Q1 2024 Paramount Group Inc Earnings Call - Q&A

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Speaker Change: Good day, ladies and gentlemen, thank you for standing by welcome to the Paramount Group first quarter 'twenty 'twenty four earnings conference call.

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

Operator: Welcome to the Paramount Group first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note that this conference call is being recorded today, May 2, 2024. I will now turn the call over to Tom Hennessy, Vice President of Business Development and Investor Relations. Thank you. You may begin.

Speaker Change: At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Operator: Please note that this conference call is being recorded today may 2nd 22024.

Operator: I will now turn the call over to Tom Hennessy, Vice President of business development and Investor Relations. Thank you you may begin.

Thomas Francis Hennessy: Thank you operator, and good morning, everyone before we begin I would like to point, everyone to our first quarter 2024 earnings release, and the supplemental information, which we released yesterday.

Thomas Francis Hennessy: Thank you, operator, and good morning everyone. Before we begin, I would like to point everyone to our first quarter 2024 earnings release and the supplemental information which were released yesterday. Both can be found under the heading Financial Results in the Investors section of the Paramount Group website at www.pgre.com. Additionally, some of our comments will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements, which are usually identified by the use of words such as will, expect, should, or other similar phrases, are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them.

Thomas Francis Hennessy: Both can be found under the heading financial result, the investors section of the Paramount group website at Www Dot P. Gerry Dot com.

Thomas Francis Hennessy: Some of our comments will be forward looking statements within the meaning of the federal Securities laws.

Thomas Francis Hennessy: Forward looking statements, which are usually identified by the use of words, such as will expect or other similar phrases are subject to numerous risks and uncertainties that could cause actual results differ materially from what we expect.

Thomas Francis Hennessy: Therefore, you should exercise caution in interpreting and relying on them.

Albert P. Behler: We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures, the most directly comparable gap measure, is available in our first quarter 2024 earnings release and our supplemental information.

Thomas Francis Hennessy: We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.

Albert P. Behler: During the call we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance.

Albert P. Behler: These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

Albert P. Behler: A reconciliation of these measures the most directly comparable GAAP measure is available in our first quarter 2024 earnings release and our supplemental information.

Albert P. Behler: Hosting the call today, we have Mr. Albert Behler, Chairman, Chief Executive Officer, and President of the company Wilbur pays Chief operating Officer, Chief Financial Officer, and Treasurer, and Peter Brindley Executive Vice President head of real estate manner.

Albert P. Behler: Hosting the call today, we have Mr. Albert Behler, Chairman, Chief Executive Officer, and President of the company; Wilbur Paes, Chief Operating Officer, Chief Financial Officer, and Treasurer, and Peter Brindley, Executive Vice President, Head of Real Estate. Management will provide some opening remarks, and we will then open the call to questions. With that, I will turn the call over to Albert.

Albert P. Behler: Management will provide some opening remarks, and we will then open the call to questions.

Albert P. Behler: With that I will turn the call over to Albert.

Albert P. Behler: Thank you, Tom, and thank you all for joining us today. Though it hasn't been long since we last spoke, we are excited to share our progress as we are off to a strong start in 2024. Yesterday, we reported core FFO of $0.22 per share for the first quarter, which was $0.01 above consensus. From an operational standpoint, we had a terrific quarter of leasing as well, carried the momentum we had in the fourth quarter of 2023 into the first quarter of 2024, and executed leases for about 277,000 square feet. To put it further in perspective, this represents our strongest first quarter of leasing since 2019. We continue to make progress on our availability in the Sixth Avenue corridor. Both 13016... and 1325-6.

Albert P. Behler: Thank you Tom and thank you all for joining us today.

Albert P. Behler: No. It hasnt been long since we last spoke we are excited to share our progress.

Albert P. Behler: We are off to a strong start in 2024.

Albert P. Behler: Yesterday, we reported core <unk> of 22 cents per share for the first quarter.

Albert P. Behler: Which was the one cent above consensus.

Albert P. Behler: From an operational standpoint, we had a terrific quarter of leasing as well.

Albert P. Behler: We carried the momentum we had in the fourth quarter of 2023.

Albert P. Behler: Into the first quarter of 2024 and executed leases or about 277000 square feet.

Albert P. Behler: To put it further in perspective this represents our strongest first quarter of leasing since 2019.

Albert P. Behler: We continued to make progress on all our availability in the sixth Avenue corridor.

Albert P. Behler: But you know one six and 13 twenty-five shakes dawn uptick and leased occupancy.

Albert P. Behler: Dawn Uptick and Leased Occupancy. While 1325.6 is full by any measure at 96.8% leased, 13016 saw the most meaningful increase this quarter with a 420 basis point increase in leased occupancy. This, of course, was driven by the new 74,000 square foot lease with Citizens Bank. We welcome Citizens Bank to the Paramount portfolio and are thrilled that we continue to add to our strong, high-quality tenant roster. The leasing activity in New York continues to improve, and we continue to pick up more than our fair share of that activity in the market.

Albert P. Behler: While at 13 25, six is supported by any measure at 96, 8% leased.

Albert P. Behler: Do you know one six so the most meaningful increase this quarter with a 420 basis point increase in leased occupancy.

Albert P. Behler: This of course was driven by the new 74000 square foot lease with citizens Bank.

Albert P. Behler: We welcome citizens bank to the Paramount portfolio and that spirit that we continued to add to our strong high quality tenant roster.

Albert P. Behler: The leasing activity in New York continues to improve and to continue to pick up more than our fair share of that activity in the market.

Albert P. Behler: The leases we signed during the quarter are a testament to the strength of our Class A assets and their ability to outperform the market in all different types of operating environments. Our class-leading buildings, situated in prime locations, continue to attract robust tenant demand. We are encouraged by the elevated level of leasing activity and remain confident in our ability to leverage the quality and strategic positioning of our portfolio to execute on our availability. Today, we also announce the official opening of Paramount Club at 1301 6th Avenue. The Paramount Club is a members-only club created exclusively for the tenants across our New York portfolio.

Albert P. Behler: The leases we signed during the quarter are a testament to the strength of our class a assets and the ability to outperform the market in all different types of operating environments.

Albert P. Behler: Our class leading buildings situated in prime locations continue to attract robust tenant demand.

Albert P. Behler: We are encouraged by the elevated level of leasing activity and remain confident in our ability to leverage the quality and strategic positioning of our portfolio to execute on our availabilities.

Albert P. Behler: Today, we also announced the official opening of Paramount Clap.

Albert P. Behler: It's fair to you know one six Avenue.

Albert P. Behler: SAP is a members only club green.

Albert P. Behler: Weighted exclusively for the tenants across our New York portfolio.

Albert P. Behler: This unique offering has undoubtedly aided in our ability to attract and retain top-tier office tenants by providing an exclusive on-site suite of amenities that enhances the work experience for our clients and The Employee. Paramount Club is quickly becoming a key differentiator in the market that will continue to drive leasing activity at 1301 and throughout our broader New York office portfolio. Adding to the excitement of carefully curated offerings for our tenants, the highly anticipated Michelin star-rated Tin Tai Fung is slated to open this quarter under the iconic glass cube in the plaza of our headquarters at 1633 Broadway.

Albert P. Behler: This unique offering has undoubtedly aided in our ability to attract and retain top tier office tenants by providing an exclusive onsite suite of amenities that enhances the work experience for our clients.

Albert P. Behler: And their employees.

Albert P. Behler: Hi, I'm on club is quickly becoming a key differentiator in the market. It's still continue to drive leasing activity that you know one and throughout our broader New York office portfolio.

Albert P. Behler: Adding to the excitement of carefully curated offerings to our tenants.

Albert P. Behler: The highly anticipated Michelin star rated in Thai fun.

Albert P. Behler: Slated to open this quarter under the iconic glass cube and the Plaza off our headquarters at 16 33 Broadway.

Albert P. Behler: Tenants and the broader New York market are abuzz about the opening, and we couldn't be happier. While certainly not at the same pace as New York, the market in San Francisco is starting to become more vibrant. The good news is that our assets are modernized, amenitized, and centrally located, and that will carry the day in attracting high-quality talent. During the quarter, we signed approximately 160,000 square feet of leases, including a 138,000 square foot short-term extension with KPMG at 55 2nd Street.

Albert P. Behler: And then and the broader New York market.

Albert P. Behler: Buzz about the opening and we couldn't be happier.

Albert P. Behler: Well it certainly not at the same pace as in New York the market in San Francisco is starting to become more vibrant.

Albert P. Behler: The good news is that our assets are modernized and monetized and centrally located.

Albert P. Behler: And that will carry the day and attracting high quality tenants.

Albert P. Behler: During the quarter, we signed approximately 160000 square feet of leases, including 138000 square foot short term extension with KPMG at 55 second Street.

Albert P. Behler: Peter will provide additional color on this in our leasing pipeline. As we touched on last call, during the quarter, we modified and extended the existing mortgage loan at One Market Plaza in San Francisco. The previous $975 million loan was extended by three years and was reduced to $850 million, following a $125 million paydown by the joint venture.

Albert P. Behler: Peter will provide additional color on this and our leasing pipeline.

Albert P. Behler: As we touched on last call during the quarter, you modified and extended the existing mortgage loan at one market Plaza in San Francisco. The previous 975 million loan was extended by three years and bus reduced to 850 million falling yet one.

Albert P. Behler: 25 million pay down by the joint venture.

Albert P. Behler: This loan modification is a terrific result and a testament to the quality of the asset and the commitment of this sponsorship. This quarter, we reached a resolution with the landing group on 60 walls. The modified and extended loan is now set to mature in May 2029.

Albert P. Behler: This loan modification is a terrific result, and a testament to the quality of the asset and the commitment of this sponsorship.

Albert P. Behler: This quarter, we reached a resolution with the lending group on 60 Wall Street.

Albert P. Behler: The modified and extended loan is now set to mature in May 2029.

Albert P. Behler: While Wilbur will discuss the financing in greater detail, the extended term allows us and our partners the appropriate runway to execute our business. 60 Wall Street will be redeveloped to today's standards and will redefine the standard of redeveloped assets in the financial district. The fully redeveloped assets, which have been designed by Corn, Patterson, Fox, will have a new glass facade on the podium floors that will replace the existing facade and allow for ample natural light into the base of the building. It will also feature a new grand staircase and a 100 foot high vertical green wall.

Albert P. Behler: While <unk> will discuss our financing in greater detail. The extended term allows us and our partner so appropriate runway to execute our business plan.

Albert P. Behler: 60 wall will be redeveloped to today's standards.

Albert P. Behler: We will redefine the standard of Redeveloped assets in the financial District.

Albert P. Behler: Fully redeveloped assets, which has been designed by corn Pedersen Fox will have a new glass for sat on the podium flaws.

Albert P. Behler: Place existing facade and allow for ample natural light into the base of the building.

Albert P. Behler: It will also feature a new grand staircase, and a 100 foot high vertical green ball.

Albert P. Behler: The redevelopment is underway, and I encourage you to check out our website for additional information regarding the project. Shifting to the broader transaction market, the environment remains muted, though the volume of deals coming to market has begun to pick up. We still believe the environment will become more dynamic in the year ahead as the white bid-ask spreads that have kept many prospective buyers and sellers on the sidelines begin to narrow. Additionally, we foresee an increase in distressed assets coming to the market, which could present compelling acquisition opportunities, as elevated interest rates may be around a bit longer than expected.

Albert P. Behler: The redevelopment is underway and I encourage you to check out our website for additional information regarding the project.

Albert P. Behler: Shifting to the broader transaction market environment remains muted so the volume of deals coming to market has begun to pick up.

Albert P. Behler: We still believe the environment will become more dynamic in the year ahead as wide bid ask spreads that have kept many prospective buyers and sellers on the sidelines begin to narrow.

Albert P. Behler: Additionally, we foresee an increase in distressed assets coming to the market, which could present compelling acquisition opportunities as elevated interest rates may be around a bit longer than expected.

Albert P. Behler: We will remain poised and judicious in allocating capital towards external growth opportunities, and only together with third parties, leveraging our deep market expertise and disciplined investment approach. Turning to sustainability. We are proud to announce that we have been awarded the 2024 Energy Star Partner of the Year award from the EPA and the Department of Energy for the third consecutive year. This is a testament to our commitment to sustainability and our efforts to achieve energy star labels across 100% of our office portfolio, totaling 11.3 million square feet, executing on initiatives that reduce our environmental impact and operating costs. To our mission as a responsible real estate owner.

Albert P. Behler: We will remain poised and judicious and allocating capital towards external growth opportunities and only together with third parties.

Albert P. Behler: Leveraging our deep market expertise and disciplined investment approach.

Albert P. Behler: Turning to sustainability.

Albert P. Behler: We are proud to announce that we have been awarded the 2024 energy Star partner of the year Award from the E. P. A.

Albert P. Behler: The department of energy for the third consecutive year.

Albert P. Behler: This is a testament to our commitment to sustainability and our efforts to achieve energy star labeled across 100% of our office portfolio totaling 11 3 million square feet.

Albert P. Behler: Executing on initiatives to reduce our environmental impact and operating cost is core to our mission as a responsible real estate owner.

Albert P. Behler: Our participation in the ENERGY STAR program exemplifies this commitment, benefiting both our company and the tenants who collaborate with us on these sustainability efforts. ESG principles are of paramount importance to us and our tenant base. Upholding strong ESG practices will remain a key strategic priority as we continue to create long-term value for our shareholders and elevate the tenant experience across our portfolio. In closing, the performance of this quarter gets us excited about 2024 and confident in executing on our strategy and the direction we are heading. Our Class A buildings and the coastal gateway markets in which we operate are resilient. With that, I will turn the call over to Peter.

Albert P. Behler: But especially in the energy Star program exemplifies this commitment.

Peter: Benefiting both our company and the tenants who collaborate with us on these sustainability efforts.

Peter: Yes G principles are of Arrow.

Peter: <unk> importance to us.

Peter: And our tenant base.

Peter: Upholding strong ESG practices will remain a key strategic priority.

Peter: As we continue to create long term value for our shareholders and elevate the tenant experience across our portfolio.

Peter: In closing the performance of this quarter gets us excited about 2024 and confident in executing on our strategy and the direction we are heading.

Peter: Our class a buildings and the coastal gateway markets in which we operate a resilient.

Albert P. Behler: With that I will turn the call over to Peter.

Peter: Thanks, Albert and good morning during the first quarter, we leased approximately 277000 square feet with approximately 117000 square feet in New York and approximately 160000 square feet in San Francisco.

Peter R.C. Brindley: Thanks, Albert, and good morning. During the first quarter, we leased approximately 277,000 square feet, with approximately 117,000 square feet in New York and approximately 160,000 square feet in San Francisco. The weighted average term of leases signed during the first quarter was 7.9 years. Our New York activity was highlighted by the 74,000-square-foot lease we signed at 1301 Avenue of the Americas with Citizens Bank for an initial 15-year term. In addition to welcoming Citizens Bank to the New York portfolio, we expanded several existing Paramount tenants, a trend we are seeing with an increasing number of tenants in New York, particularly law firms and financial service companies.

Peter R.C. Brindley: The weighted average term of leases signed during the first quarter was seven nine years.

Peter R.C. Brindley: Our New York activity was highlighted by the 74000 square foot lease we signed at 13 O. One Avenue of the Americas. The citizens Bank for an initial 15 year term.

Peter R.C. Brindley: In addition to welcoming citizens bank to the New York portfolio, we expanded several existing Paramount tenants.

Peter R.C. Brindley: Trend, we are seeing with an increasing number of tenants in New York, particularly with law firms and financial service companies.

Peter R.C. Brindley: In San Francisco, our first quarter leasing was driven largely by the 138000 square foot lease extension, we completed with KPMG and a 19000 square foot lease we completed with the growing AI based company.

Peter R.C. Brindley: In San Francisco, our first quarter leasing was driven largely by the 138,000-square-foot lease extension we completed with KPMG and a 19,000-square-foot lease we completed with a growing AI-based company. We continue to execute on our business plan, as evidenced by our solid first quarter performance.

Peter R.C. Brindley: We continue to execute on our business plan as evidenced by our solid first quarter performance.

Peter R.C. Brindley: Tenants continue to prioritize the highest-quality assets in our two markets, choosing to pursue centrally located, amenity-rich buildings run by best-in-class, well-regarded, and well-capitalized owners. Our portfolio is uniquely positioned to capitalize on these pronounced trends. As a result, our pipeline is growing.

Peter R.C. Brindley: Tenants continue to prioritize the highest quality assets now are two markets choosing to pursue centrally located amenity rich buildings run by best in class well regarded well capitalized owners.

Peter R.C. Brindley: Our portfolio is uniquely positioned capitalize on these pronounced trends.

Peter R.C. Brindley: As a result, our pipeline is growing.

Peter R.C. Brindley: We remain focused on delivering exceptional service to our tenants, renewing existing tenants with expirations over the next several years, and leasing vacant space in our portfolio. Currently, we have leases in negotiation and advanced stage proposals for more than 300,000 square feet, a good portion of which is for vacant or soon-to-be-vacant space. Beyond the 300,000 square feet, our pipeline continues to grow with ongoing negotiations at various stages.

Peter R.C. Brindley: We remain focused on delivering exceptional service to our tenants renewing existing tenants with explorations over the next several years and leasing vacant space in our portfolio.

Peter R.C. Brindley: Currently we have leases in negotiation and advanced stage proposals for more than 300000 square feet. A good portion of which is for vacant or soon to be vacant space.

Peter R.C. Brindley: Beyond the 300000 square feet, our pipeline continues to grow with ongoing negotiations at various stages.

Peter R.C. Brindley: At quarter end, our same store portfolio wide leased occupancy rates at share excluding noncore assets.

Peter R.C. Brindley: At quarter end, our same-store portfolio-wide leased occupancy rate at share, including non-core assets, was 89.1%, down 100 basis points from last quarter and down 190 basis points year-over-year. As we look ahead, our remaining lease expirations are manageable. 7.4% of annualized rent, or approximately 562,000 square feet at share, expiring by year-end. Turning to our markets, Midtown's first quarter leasing activity of approximately 3.71 million square feet, excluding renewals, surpassed the five-year quarterly average for the second consecutive quarter and was the strongest start to the year in Midtown since Q1 2020.

Peter R.C. Brindley: 89, 1% down 100 basis points from last quarter, and down 190 basis points year over year.

Peter R.C. Brindley: As we look ahead, our remaining lease explorations are manageable with seven 4% of annualized rent or approximately 562000 square feet at share expiring by year end.

Peter R.C. Brindley: Turning to our markets Midtown is first quarter leasing activity of approximately $3 seven 1 million square feet, excluding renewals, they're passed a five year quarterly average for the second consecutive quarter and was the strongest start to the year in Midtown since Q1 2020.

Peter R.C. Brindley: The steadily improving demand profile in Midtown has been most evident within Midtown's core sub-market, as tenants increasingly pursue the highest quality real estate with close proximity to public transportation. Availability in Midtown remains elevated at 18.1%, and absorption was slightly negative during the first quarter. Sublease activity in Midtown continues to decline, down 13% from the high set in February 2023.

Peter R.C. Brindley: The steadily improving demand profile in Midtown has been most evident within Midtown core sub markets.

Peter R.C. Brindley: As tenants increasingly pursue the highest quality real estate with close proximity to public transportation.

Peter R.C. Brindley: Availability in Midtown remains elevated at 18, 1% and absorption was slightly negative.

Peter R.C. Brindley: During the first quarter.

Peter R.C. Brindley: Sublease activity in Midtown continues to decline down 13% from the high set in February 2023.

Peter R.C. Brindley: Tour activity continues to accelerate, and we are experiencing growing demand for our high-quality assets in our New York portfolio. A tailwind for attracting top-tier prospects and retaining existing tenants has been the launch of our market-leading, members-only Paramount Club at 1301 Avenue of the Americas, which opened today. Membership is offered to tenants in our New York portfolio. This project embodies our belief that enterprises thrive in community, not in isolation. The Paramount Club serves as a central hub where members of our New York portfolio can connect and enjoy unmatched conveniences and enriching experiences.

Peter R.C. Brindley: Tour activity continues to accelerate and we are experiencing growing demand for our high quality assets in our New York portfolio.

Peter R.C. Brindley: A tailwind and attracting top tier prospects and retaining existing tenants has been the launch of our market leading members only paramount plug at 13 O. One Avenue of the Americas, which opened today.

Peter R.C. Brindley: Membership is offered to tenants and our New York portfolio.

Peter R.C. Brindley: This project embodies our belief that enterprises thrive and community not in isolation.

Peter R.C. Brindley: Paramount club serves as a central hub, where members of our New York portfolio can connect and enjoy unmatched conveniences and enriching experiences.

Peter R.C. Brindley: Dining in the Atrium Bar & Lounge, hosting a conference, recording a podcast, watching the Paris Olympics in the Game Room, wine tastings, and classes in the Wellness Center are just some of the opportunities from which to choose.

Peter R.C. Brindley: Dining in the atrium bar and lounge hosting a conference recording a podcast watching the Paris Olympics in the game room wine tastings and classes in the Wellness Center are just some of the opportunities from which to choose.

Peter R.C. Brindley: Our New York portfolio is currently 91% leased on a same store basis net share.

Peter R.C. Brindley: Our New York portfolio is currently 90.1% leased on a same-store basis at share, down 10 basis points both quarter over quarter and year over year. Our overall lease expiration profile in New York is manageable, with 8.4% of annualized rent, or approximately 476,000 square feet at share, expiring by year-end. Shifting our focus to San Francisco, San Francisco recorded approximately 1.4 million square feet of leasing during the first quarter, 14.4% above the pandemic era quarterly average, but 40.3% below the quarterly average during the preceding 10 years.

Peter R.C. Brindley: 10 basis points, both quarter over quarter and year over year.

Peter R.C. Brindley: Our overall lease exploration profile in New York is manageable with eight 4% of annualized rent or approximately 476000 square feet at share expiring by year end.

Peter R.C. Brindley: Shifting our focus to San Francisco.

Peter R.C. Brindley: Dan Francisco recorded approximately $1 4 million square feet of leasing during the first quarter 14, 4% above the pandemic era quarterly average, but 43% below the quarterly average during the preceding 10 year period.

Peter R.C. Brindley: Tenants in the market demand have grown to more than 6 million square feet, the highest it has been since Q1 2020. This increase has been driven, in part, by the emergence of newly funded San Francisco-based AI companies. Many of these AI-based requirements are early-stage entities that have become an increasingly large percentage of the demand pipeline in San Francisco. These requirements, coupled with the larger AI requirements, will contribute to the absorption of availability, particularly for built space, which is necessary for San Francisco to return to healthier market fundamentals.

Peter R.C. Brindley: Tenants in the market demand has grown to more than 6 million square feet. The highest it has been since Q1 2020.

Peter R.C. Brindley: This increase has been driven in part by the emergence of newly funded San Francisco based AI companies.

Peter R.C. Brindley: Many of these AI based requirements are early stage entities, which have become an increasingly large percentage of the demand pipeline in San Francisco.

Peter R.C. Brindley: These requirements coupled with the larger AI requirements will contribute to the absorption of availability, particularly for built space, which is necessary for San Francisco to return to healthier market fundamentals.

Peter R.C. Brindley: Despite challenges in the market San Francisco remains a hotbed for Premier Tech talent with high growth potential.

Peter R.C. Brindley: Despite challenges in the market, San Francisco remains a hotbed for premier tech talent with high growth potential. Our high-quality portfolio is well-positioned to capture outsized market share as the recovery continues. At quarter end, our San Francisco portfolio was 85.5% leased on a same-store basis at share, down 430 basis points quarter over quarter and down 820 basis points year over year. Looking ahead, our San Francisco portfolio has 4.7% of annualized rent or approximately 86,000 square feet at share, aspiring by year rent. We look forward to updating you on our progress. With that summary, I will turn the call over to Wilbur, who will discuss the financial results.

Wilbur: Our high quality portfolio is well positioned to capture outsized market share as the recovery continues San Francisco.

Wilbur: At quarter end, our San Francisco portfolio was 85, 5% leased on a same store basis at share down 430 basis points quarter over quarter down 820 basis points year over year.

Wilbur: Looking ahead, our San Francisco portfolio has four 7% of annualized rent or approximately 86000 square feet at share firing by yearend.

Wilbur: We look forward to updating you on our progress.

Peter R.C. Brindley: With that summary, I will turn the call over to Wilbur, who will discuss the financial results.

Wilbur: Thank you Peter and good morning, everyone.

Wilbur Paes: Thank you, Peter, and good morning, everyone. Yesterday, we reported core FFO of $0.22 per share, which is $0.01 above first quarter Wall Street consensus estimates and $0.03 below the prior year's first quarter. The $0.03 decline from the prior year was driven by negative same-store growth of 1.5% on a cash basis and 3.5% on a gap basis, primarily due to scheduled lease expirations in the portfolio and Higher Interest Expense. Looking at the same store results of each of our operating businesses, the New York portfolio was down 2.9% on a cash basis and down 1.1% on a gap basis, while the San Francisco portfolio was up 1.9% on a cash basis and down 9.2% on a gap basis.

Wilbur Paes: Yesterday, we reported core <unk> of <unk> 22 cents per share.

Wilbur Paes: Which is one cent above first quarter Wall Street consensus estimates.

Wilbur Paes: <unk> <unk> below the prior year's first quarter.

Wilbur Paes: The <unk> decline from the prior year was driven by negative same store growth of one 5% on a cash basis and three 5% on a GAAP basis.

Wilbur Paes: Mali due to scheduled lease expirations in the portfolio.

Wilbur Paes: And higher interest expense.

Wilbur Paes: Looking at the same store results of each of our operating businesses. The New York portfolio was down two 9% on a cash basis and down one 1% on a GAAP basis.

Wilbur Paes: While the San Francisco portfolio was up one 9% on a cash basis and down nine 2% on a GAAP basis.

Wilbur Paes: During the first quarter, we completed 276717 square feet of leasing at a weighted average starting rent of $68.82 per square foot and for a weighted average lease term of seven nine years.

Wilbur Paes: During the first quarter, we completed 276,717 square feet of leasing at a weighted average starting rent of $68.82 per square foot and for a weighted average lease term of 7.9 years. Marked to markets on 94,975,000 square feet of second-generation space was negative 4.1% on a cash basis and negative 17.7% on a gap basis. The negative 17.7% gap mark to market was driven by the short-term KPMG lease renewal at 55 2nd Street in our San Francisco portfolio.

Wilbur Paes: Mark to markets on 94970, 5000 square feet of second generation space was negative four 1% on a cash basis and negative 17, 7% on a GAAP basis.

Wilbur Paes: The negative 17, 7% GAAP Mark to market was driven by the short term KPMG lease renewal at 55 second Street in our San Francisco portfolio.

Wilbur Paes: As you may recall, this asset was acquired back in 2019, and at the time of acquisition, the prior lease was required to be fair valued in accordance with GAAP. So essentially, the prior GAAP rent was comprised of three components: a cash rent, a straight line rent adjustment, and a FAS 141 fair value adjustment. The current gap rent does not include a FAS 141 fair value adjustment.

Wilbur Paes: As you May recall this asset was acquired back in 2019 and at the time of acquisition. The prior lease was required to be fair valued in accordance with GAAP.

Wilbur Paes: Essentially the prior GAAP rent was comprised of three components.

Wilbur Paes: Cash rent straight line rent adjustment and a fast 141 fair value adjustments.

Wilbur Paes: The current GAAP rent does not include a fast 141 fair value adjustment.

Wilbur Paes: So if you were to exclude the FAS 141 fair value adjustment from the prior gap rent, the mark-to-market would have been negative 2.2 percent. Turning to our balance sheet, we had a very active quarter on the financing front. We modified and extended the previously announced loan at One Market Plaza and, more recently, the $575 million loan at 60 Wall Street. In fact, over the past six months, we have modified and extended over 1.8 billion of maturing debt and pushed out their weighted average maturities by over three and a half years, no small feat in this challenging capital markets environment.

Wilbur Paes: If you were to exclude the Fas 141 fair value adjustment from the prior GAAP rent Mark to markets would have been negative two 2%.

Wilbur Paes: Turning to our balance sheet.

Wilbur Paes: Had a very active quarter on the financing front.

Wilbur Paes: At 60 Wall, the modified loan was bifurcated into a $316 million A note and a $259 million B note, and the maturity was extended to May 2029. The A note will accrue interest at SOFR plus 245, but only 4% is current pay, while the remaining balance is cash. The entirety of the B note is pink and will accrue interest at 12 percent. The B note and the PIC interest on both the A and B notes will be subordinate to the equity invested by the joint venture.

Wilbur Paes: We modified and extended the previously announced loan at one market Plaza and more recently the $575 million alone at 60 Wall Street.

Wilbur Paes: In fact over the past six months, we have modified and extended over one 8 billion of maturing debt and pushed out our weighted average maturities by over three and a half years.

Wilbur Paes: No small feat in this challenging capital markets environment.

Wilbur Paes: At 60 wall. The modified loan was bifurcated into a $360 million a note and a $259 million B note and the maturity was extended to May 2029.

Wilbur Paes: The notes will accrue interest at software plus $2 45, but only 4% is current pay while the remaining is pick.

Wilbur Paes: The entirety of the B note as Pik and will accrue interest at 12%.

Wilbur Paes: The B note and the Pik interest on both the a and B notes will be subordinate to the equity invested by the joint venture with <unk>.

Wilbur Paes: The joint venture plans to invest approximately $250 million to reposition the asset, of which our 5% share, prior to any fees earned for development and asset management, is approximately $12.5 million. Our liquidity position remains strong. We ended the quarter with $412 million of cash and restricted cash at share, which is down $56.7 million from year-end, driven by our share of the loan paydown at one market plaza. We have the full $750 million of undrawn capacity under our revolver, bringing total liquidity to approximately $1.2 billion.

Wilbur Paes: <unk> venture plans to invest approximately $250 million to reposition the asset of which our 5% share prior to any fees on the development and asset management is approximately $12 5 million.

Wilbur Paes: Our liquidity position remains strong we ended the quarter with $412 million of cash and restricted cash of share, which is down $56 7 million from year end driven by our share of the loan pay down at one market Plaza.

Wilbur Paes: We have the full 750 million of Undrawn capacity under our revolver, bringing total liquidity to approximately $1 2 billion.

Wilbur Paes: Our outstanding debt at quarter end was $3 6 billion at a weighted average interest rate of 392% and a weighted average maturity of three three years.

Wilbur Paes: Our outstanding debt at quarter end was $3.6 billion at a weighted average interest rate of 3.92% and a weighted average maturity of 3.3 years. 87% of our debt is fixed and has a weighted average interest rate of 3.3%, and the remaining 13% is floating and has a weighted average interest rate of 8%. These figures, of course, include the debt on the two assets we designated as non-core, both of which come due within the next 12 months. Excluding the debt on the non-core assets, we have no debt maturing until 2026, and the weighted average maturity of the remaining debt increases from 3.3 years to 3.6 years.

Wilbur Paes: 87% of our debt is fixed and has a weighted average interest rate of three 3% and the remaining 13% is floating and has a weighted average interest rate of 8%.

Wilbur Paes: These figures of course include the depth on the two assets, we designated as non core both of which come due within the next 12 months.

Wilbur Paes: Excluding the debt on the noncore assets, we have no debt maturing until 2026, and a weighted average maturity of the remaining debt increases from three three years three six years.

Wilbur Paes: In light of the designation of 111, Sutter and market Center as noncore assets, we have provided additional disclosures throughout our supplemental package.

Wilbur Paes: In light of the designation of 111 Sutter and Market Center as non-core assets, we have provided additional disclosures throughout our supplemental package. The additional disclosures are provided in an effort to help investors evaluate the impact of these two assets on our financial and operating performance. We hope you find the additional disclosures helpful. Turning to guidance.

Wilbur Paes: Yeah.

Wilbur Paes: The additional disclosures are provided in an effort to help investors evaluate the impact of these two assets on our financial and operating performance.

Wilbur Paes: We hope you find the additional disclosure is helpful.

Wilbur Paes: Turning to guidance.

Wilbur Paes: On our first quarter results as well as our outlook for the remainder of the year, we have updated our guidance in clearing some of the underlying assumptions.

Wilbur Paes: We have increased our leasing guidance by 37500 square feet at the midpoint to a range of 725000 to 900 900000 square feet. We have increased our same store NOI and same store cash NOI growth assumptions by 50 basis points at the midpoint.

Wilbur Paes: And lastly, we have increased our core <unk> guidance by <unk> <unk> per share at the midpoint to a range between 75 and 81 per share or <unk> 78 per share at the midpoint.

Wilbur Paes: The increase in core <unk> was largely driven by better than expected portfolio operations and higher fee and other income.

Wilbur Paes: Based on our first quarter results, as well as our outlook for the remainder of the year, we have updated our guidance, including some of the underlying assumptions. We have increased our leasing guidance by 37,500 square feet at the midpoint to a range of 725,000 to 900,000 square feet. We have increased our same-stow NOI and same-stow cash NOI growth assumptions by 50 basis points at the midpoint. And lastly, we have increased our core FFO guidance by $0.02 per share at the midpoint to a range between $0.75 and $0.81 per share, or $0.78 per share at the midpoint. The increase in core FFO was largely driven by better-than-expected portfolio operations and higher fees and other increases. With that, the operator, please open the lines for questions, will now be conducting a

Speaker Change: With that operator, please open the lines for questions.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue. You May press star two if you'd like to remove a question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 if you'd like to remove a question from the queue. For any participant using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Operator: Yes.

Operator: One moment, please, while we poll for questions. And the first question comes from the line of Steve Sakwa with Evercore ISI. Please proceed with your question.

Operator: One moment please poll for questions.

Operator: And the first question comes from the line of Steve Sochua with Evercore ISI. Please proceed with your question.

Stephen Thomas Sakwa: Yeah, thanks. Good morning.

Peter R.C. Brindley: Maybe starting with Peter, just on the pipeline, the leasing, and the expirations, just kind of help us think through some of the known move-outs maybe in the upcoming expirations. And on that pipeline, is that stuff that you can get signed this year in order to kind of cover that? Or do you think that there's still some downdraft in the, I guess, the leased occupancy by the end of the year?

Stephen Thomas Sakwa: Yeah. Thanks, Good morning, maybe starting with Peter just on the pipeline the leasing and the expirations you know just kind of help us think through.

Peter R.C. Brindley: Some of the known move outs, maybe and in the upcoming explorations and on that pipeline.

Peter R.C. Brindley: Is that stuff that you can get signed this year in order to kind of cover that or where do you think that there is still some downdraft in the I guess the leased occupancy by the end of the year.

Peter: Hi, Steve I'll start in New York, We've we've talked about the known move out of Clifford chance at.

Peter R.C. Brindley: Hi Steve. I'll start in New York. We've talked about the known move out of Clifford Chance at 31 West 52nd Street in the amount of roughly 229,000 square feet. That's just shy of 50% of our 2024 lease expiration, so that is a significant known move out.

Peter R.C. Brindley: At 31, West 50, <unk> Street, and the amount of roughly 229000 square feet. That's just shy of 50% of our 2024 lease explorations. So.

Peter: That is a significant.

Speaker Change: Known move out.

Peter R.C. Brindley: But I'm happy to say that of the 300,000 square foot pipeline I referenced, a large percentage of that is based in New York, and a significant percentage of it is in vacant space, specifically space that will be vacated by Clifford Chance. We have also talked about in the past the fact that we've got a significant role in San Francisco. Roughly 60% of our 2025 lease expirations in San Francisco are made up of JP Morgan and Google. At this point, it's too soon to tell.

Peter: But I'm happy to say that of the 300000 square foot pipeline I referenced a large percentage of that is is based in New York and a significant percentage of it is on is on vacant space, specifically space that will be vacated.

Peter R.C. Brindley: By Clifford chance.

Peter R.C. Brindley: We have talked about in the past also the fact that we've got significant role in San Francisco, roughly 60% of our 2025 lease explorations in San Francisco are made up of J P. Morgan and Google at this point, it's too soon to tell we of course as I've mentioned enjoy very good relationships with our tenants in San Francisco.

Peter R.C. Brindley: We, of course, as I've mentioned, enjoy very good relationships with our tenants in San Francisco, and we're working very hard to mitigate that risk. But those are some of the larger blocks as it relates to our expirations. Going back to the pipeline now for a minute, in New York specifically, we feel better about our pipeline than we have in quite some time. In excess of the 300,000 square feet of leases out, we have, I would say, a pipeline in excess of 500,000 square feet, and it just seems to be growing.

Peter R.C. Brindley: We're working very hard to mitigate that risk, but those are those are some of the larger blocks as it relates to our explorations going back to the pipeline now for a minute in New York, specifically, we feel better about our pipeline than we than we have.

Peter R.C. Brindley: In quite some time.

Peter R.C. Brindley: In excess of the 300000 square feet of leases out we.

Peter R.C. Brindley: I would say a pipeline in excess of 500000 square feet and it just seems to be growing.

Peter R.C. Brindley: Interestingly, in Manhattan, not Midtown specifically, but Manhattan, we've seen active tenants in the market on par, I should say, with 2018, 2019 levels. We're seeing user demand approaching 20 million square feet, which is really very encouraging. And Midtown, of the three major markets in Manhattan, has been the most productive, accounting for roughly 75% of the velocity in the first quarter. And if you delve a little deeper, it's really the core submarkets in Midtown that are accelerating, accounting for about two-thirds of the leasing activity in Midtown in the first quarter.

Peter R.C. Brindley: Interestingly in Manhattan.

Peter R.C. Brindley: Midtown specifically, but Manhattan, we've seen active tenants in the market in par on par I should say with 2018 2019 levels, we're seeing user demand approaching 20 million square feet, which is really very encouraging and.

Peter R.C. Brindley: And Midtown of the three major markets in Manhattan has been the most productive.

Peter R.C. Brindley: Counted for roughly 75% of the velocity in the first quarter and.

Peter R.C. Brindley: And if you delve a little deeper it's really the core submarkets in Midtown that are that are accelerating accounting for about two thirds of the leasing activity in Midtown and the first quarter. So we feel like we're very well positioned our pipeline feels strong we're very focused on role in 'twenty four 'twenty five and into 'twenty six.

Peter R.C. Brindley: So we feel like we're very well positioned, our pipeline feels strong, we're very focused on rolling in 24, 25, and into 26. And the expirations that I just now mentioned to you are the big ones that make up the big block of that expiration profile.

Peter R.C. Brindley: The the explorations that I just now I mentioned to you are the are the big ones that make up the big blocks.

Peter R.C. Brindley: Of that exploration profile.

Speaker Change: Okay. Thanks, maybe moving on Wilbur you did mentioned that the two assets that are have the upcoming maturities that you've kind of deemed non core is there anything that you are Albert could you just sort of give us in terms of the discussions with the banks who are at this point is it pretty much. Your plan is still hand, the keys back on those assets.

Albert P. Behler: Okay, thanks. Maybe moving on, Wilbur, you did mention that the two assets that, you know, have the upcoming maturities that you kind of deemed non-core. Is there anything that you or Albert could just sort of give us in terms of the discussions with the banks, or at this point, is it still your plan to still hand the keys back on those assets, you know, at the right time?

Albert P. Behler: You know at the right time.

Wilbur Paes: Well, Steve let me.

Wilbur Paes: Well, Steve, let me say again what we said on the last call: I'll consider our assets. You know that the balance sheet, we don't have any debt on the balance sheet, and I consider our portfolio, it's like a family. I come from a family of six, and everybody got basically the same from their parents, and some of them developed nicely, and some others didn't develop that well. And that's the same with our assets. So you can only expect so much from your parents, and that's how we treat our assets for the time being.

Wilbur Paes: Say again, we've said it on the last call.

Wilbur Paes: I would consider our assets you know that the balance sheet, we don't have any debt on balance sheet.

Wilbur Paes: And I consider our portfolio, it's like a like a family.

Wilbur Paes: I come from a family of six and.

Wilbur Paes: Everybody got basically the same from the parents.

Wilbur Paes: And some of them develop nicely and some others didnt develop that well.

Wilbur Paes: And that's the same with all assets. So you can only expect so much from your parents.

Wilbur Paes: And that's how we treat our assets for the time being.

Speaker Change: Yes, maybe if I add Steve the only thing I would say look I think the goal is never to just.

Albert P. Behler: Yeah, maybe if I add, Steve, the only thing I say, look, I think the goal is never to just go and hand over the keys back. What we wanted to dimension is that these two assets, you know, have been impaired. We have lost our investment, and we are going to try to preserve as much optionality as possible. We owe that to ourselves; we owe that to our shareholders. So, while maintaining the strength of our balance sheet.

Albert P. Behler: Go and hand, the keys back what we wanted to dimension is that these two assets have been.

Albert P. Behler: Impaired.

Albert P. Behler: We have lost their investment and we are going to try to preserve as much optionality, we owe that to ourselves with all of that to our shareholders.

Albert P. Behler: While while maintaining the strength of our balance sheet. So I think we continue to discuss with the lender.

Albert P. Behler: So I think we continue to discuss with the lender to see if there's a way to move forward on 111 Sutter. I think we're probably one of the only REITs that executed a cash flow loan where literally there is literally no risk to our balance sheet. There's an optionality. If we can preserve that optionality and live to fight another day before we come up with a solution, I think that helps us on the fee income side, and that helps us preserve the optionality.

Albert P. Behler: To see if there's a way to move forward on 111 Sutter.

Albert P. Behler: I think we're probably one of the only reached that executed a cash flow loan where literally there is no risk to our balance sheet Optionality. If we can preserve that optionality and live to fight another day before we come up with a solution.

Albert P. Behler: I think that helps us on the fee income side and that helps us preserve optionality. So we're going to we're going to evaluate that we continue on knee deep in discussions I think before the next quarter. We should have some type of resolution whether it is handing the keys back or being able to preserve some optionality on that asset.

Albert P. Behler: So we're going to evaluate that. We are knee-deep in discussions. I think before the next quarter, we should have some type of resolution, whether it is handing back the keys or being able to preserve some more optionality on that asset while being mindful of shareholder capital.

Albert P. Behler: While being mindful of shell.

Albert P. Behler: Shareholder capital.

Albert P. Behler: And again, Steve, we really are very straightforward with our debt providers, and they get full information, and we like to be good partners, and that's what we do with all of our relationships. And that's, I think, what helped us in the last couple of transactions, where we got extensions negotiated at very favorable interest rates, and that shows, I think, the respect that the team has in the marketplace, and I think that's what we are going to have going forward as well.

Albert P. Behler: And again.

Albert P. Behler: Steve We we really are very straightforward with our.

Albert P. Behler: With our debt providers and they get full information and we'd like to be.

Albert P. Behler: Good partners and that's what we do in all with all of our relationships and that's I think what helped us.

Albert P. Behler: In the in the last couple of transactions, where we maybe got extensions negotiated at very favorable interest rates and that shows I think the the respect that the team is.

Albert P. Behler: In the marketplace.

Albert P. Behler: And I think that's what we are going to have going forward as well.

Speaker Change: Okay. Thanks last question for me just Albert you sort of mentioned the transaction market in distress and things picking up you know I'm curious are you solely focused on looking at New York and San Francisco opportunities I know you've been in other markets in the past. So would you open up the lens to D. C again.

Albert P. Behler: Okay, thanks. Last question for me, Albert, you sort of mentioned the transaction market and distress and things picking up, you know. I'm curious, are you solely focused on looking at New York and San Francisco opportunities? I know you've been in other markets in the past. So, you know, would you open up the lens to, you know, DC again, Boston, or other markets? Or are you exclusively looking in San Francisco and New York?

Albert P. Behler: Boston or other markets are you exclusively looking at San Francisco and New York.

Albert P. Behler: For the time being, we are looking at San Francisco and New York. We have an office still in Washington, D.C., but we don't see opportunities there. We made mass investments, mezzanine fund investments there, and the D.C. market doesn't seem to be attractive at all for the time being. And I think New York and San Francisco will offer opportunities that are right down our alley, and we will focus on that.

Albert P. Behler: For the time being we are looking at.

Albert P. Behler: San Francisco and New York.

Albert P. Behler: We hope you have an office still in Washington D C, but we don't see opportunities there.

Albert P. Behler: We had massive investments mezzanine.

Albert P. Behler: Fund investments there and the D. C market is it doesn't seem to be attractive at all for the time being and I think New York and San Francisco will offer opportunities that are.

Albert P. Behler: That are right down our alley, and we will focus on that.

Speaker Change: Great. Thanks, that's it for me.

Stephen Thomas Sakwa: Great, thanks. That's it for me.

Speaker Change: Thank you Steve.

Operator: And the next question comes from the line of Camille Bonnell with Bank of America. Please proceed with your question.

Stephen Thomas Sakwa: And the next question comes from the line of Camille Bonnell with Bank of America. Please proceed with your question.

Camille Bonnell: Hi, I wanted to clarify on 111 further you mentioned youre expecting an outcome in the next few weeks is there any best that this plays out for a few more quarters.

Camille Bonnell: Hi, I wanted to clarify on 111 Sutter. You mentioned you're expecting an outcome in the next few weeks. Is there any risk that this plays out for a few more quarters?

Albert P. Behler: Camille, I don't know what you mean by risk. When I think about risk, there is no risk, you know, to us and our partners right now.

Speaker Change: No I don't know what what.

Camille Bonnell: You mean by risk.

Albert P. Behler: When I think about risk there is no risk to us and our partners right now what we have is we have a maturing alone that is cash flowing where all shortfalls accrete to the principal balance.

Albert P. Behler: What we have is a maturing loan that is cash flowing where all shortfalls are agreed to the principal balance. The debt is still non-recourse, so there is no risk per se to Paramount and its shareholders and Paramount's balance sheet. The possible outcomes in this scenario are that we continue to extend that in a similar structure, which I think is a tremendously favorable outcome for Paramount and its shareholders because it preserves optionality while limiting any risk to Paramount's balance sheet, or the outcome is the asset potentially goes back, and if it does, then the debt comes off our books, and we would have effectively delivered because there is no contribution from these assets to Paramount's earnings right now

Albert P. Behler: The debt is still non recourse so.

Albert P. Behler: There is no risk per se to Paramount and its shareholders in panama's balance sheet.

Albert P. Behler: The outcomes are.

Albert P. Behler: Possible outcomes in this scenario, we continue to extend that in a similar structure.

Albert P. Behler: I think is a tremendously favorable outcome for paramount and its shareholders because it preserves optionality, while limiting any risks for Dubai them on balance sheet.

Albert P. Behler: The outcome is the asset potentially goes back.

Albert P. Behler: And if it does then the debt comes off our books.

Albert P. Behler: And we would have effectively de levered because there is no contribution from these assets to Paramount's earnings right now.

Speaker Change: Okay I appreciate the clarification.

Albert P. Behler: Okay, I appreciate the clarification. And there's a lot going on with Showtime's parent company. I know that lease is a bit further out, but do you see, um... Like, have you started any conversations there, and is there any probability that that lease will be extended?

Speaker Change: And there's a lot going on with Showtime's parent company I know that leases a bit further out but do you see.

Speaker Change: Like have you started any conversations there.

Speaker Change: And any color that would any of that at least will be expense standard too.

Albert P. Behler: Okay.

Albert P. Behler: Okay.

Albert P. Behler: Camille, we are constantly talking to our tenants. I think that's one of our strengths that our property and leasing management is consistently communicating with our tenants. We want to be very tenant-friendly, so there are communications all the time, and Showtime is a large tenant in our 1633 asset, but it's too early to say what the plans are there. We have a very good demand potentially from other tenants at 1633 who might want to have additional space, but it's too early to go into any detail.

Speaker Change: Constantly talking to our I think that's one of our strengths.

Albert P. Behler: That debt property and leasing and management has consistently communicating with our tenants we want to be.

Albert P. Behler: Very tenant friendly so they are communications all the time and Showtime is a large tenant in our.

Albert P. Behler: 16, 33 asset and but it's too early to say what the what the plans are there.

Albert P. Behler: We have.

Albert P. Behler: Very good demand potentially by other tenants at 16 33, you might want to have additional additional space, but it's too early to go into any details.

Speaker Change: Got it.

Albert P. Behler: Got it. And finally, just wanted to get more color on the short-term renewal of KPMG's lease at 55 seconds. Any further details on why they took a renewal for one year? And if you offered lower rent or more concessions, do you think you could have gotten a longer lease?

Albert P. Behler: Finally, just wanted to get more color on this short term renewal.

Albert P. Behler: And geez lease at 55 second does any further details on why they took a renewal for one year and if you offer a lower rent or more conventions, Jean Thank you could've gotten a longer lease.

Speaker Change: So I can mail this is Peter it was more than a year.

Peter R.C. Brindley: So, hi Camille, this is Peter. It was more than a year; it was 21 months. We know and enjoy a very good relationship with KPMG. I think, once again, it's too soon to say how this plays out going forward, but for the time being, this was a deal that was acceptable to both sides, and we were very happy to make the deal.

Peter R.C. Brindley: 21 months.

Peter R.C. Brindley: We.

Peter R.C. Brindley: No and enjoy a very good relationship with KPMG.

Peter R.C. Brindley: I think once again, it's too soon to say how this plays out going forward, but for the time being this was a deal that was acceptable to both sides and we were very happy to make the deal.

Camille Bonnell: Okay. Thanks for taking my questions.

Camille Bonnell: Okay, thanks for taking my questions.

Speaker Change: Thank you Kevin.

Camille Bonnell: And the next question comes from the line of Blaine Heck from Wells Fargo. Please proceed with your question.

Operator: And the next question comes from the line of Blaine Heck from Wells Fargo. Please proceed with your question.

Blaine Matthew Heck: Great, thanks. Good morning. Just wanted to revisit the possibility of dispositions, in particular on the retail side, given that we've seen some interesting trades relatively recently. Is that something you all would consider in the near future?

Blaine Matthew Heck: Great. Thanks, Good morning, just wanted to revisit the possibility of dispositions in particular on the retail side given that we've seen some interesting trades relatively recently.

Blaine Matthew Heck: Is that something you all would consider in the near future.

Speaker Change: Well we.

Albert P. Behler: Well, we are, as you know, in the market for 712. We have some vacancies there. We have done a terrific lease with the neighboring property and leased part of the 712 retail space to Harry Winston, which is currently under construction. They're doing a beautiful job, so it will be a wonderful new store combining 718 and parts of 712. And the rest of the space is currently in the market for lease.

Albert P. Behler: We are as you know.

Albert P. Behler: The market was 712, two we have some vacancy there we have done a terrific lease with that.

Albert P. Behler: The neighboring property.

Albert P. Behler: And at least part of the 712 retail too.

Albert P. Behler: Winston which is currently under construction.

Albert P. Behler: We're doing it.

Albert P. Behler: Beautiful job there'll be one.

Albert P. Behler: Wonderful new store, combining 718 in parts of seven to 12.

Albert P. Behler: And the rest of the spaces.

Albert P. Behler: Currently in the market for lease I think we did.

Albert P. Behler: I think we did well by taking our time because the interest is coming in our favor. Rental rates with regard to retail on Fifth Avenue are really coming up significantly. There's very healthy space demand for retail. And I don't like to comment about dispositions in the retail arena. We have discussions off and on, but there's nothing to talk about on this earnings call.

Speaker Change: Yeah, well by taking all the time because.

Albert P. Behler: The interest is coming in our favor rental rates on <unk>.

Albert P. Behler: We got to retail on fifth Avenue really coming up significantly.

Albert P. Behler: There is very.

Albert P. Behler: Very healthy.

Albert P. Behler: Healthy space.

Albert P. Behler: <unk> four for retail and.

Albert P. Behler: I don't like to comment.

Albert P. Behler: Dispositions in.

Albert P. Behler: And in the retail arena. They we have discussions often on but there's nothing to talk about that.

Albert P. Behler: At this at this earnings call.

Speaker Change: Okay, great. Thanks, Albert and just quickly to come back to Showtime I had been under the impression that you guys had previously said that was a known move out has something changed there. It didn't seem like your commentary ruled out a potential extension just wanted to make sure I heard you correctly.

Albert P. Behler: Okay, great. Thanks, Albert. And just quickly to come back to Showtime, I had been under the impression that you guys had previously said that was a known move out. Has something changed there? It didn't seem like your commentary ruled out a potential extension. Just wanted to make sure I heard you correctly.

Albert: No. It's just relatively early I mean, we have seen.

Albert P. Behler: No, it's just relatively early. I mean, we have seen a rumor; we have heard rumors from KPMG, for example. It's another example Last year that they moved out or wanted to move out, and they have now extended in place, and we don't know whether they will do another extension. My experience has taught me that large corporations change their minds a couple of times, sometimes within 12 months. And we had this in many different cases with banks that wanted to grow or shrink and change their minds because there was an M&A business going on.

Albert P. Behler: Roma, we had heard rumors by KPMG. For example, it's another example last year that they moved out of wanted to move out and they they now extended in place and we don't know whether they will do another extension.

Albert P. Behler: My experience has taught me that.

Albert P. Behler: Large corporations changed their mind a couple of times.

Albert P. Behler: Sometimes within 12 months and.

Albert P. Behler: We had this in many different cases with banks that wanted to grow or shrink and change their mind because it was M&A business going on so I think it's too early to.

Albert P. Behler: So I think it's too early to give something definite about that time.

Albert P. Behler: To give something.

Albert P. Behler: Definite about that tenant.

Speaker Change: Okay got you that's fair last one Peter can you just talk about what you're seeing with respect to concessions seem to be a little elevated on the leasing you guys did this quarter market commentaries that theyre very high if landlords can even afford to pay them. So can you just talk through those dynamics and whether youre seeing continued upward.

Blaine Matthew Heck: Okay, gotcha. That's fair.

Peter R.C. Brindley: Last one, Peter, can you just talk about what you're seeing with respect to concessions? It seems to be a little elevated on the leasing you guys did this quarter. Market commentary is that they're very high if landlords can even, you know, afford to pay them. So, can you just talk through those dynamics and whether you're seeing continued upward pressure on TIs or maybe that's plateaued at this point? Hi Blaine, I would say that

Peter R.C. Brindley: Pressure on <unk> or maybe that's plateaued at this point.

Blaine: Hi, Brian I would say that concessions have plateaued. It may be slightly elevated I think what you're referring to as concessions. We gave in New York specifically in the first quarter that was against US transaction, we completed on the second floor.

Peter R.C. Brindley: Hi Blaine. I would say that concessions have plateaued. They may be slightly elevated. I think what you're referring to are concessions we gave in New York specifically in the first quarter. That was against a transaction we completed on the second floor.

Peter R.C. Brindley: And so concessions don't vary all that much based on rent, generally. So I think that's the reason for it being slightly elevated in the quarter. But all things considered, they are at historical levels. They are high, but they have not gone up recently. They've remained stable, and we expect that to be the case going forward.

Peter R.C. Brindley: And so concessions don't vary all that much based on rent generally.

Peter R.C. Brindley: So I think thats the reason for it being slightly elevated in the quarter.

Peter R.C. Brindley: But all things considered they are at historical.

Peter R.C. Brindley: Levels, they are high but they have not gone up.

Peter R.C. Brindley: Recently, they've remained stable and we expect that to be the case going forward.

Speaker Change: Great. Thank you guys.

Speaker Change: Thank you Blayne.

Operator: And the next question comes from the line of Dylan Burzinski with Green Street. Please proceed with your question.

Peter R.C. Brindley: And the next question comes from the line of Dylan Brzezinski with Green Street. Please proceed with your question.

Dylan Robert Burzinski: Hi, all thanks for taking the question just wanted to go back to sort of your comments on acquisitions.

Dylan Robert Burzinski: Hi all, thanks for taking the question. I just wanted to go back to your comments on acquisitions. I guess, you know, what are some of the things you guys are looking for to actually go out and put capital to work in the private market? Is it simply just that pricing hasn't gotten to where you guys think it makes sense to pull the trigger today? Or are you guys more looking at it holistically from an overall portfolio perspective, to where you guys kind of want to get through some of the larger move-outs within the existing portfolio today before going out and putting capital into another opportunity?

Dylan Robert Burzinski: I guess what are some of the things you guys are looking for to actually go out and put capital work in the private market is it simply just pricing hasn't gotten to where you guys think it makes sense to pull the trigger today or are you guys more looking at it holistically from an overall portfolio perspective to where you guys kind of want to get through some of the larger move.

Dylan Robert Burzinski: Within the existing portfolio today, before going out and putting capital to work into another opportunity.

Dylan Robert Burzinski: So when we do we do things parallel we work on leasing our portfolio in parallel.

Albert P. Behler: Dylan, we do things in parallel. We work on leasing our portfolio, and we parallel work with our funds, our fund business, so we look at opportunities all the time. And the opportunity, or maybe even going back to PGRE's capital, we have said over and over that we will not be investing significant equity amounts from our own balance sheet at this time. Our balance sheet and cash are very important to us. We have a balance sheet that is debt-free and with liquidity, and we would do it potentially in joint ventures. We have relationships that we have been working on for, in certain cases, over 25 years.

Albert P. Behler: Work with our funds. So we our fund business. So we look at opportunities all the time and the opportunity or maybe even going back to the <unk>.

Albert P. Behler: <unk> capital, we have said over and over that we will be currently not investing significant equity amounts from our own balance sheet.

Albert P. Behler: Our balance sheet and cash is very important to us.

Albert P. Behler: We have a balance sheet that is debt free and then.

Albert P. Behler: With the liquidity and we.

Albert P. Behler: We would do it and potential potentially in joint ventures, we have relationships that we have been working on since.

Albert P. Behler: In certain cases over 25 years.

Albert P. Behler: And those kind of relationships.

Albert P. Behler: And those kinds of relationships have different investment horizons than we do have. But we have made investments. A while ago, we bought an asset together with a large pension fund that they wanted to focus on retail on Broadway. We bought the M&M store, and that raised some eyebrows among some shareholders. But this was not really a Paramount core investment. We put a very, very small equity amount into this investment. We made a very, very nice return on the fee income, outpacing our equity investment.

Albert P. Behler: They have different investment horizons, and we do have.

Albert P. Behler: And we have made investments.

Albert P. Behler: Have a while ago, we bought an asset together with the large pet.

Albert P. Behler: Pension funds that they wanted to focus on retail on Broadway, we bought the Eminem store.

Albert P. Behler: On the debt raise some eyebrows, but some.

Albert P. Behler: Shareholders, but this was not really a paramount.

Albert P. Behler: Core investment, we put a very very small equity.

Albert P. Behler: Mt.

Albert P. Behler: Into this investment and we made a very very nice.

Albert P. Behler: Return on the fee income.

Albert P. Behler: The outpacing our equity investment. So we are looking more for these kind of opportunities where we can you see the expertise of our platform and investing in in deep deep value.

Albert P. Behler: So we are looking more for these kinds of opportunities where we can use the expertise of our platform and invest in deep, deep value that comes to the market. And we're also focusing on quality. We are not interested in a B or C-class opportunity that some other people think it's because it's just cheap and affordable. We are looking at something that would really justify a paramount investment in our focus. Our resources on the human side are limited, and we want to make sure that we can do well for our shareholders.

Albert P. Behler: That that comes to the market and we also focus focusing on quality.

Albert P. Behler: We are not interested in in a boc class opportunity that some other people think it's because it's just cheap and affordable we are looking at.

Albert P. Behler: It's something that.

Albert P. Behler: What really justify a paramount investment in our focus our sources.

Albert P. Behler: On the on the.

Albert P. Behler: Human side is limited and we want to make sure that we can do well by our shareholders and joint venture partners.

Albert P. Behler: And then in your discussions with your JV partners or potential future JV partners. I mean, do you have a sense for what Unlevered IRR targets. There. They are looking to achieve if they put money to work in office today.

Albert P. Behler: And in your discussions with your JV partners or potential future JV partners, I mean, do you have a sense for what unlimited IRR targets they're looking to achieve if they put money to work in government today?

Speaker Change: Yes, they are looking at something in the neighborhood of 15% to 20% depending.

Albert P. Behler: Yeah, they're looking at something in the neighborhood of 15 to 20%, depending on what their capital source is and where they're coming from.

Speaker Change: Depending on what their.

Albert P. Behler: Their capital sources, and where they're coming from.

Speaker Change: Great. That's helpful. Thanks, guys.

Dylan Robert Burzinski: Great. That's helpful. Thanks, guys.

Speaker Change: Thank you.

Dylan Robert Burzinski: And as a reminder, if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the queue. You May press star two to remove any question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Operator: And as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the queue. You may press star 2 to remove any question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our next question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question.

Ronald Kamdem: Our next question comes from the line of Ronald Camden with Morgan Stanley. Please proceed with your question.

Ronald Kamdem: Hey, Good morning, guys. This is to me for Ron.

Ronald Kamdem: Good morning, guys. This is Tamim for Ron.

Tamim: Yeah on the occupancy side.

Tamim: Take your 87, 1% occupancy, yes finished at $89 one in the quarter you guys talked about Clifford chance vacating.

Tamim Mahmud Sarwary: Just on the occupancy side, if I take your 87.1% occupancy, you guys finished at 89.1 in the quarter, you guys talked about Clipper Chance vacating. I guess the occupancy guidance does imply some pretty substantial absorption. I said about Clipper Chance, maybe just talk about that a little bit and kind of where you'd see that incremental absorption coming from, whether it's in the San Francisco portfolio or in New York. Thanks

Tamim: And I guess the occupancy guidance does imply some.

Tamim Mahmud Sarwary: Some pretty substantial absorption.

Tamim Mahmud Sarwary: Set up corporate chance, maybe just talk about that a little bit.

Tamim Mahmud Sarwary: You would see that incremental absorption coming from others.

Tamim Mahmud Sarwary: San Francisco portfolio are in New York.

Tamim Mahmud Sarwary: Sure. So this is Peter speaking, we're anticipating approximately 400000 square feet of occupancy increasing leasing.

Peter R.C. Brindley: Sure, so this is Peter speaking. We're anticipating approximately 400,000 square feet of occupancy increased leasing during the year in order to achieve the midpoint of our guidance, which is 87.1%. So the areas with which we expect to achieve that occupancy, increasing leasing, I think will be more heavily weighted toward New York. Specifically, it'll certainly be 31 West 52nd Street with the known departure of Clifford Chance. Certainly, there is an opportunity at 1301 Avenue of the Americas, where we happen to be active.

Peter R.C. Brindley: During the year in order to achieve the midpoint of our guidance, which is 87, 1%. So.

Peter R.C. Brindley: The areas with which we expect to achieve that occupancy increasing leasing I think will be more heavily weighted.

Peter R.C. Brindley: Toward New York, specifically it will certainly be 31, West 50, <unk> Street with a known vacate vacate of Clifford chance certainly there is an opportunity at <unk>, one where we have been at 301 Avenue of the Americas, where we happen to be active.

Peter R.C. Brindley: Third Avenue, the east side, of course, has been quiet and has a very high availability rate. It's been one of the submarkets in Midtown that has underperformed. But I would say recently, with renewed interest in locations with close proximity to public transportation, certain buildings along Third Avenue have seen a recent uptick, 903rd being one of them, not where it needs to be just yet. But there's a building where we have an occupancy level well below where it has historically been, and there, as a result, is an opportunity to increase occupancy.

Peter R.C. Brindley: Third Avenue the East side of course has been quite quiet as very high availability rate has been one of the submarkets in Midtown that has underperformed, but I would say recently with renewed interest in locations with close proximity to public transportation certain buildings, along third Avenue have seen a recent uptick 903rd being one of them not where it needs.

Peter R.C. Brindley: To be just yet, but there is a building where we have an occupancy level well below where it has historically been and there as a result as an opportunity to increase occupancy. So those are those are I think some some some opportunities for us but.

Peter R.C. Brindley: So those are, I think, some opportunities for us. But certainly, we feel very good about activity specifically in our properties along Sixth Avenue where, once again, we have an opportunity to chip away at that 420,000 is the exact number, 420,000 square foot occupancy goal that we have to get to.

Peter R.C. Brindley: But certainly we feel very good about activity specifically in our properties along sixth Avenue, where once again, we have an opportunity to.

Peter R.C. Brindley: To chip away at that 420000 is the exact number of 420000 square foot occupancy goal that we have to get to.

Peter R.C. Brindley: Our guidance.

Speaker Change: Makes sense and then if I look at your mark to market in the quarter.

Peter R.C. Brindley: Makes sense. And then, you know, if I look at your mark to market in the quarter, flat in New York, negative in San Francisco, just for the pipeline that you guys have, where do you see the mark to market trending for the remainder of the year? You know, it's interesting, of the 18-

Peter R.C. Brindley: Flattened New York negative in San Francisco, just for that the pipeline that you guys have where do you see what do you see the mark to market trending for the remainder of the year.

Speaker Change: Yes, it's interesting.

Peter R.C. Brindley: You know, it's interesting. Of the 18% availability in Midtown, about 57% of that availability is on floors 15 and below. So, what I would say to you is that we have pricing power in our Class A and Trophy buildings and, of course, submarkets on upper floors, and we are experiencing some very positive developments in terms of pushing rents, I would say, on some of the base floors, just given the amount of availability.

Peter R.C. Brindley: In percent availability in Midtown.

Peter R.C. Brindley: 57% of that availability is on floors 15 and below so.

Peter R.C. Brindley: What I would say to you is that we have pricing power in our class a and trophy buildings in core submarkets on upper floors than we are.

Peter R.C. Brindley: Experiencing some some very positive developments in terms of pushing rent I would say on some of the base floors, just given the amount of availability.

Peter R.C. Brindley: We have been able to transact, but we just don't have nearly the pricing power that we do on the upper floors. So as it relates to mark to markets, without being too specific, there will be opportunities. We believe in our opportunity to achieve positive mark to markets, but it's really on a case by case basis.

Peter R.C. Brindley: We have.

Peter R.C. Brindley: <unk> been able to transact, but we just don't have nearly the pricing power that we do on upper floors.

Peter R.C. Brindley: So.

Peter R.C. Brindley: As it relates to mark to markets without being too specific.

Peter R.C. Brindley: There will be opportunities, we believed in our opportunity.

Peter R.C. Brindley: To achieve positive mark to markets, but it's really on a case by case basis.

Speaker Change: Got it thank you guys.

Speaker Change: Thank you.

Peter R.C. Brindley: And there are no further questions at this time I would like to turn the floor back over to Albert Behler for any closing comments.

Albert P. Behler: And there are no further questions at this time. I would like to turn the floor back over to Albert Behler for any closing comments.

Albert P. Behler: Thank you everyone for joining us here today on this call. We look forward to providing you guys an update on our continued progress when we report our second quarter 2024 results.

Albert P. Behler: Thank you, everyone, for joining us here today on this call. We look forward to providing you guys with an update on our continued progress when we report our second quarter 2024 results.

Albert P. Behler: Goodbye.

Speaker Change: And ladies and gentlemen that does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Operator: And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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