City Office REIT, Inc.

Good morning, and welcome to the City Office REIT Incorporated 4th Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. To ask a question, you may press start and 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press start and 2. As a reminder, this conference is being recorded. If you require operator assistance, please press star then zero. It is now my pleasure to introduce you to Tony Maretic, the company's chief financial officer, treasurer, and corporate secretary. Thank you, Mr. Maretic. You may begin. Good morning.

Before we begin, I would like to direct you to our website at cioreit.com, where you can view our fourth quarter earnings press release and supplemental information package. The earnings release and supplemental package Both include a reconciliation of non-GAAP measures that will be discussed today to their most directly comparable GAAP financial measures. Certain statements made today that discuss the company's beliefs or expectations, or that are not based on historical fact, may constitute forward-looking statements within the meaning of the federal securities laws. While the company believes that these expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance these expectations will be achieved. Please see the forward-looking statements disclaimer in our fourth quarter earnings press release and the company's filings with the SEC for factors that could cause material differences between forward-looking statements and actual results. The company undertakes no obligation to update any forward-looking statements that may be made in the course of this call. I'll review our financial results after Jamie Farrar, our Chief Executive Officer, discusses some of the quarter's operational highlights. I will now turn the call over to Jamie.

Good morning. Thanks for joining today. Before we touch on the quarter's results, I want to step back for a moment and reflect on the incredible and transformational year that our company has experienced. Despite the challenges associated with COVID, we have found ways to create value for our shareholders. To that end, I want to recognize and thank our team. Their hard work, persistence, and thoughtful execution has generated outstanding results. As a recap, during 2021, we sold our Cherry Creek property in Denver during the first quarter, and then our San Diego life science portfolio in the fourth quarter. Combined, these two dispositions generated our company a $477 million gain on sale, equating to approximately $10.80 per fully diluted share. From a return perspective, our shareholders were well rewarded. The market value of our common equity more than doubled and city office achieved a 112% total return during 2021. This ranked us as the top performing public office REIT and one of the best performing companies in the entire REIT universe for the year. Moving to our results in the fourth quarter, we completed $1.2 billion of acquisitions, and dispositions. We started the month of December with the sale of our San Diego Life Science portfolio for $576 million. In anticipation of this sale, we used the five months leading up to the closing to build a pipeline of properties to enhance our portfolio. Following the sale, we efficiently completed three sequential acquisitions totaling $614 million. These purchases are located in Phoenix, Dallas and Raleigh. Each of these properties is exactly the type of asset that has the highest appeal to tenants and employees today. Each property features a superb location, new construction, best-in-class amenities and modern tenant spaces. There is an acquisition presentation for each of these on our website that conveys the quality of these properties. The first acquisition to close was Block 23 in downtown Phoenix for $150 million. Block 23 is a premier office building delivered in 2019 that features an unmatched onsite amenity package. It has an incredible rooftop deck and a wide variety of nearby restaurants, bars, and entertainment options. The 307,000 square foot property was 94% leased to close including signed leases that have not yet commenced with a 12-year weighted average lease term remaining. Next, we closed the Terraces in the Preston Center Submarket of Dallas for $134 million. Preston Center is a very special and high barrier to entry location. The submarket is surrounded by some of the wealthiest residential neighborhoods in all of Texas. Proximity to these decision-makers' homes provides a competitive advantage in leasing. The Terraces is the newest building in the sub-market and has walkability to surrounding amenities. The 173,000 square foot property was 99% leased at close, including signed leases that have not yet commenced, with a weighted average lease term remaining of approximately eight years. Last, we finished the year by purchasing Block 83 in Raleigh for $330 million. Raleigh is a vibrant market to add to our portfolio. It possesses very similar characteristics to many of our other high-growth cities in the South and West. The transaction provided a great opportunity to enter Raleigh with immediate scale and one of the best assets in the entire market. The Raleigh metro area has experienced a 22% increase in population between 2010 and 2020, ranking it as one of the fastest growing population centers in the U.S. Raleigh has also experienced strong GDP increases propelled by tremendous growth in the STEM and life science industries. The research triangle with its multiple world-class universities is a deep source of talent and innovation. We believe these attributes will continue to make it a great city for future corporate expansion. Our acquisition, Block 83, is a spectacular two-building complex comprised of approximately 495,000 square feet of office and street-level retail. The property is located in the preeminent live-work-play district of Glenwood South in downtown Raleigh. It's a unique location with walkability to restaurants, bars, and coffee shops, and ample nearby quality housing options. The new build construction and top-of-the-line onsite amenities have led to a rapid lease-up of Block 83. The first of the two buildings was delivered in 2019 and is now 97% leased. The second building delivered in 2021 and is tracking well for stabilization. The building was 30% pre-leased and has achieved an additional 100,000 square feet of leasing during 2021. We expect to make significant progress on the remaining 96,000 square feet of vacancy this year. Note that for each of these acquisitions, I described the percentage leased, which includes signed leases that will take occupancy in the future. The property overview section of our financial supplement provides the percent occupied at December 31st, which will be lower until these signed leases commence. In summary, the fourth quarter was extremely busy with capital recycling activities. Because of the scale of the net proceeds from the San Diego disposition, which equated to a roughly 2% trailing cap rate, including the land, we were able to purchase these best in class properties and improve our earnings outlook at the same time. The midpoint of our new 2022 core FFO per share guidance is 16% higher than the core FFO per share that we achieved in 2021. Notably, we're generating this increase with lower leverage and we're positioned for growth as we lease our remaining vacancies and the signed leases commence. It is also worth noting that these transactions allowed us to increase our dividend by 33 and a third percent in the fourth quarter. Over time, we will continue to evaluate further increases as our portfolio supports higher dividend levels. With that, I'll shift to discussing our focus for 2022 and beyond. The main priority is to accelerate leasing and future cash flow growth across our portfolio. As we've discussed in the past, we have and will continue to invest in our properties and our available inventory. In addition, over the next few years, As opportunities arise, we intend to focus on capital recycling to further elevate the quality of our portfolio. In terms of leasing velocity in our markets, generally Omicron caused office usage to take a step back over the last few months. This appears to be changing now that we've passed the peak of new Omicron cases, and we've been pleased by the improvement in new leasing prospects and tour activity in many markets. However, at the same time, we are seeing some tenants rethink their overall space needs. For the near term, we continue to anticipate elevated downsizing and vacates, which we factored into our guidance. Further, we believe that tenants in today's marketplace want high quality properties with modern spaces to enhance the appeal of returning to the office. They desire spaces that can be occupied with speed, and minimal risk from potential delays in sourcing materials or construction labor. Responding to this opportunity continues to be a focus for our team, and we anticipate further investment in our portfolio this year. We believe these investments will accelerate long-term cash flow growth and the speed of new leasing. As we look ahead, we continue to believe that our thesis of investing in great cities in the South and West will yield attractive results for our shareholders. We look forward to updating you throughout the year on our progress. I'll now turn the call over to Tony Maretic to discuss our fourth quarter results and our 2022 outlook in detail.