again well under.

Even the post COVID-19 market rate.

And so.

Yes, disappointing that we didn't keep them around for a while longer but.

Again, we think that'll be the at least rule of law.

Take care of that space and.

Relatively.

Relative to new term near term.

Okay, and then on following up I think Jeff mentioned that $7 99 and.

Normandy, there is a pickup in activity from last quarter. Just wondering are these new tenants to Manhattan or relocations within the city and our the relocations driven by Covid.

Covid at all seeking new state of first yeah, Jeff Jeff you want to cover that.

Yes, sure I see about the.

The answer to your question is that it's all of the above.

Hum.

I can think of you know we've had multiple tours and the last.

On a few weeks Inc.

<unk> this week.

I can think of at least one tour.

As a.

Fin Tech tenant.

And there's absolutely not it doesn't currently have a presence and the city so that would be of new and you need to enter into the New York City market.

Others other activity that we have is kind.

And being from within the city and.

And a variety of different tenants.

Technology is a common theme in terms of the activity that we're seeing and.

Well I think with the tracking tenants of the neighborhood.

And the village neighborhood, the uniqueness of the property of the quality of the space and for sure.

You know the.

The the features that address the wellness and the post COVID-19 environment the outdoor terraces.

Late in the area of the ventilation systems and all of the all of that stuff. So its pretty broad base of tech centric and state tenants from within and without New York City.

Okay, great and just to add on.

Just to add on that Sheila.

One of the things, it's not it's not true in all cases, but but in most cases for the for the.

I think the more serious prospects our competition is almost exclusively Midtown south of that seems to be where they're focused and in most cases.

Where the the only new construction option and the most expensive option.

So it's a it's against the Testament like and suggest they are a testament to the two of the desirability of the neighborhood.

And then I think where we have the option and differentiate us obviously the new product.

So again it.

And we're optimistic about that.

Great and one last question on.

Nelson you mentioned, the new air system that you installed.

Is that and across the whole portfolio, how much did that did that invest and cost and do you think all landlords are doing it with the snake Columbia is building a little more competitive than.

Maybe some under cap on ice landlines.

I think most landlords are spending a substantial amount of effort and dollars on this this is the central.

Must have and.

This environment.

I don't know exactly how we compare I'd like to think that we're doing at least at least as much or more than most but.

You know, it's it's across the portfolio.

Merck filtration and latest greatest filtration and bipolar ionization, we've even gone the extra step of putting bps systems on our elevators, you know of elevators had been had been of concern.

For tenants reentering and so yeah, we're very we're very pleased and proud of what we are.

What we're doing there it's.

The cost is yeah, Jim all of them. If you have the specifics, it's probably something under a dollar of blood or so.

Yes.

Across the balance.

Sheila it's not a it's not a huge number.

<unk> had some savings last year on operations.

People of course, not being in our buildings supplies and other stuff and so it really hasn't.

Moving the needle much of it the.

All of the day, the cabs with our core tenancy.

And of 15000 also piece of the systems and the building the depends on buildings, but on.

I think we spent on.

But certainly over a million dollars across the portfolio, but what not.

And not many millions of dollars. So I can get to the guidance on but I just don't have it yet.

And just under a dollar foot or so I'll tell you the feedback we're getting from existing tenants, it's very important to them I mean prospective tenants at the given it's a must have for attracting new tenants.

Existing tenants.

Much appreciated it and it's something that we're very interested and so it's money well spent no question about it.

Okay. Thank you.

Thank you Sheila Thanks Sheila.

For every next question the have John Kim from BMO capital markets. John Your line same thing.

Thanks, and good evening I E.

Jeff and one.

Jackie mentioned the terminal warehouse.

Redevelopment is moving forward as part of building design and construction bidding.

101, Franklin and you've been intentionally delayed.

But I guess my question is why is the terminal warehouse and progressing at this time I realize the and the lower equity perpetual but.

Just given the amount of potential plans and I.

I'm just wondering are you seeing potentially greater demand for the past because of the partners want from the court.

From a commentary.

Yes sure.

And for quick background. This is the $1 2 million square foot asset.

You know of 1.7 billion total capitalization at completion.

It is a comprehensive redevelopment of an existing historic structure.

The one that is the redevelopment not of ground up development. So you know just one consideration is that our current basis is not just the land its land plus improvements debt.

More than halfway to US you know kind of.

Stabilized cost if you will and.

So the combined with the uniqueness of the products and.

And the by unique I mean, the the quality of the product and the differentiation of the product.

The we intend to deliver to the market, we think is particularly well suited to.

The Covid environment. This is day one.

Like to refer to the ground scraper none of it.

Skyscraper and so.

The variety of space that we will be delivering and the.

The the ability for tenants to control their environment and controller E tail.

And take advantage of the multiple elevator cores that we have throughout the assets.

Combined with the you know kind of the new Newbuild premium space some of the old.

Brick and beam space that will we will retain in the building and we just think offers a very compelling.

Hum.

Space offering for very high end, and the unique and and high growth tonnage.

And I think we've seen.

And New York City in particular, even during the pandemic.

On technology oriented kind of on Twitter Facebook.

Facebook and Farley or.

And your other other big commitments Amazon.

And then executed even during the pandemic.

As we.

We think the type of demand that we expect to see at terminal.

As we deliver that project. So we have the the.

Confidence and the conviction to move forward with it we thankfully also has a.

Blue chip.

Roster of co investors and the transaction with us who have the.

You know the the fortitude and the wherewithal and and the long term view.

To keep the project through and so that's where we are and so that's what we intend to do.

And John compared to 101, Franklin and <unk>.

<unk> is a little bit more advanced and then one of them on Franklin, formerly known as 250 Church.

We had just acquired the property and we're just beginning some of the early planning and design win when we had the current shutdown. So it's a little further behind and we had the.

Little better opportunity to just the press pause for a few months of that said you know as Jeff said earlier, we do hope to get going on that and Ernest It's also.

A different tenant prospect there.

Probably looking at.

Smaller.

Family Office on net worth.

On types there at that building.

And as Jeff said, the terminal warehouse can sort of lot of different types of tenants, but the but the large.

It's also of great candidates for <unk>.

The large tech campus. So we felt like that momentum and the demand that's out there.

And we want to be ready for it and the next couple of years, we felt that we had a little more time on 101 Franklin and to make sure. It's the right decision on the scope of the project, but we'll get going on it soon and also.

Okay.

Can you quantify for you guys mentioned, a few times of your kind of and increase in tours and I was wondering if you could quantify that.

And any way of just the timing related to the the vaccine.

And also on can you quantify I think the physical tours and virtual tours.

Jeff.

Yeah sure I.

It's the it's physical tours and certainly.

Much more of a stellar than it was prior to the new year.

And I think debt.

Generally across the market, we've seen there's been a uptick and activity.

Hum.

I guess, theres DD and small numbers right because there was very little activity.

For the nine nine months and in 2020.

So any increase that you kind of look good on a you know and and.

Absolute basis, but.

But relatively speaking we have seen a.

The real uptick and activity with tenants beginning to.

You didn't kind of revisit space plans.

Plot, there of reentry to the office and and.

And look forward to.

You know kind of on the back half I think of 2021 in terms of.

What their space needs are.

And you know.

And kind of when you work backwards from having to make a decision and later 2021.

You.

You know you land, where we are now on the calendar and you need to if you are a tenant.

That has to do something this year, you've got to get going and so I think that that's what you get.

And we're seeing across the market I think other landlords they were experiencing the same thing and E.

And we hope that that momentum continues and continues to build from here.

So you know it's not as Nelson said in his remarks, we're seeing green shoots.

No, we're not seeing a return to normal levels of activity and volume but.

And at least we're moving and the and a positive direction at this point.

There's certainly RMB and virtual tours and plenty of people the still arent in the office or coming into the city, but.

Yeah, but we're turning the corner on that people are starting to show of yeah.

Yeah, I agree and and unique to 799.

And I don't think of another driver there the reason we're seeing.

<unk> activity and tours there as you have said is it's a unique property, it's not going to be around forever right. So if.

You know, it's the opposite of commodity and so if you. If you want that property you you can't you can't wait around for another year to make a decision right. So I think thats debt.

The uniqueness of the opportunity is driving driving accelerated interest as well.

And on 17, 99 looks like the occupancy and then the shocking it got pushed back a quarter in the fourth quarter and just one.

The need to clarify that.

And if any occupancy.

And in your guidance for the year.

I don't think so Jim do we have any well any GAAP any GAAP earnings included.

And the Oreo earnings.

We're not sure John.

And have some a little bit of from.

And that kind of the lease percentage of little bit we've got a pretty wide range on that 90 to 95, but we don't have any earnings and.

On that property for spring.

And is up a good point.

We're not I don't mean to.

Suggests that the.

And the Sky's the limit this year, but I do think there is some potential upside this year. If we can get some of our leasing than we have on our plan.

As you know too, particularly on GAAP earnings and we need to we need to have the property completed and and occupy bowls.

And the lease would've had to commence so the chance of those two things happening I think of relatively high but.

For overall conservatism as Jim said, we Havent calendar and the earnings and the.

And the 'twenty one guidance for the property.

Okay, and then now that you've come out with the guidance for this year that's below the street.

And arguably.

There's a lot of our focus on 'twenty, one earnings and 'twenty two of the points.

Are there any non core asset sales that you're thinking about pursuing and I think it rather than later.

Whether it's 95 Columbus are two two of mine with 43, one or any other assets from.

No no.

The first one.

So the.

A lot of the driver and the difference between 'twenty and 'twenty and 'twenty one related to the property sales in 'twenty and 2020 as you know.

So it's a great question, but we are not anticipating and it could happen, but we're not anticipating and our guidance are the otherwise youre anticipating any property sales.

Core sales in the and this year.

Got it thank you know none of them none.

And our plan and none of our and monitoring got it.

Thanks.

Thanks, John.

For our next question, we have Rick Kenmore from Goldman Sachs. Rick Your line is open.

Thank you good afternoon and he Nelson.

The question for Jim.

On the straight line write down on those nine tenants that you moved to cash based accounting is that the entirety of the tenants.

And that you have debt you might have concerned about or that are not paying.

We think so Rick great question.

We think so.

And it really focused on the retail and service tenants.

And those are the ones that have really been impacted.

And.

Some of those are paid.

But.

We really did a pretty deep dive trying to understand and come up with our credit concerns and those of the once we came up with it's possible there could be some others, but we don't we don't expect that we think we've got.

We've dealt with it and.

No.

So those tenants will just recognize income as they as they receive their payments.

And Jim as you think about the guidance and 2021 does that assume the collections and relatively stable through the year or does that assume kind of a pickup in the back half with what would say would be and economic recovery and the second half of 'twenty one.

Yes.

We've had the very good fortune of collecting most of our rents as you know we've collected 98% of our rents.

Really on a very consistent basis throughout 2020 and that has continued.

And 2022, so far and we.

You know for our modeling purposes.

We've kind of run it through with high levels of collections now we have assumed some write offs.

To be conservative.

And we've got the sense, we've put on cash basis, we haven't assumed much from them.

And we haven't really assumed any significant lease termination payments, we had a number of significant ones of those last year, we might get some of those this year. So there are some things that could happen really the swing in both directions I suppose but I think we've been overall conservative as we've come up with this on.

And these numbers for this year.

And we do think debt.

The occupancy will be lower debt, the only because of the known move outs.

The we don't think it's right at all we think it's just the number that's when we think that's a temporary phenomenon. So.

That's really how we've built out budget and model and guidance for this year.

We're not assuming that.

And as Nelson said, we got 8%.

Rollover and a number of those were never leaving and so we're sort of taking us from accounts. So we're not assuming that were.

Benefited by a robust recovery, obviously, if that happens that's the good thing and.

It will drive really drive revenues and 2000 22 million debt will 2021.

Yeah I guess my question is just on those nine retail tenants that you moved to cash accounting and it sounds like you assume that the kind of stay steady state through the year as opposed to ramping up and the back half.

And that's exactly right okay.

And then just one follow up just on the write down of goodwill I assume that that was.

For the Normandy acquisition, what was the driver of that that write down was there something that changed at Normandy aside from sort of obviously the pandemic, but.

I guess the my assumption was that there was some revenue generated but it was there.

A meaningful change and the business that resulted in that significant of the write down on that asset.

And.

For the others, who haven't picked up on this if you look at our 10-K Youll see that we wrote off of the goodwill that we've assigned.

To the north of the platform homely.

Earlier in the year, when we had acquired and merged with Normandy.

It was and acquisition of the business. So there was $63 million.

From an accounting standpoint of of.

One of the acquisition.

The cost and that had to be assigned to goodwill.

For.

The way of goodwill work sits and intangible asset.

You have the test each year you have to.

And look at it every quarter, but at least once a year you have to do evaluation of what other market segments.

That goodwill is for.

Xander and look at the valuation and really it is largely informed by the stock price is.

Kind of an odd thing that when the stock price falls and stays down for a while which of the obviously good for us and others and 2020.

You have to take a hard look.

With that you do.

And do an analysis of the overall segment It's Inc.

And on the platform, but really it was not driven by the one on the platform because that's a small piece, but then we can decide that you need to take an impairment.

And you do it for the goodwill on that.

It's just the way the goodwill works. So it really doesn't have anything to do directly with Normandy and in fact, if you look at our supplemental for the last several quarters, you'll see that the revenue Spinout management and fee business had been going up pretty steadily through the year, we expect them to hold up at similar levels in 2021. So.

We're actually pleased with it it's actually done wall relative to the underwriting and.

And so it's really not normally it's a function of our stock price more than anything else and the way of the goodwill will it kind of works.

Yeah, and I, just and simply not the same size the size.

Rick.

It.

Yeah.

Obviously the.

The assets operated out of the Normandy platform and the funds I mean, obviously, there theyre impacted just like our portfolio is in terms of.

Written the leasing opportunities and valuations and that sort of thing, but as Jim said, it's held up very well.

Revenue stream, which a lot of evaluation was based on until the very well.

So again just to reiterate what Jim just said, it's not it's not a reflection of our perception of the value of Normandy.

But it's when the when the.

Value of the company as reflected the share price get squeezed.

On it.

And it had an impact on our views on goodwill so that that was all.

Yes.

Thank you.

Thank you that's correct.

For our next question and we have Michael Lewis from <unk>. Your line is open.

Hey, Michael.

Hi.

So you gave a lot of good recent details I just wanted to at a high level.

This leasing debt percentage guidance for you and you ended this year and 95 six.

The guidance of 90 to 95.

And given where the drivers.

And once you are it looks like you've got a net about 8%.

Moving on.

Kind of.

I'm wondering about the high end and the low end of that range of especially the low and.

Hopefully you just conservative.

You talked about some of the pieces there how should we think about it seems like that range.

Disciplines Hudson.

Heightened uncertainty, which we have and this is mark here.

But I'm just wondering about kind of how you came to that and what's the zip of low end and kind of the high end as well.

Yeah, generally and Jim can talk about the more detail the generally.

It's the beginning of the year and Ah.

That was disrupted market and a lot of uncertainty about the pace of leasing so I would say.

It's very conservative from the standpoint of where we would keep at well above 90%.

And we're very confident on that.

How fast we can do that and whether we you know how.

And how quickly we can absorb that lease.

Those rolling and rolling leases is the question right. So.

I think 90% is a bit conservative, but if you. If you did the math and you look to the explorations and it took you well.

And the year to get a lot of the leasing done.

You can fall down into that range. So.

If we if we do we're not staying there. It's just a matter of trying to match up the leasing pace of new leases with the exploration pace.

And that's where it gets a little tricky.

I think as the year goes on we'll obviously tightened that up and we're very optimistic we will be at the high end of that range, but it's a range.

We think this early in the year, given given where the market is it was appropriate thing to do.

Okay, Okay and.

I wanted to ask about the G&A and for Q.

It was a couple of million dollars lighter than and had been running at the guidance for 2021 true.

And then run on a couple of million dollars more of quarters on that was there anything one time.

And <unk>, 20, or <unk> or anything else to kind of draw attention to.

Well, we're going to continue to work on G&A, because it will continue to work on G&A.

Again.

It's a range we know it's something that we owe to our investors to really manage the business, especially as possible. So we'll be focused on keeping that as low as possible. So the starting range in terms of last year.

Our bonuses were substantially.

Below target.

Even though the team worked hard and performed very well.

We certainly need to we need to fill the pain with our shareholders. So we are overall bonuses for rebel of target that was a bit of of factor and then other than that we have worked pretty hard and looking at.

And where we can trim costs so.

Again I think.

And I think the range is fair, we're going to work very hard to be at the low end of that.

Hello, and let the numbers throughout the year, Jim anything to add to that.

No Thats exactly right Nelson on all fronts really and so the couple of million dollars of say there.

Michael really assets.

A lot of that is bonuses and I think that was appropriate and.

We have had in our guidance.

And full level of bonuses and weak.

Got that and our guidance for this year, but who knows.

And if it's another tough year, it might not be at that level, but the.

The important thing that Nelson and also mentioned is that we are really taking a hard look.

At G&A, we're trying to.

The reduce it as much as we can and we're going to continue to do that.

Okay, and then just last one from the.

So for question about about normal.

You know I E.

And so I had the same question right and the.

I just want to make sure you know there's nothing.

And nothing to do and degradation of the screens are funds.

Fund asset impairments nothing like that it was really just the <unk>.

High level of company thing and like you said the Dubai.

The with the stock price just to confirm.

And absolutely that is correct Michael.

You might speak to others about goodwill impairment its a bit there and real estate world because.

And really get goodwill on the books from acquiring of businesses and not from a phone and real estate funds and the other our corporate world. It does happen and then stock price Ramstam the force.

First thing you have to do is think about goodwill impairment on that.

Just kind of on odd thing and.

And GAAP accounting and Thats, where together is because of some intangible assets. So it's a onetime thing that's gone.

But again no reflection on the.

One of the value of the operations or our view on the Normandy platform.

Okay, great. Thank you.

Thanks, Michael.

Yeah.

And there are no further questions at this time centers. Please continue.

Okay, well, thank you all of it.

Very much for your on time and attention today and it's always a.

On the honor and pleasure to speak with you and thank you for the great questions.

The available.

In view of the wood.

Like to contact us and get more information.

We're going to be.

Working hard and staying focused and.

And.

And and trying to beat the expectations.

And we've laid out for the year so.

Again, thank you again, and we look forward to talking to you soon.

Ladies and gentlemen, this concludes today's conference call. Thank you on the perfect, stating you may now disconnect.

And then.

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