Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: In your press release you talked about earnings growth of 2% to 3%. I think that's a little bit lower than what you were targeting back in January. So I was wondering if there was anything that's a headwind to earnings in the near term, whether that's asset sales or no move outs that you have? Or is it simply just the spread investing has become more difficult?
A: Darrell Crate, CEO, explained that the company initially aimed for a 4% growth but adjusted to 2% to 3% due to the challenging environment. He emphasized that the company is on track to meet these targets and potentially exceed them, focusing on cost-cutting and developing properties to achieve this.
Q: The interest rate environment has changed since January. I'm wondering if that played into your outlook at all as well as then recent reports, I think it was won by the [PBRB] earlier, I guess, those last months on federal agencies only using 12% of the headquarter space. Is that leading to any pressure to reduce costs among government agencies?
A: Darrell Crate acknowledged the impact of rising interest rates but indicated that it doesn't alter the company's medium-term outlook. He highlighted that the company's buildings are mission-critical and not subject to the same dynamics as typical office spaces, which helps mitigate the impact of such macroeconomic factors.
Q: Can you provide some more color on the ICE deal in terms of overall valuation per square foot and anything on the cap rate?
A: Meghan Baivier, President and COO, noted that the ICE Dallas deal was valued at just under $26 million, with expectations of run rate accretion from this acquisition contributing to the company's growth targets.
Q: What would you say your weighted average cost of capital is today and what's the minimum spread you'd need to justify investing in a property?
A: Meghan Baivier responded that the company's cost of capital is in the mid-sevens, and they aim to acquire assets with cap rates in the high-sevens to mid-eights, ensuring accretive investments.
Q: How is the desire to cover the dividend prioritizing your acquisition versus development pipeline, which might be to the detriment of long-term value creation?
A: Darrell Crate discussed the balance between maintaining a dividend and investing in growth opportunities. He expressed confidence in the company's development pipeline and potential acquisitions, suggesting that these strategies should align with covering the dividend in the short term without compromising long-term value.
Q: You mentioned the 18% rent spreads. What's the portfolio occupancy and the specific rent spreads?
A: Meghan Baivier elaborated on the company's portfolio performance, indicating strong renewal success and sustained occupancy levels, which align with the company's financial objectives and growth trajectory.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
