Core Viewpoint - The article discusses the recent surge in DRAM prices driven by concerns over potential tariffs in the U.S. and strong demand for high bandwidth memory (HBM), which is expected to boost the profits of major South Korean memory chip manufacturers like Samsung Electronics and SK Hynix [1][2]. Group 1: DRAM Price Surge - DRAM prices have increased significantly, with Samsung and SK Hynix raising prices for traditional DDR4 and new DDR5 DRAM by double-digit percentages [1]. - The average selling price (ASP) of standard PC DRAM (DDR4 8Gb 1Gx8) rose by 22.2% in April, reaching $1.65 after five months of decline [1]. - Major clients are stockpiling DRAM ahead of potential U.S. tariffs, leading to a faster-than-expected depletion of component inventories [2]. Group 2: HBM Demand and AI Influence - The demand for HBM is rising alongside DRAM prices, fueled by Nvidia's recent agreement with Saudi Arabia for AI chip supply, which is expected to drive a second wave of AI memory demand [2][3]. - Nvidia's purchase of SK Hynix's HBM3E chips reflects a 60% price increase for 12-layer chips compared to 8-layer chips, indicating strong demand for high-performance memory [3]. Group 3: NAND Flash Market Dynamics - The top five NAND Flash manufacturers, including Samsung and SK Hynix, are implementing production cuts of 10% to 15% to address oversupply issues [4]. - This synchronized reduction in NAND production is expected to support a rebound in memory prices, with a forecasted price increase in the second quarter of 2025 [5]. - The first quarter saw a decline in NAND Flash prices by 15% to 20%, but the second quarter is projected to recover by 3% to 8% [5].

Financial Data and Key Metrics Changes - Cash basis NOI grew by nearly 2% year over year, while normalized FFO increased 43% year over year and 52% sequentially [7][16] - As of March 31, 2025, NOI was $87,500,000, cash basis NOI was $83,800,000, and adjusted EBITDAre was $85,300,000, all showing increases year over year and sequentially [17] - Interest expense decreased to $69,800,000, reflecting a reduction in interest rate cap costs [17] Business Line Data and Key Metrics Changes - The company executed over 2,300,000 square feet of total leasing activity with an occupancy rate of 94.6%, reflecting a sequential increase of 20 basis points [7] - The top 10 tenants account for 47% of annualized rental revenues, with over 76% coming from investment-grade rated tenants or secure Hawaii land leases [8] - In Hawaii, 492,000 square feet of renewals were signed at rental rates 18.2% higher than prior rents [9] Market Data and Key Metrics Changes - The Mainland properties accounted for nearly 80% of renewal activity, with significant leases signed with major companies [12] - The company is tracking 32 deals in its pipeline for over 7,400,000 square feet, anticipating a near-term conversion of 500,000 square feet [14] Company Strategy and Development Direction - The company aims to maximize mark-to-market growth opportunities, maintain strong tenant retention, and lease vacancies, particularly in Hawaii and Indianapolis [10] - There is a focus on evaluating opportunities to improve the balance sheet and reduce leverage, potentially through refinancing existing debt and strategic property dispositions [10][30] Management's Comments on Operating Environment and Future Outlook - Management is monitoring the evolving landscape surrounding global tariffs, believing the portfolio is well-positioned to withstand short-term volatility [10] - The company anticipates that tariffs may positively impact tenant demand, leading to higher tenant retention in the short term [38][39] - Management expressed confidence in the long-term value of the Hawaii land despite current leasing challenges [31] Other Important Information - The company reported a one-time benefit of $0.01 per share related to a required remediation payment for a scheduled lease termination in the second quarter [20] - The company has no debt maturities until 2027, with all debt currently carried at fixed rates [17] Q&A Session Summary Question: Details on bad debt recovery impact - The financial impact from bad debt recovery was around $750,000 in revenues [22] Question: Insights on leasing timelines - Leasing timelines are elongated, with tenants starting renewal processes earlier due to more people involved in decision-making [24][25] Question: Status of notable vacancies in Indianapolis and Hawaii - Activity has been seen in Hawaii with proposals out, while negotiations in Indianapolis did not materialize, and the property is actively being marketed [26][28] Question: Motivation for leverage reduction and property sales - The company is seeing unsolicited offers from owner-users, which are usually at higher valuations, prompting consideration for property sales [30] Question: Impact of tariffs on tenant decisions - Tariffs are anticipated to be beneficial for tenant demand, with some tenants opting to stay in place rather than relocate due to concerns over construction costs [38][39] Question: Exposure of Hawaii portfolio to inbound travel - The portfolio's exposure to inbound travel is minimal, as tenants generally serve the local economy rather than relying on tourism [40]