Peakstone Realty Trust Q1 FY2024 earnings call

• Progressed elimination of the Other segment, with it now accounting for 13% of ABR. - Strong leasing activity: 3 lease extensions in the Other segment totaling approximately 241,000 square feet with 27% GAAP and 13% cash releasing spreads. - Successful dispositions: 4 assets sold for nearly $80 million, reducing the size of the Other segment and improving portfolio metrics. - Continued reduction of leverage, resulting in a 6.2x net debt to normalized EBITDAre ratio. - Financial results: Total revenue $59.2 million, NOI $47.6 million, net income $5 million or $0.14 per share. - Balance sheet: $436 million in cash, $160 million of available undrawn capacity on the revolver, net debt reduced by $65 million to $985 million. - Dividend of $0.22 per share paid on April 18.

The Other segment now accounts for 13% of the ABR in the portfolio. In the quarter, 4 assets were disposed of for nearly $80 million. In the Other segment, 2 non-stabilized office properties totaling 389,000 square feet were sold for $23.4 million, and one manufacturing property totaling 660,000 square feet was sold to the existing tenant for $26.1 million. In the office segment, a 184,000 square foot property in Johnston, Iowa was sold to Corteva for $30 million. The industrial segment is positive with modern specs and strategic locations, and the office segment has less than 5% near-term rollover in the next 3 years and young assets.

• Positive outlook on the industrial market, expecting slowdown in industrial construction to benefit assets. - Confident in navigating the office market with limited near-term rollover and young assets in the office segment.

• Forward-looking statements are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly from those in forward-looking statements. - Risks beyond the company's control, including those in the most recent annual report on Form 10-K or quarterly report on Form 10-Q filed with the SEC.

Q: Could you give a little bit more color on the rent abatement in the industrial portfolio?

A: This was one of our leases that in the 11th year, so we back-ended the rent abatement and it happened to occur in this last quarter for one of our industrial properties. The tenant has opted for a 5-year extension beyond the original term.

Q: Is it possible to walk through cap rates on things that had closed last quarter?

A: We've been keeping track since the beginning of last year of the stabilized assets that we have sold. Over that entire time frame, our stabilized assets, the weighted average cap rate is now 7.8%.

Q: How are you thinking about the construction of the portfolio and the split between investment grade and sub and gross investment-grade assets when it comes to capital recycling?

A: Our Industrial segment is 74% investment-grade taking into consideration the 3 components of arriving at that. Our office segment is nearly 70% itself. We are more active seller in our other segment which is only 42% investment grade across the properties that remain.