Q1 2024 American Assets Trust Inc Earnings Call
Operator: Good morning, and welcome to the American Assets Trust Incorporated first quarter 2024 earnings call. As a reminder, today's conference call is being recorded. Please note that statements made on this conference call include four looking statements based on current expectations, which statements are subject to risk and uncertainties discussed in the company's filings with the SEC. You are cautioned not to place undue reliance on these four looking statements as actual results could cause the company's results to differ materially from these four looking statements.
Good morning, and welcome to the American assets Trust incorporated first quarter 2024 earnings call. As a reminder, today's conference call is being recorded. Please note that statements made on this conference call.
Include forward looking statements based on current expectations, which statements are subject to risks and uncertainties discussed in the company's filings with the SEC You are cautioned not to place undue reliance on these forward looking statements as actual results could cause the companys results to differ materially from these forward looking statements yesterday afternoon American assets.
The earnings release, and supplemental information were furnished to the SEC On form 8-K, both are now available on the Investor Relations section of its website American assets Trust Dot Com. It is now my pleasure to turn the conference over to Mr. Ernest Rady, Chairman and CEO of American assets Trust. Please go ahead Sir.
Operator: Yesterday afternoon, American Assets Trust's earnings release and supplemental information were furnished to the SEC on form 8k. Both are now available on the investor relations section of its website, AmericanAssetsTrust.com. It is now my pleasure to turn the conference over to Mr. Ernest Rady, Chairman and CEO of American Assets Trust. Please go ahead.
Ernest Sylvan Rady: Good morning, everyone, and thank you for joining us. As we reflect on the first quarter of 2024, I am pleased to report, no, very pleased to report, that despite the challenging economic backdrop, American Assets Trust had a healthy start to this year. Our financial and operational performance met expectations in quarter one, and we are increasing our guidance for the rest of the year. No doubt a testament to the resilience of our diversified asset strategy and, of course, our people as well. Navigating Through Market Turbulence
Ernest Sylvan Rady: Good morning, everyone and thank you for joining us as we reflect on the first quarter of 'twenty 'twenty four I am.
Ernest Sylvan Rady: Pleased to report no very pleased to report that despite the challenging economic backdrop American assets Trust had a healthy start to this year.
Ernest Sylvan Rady: Financial and operational performance met expectations in quarter, one and we are increasing our guidance for the rest of the year no doubt a testament to the resilience of our diversified.
Asset strategy and of course, our people as well.
And navigating through market turbulence.
Ernest Sylvan Rady: Our strategy honed over the years has proven to create a stable foundation. We owe this resilience to several key factors, the strength of our diverse portfolio spanning irreplaceable assets. A conservative balance sheet bolstered by ample liquidity, an efficient operating platform, and just as important, if not more important, our talented employees. Each element guides us in making prudent business decisions, ensuring we maintain discipline in all aspects of our operations. This is as important as ever right now, particularly in the face of stubborn inflation and the unpredictable timing of the Fed's rate, if not even the potential for the Fed to raise rates.
Our strategy honed over the years has proven to create a stable foundation.
Ernest Sylvan Rady: We owe this resilience to several key factors.
Ernest Sylvan Rady: Strength of our diverse portfolio spanning irreplaceable assets.
But the balance sheet.
Ernest Sylvan Rady: Mr by ample liquidity.
Ernest Sylvan Rady: <unk> operating platform and justice important no more important our talented team.
Ernest Sylvan Rady: Each element guide Justin exercising prudent business decisions.
Ernest Sylvan Rady: We maintain discipline in all aspects of our operations. This is important as ever right now, particularly in the face of stubborn inflation and the unpredictable timing of the fed's rate cuts if not even the potential for the fed raising rates.
Ernest Sylvan Rady: We strive to position ourselves as best as possible, to be ready for whatever economic circumstances may arise in the future. Candidly, I've long believed that inflation is a tailwind for commercial real estate, particularly as replacement costs for properties like ours soar and rents continue to rise over time. Of course, diversification has long been central to our strategy. It not only provides income stability but also diversifies our tenant base, offers portfolio flexibility, and acts as a hedge against economic uncertainty.
Ernest Sylvan Rady: Strive to position ourselves as best as possible.
Ernest Sylvan Rady: To be ready for whatever economic circumstances may arise in the future candidly I belong believed emulation as a tailwind for commercial real estate.
Ernest Sylvan Rady: Particularly as replacement costs for properties like our soar and rents continue to rise overtime.
Ernest Sylvan Rady: Of course diversification has long been central to our strategy. It not only provides income stability, but also to diversify our tenant base offering portfolio flexibility and acts as a hedge against economic uncertainties.
Ernest Sylvan Rady: Additionally, it sets up for potential capital growth opportunities while bolstering our overall competitiveness in the market, especially during periods when public investors seek high-quality portfolios. My colleagues, Adam, Bob, and Steve, will cover our various asset segments, financial results, and updated guidance shortly. But first, I am pleased to announce that our Board of Directors, your Board of Directors, has approved a quarterly dividend of $0.335 per share for the second quarter. This decision reflects our confidence in our financial performance and underscores the Board's belief in our continued success. The dividend will be paid on June 20th to shareholders of record.
Ernest Sylvan Rady: Additionally, it sets up for potential capital growth opportunities, while bolstering our overall competitive competitors in the market, especially during periods when public investors seek high quality portfolio of my colleagues, Adam Bob and Steve will cover our bearish.
Ernest Sylvan Rady: Various asset segment financial results.
Speaker Change: David guidance, shortly but first I am pleased to announce that our board of directors. Your board of Directors has approved a quarterly dividend of <unk> 33, and one half cents per share for the second quarter. This decision reflects our confidence in our financial performance underscores the board's belief of our continued success.
Ernest Sylvan Rady: The dividend will be paid off June 20th to shareholders of record June six I'd like to express our sincere gratitude for your confidence and support and allowing them to steward Steward. Your company now I'll hand over to Adam to commence a deeper dive.
Ernest Sylvan Rady: I'd like to express our sincere gratitude for your confidence and support in allowing us to steward your company. Now I'll hand over to Adam to commence a deeper dive into our quarterly performance. Public. Adam, please.
Adam: Into our quarterly performance.
Adam: Sure.
Ernest Sylvan Rady: Adam Please thank you as Ernest mentioned, there is undoubtedly an ongoing flight to quality in commercial real estate, we fully embraced the sentiment acknowledging the appeal of our exceptional properties that are highly sought after by both our tenants and their customers are situated in prime locations near world renowned universities and innovation centers.
Adam Wyll: Thank you. As Ernest mentioned, there is undoubtedly an ongoing flight to quality in commercial real estate. We fully embrace this sentiment, acknowledging the appeal of our exceptional properties that are highly sought after by both our tenants and their customers. Situated in prime locations near world-renowned universities and innovation centers, our properties offer top-tier amenities, sustainability features, and readily available transit access, solidifying their status as premier offerings within our markets. And it certainly helps that we have the balance sheet to give tenants and brokers comfort that their tenant improvement allowances and leasing commissions will be paid, something that meaningfully differentiates us from many of our competitors.
Ernest Sylvan Rady: Our properties offer top tier amenities sustainability features and readily available transit access solidifying their status as premier offerings within our markets and it certainly helps and we have the balance sheet to give tenants and brokers comfort that their tenant improvement allowances and leasing commissions will get paid something that meaningfully differentiates us.
Ernest Sylvan Rady: For many of our competitors.
Adam Wyll: Along those lines, in our office portfolio, almost 50% of which has the LEED Platinum designation, we have continued to see a rise in office utilization across our over 4 million square feet of office property since year end. We are told by our tenants and their employees that the increased usage was driven meaningfully by our upgraded and repositioned buildings, functional outdoor spaces, fitness centers, integrated technology and conference centers, and cafe offerings at our office campuses, which are enhancing the user experience. We also work very closely with our tenants to further motivate their employee base to spend more time at the office.
Ernest Sylvan Rady: Along those lines in our office portfolio, almost 50% of which has lead platinum designation. We have continued to see a rise in office utilization across our over 4 million square feet of office properties since year end.
Ernest Sylvan Rady: We are told by our tenants and their employees that the increased usage was driven meaningfully by our upgraded and reposition buildings functional outdoor spaces fitness centers integrated technology and conference centers and cafe offerings at our office campuses that are enhancing the user experience. We also work very closely with our tenants to further motivate therein.
Ernest Sylvan Rady: <unk> base to spend more time at the office. We believe this has translated into higher utilization than competing projects in our markets and we will look to continue helping our tenants justify the commute to the office.
Adam Wyll: We believe this has translated into higher occupancy than competing projects in our markets, and we will look to continue helping our tenants justify the commutes to the office. Specifically, based on estimates that we received from both tenants and our own records, office utilization by our tenants in San Diego is between 70 and 80 percent. In Portland, it's between 65 and 75 percent. In Bellevue, it's between 60 and 65 percent.
Adam Wyll: Specifically based on estimates that were received from both tenants and our own records office utilization by our tenants in San Diego was between 70 and 80% in Portland, It's between 65 and 75% in Bellevue, It's between 60, and 65% and in San Francisco driven by our two anchor tenants at landmark is holding.
Adam Wyll: And in San Francisco, driven by our two anchor tenants at Landmark, it's holding steady at about 70 to 80 percent. No doubt foot traffic and use of amenity spaces at our properties have incrementally increased. On the retail front, which comprises 27% of our portfolio NOI, we are about 95% leased and have already renewed more than half of the retail lease expirations in our portfolio this year, with none remaining in excess of 5,000 square feet that aren't pending execution.
Ernest Sylvan Rady: Steady at about 70% to 80% no doubt foot traffic and use of amenities spaces at our properties have incrementally increased over the past several quarters.
Ernest Sylvan Rady: On the retail front, which comprises 27% of our portfolio NOI, we are about 95% leased and have already renewed more than half of the retail lease expirations in our portfolio. This year with non remaining in excess of 5000 square feet that aren't pending execution.
Adam Wyll: As expected, our comparable retail leasing spreads have maintained their positive trajectory with a 2% increase on a cash basis and a 22% increase on a straight line basis for Q1 deals. For what it's worth, excluding our renewal of one tenant at Kalakaua in Oahu that revised rents from $50,000 a month to $40,000 a month, our retail leasing spreads would have increased 6% and 28%, respectively. We believe our retail portfolio has been a source of resilience with its ability to generate steady, if not reliable, growth as we achieved our highest ever average base rent for our retail segment in Q1 since our IPO. Certainly, this is a testament to our best-in-class and efficiently managed retail properties that are absolutely dominant in their trade areas.
Ernest Sylvan Rady: As expected our comparable retail leasing spreads have maintained their positive trajectory with a 2% increase on a cash basis and a 22% increase on a straight line basis for Q1 deals for what it's worth excluding our renewal of one tenant at Calico and Oahu that revised rents from 50 Grand a month to 40 Grand a month.
Ernest Sylvan Rady: Our retail leasing spreads would have increased 6% and 28% respectively.
Ernest Sylvan Rady: We believe our retail portfolio has been a source of resilience with its ability to generate steady if not reliable growth as we achieved our highest ever average base rent for our retail segment in Q1 since our IPO. Certainly this is a testament to our best in class and efficiently managed retail properties that are absolutely dominant in their trade areas.
Adam Wyll: Moving on to our multifamily portfolio, and specifically with respect to our San Diego communities, in Q1, we ended the quarter with an occupancy percentage of 95% and leased percentage of 97%. We saw leases on vacant units rent at an average rate of approximately 5% decrease from prior rents. This is due in part to prior comparable master leases and prior month-to-month tenancies with higher rents, and several affordable units leased in Q1, included in the calculations, and general softness in Q1.
Ernest Sylvan Rady: Moving onto our multifamily portfolio and specifically with respect to our San Diego communities. In Q1, we ended the quarter with an occupancy percentage of 95% and leased percentage of 97%. We saw leases on vacant units ran at an average rate of an approximately 5% decrease from prior rents. This due in part to prior.
Adam Wyll: Comparable master leases and prior month to month tenancies with higher rents and several affordable units leased in Q1 included in the calculations and general softness in Q1.
Adam Wyll: While rates on renewed units increased by an average of 6% over prior rents, for a blended average just over flat, with minimal concessions offered, net effective rents for our San Diego multifamily leases are now 7.5% higher year over year compared to the first quarter of 2023. January began with softer rents, as expected; however, we've seen those rates picking up over the last month and are hopeful that trend will continue into our stronger spring and summer leasing seasons. Of note, a little over one-third of our San Diego apartments have had the same tenant for over three years, and those rents are, on average, about 24 percent below current market rates.
Ernest Sylvan Rady: While rates on renewed units increased an average of 6% over prior rents for a blended average just over flat with minimal concessions offered.
Adam Wyll: Net effective rents for our San Diego multifamily leases are now seven 5% higher year over year compared to the first quarter of 2023.
Ernest Sylvan Rady: January began with softer rents as expected. However, we've seen those rates picking up over the last month and are hopeful that trend will continue into our stronger spring and summer leasing seasons.
Adam Wyll: Of note a little over one third of our San Diego apartments have had the same tenant for over three years and those rents are on average about 24% below current market rates. So we expect the opportunity to push rents on those renewals to continue for the foreseeable future, particularly with the state imposed rent caps in place.
Adam Wyll: So we expect the opportunity to push rents on those renewals to continue for the foreseeable future, particularly with the state-imposed rent caps in place. In Q1 in Portland, at our Haslo and Aids multifamily community, we saw a blended decrease of approximately 2% between new move-ins and renewals, as we worked to push our lease percentage to just under 97% as of the end of Q1, with minimal concessions offered. We are hopeful that lower availability will enable us to continue to minimize concessions and help us push rents into Q2 with a goal of seeing a flat or possibly a slight increase in rates on a blended basis. Net effective rents for our multifamily leases at Haselo are up one and a half percent year over year compared to the first quarter of 2023.
Adam Wyll: In Q1 in Portland at our Hasler, one eight multifamily community. We saw a blended decrease of approximately 2% between new move ins and renewals as we work to push our lease percentage to just under 97% as of the end of Q1 with minimal concessions offered.
Adam Wyll: We are hopeful that lower availability will enable us to continue to minimize concessions and help us push rents into Q2 with a goal of being a flat or possibly a slight increase in rates on a blended basis net effective rents for our multifamily leases that have the lower up one 5% year over year compared to the first quarter of 2023.
Adam Wyll: No doubt Portland has had its share of challenges the past few years, from regulatory and political issues to labor shortages and civil disobedience, but there are some silver linings. First, Portland's new multifamily developments are getting absorbed with a small pipeline for new deliveries in Portland after this year, which could set the stage for future rent gains in the market later this year or next. Second, Portland remains very affordable compared to other major West Coast cities, not to mention its beautiful natural surroundings and parks.
Adam Wyll: No doubt Portland has had its share of challenges in the past few years from regulatory and political issues to labor shortages and civil disobedience, but there are some silver linings first portland's new multifamily developments are getting absorbed with a small pipeline for new deliveries in Portland. After this year, which could set the stage for future rent gains in the March.
Adam Wyll: Later this year or next.
Ernest Sylvan Rady: Second Portland remains very affordable compared to other major west coast cities not to mention with its beautiful natural surroundings, and parks and third population loss in Portland based on its challenges attributable to some degree due to poor government policies on drugs homelessness and police force has begun improving we think eventually Portland heads towards it.
Adam Wyll: And third, population loss in Portland, based on its challenges, attributable to some degree to poor government policies on drugs, homelessness, and the police force, has begun improving. We think Portland will eventually head towards a gradual economic recovery and growth as it rebounds from some of the issues it's been facing, particularly with the current mayor not running for re-election this fall. Meanwhile, it's worth noting that our multifamily portfolio achieved its highest ever average base rent in Q1 since our IPO.
Adam Wyll: A gradual economic recovery and growth as it rebounds from some of the issues that has been facing particularly with the current mayor not running for reelection. This fall. Meanwhile, it's worth noting that our multifamily portfolio achieved its highest ever average base rents in Q1 since our IPO.
Adam Wyll: Finally, you'll note that we added a property to our redevelopment pipeline and our Supplemental, and that is for the potential addition of multifamily units at our Loma Santa Fe Plaza retail shopping center in Solana Beach. There's nothing imminent on that front, but we have started a process in which we identified existing assets in our portfolio that we could potentially densify into mixed-use properties. Many of our properties are encumbered by REAs, CCNRs, or zoning that prohibits multifamily uses.
Ernest Sylvan Rady: Finally, you'll note that we added a property into our redevelopment pipeline in our supplemental and that is for the potential addition of multifamily units at our Lomas Santa Fe Plaza retail shopping center in Solana Beach, there's nothing imminent on that front, but we have started a process in which we identified existing assets in our portfolio that we could potentially densify.
Ernest Sylvan Rady: <unk> into mixed use properties. Many of our properties are encumbered by Ari as Cc and ours are zoning that prohibits prohibit multifamily users. So we've begun clearing those restrictions and we know for coastal opportunities like Lomas, Santa Fe Plaza, we will have to work through both local municipality as well as California Coastal Commission requirements.
Adam Wyll: So we've begun clearing those restrictions, and we know for coastal opportunities, like Loma Santa Fe Plaza, we'll have to work through both local municipality requirements as well as California Coastal Commission requirements. These processes could take four to six years, if not longer, to get the entitlements, even in areas starved for housing. The goal is for these potential developments to present compelling and accretive opportunities down the road when all the entitlements are achieved.
Adam Wyll: These processes could take four to six years, if not longer to get the entitlements even in the area of Starwood browsing. The goal is for these potential developments to present compelling and.
Adam Wyll: And accretive opportunities down the road when all the entitlements are achieved its all part of our barriers to entry thesis. These are truly irreplaceable infill development opportunities, particularly with the regulatory burdens that one must overcome to build with that I'll turn the call over to Bob to discuss financial results and updated guidance in more detail.
Adam Wyll: It's all part of our barriers to entry thesis. These are truly irreplaceable infill development opportunities, particularly with the regulatory burdens that one must overcome to build. With that, I'll turn the call over to Bob to discuss financial results and updated guidance in more detail.
Robert F. Barton: Thanks Adam, good morning everyone. Last night we reported the first quarter twenty-four. FFO per share was $0.71. First quarter 2024 net income attributed to common stockholders per share was $0.32. First quarter 2024 FFO increased by approximately $0.14 to $0.71 per FFO share compared to the fourth quarter of 2023, primarily due to the following. First, we received a $10 million cash settlement in January regarding specific specifications for one of our existing buildings in the UTC sub-market of San Diego, as previously mentioned on our Q423 call, which contributed approximately $0.13 per FFO share in Q1.
Bob: Thanks, Adam and good morning, everyone.
Bob: Last night, we reported first quarter 'twenty four.
Robert F. Barton: S F O per share of <unk> 71 says first quarter 2024, net income attributable to common stockholders per share was <unk> 32 cents.
Robert F. Barton: Second, our multifamily properties contributed approximately one cent of FFO per share of performance in Q1 2024 that was not previously included in our initial 2024 guidance. Third, our mixed-use properties contributed approximately $0.01 per FFO share of outperformance in Q1 2024 that was not previously included in our initial 2024 guidance due to higher-than-expected revenue at our Embassy Suites Waikiki Beach, Ohio.
Bob: First quarter 2024, <unk> increased by approximately 14 stance to 71 cents per <unk> share compared to the fourth quarter of 2023, primarily due to the following first we received a $10 million of cash settlement Jarrod in January <unk>.
Bob: Regarding specific specifications for one of our existing buildings in the UTC Submarket of San Diego.
Robert F. Barton: As previously mentioned on our Q4 'twenty three call, which contributed approximately 13 cents per <unk> share in Q1 second our multifamily properties contributed approximately one cent of peso per share about performance in Q1 2024.
Bob: It was not previously included in our initial 2024 guidance.
Bob: Third our mixed use properties contributed approximately one cent per episode share of outperformance in Q1 24 that was not previously included in our initial 2024 guidance due to higher than expected revenue at our embassy suites Waikiki Beach walk.
Robert F. Barton: And lastly, fourth, as noted in our earnings release, we reduced FFO by approximately one cent due to non-recurring costs incurred in prior periods related to construction and progress for then prospective construction within a retail segment that we determined to have no further value during 1Q24. Same store cash NOI for all sectors combined was 1.5% growth year over year for the first quarter. As noted in the earnings release, excluding the non-recurring construction and progress write-off, safe store cash NOI would have been 2.3%, breaking it out by segment.
Robert F. Barton: And lastly, fourth as noted on our earnings release, we reduced <unk> by approximately one cents due to nonrecurring costs incurred.
Robert F. Barton: Encourage a prior periods related to construction in progress, but then perspective construction within our retail segment that we determine to have no further value during <unk> 24.
Robert F. Barton: Same store cash NOI for all sectors combined was one 5% growth year over year for the first quarter.
Robert F. Barton: As noted in the earnings release, excluding the nonrecurring construction in progress.
Robert F. Barton: Same store cash NOI would have been two 3%.
Robert F. Barton: Breaking it out by segment.
Robert F. Barton: Our same store, Office Portfolios, NOI was flat in Q1, primarily due to a contractual renovation, renovation related to the release renewal at our landmark at one market property. Our Same Store Retail Portfolio's NOI was basically flat in Q1, primarily due to the one-time write-off of certain construction and progress expenses that I previously mentioned. Absent that write-off, the Retail Portfolio's Same Store Cash NOI grew by 2.9% compared to the prior period.
Bob: Our same store office portfolios NOI was flat in Q1, primarily due to contractual renovate ran abatement related to release of renewal at our landmark at one market property, our same store retail portfolios NOI.
Robert F. Barton: It was basically flat in Q1, primarily due to the onetime write off of certain construction in progress expenses that I previously mentioned.
Robert F. Barton: So that right off the retail portfolio same store cash NOI grew by two 9% compared to the prior year period.
Robert F. Barton: Our same-store multifamily portfolios NOI was a positive 5.1% in Q1 compared to the prior year period, primarily due to higher revenue at our San Diego multifamily properties, particularly Pacific Ridge. And our mixed-use portfolios NOI grew at 10.4 percent in Q1 compared to the prior year period, primarily due to higher revenue at the Embassy Suites, Waikiki, specifically. Q124 paid occupancy was approximately 90% compared to 82% in Q123. Q124 REPAR was $320 compared to $302 or $302 at Q123.
Robert F. Barton: Same store multifamily portfolios NOI was a positive five 1% in Q1 compared to the prior year period, primarily due to higher revenue at our San Diego multifamily properties, particularly Pacific Ridge.
Robert F. Barton: And our mixed use portfolios NOI grew at 10, 4% in Q1 compared to the prior year period, primarily due to higher revenue at the embassy suites Waikiki specifically.
Robert F. Barton: Q1, 'twenty four paid occupancy was approximately 90% compared to 82% in Q1 'twenty three.
Robert F. Barton: Q1, 'twenty four revpar was $320 compared to 302 or $302 in Q1 'twenty three.
Robert F. Barton: Q124 ADR was $356 compared to $369 in Q1'23. And lastly, Q1'24 NOI was approximately $3.5 million compared to $3.2 million in Q1'23. Our liquidity, at the end of the first quarter, we had liquidity of approximately $499 million, comprised of approximately $99 million in cash and cash equivalents and $400 million of availability on a revolving line of credit.
Robert F. Barton: Q1, 'twenty for ADR was three.
Robert F. Barton: $356 compared to 369 in Q <unk> Q1, 'twenty three and lastly, Q1 'twenty four NOI was approximately $3 5 million compared to $3 2 million in Q1 'twenty three.
Robert F. Barton: Our liquidity at the end of the first quarter, we had liquidity of approximately $499 million comprised of approximately $99 million in cash and cash equivalents and 400 million of availability on our revolving line of credit. Additionally, as of the end of the first quarter, our leverage which we.
Robert F. Barton: Additionally, as of the end of the first quarter, our leverage, which we measure in terms of net debt to EBITDA, was 5.7 times on a quarter annualized basis and 6.4 times on a trailing 12-month basis. Our objective is to achieve and maintain a net debt to EBITDA of 5.5 times or below. Our interest coverage at fixed charge coverage ratio, end of the quarter on a quarterly annualized basis of 4.1 times and at 3.6 on a trailing 12 month basis.
Robert F. Barton: Measure in terms of net debt to EBITDA was five seven times on a quarter annualized basis, and 6.4 times on a trailing 12 month basis.
Robert F. Barton: Our objective is to achieve and maintain a net debt to EBITDA of five and a half times or below our interest coverage and fixed charge charge coverage ratio ended the quarter on a quarter annualized basis of four one times and add 3.6 on a trailing 12 month basis.
Robert F. Barton: Let's talk about 2024 guidance. We are increasing our 2024 FFO per share guidance range to $2.24 to $2.34 per FFO share, with a midpoint of $2.29 per FFO share. An approximately 1.3% increase from our previously stated guidance issued on our Q4'23 earnings call that had a range of $2.19 to $2.33, with a midpoint of $2.26 per FFO share. Let's walk through the two items that make up most of the increase in our 2024 FFO guidance.
Robert F. Barton: Let's talk about 'twenty 'twenty four guidance.
Robert F. Barton: We are increasing our 2020 for F F O per share guidance range to $2 24.
Robert F. Barton: To $2.34 per <unk> share with a midpoint of $2 29 per <unk> share and approximately one 3% increase from our previously stated guidance issued on our Q4 23 earnings call that had a range of $2 19 to two.
Robert F. Barton: Dollars and 33 cents with a midpoint of $2 26.
Robert F. Barton: First, our office properties contributed an additional approximately $0.02 per FFO share from new leases and renewals signed in Q1 and Q2 that are not previously included in our 2024 guidance. Second, our multifamily properties contributed an additional approximately one cent per FFO share relating to performance in Q1-24 that was not previously included in our 2024 guidance. While we believe the 2024 guidance is our best estimate as of the date of this earnings call, we do believe that it is also possible that we could perform towards the upper end of this guidance. In order to do that, first, the majority of the office and retail tenants that we reserve for must continue to pay their rents through the year.
Robert F. Barton: Let's walk through the two items that make up most of the increase in our 2044 <unk> guidance.
Robert F. Barton: First our office properties contributed an additional approximately two cents per <unk> Boe share from new leases and renewals signed in Q1 and Q2 that are not previously included in our 2020 for guidance.
Robert F. Barton: Second our multifamily properties contributed additional approximately one cent per rep at Loews share about performance in Q1 24 that was not previously included in our 2020 for guidance.
Robert F. Barton: While we believe the 'twenty 'twenty four guidance is our best estimate as of the date of this earnings call. We do believe that it is also possible that we could perform towards the upper end of this guidance range in order to do that first the majority of the office and retail tenants that we reserved for must continue to pay their rent through the.
Robert F. Barton: A year.
Robert F. Barton: As of the end of Q1'24, we have approximately $0.07 of FFO per share reserved related to various tenants, which we believe the risk probability is more likely than not to occur in 2024. We continue to update our allocation of a percentage risk probability to those tenants that we are concerned about. Note that of the $0.07 in reserves, approximately 3 cents relates to office and 4 cents relates to retail.
Robert F. Barton: As of the end of Q1 'twenty four we have approximately seven cents of F F O per share reserved related.
Robert F. Barton: To various tenants, which we believe the risk probability is more likely than not to occur in 2024, we continue to update our allocation of a percentage risk probability to those tenants that we are concerned about.
Robert F. Barton: Note that of the seven cents and reserves.
Robert F. Barton: Approximately three cents relates to office enforced.
Robert F. Barton: Right.
Robert F. Barton: <unk> to retail sector.
Robert F. Barton: Second, we need to outperform our multifamily guidance by continuing to see increasing rents and occupancy, or less expensive. Third, tourism and travel to Waikiki needs to see a more meaningful return from our Japanese guests, which we are cautiously optimistic about, if not later this year, then in the ensuing years to come. It's just a matter of time.
Robert F. Barton: Second we need to outperform or multifamily guidance by continuing to see increasing rents and occupancy and are less expensive.
Robert F. Barton: Third tourism and travel to Waikiki needs to see more meaningful return from our Japanese guess, which we are cautiously optimistic about if not later this year than in the India suing years to come it's just a matter of time.
Robert F. Barton: Unfortunately, the Japanese yen has fallen to a decade's low relative to the U.S. dollar, which is stifling Japanese rebound travel to Hawaii. However, it is worth noting that in a recent report issued less than two weeks ago titled Honolulu, the Aloha Lodging Life, Green Street ranked Honolulu as one of the top-rated lodging markets in the USA with the highest long-term growth prospect for long-term vesting, citing three unique demand drivers as tourism, which relates to leisure and international demand.
Robert F. Barton: Fortunately the Japanese yen has fallen to a decades low relative to the U S dollar, which is stifling Japanese rebound travel to Hawaii.
Robert F. Barton: However, it is worth noting that in a recent report issued less than two weeks ago titled Honolulu, The Aloha, Lord lodging Light Green Street ranked Honolulu as what are the top rated lodging markets in the USA with the highest long term growth prospects for long term investors.
Robert F. Barton: Siding three unique demand drivers is tourism.
Robert F. Barton: As relates to leisure and international demand.
Robert F. Barton: Business orientation as it relates to transit Books and Regulation on Short-Term Rentals. On top of that, we would further note that over 70% of commercial real estate in Honolulu is on ground lease. But our properties in Waikiki and Waipua are in fee ownership, where we own both the land and the improvements, which is certainly more additive for long-term investors. As always, our guidance, our NOI bridge, and these prepared remarks exclude any impact on future acquisitions, dispositions, equity issuances and repurchases, future debt refinancings, or repayments other than what we've already discussed.
Robert F. Barton: Is this orientation.
Robert F. Barton: As it relates to transit bookings and regulation on short term rentals on top of that we would further note that over 70% of commercial real estate and Honolulu.
Robert F. Barton: On ground leases, but our properties in.
Robert F. Barton: Waikiki and white pool are odd fee ownership, where we own both the land and the improvements which is certainly more additive for long term investors.
Robert F. Barton: As always our guidance our NOI bridge in these prepared remarks exclude any impact from future acquisitions dispositions equity issuances and repurchases future debt refinancings or repayments other than what we've already discussed we will continue our best to be as transparent as possible and share with you our analysis of it.
Robert F. Barton: We will continue to do our best to be as transparent as possible and share with you our analysis and interpretation of our quarterly numbers. I also want to briefly note that any non-GAAP financial measures that we've discussed, like NOI, are reconciled to our GAAP financial statements in our earnings release and supplemental information. I'll now turn the call over to Steve Center, our Senior Vice President of Office Properties, for a brief update on our office segment.
Robert F. Barton: <unk> of our quarterly numbers I also wanted to briefly note that any non-GAAP financial measures that we discussed like NOI are reconciled to our GAAP financial statements in our earnings release and supplemental information I'll now turn the call over to Steve Center, Our senior Vice President of office properties.
Steve Center: For a brief update on our office segment, Steve. Thanks.
Steve Center: Rob, at the end of the first quarter, our office portfolio was 86.4% leased, an increase of 40 basis points over the prior quarter. While we continue to experience right-sizing of existing tenants and a few small office closings, they were more than offset by Q1 leasing activity as follows.
Steve Center: Thanks, Bob.
Steve Center: At the end of the first quarter. Our office portfolio was 86, 4% leased an increase of 40 basis points over the prior quarter.
Steve Center: While we continue to experience right sizing of existing tenants and a few small office closings they were more than offset by Q1 leasing activity as follows in the first quarter, we executed 18 leases totaling approximately 125000 rentable square feet as follows three.
Steve Center: In the first quarter, we executed 18 leases totaling approximately 125,000 rentable square feet, as follows: three comparable new leases for approximately 23,000 rentable square feet, with rent increases of 14% on a cash basis and 19% on a straight line basis, including leases with institutional tenants for approximately 10,000 rentable square feet at Boyd Center Tower in Portland and approximately 10,000 rentable square feet at the Coastal Collection Torrey Reserve in San Diego. We executed nine comparable renewal leases for approximately 58,000 rentable square feet, with rent increases of 6% on a cash basis and 8% on a straight line basis, including renewals with institutional tenants for 19,000 rentable square feet at La Jolla Commons 1 in San Diego, approximately 10,000 rentable square feet, and 18,000 rentable square feet at the Kosova Collection Torrey Reserve in San Diego.
Steve Center: Three comparable new leases for approximately 23000 rentable square feet.
Steve Center: Rent increases of 14% on a cash basis, and 19% on a straight line basis, including leases with institutional tenants for approximately 10000 rentable square feet at Lloyd Center tower in Portland, and approximately 10000 rentable square feet at the coastal collection Torrey reserve in San Diego.
Steve Center: We executed nine comparable renewal leases for approximately 58000 rentable square feet with rent increases of 6% on a cash basis and 8% on a straight line basis, including renewals with institutional tenants for 19000 rentable square feet at La Jolla Commons, one in San Diego approximately 10000 rentable square.
Steve Center: Our feet and 18000 rentable square feet at the Casa collection Torrey Reserve in San Diego.
Steve Center: And we executed six non-comparable leases totaling approximately 44,000 rentable square feet, including leases with institutional tenants for approximately 15,000 rentable square feet at City Center Bellevue, 8,000 rentable square feet at La Jolla Commons Tower 3 in San Diego, and approximately 8,000 rentable square feet and 7,000 rentable square feet at Oregon Square in Portland, and the leasing momentum has continued into Q2, as follows. We've executed four leases today totaling approximately 32,000 rentable square feet.
Steve Center: And we executed six non comparable leases totaling approximately 44000 rentable square feet, including leases with institutional pads for approximately 15000 rentable square feet at City Center Bellevue.
Steve Center: <unk> 8000, rentable square feet at La Jolla Commons tower, three in San Diego, and approximately 8000, rentable square feet and 7000 rentable square feet at Oregon Square in Portland.
Steve Center: And the leasing momentum has continued into Q2 as follows.
Steve Center: You've executed for leases today totaling approximately 32000 rentable square feet.
Steve Center: We have 10 prospective deals in the lease documentation phase totaling approximately $65,000 in rentable square feet. And looking ahead, we also have eight prospective deals in the negotiation and or planning phase totaling over $100,000 in rentable square feet, which includes two prospective deals totaling approximately 36,000 rentable square feet at La Jolla Commons Tower 3. Though there are no assurances that these deals will all close, we remain optimistic based on our current discussion. And while we are not immune to continued additional attrition due to current conditions, we believe that the attrition is waning and is currently being more than offset by the new leasing activity just discussed.
Steve Center: We have 10 prospective deals in the lease documentation phase totaling approximately 65000 rentable square feet and.
Steve Center: And looking ahead, we also have eight perspective deals in negotiation and or planning phase totaling over 100000 rentable square feet, which includes two perspective deals totaling approximately 36000 rentable square feet at La Jolla Commons tower three.
Steve Center: Though there are no assurances these deals will all close we remain optimistic based upon our current discussions.
Steve Center: And while we are not immune to continued additional attrition due to current conditions do you believe that the attrition is waning and is currently being more than offset by the new leasing activity just discussed were.
Steve Center: We're down to approximately 4% rolling in 2024, given deals signed here to date, with the average deal size of the remainder being approximately 5,500 rentable square feet. And we have approximately 7,000 feet, 7% of the portfolio rolling in 2025 with the average deal size of approximately 6,600 rentable square feet. I'll now turn the call back over to the operator for Q&A. Thank you.
Steve Center: Down to approximately 4% rolling in 2024, given deal signed year to date, but the average deal size of the remainder of approximately 5500 rentable square feet.
Steve Center: And we have approximately 7000 feet seven 7% of the portfolio Rolling in 2025, but the average deal size of approximately 6600 rentable square feet.
Speaker Change: I'll now turn the call back over to the operator for Q&A.
Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Todd Thomas. This is KeyBank Capital Markets. Please go ahead.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Todd Michael Thomas: If you're using a speakerphone please pick up your handset before pressing the keys.
Todd Michael Thomas: Anytime your question has been addressed and you would like to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
Operator: And the first question will come from Todd Thomas with Keybanc capital markets. Please go ahead.
Todd Michael Thomas: Hi, thanks. Good morning out there.
Todd Michael Thomas: Hi, Thanks.
Todd Michael Thomas: Good morning out there.
Todd Michael Thomas: For first question.
Todd Michael Thomas: Bob.
Todd Michael Thomas: In your guidance commentary that the office segment outperformed in the quarter by two cents versus your original guidance from from new and renewal leasing in the quarter and Steve.
Todd Michael Thomas: You know, first question, you know, Bob, you noted in your guidance commentary that the office segment outperformed in the quarter by 2 cents versus the original guidance from new and renewable leasing in the quarter. And Steve, you know, your commentary sounds encouraging around the pipeline. You know, do you feel that the office segment has turned the corner? You know, just given the pickup in demand here, are you, you know, feeling better about the 20, the balance of 24 and the 25 outlook?
Todd Michael Thomas: Your commentary sounds encouraging around the pipeline.
Todd Michael Thomas: Do you have do you feel that the office segment has has turned the corner.
Todd Michael Thomas: Just given the pickup in demand here or are you are you feeling.
Speaker Change: Better about the 20, the balance of 'twenty, four and twenty-five outlook.
Steve Center: Yes, in fact, two of the deals that were in proposals went to letter of intent yesterday, and then one of the leases that we're pending was signed this morning, and we just got one of the RFPs for a full floor at La Jolla Commons 3 last night. So, yes, it's picking up. And intents are responding more quickly. They're getting deeper into planning and really getting into the details. So we're encouraged by what we're seeing, and the pipeline is strong.
Speaker Change: Yes in fact.
Steve Center: Two of the deals that were in proposals went to letter of intent yesterday and then one of the leases that were pending sign this morning, and we just got the or one of the Rfps for a full floor at our La Jolla Commons through last night. So yes, it's picked up.
Steve Center: And.
Steve Center: That's removed responding more quickly.
Steve Center: We're getting deeper into planning and really get into the details. So we're encouraged by what we're seeing in <unk>.
Steve Center: The pipeline is strong.
Steve Center: And you wonder.
Steve Center: [inaudible] Yeah, last quarter, you talked about about 317,000 square feet of spec office leasing that was pushed out beyond 24 into 25, I think it was about five cents that it was weighing on on, you know, 2024. How much of this leasing is from that, you know, 317,000 square foot spec office bucket? Um, and and, you know, is there some of that traction, you know, from that square footage specifically?
Steve Center: Last quarter, you talked about.
Steve Center: 317000 square feet of spec office leasing that was pushed out.
Steve Center: <unk> 24 in the 25 I think it was about five cents.
Steve Center: On 2024, how much of this leasing is from that.
Steve Center: 317000 square foot spec office market.
Steve Center: And is there some of that traction you know from from that square footage specifically.
Steve Center: It is. In fact, there were three deals. One was a deal at Torrey Reserve for 10,000 feet that was not planned. Another was a renewal of a full floor at La Jolla Commons. One that wasn't planned. And then lastly, the first new lease at La Jolla Commons 3, which wasn't in the forecast. So, you know, we were being conservative, taking deals that weren't facing us at the time that we reviewed them and pushing them out. If we didn't have a, you know, if we weren't in proposals, we pushed them out to the next year. But we had several deals that just happened very quickly, which is great.
Steve Center: It is in fact, there were three deals.
Steve Center: One was a deal at Torrey reserve for 10000 feet that was not planned in other was a renewal of a full floor at La Jolla Commons one that wasn't planned and then lastly, the firstly Lee said.
Speaker Change: What are your comments, three which wasn't in the forecast so.
Steve Center: We were being conservative taking deals that werent facing us at the time that we reviewed it and pushed them out and we didn't have at you know if.
Steve Center: If you went and proposals we pushed it out to the next year, but we had several deals that just happened very quickly.
Steve Center: With which is great.
Steve Center: Okay, in your discussions with these tenants and with brokers, you know, what's kind of behind this potential change in demand that you're seeing and, and sort of the urgency it sounds like to execute leases, you know, what are you hearing? Or what are you sensing from them?
Steve Center: Okay.
Steve Center: In your discussions with these tenants with with brokers you know, what's what's kind of behind you now.
Speaker Change: Potential change in demand that you're seeing and sort of the urgency it sounds like to execute leases.
Steve Center: What are you hearing or what are you sensing from from them.
Steve Center: Well, first, you'll note that the deals that are signed are longer-term. You'll see our weighted average lease term has gone up, so people are now making decisions about their longer-term futures. Second, there is the flight to quality. They're coming out of existing spaces that may be commodity spaces, older buildings, so the flight to quality is for the amenities, but also to newer product or repositioned product. And in particular, at La Jolla Commons 3, it's about efficiency.
Steve Center: Well first you'll note that the deals that are signed or longer terms that you see our weighted average lease term has gone up. So people are are now making decisions on their longer term futures. A second there is the flight to quality that they're coming out of existing spaces that maybe commodity spaces older buildings. So the flight to quality to to the amenities, but also.
Steve Center: To newer product or reposition product.
Steve Center: And in particular at La Jolla Commons three it's about efficiency. So for example, I was on the phone list with one of our brokers yesterday and the question from a tenant that he represents he's honor landlord side. There's also a tenant rep broker. The question from the tenant is what are the what is the cost per seat, which.
Steve Center: So, for example, I was on the phone with one of our brokers yesterday, and the question from a tenant that he represents, he's on our landlord's side, but he's also a tenant representative broker, the question from the tenant is, what is the cost per seat? This is different than price per foot, which speaks to the efficiency of the floor plate of the building but also a desire to rationalize moving into a trophy versus a commodity building. So that's what we're saying. Of course, one other factor is, too, location.
Steve Center: Which is different than price per foot, which speaks to the efficiency of the floor plan. The building, but also a desired said rationalized moving into a trophy versus a commodity buildings. So.
Steve Center: That's what we're saying of course, one other factor too is location Oh My gosh, Yes is not we are not in downtown San Diego, which is a difficult place.
Steve Center: to his location. Hey Steve, Oh my gosh. This is not, we are not in downtown San Diego, which is a difficult place to get to. Where we are is at the forefront of where people want to go.
Steve Center: But where we are.
Steve Center: Forefront of where people want it.
Steve Center: It is. In fact, we were on the phone with a tenant yesterday that spoke about how unique UTC is and that it has many of the attributes of the CBD, but it's also got the best attributes of a suburb. Because in San Diego, Todd, as you know, people drive. They want to park their car and go to work, and so we have ample parking at the projects in UTC versus downtown, which is parked at one to two per thousand. They can't accommodate everyone,
Steve Center: It is in fact, we were on the phone with a tenant yesterday and spoke about how unique UTC isn't that has many of the attributes of CBD, but it's also got the best attributes of a suburb.
Steve Center: San Diego Todd as you know people drop they want a partner car and go to work in and so we have ample parking at the projects and UTC versus downtown which is part of 1% to two per thousand they can't accommodate everybody.
Steve Center: There's some thought that UTC might be the new center of San Diego. I believe we have the best building in that market. Well, you're right.
Steve Center: There's some thought that U T C might be the new center of San Diego and we believe we have the best buildings in that.
Steve Center: But.
Steve Center: Yeah.
Steve Center: Excellent location, what Youre right.
Steve Center: To speak to that, with the several prospects that we've got at La Jolla Commons 3, two are life science financing-based or technology or life science consulting firms that stand on the floor of the building and look at many of their customers, all the life science products that surround La Jolla Commons. So we're right in the middle of it. So the office guys can survey the life science prospective customers all around them, both in UTC and Horry Pines.
Steve Center: To speak to that with the several prospects that we've got at.
Steve Center: Boy a common stream.
Steve Center: To her life science financing based or technology or life science consulting firms.
Steve Center: Stan on the floor of the building and look at many of their customers all the life science product that surrounds.
Speaker Change: What are your comments.
Steve Center: So we're right in the middle of it. So the office guys can surveyed a life science perspective customers all around that both in UTC and Torrey pines.
Steve Center: And it's just from the mall to the transit has been added to just being right in the middle of the best housing markets in San Diego. It's just a great location. And, with all due immodesty, Steve's doing a great job. Thanks, Ernest.
Steve Center: And.
Steve Center: Just from the mall to that to that.
Steve Center: <unk> transit.
Steve Center: When added to just being right in the middle.
Steve Center: Of the best housing markets in San Diego, It's just a great location.
Speaker Change: And with all due modesty, Steve is doing a great job.
Todd Michael Thomas: All right, thanks. And just one last one for Bob, just curious if you can share any updated thoughts on the 2025 maturities, you know, I guess, you know, how you're thinking about refinancing those today. Ernest touched on, you know, the uncertainty around Fed rate decisions and interest rates going forward, you know, any changes at all to your thought process around, you know, financing.
Speaker Change: Alright, Thanks, and just one last one for Bob just curious if you can share any updated thoughts on the 2025 maturities you know I guess, you know how youre thinking about refinancing those today, you know aren't as touched on.
Todd Michael Thomas: The uncertainty around fed rate decisions and and interest rates going forward.
Todd Michael Thomas: It is at all to your thought process around you know financing.
Robert F. Barton: Yeah, thanks for the question. I don't think it's changed since our last call. I mean, we have the ability to either write a check for the July maturity or draw on the line of credit. There's nothing outstanding on the line of credit as we speak. I think one logical scenario would be to draw down on the line of credit for $100 million and then push that out. And then, again, we're looking at the rates weekly, and we have the ability to put together $425 million or $525 million and take out either a 5-year or a 10-year treasury, but we're taking a look at that.
Speaker Change: Yeah. Thanks for the question.
Robert F. Barton: I don't think it's changed since our last call I mean, we have the ability to either write a check for the July maturity or draw on our line of credit Theres nothing outstanding on our line of credit as we speak.
Robert F. Barton: I think one one logical scenario would be is to draw down on our line of credit for $100 million and then push that out.
Robert F. Barton: And then.
Robert F. Barton: Again, we're looking at the rates a weekly.
Robert F. Barton: We have the ability to put together.
Robert F. Barton: 425 million or $525 million.
Robert F. Barton: Take out either a five year or 10 year treasury, but we're taking a look at that.
Robert F. Barton: A lot of that's already been priced into our future modeling. So I mean, I think we're okay. We're not concerned about it. I think, for the big picture, we're in pretty good shape. I mean, everybody that goes through a refinance in 25 or 24, 25, you know, it's gonna be an increase in interest. But we've already modeled most of that. Good question.
Robert F. Barton: A lot of that has already been priced into our.
Robert F. Barton: Future.
Robert F. Barton: Modeling.
Robert F. Barton: So I mean I think we're okay. We're.
Robert F. Barton: We're not concerned about it I think from a big picture, we're in pretty good shape, I mean, everybody that goes through or refinanced in 'twenty five or.
Robert F. Barton: 'twenty four 'twenty five.
Robert F. Barton: It's going to.
Robert F. Barton: It's going to be an increase in interest expense, but we've already model most of that up.
Todd Michael Thomas: That's a good question. Thanks, Doc.
Speaker Change: That's a good question thanks Todd.
Speaker Change: Alright, great. Thank you.
Operator: The next question will come from Hendel St. Just with Mizzouho. Please go ahead.
Speaker Change: The next question will come from Handel St Juste with Mizuho. Please go ahead.
Operator: Hi, good morning. Hey, good morning. This is Ravi Vaidya on the line for Handel.
Operator: Handle.
Speaker Change: Hey, Good morning. This is Ravi gave you on the line here and hope.
Ravi Vijay Vaidya: I hope you guys are doing well here. I just wanted to ask about office leasing. It's kind of interesting where we noticed that the renewal TIs are greater than the new lease TIs. Is this something that you expect to continue? We've just seen the opposite happen with retail leases within your portfolio, within your peers. So I just wanted to follow up on that.
Ravi Vijay Vaidya: Hope you guys are doing well here.
Ravi Vijay Vaidya: Wanted to ask about the office leasing.
Ravi Vijay Vaidya: Interesting, where we noticed that the renewal or greater than that.
Ravi Vijay Vaidya: The new lease.
Ravi Vijay Vaidya: Is this something that you expect to continue we've just seen the opposite happened with retail leases within your portfolio within your peers just wanted to follow up on that.
Steve Center: It's a good question, and there's a good answer to it. Many of these renewals, these tenants have been in their spaces for 20 plus years, and with very little TI spent along the way. In fact, one of the tenants we renewed, California Bank and Trust, the total contribution over, I think, a 20-year period was $38 a foot. So when it came time to renew them for 10 years, it was essentially a new lease where they had to move out.
Speaker Change: It's a good question.
Steve Center: There is a good answer to it many of these renewals these tax had been in their spaces for 20 plus years.
Steve Center: And with very little.
Steve Center: Update T. I spent along the way in fact, one of the tenants, we renewed California Bank and trust. The total contribution over I think a 20 year period was $38 a foot. So when it came time to renew them for 10 years. It was essentially a new lease where they had to move out we provided swing space for them and they got into this space and completely rebuilt it we gave them 10 Bucks.
Steve Center: We provided swing space for them, and they gutted the space and completely rebuilt it. We gave them $10 a foot per year or $100 a foot in allowance. They spent another, what was it, $150 to $200 of their own money to outfit the space. And we got a premium rent for the deal, so the deal penciled all day long. So we're small enough that you have three or four of those in a quarter.
Steve Center: A foot per year or 100 Bucks a foot in the allowance. They spent another 150 to 200 of their own money.
Steve Center: At this space and we got a premium rent for the deal. So the deal penciled all day long, but so.
Steve Center: We're small enough that you have three or four of those in a quarter, it's going to escalate the weighted average ti's for that period.
Steve Center: It's going to escalate the weighted average TIs for that period. On the flip side, we just did a new lease with a tenant that I just talked about, a 10,000-footer, where the TIs were built out seven years ago, but they were so well done that our contribution to a new seven-year lease is less than $10 a foot. So you've got to look at it case by case. You can't really read it as a trend, and it just depends on the vintage and the quality of the space that's being implemented.
Steve Center: On the flip side, we just did a new lease with a tenant that I just talked about a 10000 foot or where the T is more built out seven years ago, but they were so well done that our contribution to a new seven year lease is.
Steve Center: Less than 10 Bucks a foot.
Steve Center: So you got to look at it case by case, you can't really read it as a trend in gist.
Steve Center: Hands on the vintage the quality of the space.
Steve Center: Being approved.
Steve Center: You got it. That's helpful. Then what information is a factor in the guys, for sure?
Speaker Change: Got it that's helpful.
Steve Center: And as a factor in the guidance for sure.
Steve Center: Oh, no questions. Costs are up.
Speaker Change: Oh no questions Kosovo.
Ravi Vijay Vaidya: Totally. Just, just one more here.
Steve Center: Totally.
Steve Center: Just one more here how are you thinking about the serious death note that's coming due later this summer.
Ravi Vijay Vaidya: And I.
Ravi Vijay Vaidya: I guess I'm, not saying that you would necessarily.
Ravi Vijay Vaidya: You mentioned that youre going to drawdown on the revolver and he has been.
Ravi Vijay Vaidya: Some different options here, but what do you estimate your cost increments of new 10 year money to be.
Ravi Vijay Vaidya: Okay.
Ravi Vijay Vaidya: How are you thinking about the Series F note that's coming due later this summer? And I guess, like, not saying that you would necessarily, you know, I know you mentioned that you're going to draw down the revolver and you have some different options here. But what do you estimate your cost of incremental new 10 year money to be?
Ravi Vijay Vaidya: Well Ravi it's a good question I think we just answered that with.
Ravi Vijay Vaidya: It was another a research analyst, but yeah, well for the maturity coming up in July.
Ravi Vijay Vaidya: And likely.
Ravi Vijay Vaidya: We will draw on our line of credits we have nothing outstanding today on it and we still have $100 million plus in cash on the balance sheet.
Robert F. Barton: Well, Ravi, it's a good question, but I think we just answered that with another research analyst. But yeah, for the maturity coming up in July, we'll likely draw on the line of credit. We have nothing outstanding today on it, and we still have $100 million plus in cash on the balance sheet. So I think overall we're in pretty good shape. I mean, if you look at it, the short-term cost is, you know, you're going to put a spread on the line of credit, you know, you'll probably be in the 6% neighborhood.
Robert F. Barton: Overall, we're pretty good shape I mean, I think if you look at it.
Robert F. Barton: Is the short term costs as youre going to put a put a spread on the line of credit you know you'll probably be in the six six.
Robert F. Barton: 6% neighborhood.
Robert F. Barton: But then longer, when you come to the refinance of other debt that matures in the first quarter, first and second quarter of 25. Likely we'll approach the market with either a five-year or ten-year or something that's appropriate that we'll discuss at the board and We'll you know, we have a history of getting the best rate at the vet, you know during whatever time we're in I can't tell you what that will be it fluctuates We've seen so much volatility in the last, you know, four months of the year, but I can tell you we'll do the best we can in terms of Refinancing those debt maturities and we've already modeled that into our 25 and 20 26 so we're comfortable where we are obviously would like it the interest rates to be lower, but We're as good in shape as anybody else and an interest rate
Robert F. Barton: But then longer when you come to the refined to the <unk>.
Robert F. Barton: Refinance.
Robert F. Barton: Other debt that matures in the first quarter.
Robert F. Barton: First and second quarter of 25.
Robert F. Barton: Likely we'll approach the market with either a five year or 10 year or something thats appropriate that will.
Robert F. Barton: I'll discuss at the board.
Robert F. Barton: Well you know we have a.
Robert F. Barton: A history of getting the best rate at about you know during whatever time, where in I can't tell you what that will be it fluctuates, we see them. So much volatility in the last you know.
Robert F. Barton: Four months of the year, but I can tell you we'll do the best we can.
Robert F. Barton: In terms of refinancing those debt maturities and we've already modeled that into our 'twenty five in 2020 six so we're comfortable where we are obviously, we'd like it the interest rates to be lower but.
Robert F. Barton: Whereas as good shape as anybody else.
Ernest Sylvan Rady: And interest rates stay high, and they create opportunities for us that we can visualize. The uncertainty in the world we live in today is really significant.
Robert F. Barton: If interest rates stay at.
Ernest Sylvan Rady: It creates opportunities for us.
Ernest Sylvan Rady: Is your life.
Ernest Sylvan Rady: The uncertainty in the World we live in.
Ernest Sylvan Rady: It's really significant.
Speaker Change: Thanks for the question.
Ravi Vijay Vaidya: Got it. Just, um, just, just one more here.
Speaker Change: Got it just I'm just just one more here.
Speaker Change: Speaking about Hawaii, I know that you know the Japanese tourists hasn't fully come back here given weakness in the yen, but what what are you seeing from demand.
Ravi Vijay Vaidya: Um, speaking about Hawaii, I know that, you know, Japanese tourists haven't fully come back here given, you know, weakness and again, but what are you seeing from demand domestically at your property? There's a lot of concern regarding the health of the consumer. But, you know, they're just wanting to see if that's translated to foot traffic and visitation.
Ravi Vijay Vaidya: Particularly at your property and there's a lot of concern regarding health of the consumer but you know there's.
Ravi Vijay Vaidya: Just wanted to see if that's translated to foot traffic and visitation central Waikiki.
Ravi Vijay Vaidya: That's the best domestic.
Robert F. Barton: Investing jury. Oh, at the embassy? Yeah, you know, Ravi, I think it's still somewhat muted. We're seeing Japanese tourism come back slowly. But if you look at the Japanese yen, I looked at it yesterday, it was what 157 to the dollar. And, you know, pre COVID, it was 108.
Ravi Vijay Vaidya: Domestic tourism to empathy Oh at the embassy Yeah, you know Ravi I think.
Robert F. Barton: Its still somewhat muted we're seeing Japanese.
Robert F. Barton: Tourism come back slowly.
Robert F. Barton: But if you if you look at the Japanese yen I looked at it yesterday it was.
Robert F. Barton: What $1 57.
Robert F. Barton: <unk> to the dollar.
Robert F. Barton: Pre COVID-19 it was one oh wait so it's it's difficult from a pricing power for the Japanese to come to Hawaii at this point in time, but those that can afford it love to come back to Waikiki. So you know what's been interesting is that the U S. West has really supported.
Robert F. Barton: So it's difficult for the price power for the Japanese to come to Hawaii at this point in time, but those that can afford it love to come back to Waikiki. So, you know, what's been interesting is that the US West has really supported occupancy. I mean, we had, I think what it is, I think we had 92% occupancy in the first quarter compared to something like 82% in the first quarter of the prior year. So we're, you know, we still have occupancy, but we're just not having the same tourism or the same guest experience. It's a great project.
Robert F. Barton: The occupancy I mean, we had.
Robert F. Barton: I think what it is I think we had 92% occupancy in the first quarter compared to something.
Robert F. Barton: Like 82% in first quarter of the prior year.
Robert F. Barton: So where we are.
Robert F. Barton: We're still.
Robert F. Barton: We still have occupancy, but we're just not having the same tourism or the same same guest experience. It is.
Robert F. Barton: It's a great property, and it's going to get occupied one way or another, so we're glad we got that property.
Robert F. Barton: Great property.
Robert F. Barton: It's gonna get occupied by one way or another so.
Robert F. Barton: Property level.
Robert F. Barton: Yes.
Ravi Vijay Vaidya: Got it. Thank you so much. Thank you, sir. Thank you, Ravi.
Speaker Change: Got it thank you so much.
Speaker Change: Thank you Sir Thank you Robyn.
Ernest Sylvan Rady: This concludes our question and answer session. I would like to turn the conference back over to Mr. Ernest Rady for any closing remarks. Please go ahead.
Ravi Vijay Vaidya: This concludes our question and answer session I would like to turn the conference back over to Mr. Ernest Rady for any closing remarks. Please go ahead.
Ernest Sylvan Rady: Thank you guys for your interest in our company. You know, we do the best for you, and we'll continue to do that. And we hope we come through this with finding some additional opportunities in addition to enjoying the quality of the properties that we do have. So, thank you.
Ernest Sylvan Rady: Thank you guys for your interest in our company you know we do the best for you and we'll continue to do that and we hope we come through this with finding some additional opportunities in addition to.
Ernest Sylvan Rady: Enjoying the quality of the properties that we do have so.
Ernest Sylvan Rady: Thank you.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: Yeah.
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Operator: Okay.
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unknown: [music].
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unknown: Yes.