Q4 2023 Boston Properties Inc Earnings Call

Operator: Thank you. Thank you. Thank you. Good day, and thank you for standing by.

Operator: Welcome to BXP's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To rejoin your question, please press star 1 1 again.

Operator: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Helen Hahn, Vice President of Investor Relations. Please go ahead.

Helen Hahn: Good morning, and welcome to BXP's fourth quarter and full year 2023 earnings conference call. The press release and supplemental package were distributed last night and filed on Form 8K. In the supplemental package, BXP has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G. If you did not receive a copy, these documents are available in the investor section of our website at investors.bx

Helen Hahn: A webcast of this call will be available for 12 months. At this time, we would like to inform you that certain statements made during this conference call, which are not historical, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Although BXP believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements were detailed in yesterday's press release and from time to time in BXP's filings with the SEC. BXP does not undertake a duty to update any forward-looking statements.

Helen Hahn: I'd like to welcome Owen Thomas, Chairman and Chief Executive Officer, Doug Linde, President, and Mike LaBelle, Chief Financial Officer. During the Q&A portion of our call, Ray Ritchey, Senior Executive Vice President, and our regional management teams will be available to address any questions. We ask that those of you participating in the Q&A portion of the call please limit yourself to only one question. If you have an additional query or follow-up, please feel free to rejoin the queue. I would now like to turn the call over to Owen Thomas for his formal remarks. Thank you, Helen, and good morning, everyone.

Owen D. Thomas: After a brief review of our quarterly and annual performance, I intend to focus my remarks this morning on BXP's significant capital allocation activity over the last quarter, related real estate capital market conditions, and key areas of focus for us in 2024. The operating trends I've described in prior quarters, specifically the steady return of workers to their offices, the importance of corporate earnings growth to leasing activity, and the outperformance of premier workplaces, all remain important and substantially unchanged. BXP continued to perform in the fourth quarter as it did throughout 2023 despite withering negative market sentiment for the commercial real estate sector. Our FFO per share was a penny above market consensus for the fourth quarter, and for all of 2023, it was 15 cents above the midpoint of the guidance range we provided one year ago. We completed over a million and a half square feet of leasing in the fourth quarter and 4.2 million square feet of leasing for all of 2023, well above our prior forecast. Over the last year, signed leases remained long-term, over eight years weighted average, and portfolio occupancy remained stable despite a challenging leasing environment.

Owen D. Thomas: In 2023, VXP raised over $4 billion in new capital in the public unsecured debt, private secured mortgage, and private equity market. In the fourth quarter alone, we completed a new $600 million mortgage financing, a $750 million asset-specific equity capital raise, both among the largest comparable transactions completed in our sector last year, as well as three new and highly accretive equity investments, one of which closed in January. Thanks for watching!

Owen D. Thomas: So on capital allocation activities and starting with capital raising, last November, BXP announced the sale to Norges Bank Investment Management of a 45% interest in 290 and 300 Binney Street, both life science developments located in the Kendall Square District of Cambridge, leased on a long-term basis to creditworthy clients. 300 Benny is a 236,000 square foot existing office building that is being converted to lab use and scheduled for delivery at the end of this year. And 290 Benny is a 566,000 square foot ground up development that we expect to deliver in 2026. Our partner purchased the assets at a gross valuation of $1.66 billion, or $2,000,000,000.

Session to ask a question. During this session you will need to press star one one on your telephone you will then hear an automated message advising your hand is rate towards your question. Please press star one again please.

Please be advised that today's conference is being recorded I would now like.

To hand, the conference over to your first speaker today to Helen Hahn, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Dxp's fourth quarter and full year 2023 earnings conference call. The press release and supplemental package were distributed last night and furnished on form 8-K.

In the supplemental package DXP has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G. If you did not receive a copy. These documents are available in the investors section of our website at investors that DXP Dot com a website. The webcast of this call will be available for 12 months.

Okay.

[laughter].

Speaker Change: Good day, and thank you for standing by welcome to Dxp's fourth quarter and full year 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one one on your telephone you wouldn't hear an automated message advising you.

At this time, we would like to inform you that certain statements made during this conference call, which are not historical may constitute forward looking statements within the meaning of the private Securities Litigation Reform Act, although DXP believes the expectations reflected in any forward looking statements are based on reasonable assumptions. It can give no assurance that its expectations will be attained.

Speaker Change: And as rate so.

Speaker Change: Your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded.

Speaker Change: Like to hand, the conference over to your first speaker today, Helen Hahn Vice President of Investor Relations. Please go ahead.

Helen Hahn: Good morning, and welcome to Dxp's fourth quarter and full year 2023 earnings conference call. The press release and supplemental package were distributed last night and furnished on form 8-K in the supplemental package DXP has reconciled all non-GAAP financial measures.

Factors and risks that could cause actual results to differ materially from those expressed or implied by forward looking statements were detailed in yesterday's press release and from time to time and Dxp's filings with the SEC <unk> does not undertake a duty to update any forward looking statements.

Helen Hahn: The comparable GAAP measure in accordance with Reg G. If you did not receive a copy. These documents are available in the investors section of our website at investors DXP Dot Com website. The webcast of this call will be available for 12 months.

Like to welcome Owen Thomas Chairman, and Chief Executive Officer, Doug Linde, President and Mike Labelle, Chief Financial Officer during the Q&A portion of our call Ray Ritchey Senior Executive Vice President and our regional management teams will be available to address any questions. We ask that those of you participating in the Q&A portion of the call.

Helen Hahn: At this time, we would like to inform you that certain statements made during this conference call, which are not historical may constitute forward looking statements within the meeting the private Securities Litigation Reform Act, although DXP believes the expectations reflected in any forward looking statements are based on reasonable assumptions. It can give no assurance that its expectations will be attained.

Please limit yourself to only one.

If you have additional queries or follow up please feel free to rejoin the queue I would now like to turn the call over to Owen Thomas for his formal remarks.

Thank you Helen and good morning, everyone.

Helen Hahn: Factors and risks that could cause actual results to differ materially from those expressed or implied by forward looking statements were detailed in yesterday's press release and from time to time and BSP filings with the SEC.

After a brief review of our quarterly and annual performance I intend to focus my remarks. This morning on DXP significant capital allocation activity over the last quarter related real estate capital market conditions in key areas of focus for us in 2024.

He does not undertake a duty to update any forward looking statements.

Speaker Change: I'd like to welcome Owen Thomas Chairman, and Chief Executive Officer, Doug Linde, President and Mike Labelle, Chief Financial Officer.

The operating trends I have described in prior quarters, specifically the steady return of workers to their offices the importance of corporate earnings growth to leasing activity and the outperformance of Premier workplaces, all remain important and substantially unchanged.

Speaker Change: During the Q&A portion of our call Ray Ritchey Senior Executive Vice President and our regional management teams will be available to address any questions. We ask that those of you participating in the Q&A portion of the call to please limit yourself to only question. If you haven't and additional query or follow up please feel free to rejoin the queue.

DXP continues to perform in the fourth quarter as we did throughout 2023, despite weathering negative market sentiment for the commercial real estate sector.

Speaker Change: I would now like to turn the call over to Owen Thomas first formal remarks.

Our <unk> per share was a penny above market consensus for the fourth quarter and for all of 2023 with 15 above the midpoint of the guidance range, we provided one year ago.

Owen D. Thomas: Thank you Helen and good morning, everyone.

Owen D. Thomas: After a brief review of our quarterly and annual performance I intend to focus my remarks. This morning on DXP significant capital allocation activity over the last quarter related real estate capital market conditions in key areas of focus for us in 2024.

We completed over 1 million square feet of leasing in the fourth quarter and $4 2 million square feet of leasing for all of 2023, well above our prior forecast.

Owen D. Thomas: The operating trends I have described in prior quarters, specifically the steady return of workers to their offices.

Over the last year.

Signed leases remains long term over eight years weighted average portfolio occupancy remained stable despite a challenging leasing environment.

Owen D. Thomas: Portance of corporate earnings growth to leasing activity.

Owen D. Thomas: Outperformance of Premier workplaces, all remain important and substantially unchanged.

In 2023, DXP raised over $4 billion in new capital in the public unsecured debt private secured mortgage and private equity markets.

Owen D. Thomas: DXP continues to perform in the fourth quarter as we did throughout 2023, despite weathering negative market sentiment for the commercial real estate sector.

In the fourth quarter alone, we completed a new $600 million mortgage financing.

Owen D. Thomas: Our <unk> per share was a penny above market consensus for the fourth quarter and for all of 2023 with 15 cents above the midpoint of the guidance range, we provided one year ago.

$750 million asset specific equity capital raise both among the largest comparable transactions completed in our sector last year as well as three new and highly accretive equity investments one of which closed in January.

Owen D. Thomas: We completed over 1 million square feet of leasing in the fourth quarter and $4 2 million square feet of leasing for all of 2023, well above our prior forecast.

Okay.

So on capital allocation activities and starting with capital raising last November DXP announced the sale to Norges Bank investment management of a 45% interest and $2 90, and 300 Binney Street, both life Science developments located in Kendall Square District of Cambridge leased on a.

Owen D. Thomas: Over the last year.

Owen D. Thomas: Signed leases remains long term over eight years weighted average portfolio occupancy remained stable despite a challenging leasing environment.

Owen D. Thomas: In 2023, DXP raised over $4 billion in new capital in the public unsecured debt private secured mortgage and private equity markets in the fourth quarter alone, we completed a new $600 million mortgage financing.

A long term basis to creditworthy clients.

300, <unk> is a 236000 square foot existing office building that is being converted to lab use and scheduled for delivery at the end of this year and 290 Binney is a 566000 square foot ground up development that we expect to deliver in 2026, our partner purchase the assets at a gross valuation.

Owen D. Thomas: $750 million asset specific equity capital raise both among the largest comparable transactions completed in our sector last year as well as three new and highly accretive equity investments one of which closed in January.

<unk> of 166 billion or $2050 per square foot and an expected initial cash yield on cost at delivery for both asset of five 9%.

Owen D. Thomas: Okay.

Owen D. Thomas: So on capital allocation activities and starting with capital raising last November DXP announced the sale to Norges Bank investment management of a 45% interest and $2 90, and 300 Binney Street, both life Science development located in the Kendall Square District of Cambridge leased on.

DXP will retain a 55% interest in each joint venture and provide development property management and leasing services.

<unk> has closed its investment in 300, Binney and funded $213 million and we expect the 290 Binney joint venture will close in the first quarter of this year, which will reduce approximately $534 million of Dxp's development funding requirement over time.

Owen D. Thomas: Long term basis to creditworthy clients.

Owen D. Thomas: 300, <unk> is a 236000 square foot existing office building that is being converted to lab views and scheduled for delivery at the end of this year and 290 <unk> is a 566000 square foot ground up development that we expect to deliver in 2026.

We are pleased and honored to grow our important relationship with Norges Dxp's largest joint venture partner and one of our largest shareholders. Upon completion of this transaction DXP will have raised just under $750 million of equity capital on attractive terms and reduced our forecast leverage.

Owen D. Thomas: Our partner purchase the assets at a gross valuation of 166 billion or $2050 per square foot and an expected initial cash yield on cost at delivery for both assets up five 9%.

Okay.

Next DXP purchased interest in three currently owned assets from two different joint venture partners, one of which closed in early January. These transactions were sparked by anchor client renewals DXP achieved at two of the assets requiring capital for tenant improvements leasing commissions and building.

Owen D. Thomas: DXP will retain a 55% interest in each joint venture and provide development property management and leasing services.

Owen D. Thomas: <unk> has closed its investment in 300, Binney and funded $213 million and we expect the 290 Benny joint venture will close in the first quarter of this year, which will reduce approximately $534 million of Dxp's development funding requirement overtime.

Grades.

In the current environment. These two joint venture partners decided they wanted to reduce their exposure to office, we agreed to purchase their interest at attractive and accretive returns and complete the long term lease extension.

Owen D. Thomas: We are pleased and honored to grow our important relationship with Norges Dxp's largest joint venture partner and one of our largest shareholders. Upon completion of this transaction DXP will have raised just under $750 million of equity capital on attractive terms and reduced our forecast leverage.

Regarding the specific deals 901, New York Avenue is a 548000 square foot, 83% leased office building located in Washington D C.

The building is encumbered by a $207 million mortgage with attractive terms due in 2025.

Owen D. Thomas: Okay.

Owen D. Thomas: Next DXP purchased interest in three currently owned assets from two different joint venture partners, one of which closed in early January. These transactions were sparked by anchor client renewals DXP achieved at two of the assets requiring capital for tenant improvements leasing commissions and building up.

In January we completed the renewal of the 214000 square foot anchor client in the building clinical Henderson for 18 years purchased the 50% interest in the property, we didnt owned for $10 million and modify the loan to allow for an extension of the maturity date for up to five years.

Owen D. Thomas: Great.

Owen D. Thomas: In the current environment. These two joint venture partners decided they wanted to reduce their exposure to office, we agreed to purchase their interest at attractive and accretive returns and complete the long term lease extension.

Pricing for the acquisition was $414 per square foot and a six 4% initial cap rate on an as is basis and $516 a square foot with an expected eight 4% cash yield on cost at stabilization in 2027.

Owen D. Thomas: Regarding the specific deals 901, New York Avenue was a 548000 square foot, 83% leased office building located in Washington D C.

Santa Monica business Park is a 'twenty one building, one 2 million square foot and 88% leased office complex located adjacent to the Santa Monica Airport.

The building is encumbered by a $207 million mortgage with attractive terms due in 2025.

Owen D. Thomas: In January we completed the renewal of the 214000 square foot anchor client in the building clinical Henderson for 18 years.

The property is encumbered by a $300 million mortgage due in 2025 and 70% of the park is encumbered by a ground lease with above market ground rent and a fee purchase option in 2028.

Owen D. Thomas: Purchased the 50% interest in the property, we didnt own for $10 million and modified the loan to allow for an extension of the maturity date for up to five years pricing.

We completed a 467000 square foot lease renewal for snap the anchor client in the park for 10 years and purchased the 45% interest in the asset we didn't own for $38 million, which represents pricing of $395 per square foot and a 9% initial cap rate.

Owen D. Thomas: Pricing for the acquisition was $414 per square foot and a six 4% initial cap rate on an as is basis and $516 a square foot with an expected eight 4% cash yield on cost at stabilization in 2027.

On a fee simple basis based on market assumptions for land value.

Lastly, in conjunction with the Santa Monica Business Park buyout DXP purchased a 29% interest in 360 Park Avenue South for a dollar, bringing our ownership interest in the asset to 71%.

Santa Monica business Park is a 'twenty one building, one 2 million square foot and 88% leased office complex located adjacent to the Santa Monica Airport the properties encumbered by a $300 million mortgage due in 2025 and 70% of the park is encumbered by a ground lease with above market ground.

360 Park Avenue, South is a 450000 square foot office building that DXP is fully redeveloped and Midtown south.

And a fee purchase option in 2028.

And is encumbered by a $220 million mortgage.

Owen D. Thomas: We completed a 467000 square foot lease renewal for snap the anchor client in the park for 10 years and purchased the 45% interest in the asset we didn't own for $38 million, which represents pricing of $395 per square foot and a 9% initial cap rate.

Purchased 360 Park Avenue, South using OPE units priced at $111 per share in 2021, and subsequently introduced two financial joint venture partners, who secured their interest by funding the required redevelopment capital expenditures overtime.

At the time of closing the selling joint venture partner has funded $71 million and DXP assumed their remaining $46 million projected funding obligation.

Owen D. Thomas: On a fee simple basis based on market assumptions for land value.

Owen D. Thomas: Lastly, in conjunction with the Santa Monica Business Park buyout DXP purchased a 29% interest in 360 Park Avenue South for one dollar, bringing our ownership interest in the asset to 71%.

This investment represents pricing projected at building stabilization in 2026 of $754 per square foot and a seven 2% initial yield on cost.

Owen D. Thomas: 360 Park Avenue, South is a 450000 square foot office building that DXP is fully redeveloped in Midtown South.

So in summary for these three acquisitions BSP invested only $48 million upfront and materially increased its ownership position in three high quality assets, we understand well.

Owen D. Thomas: And is encumbered by a $220 million mortgage.

Owen D. Thomas: Purchased 360 Park Avenue, South using op units priced at $111 per share in 2021, and subsequently introduced two financial joint venture partners with secured their interest by funding the required redevelopment capital expenditures overtime.

We expect to receive projected total returns that will be well in excess of the cost of the equity capital. We raised from the Binney Street joint ventures, and projected <unk> per share accretion from the investments of approximately <unk> 14 in 2024.

Owen D. Thomas: At the time of closing the selling joint venture partner has funded $71 million and DXP assumed their remaining $46 million projected funding obligation.

Yes.

Regarding the broader private equity capital markets office sales volume picked up in the fourth quarter to $14 4 billion up 126% from the prior quarter and up 14% from a year ago inter.

Owen D. Thomas: This investment represents pricing projected at building stabilization in 2026 of $754 per square foot and a seven 2% initial yield on cost.

Interestingly office sales went from 12% of total real estate transaction volume in the third quarter to over 27% last quarter.

Owen D. Thomas: So in summary for these three acquisitions BSP invested only $48 million upfront and materially increased its ownership position in three high quality assets, we understand well.

So U S lenders continue to reduce exposure to office real estate, making secured financing extremely difficult to a range. There is more distressed asset restructuring activity more capitulation on pricing by owners and more confidence by buyers in their forecast cost of capital.

Owen D. Thomas: We expect to receive projected total returns that will be well in excess of the cost of the equity capital. We raised from the Binney Street joint ventures, and projected <unk> per share accretion from the investments of approximately <unk> 14 in 2024.

The Feds announcement late last year, the interest rate hikes are likely over and cuts could start to occur in 2024 is very favorable for real estate capital market conditions.

Yes.

Owen D. Thomas: Regarding the broader private equity capital markets office sales volume picked up in the fourth quarter to $14 4 billion up 126% from the prior quarter and up 14% from a year ago inter.

There were few comparable premier workplace transactions completed last quarter other than our Binney Street joint ventures, one west side and west side too in west La sold for $700 million or over $1, a square foot and a 6% cap rate to a user but the economics are influenced by a lease buyout from the existing.

Owen D. Thomas: Interestingly office sales went from 12% of total real estate transaction volume in the third quarter to over 27% last quarter.

The U S lenders continue to reduce exposure to office real estate, making secured financing extremely difficult to our range. There is more distressed asset restructuring activity more capitulation on pricing by owners and more confidence by buyers in their forecast cost of capital.

Anchor tenant.

Now turning to <unk> priorities for 2024, our overriding goal is to leverage our competitive advantages to preserve and build <unk> <unk> per share over time.

Today, the key advantages for DXP or our commitment to the office asset class and our clients as many competitors disinvest in this sector are strong balance sheet with access to capital and the unsecured debt and private equity markets and one of the highest quality portfolios of premier workplaces in the U S.

Owen D. Thomas: The Feds announcement late last year, the interest rate hikes are likely over and cuts could start to occur in 2024 is very favorable for real estate capital market conditions.

Owen D. Thomas: There were few comparable premier workplace transactions completed last quarter other than our Binney Street joint ventures, one Westside and west side too in west La sold for $700 million or over $1, a square foot and a 6% cap rate to a user but the economics are influenced by a lease buyout from the existing.

Hold over several decades of intentional acquisitions and development.

Our primary focus for 2024 will be leasing preserving and building over time, our occupancy and addressing near and in some cases medium term lease explorations with our portfolio, 88% occupied leasing vacant space is our least capital intensive way to build back <unk>, Doug will focus his comp.

Owen D. Thomas: Anchor tenant.

Now turning to <unk> priorities for 2024, our overriding goal is to leverage our competitive advantages to preserve and build <unk> <unk> per share over time.

Rents on leasing markets and our expectations for leasing this year.

Owen D. Thomas: Today, the key advantages for DXP or our commitment to the office asset class and our clients as many competitors disinvest in this sector are strong balance sheet with access to capital and the unsecured debt and private equity markets and one of the highest quality portfolios of premier workplaces in the U S. SME.

Our second focus for 2024 as new investment activity. Many office owners are facing existential risks given slow leasing and limited secured financing and many institutional owners want to diversify away from the office asset class.

We said last quarter, we intended to shift to offense on capital deployment and this has started given the three new investments I described there are and will be significant additional investment opportunities available from both lenders and owners of property.

Owen D. Thomas: Hold over several decades of intentional acquisitions and development.

Owen D. Thomas: Our primary focus for 2024 will be leasing preserving and building over time, our occupancy and addressing near and in some cases medium term lease explorations with our portfolio, 88% occupied leasing vacant space with our least capital intensive way to build back <unk>, Doug will focus his car.

Our focus will remain in our core markets on Premier workplaces life science assets in residential development during.

During the last market downturn caused by the global financial crisis, DXP was able to acquire premier workplaces, such as the GM building 200, Clarendon Street 100, Federal Street, and 510 Madison all at attractive prices at the time.

Owen D. Thomas: <unk> on leasing markets and our expectations for leasing this year.

Owen D. Thomas: Our second focus for 2024 as new investment activity. Many office owners are facing existential risks given slow leasing and limited secured financing and many institutional owners want to diversify away from the office asset class.

A third area of focus for us this year will be new development, we have two possibly three residential development opportunities under control that are being entitled and designed and we intend to raise joint venture equity capital for these projects in the second half of the year.

Owen D. Thomas: We said last quarter, we intended to shift to offense on capital deployment and this has started given the three new investments I described there are and will be significant additional investment opportunities available from both lenders and owners of property.

We also continue to have dialogue with anchor clients for sites under control in Manhattan, though.

The discussions are in early phases, and the outcomes are much less certain.

Significant pre leasing higher expected development yields and joint venture equity would be required to launch any new premier workplace developments.

Owen D. Thomas: Our focus will remain in our core markets on Premier workplaces life science assets in residential development during.

We also have several specific sites and buildings that we are trying to re entitle and advance for near term viable use based on market conditions.

During the last market downturn caused by the global financial crisis, DXP was able to acquire premier workplaces, such as the GM building 200, Clarendon Street 100, Federal Street, and 510 Madison all at attractive prices at the time.

DXP continues to execute a significant development pipeline with 10 office lab retail and residential projects underway. These projects aggregate approximately $2 7 million square feet and $2 $4 billion of DXP investment was $750 million remaining to be funded after closing the $2 90 Binney.

Owen D. Thomas: The third area of focus for US this year will be new development, we have two possibly three residential development opportunities under control that are being entitled and designed and we intend to raise joint venture equity capital for these projects in the second half of the year.

Street joint venture.

And are projected to generate attractive yields in the aggregate upon delivery.

Owen D. Thomas: We also continue to have dialogue with anchor clients for sites under control in Manhattan, though the discussions are in early phases and the outcomes are much less certain.

We will be opportunistic with dispositions in 2024 market conditions are generally unfavorable for selling assets at attractive prices, but we are interested in raising capital through asset sales a favorable opportunities present themselves.

Owen D. Thomas: Significant pre leasing higher expected development yields and joint venture equity would be required to launch any new premier workplace developments.

Owen D. Thomas: We also have several specific sites and buildings that we are trying to re entitle and advance for near term viable use based on market conditions.

To summarize in the face of strong negative market sentiment DXP executed well in 2023 leasing over 4 million square feet of space raising over $4 billion of capital and launching two large scale fully pre leased life science development.

Owen D. Thomas: DXP continues to execute a significant development pipeline with 10 office lab retail and residential projects underway. These projects.

We displayed resilience with stable occupancy and a stable dividend and our <unk> per share is higher today than it was before the pandemic started in 2020.

Owen D. Thomas: Aggregate, approximately $2 7 million square feet and $2 $4 billion of DXP investment was $750 million remaining to be funded after closing the 290 Binney Street joint venture.

So we start the year with continued challenges in the leasing market DXP is well positioned to gain market share in both assets and clients. During this time of market dislocation.

Owen D. Thomas: And are projected to generate attractive yields in the aggregate upon delivery.

Owen D. Thomas: We will be opportunistic with dispositions in 2024 market conditions are generally unfavorable for selling assets at attractive prices, but we are interested in raising capital through asset sales a favorable opportunities present themselves.

As of last closing remarks today represents of the XP milestone.

This will be Bob <unk> last earnings call as he is retiring from DXP next month after more than 25 years of service.

Owen D. Thomas: To summarize in the face of strong negative market sentiment DXP executed well in 2023 leasing over 4 million square feet of space raising over $4 billion of capital and launching two large scale fully pre leased life science developments we.

Our San Francisco region grew significantly under Bob's capable leadership. Thank.

Thank you very much Bob you will be missed by all of us at DXP.

Over to Doug Thanks Owen.

Good morning, everybody after a moment of silence to Bob I'm going to start.

Owen D. Thomas: We displayed resilience with stable occupancy and a stable dividend and our <unk> per share is higher today than it was before the pandemic started in 2020.

In early 2023, we established our baseline leasing expectations for our portfolio of about 3 million square feet and slight occupancy as <unk> commented. We ended the year with $4 2 million square feet and the fourth quarter included our 467000 square foot early renewal with snap at Santa Monica business Park.

So we start the year with continued challenges in the leasing market DXP is well positioned to gain market share in both assets and clients. During this time of market dislocation.

We executed about 500000 square feet more than we expected in 2023 and it was primarily pulling forward. Some 2024 transactions. The snap lease was part of our baseline expectations and interestingly. It was only one or two leases in excess of 130000 square feet that we executed in the portfolio during the year.

As of last closing remarks today represents of DXP milestone.

Owen D. Thomas: This will be Bob <unk> last earnings call as he is retiring from DXP next month after more than 25 years of service.

Owen D. Thomas: Our San Francisco region grew significantly under Bob's capable leadership. Thank.

Speaker Change: Thank you very much Bob you will be missed by all of us at DXP.

On 12, 31 'twenty two so.

Speaker Change: Over to Doug Thanks, Alan.

Just over a year ago, our in service occupancy was 88, 6% and we finished the year.

Douglas T. Linde: Good morning, everybody after a moment.

Douglas T. Linde: The silence to Bob I'm going to start.

In early 2023, we established a baseline leasing expectations for our portfolio of about 3 million square feet and slight occupancy as I commented, we ended the year with $4 2 million square feet.

<unk> hundred $30 23 at 88, four essentially flat.

Our in service portfolio was 49 million square feet, So 20 basis points amounts to 98000 square feet.

Douglas T. Linde: The fourth quarter included our 467000 square foot early renewal with snap at Santa Monica Business Park.

Sort of a rounding error.

Maintaining portfolio occupancy in the current environment is an accomplishment in its own right.

Douglas T. Linde: We executed about 500000 square feet more than we expected in 2023 and it was primarily pulling forward. Some 2024 transactions. The snap lease was part of our baseline expectations and interestingly. It was only one or two leases in excess of 130000 square feet that we executed in the portfolio during the year.

Our large lease expirations in 2024 or 200000 square feet at 680 Folsom.

230000 square feet at seven times square, where we own 55% and.

230000 square feet at Carnegie Center, and they all occur in the first half of the year.

A few comments on we work.

Douglas T. Linde: On 12, 31 'twenty two so.

We're actively engaged in lease modification discussions at our four units dock 72 in Brooklyn, and our three sites in San Francisco.

Douglas T. Linde: Over just over a year ago, our in service occupancy was 88, 6% and we finished the year 12.

Our occupancy expectations assume we reach agreements that result in a smaller overall footprint and a reduction to the $33 million of rent. They are currently paying.

Douglas T. Linde: <unk> hundred $30 23 at 88, four essentially flat.

Douglas T. Linde: Our in service portfolio was 49 million square feet, So 20 basis points to 98000 square feet.

To state the obvious that we work our emergence from bankruptcy as an operating business that is positioned for success, Mike will discuss the impacts and his same store property performance for 2024.

Speaker Change: Sort of a rounding error.

Speaker Change: Maintaining portfolio occupancy in the current environment is an accomplishment in its own right.

Our large lease expirations in 2024 or 200000 square feet at 680 Folsom.

And 23, the U S orphan markets experienced negative leasing absorption this.

Speaker Change: 230000 square feet at seven times square, where we own 55%.

This included the BSP coastal cities as well as the major sunbelt in the Midwest markets basically everywhere.

Speaker Change: And 230000 square feet at Carnegie Center, and they all occur in the first half of the year.

How are we thinking about the broad market for 'twenty four.

Speaker Change: A few comments on we work with.

If you look at the most recent labor statistics, while the U S added 216000 jobs in December only 5% were categorized as professional and business services AK true office using jobs.

Speaker Change: We're actively engaged in lease modification discussions at our four units dock 72 in Brooklyn, and our three sites in San Francisco.

Speaker Change: Our occupancy expectations assume we reach agreements that result in a smaller overall footprint and a reduction to the $33 million of rent. They are currently paying.

A job reductions related to the slowdown in the business economy has slowed but we continue to see employee layoff announcements across a wide variety of industries, particularly technology.

Speaker Change: State the obvious that we work our emergence from bankruptcy as an operating business that is positioned for success, Mike will discuss the impacts and his same store property performance for 2024.

The U S economy may not enter a technical recession, but no one should assume that the soft lending is going to stimulate a pickup in office using employment.

And 23, the U S office markets experienced negative leasing absorption this.

Operating in this macro environment, it's hard to envision any dramatic pickup in link market leasing absorption in 'twenty four.

Speaker Change: This included the DXP coastal cities as well as the major sunbelt in Midwest markets basically everywhere.

We think overall earnings growth for our clients and potential clients will improve and are optimistic it will lead to employment and space additions just not right away.

Speaker Change: How are we thinking about the broad markets for 'twenty four.

Speaker Change: If you look at the most recent labor statistics, while the U S added 216000 jobs in December only 5% were categorized as professional and business services AK true office using jobs.

However.

We're not counting on a market recovery to maintain dxp's occupancy.

Our leasing construction and property management teams will lean in on our operating prowess to gain new clients and market share as clients choose premier properties that are in sound financial condition or their work places. This is how we release known explorations and cover vacant space.

Speaker Change: A job reductions related to the slowdown in the business economy has slowed but we continue to see employee layoff announcements across a wide variety of industries, particularly technology.

The bifurcation of client demand between the east coast and the West Coast continues to be very wide San Francisco West L. A and Seattle are dependent on technology employers traditional technology demand growth continues to be weak and more times than not renewing technology clients are reducing their lease premises snap is a case.

Speaker Change: The U S economy may not enter a technical recession, but no one should assume that the soft landing is going to stimulate a pickup in office using employment.

Speaker Change: Operating in this macro environment, it's hard to envision any dramatic pickup in link market leasing absorption in 2004.

Speaker Change: We think overall earnings growth for our clients and potential clients will improve and are optimistic it will lead to employment and space additions just not right away.

We were successful in executing a forward starting 10 year lease extension commencing in 2006 for 467000 square feet. However, the transaction does include an early termination of a 140000 square feet. At 12, 31, 24, we cant require clients to lease more space, but we can.

Speaker Change: However.

Speaker Change: We're not counting on a market recovery to maintain dxp's occupancy.

Speaker Change: Our leasing construction and property management teams will lean in on our operating prowess to gain new clients and market share as clients chose premier properties that are in sound financial condition or their work places. This is how we will lease known explorations and cover vacant space.

Meet their work place to needs.

The leasing excitement on the West coast in 'twenty three was all about growth from AI organizations in the city of San Francisco, where we saw over 1 million square feet of positive absorption from the industry in the San Francisco CBD in 'twenty three.

Speaker Change: The bifurcation of client demand between the east coast and the West Coast continues to be very wide San Francisco West L. A and Seattle are dependent on technology employers traditional technology demand growth continues to be weak and more times than not renewing technology clients are reducing their lease premises snap is a case.

<unk> been billions of dollars of recent investment in this growing ecosystem and there are additional clients in the market, but lets acknowledge that these other AI organizations are predominantly seed or early round funded entities and not at the same scale as an open AI or anthropic Theyre leasing is focused on small footprint built opportunities that are available.

Speaker Change: We were successful in executing a forward starting 10 year lease extension commencing in 2006 for 467000 square feet. However, the transaction does include an early termination of 140000 square feet. At 12, 31, 24, we cant require clients to lease more space, but we can.

But at significantly discounted terms relative to rents being achieved in premier.

However, all demand is good demand in San Francisco, if it translates into absorptions.

The Seattle CBD continues to have very little active demand other than lease exploration driven exploration our vacancy in Seattle increased by about 100000 square feet in the second half of 'twenty three due to <unk> termination as well as the give back of a floor from a technology company as part of a five floor lease extension and Madison.

Speaker Change: Can meet their work place to needs.

The leasing excitement on the West coast in 'twenty three was all about growth from AI organizations in the city of San Francisco, where we saw over 1 million square feet of positive absorption from the industry in the San Francisco CBD in 'twenty three.

Speaker Change: <unk> been billions of dollars of recent investment in this growing ecosystem and there are additional clients in the market, but lets acknowledge that these other AI organizations are predominantly seed or early round funded entities and not at the same scale as an open AI or anthropic Theyre leasing is focused on small footprint built opportunities that are available.

Center again technology company, staying with us in our portfolio, but reducing some space.

The entertainment industry Union contract settlements are clearly a positive for west L. A but there continues to be pressure from streaming profitability industry consolidation and job reduction in the gaming and media space that is impacting overall demand growth.

But at significantly discounted terms relative to rents being achieved in premier.

The concentration of the strongest user demand, which will be the sorts of occupancy pickup is still broadly speaking asset managers, including private equity venture hedge funds and specialized fund managers and their financial and legal advisers. These.

Speaker Change: However, all demand is good demand in San Francisco, if it translates into absorptions.

Speaker Change: The Seattle CBD continues to have very little active demand other than lease exploration driven exploration our vacancy in Seattle increased by about 100000 square feet in the second half of 'twenty three due to <unk> termination as well as the give back of a floor from a technology company as part of a five floor at lease extension and Madison.

These organizations are the heart and soul of our New York City activity and our important sector of the Boston and San Francisco CBD demand as well in some instances. These clients are growing their teams and capital under management, but in many cases.

In all cases, they want to occupy premier workplaces.

Speaker Change: Center again technology company, staying with us in our portfolio, but reducing some space.

To illustrate the point during the quarter, we completed a 25000 square feet expansion for an investment bank in Manhattan, a 17000 square foot lease with a foreign bank, that's relocating to one of our other properties in Manhattan, a 10000 square foot lease with a venture capital firm that is relocating to Embarcadero Center, a 30000 square foot renewal with a private equity firm.

Speaker Change: The entertainment industry Ian contract settlements are clearly a positive for west L. A but there continues to be pressure from streaming profitability industry consolidation and job reduction in the gaming and media space that is impacting overall demand growth.

Speaker Change: The concentration of the strongest user demand, which will be the source of occupancy pickup is still broadly speaking asset managers, including private equity venture hedge funds and specialized fund managers and their financial and legal advisors.

Embarcadero Center, a 74000 square foot renewal with a law firm at Embarcadero Center, and a 15000 square foot renewal with a long only manager in Boston. This is where the demand is going to come from.

Our strongest activity remains in our Midtown Manhattan portfolio, the back Bay of Boston, The urban core of Reston Town Center in Northern Virginia in our market of.

Speaker Change: These organizations are the heart and soul of our New York City activity and our important sector of the Boston and San Francisco CBD demand as well in some instances. These clients are growing their teams and capital under management, but in many cases.

Embarcadero Center assets in San Francisco this quarter, we executed leases.

Speaker Change: In all cases, they want to occupy premier workplaces.

About 74 transactions, we signed 37 lease renewals 37 leases with new tenants there are E contractions and nine expansions among our existing clients with a net reduction of about 100000 square feet across those 17 transactions.

Speaker Change: To illustrate the point during the quarter, we completed a 25000 square feet expansion for an investment bank in Manhattan, a 17000 square foot lease with a foreign bank, that's relocating to one of our other properties in Manhattan, a 10000 square foot lease with a venture capital firm, that's relocating to Embarcadero Center, a 30000 square foot renewal with a private equity firm.

If you exclude snap the number is actually a positive 40000 square feet.

The bulk of the transactions were on the West Coast and the majority of the expansions were in New York City.

Speaker Change: Embarcadero Center, a 74000 square foot renewal with a law firm at Embarcadero Center, and 15000 square foot renewal with a long only manager in Boston. This is where the demand is going to come from.

Total leasing volume this quarter was led by New York at 567000 square feet and 468000 law 198000 in San Francisco 153 in Boston and 140000 square feet in the Greater Washington D C area.

Speaker Change: Our strongest activity remains in our Midtown Manhattan portfolio, the back Bay of Boston, The urban core of Reston Town Center in Northern Virginia, and our marketers Embarcadero Center assets in San Francisco This quarter, we executed leases of about about 74 transactions, we signed 37 lease renewals.

Highlight two leases that were executed this quarter first the Pratt Institute entered into a long term lease for 63000 square feet at dock 72, a real accomplishment for the New York team and door Dash executed 115000 square foot lease, including 57000 square feet of expansion at 205th Avenue again.

Speaker Change: 37 leases with new tenants there are eight contractions and nine expansions among our existing clients with a net reduction of about 100000 square feet across those 17 transactions if.

In Manhattan.

The mark to market of the leases that commenced this quarter, meaning they hit our revenue was flat as reported in our supplemental.

Speaker Change: If you exclude snap the number is actually a positive 40000 square feet.

Speaker Change: The bulk of the transactions were on the West Coast and the majority of the expansions were in New York City.

The overall mark to market of the starting cash rents on leases executed this quarter relative to the previous in place cash rents was down one 8% the starting cash rents on leases. We signed this quarter on second generation space were up seven 5% in Boston flat in New York down 15% in DC and over.

Speaker Change: Total leasing volume this quarter was led by New York at 567000 square feet and 468190 8000 in San Francisco 153 in Boston and 140000 square feet in the Greater Washington D. C area I would highlight two leases that were executed this quarter first the Pratt Institute entered into a long term.

We're all on the West coast down, 3%, but the San Francisco CBD was still up 9%.

Speaker Change: Lease for 63000 square feet at Dock 72, a real accomplishment for the New York team and door Dash executed a 115000 square foot lease, including 57000 square feet of expansion at 205th Avenue again in Manhattan.

At the end of the quarter, we had signed leases that have yet to commence on our in service vacancy totaling approximately 750000 square feet with 625000 square feet anticipated to commence in 2004.

Our pipeline of active leases under negotiation sits at just under 1 million square feet today.

Speaker Change: The mark to market of the leases that commenced this quarter, meaning they hit our revenue was flat as reported in our supplemental.

We have only one transaction currently in negotiation over 70000 square feet.

Speaker Change: The overall mark to market of the starting cash rents on leases executed this quarter relative to the previous in place cash rents was down one 8% the starting cash rents on leases. We signed this quarter on second generation space were up seven 5% in Boston, Florida, New York down, 15% in DC and AUM.

Pairing this for last quarter, we were at $1 2 million square feet of active discussions at the same time included the 467000 square foot snap deal we see.

Seeing an uptick in the number of active deals, but the size is smaller.

For modeling purposes, our 2020 for leasing activity is anticipated to be about $3 5 million square feet.

Speaker Change: We're all on the West coast down, 3%, but the San Francisco CBD was still up 9%.

As of January one 2022, so going back two years, our total explorations for 24 totaled three 5 million square feet.

Speaker Change: At the end of the quarter, we had signed leases that have yet to commence on our in service vacancy totaling approximately 750000 square feet with 625000 square feet anticipated to commence in 2004.

On January one 2024.

Speaker Change: Our pipeline of active leases under negotiation sits at just under 1 million square feet today, we.

We have $2 7 million square feet of current expected explorations.

Speaker Change: We have only one transaction currently in negotiation over 70000 square feet comparing.

We renewed 25% of the remaining 2024 expirations or 675000 square feet. It means we hope we will have renewed about 43% of our expiring square footage, which is sort of in line with our historical averages.

Speaker Change: Comparing this to last quarter, we were at $1 2 million square feet of active discussions at the same time included the 467000 square foot snap deal we've seen an uptick in the number of active deals, but the size is smaller.

We have executed leases on 625000 square feet of vacant space commencing in 'twenty four so effectively we need about one 4 million square feet of leases that we have yet to execute on 2024 vacant space to have a rent commencement during the year to maintain.

Speaker Change: For modeling purposes, our 2020 for leasing activity is anticipated to be about $3 5 million square feet.

Speaker Change: As of January one 2022, so going back two years, our total explorations for 24 totaled three 5 million square feet.

Paying a flat occupancy that's what is built into the model and then to Mike same store.

Speaker Change: On January one 2024.

Speaker Change: We have $2 7 million square feet of current expected explorations.

As we look forward into the year 2024, we expect to have sticky occupancy defined as 20 basis points plus to a minus 120 basis point negative at the year and that also factors in some tenant defaults in addition to contractual explorations.

Speaker Change: If we renew 25% of the remaining 2024 expirations or 675000 square feet.

Speaker Change: It means we will have renewed about 43% of our expiring square footage, which is sort of in line with our historical averages.

During the year, we will have property additions and subtractions to the portfolio. These are not included in the current portfolio occupancy guidance as an example in the fourth quarter of 'twenty for the two Waltham life Science developments will join the in service portfolio. There are 32% leased and include 300000 square feet of vacant space that will hit the reported vacancy.

Speaker Change: We have executed leases on 625000 square feet of vacant space commencing in 'twenty four so effectively we need about one 4 million square feet of leases that we have yet to execute on 2024 vacant space to have a rent commencement during the year to maintain.

Not part of our projections were just looking at our input service portfolio as of today.

And as long as we're on the topic of life Science leasing new life science activity across our two markets as well as our entire portfolio continues to be light during the quarter. We actually had 137000 square foot known exploration of a life science lease in our Waltham portfolio, which impacted our sequential occupancy and there were no new leases signed.

Speaker Change: In a flat occupancy that's what is built into the model and then to Mike same store.

Speaker Change: As we look forward into the year 2024, we expect to have sticky occupancy defined as 20 basis points plus to minus 120 basis point negative at the year and that also factors in some tenant defaults in addition to contractual explorations.

And in South San Francisco at 651, Gateway and Walter and we are seeing some tour activity and have made some proposals, but potential clients don't feel a sense of urgency to make a quick decision.

Speaker Change: During the year, we will have property additions and subtractions to the portfolio. These are not included in the current portfolio occupancy guidance as an example in the fourth quarter of 'twenty for the two Walter and life Science developments will join the in service portfolio. There are 32% leased and include 300000 square feet of vacant space that will hit the reported vacancy.

Before Mike discusses our 2024 guidance I want to make one additional comment around the cost of potential new developments that Owen described we are seeing more competitive pricing and tenant improvement projects, we've not experienced deflation in material prices or labor, but it's true that there is less work and we believe that this has resulted in the <unk>.

Speaker Change: Not part of our projections, we're just looking at our input service portfolio as of today.

Speaker Change: And as long as we're on the topic of life Science leasing new life science activity across our two markets as well as our entire portfolio continues to be light during the quarter. We actually had a 137000 square foot known exploration of a life science lease in our Waltham portfolio, which impacted our sequential occupancy and there were no new leases signed.

Lower pricing from the various subcontractors, who want to maintain a certain size of business as we think about new base building construction costs. We're hopeful that escalation is no longer part of the conversation and at the same pressures will result in bids that allow us to consider moving forward. However.

There are lots of infrastructure projects as well as institutional construction that is filling a portion of the void from lower commercial construction in our markets.

Speaker Change: In South San Francisco at 651, Gateway and Walter and we are seeing some tour activity and have made some proposals, but potential clients don't feel a sense of urgency to make a quick decision.

Capital costs still Havent received it construction financing requires a significant capital charge for lenders and obviously result in a higher margin on top of the underlying sofa, everyone has the view on the timing and depth of fed rate cuts, but if silver goes to 4% construction financing. If you can arrange it still going to be very expensive and a significant drag.

Speaker Change: Before Mike discusses our 2024 guidance I want to make one additional comment around the cost of potential new developments that Owen described we are seeing more competitive pricing and tenant improvement projects, we've not experienced deflation in material prices or labor, but it's true that there is less work and we believe that this has resulted in low.

On new construction starts.

Current market rents and concessions associated with available existing space don't support office, New office development to a potential client that request or proposal for new construction understands it will involve appropriate lease economics to justify the new capital requirements. So Mike.

Michael E. LaBelle: Sure pricing from the various subcontractors, who want to maintain a certain size of business.

Michael E. LaBelle: As we think about new base building construction costs, we're hopeful that escalation is no longer part of the conversation and at the same pressures will result in bids that allow us to consider moving forward. However.

Michael E. LaBelle: There are lots of infrastructure projects as well as institutional construction there is filling a portion of the void from lower commercial construction in our markets.

Hey, it's time to talk about the quarter and guidance for 'twenty four.

Great. Thanks, Doug Good morning, everybody.

So this morning I plan to cover the details of the fourth quarter and our full year 2023 performance, but I'm going to spend most of our time, describing our 2024 initial earnings guidance that was included in our press release with additional details in our supplemental financial package.

Capital costs still Havent received construction financing requires a significant capital charge for lenders and obviously result in a higher margin on top of the underlying as ofer, everyone has the view on the timing and depth of fed rate cuts with if silver goes to 4% construction financing. If you can arrange it is still going to be very expensive and a significant drag.

So for 2023, we reported full year <unk> of $7 28 per share and that was <unk> <unk> per share of the midpoint of our guidance range provided last quarter and <unk> <unk> above street consensus.

Michael E. LaBelle: Our new construction starts.

Current market rents and concessions associated with available existing space don't support office, New office development. So a potential client that request or proposal for new construction understands it will involve appropriate lease economics to justify the new capital requirements.

Owen described the strong one 5 million square feet of leasing activity in the quarter and included in this is 270000 square feet within our unconsolidated joint venture portfolio, where we generate leasing commissions that exceeded our budget by <unk> <unk> per share.

Michael E. LaBelle: Okay.

Michael E. LaBelle: Time to talk about the quarter and guidance for 'twenty four.

We also outperformed our guidance for the quarter was <unk> <unk> per share of lower net interest expense.

Speaker Change: Great. Thanks, Doug Good morning, everybody.

Speaker Change: So this morning I plan to cover the details of the fourth quarter and our full year 2023 performance, but I'm going to spend most of our time, describing our 2024 initial earnings guidance that was included in our press release with additional details in our supplemental financial package.

There were two real reasons for that last quarter, we announced the closing of our $600 million five year floating rate mortgage on three of our Cambridge buildings when interest rates rallied in December we opportunistically hedge this financing to fix the rate at 6% for the term this reduced our interest rate by 160 basis point.

Speaker Change: So for 2023, we reported full year <unk> of $7 28 per share and that was <unk> <unk> per share of the midpoint of our guidance range provided last quarter and <unk> <unk> above street consensus.

Contributing to lower interest expense in the quarter.

Additionally, the closing of the sale of a 45% interest in 300 Binney Street raised $213 million of equity that transaction closed earlier than we expected. So the interest earned on the cash represents an increase to our net interest guidance.

Speaker Change: Owen described the strong one 5 million square feet of leasing activity in the quarter and included in this is 270000 square feet within our unconsolidated joint venture portfolio, where we generate leasing commissions that exceeded our budget by <unk> <unk> per share.

These two items were offset by about <unk> <unk> per share of one time unbudgeable transaction expenses related to the forming of the joint venture for $2 90, and 300 Binney Street as well as slightly higher G&A costs in the quarter.

Speaker Change: We also outperformed our guidance for the quarter was <unk> <unk> per share of lower net interest expense.

Speaker Change: There were two real reasons for that last quarter, we announced the closing of our $600 million five year floating rate mortgage on three of our Cambridge buildings when interest rates rallied in December we opportunistically hedge this financing to fix the rate at 6% for the term.

Our portfolio NOI performed in line with our expectations, though we did experienced a shift from the same property income bucket to termination income.

We booked $10 million of termination income in the quarter, which was $7 million higher than our assumption primarily from rework terminating its lease for two floors in Madison Center in Seattle.

Speaker Change: This reduced our interest rate by 160 basis points contributing to lower interest expense in the quarter.

Speaker Change: Additionally, the closing of the sale of a 45% interest in 300 Binney Street raised $213 million of equity that transaction closed earlier than we expected. So the interest earned on the cash represents an increase to our net interest guidance.

Our practice is to exclude termination income from our same property results. So the impact caused our same property growth to be slightly negative for the quarter.

You exclude the impact of the termination income our same property performance actually would've been roughly flat.

Speaker Change: These two items were offset by about <unk> <unk> per share of onetime unbudgeable transaction expenses related to the forming of the joint venture for $2 90, and 300 Binney Street as well as slightly higher G&A costs in the quarter.

So with that I'm going to turn to our 2020 for guidance.

On a high level, our 2024 guidance can be summarized as follows.

We project growth from the delivery of developments and the acquisitions of our partner share in Santa Monica Business Park, and one New York Avenue.

Speaker Change: Our portfolio NOI performed in line with our expectations, though we did experience a shift from the same property income bucket to termination income.

A slight decrease in our same property portfolio NOI compared to 2023 higher net interest expense due to the persistency of the current interest rate environment, and lower development and management services fee income.

Speaker Change: We booked $10 million of termination income in the quarter, which was $7 million higher than our assumption primarily from rework terminating its lease for two floors in Madison Center in Seattle.

I'm going to start with the impact of the acquisitions of our partner's interest in Santa Monica Business Park in 91, New York Avenue that Owen described.

Our practice is to exclude termination income from our same property results. So the impact caused our same property growth to be slightly negative for the quarter.

360 Park is still in development. So that transaction has limited impact on 2024 <unk>.

Speaker Change: You exclude the impact of the termination income our same property performance actually would've been roughly flat.

There are a lot of moving pieces with these transactions from an income and balance sheet perspective, So bear with me for a moment.

Speaker Change: So with that I'm going to turn to our 2020 for guidance.

Including the impact of the incremental debt acquired as well as the loss of fee income earned from our former partners. We project. These acquisitions are highly accretive, adding approximately $25 million or <unk> 14 per share to our 2024 <unk>.

Speaker Change: A high level, our 2024 guidance can be summarized as follows we project growth from the delivery of developments and the acquisitions of our partner's share in Santa Monica Business Park in 91, New York Avenue.

Speaker Change: Slight decrease in our same property portfolio NOI compared to 2023 higher net interest expense due to the persistency of the current interest rate environment, and lower development and management services fee income.

Noncash components represent about 50% of the incremental <unk> pickup and are derived from straight lining the leases and fair valuing the debt and the ground lease at Santa Monica business Park.

Speaker Change: I'm going to start with the impact of the acquisitions of our partner's interest in Santa Monica Business Park in 91, New York Avenue that Owen described three.

If we break that down into the categories for our guidance assumptions the incremental property NOI is approximately 22 per share and thats offset by the additional interest expense of five cents per share and the loss of fee income of <unk> <unk> per share.

Speaker Change: <unk> hundred 60 Park is still in development. So that transaction has limited impact on 2024 <unk>.

Speaker Change: There are a lot of moving pieces with these transactions from an income and balance sheet perspective, So bear with me for a moment.

We will now be consolidating the results from these properties. So starting in 2024, you will see the increase in our consolidated NOI and interest expense and a decrease in <unk> from unconsolidated joint ventures and fee income.

Speaker Change: Including the impact of the incremental debt acquired as well as the loss of fee income earned from our former partners. We project. These acquisitions are highly accretive, adding approximately $25 million or <unk> 14 per share to our 2024 <unk>.

Also impacting 2024 is the disposition of Metropolitan square in Western Washington D. C that we transacted last year.

Non cash components represent about 50% of the incremental <unk> pickup and are derived from straight lining the leases and fair valuing the debt and the ground lease at Santa Monica business Park.

Inclusive of interest expense the transaction is neutral to our 2024 episodes, but.

But we do expect a reduction in property NOI of <unk> <unk> per share that is offset by a comparable <unk> per share reduction in interest expense.

Speaker Change: If we break that down into the categories for our guidance assumptions the incremental property NOI is approximately <unk> 22 per share and thats offset by the additional interest expense of $5 per share and the loss of fee income of <unk> <unk> per share.

Turning to development activity, our development activity includes $550 million of investments that delivered in 2023 and will contribute incremental growth for our full year. In 2024. These include 20, 110, 140, Kendrick Street and 751 gateway that are in aggregate, 97% leased.

Speaker Change: We will now be consolidating the results from these properties. So starting in 2024, you will see the increase in our consolidated NOI and interest expense and a decrease in <unk> from unconsolidated joint ventures and fee income.

We have an additional $665 million of developments that are projected to deliver.

In the near term that we expect will commence revenue in 2024, but be much more meaningful to our growth in 2025 as they complete their lease up and.

Speaker Change: Also impacting 2024 is the disposition of Metropolitan square in Western Washington D. C that we transacted last year.

In aggregate, we expect our developments to contribute an incremental $35 million to $42 million in 2024.

Speaker Change: Inclusive of interest expense the transaction is neutral to our 2020 for <unk>, but.

Speaker Change: But we do expect a reduction in property NOI of <unk> <unk> per share that is offset by a comparable <unk> per share reduction in interest expense.

20% to 20 <unk> per share.

Turning to the same property portfolio.

Doug spent time, describing our occupancy outlook and the impact of the uncertain economic environment that our clients are dealing with.

Speaker Change: Turning to development activity, our development activity includes $550 million of investments that delivered in 2023 and will contribute incremental growth for full year. In 2024. These include 20, 110, 140, Kendrick Street and 751 gateway that are in aggregate, 97% leased.

Most continue to be very cautious around new investments, including space and our leasing projections reflect this conservatism.

We still expect to have a productive leasing year and as Doug described we have a large backlog of signed leases and leases in negotiation that will go into occupancy in 2024.

Speaker Change: We have an additional $665 million of developments that are projected to deliver in.

We expect the occupancy range for our in service portfolio of 87, 2% to 88, 6%.

Speaker Change: In the near term that we expect will commence revenue in 2024, but be much more meaningful to our growth in 2025 as they complete their lease up and.

Overall, our assumption for 2020 for same property NOI growth from 2023, this negative 1% to negative 3%.

Speaker Change: In aggregate, we expect our developments to contribute an incremental $35 million to $42 million in 2024.

As Doug mentioned, we're in discussions with we work on modifications for the remaining four leases our guidance assumes our guidance includes assumptions for these modifications that comprised 45 basis points of the decrease in our projected same property NOI performance.

Speaker Change: 20% to 24 per share.

Speaker Change: Turning to the same property portfolio.

Speaker Change: Doug spent time, describing our occupancy outlook and the impact of the uncertain economic environment that our clients are dealing with.

As you all should expect our interest expense will be higher in 2024 with the continued high interest rate environment.

Speaker Change: Most continue to be very cautious around new investments, including space and our leasing projections reflect this conservatism.

We expect floating rates will start to drop in the back half of the year and our modeling 75 basis points of fed cuts, which is more conservative than the current forward Super curve.

Speaker Change: We still expect to have a productive leasing year and as Doug described we have a large backlog of signed leases and leases in negotiation that will go into occupancy in 2024.

Currently floating rate debt is only 5% of our total debt is comprised of $730 million of mortgages and.

Speaker Change: We expect that occupancy range for our in service portfolio of 87, 2% to 88, 6%.

And we have a $1 $2 billion term loan that is currently fixed and the interest rates swap expires in may of 2024.

Speaker Change: Overall, our assumption for 2020 for same property NOI growth from 2023, this negative 1% to negative 3%.

Our liquidity is very strong we have current cash balances of $1 5 billion.

Speaker Change: As Doug mentioned, we're in discussions with we work on modifications for the remaining four leases our guidance assumes our guidance includes assumptions for these modifications that comprised 45 basis points of the decrease in our projected same property NOI performance.

And our entire $1 $8 billion line of credit is available we will be using approximately $700 million of cash to redeem our maturing three 8% $700 million unsecured bond that expires tomorrow.

Speaker Change: As you all should expect our interest expense will be higher in 2024 with the continued high interest rate environment.

Other than that we have no meaningful 2024 debt maturities without extension provisions. So we're not projecting significant changes in our debt profile.

Speaker Change: We expect floating rates will start to drop in the back half of the year and our modeling 75 basis points of fed cuts, which is more conservative than the current forward Super curve.

Our only external funding need is approximately $600 million of development spend in 2024 that will be funded with available cash.

Speaker Change: Currently floating rate debt is only 5% of our total debt is comprised of $730 million of mortgages and.

The majority of the increase in interest expenses coming from our 2023 refinancing activity, resulting in a roll up to market interest rates and the consolidation of the mortgage stress for Santa Monica business Park in 91, New York Avenue.

Speaker Change: And we have a $1 $2 billion term loan that is currently fixed and the interest rates swap expires in may of 2024.

Speaker Change: Our liquidity is very strong with current cash balances of $1 5 billion.

And lastly, as I mentioned last quarter, our average cash balance will be less in 2024 than it was in 2023, and we expect approximately $30 million of lower interest income.

Speaker Change: And our entire $1 $8 billion line of credit is available we will be using approximately $700 million of cash to redeem our maturing three 8% $700 million unsecured bond that expires tomorrow.

So overall, we're projecting net interest expense of $570 million to $590 million in 2024.

Speaker Change: Other than that we have no meaningful 2024 debt maturities without extension provisions. So we're not projecting significant changes in our debt profile.

We expect consolidated net interest expense to be higher by $72 million at the midpoint inclusive of the drop in interest income I mentioned with.

With the consolidation of the SMB P and I know one New York Avenue, the interest expense in our unconsolidated joint venture portfolio is expected to be $18 million lower.

Speaker Change: Our only external funding need is approximately $600 million of development spend in 2024 that will be funded with available cash.

Speaker Change: The majority of the increase in interest expenses coming from our 2023 refinancing activity, resulting in a roll up to market interest rates and the consolidation of the mortgage stress for Santa Monica business Park in 91, New York Avenue.

So this results in a projected increase from year to year and total interest expense, including our joint ventures of $54 million or <unk> 31 per share at the midpoint of our guidance range over 2023.

And lastly, as I mentioned last quarter, our average cash balance will be less in 2024 than it was in 2023, and we expect approximately $30 million of lower interest income.

Additionally, the consolidation of Santa Monica business Park requires us to fair value the above market ground lease we projected $10 million positive noncash impact from this in 2024.

Speaker Change: So overall, we're projecting net interest expense of $570 to $590 million in 2024.

The last item I would like to cover is our fee income projections.

We have or will be delivering several joint venture development projects, including our gateway Joint ventures, 360, part and the Sky Mark residential development with the delivery of these projects or development fees are expected to be lower by about $5 million in 2024.

Speaker Change: We expect consolidated net interest expense to be higher by $72 million at the midpoint inclusive of the drop in interest income I mentioned with.

Speaker Change: With the consolidation of SMB P and 91, New York Avenue, the interest expense in our unconsolidated joint venture portfolio is expected to be $18 million lower.

Also we are no longer receiving fees of about $5 million from Santa Monica and 901, New York Avenue now that they're wholly owned so our guidance for fee income is lower and is now 25% to $28 million in 2024.

Speaker Change: So this results in a projected increase from year to year and total interest expense, including our joint ventures of $54 million or <unk> 31 per share at the midpoint of our guidance range over 2023.

So if you aggregate all of these assumptions we are providing an initial 2024 <unk> guidance range of $7 to $7 20 per share at the midpoint of our guidance, that's 18 <unk> per share lower than our 2023 reported.

Speaker Change: Okay.

Speaker Change: Additionally, the consolidation of Santa Monica business Park requires us to fair value the above market ground lease, we projected $10 million positive noncash impact to <unk> from this in 2024.

Speaker Change: The last item I would like to cover is our fee income projections.

The difference is comprised of increases of 19 cents of incremental NOI from acquisitions and dispositions.

We have or will be delivering several joint venture development projects, including our gateway Joint ventures, 360, part and the Sky Mark residential development.

22, <unk> from our developments <unk> of lower G&A expense offset by 26 cents of higher interest and fair value ground lease amortization.

Speaker Change: With the delivery of these projects or development fees are expected to be lower by about $5 million in 2024.

One sense of lower contribution from same property NOI <unk> <unk> of lower fee income and <unk> <unk> of lower termination income.

Speaker Change: Also we are no longer receiving fees of about $5 million from Santa Monica and 901, New York Avenue now that they're wholly owned so our guidance for fee income is lower and is now 25% to $28 million in 2024.

At the midpoint, our 2020 for <unk> results in a modest two 5% decline from 2023.

Speaker Change: So if you aggregate all of these assumptions we are providing an initial 2024 <unk> guidance range of $7 to $7 20 per share at the midpoint of our guidance Thats 18 per share lower than our 2023 reported <unk>.

So despite the economic headwinds, we continue to gain market share with our leasing and operating prowess and premier workplace portfolio, demonstrating relative stability in times of negative absorption. We're optimistic that the interest rate environment will settle at a lower level, providing more confidence in the economy.

Speaker Change: The difference is comprised of increases of 19 cents of incremental NOI from acquisitions and dispositions.

We're also successfully executing on accretive new investments and continue to focus on additional opportunities to grow our earnings and create shareholder value.

Speaker Change: <unk> from our developments <unk> of lower G&A expense offset by 26 cents up higher interest and fair value ground lease amortization 21 cents of lower contribution from same property NOI <unk> <unk> of lower fee income and <unk> <unk> of lower termination income.

That completes our formal remarks.

Operator can you open the line for questions.

Thank you Sir.

As a reminder to ask a question you will need to press star one on your telephone.

To withdraw your question. Please press star one again.

Speaker Change: At the midpoint, our 2024 <unk> result in a modest two 5% decline from 2023.

We ask that you please limit yourself to one question.

And if time permits we'll be more than happy to take any follow up questions at that time.

Speaker Change: So despite the economic headwinds, we continue to gain market share with our leasing and operating prowess and premier workplace portfolio, demonstrating relative stability in times of negative absorption. We're optimistic that the interest rate environment will settle at a lower level, providing more confidence in the economy.

Please standby, while we compile the Q&A roster.

And I show our first question.

Comes from the line of Steve <unk> from Evercore ISI. Please go ahead.

Speaker Change: We're also successfully executing on accretive new investments and continue to focus on additional opportunities to grow our earnings and create shareholder value.

Thanks, Good morning, I appreciate all the detail I guess, Doug I wanted to maybe circle back on the $1 four that you talked about I think that's kind of the.

Speaker Change: That completes our formal remarks.

Speaker Change: Operator can you open the line for questions.

Effectively the new leasing number that you need to hit this year and I think you said you've got some things in the pipeline, but just how do we think about that number is unfolding over the course of the year.

Speaker Change: Thank you Sir.

Speaker Change: As a reminder to ask a question you will need to press star one on your telephone.

Speaker Change: To withdraw your question. Please press star one again.

And I guess at what point of the year do those leases need to be signed in order to take effect to hit the occupancy target that youre looking for this year.

Speaker Change: We ask that you please limit yourself to one question.

Speaker Change: And if time permits we'll be more than happy to take any follow up questions at that time.

So unfortunately, the technical question that keeps everybody up at night here at DXP, which is what will the the actual condition of the space that we're leasing and what will our requirements be to either modify or change the space relative to simply.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: And I show our first question.

Speaker Change: Comes from the line of Steve <unk> from Evercore ISI. Please go ahead.

Steve: Thanks. Good morning, appreciate all the detail I guess, Doug I wanted to maybe circle back on the $1 four that you talked about I think that's kind of.

The space over to the tenant and I wish I could give you a precise answer to that Steve.

Now of just over 1 million square feet of space that we are currently under negotiation with them.

Steve: Effectively the new leasing number that you need to hit this year and I think you said you've got some things in the pipeline, but just how do we think about that number is unfolding over the course of the year.

500000 of that is covering what I would refer to as pure vacancy.

<unk>.

Steve: And I guess at what point of the year do those leases need to be signed in order to take effect to hit the occupancy target that youre looking for this year.

I think there is a good probability that 50 plus percent of that will be quote unquote in place from a revenue perspective in 2024, but it's that's the really hard question for us to gauge, which is I am comfortable that we're going to get the leasing done and that when we are at.

So unfortunately, the technical question that keeps everybody up at night here at DXP, which is what will the actual condition of the space that we're leasing at what will our requirements be to either modify or change the space relative to simply.

Also showing our quote unquote.

Occupancy, including signed leases that it will it will illustrate that we have had a very successful year from a leasing perspective, it's really hard to know when that revenue is going to hit.

Speaker Change: Winning this space over to the tenant and I wish I could give you a precise answer to that Steve.

And so so that's the that's the variable that we can't control because it's really a question of how the lease comes to together and all of that is embroiled into Mike same store number. So that's why I think to be fair, we are being I think conservative, but they're conservative not trying to we're not sandbagging anything here because we just don't know.

Right now of just over 1 million square feet of space that we are currently under negotiation with.

Speaker Change: About 500000 of that is covering what I would refer to as pure vacancy.

Speaker Change: And.

Speaker Change: I think there is a good probability that 50 plus percent of that will be quote unquote in place from a revenue perspective in 2024, but it's that's the really hard question for us to gauge, which is I'm comfortable that we're going to get the leasing done and that when we are also.

Okay.

Thank you.

And I show. Our next question comes from the line of John Kim from BMO Capital markets. Please go ahead.

Thank you.

On your joint venture acquisitions, two of them were <unk>.

Centered around major lease extensions with that timing related to your partner's exit because we no longer wanted to fund future Capex.

Speaker Change: Showing our quote unquote.

Occupancy, including signed leases that it will it will illustrate that we have had a very successful year from a leasing perspective, it's really hard to know when that revenue is going to hit.

Or did the signing those leases really provide valuations for your partners to exit and what does this mean for your other assets that you come in with <unk> and your other selling Tucker.

And so so that's the that's the variable that we can't control because it's really a question of how the lease comes to together and all of that is embroiled into Mike same store number. So that's why I think to.

Yes, good morning, John Yes, as I said in my remarks, the lease extensions did spark the acquisitions that we made.

Speaker Change: To be fair, we are being I think conservative, but they're conservative not trying to we're outstanding backing anything here because we just don't know.

And it's for the reasons that you outlined.

So with each of these.

Speaker Change: Okay.

Extensions came a capital requirement for tenant work leasing commissions and in some cases building upgrades and the two partners.

Speaker Change: Thank you.

Speaker Change: And I sure.

Speaker Change: Our next question comes from the line of John Kim from BMO Capital markets. Please go ahead.

A shift in strategy.

Disinvest or reallocate away from office.

John P. Kim: Thank you.

John P. Kim: On your joint venture acquisitions, two of them were centered around major lease extensions with that timing related to your partner's exit because we no longer wanted to fund future capex or.

And that basically sparked the acquisitions and the other thing I would point out.

Other assets had future capital requirements as well so in the case of Santa Monica business Park.

John P. Kim: Signing those leases really provide valuations for your partners to exit and what does this mean for your other assets that you come in with <unk> and your other selling.

We have the snap renewal, but also we have a purchase option coming up in 2028.

<unk> to purchase the fee that will have a capital requirement.

Speaker Change: Yes, good morning, John Yes, as I said in my remarks, the lease extensions did spark the acquisitions that we made.

And those 360.

Park Avenue, South there was not a anchor lease renewal because that project is under redevelopment. It's in the middle of the redevelopment. So the partner basically sold out their position in the middle of funding that development. So it also had a future funding requirements. So so those are really the drivers.

Speaker Change: And it's for the reasons that you outlined so with each of these.

Extensions came a capital requirement for tenant work leasing commissions and in some cases building upgrades and the two partners.

Speaker Change: <unk> had a shift in strategy.

Yes, John I would just say the following which is there are institutional investors, who have just have a perspective that at this moment in time investing additional capital in and our sector is not what they want to do relative to their portfolios. We obviously have a very different perspective on the long term value that's going to be created by doing these transactions or we.

Speaker Change: To disinvest or reallocate away from office.

Speaker Change: And that basically sparked the acquisitions and the other thing I would point out.

Speaker Change: Other assets had future capital requirements as well so in the case of Santa Monica business Park.

We have the snap renewal, but also we have a fee purchase option coming up in 2028 that.

Wouldn't be doing them. So we're excited about the lease that we signed with snap. We're excited about the lease we signed with Finnegan Henderson and we're excited about what that means for the long term value of these properties and it was the disconnect between what they wanted to do and what we want to do that really created the opportunity from our perspective to deploy capital at a very accretive way.

Elect to purchase the fee that we will have a capital requirement.

Speaker Change: And those 360.

Speaker Change: Park Avenue, South there was not a anchor lease renewal because that project is under redevelopment. It's in the middle of the redevelopment. So the partner basically sold out their position in the middle of funding that development. So it also had a future funding requirements. So so those are really the drivers.

And we're looking for other opportunities in our portfolio and away from our our portfolio, where these types of disconnects between the owned current owner and what our perspective is are different and just lastly, Jon to the second question that you asked.

Speaker Change: Yes, John I would just say the following which is there are institutional investors, who have just have a perspective that at this moment in time investing additional capital in and our sector is not what they want to do relative to their portfolios. We obviously have a very different perspective on the long term value that is going to be created by doing these transactions, where we were.

Never say never there might be other opportunities to acquire interest in properties that we own but I certainly don't think the volume would be anything like what we experienced in the last quarter for example.

<unk>, our largest joint venture partner is norges and the last quarter. They actually increased their number of joint ventures with us because we did these two major JV.

Speaker Change: Be doing them. So we're excited about the lease that we signed with snap. We're excited about the lease we signed with Finnegan Henderson and we're excited about what that means for the long term value of these properties.

Cambridge, and obviously they have a different strategy from the JV partners that we acquired interests from so so it could be more but.

Speaker Change: And it was the disconnect between what they wanted to do and what we want to do that really created the opportunity from our perspective to deploy capital at a very accretive way and.

I don't think it'll be at anything close to the volume that we experienced last quarter.

Thank you.

Speaker Change: We're looking for other opportunities in our portfolio and away from our our portfolio, where these types of disconnects between the owned current owner and what our perspective is are different and just lastly, Jon to the second question that you asked.

And our next question comes from the line of Alexander Goldfarb from Piper Sandler. Please go ahead.

Hey, good morning, and first Bob Peter Congrats.

On retirement.

Speaker Change: Never say never there might be other opportunities to acquire interest in properties that we own but I certainly don't think the volume would be anything like what we experienced in the last quarter for example.

Yes, now we can all look for rod steady hand.

Just Oh, and then Doug just I guess, a two parter following up on John <unk> questions.

One obviously is the debt side of the equation looking what your expectations are for potential debt resolution, where Boston may be able to pay off debt.

Speaker Change: Today, our largest joint venture partner is norges and the last quarter. They actually increased their number of joint ventures with us because we did these two major JV.

Speaker Change: Cambridge, and obviously they have a different strategy from the JV partners that we acquired interest from so so it could be more but.

At cents on the dollar and too as you look at these JV buyouts is it purely that the partners, whether the existing or potential ones in the future just don't want to put in capital or is it that they view the investment of that capital to be highly risky, whereas you guys seem quite confident in your returns and just.

Speaker Change: I don't think it'll be at anything close to the volume that we experienced last quarter.

Speaker Change: Thank you.

Speaker Change: And I show our next.

Speaker Change: And then comes from the line of Alexander Goldfarb from Piper Sandler. Please go ahead.

Trying to understand if it's a capital issue that your partners just want no more versus a risk of investment decision.

Hey, good morning, and first Bob Peter Congrats.

Alexander Goldfarb: On retirement I guess now we can all look for rod steady hand.

Yes, I think.

Alex to answer your question on the debt side, Mike should answer but in general as you know, we primarily financed with unsecured financing and we have great access to that market and have been accessing it and we think it is very attractive and in most cases, we've been able to extend or refinance existing mortgages that we have on our joint ventures.

Alexander Goldfarb: And then Doug just I guess, a two parter following up on John <unk> questions.

Alexander Goldfarb: One obviously is the debt side of the equation looking what your expectations are for potential debt resolution, where Boston may be able to pay off debt.

Alexander Goldfarb: At cents on the dollar and too as you look at these JV buyouts is it purely that the partners, whether the existing or potential ones in the future just don't want to put in capital or is it that they view the investment of that capital to be highly risky, whereas you guys seem quite confident in your returns and just.

Look I think in terms of the answer to your question. The JV partners would have to answer it in terms of how they thought about the returns that they were forecasting from the extensions that we.

Committed to but when we do our own math and we shared some of it with you on this call. We think it's very attractive and it's very accretive to our company and we think it makes a lot of sense. So.

Alexander Goldfarb: Trying to understand if it's a capital issue that your partners just want no more versus a risk of investment decision.

Our suspicion as a result is that these decisions that they made were more related to a change in strategy as opposed to.

Alexander Goldfarb: Yes, I think the.

Speaker Change: Alex to answer your question on the debt side, Mike should answer but in general as you know, we primarily financed with unsecured financing and we have great access to that market and have been accessing it and we think it's very attractive and in most cases, we've been able to extend or refinance existing mortgages that we have on our joint ventures.

A lack of enthusiasm for the returns.

I'd also just make an additional point on this these are two different partners in and they come from a little bit different position. So the partner on 901 had been a long term investor in that project and they had been in it.

<unk> made good return it has been very successful for them. So.

Michael E. LaBelle: Look I think in terms of the answer to your question. The JV partners would have to answer in terms of how they thought about the returns that they were forecasting from the extensions that we committed.

Maybe it was a change in strategy, but it also might've been look we've been in this for a very long period of time, we've done fine maybe this would be a good time to exit I think on the partner on the other two deal Santa Monica business Park, and 360 definitely they were newer to the to the JV and I think that clearly was more of a change in strategy.

Michael E. LaBelle: Committed to but when we do our own math and we shared some of it with you on this call. We think it's very attractive and it's very accretive to our company and we think it makes a lot of sense. So.

Michael E. LaBelle: Our suspicion as a result is that these decisions that they made were more related to a change in strategy as opposed to.

Thank you.

And I show. Our next question comes from the line of Nick <unk> from Scotiabank. Please go ahead.

Michael E. LaBelle: A lack of enthusiasm for the returns.

Thank you I was hoping to just get a little bit more feel for.

Michael E. LaBelle: I would also just make an additional point on this these are two different partners in and they come from a little bit different position. So the partner on 901 had been a long term investor in that project and they had been in it.

The decision to reinvest in Santa Monica Business Park, why why do you think it's still an attractive long term opportunity and secondly, if you could just give us any feel for in terms of the snap.

Michael E. LaBelle: <unk> made good return it has been very successful for them. So.

Renewal.

Michael E. LaBelle: It was a change in strategy, but it also might've been look we've been in this for a very long period of time, we've done fine maybe this would be a good time to exit I think on the partner on the other two deal Santa Monica business Park, and 360, <unk> definitely they were newer to the to the JV and I think that clearly was more of a change in strategy.

How the Mark to market worked on that plus you have the level of Ti and free rent to if you had to guess.

Yes.

Yes.

Ill.

Turn it over to Mike for the second question, but in terms of the first question.

You mentioned the yield that we bought this in the per foot that we bought the asset on a fee simple basis, we think thats very attractive pricing.

Speaker Change: Thank you.

Speaker Change: And I show. Our next question comes from the line of Nick <unk> from Scotiabank. Please go ahead.

We're able to derisk the asset materially through the extension of the anchor tenant which leases.

Nick: Thank you I was hoping to just get a little bit more feel for.

400, plus thousand square feet of the $1 two square feet.

Nick: The decision to reinvest in Santa Monica Business Park, why why do you think it's still an attractive long term opportunity.

And also we think that Santa Monica business Park is a very interesting redevelopment opportunity for our company and we're in the process of commencing that redevelopment process and we think over a long period of time, it's going to be a very accretive asset to our to our company. So we are excited about the asset.

Secondly, if you could just give us any feel for in terms of the snap.

Nick: Renewal.

Nick: How the mark to market worked on that plus the level of Ti and free rent to if you had to give.

And Nick this is Doug.

Nick: Yes.

On your answer your other question without without I'm, not we're not going to get into the specifics of a particular tenants economics.

Nick: Turn it over to Mike for the second question, but in terms of the first question.

As I said in my remarks, our West Coast <unk>.

Michael E. LaBelle: You mentioned the yield that we bought this in the per foot that we bought the asset on a fee simple basis, we think thats very attractive pricing.

<unk> that were signed this quarter executed this quarter was down 3%, but San Francisco was up 9%. So you can go through the statistics.

Michael E. LaBelle: We were able to derisk the asset materially through the extension of the anchor tenant which leases.

Sort of decide yourself, how you think that might have played out.

And relative to transaction cost and free rent it was actually a very low transaction cost and low free rent.

Michael E. LaBelle: 400, plus thousand square feet of the $1 two square feet.

Michael E. LaBelle: And also we think that our Santa Monica business Park is a very interesting redevelopment opportunity for our company and we're in the process of commencing that redevelopment process and we think over a long period of time, it's going to be a very accretive asset to our to our company. So we're excited about the asset.

Early renewals so those economics were built into the lease rate.

Thank you.

And I show. Our next question comes from the line of Anthony per loan from J P. Morgan. Please go ahead.

Yes, thanks, good morning.

Michael E. LaBelle: And Nick this is Doug.

Talked about play.

Douglas T. Linde: On your answer your other question without without I'm, not we're not going to get into the specifics of a particular tenants economics.

Playing offense and it sounds like you'll use some third party capital as you've done in the past, but just for <unk> portion of deals and in playing offense, where do you think we see capital come from for you all.

Douglas T. Linde: As I said in my remarks, our West coast.

<unk> that were signed this quarter executed this quarter was down 3%, but San Francisco was up 9%. So you can go through the statistics.

Well as you said.

As I mentioned in my remarks, I do think there will be opportunities that will present, our present themselves for the company this coming year and as.

Douglas T. Linde: Sort of decided yourself, how you think that might have played out.

Douglas T. Linde: And relative to transaction cost and free rent it was actually a very low transaction cost and low free red.

As he said, we will be a joint venture partner more than likely.

Using third party capital.

Douglas T. Linde: Early renewals so those economics were built into the lease rate.

And we will be using our balance sheet to fund our joint venture interest in whatever we come up with but it's again.

Speaker Change: Thank you.

Speaker Change: And I show. Our next question comes from the line of Anthony Powell loan from JP Morgan. Please go ahead.

We are receiving.

Inquiries were looking at things, but.

We're not.

Anthony Franklin Powell: Yes. Thanks, Good morning, you talked about playing.

I would say advanced than anything at this time, but if we look at what we think will happen in 2024 versus the illiquidity in the market in 2023, I think activity will be greater this coming year.

Anthony Franklin Powell: Playing offense and it sounds like you'll use some third party capital as you've done in the past, but just for Dxp's portion of deals and in playing offense, where do you think we see capital come from for you all.

And then I would just add that a lot of what we're looking at is doing things more on a capital light basis, and taking a lower percentage interest percentage potentially or entering assets in a different way and kind of similar to these transactions that we did this didn't require a lot of incremental capital.

Anthony Franklin Powell: Well as you said.

Anthony Franklin Powell: As I mentioned in my remarks, I do think there will be opportunities that will present, our present themselves for the company this coming year and as.

Anthony Franklin Powell: As he said, we will be a joint venture partner more than likely.

We took on a little bit obviously their share of the debt, but the overall impact on our leverage was very very small <unk>.

Anthony Franklin Powell: Using third party capital.

Anthony Franklin Powell: And we will be using our balance sheet to fund our joint venture interest in whatever we come up with but it's again.

These transactions and in fact, we've kind of de Levered overall, because we brought in the equity from the Cambridge transaction. So overall, we deleverage.

Anthony Franklin Powell: We are receiving.

We don't expect that we're going to increase our leverage significantly.

Anthony Franklin Powell: Inquiries were looking at things, but.

We're not.

Our goal is to kind of maintain it in a range.

Anthony Franklin Powell: Say advanced than anything at this time, but if we look at what we think will happen in 2024 versus the illiquidity in the market in 2023, I think activity will be greater this coming year.

That is pretty.

Pretty close to where we are.

So I think that when we think about investments we keep that in mind.

Anthony Franklin Powell: And then I would just add that a lot of what we're looking at is doing things more on a capital light basis, and taking a lower percentage interest percentage potentially or entering assets in a different way and kind of similar to these transactions that we did this didn't require a lot of incremental capital.

Thank you.

And I show. Our next question comes from the line of Michael Goldsmith from UBS. Please go ahead.

Good morning, Thanks, a lot for taking my questions.

We've talked a little bit about San Francisco and defer some clear differences in the markets do you think we're kind of hitting the bottom and these tech markets are lagging in the portfolio and just.

Anthony Franklin Powell: We took on a little bit obviously their share of the debt, but the overall impact on our leverage was very very small.

Anthony Franklin Powell: With these transactions and in fact, we kind of de Levered overall, because we brought in the equity from the Cambridge transaction. So overall, we deleveraged.

From the demand from AI or other sources that are providing some near term excitement for a rebound in San Francisco and Seattle. Thank you.

We don't expect that we're going to increase our leverage significantly.

I would say Michael that the technology demand on the West coast is lower than we would like it to be largely because there have been a significant amount of technology lay offs over the past call. It.

Anthony Franklin Powell: Our goal is to kind of maintain it in a range.

Anthony Franklin Powell: That is pretty.

Anthony Franklin Powell: Pretty close to where we are.

Anthony Franklin Powell: So I think that when we think about investments we keep that in mind.

12 to 18 months and they are still happening clearly they are happening at a much lower rate than they are on the margin.

Speaker Change: Thank you.

Speaker Change: And I show. Our next question comes from the line of Michael Goldsmith from UBS. Please go ahead.

So I would tell you that I think we are.

We have been sort of in the quote unquote bottom for a period of time and I don't look at the world and say that Theres. Another quote unquote shoe to drop I think we're just sort of sort of in a in a portion of time, where theres just not interest in growth from our real estate space perspective for technology companies.

Michael Goldsmith: Good morning, Thanks, a lot for taking my questions.

Michael Goldsmith: We've talked a little bit about San Francisco and defer some clear differences in the markets do you think we're kind of hitting the bottom and these tech markets that are lagging in the portfolio and just any different the demand from AI or other sources center, providing some near term excitement for a rebound in San Francisco and Seattle. Thank you.

I'll leave that will change the fourth quarter in the third quarter of 2023 in San Francisco for AI was a great quarter and we had two really interesting transactions occur, which we've described previously there was a 1 million square feet of positive absorption.

Speaker Change: I would say Michael that the technology demand on the West coast is lower than we would like it to be largely because there have been a significant amount of technology lay offs over the past call. It.

I'm not smart enough to know if those two tenants may double or triple or quadruple over the next two to three years am I also don't know whether or not there are going to be other AI companies that are either VC or seed invested.

12 to 18 months and they are still happening clearly they are happening at a much lower rate than they are on the margin.

So I would tell you that I think we are where we've.

With Angel investing that are going to explode I'm hopeful that those types of things will happen.

Speaker Change: We have been sort of in the core on core bottom for a period of time and I don't look at the world and say that there is another quote unquote shoe to drop I think we're just sort of sort of in a in a portion of time, where theres just not interest and growth from our real estate space perspective for technology companies I believe.

From our perspective that will all be to the good before the west coast and for the city of San Francisco to.

2024 is not going to be that year in terms of in our view space absorption.

Thank you.

And I show. Our next question comes from the line of Michael Griffin from Citi. Please go ahead.

That will change.

Speaker Change: Fourth quarter in the third quarter of 2023 in San Francisco for AI was a great quarter, and we had two really interesting transactions occur, which we've described previously there was a 1 million square feet of positive absorption.

It's actually Nick Joseph here with Michael.

I wanted to ask you guys.

Touched on the opportunities expected this year and with some institutional owners, maybe change in strategy or Lauren exposure I guess.

Speaker Change: I'm not smart enough to know if those two tenants may double or triple or quadruple over the next two to three years I also don't know whether or not theyre going to be other AI companies that are either PC or seed invested with angel investing that are going to explode im hopeful that those types of things will happen.

On the other side are you seeing more competition for some of these.

Potential deals are you seeing people actually looking.

They're distressed.

Distressed opportunities or other opportunistic opportunities looking at actually add exposure to office and then how are you thinking about actually underwriting the deals just given the current environment.

Speaker Change: And from our perspective that will all be to the good for the west coast and for the city of San Francisco.

Yes so.

Hey, Nick good morning, so.

Speaker Change: 2024 is not going to be that year in terms of our views based absorptions.

There have been more office transactions in the fourth quarter you know in my remarks, I gave some stats and it was kind of interesting to me the percentage of the commercial real estate transactions that are going on from office increased materially in the fourth quarter to the third so what's happening.

Speaker Change: Thank you.

Speaker Change: And I show. Our next question comes from the line of Michael Griffin from Citi. Please go ahead.

Speaker Change: It's actually Nick Joseph here with Michael.

I think theyre more distressed players that are out there buying assets at very low per square foot prices.

I wanted to ask you guys.

Nicholas Yulico: Touched on the opportunities expected this year and with some institutional owners, maybe change in strategy or Lauren exposure I guess.

Some of these assets are challenged physically most of them are not very well leased and I think those buyers are.

Nicholas Yulico: On the other side are you seeing more competition for some of these.

Speaker Change: Potential deals are you seeing people actually looking either.

Family offices for example, they're smaller deals that don't need leverage because again getting a secured mortgage for an office building is virtually impossible.

Speaker Change: Stressed opportunities or other opportunistic opportunities looking to actually add exposure to office and then how are you thinking about actually underwriting the deals just given the current environment.

And I think these buyers are just saying look at this per square foot price, we think the market will ultimately recover and we're in at a good basis. So I think that's the kind of market that's out there.

Yes so.

Speaker Change: Hey, Nick good morning, so.

Speaker Change: There have been more office transactions in the fourth quarter in my remarks that gave some stats and it was kind of interesting to me the percentage of the commercial real estate transactions that are going on from office increased materially in the fourth quarter to the third so what's happening.

Those aren't the kind of deals that we want to do I mean, we are looking for premier workplaces. We're looking for assets that may not be fully leased maybe there are some challenges with it or an asset that we can make a premier workplace and theyre going to be larger.

Speaker Change: There are more distressed players that are out there buying assets at very low per square foot prices.

And they're going to probably require funding from the financing market in some way and I think there's much less competition for anything like that and I think hence that's dxp's opportunity.

Some of these assets are challenged physically most of them are not very well leased and I think those buyers are.

Thank you.

Speaker Change: Family offices for example, they're smaller deals that don't need leverage because again getting a secured mortgage for an office building is virtually impossible.

And I show. Our next question comes from the line of Ronald Camden from Morgan Stanley. Please go ahead.

Yes.

Hopefully you can hear me.

Speaker Change: I think these buyers are just saying look at this per square foot price, we think the market will ultimately recover and we're in a good basis. So I think that's the kind of market that's out there.

Just 112 parter one on the same store NOI guidance of down 2%, just hoping a little bit more color you talked about we werent being a 45 basis point headwinds.

Speaker Change: Those aren't the kind of deals that we want to do I mean, we are looking for premier workplaces. We're looking for assets that may not be fully leased maybe there are some challenges with it or an asset that we can make a premier workplace and theyre going to be larger.

Talk to maybe what some of the larger explorations that youre expecting in the first half the impact will be and what you're assuming at the top and bottom end of the guidance range.

The second part if I could sneak it in is just on the life science market.

Speaker Change: And they're going to probably require funding from the financing market in some way and I think there's much less competition for anything like that and I think hence that's dxp's opportunity.

As you sit here today versus three to six months ago can you just characterize with the leasing activity is like for the larger versus sort of mid and smaller tenants.

So I'll start with that on the same store question, which is really related to kind of the trends in our occupancy that we expect.

Speaker Change: Thank you.

Speaker Change: And I show. Our next question comes from the line of Ronald Camden from Morgan Stanley. Please go ahead.

So we gave the range of that and our anticipation is the first half of the year has some of these larger explorations there is one.

Speaker Change: Yes.

Ronald Kamdem: Hopefully you can hear me.

Ronald Kamdem: 112, parter one on the same store NOI guidance of down 2%, just hoping a little bit more color you talked about re work being a 45 basis point headwinds.

Dark city, there's one Carnegie Center, and then Theres one in San Francisco, Doug kind of describe how big they were.

And then the leasing that we have signed that are going in to vacant space is more spread across so my expectation is that youre going to see occupancy decline a little bit. The first couple of quarters, and then kind of build back up.

Ronald Kamdem: Can you talk to maybe what some of the larger explorations that youre expecting in the first half the impact will be and what youre, assuming at the top and bottom end of the guidance range and the second part if I could sneak it in is just on the life science market.

Through the year and that's what's built into our guidance ranges.

Ronald Kamdem: As you sit here today versus three to six months ago can you just characterize what the leasing activity is like for the larger versus the sort of mid and smaller tenants.

And then obviously, our our boundaries are kind of the upper and lower boundaries of what that year end occupancy.

Speaker Change: So ill start with that on the same store question, which is really related to kind of the trends in our occupancy that we expect.

Range that we provided is that Doug talked about.

So thats kind of how we build that that range.

And.

Speaker Change: So we gave the range of that.

<unk>.

That pretty much answers your question I think.

Speaker Change: Our anticipation is the first half of the year has some of these larger explorations there is one.

Let me, let Rod deal go first on life science activity that in the San Francisco South San Francisco.

Speaker Change: New York City, there's one cardiac center and then Theres one in San Francisco, Doug kind of describe how big they were.

North Peninsula market and then Brian can talk about life science activity in our Waltham portfolio, which is where obviously, we're our availability. It's Brian you want to start.

Speaker Change: And then the leasing that we have signed that are going in to vacant space is more spread across so my expectation is that youre going to see occupancy decline a little bit. The first couple of quarters and then it's going to build back up.

Yeah, I would just say that relative to six months ago at least in the Bay area I would say the life science demand is about what it had been which is that it's.

Speaker Change: Through the year and that's what's built into our guidance ranges.

It's not with the larger users there have been some smaller tenants that's how we've.

Speaker Change: And then obviously, our our boundaries are kind of the upper and lower boundaries of what that year end occupancy.

We're able to land the three deals at our 651 Gateway project.

Those are single floor tenants roughly 22000, each so in that section of the demand, we're still seeing a little bit of activity, but not so much on the larger the larger groups. So relative to six months ago I think it's probably about the same.

Speaker Change: Range that we provided is that Doug talked about.

Speaker Change: So thats kind of how we build that that range.

Speaker Change: And.

Speaker Change: Zinc.

Speaker Change: That pretty much answers your question I think.

Speaker Change: I'll, let me, let Rod deal go first on life science activity in the San Francisco, South San Francisco.

Boston This is Bryan Koop.

It really reflects the same thing.

Half of last year was far different than the first and activity picked up on life science tours.

North Peninsula market and then Brian can talk about life science activity in our Waltham portfolio, which is where obviously, we're our availability. It's Brian you want to start.

But let's say from summer beginning smaller users out there still questioning it was the time to make a commitment or not a lot of questions about their funding et cetera, and then fourth quarter. We did see a couple of let's say the life science tightens come out and emerge and they were all.

Brian: Yes, I would just say that relative to six months ago at least in the Bay area I would say the life science demand is about what it had been which is that it's.

Brian: It's not with the larger users there have been some smaller tenants. That's how we were able to land the three deals at our 651 Gateway project.

All client.

Lets say potential clients that are in the market already in Cambridge that worse.

Brian: And those are single floor tenants roughly 22000, each so in that sector section of the demand, we're still seeing a little bit of activity, but not so much on the larger the larger groups. So relative to six months ago I think it's probably about the same.

Let's say looking sourcing the Waltham market for what could be available.

In general.

Just had a summary, with Doug and Owen yesterday about last year's performance and we're quite surprised we had 360 tours last year, so you're averaging seven a week, which was surprising given how dismal the attitude about office was.

Brian: Boston This is Bryan Koop.

Bryan J. Koop: Is it really reflects the same thing the second half of last year was far different than the first and activity picked up on life science tours.

Bryan J. Koop: But let's say from summer beginning smaller users out there still questioning.

Two comments one is that the clients are spending far more time with us and aggressively looking for what their strategy is going forward and we have also seen verification of possible spoke place where you have a large <unk>.

That makes a commitment or not a lot of questions about their funding et cetera, and then fourth quarter. We did see a couple of let's say the life science tightens come out and emerge and they were all client.

<unk> headquarters in the CBD District, and then looking for a spoke location further closer to the suburbs to People's homes, and we've had two great executions of that and Theres been a lot of interest in that.

Bryan J. Koop: Lets say potential clients that are in the market already in Cambridge that worse, let's.

Bryan J. Koop: Let's say looking sourcing the Waltham market for what could be available.

Bryan J. Koop: In general.

Thank you.

At a summary, with Doug and Owen yesterday about last year's performance and we're quite surprised we had 360 tours last year, so you're averaging seven a week, which was surprising given how dismal attitude about office was.

And I show. Our next question comes from the line of Caitlin Burrows from Goldman Sachs. Please go ahead.

Hi, everyone. Maybe just a question Google announced last night meaningful office optimization charges $1 2 billion in the quarter. So given you are at two 8% exposure to the tenant will this impact any of your properties and I guess more broadly I think you mentioned that tenant defaults are included in your guidance. So what's your watch list like ours.

Bryan J. Koop: Two comments one is that the clients are spending far more time with us and aggressively looking for what their strategy is going forward and we have also seen verification of possible spoke place where you have a large head.

Our outlook for early exits by tenants this year. Thanks.

With.

To your first question about Google.

Bryan J. Koop: Headquarters and the CBD District, and then looking for a spoke location further closer to the suburbs to People's homes, and we've had two great execution of that and Theres been a lot of interest in that.

Answer is absolutely not we at Google's and only one asset of ours, which is in our Cambridge portfolio and they are they're in there for a long long time and they are actively using their space and talking to us about increasing parking needs and things like that so.

Speaker Change: Thank you.

We have no sense that there's any change in their portfolio composition at least with with us at DXP.

Speaker Change: And I show. Our next question comes from the line of Caitlin Burrows from Goldman Sachs. Please go ahead.

I would say most of our defaults have been in the life science and they've been in the sort of startup Tech world.

Caitlin Burrows: Hi, everyone, maybe just a question.

Caitlin Burrows: We announced last night meaningful office optimization charges $1 2 billion in the quarter. So given your two 8% exposure to the tenant will this impact any of your properties and I guess more broadly I think you mentioned that tenant defaults are included in your guidance. So what's your watch list like our outlook for early exits by tenants this year. Thanks.

And we have one in Cambridge, and Waltham, that's probably going to occur and we have two or three that occurred in the latter parts of 2023 on the West Coast <unk>.

<unk>, CBD and <unk> and the.

Suburban market and they are all sort of in this 20 to 25000 square feet a piece and.

They are just part of what's going on in the economy with regards to capital formation, where <unk> want to put their money, where they don't want to put their money whether technologies are successfully getting giving company to the point, where they can raise additional capital again.

Caitlin Burrows: With.

Caitlin Burrows: Regards to your first question about Google.

Speaker Change: Answer is absolutely not.

Speaker Change: <unk> only one asset of ours, which is in our Cambridge portfolio and they are they are in there for a long long time and they are actively using their space in talking to us about increasing parking needs and things like that so.

We have some exposure to that but it's not significant.

Speaker Change: We have no sense that there is any change in their portfolio composition at least with with us at DXP.

Yes.

Thank you.

One moment for our next question.

Speaker Change: I'd say most of our defaults have been in the life science and they've been in the sort of startup Tech world.

And our next question comes from the line of <unk> from Bank of America. Please go ahead.

Speaker Change: And we have one in Cambridge, and Waltham, that's probably going to occur and we have two or three that occurred in the latter parts of 2023 on the west coast.

Good morning on the six projects that are scheduled to be stabilized in 2025 and have started or are starting initial occupancy. This year, how far along are the leasing prospects on those buildings and how much do these development prospects represent in the active leases under negotiation pipeline.

Speaker Change: <unk> CBD and two in the <unk>.

Speaker Change: Suburban market and they are all sort of in this 20% 25000 square feet a piece in there.

Speaker Change: They are just part of what's going on in the economy with regards to capital formation, where <unk> want to put their money, where they don't want to put their money whether technologies are successfully getting giving company to the point, where they can raise additional capital again.

So Mike is pulling out which one theoretically are working you didn't want to breach.

<unk>. So the developments that we have I believe that you're referring to are.

290, Binney Street, which is a 2026, that's astrazeneca that's 100% leased.

Speaker Change: We have some exposure to that but it's not significant.

Speaker Change: Thank you.

103 fourth Avenue, which we don't have any leasing velocity on.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from the line of commitment, but now from Bank of America. Please go ahead.

180 City point, where we have about 140000 square feet of available space. Those two are coming online in 'twenty four.

Speaker Change: Good morning on the six projects that are scheduled to be stabilized in 2025 and have started or are starting initial occupancy. This year, how far along are the leasing prospects on those buildings and how much do these development prospects represent in the active leases under negotiation pipeline.

In terms of when theyre going to be in service.

And we need to do find some clients to lease those buildings in order for them to be stabilized in 2025.

651 gateway, it's a similar conversation and that we have.

Speaker Change: So Mike is pulling out which one theoretically or is working on getting 100 threes.

Started doing leasing we will be through 12 months of lease up in early 2025, and we need to do more leasing in order to get that one going in at 360 Park Avenue South.

So <unk> so the developments that we have I believe that you're referring to are.

Where the building construction is complete and Hillary and her team in New York are aggressively pursuing.

Speaker Change: Okay.

Speaker Change: <unk> hundred 90, Binney Street, which is a 2026, that's astrazeneca that's 100% mission.

Anybody who wants premier space, a space in the Midtown South market, where we've done one lease and we have another lease that we're close to having a letter of intent on for a floor plus and then there is other interest in the building and that one also we need to do some leasing in order for it to be stabilized in 2025.

Speaker Change: 103 fourth Avenue, which we don't have any leasing velocity on.

Speaker Change: 180 City point, where we have about 140000 square feet of available space. Those two are coming online in 'twenty four.

Speaker Change: In terms of when theyre going to be in service.

Speaker Change: And we need to do find some clients to lease those buildings in order for them to be stabilized in 2025.

The rest of the I believe the rest of the stuff is residential.

That's obviously a.

A question of when those buildings start and how long before that.

Speaker Change: $6 51 gateway at the similar conversation and that we have.

Ramp up is in terms of turning over the units and I think when when Sky Mark opens which is the rest in property.

Speaker Change: Started doing leasing we will be through 12 months of lease up in early 2025, and we need to do more leasing in order to get that one going in at 360 Park Avenue South.

The third quarter of 2024.

Speaker Change: Where the building construction is complete and Hillary and her team in New York are aggressively pursuing.

We have probably a 15 to 18 months Lisa partner you can correct me if I'm wrong.

That would be stabilized.

Anybody who wants premier space, a space in the Midtown South market, where we've done one lease and we have another lease that we're close to having a letter of intent on for a floor plus and then there's other interest in the building and that one also we need to do additional leasing in order for it to be stabilized in 2020.

Yeah.

No those are both correct and that also has as you know 75000 square feet of office and then some ancillary retail and.

And we're working on a couple of deals for the retail space and we've got I would say a real prospect for about half of the office space that were <unk>.

Speaking to but not in LOI stage with at this point.

The rest of the I believe the rest of the stuff or is residential.

So to me that was really in my notes I kind of described that the deliveries in 'twenty for these deliveries we're talking about and we don't expect 24 to have a really significant impact from those.

Speaker Change: That's obviously.

Speaker Change: Question of Windows building started how long but.

Speaker Change: The ramp up is in terms of turning over the units and I think when when sky.

Speaker Change: Sky Mark opens which is the rest in property.

But we do expect to have some leasing momentum in 'twenty four.

Speaker Change: The third quarter of 2024.

With income starting in 'twenty five so our expectation is that thats win.

Speaker Change: We have probably a 15 to 18 months Lisa Pete partner, you can correct me if I'm wrong.

We will start to see more revenue come from these buildings.

Speaker Change: If that would stabilize.

Thank you.

Lisa: No those are both correct and that also has as you know 75000 square feet of office and then some ancillary retail and we're working on a couple of deals for the retail space and we've got I would say a real prospect for about half of the office space that were speak.

And I show. Our next question comes from the line of Blaine Heck from Wells Fargo. Please go ahead.

Great. Thanks, So it seems like we're still seeing the flight to quality trend play out with most net absorption and leasing activity taking place at high quality buildings with high rents, but recent media reports have tried to kind of poke holes and even the top of the office market. So just wanted to get your thoughts on whether anything has changed.

Lisa: Speaking to but not at LOI stage with at this point.

Lisa: So Camille that was really in my notes I kind of described that the deliveries in 'twenty for these deliveries we're talking about and we don't expect 24 to have a really significant impact from those but we do expect to have some leasing momentum in 'twenty four.

With respect to leasing activity or rents at the top of the market and whether you've noticed that tenants have maybe become more cost conscious and less likely to lease at those highest quality spaces.

Lisa: With income starting in 'twenty five so our expectation is that thats win.

I would tell you I didn't go through it this quarter because we had so much other stuff to go through but the <unk>.

Lisa: We will start to see more revenue come from these buildings.

Premier workplace data that I generally provide on this call shows accelerating distancing between premier workplaces and the rest of the market from a vacancy net absorption and rental perspective, so at least at a high level.

Camille: Thank you.

Camille: And I show. Our next question comes from the line of Blaine Heck from Wells Fargo. Please go ahead.

Blaine Heck: Great. Thanks, So it seems like we're still seeing the flight to quality trend play out with most net absorption and leasing activity taking place at high quality buildings with high rents, but recent media reports have tried to kind of poke holes and even the top of the office market. So just wanted to get your thoughts on whether anything has changed.

The trend to Premier workplaces has it continues to run unabated.

And I would tell you that the.

The most activity that we are having on a building by building basis is in fact in our CBD.

Blaine Heck: With respect to leasing activity or rents at the top of the market and whether you've noticed that tenant maybe.

<unk> Premier Premier assets and in no case are we seeing.

Blaine Heck: Maybe become more cost conscious and less likely to lease at those highest quality spaces.

Changes in the economics of what the market or where we are asking for.

Speaker Change: I would tell you I didn't go through it this quarter because we had so much other stuff to go through but the.

Ultimately achieving in those those.

Speaker Change: Premier workplace data that I generally provide on this call shows accelerating distancing between premier workplaces and the rest of the market from a vacancy net absorption and rental perspective, so at least at a high level.

Client conversations I'm.

I'm not sure where that information that was in the article in the Wall Street Journal came from.

But it's just.

I'll, let hillary describe what's going on in Manhattan in terms of our activity level, which I think is going to sort of the poster child for premier.

Speaker Change: The trend to Premier workplaces has it continues to run unabated.

And she can sort of give you a perspective on why I think that article is just not it doesn't hold water for us.

Speaker Change: And I would tell you that.

Speaker Change: No.

The most activity that we are having on a building by building basis is in fact in our CBD.

Okay.

Thanks, Doug.

So we have seen consistently at.

Speaker Change: Most premier Premier assets.

At least 2019 gains in occupancy and Midtown Manhattan for Premier workplace with corresponding declines in occupancy for non premiere workplaces and the same is true.

Speaker Change: In no case are we seeing.

Speaker Change: Pages in the economics of what the market or where we are asking for.

Speaker Change: And ultimately achieving in those those.

Terms of rental rate gains from Premier Werent places in Midtown Manhattan. So while you might expect given the weakness in some of the overall office statistics to sort of effects that premier workplace. In fact, the opposite is true and at present the vacancy rate for Premier workplaces is hovering just around 10.

Client conversations.

Im not sure where that information that was in the article in the Wall Street Journal came from.

Speaker Change: But it's just.

Speaker Change: I'll, let hillary describe what's going on in Manhattan in terms of our activity level, which I think is going to sort of the poster child for premier.

<unk>, which we consider stabilization levels for Midtown Manhattan.

And so you can sort of give you a perspective on why I think that article just not it doesn't hold water for us.

And although the capital markets environments are not constructive for new development that is generally the point in the market at which you would start to see people interested in building new product. So.

Speaker Change: Okay.

Hillary: Thanks, Doug.

Hillary: Yeah. So we have seen consistently sense at.

At least 2019 gains in occupancy and Midtown Manhattan for Premier workplace with corresponding declines in occupancy for non premiere workplaces and the same is true in <unk>.

If you think about the availability of high quality space in Midtown there are only three available spaces and the park Avenue Submarket of 250000 square feet or greater one of them has a lease out on it. So if you are a tenant of size and you are looking for premier space in Midtown It simply is very very hard.

Terms of rental rate gains for Premier Werent places and.

Hillary: Tom Manhattan, So while you might expect given the weakness in some of the overall office statistics to.

To find and getting harder.

What drives pricing, obviously, so we feel very very good about our Midtown portfolio and we think that rents will continue to improve across the board for premier workplace in New York.

Hillary: That's actually a premier workplace in fact, the opposite is true and at present the vacancy rate for Premier workplaces is hovering just around 10%, which we consider stabilization levels for Midtown Manhattan, and although the capital markets environments are not constructive for new development.

And then I just Jay you might comment on the phenomenon you're seeing at the high end in the Premier buildings, where they were I guess, what we would refer to in Washington D. C is the trophy buildings on in terms of both the demand and the economics there.

Hillary: That is generally the point in the market at which you would start to see people interested in building new products. So.

Hillary: Do you think about the availability of high quality space in Midtown and there are only three available spaces and the park Avenue Submarket of 250000 square feet or greater one of them has a lease out on it. So if you are a tenant of size and youre looking for premier space in Midtown It simply is very very hard to <unk>.

Sure I will just sort of.

Tack on to what Hillary had noted in Washington D. C. We continue to see.

Significant sort of material outperformance for trophy.

Class a assets and repositioned assets in our market.

There is an incredible amount of leasing velocity that we see at those assets realm.

Relative to what.

Hillary: Signed and getting harder.

We see across the rest of the market being <unk>.

Hillary: And that drives pricing, obviously, so we feel very very good about our Midtown portfolio and we think that rents will continue to improve across the board for our premier workplace in New York.

Commodity space so.

We've achieved a lot of leasing success and a lot of our premier assets in downtown Washington, and continuing to see a lot of traffic.

We're seeing the same thing in Boston and as noted.

And then I just J code you might comment on on the phenomenon you're seeing at the high end in the Premier buildings, where everywhere I guess, what we would refer to in Washington D. C is the trophy buildings in terms of both the demand and the economics there.

In our discussions internally this last week.

Our Boston portfolio were at four point.

4% vacancy in Cambridge is two five which is just phenomenal.

Speaker Change: Sure I will just sort of <unk>.

We are seeing I wouldn't say this is the.

Speaker Change: Tack on to what Hillary had noted in Washington D. C. We continue to see <unk>.

Outstanding trend, but we are seeing users that normally would not be in our office building, where they bought more square footage and let's say it class b or C buildings looking to us for reaching up with smaller square footage just use more efficiently.

Speaker Change: Significant sort of material outperformance for trophy class assets and repositioned assets in our market. There is an incredible amount of leasing velocity that we see at those assets.

Speaker Change: Relative to what.

We see across the rest of the market being <unk>.

Okay.

Speaker Change: Commodity space so.

Thank you.

Speaker Change: We've achieved a lot of leasing success and a lot of our premier assets in downtown Washington, and continue to see a lot of traffic.

And I show. Our next question comes from the line of powertrain off from Keybanc. Please go ahead.

Speaker Change: We're seeing the same thing in Boston and as noted.

Hi, good morning.

The D C market seem to be a bright spot given the JV acquisition.

Speaker Change: In our discussions internally this last week.

One in the lease extension.

Speaker Change: Boston portfolio were at four point.

As well as the increase in occupancy there do you see the strength is sustainable or could you provide your thoughts on the D C market in general thanks.

Speaker Change: 4% vacancy in Cambridge is two five which is just phenomenal.

Speaker Change: We are seeing I wouldn't say this is.

So I would tell you that.

Speaker Change: Outstanding trend, but we are seeing users that normally would not be in our office building, where they bought more square footage in let's say a class b or C buildings looking to us for reaching up with smaller square footage just to use more efficiently.

The D C market is the most one of the most interesting markets from our perspective in the sense that there are more what I would refer to as.

Over finance buildings with institutional owners that are no longer interested in providing capital to those to those assets, which is manifesting itself in a inability for lease transactions to occur in those transactions and Jacob his team are I would say.

Speaker Change: Okay.

Speaker Change: Thank you.

Powertrain: And I show. Our next question comes from the line of powertrain off from Keybanc. Please go ahead.

Highlighting our financial stability and the things that we're doing in our buildings and there is no question that the lease transaction that he just pulled off with Finnegan Henderson was a directional.

Powertrain: Hi, good morning.

Powertrain: The DC market seems to be a bright spot given the JV acquisition.

Powertrain: One in the lease extension.

Powertrain: As well as the increase in occupancy there do you see the strength is sustainable or could you provide your thoughts on the D C market in general.

<unk> result.

The result of the lack of opportunities for a large tenant to go to other existing buildings the inability of any new construction to commence and dxp's ability too.

Speaker Change: So I would tell you that.

Speaker Change: The D C market is the most one of the most interesting markets from our perspective in the sense that there are more what I would refer to as.

Both provide.

Speaker Change: Over finance buildings with institutional owners that are no longer interested in providing capital to those to those assets, which is manifesting itself in a inability for lease transactions to occur in those transactions and Jason and his team are I would say.

Capital as well as figure out a way to reposition that building to be.

As close to a brand New Trophy building as you, possibly can have and Jacob you might just sort of describe the.

The choices that are out there and how the the distress in the market is impacting our ability to transact.

Speaker Change: Highlighting our financial stability and the things that we're doing in our buildings and there is no question that the lease transaction that he just pulled off with Finnegan Henderson was a director.

Yes, sure I can just Doug to that to that point, if we look at 901, New York Avenue as an example.

Last 30 months, we've done 140000 square feet, plus or minus of transactions at that asset and we've had great activity and I think a lot of that is because we've been incredibly responsive.

Speaker Change: Result of the.

Speaker Change: Lack of opportunities for a large tenant to go to other existing buildings the inability of any new construction to commence and dxp's ability too.

To the clients in the market and I think people have been responsive to our sponsorship at the asset.

Speaker Change: Both provide ti capital as well as figure out a way to reposition that building to be as.

So.

We feel really comfortable with the plus or minus 100000 square feet of vacancy at the asset given the repositioning program that we're going to undergo.

Speaker Change: As close to a brand New Trophy building as you, possibly can have and Jacob you might just sort of describe the.

And so we're really excited because these repositioned assets and investing in this new capital into Ria monetizing the ground floor plan of the building.

Choices that are out there and how the the distress in the market is impacting our ability to transact.

Sort of.

Jacob: Yes, sure I can just Doug to that to that point, if we look at 901, New York Avenue as an example in the <unk>.

Really repositioning the lobby experiences.

It really drives the activity of that asset and it really becomes a.

Jacob: Last 30 months, we've done 140000 square feet, plus or minus of transactions at that asset and we've had great activity and I think a lot of that is because we've been incredibly responsive.

Our new building in the market.

And so there are there are fewer and fewer of those opportunities available in downtown Washington.

Ever since news of.

Jacob: To the clients in the market and I think people have been responsive to our sponsorship at the asset.

The transaction that Doug noted was completed we've had we've seen great activity already and continue to at 901, and it's just representative of the fact that there arent a lot of great opportunities in Washington, DC that exist today for premiere all kinds of repositioned office.

Jacob: So.

Jacob: We feel really comfortable with the plus or minus 100000 square feet of vacancy at the asset given the repositioning program that we're going to undergo.

Jacob: And so we're really excited because these repositioned assets and investing with new capital into Ria monetizing the ground floor plan of the building.

The one other thing I would add is.

The performance of Reston Town Center when again, the majority of our portfolio in the greater Washington areas in Reston Town Center in Reston is 94% leased and we've had positive absorption there in this past quarter, we did a 60000 square foot.

Jacob: Really repositioning the lobby experiences.

Jacob: It really drives the activity of that asset and it really becomes.

Jacob: Our new building in the market.

New lease with a technology company coming from another place into Reston Town Center.

Jacob: And so there are there are fewer and fewer of those opportunities available in downtown Washington.

Again, because it is such high quality kind of a live work play kind of place.

Jacob: Ever since news of.

Jacob: The transaction that Doug noted.

And these clients really really value that so we're outperforming.

Jacob: Completed we've had we've seen great activity already and continue to at 901, and it's representative of the fact that there arent a lot of great opportunities in Washington, DC that exist today for Premier office, a repositioned office.

From a rental rate perspective, and we're seeing positive absorption there.

Thank you.

And I show. Our next question comes from the line of Peter Abramowitz from Jefferies. Please go ahead.

Speaker Change: The one other thing I would add is the.

Thank you.

Speaker Change: The performance of Reston Town Center when again, the majority of our portfolio in the greater Washington area is in Reston Town Center in Reston is 94% leased and we've had positive absorption there in this past quarter, we did a 60000 square foot.

Owen mentioned there's.

An early termination option, so part of the snap extension at Santa Monica Business Park.

Just curious how that kind of factoring in your conversations.

With the lender.

Loan return in 2025, and I'm wondering just how to think around parameter for where pricing is.

Speaker Change: New lease with a technology company coming from another place into Reston Town Center.

You start to have those conversations.

Speaker Change: Again, because it is such high quality kind of a live work play kind of place.

This is Doug there is no there is no termination.

Auction on the lease that we just signed as part of the lease we allowed them to terminate on a 140000 square feet at the end of 2020 for the remaining 467000 square feet is going out for 10 years.

Speaker Change: These clients really really value that so we're outperforming.

Speaker Change: From a rental rate perspective, and we're seeing positive absorption there.

Speaker Change: Thank you.

Speaker Change: And I show. Our next question comes from the line of Peter Abramowitz from Jefferies. Please go ahead.

Starting in 2026 of 2036 so.

Hi, Mike can describe any conversations that we've had with the lender, but we're very comfortable with the refinancing opportunity associated with that building and how that will play out relative to both the new leasing that we hope to do as well as the potential purchase of the ground which is.

Peter Abramowitz: Thank you.

Peter Abramowitz: Owen mentioned there is.

Peter Abramowitz: An early termination option, so part of the snap extension at Santa Monica Business Park.

Peter Abramowitz: Just curious how that kind of factoring into your conversations.

Peter Abramowitz: With the lender.

Can occur in 2028.

Peter Abramowitz: Loan maturity in 2025, and I'm wondering just how to think around parameter for where pricing is.

And.

Peter the loan is with a syndicate of banks.

Who are our relationship banks of ours. It does expire in 2025.

Peter Abramowitz: You start to have those conversations.

Peter Abramowitz: This is Doug there is no there is no termination.

I'm confident that those banks will be supportive of us and we will likely.

Peter Abramowitz: Option on the lease that we just signed as part of the lease we allowed them to terminate on a 140000 square feet at the end of 2020 for the remaining 467000 square feet is going out for 10 years.

And that loan.

The bridge period that will get us through the purchase of the ground lease.

After the purchase of the ground lease because it's.

And above market ground lease.

Be an improvement to the economics of the asset.

Peter Abramowitz: Starting in 2026 of 2036 so.

And we would probably do a longer term refinancing.

Peter Abramowitz: Hi, Mike and describe any conversations that we've had with the lender, but we're very comfortable with the refinancing opportunity associated with that building and how that will play out relative to both the new leasing that we hope to do as well as the potential purchase of the ground which is.

After that or focus on.

A portion of the park them won't be Redeveloped and then we can split it into a portion that is going to stay as is for a while and a portion where we might do a kind of mixed use redevelopment.

Peter Abramowitz: Can occur in 2028.

Now that it's effectively a wholly owned joint venture we have no partner, we don't need to use third party financing, we can choose to use unsecured financing. So I mean, there are lots of options.

Peter Abramowitz: And.

Peter the loan is with a syndicate of banks.

Peter Abramowitz: Who are our relationship banks of ours. It does expire in 2025.

Peter Abramowitz: Confident that those banks will be supportive of us and we will likely extend that loan.

Thank you.

And I show. Our next question comes from the line of Donlin Brzezinski from Green Street. Please go ahead.

Peter Abramowitz: We're able to see a bridge period that will get us through the purchase of the ground lease.

Hi, guys. Thanks for taking the question I guess just I appreciate the comments on potential acquisition opportunities in the future, but could you just talk about sort of how maybe your co investment partners are viewing office today and sort of the return threshold needed for them to deploy capital to the sector.

Peter Abramowitz: And after the purchase of the ground lease because it's.

Peter Abramowitz: And above market ground lease.

Peter Abramowitz: There'll be an improvement to the economics of the asset.

Peter Abramowitz: And we would probably do a longer term refinancing.

Peter Abramowitz: After that or focus on.

Yes, I think it's a mixed.

Peter Abramowitz: A portion of the park that must be Redeveloped and then we can split it into a portion that is going to stay as is for a while and a portion where we might do a kind of mixed use redevelopment.

We've just described some partners that are trying to reallocate away from office.

And but there are others that are interested they are intrigued I think they see the same opportunity that we do.

Peter Abramowitz: And now that it's effectively a wholly owned joint venture we have no partner, we don't need to use third party financing, we can choose to use unsecured financing. So I mean, there are lots of options.

All of this negative sentiment about office is creeping into the premier workplace segment, which which doesn't deserve it given all of the color that we just gave you on this call and I think there are investors, who have capital that see that and are interested in co investing with us and so.

Speaker Change: Thank you.

Speaker Change: And I show. Our next question comes from the line of Bill and Brzezinski from Green Street. Please go ahead.

Bill Brzezinski: Hi, guys. Thanks for taking the question I guess just I appreciate the comments on potential acquisition opportunities in the future, but could you just talk about sort of how maybe your co investment partners are viewing office today and sort of the return threshold needed for them to deploy capital to the sector.

In terms of pricing I think it's to be determined.

It depends a lot on the building leasing status.

What exactly the issues are there is no doubt that pricing has changed and.

We demonstrated what some of those changes are with the deals we did last quarter.

Speaker Change: I think it's a mixed.

Okay.

Speaker Change: We've just described some partners that are trying to reallocate away from office.

Thank you.

One moment please.

Speaker Change: And but there are others that are interested they are intrigued I think they see the same opportunity that we do that.

And I show our last question comes from the line of Floris Van <unk> from Compass point LLC. Please go ahead.

Speaker Change: All of this negative sentiment about office.

Speaker Change: Creeping into the Premier workplace segment, which which doesn't deserve it given all of the color that we just gave you on this call and I think there are investors, who have capital that see that and are interested in co investing with us and so.

Hi, Good morning, Thanks for taking my question I.

I guess following up on the last question, a little bit or maybe I'd love to get your thoughts on <unk>.

Cap rates.

And what is happening in office and win.

In terms of pricing I think it's to be determined I think it depends a lot on the building leasing status and what exactly the issues are there is no doubt that pricing has changed and.

Could we see in your opinion the stabilization of of cap rates. It appears that clearly the Santa Monica deal at a at a 9% cap rate that would be probably 200 basis points north of where it was maybe 18 to 24 months ago.

Speaker Change: We demonstrated what some of those changes are with the deals we did last quarter.

Speaker Change: Thank you.

Maybe talk specifically about your view on what's happening to cap rates.

Speaker Change: One moment please.

Some of your key markets like New York, San Francisco, Boston, DC or la.

And so our last question comes from the line of Floris Van <unk> from Compass point LLC. Please go ahead.

And what.

And at what points.

Floris Van: Hi, good morning, Thanks for taking my question.

Would you.

Where do cap rates need to be for you to actually deploy more capital.

Floris Van: I guess following up on the last question, a little bit or maybe I'd love to get your thoughts on <unk>.

Floris, you're asking a very good but unanswerable question and I'll explain why.

Floris Van: Cap rates.

And what is happening in office and win.

We tried I try every quarter to give all of you comparable market deal. So we all understand together where pricing is and this quarter I could not come up with one or the only one was the deal in west L. A but it had a lease buyout and I'm not sure it was per se a comparable deal.

Floris Van: Could we see in your opinion the stabilization of of cap rates. It appears that clearly the Santa Monica deal at a at a 9% cap rate that would be probably 200 basis points north of where it was maybe 18 24 months ago.

We gave you some data on partner buyouts that we did each one of those deals have different facts.

Floris Van: Maybe talk specifically about your view on what's happening to cap rates.

For example, the Santa Monica deal with an Unlevered fee simple cap rate well, that's got an assumption in there about land values. So.

Floris Van: Some of your key markets like New York, San Francisco, Boston D C or la.

And what.

How accurate and how usable is that cap rate I don't know, but we did just give you a three cap rates on deals in New York West La and Washington D. C. On partners that we bought out so that has some data.

Floris Van: And at what points would you.

Floris Van: Where do cap rates need to be for you to actually deploy more capital.

Speaker Change: Floris, you're asking a very good but unanswerable question and I'll explain why.

And then lastly in terms of what would be interesting to us.

We pay attention to what is the look through cap rate for DXP, and what would be accretive to us and today I think that number is around seven 5%.

Speaker Change: We tried try every quarter to give all of you comparable market deal. So we all understand together where pricing is and this quarter I cannot come up with one the only one was the deal in west La but it had a lease buyout and I'm not sure. It was per se a comparable deal.

We need to if we're going to do things and needs to accrete our earnings and so we're going to be focused on that look through cap rate as a guidepost for what we do.

Okay.

Speaker Change: We gave you some data on partner buyouts that we did each one of those deals have different facts.

Thank you.

This concludes our Q&A session at this time I would like to turn the call over to Owen Thomas Chairman and CEO for closing remarks.

Speaker Change: For example, the Santa Monica deal with an Unlevered fee simple cap rate well, that's got an assumption in there about land values. So.

I can't imagine you all want to hear any more remarks rollout. So I. Thank you for your patience. This a complicated quarter, we got through a lot of data and again. Thank you for your time and interest in DXP.

Speaker Change: <unk>.

Speaker Change: How accurate and how usable is that cap rate I don't know, but we did just give you a three cap rates on deals in New York West La and Washington D. C. On partners that we bought out so that is some data.

Thank you Sir This concludes today's conference call. Thank you for participating you may now disconnect good day.

Speaker Change: And then lastly in terms of what would be interesting to us.

Sure.

Speaker Change: We pay attention to what is the look through cap rate for DXP, and what would be accretive to us and today I think that number is around seven 5%.

Speaker Change: We need to if we're going to do things and needs to accrete our earnings and so we're going to be focused on that look through cap rate as a guidepost for what we do.

Speaker Change: Okay.

Thank you.

Speaker Change: This concludes our Q&A session at this time I would like to turn the call over to Owen Thomas Chairman and CEO for closing remarks.

Owen D. Thomas: I can't imagine you all want to hear any more remarks for us. So I. Thank you for your patience. This a complicated quarter, we got through a lot of data and again. Thank you for your time and interest in DXP.

Owen D. Thomas: Thank you Sir This concludes today's conference call. Thank you for participating you may now disconnect good day.

Owen D. Thomas: Okay.

Owen D. Thomas: Okay.

Owen D. Thomas: [music].

Owen D. Thomas: Okay.

Owen D. Thomas: Yes.

Owen D. Thomas: [music].

Owen D. Thomas: Okay.

Owen D. Thomas: Okay.

Owen D. Thomas: Thank you.

Owen D. Thomas: [music].