Q1 2025 City Office REIT Inc Earnings Call
We are in a listen only mode. A brief question and answer session will follow the formal presentation to ask a question you May Press Star then one on your Touchtone phone and if you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
As a reminder, this conference call is being recorded if you require operator assistance.
Speaker Change: Please press Star then zero. It is now my pleasure to introduce you to Tony Mirotic, The company's Chief Financial Officer, Treasurer, and corporate Secretary. Thank you. Mr. <unk> you may begin.
Speaker Change: Good morning, before we begin I would like to direct you to our web site at C. I O <unk> Dot Com, where you can view, our first quarter earnings press release and supplemental information package. The earnings release and supplemental package. Both include a reconciliation of non-GAAP measures that will be discussed today to their most direct.
Speaker Change: The comparable GAAP financial measures.
Speaker Change: Certain statements made today that discuss the companys beliefs or expectations or that are not based on historical fact may constitute forward looking statements within the meaning of the federal securities laws.
Speaker Change: While the company believes that these expectations reflected in such forward looking statements are based upon reasonable assumptions, we can give no assurance that these expectations will be achieved.
Speaker Change: Please see the forward looking statements disclaimer in our first quarter earnings press release, and the company's filings with the SEC for factors that could cause material differences between forward looking statements and actual results.
Speaker Change: The company undertakes no obligation to update any forward looking statements that maybe made in the course of this call.
Speaker Change: I'll review, our financial results after Jamie Farrar, our Chief Executive Officer discusses some of the quarters operational highlights I will now turn the call over to Ginny.
Speaker Change: Good morning, I wanted to start today with a status update on the planned redevelopment of our city center property in downtown St. Petersburg, Florida.
Speaker Change: On our last call. We mentioned that we received site plan application approval from the city of St. Petersburg.
Speaker Change: This plan was for the redevelopment of city centers existing parking structure into a 49 storey residential condominium and mixed use tower.
Speaker Change: We're excited to announce that after quarter end, we entered into an agreement with property markets group or PMG to lead the development.
Speaker Change: <unk> is a very experienced developer who is currently building the Waldorf Astoria residences in Miami.
Speaker Change: That project will rank as one of Miami's tallest residential towers upon completion.
Speaker Change: Our project is also expected to be sold under the luxury Waldorf Astoria residents as Brent and capitalizes on our sites incredible water views and exposure.
Speaker Change: The agreement with PMG charges them with responsibility for all pre development activities and the associated costs, which we anticipate will require them to invest $17 million of cash.
Speaker Change: There are various preconditions to be completed prior to the contribution of our land to the venture including achievement of pre sales financing and return on cost targets.
Speaker Change: The contribution of our parking structure land to the development venture we would receive a 50% interest in the partnership.
Speaker Change: Today. The project sales center is nearing completion at City Center, and we expect that pre sales will commence shortly.
Speaker Change: Upon achieving the conditions to commence construction, we anticipate a construction period of approximately three years.
Speaker Change: Downtown St. Pete has seen a dramatic transformation over the past 10 years with luxury condo development in high demand and neighboring projects selling out quickly.
We believe the announcement of this project is set to meet that demand as one of the premier offerings in the marketplace.
Speaker Change: In sum, we've created a unique venture that positions us to benefit alongside highly experienced development partner.
Speaker Change: This exciting project is tremendous longer term value creation potential for our shareholders.
Speaker Change: Turning to other highlights of the first quarter, we continued to see a positive trend in overall office real estate fundamentals Nash.
Speaker Change: <unk> office leasing volume was 15% higher than a year ago.
Speaker Change: <unk> estimate that office leasing volume has returned to approximately 89% of typical pre pandemic levels.
Speaker Change: Higher quality office spaces in Sunbelt markets continue to outperform.
Moving to our leasing activity. The first quarter is typically one of the slowest quarters of the year. Despite this we completed a healthy 144000 square feet of new and renewal leases.
Speaker Change: Our largest lease completed during the quarter was a 34000 square foot new lease at our Papago Tech property in Phoenix.
Speaker Change: This lease represents the last vacancy that we have at that property.
Speaker Change: Subsequent to quarter end, we achieved another impactful new lease our Greenwood Blvd property in Orlando was 100% leased to a single tenant with a lease expiration in 2028.
Speaker Change: We were successful in negotiating a transaction to bring a new 66000 square foot tenant into the building prior to that existing tenants exploration.
Speaker Change: The new tenant signed a 10 year lease expected to commence in the fourth quarter of this year.
Speaker Change: The current tenant will vacate that space and pay a sizable termination fee.
Speaker Change: The remaining 89000 square feet in the building the current tenant will keep its 2028 exploration on 31000 square feet and agreed to extend the remaining 58000 square feet on a longer term basis to 2033.
Speaker Change: Overall these were very important lease transactions that provide certainty around this asset long term cash flow the.
Speaker Change: The transactions also position us favorably to extend the property's upcoming loan maturity, which is expected to be achieved in the second quarter.
Operator: conference call. At this time, all participants are in a listen only mode.
Speaker Change: Portfolio wide, we continue to see rent growth upon renewals and have realized an eight 5% positive cash re leasing spread on our renewals over the last 12 months.
We were successful in negotiating a transaction to bring a new 66000 square foot tenant into the building prior to that existing tenants exploration.
Operator: A brief question and answer session will follow the formal presentation. To ask a question, you may press star, then one on your touch tone phone. And if you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.
Speaker Change: Our same store cash NOI also increased four 4% in the first quarter as compared to the prior year.
The new tenant signed a 10 year lease expected to commence in the fourth quarter of this year.
The current tenant will vacate that space and pay a sizable termination fee.
Speaker Change: As far as our overall earnings and occupancy trends for the year. We are still on track within the guidance ranges. We provided at the end of February.
Operator: As a reminder, this conference call is being recorded. If you require operator assistance, please press star, then zero.
On the remaining 89000 square feet in the building the current tenant will keep it to 2028 exploration on 31000 square feet and agreed to extend the remaining 58000 square feet on a longer term basis to 2033.
Operator: It is now my pleasure to introduce you to Tony Maretic, the company's Chief Financial Officer, Treasurer, and Corporate Secretary. Thank you, Mr. Maretic. You may begin.
Speaker Change: With that I'll turn the call over to Tony to discuss our financial results in more detail. Thanks, Jami our net operating income in the first quarter was 26.0 million, which is 500000 higher than the amount we reported in the fourth quarter higher revenue, partially driven by strong same store results combined with <unk>.
Overall these were very important lease transactions that provide certainty around this asset long term cash flow.
Tony Maretic: Before we begin, I'd like to direct you to our website at cioreit.com, where you can view our First Quarter Earnings Press Release and Supplemental Information Package. The Earnings Release and Supplemental Package both include a reconciliation of non-GAAP measures that will be discussed today to their most directly comparable GAAP financial measures.
The transactions also position us favorably to extend the property's upcoming loan maturity, which is expected to be achieved in the second quarter.
Speaker Change: Lower operating expenses was the primary driver of the NOI increase.
Speaker Change: We also reported core <unk> of $12 3 million or <unk> 30 per share for the first quarter.
Portfolio wide, we continue to see rent growth upon renewals and have realized an eight 5% positive cash re leasing spread on our renewals over the last 12 months.
Speaker Change: <unk> was 600000 higher than the amount we reported in the fourth quarter for the same reasons NOI was higher.
Tony Maretic: Certain statements made today that discuss the company's beliefs or expectations, or that are not based on historical fact, may constitute forelooking statements within the meaning of the federal securities laws. While the company believes that these expectations reflected in such forelooking statements are based upon reasonable assumptions, we can give no assurance that these expectations will be achieved.
Speaker Change: Our first quarter <unk> was $6 5 million or <unk> 16 per share there was no single ti or LC amount that impacted <unk> by more than 500000.
Our same store cash NOI also increased four 4% in the first quarter as compared to the prior year.
As far as our overall earnings and occupancy trends for the year. We are still on track within the guidance ranges. We provided at the end of February.
Speaker Change: Our spending on property renovations also decreased in the first quarter relative to last year as we completed several property renovation projects and amenity upgrades in the fourth quarter move.
Tony Maretic: Please see the for looking statements disclaimer in our first quarter earnings press release and the company's filings with the SEC for factors that could cause material differences between for looking statements and actual results. The company undertakes no obligation to update any forelooking statements that may be made in the course of this call.
With that I'll turn the call over to Tony to discuss our financial results in more detail. Thanks, Jami our net operating income in the first quarter was $26.0 million, which is 500000 higher than the amount we reported in the fourth quarter higher revenue, partially driven by strong same store results combined with <unk>.
Speaker Change: Moving onto some of our operational metrics, our same store cash NOI trended higher in the first quarter. There was a healthy increase of four 4% or $1 1 million as compared to the first quarter of 2024, the largest contributor to that was Raleigh, again, where NOI continues to materially increase.
Tony Maretic: I'll review our financial results after Jamie Farrar, our Chief Executive Officer, discusses some of the quarter's operational highlights.
Lower operating expenses was the primary driver of the NOI increase.
Tony Maretic: I'll now turn the call over to Jamie.
James Farrar: Good morning, I wanted to start today with a status update on the planned redevelopment of our city center property in downtown St. Petersburg, Florida. On our last call, we mentioned that we received site plan application approval from the City of St. Peter's. This plan was for the redevelopment of City Center's existing parking structure into a 49-story residential condominium and mixed-use tower.
Speaker Change: At block 83 as signed leases take occupancy.
Tony: We also reported core <unk> of $12 3 million or <unk> 30 per share for the first quarter.
Speaker Change: Our portfolio occupancy ended the quarter 84, 9% this was slightly lower than the prior quarter, which we expected as a result of a couple of known Vacates at our Denver Tech and $25 25 Mckinnon properties.
Tony: <unk> was 600000 higher than the amount we reported in the fourth quarter for the same reasons NOI was higher.
Tony: Our first quarter <unk> was $6 5 million or <unk> 16 per share.
Speaker Change: These vacates occurred later in the quarter and as a result did not have a significant impact to NOI we.
Tony: There was no single Ti or LC amount that impacted <unk> by more than 500000.
Speaker Change: We expect occupancy will decrease in the second quarter. This will be driven by the existing tenant at Greenwood Blvd, downsizing by 66000 square feet that Jamie described prior to the commencement of a new tenant later this year.
Tony: Our spending on property renovations also decreased in the first quarter relative to last year as we completed several property renovation projects and amenity upgrades in the fourth quarter.
James Farrar: We're excited to announce that after quarter end, we entered into an agreement with Property Markets Group, or PMG, to lead the development. PMG is a very experienced developer who is currently building the Waldorf Astoria Residences in Miami. That project will rank as one of Miami's tallest residential towers upon completion. Our project is also expected to be sold under the luxury Waldorf Astoria Residences brand and capitalizes on our site's incredible water views and exposure. The agreement with PMG charges them with responsibility for all pre-development activities, and the associated costs, which we anticipate will require them to invest $17 million of cash.
Tony: Moving on to some of our operational metrics.
Tony: Our same store cash NOI trended higher in the first quarter. There was a healthy increase of four 4% or $1 1 million as compared to the first quarter of 2024, the largest contributor to that was Raleigh again, where NOI continues to materially increase at block 83 as signed leases.
Speaker Change: And also due to a 72000 square foot tenant that vacated our <unk> property in Portland after quarter end on April one as expected.
Speaker Change: At quarter end, we had 143000 square feet of signed leases that have not yet commenced.
Speaker Change: As those signed leases take occupancy, we expect occupancy will increase and therefore, we still anticipate year end occupancy will end within the 85% to 87% range contained within our original guidance.
Tony: Occupancy.
Tony: Our portfolio occupancy ended the quarter 84, 9% this was slightly lower than the prior quarter, which we expected as a result of a couple of known Vacates at our Denver Tech and 20 525 Mckinnon properties. These vacates occurred later in the quarter and as a result did not have a significant impact to NOI.
Speaker Change: Our total debt as of March 31 was $646 million.
Speaker Change: Our net debt, including restricted cash to EBITDA was six seven times.
James Farrar: There are various preconditions to be completed prior to the contribution of our land to the venture, including achievement of pre-sales, financing, and return on cost targets. Upon contribution of our parking structure land to the development venture, we would receive a 50% interest in the park. Today, the Project Sales Center is nearing completion at City Center, and we expect that pre-sales will commence shortly. Upon achieving the conditions to commence construction, we anticipate a construction period of approximately three years.
Speaker Change: As of March 31, we had approximately $42 million Undrawn and authorized on our credit facility. We also had cash and restricted cash of $37 million as of quarter end.
Tony: We expect occupancy will decrease in the second quarter. This will be driven by the existing tenant at Greenwood Blvd, downsizing by 66000 square feet that Jamie described prior to the commencement of the new tenants later this year.
Speaker Change: Our credit facility matures in November 2025, with an ability to extend it to November 2026 that option can be exercised in August 90 days prior to the maturity as long as we remain in compliance with our debt covenants, which we are comfortably projected to be at.
Tony: And also due to a 72000 square foot tenant that vacated our <unk> property in Portland after quarter end on April one as expected.
Tony: At quarter end, we had 143000 square feet of signed leases that have not yet commenced.
Speaker Change: As such we expect to exercise that option and continue discussions on a longer term renewal.
Tony: As those signed leases take occupancy, we expect occupancy will increase and therefore, we still anticipate year end occupancy will end within the 85% to 87% range contained within our original guidance.
James Farrar: Downtown St. Pete has seen a dramatic transformation over the past 10 years, with luxury condo development in high demand and neighbouring projects selling out quickly. We believe the announcement of this project is set to meet that demand as one of the premier offerings in the market. In sum, we've created a unique venture that positions us to benefit alongside a highly experienced development partner. This exciting project has tremendous longer term value creation potential for our shareholders.
We have two property debt maturities in 2025, the loans for both Greenwood Blvd in Orlando and in telephone or Tampa mature in the fourth quarter.
Speaker Change: We are at an advanced stage of discussions on a three year term extension with the existing lender for Greenwood Blvd, and have initiated discussions on a short term extension with the existing lender until a center, we expect to provide an update on next quarter's call.
Tony: Our total debt as of March 31 was $646 million.
Tony: Our net debt, including restricted cash to EBITDA was six seven times.
Tony: As of March 31, we had approximately $42 million Undrawn and authorized on our credit facility. We also had cash and restricted cash of $37 million as of quarter end.
Speaker Change: Last we are also have two high value properties block <unk> three in Raleigh in City center in Tampa that are completely unencumbered as the office debt capital markets continue to come back we may explore options to add financing to those properties to generate additional liquidity that.
Tony: Our credit facility matures in November 2025, with an ability to extend it to November 2026 that option can be exercised in August 90 days prior to the maturity as long as we remain in compliance with our debt covenants, which we are comfortably projected to be at.
James Farrar: Turning to other highlights of the first quarter, we continued to see a positive trend in overall office real estate fundamentals. Nationally, office leasing volume was 15% higher than a year ago. JLL estimate that office leasing volume has returned to approximately 89% of typical pre-pandemic level. Higher quality office spaces in sunbelt markets continue to outperform. Moving to our leasing activity, the first quarter is typically one of the slowest quarters of the year. Despite this, we completed healthy 144,000 square feet of new and renewal leasing.
Speaker Change: That concludes our prepared remarks, and we will open up the line for questions operator.
Speaker Change: Thank you very much.
Speaker Change: Just as a reminder to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two.
Tony: As such we expect to exercise that option and continue discussions on a longer term renewal.
Tony: We have two property debt maturities in 2025, the loans for both Greenwood Blvd in Orlando and in telephone or Tampa mature in the fourth quarter.
Tony: We are at an advanced stage of discussions on a three year term extension with the existing lender for Greenwood Blvd, and have initiated discussions on a short term extension with the existing lender until a center.
Speaker Change: Our first question comes from <unk> Rana with Keybanc capital markets. Your line is now open. Please go ahead.
James Farrar: Our largest lease completed during the quarter was a 34,000 square foot new lease at our Papago Tech property in Phoenix. This lease represents the last vacancy that we have at that property.
Tony: We expect to provide an update on next quarter's call.
Tony: Last we are also have two high value properties block <unk> three in Raleigh in City center in Tampa that are completely unencumbered as the office debt capital markets continue to come back we may explore options to add financing to those properties to generate additional liquidity at.
Speaker Change: Great. Thank you.
Speaker Change: I was wondering where those new developed project.
James Farrar: Subsequent to quarter end, we achieved another impactful new leap. Our Greenwood Boulevard property in Orlando was 100% leased to a single tenant with a lease expiration in 2028. We were successful in negotiating a transaction to bring a new 66,000-square-foot tenant into the building prior to that existing tenant's expiration. The new tenant signed a 10-year lease expected to commence in the fourth quarter of this year. The current Senate will vacate that space and pay a sizable termination. On the remaining 89,000 square feet in the building, the current tenant will keep its 2028 expiration on 31,000 square feet and agreed to extend the remaining 58,000 square feet on a longer-term basis to 2035.
How did that come about was this something that you seek down or was it something you were approached on.
Speaker Change: Sure. It's Jamie here. So this is something we started about two years ago, recognizing how strong the downtown St. Petersburg market was per development and so we did a fairly deep canvas.
Tony: That concludes our prepared remarks, and we'll open up the lines for questions operator.
Tony: Thank you very much.
Speaker Change: Just as a reminder to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two.
Speaker Change: Options and how to best execute when we landed on I think a great structure that will generate significant value over time for us and then actually on that point.
Speaker Change: For more information Forbes actually published an article earlier this week, which is a lot of good information. So you can search Forbes Waldorf story of St. Petersburg, and get a really good summary of the project.
Speaker Change: Okay.
Rana: Our first question comes from <unk> Rana with Keybanc capital markets. Your line is now open. Please go ahead.
Speaker Change: Okay, Great and then.
Speaker Change: A lot of work still needs to be done potash the shovel in the ground, but could you give a sense of timing and what that looks like and how it's shaping up to be you did mentioned three years in construction in your prepared remarks, but.
Speaker Change: Great. Thank you.
James Farrar: Overall, these were very important lease transactions that provide certainty around this asset's long-term cash flow. The transactions also position us favorably to extend the property's upcoming loan maturity, which is expected to be achieved in the second quarter. Portfolio-wide, we continue to see rent growth upon renewals and have realized an 8.5% positive cash-releasing spread on our renewals over the last 12 months. Our same-store cash NOI also increased 4.4% in the first quarter as compared to the prior year. As far as our overall earnings and occupancy trends for the year, we are still on track within the guidance ranges we provided at the end of February.
Speaker Change: I was wondering where those new developed project.
Speaker Change: How did that come about was this something that you seek out or something.
Speaker Change: I wonder if there's any other color you can provide us.
Speaker Change: Something your approach at all.
Speaker Change: Sure so pre sales or about to commence.
Speaker Change: Sure. It's Jamie here. So this is something we started about two years ago, recognizing how strong the downtown St. Petersburg market was for development and so we did a fairly deep canvas on options and how to best execute when we landed on.
Speaker Change: We're building out a sales center within the ground floor of City Center Thats almost finished so internally, we think it'll be about a year plus or minus a pre sales and then three years construction. So if things go. According to plan, it's probably four years for the full project.
Speaker Change: Think a great structure that will generate significant value over time for us and actually on that point.
Speaker Change: Okay and would there be.
Speaker Change: Any disruption.
Speaker Change: For more information Forbes actually published an article earlier this week, which is a lot of good information. So you can search Forbes Waldorf Astoria, St. Petersburg, and get a really good summary of the project.
Speaker Change: Properties that you've got broad space.
Speaker Change: So we've been working on alternative parking arrangements, we've been keeping all of our tenants up to speed on what's going to happen. So there'll be a period of time, where tenants are offered alternative arrangements, including valet and when the structures done it replaces the parking for the office building.
Anthony Maretic: With that, I'll turn the call over to Tony to discuss our financial results in more detail. Thanks Jamie. Our net operating income in the first quarter was $26.0 million, which is $500,000 higher than the amount we reported in the fourth quarter. Higher revenue, partially driven by strong same-store results, combined with lower operating expenses was the primary driver of the NOI increase. We also reported core FFO of $12.3 million or $0.30 per share for the first quarter. Core FFO was $600,000 higher than the amount we reported in the fourth quarter for the same reasons NOI was higher.
Speaker Change: Okay, Great and then.
Speaker Change: Lot of work still needs to be done punish the shovels in the ground, but can you give a sense of timing and what that looks like and how it's shaping up to be you had mentioned three years in construction in your prepared remarks, but.
Speaker Change: Okay, Great last one for me.
Speaker Change: You are currently just below the low end of your occupancy guidance here.
Speaker Change: Wondering if there's any other color you can provide us.
Speaker Change: Sure so pre sales or about to commence we.
Speaker Change: And could you give us some color on the pace of occupancy this year in order to get you to the midpoint.
Speaker Change: We're building out a sales center within the ground floor of city center that is almost finished so internally, we think it'll be about a year plus or minus a pre sales and then three years construction. So if things go. According to plan, it's probably four years for the full project.
Speaker Change: 86% I know you do have about 300000 square feet expiring over the next couple of quarters here. So.
Speaker Change: Great. Thank you.
Speaker Change: Yes sure.
Anthony Maretic: Our first quarter AFFO was $6.5 million, or $0.16 per share. There was no single TI or LC amount that impacted AFFO by more than $500,000. Our spending on property renovations also decreased in the first quarter relative to last year as we completed several property renovation projects and amenity upgrades in the fourth quarter.
Speaker Change: This is Tony.
Speaker Change: Yes, so we have 143000 square feet of leases at March 31 that have yet to take occupancy that represents about two 7% of our portfolio. So thats, where the bulk of that is going to come from.
Speaker Change: Okay and will there be any disruption.
Speaker Change: Property, but use that broad space.
Speaker Change: So we've been working on alternative parking arrangements, we've been keeping all of our tenants up to speed on what's going to happen. So there'll be a period of time, where tenants are offered alternative arrangements, including ballet and when the structures done it replaces the parking for the office building.
Speaker Change: The majority of that will move in over the next two quarters.
Speaker Change: And then beyond that.
Speaker Change: We have the move out that I mentioned on my prepared remarks at.
Anthony Maretic: Moving on to some of our operational metrics. Our same-store cash NOI trended higher in the first quarter. There was a healthy increase of 4.4% or $1.1 million as compared to the first quarter of 2024. The largest contributor to that was Raleigh again, where NOI continues to materially increase at Block 83 as signed leases take occupation. Our portfolio occupancy ended the quarter at 84.9%. This was slightly lower than the prior quarter, which we expected as a result of a couple of known vacates at our Denver Tech and 2525 McKinnon properties. These vacates occurred later in the quarter and as a result did not have a significant impact to NOI.
Speaker Change: In Portland.
Speaker Change: And then we have the activity thats happening at Greenwood Blvd, which is a net positive.
Speaker Change: And kind of occupancy dipping through the first two quarters, but we expect the new tenant will take occupancy before.
Speaker Change: Okay, Great last one for me.
Speaker Change: You are currently just below the low end of your occupancy guidance here.
Speaker Change: Toward the end of the year to get us back within that range.
Speaker Change: And could you give us some color on the pace of occupancy this year in order to get you to the midpoint.
Speaker Change: Okay, great. Thank you.
Speaker Change: 86% I know you do have about 300000 square feet expiring over the next couple of quarters here. So.
Craig Sarah: Our next question comes from Craig Sarah with Lucid capital markets. Craig. Your line is now open. Please go ahead.
Speaker Change: Great. Thank you.
Tony: Yeah sure Paul This is Tony.
Speaker Change: Yes, so we have 143000 square feet of leases at March 31 that have yet to take occupancy that represents about two 7% of our portfolio. So thats, where the bulk of that is going to come from.
Craig Sarah: Hey, good morning, guys.
Craig Sarah: I just wanted to circle back to the Greenwood Blvd transaction I wasn't able to do the math quick enough in my head, but is there going to be ultimately any vacancy in that asset or does the new tenants.
Anthony Maretic: We expect occupancy will decrease in the second quarter. This will be driven by the existing tenant at Greenwood Boulevard downsizing by 66,000 square feet that Jamie described prior to the commencement of a new tenant later this year, and also due to a 72,000 square foot tenant that vacated their ambiguous property in Portland after quarter end on April 1st, as expected. At quarter end, we had 143,000 square feet of signed leases that have not yet come in. As those sign leases take occupancy, we expect occupancy will increase and therefore we still anticipate year-end occupancy will end within the 85 to 87 percent range contained within our original guidance.
Tony: The majority of that will move in over the next two quarters.
Craig Sarah: Taking the remaining space in the other tenants downsizing and extending their lease thank you.
Speaker Change: And then beyond that.
Craig Sarah: Yeah, Yeah, Yeah, Hey, Greg It's Tony here, Yes, it's the latter there it's going to take the occupancy. It's currently 100% it will dip down for this vacate and then get back 100% before the end of the year, but what it does do is it dramatically extend the world of the property.
Speaker Change: We have the move out that I mentioned on my prepared remarks at.
Speaker Change: In Portland.
Speaker Change: And then we have the activity thats happening at Greenwood Blvd, which is a net positive but.
Speaker Change: Results in kind of occupancy dipping to the first two quarters, but we expect that new tenant will take occupancy before the end of the year to get us back within that range.
Craig Sarah: As you know.
Craig Sarah: Of that maturity was scheduled for 2028 and now the bulk of the space has been extended out the new lease that we have is a 130 month. So over just over 10 years 10 year term and.
Speaker Change: Okay, great. Thank you.
Craig: Our next question comes from Craig to Sara with Lucid capital markets. Craig. Your line is now open. Please go ahead.
Craig Sarah: An existing tenant is extending their space out by five years on two to three four so it's a big win for the property.
Anthony Maretic: Our total debt as of March 31st was $646 million. Our net debt, including restricted cash to EBITDA, was 6.7 times. As of March 31st, we had approximately $42 million undrawn and authorized in our credit facility. We also had cash and restricted cash of $37 million as of quarter end. Our credit facility matures in November 2025, with an ability to extend it to November 2026. That option can be exercised in August, 90 days prior to the maturity, as long as we remain in compliance with our debt covenants, which we are comfortably projected to be. As such, we expect to exercise that option and continue discussions on a longer-term renewal.
Craig: Hey, good morning, guys.
Craig Sarah: Right and as far as the rent there I think the existing tenant was paying $25 75 were there.
Craig: I just wanted to circle back to the Greenwood Blvd transaction I wasn't able to do the math quickly enough in my head, but is there going to be ultimately any vacancy in that asset or does the new tenants taking.
Craig Sarah: Any changes in the rent per square foot.
Craig Sarah: For the new tenant or for the existing tenant.
Speaker Change: Taking the remaining space in the other tenants downsizing and extending their lease thank you.
Craig Sarah: So for the new tenant it kind of stepped back up over a period of time and gets back slightly above where the current rent is so little dip down a little bit and then there'll be back.
Speaker Change: Okay, Yeah, Yeah, Hey, Greg It's Tony here, Yes, it's the latter there.
Speaker Change: Going to take the occupancy. It is currently 100% it will dip down for this vacate and then get back 100% before the end of the year, but what it does do is it dramatically extends the wealth of the property.
Craig Sarah: Okay fair enough.
Craig Sarah: Just one more for me I mean heading into this year.
Speaker Change: I think your expectation was that you would see the most leasing activity and traffic and Phoenix and congrats on the Liza Papago.
Speaker Change: As you know.
Speaker Change: That maturity was scheduled for 2028 and now the bulk of the space has been extended out the new lease that we have is a 130 month. So over just over 10 years 10 year term and.
Anthony Maretic: We have two property debt maturities in 2025. The loans for both Greenwood Boulevard in Orlando and IntelliCenter in Tampa mature in the fourth quarter. We are at an advanced stage of discussions on a three year term extension with the existing lender for Greenwood Boulevard and have initiated discussions on a short term extension with the existing lender in IntelliCenter. We expect to provide an update on next quarter's call.
Speaker Change: But I just would be curious to hear your read on sort of how you're top sunbelt markets are performing and with Phoenix in particular, if that's helpful. Thank you.
Speaker Change: And the existing tenant is extending their space out by five years on two to three four so it's a big win for the property.
Speaker Change: Sure I'll start and Tony might have some comments as well.
Speaker Change: Yeah.
Speaker Change: If you actually have an investor presentation on slide three shows the maps of really where our current markets are in our overall value.
Speaker Change: Right and as far as the rent there I think the existing tenant was paying $25 75 were there.
Anthony Maretic: Last, we also have two high-value properties, Block A3 in Raleigh and City Centre in Tampa, that are completely unencumbered. As the office debt capital markets continue to come back, we may explore options to add financing to those properties to generate additional liquidity.
Speaker Change: Any changes in the rent per square foot.
Speaker Change: What you can see is the bulk of our value is in the sunbelt markets and we're feeling really good about leasing there. So when Tony mentioned about some occupancy dipping down in Portland.
Speaker Change: Either for the new tenant or for the existing tenant.
Speaker Change: So for the new tenant it kind of stepped back up over a period of time and gets back slightly above where the current rent is so little dip down a little bit and then then be back.
Speaker Change: That's unfortunate, but that's not a market that we're looking to invest capital in where we're investing capital is in the sunbelt, where we're creating the most value in Phoenix has been very strong in fact, a significant portion of a leading leasing this quarter was in Phoenix.
Operator: That concludes our prepared remarks and we will open up the line for questions. Operator? Thank you very much.
Speaker Change: Okay fair enough.
Speaker Change: Just one more for me I mean heading into this year.
Operator: Just as a reminder, to ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star, then two.
Speaker Change: I think your expectation was that you would see the most leasing activity and traffic and Phoenix and congrats on Elisa Papago.
Speaker Change: So we continue to feel really good there and across the other sunbelt markets that we have.
Speaker Change: But I just would be curious to hear your read on sort of how you're top sunbelt markets are performing and with Phoenix in particular, if that's helpful. Thank you.
Speaker Change: Yes, just to echo some of Jamie's comments, the bulk of the leasing activity. This quarter. The 144000 square feet of leasing this quarter was in Phoenix.
Speaker Change: And if you look at where the cash spreads are this quarter you can see how strong that is and that was largely driven by that activity in Phoenix.
Speaker Change: Sure I'll start and Tony might have some comments as well.
Upal Rana: Our first question comes from Upal Rana with KeyBank Capital Markets. Upal, your line is now open, please go ahead. Great, thank you.
Tony: If you actually have our investor presentation on slide three shows the maps of really where our current markets are in our overall value.
Speaker Change: Okay. Thanks, guys.
Speaker Change: I think what you can see is the bulk of our value is in the Sun belt markets and we're feeling really good about leasing there. So when Tony mentioned about some occupancy dipping down in Portland.
Greg: Thanks for the question Greg.
James Farrar: You know, I was wondering, with this new development project, how did that, how did that come about? Was this something that you seeked out? Or was it something you're approached on?
Greg: As a reminder to ask a question you May Press Star then one on your Touchtone phone right now.
Okay.
Tony: That's.
James Farrar: Sure, it's Jamie here. So this is something we started about two years ago, recognizing how strong the downtown St. Petersburg market was for development. And so we did a fairly deep canvas on options and how to best execute, and we landed on, I think, a great structure that will generate significant value over time for us. And actually on that point, for more information, Forbes actually published an article earlier this week, which has a lot of good information, so you could search Forbes Waldorf Astoria St. Petersburg and get a really good summary of the project.
Tony: Unfortunate, but thats not a market that we're looking to invest capital in where we're investing capital is in the sunbelt, where we're creating the most value in Phoenix has been very strong in fact, a significant portion of the leading leasing this quarter was in Phoenix.
Greg: We currently have no further questions. So I will hand back over to Jamie for any closing remarks.
Greg: Thank you for joining today, we look forward to updating you further next quarter Goodbye.
Tony: So we continue to feel really good there and across the other sun belt markets that we have yes, just to echo some of Jamie's comments the bulk of the leasing activity. This quarter. The 144000 square feet of leasing this quarter was in Phoenix.
Greg: Okay.
Speaker Change: Thank you very much Jamie and Tony for being our speakers today that comes to the end of our conference call. We appreciate everyone for participating you may now disconnect your lines.
Tony: And if you look at where the cash spreads are this quarter you can see how strong that is and that was largely driven by that activity in Phoenix.
James Farrar: Okay, great. And then, you know, a lot of work still needs to be done, probably, you know, the shovels in the ground. But if you give a sense of timing and what that looks like, and how it's shaping up to be, you did mention three years of construction and your prepared remarks, but I wonder if there's any other call you can provide us Sure, so pre-sales are about to commence, we're building out a sales centre within the ground floor of City Centre that's almost finished, so internally we think it'll be about a year, plus or minus, of pre-sales, and then three years construction, so if things go according to plan, it's probably four years for the full project.
Tony: Okay. Thanks, guys.
Speaker Change: Thanks for the question Greg Greg.
Speaker Change: As a reminder to ask a question you May Press Star then one on your touch.
Speaker Change: <unk> phone right now.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: We currently have no further questions. So I will hand back over to Jamie for any closing remarks.
Jamie: Thank you for joining today, we look forward to updating you further next quarter Goodbye.
Speaker Change: Yes.
Speaker Change: Thank you very much Jamie and Tony for being our speakers today that comes to the end of our conference call. We appreciate everyone for participating you may now disconnect your lines.
James Farrar: Okay, and will there be any disruption to the existing properties that use that garage space? So, we've been working on alternative parking arrangements. We've been keeping all of our tenants up to speed on what's going to happen, so there'll be a period of time where tenants are offered alternative arrangements, including valet. And when the structure is done, it replaces the parking for the office. Okay, great.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Upal Rana: Last one for me, you know...
Upal Rana: You're currently just below the low end of your occupancy guidance here.
Speaker Change: Okay.
Upal Rana: And, you know, could you give us some color on the pace of occupancy this year in order to get you to the midpoint of 86%? You know, I know you do have about 300,000 square feet expiring over the next couple quarters here. So All right, great.
Speaker Change: Okay.
Speaker Change: [music].
Tony Maretic: Thank you. Yeah, sure.
Tony Maretic: Upal, this is Tony. Yeah, so we have 143,000 square feet of leases at March 31st that have yet to take occupancy. That represents about 2.7% of our portfolio. So that's where the bulk of that's going to come from. The majority of that will move in over the next two quarters.
Tony Maretic: And then beyond that, you know, we have the move-out that I mentioned on in my prepared remarks in Portland. And then we have the activity that's happening at Greenwood Boulevard, which is a net positive, but will result in kind of occupancy dipping through the first two quarters. But we expect that new tenant will take occupancy before the end of the year to get us back within that. Okay, great. Thank you.
Craig Kucera: Our next question comes from Craig Kucera with Lucid Capital Markets. Craig, your line is now open, please go ahead. Hey, good morning, guys.
Anthony Maretic: I just want to circle back to the Greenwood Boulevard transaction. I wasn't able to do the math quick enough in my head. But is there going to be ultimately any vacancy in that asset? Or does the new tenant taking, you know, the remaining space and the other tenant just downsizing and extending their lease? Thank you.
Anthony Maretic: Yeah, hey Greg, it's Tony here. Yeah, it's the latter. It's going to take the occupancy, it's currently 100%, it'll dip down for this vacate and then get back to 100% before the end of the year. But what it does do is it dramatically extends the waltz of the property as that maturity was scheduled for 2028. And now the bulk of the space has been extended out. The new lease that we have is a 130-month, so just over 10 years, 10-year term. And the existing tenant is extending their space out by five years on two of the three floors.
Craig Kucera: So it's a big win for the property. Right. And as far as the rent there, I think the existing tenant was paying $2575.
Anthony Maretic: Were there any changes in the rent per square foot, either for the new tenant or for the existing tenant? So for the new tenant, it kind of steps back up over a period of time and gets back slightly above where the current rent is. So it'll dip down a little bit and then be back. Okay, fair enough.
Craig Kucera: Just one more for me.
James Farrar: I mean, heading into this year, I think your expectation was that you would see the most leasing activity and traffic in Phoenix, and congrats on the lease at Papago. But I just would be curious to hear your read on sort of how your top Sunbelt markets are performing, and with Phoenix in particular, if that's helpful. Thank you.
James Farrar: Sure, I'll start, Tony might have some comments as well. If you actually have our investor presentation on slide three, shows the maps of really where our current markets are and our overall value. And I think what you can see is the bulk of our value is in the Sunbelt markets. And we're feeling really good about leasing there.
James Farrar: So when Tony mentioned about some occupancy dipping down in Portland, that's unfortunate, but that's not a market that we're looking to invest capital in. Where we're investing capital is in the Sunbelt where we're creating the most value. And Phoenix has been very strong. In fact, a significant portion of the leasing this quarter was in Phoenix. So we continue to feel really good there and across the other Sunbelt markets that we have. Yeah, just to echo some of Jamie's comments, the bulk of the leasing activity this quarter, the 144,000 square feet of leasing this quarter was in Phoenix.
Anthony Maretic: And if you look at where the cash spreads are this quarter, you can see how strong that is. And that was largely driven by that activity in Phoenix.
Craig Kucera: Okay, thanks guys. Thanks for the question, Craig. Thanks, Craig.
Operator: As a reminder, to ask a question, you may press star then one on your touch tone phone right now.
James Farrar: We currently have no further questions, so I will hand back over to Jamie for any closing remarks.
James Farrar: Thank you for joining today. We look forward to updating you further next quarter.
Operator: Goodbye.
Operator: Thank you very much Jamie and Tony for being our speakers today.
Operator: That comes to the end of our conference call. We appreciate everyone for participating. You may now disconnect your line.