City Office REIT, Inc.

to 2023 earnings conference call at this time all participants are in a listen only mode a brief question and answer session will follow the formal presentation to ask a question you may press start then one 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 then two as a reminder this conference call is being recorded if you require operator assistance throughout please press start 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'd 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. Although the company believes that these expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that 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'll now turn the call over to Jamie.

Good morning and thanks for joining today. On this call, I'd like to touch on several topics. First, a look back at our performance in 2023, then an overview on the state of the office market, and last, updates on our progress and focus areas for 2024. Overall, 2023 was in line with our expectations. Our core FFO per share ended the year at $1.39, which was within the guidance range we set at the beginning of 2023. Our performance led to dividend coverage for the year, with a total AFFO payout ratio of 66%. Operationally, we executed 599,000 square feet of new and renewal leasing throughout the year. Our pipeline of leasing prospects gained considerable momentum as the year progressed. In the fourth quarter, we executed 109,000 square feet of new leases, which was the highest level of any quarter in 2023. The average term of those leases was a healthy eight years. Our occupancy also ended the year approximately where we expected it to land, and we achieved 3% same-store cash NOI growth for 2023 as compared to the prior year. Last, during 2023, we renewed two property loans for five years each, which was a success in an otherwise challenging financing market. I'll use this as a transition to provide an update on the state of the office market. There continue to be headwinds in certain areas and promising green shoots in others. On the challenging side, the investment sales market continues to be very slow. Across the office market in 2023, sales volumes was down 57% year over year. Within the limited transactions that closed, many were aided by seller financing or assumable debt. Debt capital also continues to be effectively frozen for new originations with lenders seeking to reduce their office sector exposure. We're closely monitoring these trends and remain in active dialogue with our own lending relationships. On the side of positive trends, The corporate pressure on employees to return to the office continues to gather momentum. Major companies, including employers such as Google, Meta, Salesforce and Amazon, to name a few, have all shifted their policies towards more consistent in-office collaboration. Having employees attending the office a minimum of three days a week, which appears to be a common current policy, should bolster overall space needs and benefit high-quality office assets. We believe these trends will further strengthen throughout 2024. Another helpful change is the rapid slowdown in new construction. Q4 2023 had the least amount of ground broken for new office buildings in over 20 years, according to JLL. The projects that are breaking ground are generally build-to-suit or pre-leased with almost no new spec projects underway. This will help shift the supply-demand balance as obsolete buildings get removed from inventory without being replaced. Subleasing is also moderating, with Q4 starting to indicate an equilibrium or decrease of sublease availability across many office markets. Relating to leasing trends, the flight to quality trend continues, which benefits our portfolio. According to JLL's research, 60% of total vacancy is concentrated in just 10% of buildings. Leasing demand continues to be highest for well-located premier buildings that have amenities and ready to lease space. That leads us to our update on our progress so far in 2024. The leasing momentum that we experienced in the fourth quarter carried over into 2024. Today we're actively pursuing a leasing pipeline that exceeds 200,000 square feet. Of note, last year, larger corporate user lease discussions were less frequent with most of last year's activity in the small to medium sized suite range. Within our current pipeline, we are in active lease negotiations with four companies that average over 40,000 square feet per lease. The return of these larger corporate tenants is a positive development, which has the potential to re-accelerate leasing results. Our leasing pipeline is in part driven by our spec suite and renovation programs that we've been focused on for the last two years. We currently have 84,000 square feet of built spec suites in our inventory, with 19,000 square feet under construction or planned to commence in 2024. Combined with renovations, such as our Pima Center property in Phoenix, these investments are allowing us to compete for a larger share of leasing across our markets. As a status update on WeWork, they continue to operate in bankruptcy. As a reminder, at year end, we had three WeWork leases at our newest and best properties. On our last call, we highlighted that WeWork's Raleigh and Dallas operations inner buildings appear to be performing well from an occupancy standpoint. However, their Phoenix location at Block 23 had lower occupancy as it was still in a lease-up phase, having been opened for just over a year. Block 23 is an incredible, newly constructed building that is one of the top properties in Phoenix. We did not come to terms with WeWork on a lease restructuring, and the Block 23 lease was rejected effective February 7th. City office holds a $1 million letter of credit as additional security for this lease, which is being drawn and applied against our costs and lost income. As discussed on our last call, we've been working with other co-working operators to rebrand this location in the event of a WeWork departure. We continue to keep all of our options open, but are in late-stage negotiations with another high-quality co-working operator. We're working at this location backfilled quickly, and we'll provide further details on our next call. In terms of collection of rent from WeWork, they withheld January and February rent payments at Block 23 and the Terraces as part of their lease negotiation tactics. In response, we immediately initiated litigation. Ultimately, WeWork have now agreed to repay these overdue amounts by the end of February in exchange for us dropping our litigation. bottom line we remain very confident in our position our block 83 terraces and block 23 properties are three of the most desirable office assets in the entirety of raleigh dallas and phoenix irrespective of what happens with we work these are incredible new buildings and are exactly what tenants want to lease today with that i'll turn to our outlook for the balance of 2024. Tony will provide more detail, but in broad strokes, we have several focus areas. First, we remain focused on executing new leasing and driving occupancy. Related to that, we will further our spec suite and property renovation programs to optimally position our spaces for success. We believe the timing of these enhancements aligns with market demand. Second, we continue to prioritize maintaining liquidity protecting capital, and addressing debt maturities in a prudent manner. And last, our DNA as a company has always been to uncover creative ways to unlock value at our properties. And in 2024, we're looking to advance a few promising projects. While these initiatives remain at an earlier stage, we've been focused on finding ways to advance shareholder value. With that, I'll hand the call over to Tony to discuss our financial results and guidance in more detail. Thanks, Jamie.