Paramount (US:PGRE)2025-05-01 14:00Financial Data and Key Metrics Changes - The company reported core FFO of $0.17 per share for Q1 2025, exceeding consensus by $0.01 [5][21] - First quarter same store growth was negative 4.1% on a cash basis and negative 5.4% on a GAAP basis [21] - The leased occupancy rate of the same store portfolio was 86.2%, up 140 basis points from the prior quarter [22] Business Line Data and Key Metrics Changes - The company executed leases totaling approximately 284,000 square feet, marking the strongest first quarter of leasing since 2019 [6][14] - The weighted average term for leases signed during the first quarter was 12.9 years [21] - In New York, the portfolio was 87.4% leased on a same store basis, up 240 basis points from the last quarter [18][22] Market Data and Key Metrics Changes - In New York, Manhattan's office market showed significant improvement, with new leasing activity reaching the highest quarterly total since Q4 2021 [7] - In San Francisco, leasing activity marked the strongest first quarter since 2019, with AI-based companies accounting for approximately 20 deals totaling over 275,000 square feet [19][20] - The San Francisco portfolio was 82.3% leased on a same store basis, down 150 basis points from the last quarter [20][22] Company Strategy and Development Direction - The company aims to maintain strong tenant relationships and secure renewals while focusing on high-quality, well-located office spaces [12][21] - The Paramount Club continues to be a significant differentiator in the market, enhancing tenant satisfaction and retention [10] - The company is optimistic about the recovery in San Francisco, driven by the evolving political landscape and demand for office space [11][40] Management's Comments on Operating Environment and Future Outlook - Management noted that despite recent economic shifts, there has been no disruption to leasing activity [6] - The company expects ongoing absorption of space in submarkets to support increased leasing and improved deal economics [17] - Management remains cautiously optimistic about San Francisco's recovery, highlighting increased leasing activity and constructive conversations with local authorities [40] Other Important Information - The company closed the sale of a 45% interest in 900 Third Avenue, raising approximately $95 million in net proceeds [12][24] - The debt at quarter end, excluding noncore assets, amounted to $3.25 billion at a weighted average rate of 4.26% [24][25] Q&A Session Summary Question: What should be expected regarding capital uses and sources in 2025? - Management indicated they are considering all options and remain disciplined and opportunistic regarding transactions like the one at 900 Third Avenue [28][29] Question: Can you discuss the 32,000 square feet law firm lease at 1 Market Plaza? - The upper floors generally command rents in excess of $120 per foot, and there is increasing interest from law firms looking to upgrade their real estate [31][32] Question: How is the leasing activity in San Francisco? - Management noted that while the market is improving, it may take time to see significant results, but there is optimism regarding increased leasing activity [40][41] Question: What is the status of large spaces facing expirations in 2026? - Management is in advanced discussions for backfilling spaces from Visa and Morgan Lewis, and they are optimistic about the activity level [44][46] Question: Why was there no change in same store NOI guidance despite increased leasing volume? - The lack of change is primarily due to the delayed commencement of leases expected to transfer into occupancy [47] Question: Is there a trend of larger tenants returning to the market? - Management confirmed that there is increased activity from large tenants, particularly in premier buildings in Midtown [52][55]