City Office REIT (CIO) 7 May 212021 Q1 Earnings call transcript

Good morning, and welcome to the City Office REIT, Incorporated First Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions]. pleasure Chief to Corporate Financial my Maretic, to Secretary. now company's the Officer, is to you introduce Tony It Treasurer and Thank you Mr. Maretic.

begin. may You

Good morning.

to discuss release where non-GAAP begin website Certain to release first reconciliation on and today comparable we I of most company's package. like statements measures package press direct Before The both or made information expectations earnings their that constitute historical forward-looking based measures. discussed a would be statements meaning quarter GAAP earnings that today laws. securities will at within directly supplemental can you federal you the cioreit.com, supplemental view may not and our that or to beliefs the our financial are include the of fact,

call. results between now in forward-looking Chief update the course review be in see believes statements cause statements quarter our may will turn some statements give the operational could company no first material and company that made forward-looking company's filings that upon results. assumptions, Jamie. will Executive reflected after financial call differences of I'll SEC James expectations the release this earnings discusses Please these with for no Farrar, any I obligation press Officer, expectations that of our actual these be forward-looking undertakes over quarter's we highlights. factors statements to the The such reasonable the achieved. forward-looking our assurance can and based to the the are in Although disclaimer that

XXXX trending quarter the the that joining positively. our Good for to for are pleased of expectations our for report morning. Thanks balance and first today. I'm results

AFFO we core FFO growth. the first reported strong For quarter, and

well covered these Our dividend metrics. was by

term. expect to long dividends We excess the cash our to in over of continue generate

end third XX% rent receive we Bottom $XXX,XXX and once pandemic. base the start of tenancy the of with of to the line, and quarter collections almost XX% in in XXXX rent solid be excellent. that strong were rent Further, the before we expect of deferrals repaid We've our collection. have to contractual been quarter. the of is exceeded granted Our continue collections of to-date XXX% the the every again balance collection since health

Creek Tampa. achieved also and the year. renewal at square include in by sale San This and quarter renewal X% mark-to-market same-store Tech Diego. of compared growth We Creek expansion the our To XXXX. quarter the rate foot Carillon sale gain Cherry on Denver our prior in Other highlights in our first of a substantial property Cherry to earnings events both in on the Point our at last lease and Point the the Carillon $XX worth driven noting cash on represented history. execution an foot tenant the and feet metrics. The but our and property, call, million renewal $XX other secured with again. year eight sale some leasing square a gain, commencing our a touch expansion at we property at NOI was of XX,XXX our XX,XXX XX,XXX million was at last Science of X.X% property of generated cap leasing The Denver in Properties largest is paychecks, square Life these early on the largest one announced company's primarily We

discussions pandemic. note, a our achieved We quarter Over healthy XXXX increasingly Of recovery. great about was we're start of renewal to Overall, new and feet this signed leasing five as first tenant timing see higher vaccination rate feeling quarter combination return leases, will more over us start of a we of of leases lease including our to that school utilization the Based XX,XXX on strongest giving We kids levels three major confidence for of return to of see is a the fall and the XX%. this square office. levels long position the since well post new XX,XXX sunbelt the anticipate feet. Labor the optimistic of We term. expansions Further, cities square we a the stimulate to strength the the the continue of us will Day. our over further last new XX months, will activity. believe we've that leasing also for

tenant However, needs. we their do expect elect to as will reduce some space an turnover element of companies

XXX,XXX quality at in their lease SanTan detailed great hope million Phoenix Toyota then city. Corporation, term, and rent our the in until sub XX will corporate had over been for Motor Chandler square XX, life. of $X.X Well, by representing our with As would due XXXX. due are to a Toyota have building property Toyota one maturity pay live of would course technology two continue that a Credit approximately the professionals Phoenix, abundance demographics period. who press accelerated accelerated to August months in of a strong rent a is most tenant release year tenant time remain lease the the foot fee markets large it two and of desirable that paid to high of we positioned long the termination full the of well half and over to that of years secure replacement tenants we there, a lead

continues Turning to transaction markets be our slow. to in volumes acquisitions,

corn strong still for potential for options limited. are have for points buildings but acquisitions, searching with been at looking valuations capital a lot of We're entry attractive opportunities. the trading However, actively stabilized investment private

infill income strategic progress highly own our X our both million land zone that Mesa see on in with with our look a options. located buildings creates campus. value of development, San we're perspective will due purchase map our that land, expected two these and their we solid smaller life Effectively our market square opportunity portfolio. $XX waive this these slide on our street In combination existing the about includes we've investors you headquarters development sites very properties. over development total across properties We're for in in we adjacent excited investor of provide secured We including valuable properties our from website incremental better that To million. this conditions two included [of that with produced presentation our buying main office as this note] own month. presentation a holdings. when location off you the contiguous close generate two at our science a for for a the later two transaction Qualcomm's diligence an feet on sites of However, to development to sites The acquisition Diego Sorrento world directly holding purchase map our have fantastic to Holdings

development highs. we science be the continue At San States the science on of the Diego across an very As we XX% showed to in is science to lastly existing completing spring busy of And our sector our hit three this intend flow phase and portfolio. life we're past, mentioned vacancy head with In cash same closing focused life buildings excited and all we X% an further in XX income. for in XXXX experienced into in cash a maximize of grew end a purchase United new low the CBRE's top markets the considering time, We're options, rents San the and me, in record a holding management as the build to partner. X.X% that to flow over leasing across one Diego's including of meantime, continues Mesa. the is growth participating the the operate summer, to our strategic life last dominant driving impressive XXXX, grow one to at years. Sorrento quarter. the first data rental rates by attractive. holdings and Upon

to We updates now working in to opportunities turn the future. further that detail call Anthony We on forward to of have providing a look number the financial exciting our provide over we're on. I'll results.

to results, quarter's the first guidance then for the and XXXX. our update address I'll Jamie. provide of balance an Thanks,

net the expenses We line increase of more slightly income was in sale of a higher million properties our than the these quarter the result positive $XX.X $XX.X termination signed Our last in in the recorded Cherry first we the combination fee offset income. $XXX,XXX at Carillon which variances the Creek quarter. number straight lease rent income described. major our at operating of increase in Point of quarter the Jamie reported the property the a in which increase as quarter. lower the than we factors. first and reduction The We midway from result NOI aggregate, had a quarter we In through from higher a was had an operating was million

recorded be core us higher total the than in first quarters reported million discussed, property. million We this the amount of $XXX,XXX As of SanTan to of million FFO will termination the the was $X.X fee Jamie that $XX.X per of just A higher. of three $X.XX XXXX. quarter. be remaining XXXX $XX,XXX or $X.XX NOI was million the and share, for recorded recorded which $X related We will same quarter during reasons fourth in Toyota paid a in

Carillon Our or and on at share. impact first year quarter AFFO paid The was leasing $X.X renewal per eight our a paychecks Point largest was the million expansion $XX.X $X.XX AFFO property. million commission

Denver a prior to leases sciences first first are the NOI Tech in over the life results these XXXX combined as we of quarter biggest The portfolio operating Our drivers our positive and same-store lower signed last was slightly X.X% expenses at year. year. those growth cash to property the quarter compared property the particularly

was $XXX of at the our Creek repayment quarter. debt That the decrease sale year the Cherry million, of of which from decrease during primarily end $XX million XX million $XXX was a result loan figure. total with over the Our proceeds an March was

Our our of times. cash quarter was effectively including our years average maturity EBITDA and X.X fixed. At XX% end, a had net debt healthy of restricted X.X to total debt a weighted was debt,

of our considerations line our updates the changes income, reduction is earnings have now our Our drivers the to we XXXX. rental the and Operator? year NOI forth acquisition XXXX X.X% release. and cash property press set refer provided termination These full income, you due to operating average And have impacted updated assumptions rate fee until Last our the open same-store and guidance our to operational FFO positively up in growth. interest concludes material we'll primary in questions. The forecasted weighted collections maturities remarks. of for acceleration guidance we and core prepared are That net general strong press our debt the release. timing. no We provision

the go Our comes Janney. begin with [Operator ahead. now will Please We Stevenson and Instructions] from answer Rob question session. first question

to element suit going million Jamie, acquisition? vacancy and capability guys development incremental office builder up and Mesa post the for this vacancy? guys. about morning, larger what's the to Do or half current ability back with for with the there, closing occupy that market here and somebody of user the you put the who's now lease Do at do you Good are plan that? you feet this Sorrento keep you something large like a that this the point? hold a thinking How square to

Sure Rob.

we couple portfolio, pretty as good feet, on far XX,XXX prospects starting vacant So and existing One there. that. about up it's pick have our elements one that there's feeling as building action a in and square to that's we're

that we two created developer. So by to say. know have participating development we've want table there. doing with kind of an our and experienced is days, looking two of on development the pretty by phase early in What we these That's that. at really that's get options sites the a you overall a options are I'd at all When leased land, solid flow sizable lot properties, all we're in of adding including up. and and We're a value our one look development potential cash other increase

of comments potential point Okay. we this outs And terms this should the any that of in or year incremental earlier be downsizings that are then, note next? downsizings, etc, known early Tony at aware move of about or

that question. Rob. Yes. Hey To address

back a on sign half XX,XXX previous coming The to up here Research which space the have in talked QX for first means in We've approximately coming coming square Florida in make to be to one XX,XXX calls. we short renewal for about back We're feet just feet. note that's we'll QX. expecting that's lease us up Park. an square That's getting here, in of immediate very over this quarter is space

we're expecting the Beyond year. the the on that Park. that for significant At in XX,XXX the end that balance anything property isn't year we of That's Florida there XX, get Research too field also to. feet of ingenuity this refer December drive really to square

coming building foot on just for is And square But XX,XXX XXX,XXX We XX. there. go to with you square us have some recall December subtenant square that signed a feet to a we've time deal as back yet XX,XXX feet. direct

Okay.

give a And quarter, need the any half current of taking the aware tenant staying On we tenant the space? that that second Is that's back, new in? improvements of? to there be is material is

now. so Yes, a, in that's tenant are And that's half. it's they there giving a back GSA

the renewing existing terms. on we're So reasonable tenant

Okay. without up the you've last me. levels, going the position in your for how And do of capital mean is When got look the then wind ends one What closing the upper of remainder proceeds? acquisition to the to like? you have etc? essentially you the year invest disposition much capital I leverage

one, Rob. start on I'll maybe that So

go could the bit So end it we've comfortable got another guidance at that. of call above top million. million still We're we from XXX that a our XX

we've far of kind be model on are Look a to at looking follow really we're later. things was the a It's could acquisition. could As be It sooner internally QX, far way as mid timing, hard right now. number as it of there as say.

think change put I what far we guess on wouldn't I as there. So timing, as best

Okay, guys. Appreciate time. thanks, the

Yes. Rob. Thanks ,

Jason comes Please with from go The RBC. Idoine next ahead. question

guys. Hey,

the lease. Just on Toyota touching SanTan

have bit why I And a the space? about that? you could for that So little looking us prospects you tenant leave there. tell guys think on you the to does buildings question first two idea my that is then I around have space? If guess any

those you buildings? could if planning tenant bring are or there and wondering the of lease Or kind multi of on there's there? do? creative plan tenant to you just both that So Toyota what's one one the in anything Maybe you

Sure.

the of So, Toyota Jason, they lot three to buildings, workers taking by space. those remote. their across as they bulk you're buildings two put were into occupies the shifting far we as the there's and Toyota advised money have correct, a What were one. They country of is

the in in two other And on parts so they country. moved that three different in of direction Phoenix, locations. One

we So it's it a standpoint, XX We before time days. of the back. our space get still almost have was early disappointing from here lot months

and And at we team. thinking amenities. on looking as enhancing we're are could be far to could benefit same so particular can do at but users follow. are the looking building, huge leasing a some with commitment And spend building in in we've time that. the multi to fired making there our area. of what large starting that We're as time ancillary up Intel from It Chandler for there investment tenant space be some

the So we're Toyota to good feeling get, and to we're a in really we'd good love kept there. obviously, about I the we're time we the have but have spot think prospects and going rate but

redevelopment I guess, in And Mesa. on Sorrento Okay. the opportunities

going that office think traditional from to lab. those I are So be to conversions

up some that of science your spaces spec to to Some users. who peers office life lab in other noted difficult the have of for space it's kind bring are those exceptionally tenant traditional of

I guess around to there? of or that just what development thoughts plan is So the curious your kind hear ultimate

position the with them have, of buildings a five science life lab. are already of four we're different we in So a where bit

One of to be be leased that an R&D easily of is Qualcomm, converted building with infrastructure which to lot lab. Intel could could is easily sorry, them a

phased development to So buying when happen look going that would our at are buildings view sites we're the be It's over is the you income. there likely time. holding two a we're maximize that on would that

before then it's development. those a number would a ones taken overall down years ultimately So into larger wrapped of and be

were know, space, the quarter, GSA you we gave and some guys those Okay, the working leasing guys deciding lease. And out? give discussions, be are going I guess why I confident that I and that's space? they did one just then an you the one was guess it update think still space I on my the end but FRP up had discussions prospects through to remaining on got second it. vacant XX,XXX the are one the back last of last to what guess And I you

Yes.

terms one that were is utilize and the So of so another the the they to end the day, floor to needed around discussion, do at they very whether what Ultimately weren't second we're decided extension for discussions Ultimately, the department the space. and and floor revolving could terms over. to it come department going on months the short term to they'll take able space we a to then of with half do another two vacate. of in

Research There this military terms replacement be hopefully a in the of prospects feel this base for Park reminder again, is They'll remained then new Florida a so good and of a demand balance prospects. our just has the paying the In we for there. that of steady. to is number contractors and probably around space, year And rent through year. downtime about tenant is have

Thanks. Okay.

Securities. from B. go Riley Your ahead. next question Craig with Kucera comes Please

guys. Hey, about back to coming REIT hearing season Office more We're from traffic good pre-pandemic morning, this earnings levels. leasing and

I'd curious those greater color which be regard? sound clearly markets that You maybe any might but as are on versus which seeing that you're optimistic, strength showing lagging in to be

So Craig comment. fair that's I think a

when starting look back with are plans is Day. where But on hearing as up of a it's from little a to XX%. but timing, summer, lot it's utilization, starting far their still bit, and circle fall feeling as more coming in tenants actual the directly So optimistic you the around we mid at picked is Labor which kind

a San And Dallas, at translate And absolutely I sciences forefront. hot. life really of Phoenix, it's white is up the lot, then feeling and activity, so like are you markets into good we're on tour Orlando, that. Tampa, Diego say when about kind the come would

portfolio. the So kind leaders those our be across would of

of or getting we're spaces time as been have being high replacement that of some assets. a potentially space or where blocks on is that we case of used. And the action lease in our spending some in few in we're something good those hasn't the overall larger really bringing around merger could extend thing tenants other The utilization terms at looking

And well. we up And so otherwise our would that activity as vacancy. accommodate in space be that couldn't picking is that in

seeing. So we're feeling we're pretty good what about

going to seeing be in back way. to the I it's before starts a of think translating year leases done meaningful end really that

remainder Tony, credit be motor of Okay, any is there fee that. the sort in until I Toyota will ratably lease there? lumpiness of recognized appreciate the they vacate? Or termination

We which of signed. but see August and of straight really in until be end only the why you is got departure. line March XX,XXX the it's recognized No, end They at really between information straightline XXXX. notice a it'll now QX, the

Okay, great. for entry evaluate one you lot a you to Is points not really that maybe actually in now me. rate Jamie, more that to and market. of relative mentioned are to cap the ago? find any And or were just acquisition compression we because to seeing there's have attractive half product year you a year

just a we well transactions transactions they the is moved that lot There's of and move were some initially beyond lot cases of there's what really working not and are we're interested of both competitors fit has pricing There Craig. and of on ones in the a that been asking.

value that And where good timed so make on our a back that's our there the capital assets. little we're and more for acquisition buy of kind lot known sure it and for we sidelines we And be going good in I of then quality going think bit to disciplined we put difficult. be model we and us. a to why own And they're that's capital year end is the of what and making the so

Thanks. great. Okay,

Thanks Craig.

to for closing there back I As Mr. questions, to [Operator Farrar the conference no like Instructions] would over turn any are remarks. additional

at today. questions. Please further out Goodbye. the you us time have Thanks don't call to reach any if for hesitate any joining to

The today's for conference concluded. has you Thank presentation. attending now

You may now disconnect.