Paramount Group, Inc.

Vice President of Business Development and Investor Relations. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Before we begin, I would like to point everyone to our second quarter 2024 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 .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 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 2024 earnings release and our supplemental information. Hosting the call today, we have Mr. Albert Baylor, Chairman, CEO, and President of the company, Wilbur Payes, Chief Operating Officer, Chief Financial Officer, and Treasurer, and Peter Brinley, Executive Vice President and Head of Real Estate. Management will provide some opening remarks and we will then 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 20 cents per share for the second quarter in line with consensus. Operationally, we had another solid quarter of leasing activity. We executed leases of approximately 198,500 square feet, bringing our -to-date leasing volume to about 475,000 square feet. This represents our strongest second quarter and first half of leasing since 2020, demonstrating the continued strength and appeal of our high quality portfolio. We continue to make progress on our availability in New York where leasing activity during the quarter totaled approximately 178,000 square feet. We are particularly encouraged by the steady flow of inquiries and tours we are seeing, which we believe will continue to translate into further leasing success in the coming quarters. We are seeing strong demand from a diverse range of tenants, especially financial services and law firms. The momentum we are experiencing across our New York portfolio reinforces our confidence in the enduring appeal of high quality, well-located office spaces in prime sub-markets. I can announce that we officially opened Paramount Club at 13016 Avenue during the second quarter. This exclusive amenity offering has been extremely well received by our tenants and is proving to be a significant differentiator in the market. Paramount Club is not only enhancing the workplace experience for our existing tenants, but is also playing a crucial role in attracting new tenants to our portfolio. Our ability to attract and retain top tier tenants is a testament to the strength of our portfolio and our team's leasing expertise. I'm also thrilled to share that on July 18th, we celebrated the grand opening of the highly anticipated Michelin star rated Din Tai Fung restaurant. Set under the iconic glass cube in the plaza of our headquarters at 1633 Broadway, Din Tai Fung adds a new layer of excitement to our curated offerings. The bust surrounding the opening has been tremendous and we couldn't be happier. We invite you to visit and experience the culinary sensation firsthand. The opening of these two unique and outstanding amenities will further enhance the tenant experience and elevate our portfolio in ways that are distinguishing it for both our current tenants and prospective tenants alike. These are the types of exclusive amenities that resonate with today's discerning tenants. As a flight to quality persists, we believe our portfolio is well positioned to capture a disproportionate share of demand, driving occupancy improvement and at times, allowing us to push rents across our New York portfolio. As in New York, the ongoing flight to quality in the office market continues to play to our strength in San Francisco. There we are seeing a clear preference for class A. Amenity rich buildings in prime locations, precisely the type of assets in our portfolio. Our properties with their state of the art infrastructure, large and efficient floor plates and desirable locations are increasingly attractive to tenants seeking to upgrade their office space. The market in San Francisco remains tough and behind New York. During the quarter, we signed approximately 20,500 square feet of leases in San Francisco, which resulted in total leases executed during the first half of the year of approximately 180,000 square feet. While leasing velocity remains below long-term averages, we are seeing some encouraging signs that demand is picking up. San Francisco remains a center for premier tech talent with high growth potential and is a clear global front runner for VC funding to AI companies. Our high quality portfolio is well positioned to capture outside market share as the recovery persists. Turning to our balance sheet, we continue to maintain a strong liquidity position with approximately 409 million in cash and restricted cash at our share, excluding non-core assets, along with the full 750 million available on our revolving credit facility. While the broader transaction market remains subdued, we are beginning to see early signs of increased activity. The volume of potential deals in the pipeline is gradually expanding, suggesting a possible shift towards a more dynamic environment in the coming year. We anticipate that the wide bid-ask spreads, which have historically kept many market participants on the sidelines, may start to converge. This could potentially unlock more transaction opportunities. Furthermore, the prolonged period of elevated interest rates may lead to an uptick in distressed assets coming to market, potentially creating attractive acquisition prospects. In this evolving landscape, we maintain our disciplined approach to capital allocation. We are strategically positioned to capitalize on external growth opportunities, particularly those in partnership with third parties, where we can leverage our extensive market knowledge and disciplined investment approach. Our strong balance sheet and ample liquidity position as well to act on attractive opportunities should there arise. In closing, we had a solid performance this quarter and remain confident in our strategy. Our high quality assets in prime locations continue to outperform the broader market, and we are well positioned to capitalize on the ongoing flight to quality in our core markets. With that, I will turn the call over to Peter.

Thanks, Albert, and good morning. During the second quarter, we leased approximately 198,500 square feet, with approximately 178,000 square feet in New York, and approximately 20,500 square feet in San Francisco. The weighted average term of leases signed during the second quarter was 8.6 years. During the second quarter, three of the leases we completed occurred at 1301 Avenue of the Americas, totaling more than 92,000 square feet, two of which were with new financial service-based companies, and the third was with a law firm that continues to expand in the building. Approximately 60% of this leasing activity was on vacant space, and the balance was on space that was otherwise scheduled to expire in 2025. Over the past 12 months, we have made substantial progress at 1301 Avenue of the Americas with leased occupancy at the building, improving from .8% leased to 89.5%, or 970 basis points. In both New York and San Francisco, tenants continue to pursue premium, centrally-located, amenity-rich buildings run by -in-class, well-regarded, and well-capitalized owners. This accelerating trend ennores to our benefit, enabling us to capitalize on these market dynamics and expand our leasing pipeline. Our priorities remain centered on maintaining exceptional tenant relationships, securing renewals for upcoming lease expirations, and leasing our vacant space. At quarter end, our same store portfolio-wide leased occupancy rate at Share, excluding non-core assets, was 86.3%, down 280 basis points from last quarter, and down 440 basis points year over year, driven by the previously discussed and known move out of our second-largest tenant at Share, Clifford Chance at 31 West 52nd Street. Turning to our markets, Midtown's second-quarter leasing activity of approximately 4 million square feet, excluding renewals, surpassed the five-year quarterly average by 21%. Leasing activity during the second quarter exceeded the five-year quarterly average for the third consecutive quarter, the first three-quarter streak since 2018. The steady improvement of the demand profile in Midtown has been most evident within Midtown's core sub-markets, as tenants increasingly pursue the highest quality real estate with a close proximity to public transportation. Availability in Midtown remains elevated at 18.2%. However, the tightening of supply on upper floors has resulted in upward pressure on rents for view space, particularly in Midtown's core sub-markets. The recently opened Paramount Club at 1301 Avenue of the Americas has proven to be a key differentiator in attracting and retaining tenants. Membership is offered to tenants in our New York portfolio, many of whom have offered rave reviews in the early going. Brokers and prospective tenants alike have offered similar feedback, referring to it as best in class, unlike anything else in the market. The club is bustling, irrespective of the time of day, as members take full advantage and incorporate the club into their workday. Our New York portfolio is currently .9% leased on a same-store basis at Share, down 320 basis points -over-quarter, and down 360 basis points -over-year. Shifting our focus to San Francisco. San Francisco recorded more than 1.6 million square feet of leasing during the second quarter, approximately one-third of which was made up of -to-market tenants, primarily AI companies. Tenants in the market demand has grown to more than six and a half million square feet, the highest it has been since Q4 2019. This increase continues to be driven by the emergence of newly funded San Francisco-based AI companies, which have become an increasingly large percentage of the demand pipeline in San Francisco. In fact, VC funding in San Francisco is on pace to reach 2022 levels, north of $30 billion, much of which is going toward AI companies. Despite challenges in the market, including a record high availability of 37.1%, San Francisco remains a hotbed for top tech talent with high growth potential. Our high-quality portfolio is well positioned to capture outsized market share as the recovery continues in San Francisco. At quarter end, our San Francisco portfolio was .2% leased on a same-store basis at Share, down 130 basis points -over-quarter, and down 740 basis points -over-year. We look forward to updating you on our progress. With that summary, I will turn the call over to Wilbur, who will discuss the financial results.

Thank you, Peter, and good morning, everyone. Yesterday, we reported core FFO of 20 cents per share, which is in line with second quarter Wall Street consensus estimates. Same-store growth in the quarter was essentially flat, up .1% on a cash basis, and slightly negative at .3% on a gap basis. During the second quarter, we executed 15 leases, totaling 198,505 square feet, at a weighted average starting rent of $74.55 per square foot, and for a weighted average lease term of 8.6 years. -to-market on 98,862 square feet of second generation space was positive 1% on a cash basis and negative .4% on a gap basis. This -to-market data represents only a New York portfolio, as the 20,647 square feet leased in our San Francisco portfolio represented leases executed within our non-core assets at Market Center and 111 Sutter Street. Turning to our balance sheet, our liquidity position remains strong at over 1.1 billion. We ended the quarter with little over 409 million of cash and restricted cash, and a full 750 million of undrawn capacity under our revolver. Our share of the 409 million of cash and restricted cash excludes amounts from non-core assets. During the quarter, we once again extended the mortgage loan on 111 Sutter Street and pushed out the maturity to December 2025. We did this on the same terms as the previous extension, namely that all interest shortfalls will continue to accrete to the principal balance of the loan with the lender funding all capital needed to stabilize the asset, thereby protecting our balance sheet all while preserving optionality for our shareholders. Outstanding debt at quarter end was 3.6 billion at a weighted average interest rate of .92% and a weighted average maturity of 3.1 years. 87% of our debt is fixed and has a weighted average interest rate of 3.31%, and the remaining 13% is floating and has a weighted average interest rate of 8.01%. These figures, of course, include the debt on the non-core assets. Excluding debt on non-core assets, outstanding debt was 3.24 billion at a weighted average interest rate of .89% and a weighted average maturity of 3.4 years. And we have no debt maturities until 2026. Please refer to page 39 in our supplemental package for the impact of non-core debt on our capital structure for additional information. Turning now to our 2024 guidance, based on our -to-date results, as well as our outlook for the remainder of the year, we have improved our same still cash and gap NOI growth outlook by 100 basis points and 50 basis points respectively. The improvement in our same store results is offset by slightly higher interest and GNA expense. As such, we have maintained the midpoint of our core FFO guidance of 78 cents per share by narrowing the range to be between 76 and 80 cents per share. Please refer to page six of our supplemental package for additional information regarding the changes and assumptions underlying our guidance. With that, operator, please open the lines for questions.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Steve Sacqua with Evercore ISI. Please proceed with your question.

Thanks, good morning. Either for Peter or Wilbur, I guess it's kind of a two-parter. Number one, can you just kind of remind us some of the large known vacates that you guys have maybe between now and the end of 25, and if there are some things that are not necessarily resolved, maybe just remind us kind of what are some potential things that could become known vacates over the next 18 months? And I guess the corollary to that is, can you just help us think through the sign lease not commence figure as we try and think about the occupancy bridge over the next 18 months?

Morning, Steve, this is Peter. I'll start by saying that Google and JP Morgan make up 40% of our 2025 lease expirations. And as we now know, Google will vacate the entirety of one market, which is roughly 340,000 square feet, 168,000 square feet at share. And as it relates to JP Morgan at One Front Street, we are in discussions with them. We don't expect to keep them in the entirety of the 241,000 square feet that expires in 2025. We do expect to keep them in a portion of it, but that is the largest block, if you will, when you think about our 2025 lease expiration. Beyond that, we are having constructive conversations with a number of tenants that have lease expirations in 2025 and working very hard. And we believe we will be successful to keep a good portion of the remaining 25 lease expirations.

Sure, and Steve, to the second part of your question, as far as signed leases, you'll see there's a big delta, as I'm sure you've seen, between 1301 leased and occupied percentage, and also at 31 West. That will start to narrow through the end of the year relative to those signed leases, and start to hit really in the early part of 25. At 1301, it's the big citizen bank deal that was done at 1325. It was the large Wilson-Suncini expansion that was done there.

So is there just kind of a rough figure, Wilbur, or should we just kind of extrapolate between the occupancy and the lease, and assume some of that, but not all of that, will commence over the next, kind of say, 12 months?

Yeah, I think you will need to extrapolate, Steve. I don't want to get into precise figures of what that contribution will be.

Okay, thanks. And then maybe Albert, you mentioned, still the dislocation in the capital markets, transaction market, but you're starting to see more potential things come to market. I'm just given, excuse me, given where your kind of capital structure sits today, and kind of where your stock price is, I'm sure, you wouldn't want to issue equity to do deals, excuse me, at these levels, but how would you think about funding deals, and just, I guess, what would the economics of the deal sort of have to look like to kind of get you guys to jump in?

Yeah, Steve, as said over the last couple of earnings calls, we are looking at potential opportunities very carefully. In the class A, that's where we are interested in, and trophy, there are very few transactions happening. So far, there's still a big gap, a bit ask, which seems to be narrowing, and we will not be using a lot of our equity of our liquidity that we currently have on balance sheet. So we will invest asset light, as we call it, and use outside venture capital. That seems to be more interested at this point in the cycle. There are a number of, I would say, especially foreign, but especially also private investors, less institutional ones who are considering to get into the market, and we will use these relationships that we have developed over the last many years to look at investment opportunities. It's at a lower point in San Francisco at this point, and you have to have the hope that San Francisco is coming back, which I think is behind in comparison to New York. So we are looking at both markets, but we will be very, very capital before we pull the trigger.

Okay, thanks, that's it for me. Thank

you, Steve.

Thank you. Our next question comes from the line of Vikram Mahoultra with Misuho. Please proceed with your question.

Good morning, thanks for taking the question. I guess just first on two specific properties. I think at 1633 Showtime has a bunch of space on the Sublette market. I'm just wondering if you've had any discussions on their plans. I know the lease doesn't come up for a while, but just curious, given the size at 1633. And then any update on the retail block on 5th Avenue? It's fairly large, but I know there are few large blocks there, so any update would be helpful on leasing prospects.

Hi, Vikram. We have more activity on that retail space at 712 5th Avenue than at any point since we began marketing it. Certainly there's been a lot of productive deals that have transpired on upper 5th, and there's not a whole lot of supplies. Certainly nothing like ours, I think everybody would agree. So nothing to report just yet in this regard, but we feel like there's really very nice activity and we may have an opportunity to convert with a really exciting couple of tenants. So more to come.

Vikram, as mentioned again a couple of times before, we leased a nice part of that retail after Henry Bendell moved out to Harry Winston, and the rent we got is nearly at the level that Henry Bendell had paid previously. We wanna be very careful to find the right tenant. It's most probably in the luxury segment, and it has to fit the asset class of the rest of the office building. And Peter and his team have very decent interest because there's not much of spare footage available on 5th of that kind of quality.

Thanks so much. So maybe just one more. Peter, you alluded to maybe some early signs of improvement in San Francisco in particular, and just generally from your peers, things seem very slow pipeline-wise, leaving velocity-wise. I'm just wondering, can you elaborate on whether it's AI or traditional tech? What are you looking for? What green shoots may you be seeing?

The green shoots, Vikram, are that the demand pipeline, the tenants in the market continues to increase. Venture capital funding continues to find its way to San Francisco-based companies. There are new companies entering the market. In fact, a third of the leasing activity in the second quarter was made up of new tenants to the market. AI-based companies, of course, we're all talking about. I think the most important thing is that they acknowledge the importance of the office. They are in fact looking to secure office space to allow for collaboration in order to execute on their lofty plans, of course. So I think that is all trending very nicely. We, of course, are working our way through a lot of availability in this market to return it to a healthier fundamentals. But directionally, what I am experiencing, what we as a team are experiencing in our properties is increased tour activity, increased proposals. We have nice activity on the Google block of floors that we'll be getting back next year. And so for those reasons, we feel more optimistic today than we did going back, call it six months. And so directionally, San Francisco seems to be moving in a better direction.

Thank you. Our next question comes from the line of Camille Bonneau with Bank of America. Please proceed with your question.

Good morning, everyone. I saw you kept the leasing target for the year and momentum seems to be picking up in New York City, but your signed activity is still tracking below the low end of guidance so far. So I was wondering if you could provide more details on how much San Francisco leasing was factored into your guidance. And if you feel anything on the demand front into July has really changed versus your expectations at the beginning of the year.

Camille, maybe I'll just start. I don't think your statement about it trending at the low end of the guidance is true. We have leased 475,000 square feet here to date. To get to the midpoint, you need to lease 168,000 square feet per quarter if it was linear. And obviously both the first and the second quarter were well ahead of those figures.

Okay, thanks for clarifying, Wilbur. And Wilbur, while I have you, can you provide an update on what assumptions are factored into your interest expense guidance following the increase in this quarter? Because statements from the Fed yesterday seem to be increasing the odds of a September cut. So are you baking any of this in?

Yes, so just to put this in perspective, obviously when we did come up with interest expense guidance that was in February, as you can imagine, at that point there was a lot of chatter between four to five cuts in the year. That did not come to fruition. Hence, we're tweaking assumptions based on where the Fed speak is now based on the expectation of rate cuts for the duration of the year, but it is incrementally higher relative to what we provided in the guidance. You also know the rate cap and the swap at 1301 expires in August, and that was factored into that equation as well.

Okay, thanks for walking through that. And we ran a bottoms up analysis of office assets across New York City to see how the rates rank relative to each other, and your portfolio comes up as one of the top three platforms. But we see when demand pulls back, you can really see how the high concentration in buildings and large tenants can have a large impact to your operations. So as we look forward, can you talk about how you think about balancing this risk versus the benefits of diversification, and is there anything the team's doing to mitigate this risk?

Well, I think our portfolio is pretty diversified, and if you look at the New York market historically, it has been more and more diversified over the years. You might not remember not being around. Many years ago, New York didn't have entertainment. It was depending mainly on fire tenants, and today it's, and that means mainly finance and insurance, and today it's a very, very diversified tenant mix, and we have tech included as well. And so I think our portfolio is also quite diversified across the board. Each building is different, and we like it that way, and that's typical for office buildings in this market. If you have smaller floor beds, it's catering to a different demand, or a different tenancy than larger buildings, and I think we manage it pretty well.

Thank you for your thoughts.

Thank you.

Thank you. Our next question comes from the line of Blaine Heck with Wells Fargo. Please proceed with your question.

Great, thanks. Good morning. I was hoping to get some color on the drivers of the increase in same store and OI expectations, given that the lease percentage outlook didn't change, so any details there would be helpful?

Sure, Blaine. And as you point out, we bumped same store cash-in gap and OI guidance, 100 basis and 50 basis points, respectively, at the midpoint. You saw the results in the second quarter that aided in that, and the expectation of reduced operating expenses in the second half of the year, that's really what drove the NOI increase. But, you know, recognize, where we're trending relative to the year to date, Blaine, it will be negative in the second half of the year, and that comes as no surprise to everybody because, you know, Clifford Chance vacated in May of this year, so you're losing that. That was your second largest tenant, so that New York will be more negative in the second half of the year, because of that, and then you have the impending lease expiration of Lee rank at 1301.

Right, okay, that's helpful, thanks, Wilbur. And then on the lease rate guidance itself, it looks like that implies about 80 bits of improvement between June 30th and the end of the year. I guess how much of that do you have strong visibility on, and how much would you say is more kind of speculative at this point?

So, you know, if you look at the lease rate, I mean, if you look at how much expirations we have throughout the rest of the year, it's about 170,000. In order to get to the midpoint of our guidance, you're talking about leasing in excess of 200,000 square feet on vacant space or about to expire space to be able to get that. I think Peter can dimension the pipeline and how much of that pipeline is on vacancy, but the reason we left that unchanged is because we feel good about reaching that level based on what we're seeing in the pipeline.

Yeah, I would dimension our pipeline as remaining very, very strong. Wayne, we have leases in negotiation and proposals in advanced stages from more than 300,000 square feet, a good portion of which, getting to your question, is on vacant space or soon to be vacant space. And given that we need to lease in excess of 200,000 square feet, what we refer to as occupancy increasing transactions, you know, we believe we will get to the midpoint based on what we're currently seeing in the pipeline.

Great, that's really helpful. And then last one, Albert, with respect to external growth through acquisitions, you talked about partnering with other investors for transactions. Can you just talk about the amount of demand you're seeing to co-invest on office investments? It sounds like these opportunities are a little bit more tangible at this point than maybe I perceived on past calls and in past meetings. Has that level of interest from institutional capital increased recently?

Well, institutional capital is clearly not the front runner here. The capital that is looking more intensively to get into the market is private capital. You have to think about family offices, ultra high net worth, individuals, and especially office investors who have not been in office so far because many others are dealing with the issues that they have themselves. They just see the opportunity, they see the tremendous pricing advantage you have currently if you take an asset. So that is getting more and more active because they have been on the sidelines for a while because the phenomenon in America of work from home has been very consistent for a while and surprisingly long, but it seems to be that the office attendance is improving, definitely in New York but also in San Francisco. And I think that's something that many, especially foreign investors, were surprised by for a long time, how long that persisted because if you travel to other countries, especially in Asia, everybody's back to the office and here it's taking a while. So that was I think the biggest negative that was shunning investors away from this market.

Great, thank you. Thank you.

Thank you. Our next question comes from the line of Ron Camden with Morgan Stanley. Please proceed with your question.

Hey, just two quick ones for me. The commentary on the 25 expiration for San Francisco was super helpful. Can you sort of do the same thing for New York though whether it's charter or Wilson-Sinsegni or Veritas or any of those sort of known vacates or still negotiations or what's the thinking there?

Sure, Ron. So we have what equates to about 450,000 square feet or .8% expiring at share in New York in 2025. I don't wanna give away too much by way of specifics, but charter is a very important tentative of ours, long standing relationship. They expire for about 100,000 feet in 25. We're having constructive conversations with them. Wilson-Sinsegni, as you may know, relocated to 31 West 52nd Street, which effectively helped de-risk the known move out of Clifford Champs. But I can tell you that those two floors that they have vacated at 1301 are highly coveted given that a lot of the availability in Midtown is disproportionately located on lower floors. There's just not a whole lot of great space high up like those floors are. Virtus is now attended at 1301 Avenue of the Americas. So we will get those two floors back at 31 West, but they have chosen to remain with Paramount and have most recently transacted at 1301. Those floors will be contiguous to the block of space that we're getting back from Clifford Champs. And because of the quality of 31 West, we have a lot of confidence that we'll have success leasing up that block of space to credit tenants. And we're excited about the offering and excited about the current level of activity. But those are really, you really called them out. Those are the biggest moving parts of the 450,000 square feet that we have coming back to us in 25.

Okay, great, super helpful. And then on the, just on the non-core assets at 111 and Market Center, when do, like when should we expect those to actually be off the books? Is that like 2025 or are there still negotiations? Just trying to figure out when do they actually, when can you actually be like taking them off the books?

Well, there's still negotiations. So I don't think we wanna predict at this point what's happening there. And the loan at 111 Sutter got extended for 18 months. So that's still open what's happening there.

Yeah, Albert's right. Obviously 111 Sutter will, that got extended to December 25, Ron Market Center. We are in negotiations. These things can take a while. You have multiple banks in these processes and you have to first be in default and then the banks have to notify that you're in default and reserve their rights and go through a process.

Okay, makes sense. That's it for me. Thank you so much.

Thank you. Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star one on your telephone keypad. Our next question comes from the line of Dylan Brzezinski with Green Street. Please proceed with your question.

Thanks for taking the question all. Just trying to look at sort of expectations for net effective rents over the next 12 months, two years. I mean, is it your expectation that we'll continue to see pressure on this front or, and I guess it's probably different by whether it's in New York or San Francisco, but just sort of trying to get a sense for where you guys' expectations for net effective rents are across your portfolio.

So I would think that we have pretty much pretty close to maybe the bottom and New York already improving, especially for, and you have to differentiate between class A and class B and then, and trophy and so the better and the difficult buildings. I think for the worst buildings, this will be still a struggle for longer to come. In San Francisco, we might be a little bit behind and that will take a little longer because also the vacancy for the entire market is at a higher level, but for even there for class A assets, it might be close to the

bottom in San Francisco as well.

Appreciate

that color.

And then going back to JP Morgan's leads, I just realized that you guys are still in discussions with them, but I mean, do you sense that they'll give back more than 50% of their space or?

Dylan, I think we at this point assume that it will be more than 50% of their 2025 space expiring, which is the 241,000 square feet. I do think it'll be probably more than 50%, but as I said, they will keep some component, we believe, and those are the discussions that we're having.

Great, thanks guys. Thank you.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Baylor for any final comments.

Thank you all for joining us today. We really look forward to providing an update on our continuous progress when we report our third quarter 2024 results. Goodbye.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.