City Office REIT, Inc. (NYSE:CIO) Q4 2022 Earnings Call Transcript

Jamie Farrar: I think the position we’re in pretty much the same as when we had the discussion last quarter. So we’re completely comfortable with the level of dividend that we’re at today. But the Board is reflecting on challenging operating conditions and we are having a thoughtful dividend discussion each quarter and assessing a number of things, the impact of interest rates, overall conditions on the business. So I think to repeat, we’re comfortable with the dividend level today, but we don’t have a crystal ball on future operating conditions and we’re going to pragmatically look at it each quarter until we’re at a point of being fully covered.

Robert Stevenson: Okay. Thanks guys. I appreciate the time.

Jamie Farrar: Thanks, Rob.

Operator: Thank you. Our next question comes from Craig Kucera from B. Riley Securities. Craig, your line is now open. Please go ahead.

Craig Kucera: Hey, good morning guys. I apologize if I missed this. There’s quite a few calls going on right now, but I just want to go back to your CapEx kind of budget and expectations for 2023. Tony, I think you thought you were or Jamie, I should say I think you thought you maybe would spend $5 million to $10 million at San Tan and a couple million dollars at Pima. But kind of what is your all in sort of breakout between some of those more in-depth projects as well as the spec suites for 2023?

Tony Maretic: So I can address some of those comments, Craig. So if we look at 2023, Pima, as you mentioned, that property is in line with a number that you just threw out there that we’re expecting to play in 2023. San Tan is a little larger, but one thing about San Tan is, we have — what we’re doing there is, there’s two buildings and one has been completely gutted. And as a result, we’ve treated that as a repositioning for 2023. And as a result, it won’t have an AFFO impact. But that number is larger as you indicated. So really the biggest impacts that we’re looking at to AFFO for 2023 is Pima, as you mentioned. CapEx, we’re going to continue to sort of add amenities at some of the other properties in addition to Pima. And then the spec sheet program, which I talked about.

Jamie Farrar: And just to add one thing on that. So San Tan is at a point where we’re trying to finalize the level of renovation that we’re doing. So at the upper end, could be higher than what you position, but we think we could get a premium on rents. And so we’re just assessing whether or not that makes sense to do today.

Craig Kucera: Okay, great. Moving directions. On the disposition front, have you brought any of those assets to market? And I’d be curious as to sort of what kind of appetite you’re seeing out there right now if you have?

Jamie Farrar: So we have not brought any of those to market. I guess I would say the investment sales market remains very slow. And so there’s not a lot of transactions. If you’re looking at premium type assets across our markets, the one transaction that did close, which is public is Highwoods in mid-December bought McKinney and all of an Uptown, Dallas and metrics there you can get from their release, but effectively 5.5% cash cap rate and just over (ph). But there hasn’t been many transactions.