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Edited Transcript of CXP earnings conference call or presentation 25-Apr-19 9:00pm GMT

Q1 2019 Columbia Property Trust Inc Earnings Call

Atlanta May 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Columbia Property Trust Inc earnings conference call or presentation Thursday, April 25, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* E. Nelson Mills

Columbia Property Trust, Inc. - President, CEO & Director

* James A. Fleming

Columbia Property Trust, Inc. - Executive VP & CFO

* Matt Stover

Columbia Property Trust, Inc. - Director of Finance & IR

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Conference Call Participants

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* Adam Joel Gabalski

Morgan Stanley, Research Division - Research Associate

* Mitchell Bradley Germain

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* Piljung Kim

BMO Capital Markets Equity Research - Senior Real Estate Analyst

* Sheila Kathleen McGrath

Evercore ISI Institutional Equities, Research Division - Senior MD

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Presentation

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Operator [1]

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Good afternoon, and welcome to the Columbia Property Trust First Quarter 2019 Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Matt Stover, Director of Investor Relations. Please go ahead, sir.

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Matt Stover, Columbia Property Trust, Inc. - Director of Finance & IR [2]

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Good afternoon, everyone, and welcome to the First Quarter 2019 Columbia Property Trust Investor Conference Call. On the call with me today are Nelson Mills, President and Chief Executive Officer; Jim Fleming, Executive Vice President and Chief Financial Officer; and other members of our senior management team.

Our results were released this afternoon in our quarterly supplemental package, which can be found on the Investor Relations section of our website and on file with the SEC on Form 8-K. We filed our 10-Q with the SEC this afternoon, and an audio replay of this call will be available by this time tomorrow.

Statements made on today's call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated, including those discussed in the Risk Factors section of our 2018 Form 10-K.

Forward-looking statements are made based on our current expectations, assumptions and beliefs as well as information available to us at this time. Columbia undertakes no obligation to update any information discussed on this conference call.

During this call, we will also discuss certain non-GAAP financial measures. Reconciliations to comparable GAAP financial measures can be found in our supplemental financial data.

With that, I will turn the call over to Nelson Mills.

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [3]

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Thank you, Matt, and welcome, everyone, to the call. We've had a strong start to the year, and our first quarter results reflect Columbia's continuing quest to create shareholder value. We're capitalizing on the attractive portfolio we've assembled, while also creating brand new opportunities to generate value for our shareholders. Our portfolio is one of the best positioned across the entire office sector, with premier locations and outstanding physical space, further enhanced by recent renovations and attractive amenities. We are now 97% leased, with more than 6 years of average remaining lease term. Though we have limited vacancy and near-term expiration, what we do have as well below the market on average. So we expect our trend of strong leasing spreads to continue.

We have a unique niche strategy in each of our markets, focused on modernized boutique office space in some of the most exciting up-and-coming neighborhoods. It's this disciplined investment focus and commitment to value creation that sets us apart, both with tenants in our market and with investors seeking reliable performance and value growth. We've created a real estate platform in these selected gateway markets that offers a compelling combination. Stabilized asset with substantial embedded growth, a pipeline of new value add opportunities and a talented and a highly motivated team to produce results for our shareholders.

We are well positioned to build on our record of creating office environment that have attracted top tenants and have produced market-leading rent. Most importantly, our unique approach for value creation is producing some of the strongest financial performance in the entire office sector. During the first quarter of 2019, our same-store cash net operating income grew 8.2%. We also generated normalized FFO of $0.38 per share, and we're raising our initial full year guidance for FFO. Today, we are 97.1% leased overall and 98.5% leased in New York, our largest market. We leased another 83,000 square feet during the quarter, and our trend of strong leasing spreads has continued, with roll ups of 38% on a cash basis and 62% on a GAAP basis. We have created an embedded value that will drive cash flow growth for years to come at Columbia. These financial results also affirm the benefits of our repositioning portfolio.

Subsequent to the quarter end, we announced the sale of One & Three Glenlake Parkway in Atlanta. We successfully repositioned this property as best-in-class for Atlanta's Central Perimeter submarket, allowing us to lease 100% of the property at attractive rates and terms. The sale generated nearly $200 million in net proceeds, which we can redeploy into value creation opportunities in our core markets.

I'd like to highlight another recent example of our value creation success. 221 Main Street is a property in San Francisco we acquired in 2014, with below-market leases and 50% of those leases set to roll during the first 5 years of our ownership. This property has an excellent (inaudible) market location, and we undertook selected capital improvement to maximize its value. We approached the lease expiration with a focus on creating a more vibrant building and tenant roster, including a restack to accommodate larger tenants. This focus resulted in fewer, but higher quality tenants, and has helped us increase rents at an average of 65% on the way to achieving 99% occupancy. We estimate that these efforts, combined with the benefits of strong fundamentals in this market, has helped us drive nearly 50% value creation relative to our cost basis at the property.

In our latest investor presentation, we highlight other examples of a strong recurrence on the capital projects in New York and DC. We will continue to replicate this process going forward with some of the most attractive projects we've ever taken on. As demonstrated over the years, we've taken a disciplined approach to allocating capital, and this will remain our guiding principle.

One such project that you'll hear much more about in coming quarters is 799 Broadway, our development with Normandy Real Estate Partners, just below New Square Park in New York City. We're very excited to have begun construction, and recently opened a marketing center for the project at our 315 Park Avenue South headquarters. We recently announced an agreement to acquire 250 Church Street, our second joint venture with Normandy. This 235,000 square foot, 16-story office building in TriBeCa will become Columbia's eighth Manhattan property, and is a terrific fit for our New York portfolio strategy. The location is ideal, in the heart of TriBeCa, one of the New York City's most desirable neighborhood. The property is a short walk from multiple subway stations and the World Trade Center transit hub, and is currently underserved in terms of new office development. Once the current tenant vacates this summer, we'll take on a complete transformation of the building to create the highest-caliber boutique office space in all of TriBeCa. We are confident that this transformative development project will become yet another Columbia's success story, and we look forward to sharing more details as we make progress on the project.

I'd like to provide a quick update on our 3 focused markets. As you probably gathered, we have a niche strategy in New York and that's yielding strong results. With our portfolio concentrated in Midtown South, we've had great success in appealing to small to midsize any fintech tenants, and on the heels of the successful repositioning of 315 Park Avenue South, we're now 98.5% leased in New York. We're looking to build upon that success with 799 Broadway and 250 Church, which will both be positioned to meet the demand of media and tech tenants for creative space in these desirable Manhattan submarkets.

In San Francisco, demand remains strong, supply is very tight, and as a result, there are limited options for larger tenants. It's a landlords market and a great opportunity to grow rent, which we're doing with our limited availability at 221 Main and 650 California.

In Washington, D.C., office demand continues to improve, especially with the announcement of HQ2, but there is still substantial new supply to be absorbed. We've had terrific leasing results at our 3 properties there, and while we are not immune to broader market forces, our recent success illustrates how well located and differentiated office real estate is rewarded. Quality matters more than ever, and we've generated compelling return on building an amenity improvement across the D.C. portfolio. Our intentional cultivation of top tenant rosters has also been key. For example, in Market Square, we've added world-class amenities that have been very diligent in targeting the government affairs offices of Fortune 500 companies. These tenants value proximity to The Hill and to the other lobbyists, and our momentum with this community continues to snowfall. Now roughly half of our 65 tenants in Market Square are Fortune 500 companies, and we're outperforming in net absorption, while pushing rents to nearly $90 per foot on a full service basis.

Looking ahead, we believe Columbia is exceptionally well positioned due to our highly desirable existing portfolio and relentless focus on finding new opportunities to enhance the portfolio. This should allow us to continue producing sector leasing same-store NOI growth in the near term, while continuing to create substantial shareholder value over the long term.

We have just 2 buildings remaining in our non-core markets, one in Atlanta and one in Pittsburgh. We'll strive to optimize the value on these assets, generating proceeds to reinvest into higher growth opportunities in our target markets. Lindbergh Center in Atlanta has now been awarded to a buyer, and we are working through the due diligence process with an expected closing later this quarter. In order to maximize proceeds of the Westinghouse campus in Pittsburgh, we have decided to suspend our marketing efforts for the time being. Westinghouse recently emerged from bankruptcy and has been restructured under new ownership by Brookfield. They are exploring subleasing options for a portion in campus and that has caused some trepidation amongst potential buyer. With nearly 14 years remaining on Westinghouses' lease, we believe holding the property a bit longer and working through leasing options will increase the value of this asset. And importantly, we'll collect substantial NOI for our investors in interim.

I want to thank our entire team for their hard work, creativity and dedication to build Columbia Property Trust into what it is today. We're in our best position ever with a unique and attractive portfolio that will deliver for years to come. We have ample growth opportunities within immediate reach and a healthy financial position that enable us to diligently seek new opportunities to further enhance shareholder value well into the future. With that, I'll turn it over to Jim to discuss our results in more detail and provide our updated outlook for the year.

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James A. Fleming, Columbia Property Trust, Inc. - Executive VP & CFO [4]

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Thank you, Nelson, and thanks, everyone, for joining us today. We're glad you can be with us. The year is off to a strong start at Columbia. This afternoon, we reported same-store net operating income growth of 8.2% for the first quarter, which is within our full year guidance range of 8% to 10%. We also reported normalized FFO of $0.38 per share, which was also in line with expectation. Given our already high leased rate of 97.1%, and our limited rollover for the next couple of years, our leasing activity was naturally modest at 83,000 square feet. As Nelson mentioned, our leasing spreads were quite robust at more than 38% on a cash basis and nearly 62% on a GAAP basis.

Our balance sheet remained strong, and we ended March with net debt to adjusted EBITDA of 6.6x, net debt to gross real estate assets of 32.3% and no debt maturities for the next 2 years. We have more than $4 billion of unencumbered property and only 2 properties with mortgage debt, both of which are in our joint venture. We paid a quarterly dividend of $0.20 per share, and we ended the quarter with $124 million still available under our current share buyback authorization. The recent sale of the Glenlake properties has further strengthened our balance sheet and not only provides resources to invest in attractive development and redevelopment project, but also allows us to continue our opportunistic share repurchases going forward.

Turning to our outlook for the remainder of 2019, we are raising both the low and high end of our normalized FFO range by $0.02 to a new range of $1.37 to $1.42 per share. Our other outlook ranges remain unchanged, including same-store cash NOI growth of 8% to 10%, year-end lease percentage of 95% to 97% and corporate G&A expense of $34 million to $36 million. As I mentioned last quarter, our projected 8% to 10% growth in the same-store cash NOI is on top of last year's nearly 14% growth. We continue to expect that 2020 will again see strong growth in the high-single digits due to our leasing accomplishments over the years as well as embedded growth in lease roll up opportunities.

In closing, the year is off to a solid start for Columbia with our portfolio the strongest it's ever been, with growth in value creation opportunities ahead and with the experienced teams on the corporate side and in each of our markets. We look forward to keeping you posted as the year progresses. And with that, Nelson and I will now be happy to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question will come from Sheila McGrath of Evercore ISI.

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Sheila Kathleen McGrath, Evercore ISI Institutional Equities, Research Division - Senior MD [2]

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I guess -- could you give us a little bit more detail on the sale of Glenlake, the interest level, the type of buyers, cap rate and how the price compared to your expectations?

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [3]

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Sure, Sheila. This is Nelson. So it was a -- obviously, a fully marketed process. Kevin Hoover of our team ran that process with help from CB. We had a lot of wide range of buyers, including other public REITs. And obviously, it's a very core stabilized property and it got a lot of great submarket and it got a lot of interest for that reason. Pricing came in about what we expected. Very close to what our initial expectations were. And it traded in the mid-6 cap range. So -- or maybe mid- to high-6 cap. And that's about what we expected. So I'd say great process overall,and of course, that was the culmination of a lot of leasing work in -- that we've done at the property over the last couple of years. And so we're pleased with that. So...

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Sheila Kathleen McGrath, Evercore ISI Institutional Equities, Research Division - Senior MD [4]

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Okay. Great. And then if you could, I -- sorry, if I missed this, but what was the primary drivers of the large leasing spreads? Was there one particular lease that is driving that?

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James A. Fleming, Columbia Property Trust, Inc. - Executive VP & CFO [5]

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Sheila, this is Jim. Pretty low leasing volume this quarter, just because we didn't have -- we don't -- obviously, don't have a lot of role and not a lot of vacancies. So it was a small sample size, I guess. But it was really -- there were a few leases in New York, 315 Park Avenue South and in San Francisco, primarily at 221 Main.

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Sheila Kathleen McGrath, Evercore ISI Institutional Equities, Research Division - Senior MD [6]

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Okay. Great. And last question, just curious what your vision is at Church Street. Is that a full gut rehab? Or just give us a little bit more detail on that future value add.

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [7]

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Sure, Sheila. So, yes, our expectation is there will be a full gut renovation. Well located property, good bones, but in all likelihood, we're going through some of the details with our partner Normandy. But in all likelihood it'll be new mechanicals, new systems, a re-skin of the building would be our leaning. We paid a couple of hundred million dollars for that, I think, it's been reported, about $800 a foot, with spend potentially almost that much again, $1,500-plus a foot by the time we are finished. And of course, we'll have a -- we expect it to achieve the rents commensurate with that. So, yes, more to come on that in the next few quarters. We have not closed on the transaction. That's -- that should happen in late summer, early fall. And we'll be glad to provide more details then.

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Operator [8]

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The next question will come from John Kim of BMO Capital Markets.

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Piljung Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [9]

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So just to clarify. The guidance upgrade for the year was really based on the timing of the sale and the delay of the Pittsburgh sale?

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James A. Fleming, Columbia Property Trust, Inc. - Executive VP & CFO [10]

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So John, this is Jim. I would say, yes. But I just want to explain. What we try to do each quarter, and we did it last quarter, was just to give our best estimate of where we think we're going to come out. Knowing that there are a lot of variables in terms of asset sales, potential new investments, potential share buybacks and a number of things like that. And so we've moved it up a little bit. Depending on what happens on the transaction side, that could move around some more later in the year, but we just try to do the best we could. I would say, the biggest thing that changes -- only been a couple of months since our last call. It's a short period from that last call to now. The only thing really significant that's changed is our view on transaction timing. We, Of course, got Glenlake done, really when we planned and with the execution that we expected. I'd say Lindbergh, while it's still in process, we still think that it's going to be sort of according to plan. And then Westinghouse is delayed. We'll see what happens as we move ahead. No final decisions. We ultimately will sell that property. But I'd say, if you wanted to truck it up to something, it'll be Westinghouse.

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Piljung Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [11]

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And I think in the last call you were saying that between Glenlake, Lindbergh and Westinghouse assets, you expected to get to $500 million to $600 million in proceeds? Is that still the case? Or...

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James A. Fleming, Columbia Property Trust, Inc. - Executive VP & CFO [12]

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Yes. That's still what we believe. And actually, even if we chose to sell Westinghouse now, even though it's not -- didn't come out quite at the pricing that we had hoped, we'd still get really to -- we think to the mid-5s probably between the 3 properties. We're just trying to maximize value, we're trying to really do the right thing. So $194 million net proceeds for Glenlake. And that's off to a good start. And we think -- we, I think, telegraphed that each of the 3 were in about the same price range, a little less than $200 million for each of the three.

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Piljung Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [13]

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And what would you see the appetite is hold on to Lindbergh, if you don't get the price that you want?

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [14]

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Well, we'd like to sell it for the reasons we discussed. It's a good opportunity for the buyer but it's a heavy lift, longer-term value add opportunistic place. So we would -- it's not in our markets, it is not one of our core markets, so we'd like to move on. That said, we need to get our pricing, and we expect to get our pricing. And we think we'll get it closed. But it's very much like we've demonstrated with Westinghouse. If we don't, we'll hold off on the sale and do what we need to do to get that pricing. So expectation is we will close, and we prefer to close, but we'll see. We need to deliver on the value that's there.

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Piljung Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [15]

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Okay. At 229 West 43rd, the occupancy and leasing dipped this quarter, was that due to an expiration? Or is there another reason for that?

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James A. Fleming, Columbia Property Trust, Inc. - Executive VP & CFO [16]

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Yes. There was a small -- I think it was a half a floor, a tenant there that expired. And so we have a little bit of vacancy. Very little of course all throughout New York, but we have a little bit of vacancy there now.

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Piljung Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [17]

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And what would you say the mark-to-market is -- re-lease in that space?

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James A. Fleming, Columbia Property Trust, Inc. - Executive VP & CFO [18]

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I'd have to look at that particular lease, but when you bought the building, and this one was in place, there's a little bit of a positive mark-to-market. But I'd have to go back and look at that one, John.

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [19]

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I don't remember the exact number, John. I think that was one of the original tenants when Blackstone reconfigured the building -- re-leased the building as a tech TAMI building. Mungo was the -- they were the first ones. And so it's been a while. So I think there's a roll up there, but it's relatively small, it's a half-floor.

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Piljung Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [20]

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Okay. And then at 799 Broadway, it's sort of a unique office submarket in Manhattan. Can you just describe where you see rents for the building and the type of tenants that maybe attracted to that asset?

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [21]

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Sure. So as you said, it's a very unique opportunity. It's 182,000 feet. Obviously, beautiful new modern design, terrific location, corner of 11th and Broadway, just below Union Square Park and the transportation that comes with that. You're right there at the village, NYU-- it's just really unique live-work-play location. And also there's just not really any competition from new boutique space there. So we're very excited about the project, very optimistic about achieving some great rents there. Our asking rents are in the $150 range on average throughout the building. Probably a bit better than that for certain spaces. But that's our ask. We're getting a lot of interest. We're having a lot of lookers. We have a marketing center now open at 315 Park Avenue South in one of them on a retail base there. I'm encouraging all of you to stop by and visit. So we're very helpful in achieving those rents. It is still fairly early. And again, there'll be more to come on that in the next few quarters, I'm sure.

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Piljung Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [22]

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And I noticed on your CapEx spend per quarter. It -- for 799, and 149, it kind of dipped this quarter is that due to weather? Or the seasonality? Or were there other reasons for that?

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James A. Fleming, Columbia Property Trust, Inc. - Executive VP & CFO [23]

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You're talking, John, about the schedule that show so much we've invested so far and how much we're going to invest in the future?

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Piljung Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [24]

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Exactly, Page 14.

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James A. Fleming, Columbia Property Trust, Inc. - Executive VP & CFO [25]

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Oh. So I'm looking at page -- oh, yes. So Page 14...

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [26]

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So John, while Jim's looking at that, I'll just give you a general update. We -- at 149 Madison, WeWork is full steam on building out the building. And they're doing some pretty extensive renovations there. And so that's coming along. And on 799 Broadway, we recently raised the existing building, and vertical constructions started there. Pretty quick delivery dates on that. We expect that property to be completed by late third quarter or by fall of 2020. So everything's on schedule and going well. In terms of the actual cash flowing through the model -- Jim what are you...

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James A. Fleming, Columbia Property Trust, Inc. - Executive VP & CFO [27]

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Yes. So here's a -- so John, you're looking at Page 14 that shows capital that has been spent during the quarter. And you're right, the capital spend at 149 was down a little bit from what it had been in the previous quarter. It's going to be lumpy, same thing is true with 799 Broadway. What I would refer you to is at Page 28, which gives you the full picture it, which shows you where we stand and so far on capital for both of those projects, how much more is to go. But it'll be lumpy, depending on where we're -- where the building stands and where the capital -- when the capital needs to be spent for the projects. Really the bulk for 149 that needs to be -- the remaining capital is only going to be advanced once all the work gets done by WeWork, and then we'll reimburse them. So that's -- that'll be very lumpy at the end. But 799 will continue along, and we're getting ready to start to -- we're just starting the construction of the building. And so, that's going to ramp up.

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Operator [28]

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The next question comes from Mitch Germain of JMP Securities.

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Mitchell Bradley Germain, JMP Securities LLC, Research Division - MD and Senior Research Analyst [29]

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250 Church. You -- The economics of that joint venture still are under consideration, correct?

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [30]

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The details. I mean, obviously, we're under contract. So we've done thorough underwriting and diligence on the project. We still have some options we're exploring, architectural design and exactly how far we go with the building, and mirroring that with what our -- when expectations are. So a bit more work to do. But yes, we have a pretty good feel for what we think is going to cost to complete the project.

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Mitchell Bradley Germain, JMP Securities LLC, Research Division - MD and Senior Research Analyst [31]

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But your percentage stake in that investment is still undetermined, right?

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [32]

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Oh, that part, yes. So today, we have -- we're in partnership with Normandy. We are effectively sharing the GP interest, and we're running the project together, sharing fees and risks and all the rest on that. We have the opportunity of the potential to syndicate some of that interest to a limited partner. That's an option we'll have, and we're confident there would be some capital interest in doing that. But that hasn't been decided yet. If we elect not to do so, we'll likely be the majority of the capital in that project. But that -- you're right, that part has not yet been determined.

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Mitchell Bradley Germain, JMP Securities LLC, Research Division - MD and Senior Research Analyst [33]

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Got you. With regards to 149 Madison, obviously, these single-tenant assets appear to be ones that are no longer core to your business. Is that potentially an asset that could be a sale candidate down the road?

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [34]

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Yes. I think that's always a possibility. Mitch, you'll recall from prior discussions, prior calls that our original intention was to build that out and lease it to multi-tenants and so forth. And for the reasons we've discussed in the past, WeWork gave us the most compelling economic result. And that was even considering resale risk and all the rest. So we feel really good about that decision. But you're right, single-tenant is not really our focus and -- but -- and we could sell a property down the road. But on the other hand, it is a beautiful property and well located, Midtown South, which is our focus. It's going to be fully renovated, and it's going to have a nice yield on cost. And we can certainly hold it as well. So that's something we'll consider down the road. In the short term, we'd at least want the building to be renovated. And to let WeWork settle in and let concessions to burn and that kind of thing before we consider it. But -- so nothing in the near term for sure. But yes, that's an option down the road.

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Mitchell Bradley Germain, JMP Securities LLC, Research Division - MD and Senior Research Analyst [35]

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Great. Last one for me. I just want to clarify guidance. Was the Pittsburgh sale completely eliminated? Or is it in there at a later time frame?

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James A. Fleming, Columbia Property Trust, Inc. - Executive VP & CFO [36]

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Mitch, we really try to provide guidance that in -- really covers our number of scenarios. I think it's easy to think of this as just kind of one scenario. And -- but we try to leave ourselves some flexibility. I would say it's unlikely that we would sell Pittsburgh this year. But there still are a number of other variables and still pretty early in the year, and so we try to leave ourselves some room for a number of different possibilities.

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [37]

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Mitch, I agree with Jim. That change is a little bit more than $0.02 a share, right? We only moved $0.02. So -- but there are some other things going on there, and it's early in the year. And we're not trying to be, trying to be as direct as we can. That's not -- that's just one of the moving parts, I guess, as we look at the remainder of the year.

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Operator [38]

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And the next question comes from Adam Gabalski of Morgan Stanley.

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Adam Joel Gabalski, Morgan Stanley, Research Division - Research Associate [39]

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I just wanted to talk a little bit about the same store trajectory for 2019. Just kind of given the volatility going from north of 20% in 4Q '18 down to 8.2% this quarter, which is in the -- within the guidance range. Can you talk a little bit about the trajectory for the rest of 2019 and into 2020? And if there's going to be any sort of more inter-quarter volatility? Or if you expect to it kind to be a little bit more normalized moving forward?

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James A. Fleming, Columbia Property Trust, Inc. - Executive VP & CFO [40]

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Sure, Adam. So I mean there are a couple things going on here. One is the leasing spreads, and those are going to be pretty volatile because it -- they're just bumpy. It just depends on what leases gets renewed. If it's some legacy assets, renewed or released. If it's a legacy assets, it could even be down. And we've seen that in the past. But on average, they've been very strong, and that's really what's driving all of this. They've been up more than 30% for the past 2.5 years. And you'll see that does continue to be very positive this quarter. In terms of the same-store NOI, as I think you know, we were just shy of 14% last year. We've given a range of 8% to 10% this year. We haven't really given a precise range next year, but we think somewhere in that same ZIP Code for next year. And really, that's just a function of leases that we've already signed, commencing and into next year property, a little bit of additional roll. But it's leases commencing and starting to pay rent. So we've got a pretty good bit of visibility. What really quite drives that from quarter-to-quarter is lease commencements once the free rent runs off. So it'll -- that'll be a little bit lumpy, too, from a cash standpoint. But we think, we're not going to do it quarter-by-quarter, but what I would say is we still feel really good about the 8% to 10% for this year. And we've got pretty good visibility in terms of the full year about what that number is going to look like.

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Adam Joel Gabalski, Morgan Stanley, Research Division - Research Associate [41]

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Got it. That's very helpful. And then just one more for me. Could you talk a little bit about your appetite for any sort of additional acquisitions or JVs and what sort of up -- level of opportunity and pricing you guys are seeing across your key markets?

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [42]

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Sure, Adam. So we have continued to maintain a very active pipeline of looking at our opportunities in all 3 of our markets. That's been the case all along. Even last year, we only did 1 transaction, the 799 Broadway deal. But that wasn't for the lack of exploring a lot of options. The same is true now, we'll take a very disciplined approach. Any given week, we have 3 or 4 deals we're looking at one place or the other. So the same is true now. In terms of appetite going forward, we do have some capacity, given the recent asset sales, given the strength of the balance sheet. We've got some capacity, if the right opportunity comes along. But we can also be patient with that capital. So in terms of market-by-market, we're competing on a regular basis for opportunities in San Francisco. It's a very challenging, competitive market. Again, we're taking a disciplined approach. And so it's tough to win a deal there but we're trying to find other great opportunities there in that terrific market. D.C, a bit softer. And we're a little more reluctant to take on a lot of leasing risk there, even though our 3 properties are very well leased, and doing quite well. But we -- I'd say, of the 3 markets, we're a little more reluctant in that market. And then Manhattan is sort of in the middle of those 2. We think it's very strong particularly for Midtown South, the West side and our key focus submarkets. And there are a few opportunities in play that are of interest. So I'd say, it's hard to know for sure, but I -- we would expect another deal maybe this year, maybe 2. But again, continuing those -- continuing that disciplined approach we've always -- we've had. So I know that's a bit of a vague answer. But I'd say, we have capital, we're active in the market, but we're being very selective.

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Operator [43]

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This concludes our question-and-answer session. I would like to turn the conference back over to Nelson Mills for any closing remarks.

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E. Nelson Mills, Columbia Property Trust, Inc. - President, CEO & Director [44]

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Thank you. Well, thanks, everybody, for joining us on the call, and thanks for those great questions. We're, obviously, very pleased with our start to the year. We're excited about our progress against our strategy. And we look forward to continue to update you throughout the year. And we hope to see many of you at the upcoming (inaudible) event. Until then, take care, we'll speak to you soon.

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Operator [45]

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