Q1 2021 Columbia Property Trust Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the Columbia Property Trust first quarter 2021 conference calls.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
Ask a question during this session you will need to press star one on your telephone.
Should you require any further assistance please press star zero.
I'd now like to hand, the conference over to your speaker for today, Mr. Matt Stover. Thank you Sir Please go ahead.
Thank you operator, and thank you everyone for joining us on our first quarter 2021, Columbia property Trust Investor Conference call.
On the call with me today are 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.
We released our results. This afternoon in 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-Q with the SEC this afternoon and on.
<unk> 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.
A number of factors could cause actual results to differ materially from those anticipated, including those discussed in the risk factors section of our form 10-K, which include specific risks pertaining to COVID-19.
Forward looking statements are made based on our current expectations assumptions and beliefs as well as information available to us at this time 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 in our supplemental financial data with that I'll turn the call over to Nelson Mills.
Thank you, Matt and thank you all for joining today's call.
I'll begin with a review of our first quarter performance.
Discuss the value creation opportunities we have at hand.
Talk about our commitment to corporate responsibility.
And conclude with an update on our strategic review process.
Columbia is off to a great start in 2021.
Following a year that none of us will ever forget.
The year that challenged us all but ultimately demonstrated the resiliency of our portfolio.
The strength of our platform.
On the quality and commitment of our team.
With one quarter of the new year already behind us that same winning spirit and keen focus are continuing to carry us forward and drive our success.
Now as green shoots begin to emerge within the office sector and within our markets. We are better equipped to serve our existing tenants and to attract new ones than ever before.
We now have enhanced health and safety protocols in place cutting edge technology deployed across our portfolio.
And enhanced levels of service and flexibility to meet increasingly discerning demand.
For the first quarter of 2021, our key performance metrics reflected the stability of our portfolio and tenant roster.
We generated normalized <unk> of 35 per share and positive same store cash NOI growth of four 8%.
We ended the quarter with a 94% leased rate.
Our rent collections have also remained strong consistent with our experienced throughout 2020.
98% of our first quarter rents are in the bank.
April collections are trending in the same direction and we're confident that this pace can continue.
This performance reflects the exceptional quality of our portfolio and the high caliber of tenants we've attracted.
Qualities that in combination with the hard work of our team continue to insulate us from severe negative effects of the pandemic.
We have an average remaining lease term of five nine years with only 6% of the portfolio expiring over the remainder of this year.
The modest level of rent relief requests we saw last year slowed considerably.
And for the first quarter of 2021, only 2% of rents were deferred.
And fewer than 1% of rents were written off.
We leased 69000 square feet during the first quarter.
And cash leasing spreads averaged 13, 2% our strongest in five quarters.
Our GAAP leasing spreads were even better at 17%.
While commodity office space is expected to suffer significant declines in net effective rents.
Columbia is truly differentiated spaces continue to perform.
More on that in a moment.
We are seeing many encouraging signs that the office market begins to recover from this pandemic driven slowdown over the past year.
The number of property tours with prospective tenants have dramatically increased and existing tenants are beginning to plan in earnest for life after COVID-19.
We are prepared and eager to serve as a resource and an ally as our tenants plan for the reentry of their teams to the office.
Most are reconfiguring workspaces altering work schedules and.
And exploring new ways to foster collaboration and productivity.
Because of our investments and our tenant relationships and our differentiated spaces and services.
These forward thinking companies know they can count on Columbia to help meet their future demands and offer their employees, a safe healthy and productive return to the workplace.
Because of our strong tenant partnerships in the highly desirable space, we have available <unk> under development.
We're excited about the opportunities ahead to create shareholder value and drive leasing and cash flow growth through the remainder of 2021 and beyond.
These opportunities include a combination of renovated finished product.
And state of the art new construction.
As well as attractive existing space.
All have substantial embedded rent roll up potential.
These properties are in some of the most sought after neighborhoods are factor that sets Columbia space Apart and helps us consistently attract the most desirable tenants.
In our Manhattan portfolio tour activity has surged over the past 90 days and we are actively negotiating with several tenants on multi floor requirements.
Our Midtown South and west Chelsea locations per.
Direct exposure to tech and media driven demand that is alive and well.
And we're adding to those opportunities.
Our new build at 799 Broadway is on scheduled to be completed this summer.
Tour activity for this unique trophy office building continues to grow and we're now in advanced talks with multiple prospective tenants.
Another well located property is 149 Madison Avenue, and the nomads section of Midtown South.
Where we will soon hold a broker event to introduce this fully renovated and attractively sized building to the market.
This building will provide modernized creative office space with exciting new amenities and options for flexibility.
We also have longer term growth opportunities in Manhattan, including terminal warehouse, a truly unique historic redevelopment that offers a compelling mix of creative office space and on site amenities to attract discerning tenants of all sizes.
We expect to begin redevelopment of this exciting project with our partners in the coming months.
We are also on the planning stages for 101 Franklin in Tribeca, yet another unique opportunity to deliver meaningful shareholder value in the years ahead.
We have many other value creation opportunities across the portfolio that feature attractive locations.
Lexical floor plans and state of the art systems for a successful return to office life.
At University Circle in Palo Alto will be recapturing 90000 square feet of Prime office space in the next couple of months from Amazon Web services, which was paying a blended rate of just $79 per square foot for their space.
We expect a substantial roll up in rents on this space, which is some of the best in our entire portfolio located at one of the Premier office addresses in Silicon Valley.
Tour activity in San Francisco are picked up in March and April as the city began to relax, it's COVID-19 restrictions and tenants planned for Q3 or Q4 occupancy.
Much of the demand has come from smaller professional services tenants, but recent data suggests that tech demand is returning rapidly.
Some of the market leaders have formally announced their return to work plans, which should help influence other companies to begin more actively looking for space.
In Washington D. C. We will have more than 130000 square feet of highly desirable space available at our iconic market square property.
We're executing an enhancement plan for the lobby the outdoor plaza and the ground level retail areas.
In person tours increased meaningfully during the first quarter and we now have proposals out on over 100000 square feet at this property.
A couple of miles to the South East and the Capitol Riverfront District, we're seeing similar trends at 80 M Street.
With 140000 square feet of proposals and LOI on roughly 160000 square feet of availability.
Development continues on our innovative three floor vertical expansion at this property, which will add 105000 square feet of office and amenity space.
Constructive with environmentally friendly mass timber this.
This will be among the most appealing office space in D. C. When it comes online in mid 2022.
60% of this new space is pre leased.
And we've seen a dramatic uptick in market interest for the remainder.
Our mass timber overbuild at 80 M Street is just one of many examples of our commitment to caring for the environment and operating responsibly and all that we do.
Our 2020, environmental social and governance report released last week chronicles this dedication across our platform over the past year.
The report describes our long term commitment to net zero carbon emissions and our expanded tracking and reporting of environmental data for all of our properties.
This report, which is available on our website.
Also describes how we are caring for people on our team in our industry.
And across our communities.
Through the challenges of 2020 and beyond we pledged to create a positive impact on our stakeholders the environment and communities in which we operate.
This includes our teams and passion commitment to meaningful diversity equity and inclusion initiatives.
On behalf of all of my colleagues, we're very proud of our efforts and commitment to addressing climate change advancing social justice and reporting our progress to you with awareness and transparency.
I Hope you will take the opportunity to read this important report.
In summary, there are many reasons for our confidence in the future of Columbia property Trust.
We have one of the nation's premier office portfolios, which we're leveraging with our capable and committed team to provide differentiated service to our shareholders and tenants.
Our pipeline of near term value creation opportunities includes nearly 2 million square feet of active development and redevelopment projects that once delivered and stabilized could add more than $40 million of incremental NOI.
As we pursue these new opportunities we will continue to focus on optimizing our existing high quality portfolio, which has been a pillar of our long term success.
We provided workspaces to some of the world's most forward thinking dynamic growth companies.
Companies like a firm.
<unk>.
Oracle.
Pitch book.
Snap.
Amazon.
Jim and I and Twitter.
We are driven to provide workplace environments in which our tenants innovative and collaborative culture thrive.
More than ever these discerning companies seek flexibility creativity and differentiated service to meet their needs and Columbia is well positioned to remain their partner of choice.
Finally, I want to comment on our recently announced strategic review process.
Our board announced its decision to conduct a comprehensive strategic review of alternatives.
And we are serious about this process.
The process includes the <unk> group, which as you know previously announced their interest in the company and whom we invited to participate in our process as well as other potential counterparties.
While we cannot provide any assurances or certainty about the timing or outcome of our strategic review I want to assure you that our board is driven by their fiduciary duty to represent our shareholders interest.
And the process is being conducted with open minds and in a manner designed to achieve the best outcome for all shareholders.
We wanted to provide that level of transparency to you and that is all the detail. We can provide at this point.
We will not be commenting further about our process on this call.
With that I'll now turn the call over to Jim to walk us through our results our strong financial position.
And our financial outlook for the year.
Thank you Nelson and thanks, everyone for joining us on today's call.
We started the year with another solid quarter, despite continued challenging conditions.
During the first quarter.
We produced normalized <unk> of 35 cents.
On our adjusted <unk> 31 was up sequentially and year over year.
And well in excess of our 21 cent quarterly dividend.
And we once again grew quarterly same store cash NOI, which was up four 8%.
Our numbers this quarter.
<unk> from a <unk> tax abatement that we had anticipated.
But they also reflected some increased operating expenses due to seasonality and timing.
All in all we believe we're on track for a good year.
And we're pleased with these results.
Our rent collections were also strong during the quarter at nearly 98% overall.
And just over 98% per our office tenants.
As Nelson mentioned, we had very few deferrals or write offs during the first quarter.
And so far April rents have come in at a similar pace to what we've seen over the past several months.
At the end of March.
<unk> percentage stood at 94% down slightly as expected.
But consistent with the outlook, we provided last quarter.
However, we are pleased to see activity picking up on the leasing front.
Increased tour traffic and.
And interest across our available opportunities.
Our team leased another 69000 square feet during the first quarter, our highest level since the second quarter of last year.
47000 square feet, although our first quarter leasing was in San Francisco.
We had double digit positive cash re leasing spreads.
In fact due to the below market nature of our portfolio on.
Leasing spreads remain robust overall.
Up 13, 2% on a cash basis and 17% on a GAAP basis.
We're also pleased to see a solid start to on our leasing activity in the second quarter.
Summarizing our financial and operational performance, we remain proud of the resiliency, we demonstrated last year.
Which is clearly carried into 2021.
Nelson mentioned this not only reflects the quality of our portfolio and tenant roster.
But also the ongoing efforts of our team.
We have a solid balance sheet and strong liquidity.
Which enables us to take a thoughtful approach to creating long term shareholder value.
We ended the quarter with more than $60 million on cash plus access to $526 million of additional funds under our revolving credit facility.
Our net debt to real estate asset ratio was 32 two per cent.
And our fixed charge coverage ratio stood at two five times.
We have more than $4 billion of unencumbered properties.
And our only debt maturity prior to next year or modest loans on our share.
On 799 Globe Life, Inc.
On the warehouse.
I want to point out a new line of our income statement.
The strategic review costs.
These costs are being added back in calculating normalized SFO.
But not in calculating adjusted at all.
Turning to our full year outlook, we are reaffirming the ranges, we provided last quarter, which reflect our strategic dispositions in 2020.
And assume a continuation of current operating conditions.
This concludes our normalized <unk> guidance range of $1 23 to $1 30 per share.
Same store cash NOI growth of negative 3% to 5%.
And a year end occupancy range of 90 to 95 per cent.
We also continue to expect full year, corporate G&A $33 million to $35 million.
As Nelson discussed we have many exciting leasing opportunities across New York, Washington, D C and the San Francisco Bay area.
We expect these leasing opportunities.
Which include new and renovated space.
As well as attractive availabilities in our existing portfolio.
We will begin to make a meaningful contribution to our cash flows next year.
In summary, the year is off to a strong store.
And so we've maintained the focus that carried us through 2020.
Our year on what your outperformance was largely consistent with.
Or even better than our initial outlook.
Despite the unexpected impacts of the global pandemic.
We're proud of our team's efforts.
And excited about the opportunities ahead.
Now operator, if you could please open the lines, we'd be happy to take questions.
Yes, Sir ladies and gentlemen at this time, if you'd like to ask a question. Please press Star then the number one on your telephone keypad once again, the day star and the number one.
Your first question comes from the line of Sheila Mcgrath with Evercore.
Hi, Sheila.
Hi, Nelson I wondered if you could.
Comment on leasing activity you did have a pretty active comparatively quarter interest corridor and also you have some things in the pipeline are there any trends that you could point us to in terms of how the rents are coming in versus your expectation or concession.
Concessions more elevated.
And also on length of lease term.
Sure you know as we said Sheila and.
Prepared comments.
Activity tours interest really in all three markets.
Has picked up dramatically.
These are these are meaningful discussions towards even even swapping paper.
Not a lot of leases executed just yet, but we think we think we're making good progress in.
And which some are getting close but I would say New York first and foremost followed by D. C. And then even in San Francisco, we're seeing a lot of activity in terms of the rent.
So far so good.
For the really high quality space, which again this most of our space, it's either new build or a renovated or.
Well located Midtown south stuff.
We're really not seeing we're not having to pull back that much.
From from pre COVID-19 pricing, it's obviously, obviously theres some of that a little more in terms of concession or free rent.
But on.
Certainly inside 10% on most of our properties in terms of a reduction.
Some of the space that we have around the portfolio.
We may have to pull back a bit more than that just to get leases done, but I will tell you we're feeling very optimistic.
Over these last couple of months about the pace of absorption rate pace as well as the terms I think we'll we'll we'll actually going to come out okay on that.
I don't want on overstated I mean, there clearly is pressure on the system Theyre securely.
Excess demand out there their sublease sublease activity is still substantial so there is it is it is.
It's still a tough road out there, but we feel we feel good about delivering certainly on the expectations that are embedded in our guidance for the year, and we think even better than that.
So.
Paul <unk>, who heads our.
We will state operations group is actually here, Paul anything to add to that no I think I think that's right Nelson.
Really encouraged by the activity this quarter and I think regarding your question.
Most of the movement that we've seen in terms of.
It's been in the form of concessions.
On a free rent timing.
That sort of thing we haven't seen as much pullback in phase III.
As Nelson pointed out we're going to see more transactions across the board in the market close and I think that will give us a better sense on those comps start to hit.
Okay. Thank you.
We are quite optimistic Sheila you know relative to where we were a couple of months ago.
Okay, great. Thank you.
Thank you.
Your next question comes from the line of John Kim with BMO capital markets.
Good evening John.
Thanks.
I know Youre limited on what you could say on the strategic review I just have a very simple question for you.
Or can you give us an indication on how long you think this process may take I think the last time you went through a review it was never really formally announced are concluded and I was just wondering if this time it will be different.
You know John that's difficult to say and we certainly can't commit to a particular timeline I will.
I'll tell you the process has started in earnest.
Very active.
We're really focused on it as are our advisors Morgan Stanley and on advisory team.
So we are.
Its moving along and we're giving it full attention.
A lot of the timing will depend on how.
This takes us the level of interest the nature of the interest.
But we certainly don't want to drag it out for months and months right.
Yes.
I'd say I'd say best guess would be a few months.
But it's really we really don't want a we really can't nail down team specific timeline at this point.
Okay.
Announcement that you made this morning with our accounts withdrawing its slate of directors.
Is that indicating that your you have a more friendly friendly relationship with them and you're opening up the due diligence process to them.
Alright.
Sure John So we've always had a friendly dialogue open dialogue with the arc House group.
And they are very much part of this process as you know there are.
They were the first first express interest and they're very much involved in the process they have access.
To the data room and access to us on our advisors. So.
It's always been.
Our friendly open dialogue I think.
They made a decision as we announced this morning, we're really just updating the proxy.
With annual meeting coming up but they made the decision to withdraw the slate and I think thats in connection with you.
With us are working together to see if there's a particular transaction here.
Okay.
You mentioned in San Francisco Youre anticipating.
Offer complaints coming back.
On to the Opex in the second and third quarter are you anticipating higher leasing activity out of that.
Well.
Third and fourth quarter I think we said in.
A lot of those.
We have specific dates for several of our larger tenants, there, who they've announced to their teams on to us.
Their reentry and a lot of cases there'll be a phase III injury.
But all of them.
All of our almost all of our major larger tenants or at least in the active planning stages coming back some are taking steps to actually physically come back already in terms of leasing.
In most cases.
There is term left on the lease.
There's not any expansion or contraction.
<unk> plans on the board.
It's just a matter of reading reentering, if their existing space. Although we are having several discussions across the San Fran portfolio as we are in other markets about renewals.
Tensions.
And even even expansions in a couple of cases so.
A lot of discussion is.
With within the.
With us on the tenant has to do with.
But how is it going to be different when they come back the reconfiguration of the space.
Their work schedules.
Possibly converting some of their space to more collaborative conference room space, you know less density those sorts of things.
That's.
More of a tenant or a company determination, but we're certainly engaged and involved with those discussions so yes.
Yes, I think I think we will see more leasing Paul is that fair on that we'll see more leasing as we get later in the year for sure and I think the dynamic that Nelson pointed out is particularly relevant for.
Smaller tenants call it less than 50000 feet, where they can come back a little bit quicker and I think we've heard some of the activity that we've seen.
Broken about here today as a result of coming back and realizing that they want they might want a little bit more strength.
Early indications there John this is Jim.
Just to note.
We have had some leases in San Francisco I should expect that those will increase as people actually come back to the office, but.
As we noted in our remarks, we had we actually had two on renewal leases and two new leases in our San Francisco property is in the first quarter.
Really good leasing spreads so.
Hope, that's a leading indicator.
Yeah, and John as we all know as anybody would expect.
The better the property the better located property the better the space to better design.
The lethal unless it will be impacted right. So.
As you know we worked very hard over the years to really be very discerning on not only selection of properties, but spending capital on properties and even even on.
No.
Assembling tenant rosters right, we've been we've been pretty selective on that and that's really again, we're not immune to the pressures in the system.
But that's that's paying off force, we've got some really good quality space.
<unk>.
Out there and I think we're going on that's why I think that's a lot of the reason why we're seeing this.
This early demand as companies reinforce hunter.
My final question is on the D. C market you had a dip in occupancy.
This quarter, which.
Partially due to the market square renovation.
But one of your office REIT peers have described the D. C. CBD market is one of the slowest.
On a portfolio and I'm wondering if that's a fair characterization for you guys.
Yes, I'd say that's definitely fair.
D C for several years has been.
Yeah.
Hmm.
I guess, you said the weakest of our three markets and it's primarily because of the influx of high quality New Trophy supply.
The reason, even pre COVID-19 and we think now we'll hold our own there because.
Again, we have some pretty unique building share market square.
He is its location its reputation for being one of the main.
Attracted home store and government affairs.
It does quite well and we do think some enhancements to some of the common areas and many of these are in order, we put a beautiful rooftop in place, but we think there's opportunity on the ground floor retail and some conference space to really enhance it even further.
So we think we'll do okay, there, but and then and then 80 M Street, where we're doing the overbuild that is really getting a lot of market attention and interest from.
From some strong tenant prospects so.
We're fortunate to have some really unique property theory, but I agree with with your other companies sentiment debt.
It's not the strongest office market right now in terms of just base based on a broad fundamentals.
Great. Thank you.
Thank you.
Your next question comes from the line of Vikram Malhotra from Morgan Stanley.
Thanks, and thanks for taking the question good evening, Hey, How're you doing great.
Great maybe just maybe just first question on specifically the development.
On projects as we kind of emerge out of COVID-19 you referenced they return to work and the pickup in leasing can you, maybe just give us a bit more color on how youre thinking about lease up.
Maybe any incentives you're offering just to get some of the smoothed up.
Price points are now shaking out versus pre COVID-19.
Yes, we will certainly do that I'll I'll start and I'll ask Paul to weigh in as well.
So as we've said before vikram.
You know the better the property.
The property the better located the more unique it is the easier time, you will have of it that's true for all of us in this business.
So it's 799 Broadway of course, we will experience.
Lighter economics somewhat lighter economics than we would have pre COVID-19, but we really don't think we will have to give up that much from pre COVID-19 pricing Paul can talk about more of the dynamics of how that.
Does that take the form of increased concessions or whatever but even.
Even on one point on Madison, which is a 100 year old property that we took back we had at least two we work we unwound that.
On a termination payment and took that property back even on an older property like that.
It.
This shows really nicely.
We cleaned it out cleaned it up and we're showing some floors there and we're getting interest there is.
In that case, the economics would be a little tougher.
To entice tenants.
We're going to be a little higher on concessions than we might have been before.
But again, great location relative to transportation really flow place lay out well high ceilings, great Windows is going to do is going to do do okay too we're fortunate not to have.
Much on the way of just basic.
Commodity Midblock mid building type space.
We think that struggles a little more but Paul.
We're doing a lot of is we mentioned that we were having a lot of discussions right now with real live prospects and we've done some leasing where we're getting closer on some other leasing so we have a pretty good finger on the pulse of what it's going to take to get deals done, but it does vary by property, Paul a little bit of color on that.
Thanks Nelson.
I think that's right and the other thing I would say in the form when you talked about concessions or things that you might utilize to incentivize folks to make decision I think the other thing that comes into play is flexibility and so those concessions could take the form of perhaps a phase and if it is a multi floor tenants.
Or even our willingness to break a certain block of space in order to get some growth. So those are the types of things we're talking about when we think about either concessions or flexibility to help tenants as they reenter make those decisions a little bit more swiftly.
And we're employing that factor here across some of the buildings as Nelson mentioned pick on one of the things I think we are going to see we are seeing.
Given all the uncertainty in the market uncertainty within within with tenants about exactly how fast and how far they want to go with office space right. So one thing is we are seeing it.
Is a desire for shorter lease term.
Pretty dramatically so in some cases.
But but but but those tenants would be willing to pay a premium or give up some other.
Part of the terms so.
That's going to be a pretty common recurring thing youre going to see with us and other landlords I think now for seven to nine nine Broadway, where you have a high quality unique space like that.
We're not we're still gonna get lease term were still going to get.
Reasonable concessions in decent rate, but some of this other space like one point on Madison, We may look at.
You know shorter lease terms something inside five years now to do that we're going to have we need to get paid for that in terms of face right and we can't give up as much on concessions.
But.
A lot of these tenants as they're trying to figure out their comeback and post COVID-19, they're willing to pay those premiums.
To have that flexibility. So that's something we'll see we'll see surface over the next few quarters.
That makes sense, yeah, I mean, I guess are.
You said in some cases under five years. So I guess, if you look at your pipeline you talked a lot about.
Direct tour activity proposal is being treated in San Francisco New York.
I guess, if you were to bucket it like roughly what proportion of the pipeline would you say is looking for that short of a five year type lease and can you also comment on.
How domination kind of clauses might may or may not change going forward.
Sure with respect to the pipeline relative to the overall activity I'd say, it's probably less than 20%.
So it's significant enough.
It's worth mentioning and it's a tool that we think we can utilize to get close activity on premium like Nelson mentioned in some cases, but that's probably right.
Somewhere on the 20% range of the overall activity is looking for some form of more flexible terms yeah in term in terms of the termination.
That's on old that's an old trick.
They were all very accustomed to the I'll do a 10 year term, but I'd like on out after four.
That's not a 10 year lease right. So.
Obviously.
When you're talking about term.
What's the real term price.
So yes those are those are on the discussions I'd like.
Like Paul said.
A minority of the cases will go for the shorter lease term, but again to get that theyre going to need to pay a premium.
And we've got to make sure we can reuse the tea ice on all of those sorts of things and evaluating.
How much premium we we we have to have the other thing that's important to keep them on though vikram.
In addition, it's expensive.
And time consuming and disruptive for companies to choose a home build out that home established that their business operations and their culture in that home.
And doing that every few years is disruptive to their business. So aside from the economics.
All things held equal tenants would like to have longer lease terms right, but again cause us on the uncertainty that we're dealing with right. Now we think we think we will see a significant portion of a significant portion of our negotiations will include at least discussion about shorter lease terms.
That makes sense and then I remember you know obviously last call you talked about.
No known move outs.
You know over the next go on at 12 months or so and I'm wondering if you can just give us an update if there's any changes in that schedule on the movement.
And anything incremental would be helpful.
Okay, well, nothing really surprising or incremental from Jim can give us some some some some of the headline numbers. If you. If you if you recall our guidance for the year. We're at about 94, just over 94% leased today at least today our guidance for the year is 90 to 95 right.
What that but you know mid year, we may dip below that and you've got the Pershing termination coming up June 30, you've got Amazon Web services 9000 feet coming up June 30.
We also hope to have some leases signed in the next quarter or two.
But you know it's possible that our low point is in the high eighties, but then we expect certainly by and this is consistent with our guidance. We expect certainly by the end of the year to be back up on that.
Low low to mid Ninety's range, but anyway, Jim if theres some.
Nothing new really but what are some of the headlines here that's right Nielsen and the other one to mention is there is a law firm minced 11, net market square and we only own 51% on building but.
54000 square feet. That's the end of July so those are the big ones. This.
This year those are all leaving.
And that book.
As Nelson said, we've taken all that into account.
We.
And both in terms of the year and leasing expectations percentage leased and in terms of the revenue expectations for the year.
And.
I will say.
We feel that we're on track for the year two in terms of our guidance we think debt.
Things are moving in the right direction.
Now we may sound, a little more optimistic than some other companies that have had their conference calls but.
Tell me, what we're seeing in our properties and we feel.
We feel that we're on track so.
Really no update but.
I guess, we are reaffirming what we said last call.
Great. Thanks, so much.
Thanks, Vikram good talking to you.
Your last question comes from the line of Michael Lewis with tourists Securities.
Alright, thank you.
Hi, Nelson.
And you already answered this question I'm going to ask it more bluntly, even though I realize you may not they may not be anything else to add to it but why did our accounts withdraw their sleep.
You know that's a question for them I think I wouldn't feel comfortable speculating on that as I mentioned on John's question, we've been in regular dialogue with them.
<unk>.
Their focus has been clearly.
Their interest in the.
The acquisition.
And as indicated by their offer.
And.
This is consistent with that.
We're very engaged with them.
They are fully plugged into the process and to our advisers and our team and so.
I don't know I couldnt speculate beyond that but I think I think it's just indication that the interest is.
There.
They are in the process of net and I think thats that was there doesn't seem to be their primary focus.
Okay got it.
And then Jim you know.
One on the guidance.
You did 35 cents a share normalized in <unk>, if I look at your range for the full year that implies less than 31 cents a quarter at the midpoint for the rest of the year.
Is that a function of you know.
Again, leaving some conservatism for lease.
Leasing volume and what's going to happen on the rest of the year or was there anything.
On incremental in <unk> that that doesn't really carry through to the rest of the year.
Yes, Michael there are really two things to note.
One is debt midway through the year as we've talked about we've got three significant leases that are expiring and we do think we will get those leases with.
Placed we actually think we're going to wind up with roll ups in rent on.
On average for those three leases, but we think just given the timing that it's awfully hard to get a new space built out and get new rent coming in the door.
Without some real.
Significant sized spaces and so it will require some even if we get the leases done right away on question build out and so it will take some time before those leases commenced so there'll be some slippage there so.
I guess translate that.
The income in the second half of the year ought to be lower than the first half.
The other thing to note is that the 35.
There were a couple of onetime things going on in the first quarter debt by the.
That happens all.
All the time it happened last year it will happen next year I'm sure.
May have a next quarter, but we had.
A tax abatement that hit in the first quarter that helped US. We also had if you look at our management fee income it appears to be low in the second quarter and Thats really a function of timing of some expense would still think that's on budget.
And on track to deliver are essentially the same.
This year as last year. So those two things will even out a little bit but on the whole it was a little bit beneficial than first quarter. So.
On a little bit of Lumpiness and a little bit of.
Probably some slippage in the back half.
<unk>.
By the way it temporary slippage in the back half as soon as we get those spaces re leased and especially after we get some leases done at 799 and $1 49, we should be headed in the other direction.
And as Jim said earlier, we were effectively reiterating our guidance from earlier, yes, we still feel good about all those ranges so yes.
Okay.
That's helpful. Thanks, and then just lastly, I'm going to ask kind of a bigger picture question.
It's very early in the in the return to work maybe ahead of most of the return to work, but I E.
As you're talking to tenants in and maybe even in your own portfolio are there any tangible signs yet of tenants reconfiguring space using it differently.
Committing to hybrid models and whatever that means for the way that they utilize the space.
Or is it still too early to kind of tell what's going to happen on that front.
So Michael a quarter ago, I would've said, it's a bit early but in this quarter and based on conversations we're having with various.
Tenants.
Those plans those those are in process.
And what you just mentioned it's happening now.
Very few tenants had moved back in an athlete actually implemented those changes, but there's definitely a lot of thought.
For going into work schedules.
Reconfiguration of space.
Making sure that the space is it fits a different.
Less density more collaboration all the rest and.
Some of our.
Some of our larger tenants have had quite advanced.
Thoughts planning about that others are just where we.
We're spending a lot of time talking with tenants about the options.
So Paul what are some things you are seeing yes, I think the more the more tangible adjustments that we've seen over the last quarter have been from some of the smaller tenants as I mentioned call it below 25% to 50000 feet.
Don't have the luxury of every other person every other day they don't have large departments.
Some of them either smaller tech and financial users around our portfolio that have come back and that's where we've seen the more immediate either reconfiguration or some of that.
Organic demand that I've mentioned earlier on the call I think for the larger tenants. It's been more in the planning and discussion phase and then the last thing I'd say is the most encouraging thing obviously.
Come back has been the vaccinations right. So for larger tenants I think now that vaccinations are widely available what we've actually started to see in the form of the new tenants coming to market in the buildings that Nelson.
You mentioned.
As such.
Some of those plans are more normal than you might think because I think the plan is really let's reenter when it's safe and that safety picture seems to be getting better every day.
And not not to go too far with this example, but 315 Park Avenue South.
Where our office is located here we have seven.
Tenants in 'twenty store, seven or eight tenants from 'twenty stories here, it's all tech and media.
Tenants from great tenant roster.
Six months ago, if you were to speculate about what this building might look like a year. Later you could have made the argument I wouldn't have but you can make the argument that well maybe this group sublease, maybe they don't come back maybe they don't expand whatever.
You just based on the discussions in these tenants trying to figure out when and how and whether they come back and how much and do they need all their space.
Today and again these are tenants, we know well today based on those same discussions with the same tenants.
We'd say.
No concern about having this building 100% occupied.
Those who were considering sublease may be still but not to the same degree they were.
There are even some considering expansion needs. That's just a microcosm thats just one building and we have the same story at other builders other locations, but I've mentioned this building just because it's to me it's.
It's reflective of the major shifts we're seeing in the last few months of just the.
The attitude the intention that the optimism.
We will see I mean.
The remaining quarters will be reporting on leasing activity and we'll give you more details, but we feel.
We're not declaring a full recovery just.
Just yet by any means but we do see a lot of a lot of positive movement in our in our in our portfolio.
Yeah, that's that's really interesting thanks for that.
Thanks, Michael Thank you Michael.
And there are no further questions at this time.
Okay well. Thank you. Thank you all for spending your time with us today and.
We appreciate your interest and the opportunity to share with you.
Certainly being touch over the next few months and coming quarters on our.
Our activity operational activity in <unk>.
Financial performance and also the strategic process.
Again, we can't commit to a specific timeline or certainly not on outcome, but we know this is important the board is taking it very seriously.
Where we are.
Giving it our all to make sure we're on a good process to get the best results for shareholders and so we look we look forward to reporting back to you on that it's.
At some point in the near future, but thank you again, and we look forward to speaking again soon.
Ladies and gentlemen, this does conclude today's conference call. We thank you for your participation you may now disconnect.
Okay.
Okay.
Yes.
Okay.
Moving on.
[music].
Yes.
Yes.
Moving on.
<unk>.
Net.
[music] free.
Yeah.