Paramount Group, Inc.

Today, ladies and gentlemen, thank you for standing by. Welcome to the Paramount Group's second quarter 2023 earnings conference call. At this time, all participants are in the listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference call is being recorded today, August 1, 2023. I will now turn the call over to Tom Hennessey, Vice President of Business Development and Investor Relations.

Thank you, Operator, and good morning, everyone. Before we begin, I would like to point everyone to our second quarter 2023 earnings release and supplemental information, which were released yesterday. Both can be found under the heading Financial Results in the Investors section of the Paramount Group website at www.pgre.com. Some of our comments will be forward-looking statements with 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 to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. 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 second quarter 2023 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 Pays, Chief Operating Officer, Chief Financial Officer and Treasurer, and Peter Brindley, Executive Vice President, Head of Real Estate. Management will provide some opening remarks, and then we will open the call to questions. With that, I will turn the call over to Albert.

Thank you, Tom, and thank you all for joining us today. Yesterday, we reported core FFO of 18 cents per share, which is a penny ahead of consensus estimates. Our second quarter financial and operating metrics were impacted by the much-talked-about First Republic lease at One Front Street and the SVB securities lease at 13016 Avenue. While Wilbur will cover the impact of these items on our operating results and guidance, Let me spend a few minutes recapping those transactions. As you all know, First Republic was our largest tenant and leased over 460,000 square feet at one front street. They represented approximately 6.4% of our annualized rent, which equated to about $43 million annually. On May 1st, First Republic was shut down and the FDIC was appointed as receiver. Shortly thereafter, JPMorgan Chase acquired substantially all of the assets and assumed certain obligations of First Republic. JPMorgan had 60 days to decide whether or not to assume or reject our lease. We didn't just sit back and wait for the outcome. Right from the onset, we began discussions and negotiations with JPMorgan. That effort, which culminated at the end of June, resulted in what we believe was a terrific outcome, especially considering what could have been. When all was said and done, J.P. Morgan ended up retaining about 75% of the space that was leased to First Republic and that too at the same economic terms. The 25% they surrendered essentially represented space that wasn't being utilized and over 75% of the space surrendered had been subleased to several tenants. We immediately engaged with these subtenants and converted them to direct leases. All in all, we were able to retain over 94% of the occupancy and about 88% of the rental revenue. The outcome is not only a testament to the desirability of the quality of the asset, but also our proactive, hands-on management style. We are delighted to welcome JP Morgan to the Paramount portfolio. We look forward to working with them in the future as they figure out their long-term space needs post the integration of the First Republic platform. In addition to the failure of First Republic, we were also affected, albeit to a lesser extent, by the failure of Silicon Valley Bank. Our tenant at 13016 Avenue was SVB Securities, a subsidiary of SVB Financial Group, the parent company of Silicon Valley Bank. SVB Financial Group filed for bankruptcy and rather than wait for the outcome of that bankruptcy proceeding, we choose to engage directly with the entity that was going to acquire the assets of SVB Securities. The original lease was for 109,000 square feet. The new lease with the acquiring entity is also for 109,000 square feet, although I should point out that about 41,000 square feet is leased on short-term basis. Both the SVB and JPMorgan deals were being negotiated simultaneously as one was executed on June 28th and the other one on June 30th. Needless to say, I'm extremely proud of our team's efforts here, and this would not have been possible without their hard work and dedication. Turning to our operating businesses. Our New York portfolio continues to be steady and improving. Occupancy was up 30 basis points to 90.5%. Notwithstanding the reduced leasing velocity in the market during the second quarter, we are experiencing an increase in inquiries and tours. Utilization figures have been consistently improving as more and more businesses are mandating returns to the office. While we continue with the blocking and tackling, our primary focus in New York is to fill our existing large block vacancy at 13016 Avenue and the upcoming availability at 31 West 52nd Street. To that end, we're in the final stages of finalizing our 30,000 square foot amenity center at 13016 Avenue. The amenity center, which will be at the base of 1301, will feature a double-height atrium providing for ample natural light into the main lounge area, an elevated food and beverage offering and catering service, a grab-and-go cafe, a wellness studio, a game room, and a large training room, and a 200-plus person auditorium. The amenity center at 1301 will be available to all tenants at the Paramount campus. The reception from the brokerage community and existing and prospective tenants alike has been stupendous. We look forward to sharing more with you in the coming months. While our San Francisco portfolio continues to lag that of New York, the streets of San Francisco have become more vibrant in recent months and utilization figures have been consistently rising. Recent data suggests there is an increase in demand driven by AI companies. Many of those are searching for larger block space in excess of 50,000 square feet. Turning to the transaction market, activity remains subdued due to elevated interest rates, volatile equity markets, and wide bid ask spreads. To date, there have been very few quality assets coming to market. However, there has been some recent activity showing signs of optimism and supporting our view that for the most part, the underlying value of class A trophy real estate remains intact. While that is certainly not reflected in the current public market stock prices of office suites, including ours, we run our business with a long-term mindset. Our strategy of investing in Class A and trophy buildings in coastal gateway markets is one that has stood the test of time. It will again. With that, I will turn the call to Peter.