Allied Properties Real Estate Investment Trust

Ladies and gentlemen, thank you for standing by and welcome to the Allied Properties REIT second quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I would now like to turn the call over to Cecilia Williams, President and CEO. You may begin your conference.

Thanks, Josh. Good morning and welcome to our conference call. I'll be presenting briefly on the second quarter and I'm joined by Nan and JP to answer questions. Michael is also here with us. We may in the course of this conference call make forward-looking statements about future events for future performance. These statements by their nature are subject to risk and uncertainty that may cause actual events or results to differ materially. Including those risks described under the heading risk and uncertainty in our 2022 annual report and our most recent quarterly report. Material assumptions that underpin any forward-looking statements we make include those assumptions described under forward-looking statements in our most recent quarterly report. Our second quarter was positive operationally. Demand for our space remains strong as indicated by tour activity. We also leave significantly more space than last quarter. And net rent for occupied square foot continues to increase up from last quarter to $23.51. Higher interest expense and longer lease-up timeframes resulted in lower-than-budgeted same math and NOI, FFO, and AFFO per unit in the first half of the year. Although temporary, as interest expense will materially decrease going forward with the pay down of $1,000,000 of debt, our results for the year have been impacted, moderating our outlook. The good news is that we continue to see demand for arts-based products. with tour activities continuing to increase. Closing of a UDC transaction will be liberating in many ways. Operationally, the entire team will now be focused on running the workspace portfolio. Financially, we'll be able to meet obligations while barely using our lines through 2027. Our debt metrics will also continue to improve as our development completions turn economically productive. Our fourth annual EST report was released on June 26th. I'm pleased with the progress on our plan to net zero carbon, including establishing an internal cost of carbon to support internal decision making and forecasting. More details on our progress will be disclosed in next year's report. My confidence in our long term outlook remains strong. Our portfolio has performed well over the last three and a half years of upheaval and will continue to do so through the current headwinds because ultimately we have the space that people want. More importantly, our team has never been stronger, more focused, or better integrated. I hope that was a helpful update. We'd now be pleased to answer any questions.

At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. Your first question comes from the line of Jonathan Kilcher with TD Cowen. Your line is open.