Paramount Group, Inc.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Paramount Group third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note that this conference call is being recorded today, October 28, 2021. I'll now turn the call over to Sumit Sharma, Vice President of Business Development and Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Before we begin, I would like to point everyone to our third quarter 2021 earnings release and the supplemental information which were released yesterday. Both can be found under the heading Financial Information-Quarterly Results in the Investor Relations section of the Paramount Group website at www.pgre.com. Some of our comments will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements, which are usually identified by the use of the words such as will, expect, should, or other similar phrases, are subject to numerous risks and uncertainties that could cause actual results from what we expect, including, without limitation, the negative impact of the coronavirus, COVID-19, on the U.S. regional and global economies and our tenants' financial condition and results of operations. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a detailed discussion on the risks that could impact our future operating results and financial conditions. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our third quarter 2021 earnings release and our supplemental information. Hosting the call today, we have Mr. Albert Baylor, Chairman, Chief Executive Officer, and President of the company. Wilbur Pace, Chief Operating Officer, Chief Financial Officer, and Treasurer. And Peter Brindley, Executive Vice President and Head of Real Estate. Management will provide some opening remarks and we will open the call to questions. With that, I will turn the call over to Albert.

Thank you Sumit and thank you everyone for joining us this morning. We delivered a quarter with strong operating performance as we continue to experience a steady return to normalcy. In the third quarter of 2021, we reported core FFO of 23 cents per share with same-store cash NOI growing 6% year over year. We completed the 860 million refinancing of 1301 Sixth Avenue with a blend of fixed and floating rate debt at 2.95%. The favorable terms of the refinancing highlight the confidence that the debt markets have in the quality of 1301 and the strength of the operations. We leased 374,000 square feet in the quarter, bringing year-to-date leasing activity to over 800,000 square feet. Our strong results and execution enabled us to once again increase our guidance on pretty much every metric for 2021. Wilbur will cover this in greater detail. This quarter's leasing was highlighted by the 279,000 square feet at 1301 6th Avenue, of which 190,000 square feet served to backfill existing vacancy at the property. This resulted in leased occupancy at 1301, increasing by 1,280 basis points from last quarter. The asset is currently 84.3% leased. I'm extremely proud of the team's focused work as we have now effectively backfilled approximately 41% of the Barclays vacancy at 13016 Avenue due to the leases we recently signed with two very important tenants, Credit Agricole and SVB Learing. We are now left with 269,500 square feet of available space and we continue to remain laser-focused on the task at hand. Our leasing success this quarter was built on the strong momentum we established the last quarter when we successfully executed leases at 31 West 52nd Street with Bracewell and Centerview Partners backfilling over 60% of that block of space. As a result of all this leasing, we were able to drive up the least occupancy of our portfolio to above 90%, ahead of our own expectations, and especially remarkable when considering the impact of COVID-19 on the market. While Peter will cover our leasing in greater detail, I would like to spend a moment sharing some observations on our markets. Key fundamentals in both of our markets continue to improve gradually. and our leasing team remains quite busy in both New York and San Francisco. The pipeline of activity continues to build. Every day we are seeing more evidence of a flight to quality, and that trend endures to our benefit. It is not by chance that we have had the leasing success we have had. It is by design. Tenants in the market today are keenly focused on their real estate as they look to attract, retain, and bring their employees back to the office. Many tenants who already executed leases with us this year are seeking additional space as they underestimated the growth in their business and consequently their space needs. Others who are ready to ink deals but have less visibility into the future currently are hoping to have optionality built in their leases to expand their space at a future date. While market rents have declined about 3% in Midtown and about 8% in San Francisco, landlords with better building are able to hold the line and, in select instances, push rents. Our results continue to demonstrate the strengths and resilience of our portfolio as we continue to benefit from the high quality of our assets. In New York, the city is coming back to life. Restaurants are full, Broadway is back, and sports and concert venues are selling out. While space utilization in our own portfolio is up, it is still significantly below pre-pandemic levels. The COVID Delta variant caused many of our tenants who plan to return on Labor Day to delay their reentry plan. Many of them are going to have employees face back as the year progresses with a full return in January 2022. While the work-from-home narrative continues to make news, most business leaders, including myself, continue to believe that working in the office will carry the day. In San Francisco, tenants continue to take a slower approach in returning to offices. While our San Francisco leasing activity still favors renewals over new leases, we are seeing some bright spots beginning to shine through as the market improved modestly during the third quarter and gradually gains momentum. Turning to the transaction market, overall deal volumes are still muted compared to 2019 levels, though there has been an uptick in volume quarter over quarter. Liquidity is ample and pricing remains unchanged. Data points are still limited, but there are certainly more asset sales being discussed. From what we see, core assets are outperforming value-added opportunities, which underscores the inherent value of our portfolio. We remain interested yet disciplined with our capital and monitor the markets carefully. To conclude, our priority remains the lease-up of our availabilities as well as gradual reintegration of our tenants in a safe and healthy manner. As has been the case for the past year, we continue to maintain sufficient liquidity, which amounts to $1.5 billion at the end of the quarter. With our portfolio of stable trophy assets and our proven ability to allocate capital, we remain well positioned for the long term. With that, I will turn the call to Peter.