Yahoo Finance Paramount Group Inc (PGRE) Q1 2024 Earnings Call Transcript Highlights: Strategic Moves and ...
Core FFO: $0.22 per share, $0.01 above consensus.
Leasing Activity: 277,000 square feet executed in Q1 2024.
Leased Occupancy: 96.8% at 13256, 420 basis point increase at 13016.
Loan Modification: One Market Plaza loan reduced to $850 million from $975 million.
Energy Star Partner of the Year: Awarded for the third consecutive year.
Same-Store Portfolio-wide Leased Occupancy Rate: 89.1%, down 190 basis points year over year.
Same-Store Growth: -1.5% on a cash basis, -3.5% on a GAAP basis.
Mark-to-Market: -4.1% on a cash basis, -17.7% on a GAAP basis for second-generation space.
Debt Position: Modified and extended over $1.8 billion of maturing debt.
Liquidity: $412 million in cash and restricted cash, $1.2 billion total liquidity.
Core FFO Guidance: Increased to $0.75 to $0.81 per share.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Paramount Group Inc (NYSE:PGRE) reported core FFO of $0.22 per share for Q1 2024, which was $0.01 above consensus estimates.
Strong leasing activity with approximately 277,000 square feet executed in Q1, demonstrating robust demand for the company's Class A assets.
Successful loan modifications and extensions, such as the One Market Plaza and 60 Wall Street loans, enhancing financial stability.
Awarded the 2024 ENERGY STAR Partner of the Year for the third consecutive year, highlighting commitment to sustainability.
Introduction of the Paramount Club at 1301 Avenue, enhancing tenant amenities and potentially boosting tenant retention and attraction.
Negative Points
Negative same-store growth reported, with a 1.5% decrease on a cash basis and a 3.5% decrease on a GAAP basis due to scheduled lease expirations and higher interest expenses.
Leased occupancy rates showed a decline, with portfolio-wide leased occupancy at 89.1%, down 100 basis points from last quarter and 190 basis points year over year.
Mark-to-market for lease renewals was negative, indicating potential challenges in rental income growth.
Concerns over upcoming large lease expirations, such as Clifford Chance, which could impact future occupancy rates.
Elevated concessions in leasing negotiations, reflecting ongoing pressures in maintaining competitive leasing terms.
Q & A Highlights
Q: Can you discuss the known move-outs and upcoming lease expirations, and how the current leasing pipeline might cover these? A: Peter Brindley, EVP of Real Estate, Paramount Group Inc, highlighted significant known move-outs, including Clifford Chance vacating 229,000 square feet, which is nearly 50% of the 2024 lease expirations. He noted that a large portion of the 300,000 square foot leasing pipeline is based in New York, particularly for spaces soon to be vacated. Despite significant rollovers in San Francisco, ongoing tenant relations are expected to mitigate risks.
Q: What are the plans regarding the non-core assets and their upcoming maturities? A: Albert Behler, CEO of Paramount Group Inc, and Wilbur Paes, CFO, discussed strategies for non-core assets with upcoming maturities. They emphasized maintaining optionality while preserving shareholder value, potentially extending current structures or returning assets if favorable outcomes aren't feasible.
Q: Is there any update on the Showtime lease given the developments with its parent company? A: Albert Behler mentioned ongoing discussions with tenants, including Showtime. He stressed the importance of being tenant-friendly and proactive in communications, although it's too early for definitive plans regarding Showtime's lease.
Q: Could you provide more details on the short-term renewal of KPMG's lease? A: Peter Brindley explained the 21-month renewal agreement with KPMG, describing it as mutually acceptable and highlighting the strong relationship with KPMG. The short-term nature of the deal was presented as a strategic decision beneficial to both parties.
Q: What are your considerations regarding potential dispositions, especially in the retail sector? A: Albert Behler addressed the retail strategy, particularly the leasing activities at 712 Fifth Avenue. He mentioned high demand and rising rental rates in retail, suggesting a cautious approach to dispositions while focusing on maximizing current asset values.
Q: How are you managing the elevated concession levels in lease negotiations? A: Peter Brindley acknowledged high but stable concession levels, particularly in New York. He noted specific instances where concessions appeared elevated due to the floor levels involved in transactions but reassured that overall, concessions have plateaued.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
