NYSE:CIO City Office REIT Q1 2025 Earnings Report $5.00 -0.25 (-4.76%) Closing price 05/2/2025 03:59 PM EasternExtended Trading$5.12 +0.12 (+2.30%) As of 05/2/2025 05:40 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings History City Office REIT EPS ResultsActual EPSN/AConsensus EPS $0.27Beat/MissN/AOne Year Ago EPSN/ACity Office REIT Revenue ResultsActual RevenueN/AExpected Revenue$42.38 millionBeat/MissN/AYoY Revenue GrowthN/ACity Office REIT Announcement DetailsQuarterQ1 2025Date5/2/2025TimeBefore Market OpensConference Call DateFriday, May 2, 2025Conference Call Time11:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by City Office REIT Q1 2025 Earnings Call TranscriptProvided by QuartrMay 2, 2025 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:01Good morning, and welcome to the Citi Office REIT First Quarter twenty twenty five Earnings Conference Call. As a reminder, this conference call is being recorded. It is now my pleasure to introduce you to Tony Maratik, the company's Chief Financial Officer, Treasurer and Corporate Secretary. Thank you. Mr. Operator00:00:48Muratik, you may begin. Speaker 100:00:52Good morning. 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. Certain statements made today that discuss the company's beliefs or expectations or that are not based on historical fact may constitute forward looking statements within the meaning of the federal securities laws. While the company believes that these expectations reflected in such forward looking statements are based upon reasonable assumptions and give no assurance that these expectations will be achieved. Speaker 100:01:33Please 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. The company undertakes no obligation to update any forward looking statements that may be made in the course of this call. I'll review our financial results after Jamie Ferrer, our Chief Executive Officer, discusses some of the quarter's operational highlights. I'll now turn the call over to Jamie. Speaker 200:02:00Good 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. Petersburg. Speaker 200:02:18This plan was for the redevelopment of City Center's existing parking structure into a 49 storey residential condominium and mixed use tower. 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. Speaker 200:03:03The agreement with PMG charges them with responsibility for all predevelopment activities and the associated costs, which we anticipate will require them to invest $17,000,000 of cash. There are various preconditions to be completed prior to the contribution of our land to the venture, including achievement of presales, 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 partnership. Today, the project sales center is nearing completion at City Center, and we expect that presales will commence shortly. Upon achieving the conditions to commence construction, we anticipate a construction period of approximately three years. Speaker 200:03:55Downtown St. Pete has seen a dramatic transformation over the past ten 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. 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 Speaker 100:04:26for our shareholders. Speaker 200:04:29Turning to other highlights of the first quarter. We continue 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 levels. Higher quality office spaces in Sunbelt markets continue to outperform. Speaker 200:04:57Moving to our leasing activity, the first quarter is typically one of the slowest quarters of the year. Despite this, we completed a healthy 144,000 square feet of new and renewal leasing. 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. Subsequent to quarter end, we achieved another impactful new lease. Speaker 200:05:29Our 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 ten 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. 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 02/1933. Speaker 200:06:17Overall, 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 re leasing spread on our renewals over the last twelve 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 February. Speaker 200:07:04With that, I'll turn the call over to Tony to discuss our financial results in more detail. Speaker 100:07:09Thanks, Jamie. Our net operating income in the first quarter was $26,000,000 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 $12,300,000 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 100:07:42Our first quarter AFFO was £6,500,000 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. 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 $1,100,000 as compared to the first quarter of twenty twenty four. Speaker 100:08:20The largest contributor to that was Raleigh again, where NOI continues to materially increase at Block 83 as signed leases take occupancy. 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 2,525 McKinnon properties. These vacates occurred later in the quarter and as a result did not have a significant impact to NOI. We expect occupancy will decrease in the second quarter. Speaker 100:08:55This 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 Amberglint property in Portland after quarter end on April 1 as expected. At quarter end, we had 143,000 square feet of signed leases that have not yet commenced. 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. Our total debt as of March 31 was $646,000,000 Our net debt, including restricted cash to EBITDA was 6.7 times. Speaker 100:09:45As of March 31, we had approximately $42,000,000 undrawn and authorized on our credit facility. We also had cash and restricted cash of £37,000,000 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. Speaker 100:10:20We 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 IntelliCentre. We expect to provide an update on next quarter's call. Last, we also have two high value properties, Block A3 in Raleigh and City Center in Tampa, that are completely unencumbered. Speaker 100:10:52As the office debt capital markets continue to come back, we may explore options to add financing to those properties to generate additional liquidity. That concludes our prepared remarks and we'll open up the line for questions. Operator? Operator00:11:08Thank you very much. Our first question comes from Upal Rana with KeyBanc Capital Markets. Upal, your line is now open. Please go ahead. Speaker 300:11:44Great. Thank you. I was wondering, was this new development project, how did that come about? Was this something that you seek out? Or was it something you're approached on? Speaker 200:11:57Sure. 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. Speaker 200:12:13And 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, Saint Petersburg and and get a really good summary of the project. Speaker 300:12:37Okay, great. And then I understand there's a lot of work still needs to be done, probably 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 did mention three years of construction in your prepared remarks, but I wonder if there's any other color you can provide us. Speaker 200:12:54Sure. So presales are about to commence. We're building out a sales center within the Ground Floor of City Centre that's almost finished. So internally, we think it will be about a year plus or minus of presales and then three years construction. So, you know, if things go according to plan, it's probably four years for the full project. Speaker 300:13:16Okay. And will there be any disruption to the existing property that use that garage space? Speaker 200:13:23So we've, we've been working on alternative parking arrangements. We've been keeping all of our tenants up to speed on what's gonna happen. So there'll be a period of time where tenants are are offered, alternative arrangements, including valet. And when the structure is done, it replaces the parking for the office building. Speaker 300:13:44Okay. Great. Just last one for me. You're currently just below the low end of your occupancy guidance here. Could you give us some color on the pace of occupancy this year in order to get you to the midpoint of 86%? Speaker 300:13:58I know you do have about 300,000 square feet expiring over the next couple of quarters here. So that would great. Thank you. Speaker 100:14:07Yes. Sure. Paul, this is Tony. Yes. So we have 143,000 square feet of leases at March 31 that have yet to take occupancy. Speaker 100:14:17That 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. And then beyond that, we have the move out that I mentioned on my prepared remarks at in Portland. And then we have the activity that's happening at Greenwood Boulevard, 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 range. Speaker 300:14:52Okay, great. Thank you. Operator00:14:57Our next question comes from Craig Kucera with Lucid Capital Markets. Craig, your line is now open. Please go ahead. Speaker 400:15:08Hey, good morning guys. 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 just a new tenant taking, Speaker 200:15:21you know, the Speaker 400:15:21the remaining space and the other tenant just downsizing and extending their lease? Thank you. Speaker 100:15:26Yeah. Yeah. Hey, Greg. Hey. It's Tony here. Speaker 100:15:29Yeah. It's the latter. They're it's gonna take the occupancy. It's currently a %. It'll dip down for this vacate and then get back to 100% before the end of the year. Speaker 100:15:38But what it does do is it dramatically extends the walls of the property as, you know, 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 one hundred and thirty month, so over just over ten years, ten year term, and the existing tenant is extending their space out by five years on two of the three floors. So it's a big win for the property. Speaker 400:16:06Right. And as far as the rent there, think the existing tenant was paying $25.75 Were there any changes in the rent per square foot either for the new tenant or for the existing tenant? Speaker 200:16:19So 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. Speaker 400:16:34Okay. Fair enough. Just one more for me. 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. Speaker 400:16:57Thank you. Speaker 200:16:59Sure. 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. Speaker 200:17:16And we're feeling really good about leasing there. 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. Speaker 200:17:42So we continue to feel really good there and across the other Sunbelt markets that we have. Yes. Just to echo some of Speaker 100:17:48Jamie's comments, the bulk of the leasing activity this quarter, the 144,000 square feet of leasing this quarter was in Phoenix. 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 200:18:09Thanks for the question, Craig. Speaker 300:18:10Thanks, Craig. Operator00:18:27We currently have no further questions. So I will hand back over to Jamie for any closing remarks. Speaker 200:18:36Thank you for joining today. We look forward to updating you further next quarter. Goodbye. Operator00:18:43Thank 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.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCity Office REIT Q1 202500:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) City Office REIT Earnings HeadlinesCity Office REIT, Inc. (CIO) Q1 2025 Earnings Call TranscriptMay 2 at 2:01 PM | seekingalpha.comCity Office REIT Reports First Quarter 2025 ResultsMay 2 at 6:00 AM | prnewswire.comMusk's warning signal: Prepare before the cascade beginsWhen Elon Musk triggered his AI layoff plan, most analysts missed what it really meant. Louis Navellier didn’t. With 40+ years of market modeling, he says Musk’s move wasn’t about efficiency — it was a signal. And what’s coming next could divide the market into winners and losers faster than anyone expects. Watch this urgent video briefing now.May 3, 2025 | InvestorPlace (Ad)City Office REIT Q1 2025 Earnings PreviewMay 1 at 11:40 AM | msn.comCity Office REIT (CIO) Expected to Announce Quarterly Earnings on FridayMay 1 at 2:03 AM | americanbankingnews.comCity Office REIT Announces First Quarter 2025 Earnings Release and Conference CallApril 1, 2025 | prnewswire.comSee More City Office REIT Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like City Office REIT? Sign up for Earnings360's daily newsletter to receive timely earnings updates on City Office REIT and other key companies, straight to your email. Email Address About City Office REITCity Office REIT (NYSE:CIO) is an internally-managed real estate company focused on acquiring, owning and operating high-quality office properties located predominantly in Sun Belt markets. 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There are 5 speakers on the call. Operator00:00:01Good morning, and welcome to the Citi Office REIT First Quarter twenty twenty five Earnings Conference Call. As a reminder, this conference call is being recorded. It is now my pleasure to introduce you to Tony Maratik, the company's Chief Financial Officer, Treasurer and Corporate Secretary. Thank you. Mr. Operator00:00:48Muratik, you may begin. Speaker 100:00:52Good morning. 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. Certain statements made today that discuss the company's beliefs or expectations or that are not based on historical fact may constitute forward looking statements within the meaning of the federal securities laws. While the company believes that these expectations reflected in such forward looking statements are based upon reasonable assumptions and give no assurance that these expectations will be achieved. Speaker 100:01:33Please 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. The company undertakes no obligation to update any forward looking statements that may be made in the course of this call. I'll review our financial results after Jamie Ferrer, our Chief Executive Officer, discusses some of the quarter's operational highlights. I'll now turn the call over to Jamie. Speaker 200:02:00Good 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. Petersburg. Speaker 200:02:18This plan was for the redevelopment of City Center's existing parking structure into a 49 storey residential condominium and mixed use tower. 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. Speaker 200:03:03The agreement with PMG charges them with responsibility for all predevelopment activities and the associated costs, which we anticipate will require them to invest $17,000,000 of cash. There are various preconditions to be completed prior to the contribution of our land to the venture, including achievement of presales, 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 partnership. Today, the project sales center is nearing completion at City Center, and we expect that presales will commence shortly. Upon achieving the conditions to commence construction, we anticipate a construction period of approximately three years. Speaker 200:03:55Downtown St. Pete has seen a dramatic transformation over the past ten 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. 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 Speaker 100:04:26for our shareholders. Speaker 200:04:29Turning to other highlights of the first quarter. We continue 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 levels. Higher quality office spaces in Sunbelt markets continue to outperform. Speaker 200:04:57Moving to our leasing activity, the first quarter is typically one of the slowest quarters of the year. Despite this, we completed a healthy 144,000 square feet of new and renewal leasing. 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. Subsequent to quarter end, we achieved another impactful new lease. Speaker 200:05:29Our 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 ten 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. 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 02/1933. Speaker 200:06:17Overall, 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 re leasing spread on our renewals over the last twelve 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 February. Speaker 200:07:04With that, I'll turn the call over to Tony to discuss our financial results in more detail. Speaker 100:07:09Thanks, Jamie. Our net operating income in the first quarter was $26,000,000 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 $12,300,000 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 100:07:42Our first quarter AFFO was £6,500,000 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. 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 $1,100,000 as compared to the first quarter of twenty twenty four. Speaker 100:08:20The largest contributor to that was Raleigh again, where NOI continues to materially increase at Block 83 as signed leases take occupancy. 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 2,525 McKinnon properties. These vacates occurred later in the quarter and as a result did not have a significant impact to NOI. We expect occupancy will decrease in the second quarter. Speaker 100:08:55This 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 Amberglint property in Portland after quarter end on April 1 as expected. At quarter end, we had 143,000 square feet of signed leases that have not yet commenced. 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. Our total debt as of March 31 was $646,000,000 Our net debt, including restricted cash to EBITDA was 6.7 times. Speaker 100:09:45As of March 31, we had approximately $42,000,000 undrawn and authorized on our credit facility. We also had cash and restricted cash of £37,000,000 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. Speaker 100:10:20We 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 IntelliCentre. We expect to provide an update on next quarter's call. Last, we also have two high value properties, Block A3 in Raleigh and City Center in Tampa, that are completely unencumbered. Speaker 100:10:52As the office debt capital markets continue to come back, we may explore options to add financing to those properties to generate additional liquidity. That concludes our prepared remarks and we'll open up the line for questions. Operator? Operator00:11:08Thank you very much. Our first question comes from Upal Rana with KeyBanc Capital Markets. Upal, your line is now open. Please go ahead. Speaker 300:11:44Great. Thank you. I was wondering, was this new development project, how did that come about? Was this something that you seek out? Or was it something you're approached on? Speaker 200:11:57Sure. 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. Speaker 200:12:13And 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, Saint Petersburg and and get a really good summary of the project. Speaker 300:12:37Okay, great. And then I understand there's a lot of work still needs to be done, probably 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 did mention three years of construction in your prepared remarks, but I wonder if there's any other color you can provide us. Speaker 200:12:54Sure. So presales are about to commence. We're building out a sales center within the Ground Floor of City Centre that's almost finished. So internally, we think it will be about a year plus or minus of presales and then three years construction. So, you know, if things go according to plan, it's probably four years for the full project. Speaker 300:13:16Okay. And will there be any disruption to the existing property that use that garage space? Speaker 200:13:23So we've, we've been working on alternative parking arrangements. We've been keeping all of our tenants up to speed on what's gonna happen. So there'll be a period of time where tenants are are offered, alternative arrangements, including valet. And when the structure is done, it replaces the parking for the office building. Speaker 300:13:44Okay. Great. Just last one for me. You're currently just below the low end of your occupancy guidance here. Could you give us some color on the pace of occupancy this year in order to get you to the midpoint of 86%? Speaker 300:13:58I know you do have about 300,000 square feet expiring over the next couple of quarters here. So that would great. Thank you. Speaker 100:14:07Yes. Sure. Paul, this is Tony. Yes. So we have 143,000 square feet of leases at March 31 that have yet to take occupancy. Speaker 100:14:17That 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. And then beyond that, we have the move out that I mentioned on my prepared remarks at in Portland. And then we have the activity that's happening at Greenwood Boulevard, 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 range. Speaker 300:14:52Okay, great. Thank you. Operator00:14:57Our next question comes from Craig Kucera with Lucid Capital Markets. Craig, your line is now open. Please go ahead. Speaker 400:15:08Hey, good morning guys. 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 just a new tenant taking, Speaker 200:15:21you know, the Speaker 400:15:21the remaining space and the other tenant just downsizing and extending their lease? Thank you. Speaker 100:15:26Yeah. Yeah. Hey, Greg. Hey. It's Tony here. Speaker 100:15:29Yeah. It's the latter. They're it's gonna take the occupancy. It's currently a %. It'll dip down for this vacate and then get back to 100% before the end of the year. Speaker 100:15:38But what it does do is it dramatically extends the walls of the property as, you know, 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 one hundred and thirty month, so over just over ten years, ten year term, and the existing tenant is extending their space out by five years on two of the three floors. So it's a big win for the property. Speaker 400:16:06Right. And as far as the rent there, think the existing tenant was paying $25.75 Were there any changes in the rent per square foot either for the new tenant or for the existing tenant? Speaker 200:16:19So 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. Speaker 400:16:34Okay. Fair enough. Just one more for me. 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. Speaker 400:16:57Thank you. Speaker 200:16:59Sure. 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. Speaker 200:17:16And we're feeling really good about leasing there. 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. Speaker 200:17:42So we continue to feel really good there and across the other Sunbelt markets that we have. Yes. Just to echo some of Speaker 100:17:48Jamie's comments, the bulk of the leasing activity this quarter, the 144,000 square feet of leasing this quarter was in Phoenix. 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 200:18:09Thanks for the question, Craig. Speaker 300:18:10Thanks, Craig. Operator00:18:27We currently have no further questions. So I will hand back over to Jamie for any closing remarks. Speaker 200:18:36Thank you for joining today. We look forward to updating you further next quarter. Goodbye. Operator00:18:43Thank 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. 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