Fortuitous timing: Columbia Property Trust is done selling properties

The landlord’s exposure to WeWork was recurring topic on Q1 earnings call

National /
May.May 01, 2020 02:00 PM
Columbia Property Trust CEO & President E. Nelson Mills with 149 Madison and 315 Park Avenue South (Credit: Columbia Property Trust; Google Maps)
Columbia Property Trust CEO & President E. Nelson Mills with 149 Madison and 315 Park Avenue South (Credit: Columbia Property Trust; Google Maps)

Having wrapped up a number of big deals shortly before the coronavirus crisis hit, Columbia Property Trust executives think the company is in a good position to weather upcoming economic uncertainty.

The first quarter of 2020 saw the real estate investment trust sell off its last “non-core” assets — an office campus in suburban Pittsburgh and a corporate park in Pasadena — and complete team integration with recently acquired Normandy Real Estate Management. The company leased 126,000 square feet of office space and had normalized funds from operation of $45 million, or $0.39 per share.

“In retrospect, the timing was fortuitous given the situation we all now face,” president and CEO Nelson Mills said of the asset sales on Thursday afternoon’s earnings call. “For the first time in many years, we no longer have any properties that we’re looking to sell.”

Instead of withdrawing guidance outright as many other REITs have doen, Columbia has widened and lowered the ranges of its guidance in light of the economic slowdown. In particular, the recent struggles of WeWork were the subject of several questions from analysts on the call.

“Given the uncertain time, we thought it was prudent to pull that back a little bit. WeWork did come into that equation,” Mills said.

CFO James Fleming acknowledged that the new guidance allowed for the possibility of leases being broken early.

“We don’t think tenants will have the right to walk away from leases, but maybe some leases — who knows, there could be some tenants that don’t make it,” he said.

WeWork has paid 90 percent of its April rent for the offices it leases from the REIT in San Francisco and Washington D.C., Mills said. The co-working giant also has a lease for the entire 115,000-square-foot office portion of Columbia’s 149 Madison Avenue, on which it is set to begin paying rent in July.

Sandeep [Mathrani] and his team are doing a great job of staying in touch with us and other landlords and working through it,” Mills said. “And so we’re very optimistic that we’ll work out something that’s a good result for our investors.”

Overall, Columbia collected 97 percent of office rents and 95 percent of total recurring rents for April. The firm is in discussions with “a couple of significant office tenants” regarding two- or three-month rent deferrals.

The first quarter also saw the landlord lease out the top two floors of 315 Park Avenue South to an “exciting” confidential tenant for triple-digit rents. The space had been leased to U.K. hedge fund Winton Capital in 2016. “As it turns out, they just didn’t need all the space ultimately,” Mills said.


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