Office Properties Income Trust (OPI) 2018 Q2 法說會逐字稿

Good morning, and welcome to Government Properties Income Trust Second Quarter Financial Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Director of Investor Relations, Mr. Brad Shepherd.

早上好，歡迎參加政府財產收入信託第二季財務業績電話會議。此通話正在錄音。現在，我想將電話轉給投資者關係總監 Brad Shepherd 先生進行開場發言和介紹。

Thank you. Welcome to Government Properties Income Trust call covering the second quarter 2018 results. Joining me on today's call are David Blackman, President and Chief Executive Officer; and Mark Kleifges, Chief Financial Officer. Today's call includes a presentation by management, followed by a question-and-answer session. I would like to note that the transcription, recording and retransmission of today's conference call without prior written consent of GOV are strictly prohibited. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based upon GOV's present beliefs and expectations as of today, August 2, 2018. GOV undertakes no obligation to revise or publicly release the results of any revision to forward-looking statements made in today's conference call other than through the filings with the Securities and Exchange Commission or SEC. In addition, this call may contain non-GAAP numbers, including normalized funds from operation or normalized FFO and cash based net operating income or cash NOI. Reconciliations of net income attributable to common shareholders to these non-GAAP figures and components to calculate AFFO, CAD, FAD are available in our supplemental operating and financial data package found on GOV's website at www.govreit.com. Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our filings with the SEC. Investors are cautioned not to place undue reliance upon any forward-looking statements. I'd now like to turn the call over to David.

謝謝。歡迎參加政府財產收入信託電話會議，了解 2018 年第二季業績。與我一起參加今天電話會議的還有總裁兼執行長 David Blackman；和財務長馬克‧克萊夫格斯 (Mark Kleifges)。今天的電話會議包括管理層的演講，然後是問答環節。我想指出的是，未經政府事先書面同意，嚴禁對今天的電話會議進行轉錄、錄音和轉發。今天的電話會議包含 1995 年《私人證券訴訟改革法案》和其他證券法含義內的前瞻性陳述。這些前瞻性聲明是基於 GOV 截至 2018 年 8 月 2 日的當前信念和期望。GOV 沒有義務修改或公開發布今天電話會議中前瞻性陳述的任何修改結果，除非透過向美國證券交易委員會或 SEC 提交文件。此外，本次電話會議可能包含非 GAAP 數據，包括標準化營運資金或標準化 FFO 以及基於現金的淨營運收入或現金 NOI。在 GOV 網站 www.govreit.com 上找到的補充營運和財務資料包中找到歸屬於普通股股東的淨利潤與這些非 GAAP 資料和用於計算 AFFO、CAD、FAD 的組成部分的對帳。實際結果可能與任何前瞻性陳述中預測的結果有重大差異。有關可能導致這些差異的因素的更多資​​訊包含在我們向 SEC 提交的文件中。投資者應注意不要過度依賴任何前瞻性陳述。我現在想把電話轉給大衛。

Thank you, Brad, and good morning. On today's call, I will review our quarterly leasing activity, discuss our forecast for tenant retention and provide an update on our property disposition activity, before turning the call over to Mark to review our financial results and balance sheet.

謝謝你，布拉德，早安。在今天的電話會議上，我將審查我們的季度租賃活動，討論我們對租戶保留的預測，並提供有關我們財產處置活動的最新信息，然後將電話轉給馬克審查我們的財務業績和資產負債表。

For the second quarter 2018, Government Properties Income Trust delivered strong property level operating results growing year-over-year same property cash NOI by 5%. At quarter-end, consolidated and same property occupancy was 94% and 94.6%, respectively. We executed 396,000 square feet of new and renewal leases during the second quarter for a 60 basis point roll-up in rent, a weighted average lease term of 6.2 years, and leasing concessions and capital commitments of $2.79 per square foot per lease year. We also experienced another strong quarter of leasing with government tenants, executing 185,000 square feet of new and renewal leases for a 4.1% roll-up in rent, a weighted average lease term of 8.6 years, and leasing concessions and capital commitments of $1.87 per square foot per lease year. GOV continues to have a strong leasing pipeline, with active deals that exceeds 2 million square feet. This includes more than 750,000 square feet of potential new leases, of which over 225,000 square feet would absorb vacant space in our buildings.

2018 年第二季度，政府財產收入信託基金交付了強勁的財產水準營運業績，同財產現金 NOI 較去年同期成長 5%。截至季末，綜合和同物業入住率分別為 94% 和 94.6%。我們在第二季執行了 396,000 平方英尺的新租賃和續租租賃，租金上漲 60 個基點，加權平均租賃期限為 6.2 年，租賃優惠和資本承諾為每個租賃年每平方英尺 2.79 美元。我們也經歷了另一個與政府租戶的強勁租賃季度，執行了185,000 平方英尺的新租約和續租租約，租金上漲4.1%，加權平均租期為8.6 年，租賃優惠和資本承諾為每平方米1.87美元每租賃年英尺。GOV 繼續擁有強大的租賃管道，活躍交易面積超過 200 萬平方英尺。這包括超過 750,000 平方英尺的潛在新租賃，其中超過 225,000 平方英尺將吸收我們建築物的空置空間。

Now let's review our tenant retention expectations. As of June 30, we had leases contributing 12.4% of GOV's annualized rent with tenants occupying 1.7 million square feet that are subject to expiration over the next 12 months. Of these expirations, we expect tenants contributing 4.7% of GOV's annualized rent to vacate at lease expiration. This is a reduction of 33 basis points from the previous quarter after eliminating 75 basis points of annualized rent associated with tenants that vacated as expected during the second quarter. Included in the vacating tenants are 4 government agencies that contribute 325 basis points of annualized rents, with the 2 largest agencies contributing almost 90% of the total. As discussed previously, these 2 agencies are the Bureau of Prisons and the Department of Justice, both occupying space in Washington D.C. The Bureau of Prisons has been in holdover since 2017 and are now expected to vacate by the end of September. We had been negotiating a lease for a full-building user for this property, but are now opportunistically considering other options.

現在讓我們回顧一下我們的租戶保留預期。截至 6 月 30 日，我們的租約佔 GOV 年化租金的 12.4%，租戶佔地 170 萬平方英尺，這些租約將在未來 12 個月內到期。在這些到期的租約中，我們預計貢獻 GOV 年化租金 4.7% 的租戶將在租約到期時搬出。扣除與第二季預期騰出的租戶相關的 75 個基點的年化租金後，這比上一季減少了 33 個基點。騰出的租戶中包括 4 個政府機構，貢獻了 325 個基點的年化租金，其中最大的 2 個機構貢獻了近 90%。如前所述，這兩個機構是監獄局和司法部，兩者都位於華盛頓特區。監獄局自 2017 年以來一直處於擱置狀態，目前預計將在 9 月底騰出。我們一直在就該房產的整棟建築用戶的租賃進行談判，但現在正在機會主義地考慮其他選擇。

DOJ is expected to vacate in the fourth quarter of 2018, but the U.S. government is exploring options to absorb DOJ space for at least another 12 months in order to continue to control security in the building. In addition to the tenants we have identified as vacating, we have identified tenants that contribute 118 basis points of GOV's annualized rent to be at risk of downsizing or vacating over the next 12 months. This is a 49 basis point increase from the previous quarter, after transitioning 13 basis points of annualized rent to the vacate category, and removing 6 basis points of annualized rent from the at-risk category after renewing a tenant lease.

DOJ 預計將於 2018 年第四季騰出，但美國政府正在探索在至少 12 個月內吸收 DOJ 空間的方案，以便繼續控制大樓內的安全。除了我們確定要騰出的租戶外，我們還確定貢獻 GOV 年化租金 118 個基點的租戶在未來 12 個月內面臨縮小規模或騰出的風險。這比上一季增長了 49 個基點，此前將年化租金 13 個基點轉入空置類別，並在續簽租戶租約後將年化租金從風險類別中刪除 6 個基點。

The largest at-risk tenant is a U.S. government agency that contributes 48 basis points of our annualized rent that is expected to downsize its occupied square feet by about 40%, and is new to the at-risk category this quarter.

最大的風險租戶是美國政府機構，該機構為我們的年化租金貢獻了 48 個基點，預計其佔用面積將減少約 40%，並且是本季度新加入的風險類別。

The remainder of the at-risk annualized rent is contributed primarily by small private sector tenants.

剩餘的風險年化租金主要由小型私部門租戶貢獻。

This forward perspective into GOV's lease expiration schedule is the best information we have available today based upon our dialogue with tenants. Lease negotiations are fluid and circumstances can change. However, tenant retention and attracting new tenants to our buildings remain a significant area of focus for GOV.

根據我們與租戶的對話，對 GOV 租約到期時間表的前瞻性看法是我們今天獲得的最佳資訊。租賃談判是不穩定的，情況可能會改變。然而，保留租戶和吸引新租戶入住我們的建築仍然是政府關注的重要領域。

Now let's turn to our property disposition activity. In May, we closed on the sale of 2 office buildings that were disclosed as under-agreement during the first quarter. The 2 buildings sold for $129 million, increasing our total asset sales for the year to $150 million. Our office property in Manhattan sold for $118.5 million or a 5.9% cap rate. The other office building is a building located in suburban Sacramento, California that the tenant is vacating. We sold this property for $10.8 million or a 15.7% cap rate, as the tenant is currently paying an above-market rent. GOV is currently marketing numerous other properties, including 2 large portfolios. We have completed the first round of marketing for both portfolios and have found the offers to be sufficiently within the range of the broker guidance to continue with the sales process. We have also executed a letter of intent to sell the property for $70 million. While the sale of this property remains subject to numerous conditions, we believe this sale could close early in the fourth quarter of 2018.

現在讓我們轉向我們的財產處置活動。5 月份，我們完成了兩棟辦公大樓的出售，這些辦公大樓在第一季被揭露為未達成協議。這兩棟建築以 1.29 億美元的價格售出，使我們今年的總資產銷售額達到 1.5 億美元。我們位於曼哈頓的辦公物業以 1.185 億美元的價格售出，上限利率為 5.9%。另一棟辦公大樓位於加州薩克拉門托郊區，租戶正在騰出。我們以 1080 萬美元或 15.7% 的上限利率出售了該房產，因為租戶目前支付的租金高於市場價格。GOV 目前正在行銷眾多其他房產，其中包括 2 個大型投資組合。我們已經完成了兩個投資組合的第一輪行銷，並發現報價完全在經紀人指導的範圍內，可以繼續銷售流程。我們還簽署了一份意向書，以 7000 萬美元的價格出售該房產。儘管該房產的出售仍需滿足多項條件，但我們相信此次出售可能會在 2018 年第四季初完成。

Based upon the progress of our portfolio sales and our other marketing activities, we remain comfortable with our guidance to complete between $500 million and $700 million in total asset sales by year-end 2018.

根據我們投資組合銷售和其他行銷活動的進展情況，我們仍然對 2018 年底前完成 5 億至 7 億美元總資產銷售的指導感到滿意。

I will now turn the call over to Mark to review our financial results. Mark?

我現在將把電話轉給馬克，以審查我們的財務表現。標記？

Thanks, David. Let's begin with the review of our property level performance for the second quarter of 2018.

謝謝，大衛。讓我們先回顧一下 2018 年第二季我們的房地產層面的表現。

In the second quarter, GOV's consolidated cash net operating income, or cash NOI, increased by $24 million or 57% compared to the same quarter last year. While most of this increase was due to the First Potomac acquisition, our legacy properties also contributed to this quarter's cash NOI growth.

第二季度，GOV 的綜合現金淨營業收入（現金 NOI）與去年同期相比增加了 2,400 萬美元，即 57%。雖然這一成長大部分歸因於 First Potomac 收購，但我們的遺留資產也為本季的現金 NOI 成長做出了貢獻。

On a same property basis, second quarter cash NOI increased approximately $2 million or 5%. Same property cash rental income increased approximately $1.9 million or 3% compared to the second quarter of last year, while same property operating expenses remained flat.

在相同的房地產基礎上，第二季現金 NOI 增加了約 200 萬美元，即 5%。與去年第二季相比，同一物業的現金租金收入增加了約 190 萬美元，即 3%，而同一物業的營運支出則保持不變。

Our same property cash NOI margin improved as well with a 120 basis point increase to 61.7%. This positive same property performance is the result of our team's leasing efforts over the past 12 months, resulting in tenant retention rate of 83% and 125,000 square feet of new leases signed in the same property portfolio over that time.

我們同樣的房地產現金 NOI 利潤率也有所改善，增加了 120 個基點，達到 61.7%。相同物業的正面表現是我們團隊過去 12 個月的租賃工作的結果，租戶保留率達到 83%，同一物業組合在此期間簽署了 125,000 平方英尺的新租約。

Turning to our consolidated financial results. Normalized FFO for the second quarter was $51.3 million, which is up 21% from $42.4 million for the 2017 second quarter. Normalized FFO per share for the 2018 second quarter was $0.52, which is down $0.08 from the 2017 second quarter. $0.06 of this decline was a result of a decrease in the amount of normalized FFO per share we recognize from our investment in Select Income REIT or SIR common shares. The decline in SIR's 2018 second quarter normalized FFO was due primarily to a noncash write-off associated with a tenant default.

轉向我們的綜合財務表現。第二季標準化 FFO 為 5,130 萬美元，比 2017 年第二季的 4,240 萬美元成長 21%。2018 年第二季標準化 FFO 每股為 0.52 美元，較 2017 年第二季下降 0.08 美元。其中 0.06 美元的下降是由於我們從 Select Income REIT 或 SIR 普通股投資中確認的每股標準化 FFO 金額減少所致。SIR 2018 年第二季標準化 FFO 的下降主要是由於與租戶違約相關的非現金沖銷。

As a reminder, in calculating GOV's normalized FFO, we include our ownership share, which is currently 27.8% of SIR's normalized FFO. Although changes in SIR's normalized FFO impact our reported FFO, they have no impact on the amount of cash distributions we receive from our SIR investment.

提醒一下，在計算 GOV 的標準化 FFO 時，我們包括了我們的所有權份額，目前佔 SIR 標準化 FFO 的 27.8%。儘管 SIR 標準化 FFO 的變化影響了我們報告的 FFO，但它們對我們從 SIR 投資中收到的現金分配金額沒有影響。

EBITDA for both the 2017 and 2018 quarters includes $12.7 million of cash distributions received from SIR. G&A expense for the second quarter was $4.4 million, which is down 12.6% from the 2017 second quarter. G&A expense in the second quarter includes the reversal of $2.2 million of incentive management fees accrued in the first quarter. The benefit of this reversal is not included in the calculation of our second quarter normalized FFO.

2017 年和 2018 年季度的 EBITDA 包括從 SIR 收到的 1,270 萬美元現金分配。第二季的一般管理費用為 440 萬美元，比 2017 年第二季下降 12.6%。第二季的一般管理費用包括沖銷第一季應計的 220 萬美元激勵管理費。這種逆轉的好處並未包含在我們第二季度標準化 FFO 的計算中。

In the 2018 second quarter, we spent $4 million on recurring building improvements and $5.5 million on tenant improvements and leasing costs. As of quarter-end, we had approximately $32.6 million of unspent leasing related capital obligations, of which we expect to spend approximately $21 million during the remainder of 2018. As of June 30, GOV's ratio of debt to total gross assets had declined to 55.4%. And for the quarter, debt to annualized adjusted EBITDA was 7x, down from 7.7x last quarter. On a run-rate basis, taking out EBITDA related to the second quarter dispositions, debt to annualized adjusted EBITDA was 7.1x. This decrease in leverage was the result of our repayment of debt with proceeds from the sale of 2 properties in the second quarter.

2018 年第二季度，我們花了 400 萬美元用於經常性建築改善，550 萬美元用於租戶改善和租賃成本。截至季末，我們還有約 3,260 萬美元的未支出租賃相關資本負債，預計在 2018 年剩餘時間內支出約 2,100 萬美元。截至6月30日，GOV的債務佔總資產的比率已下降至55.4%。本季度，債務與年化調整後 EBITDA 比率為 7 倍，低於上季的 7.7 倍。以運轉率計算，除去與第二季處置相關的 EBITDA，債務與年化調整後 EBITDA 比率為 7.1 倍。槓桿率的下降是我們用第二季出售兩處房產的收益償還債務的結果。

During the remainder of 2018, we intend to further reduce leverage with the proceeds from our property disposition program.

在 2018 年剩餘時間內，我們打算利用財產處置計畫的收益進一步降低槓桿率。

Operator, that concludes our prepared remarks. We'd like to open up the call for questions.

接線員，我們準備好的發言到此結束。我們願意開放提問。

(Operator Instructions) The first question comes from Bryan Maher of B. Riley FBR.

（操作員說明） 第一個問題來自 B. Riley FBR 的 Bryan Maher。

Quick question. I didn't quite catch the CapEx and tenant improvement numbers. I think you said $4 million in CapEx in the second quarter and $5.5 million of tenant improvements, is that correct?

快問。我不太了解資本支出和租戶改善數據。我想你說第二季的資本支出為 400 萬美元，租戶改善為 550 萬美元，對嗎？

Yes, the numbers -- $4 million of building improvements, $5.5 million of tenant improvements and leasing costs.

是的，這些數字——400 萬美元的建築改善費用、550 萬美元的租戶改善費用和租賃成本。

Okay. And what is the outlook for -- kind of the quarterly run rate expectation, excluding tenant improvements for the next couple of quarters? So the building improvements, kind of, quarterly, is that -- $4 million an appropriate run rate?

好的。不包括未來幾季的租戶改善情況，季度運行率預期的前景如何？那麼，每季進行一次建築改進，400 萬美元是合適的營運費用嗎？

I think, historically, what's happened with our properties is, we've had -- our CapEx has probably been more back ended in the second half of the year. There's always been a higher run rate. If you look back at last year, we'd, only through the first 2 quarters, only incurred about 1/3 of our total spend for the year. And I would -- my expectation right now is we're, kind of, in the same place. I'd expect to see a ramp-up in BI in the second half of the year from where we were during the first 6 months. So I'd say that run rate is higher than where it's been.

我認為，從歷史上看，我們的資產發生的情況是，我們的資本支出可能在今年下半年更加落後。一直以來都有較高的運行率。如果你回顧去年，我們僅在前兩季的支出就只佔全年總支出的 1/3 左右。我現在的期望是，我們在某種程度上處於同一個地方。我預計下半年 BI 會比前 6 個月有所上升。所以我想說運行率比以前高。

All right. That's helpful. And then with respect to the 2 portfolios that you're marketing, whereby the initial bids seem sufficient, I guess, in your words, to continue down the path, can you give us any color, not necessarily the specific cap rates associated with those potential portfolio sales, but do the cap rates give you more comfort in not having to consider a dividend cut?

好的。這很有幫助。然後，關於您正在行銷的2 個投資組合，我想，用您的話來說，初始出價似乎足以繼續沿著這條路走下去，您能給我們任何顏色嗎，不一定是與這些投資組合相關的具體上限利率潛在的投資組合銷售，但資本化率是否讓您更放心，不必考慮削減股利？

It's an interesting question, Bryan. Those portfolios are going to be somewhere, on a combined basis, around -- approaching $400 million would be my guess. I don't know that we will be sufficiently concluded with our disposition program to say that the dividend can remain unchanged. Remember, a big challenge that we have continues to be the leasing capital and our lease expirations. So I think as it relates to the dividend, nothing has really changed for us. The dividend is safe for the remainder of 2018. We'll reevaluate it during the first quarter of 2019. By then, we would expect to have leverage consistent with where we want it to be and have a pretty good idea of what the expectations are for tenant improvement and leasing capital for the next 12 months. And we'll make a decision at that time.

這是一個有趣的問題，布萊恩。我猜測，這些投資組合總計將接近 4 億美元。我不知道我們的處置計劃是否足以得出股息可以保持不變的結論。請記住，我們面臨的一大挑戰仍然是租賃資本和租賃到期。所以我認為，就股息而言，我們並沒有真正改變什麼。2018 年剩餘時間裡，股利是安全的。我們將在 2019 年第一季重新評估它。到那時，我們預計槓桿率將達到我們想要的水平，並對未來 12 個月租戶改善和租賃資本的預期有一個很好的了解。到時候我們就會做出決定。

The next question comes from Jamie Feldman of Bank of America Merrill Lynch.

下一個問題來自美銀美林的傑米·費爾德曼。

This is Kim Hong on for Jamie. David and Mark, I appreciate the tenant movements and move-outs in your prepared remarks. But could you just give us the specific update on the Bureau of Prisons? I think last quarter you said that they were going to move out in -- on March 31, but they seem to be still in the portfolio.

這是傑米的金洪。大衛和馬克，我很欣賞你們在準備好的發言中提到的租戶變動和搬出情況。但能否向我們介紹一下監獄管理局的具體最新情況？我想上個季度您說過他們將於 3 月 31 日搬出，但他們似乎仍在投資組合中。

Yes, it's interesting. They seem to be having a hard time getting into their new building. We were expecting them -- when we underwrote the First Potomac acquisition, we had underwritten them leaving the building by 12/31/17. So it looks like we're going to get about 9 months of additional holdover rent. And that holdover rent grows by about 5% a month. So right now, we're expecting to have them out by the end of September. That obviously could change. But it does appear that they're getting close.

是的，這很有趣。他們似乎很難進入新大樓。我們在期待他們——當我們承保第一波托馬克收購時，我們已經承保他們在 2017 年 12 月 31 日離開大樓。所以看起來我們將獲得大約 9 個月的額外延期租金。滯留租金每月成長約 5%。所以現在，我們預計在九月底之前將它們推出。這顯然可能會改變。但看起來他們確實正在接近。

Okay. And since the FPO acquisition, your office portfolio is now 1/3 occupied by nongovernment tenants. Have you made any changes to your leasing team and leasing strategies, since this tenant base is different from government tenants? And do you expect the percentage of nongovernment tenants to grow even more than now?

好的。自從收購 FPO 以來，您的辦公室組合現在有 1/3 被非政府租戶佔用。由於這個租戶群與政府租戶不同，你們的租賃團隊和租賃策略是否有任何改變？您預計非政府租戶的比例會比現在增長更多嗎？

We have always, from a leasing perspective, hired both government-specific brokers and private sector brokers to make sure that we have the right team representing our buildings. So our strategy hasn't changed as a result of acquiring First Potomac. I would not expect any material changes in the percentage of government and private sector tenants across our portfolio. As you know, we aren't actively pursuing acquisition opportunities. We are selling some buildings that are occupied by government tenants. That will create some changes in the ratio of government and private sector tenants. But I don't think it's going to be a material change over the next 12 months.

從租賃的角度來看，我們一直聘請政府特定經紀人和私營部門經紀人，以確保我們擁有代表我們建築物的合適團隊。因此，我們的策略並沒有因為收購 First Potomac 而改變。我預計我們投資組合中政府和私部門租戶的比例不會有任何重大變化。如您所知，我們並沒有積極尋求收購機會。我們正在出售一些政府租戶佔用的建築物。這將使政府和私營部門租戶的比例發生一些變化。但我認為未來 12 個月不會有重大變化。

Okay. And the last one for me is, can you discuss the rationale behind the asset sales this quarter? I think in the prepared remarks, I think I heard that one of the assets you sold, there was a pending vacancy, but just what were your thoughts in selling the 3?

好的。最後一個問題是，您能討論一下本季資產出售背後的理由嗎？我想在準備好的發言中，我想我聽說你出售的其中一項資產有一個待定的空缺，但你對出售這 3 項資產有何想法？

Well, as we've been saying for, I guess, close to a year now, we have a number of assets that we're selling. The assets that we've identified to sale -- to sell are either properties that we think we can create compelling gains on a sale or they are properties that, we think, are challenged for a long-term hold. And I would say that one of the properties we sold during the second quarter was a compelling gain and the other one was a challenged asset that we didn't think investing capital on a long-term basis would generate appropriate return for shareholders. So we elected to sell it now.

嗯，正如我們一直所說的，我想，現在已經接近一年了，我們正在出售許多資產。我們確定要出售的資產要么是我們認為可以在出售中創造令人信服的收益的房產，要么是我們認為長期持有面臨挑戰的房產。我想說，我們在第二季出售的其中一處房產是令人矚目的收益，而另一處房產是一項充滿挑戰的資產，我們認為長期投資資本不會為股東帶來適當的回報。所以我們選擇現在就賣掉它。

The next question comes from Adam Gabalski of Morgan Stanley.

下一個問題來自摩根士丹利的亞當·加巴爾斯基。

Just want to dive a little bit deeper into the Bureau of Prisons. You talked about maybe considering other options other than a single tenant taking the whole building now. Just with them extending maybe to September and now starting to look at different options for backfilling that space, what does that do to the time line of getting a new stable tenant in there as far as later quarters in 2019?

只是想更深入地了解監獄管理局。您談到除了現在讓單一租戶佔用整棟大樓之外，也許會考慮其他選擇。只是他們可能會延長到 9 月，現在開始考慮回填該空間的不同選擇，這對 2019 年晚些時候獲得新的穩定租戶的時間線有什麼影響？

Yes. I think that we are considering whether it makes sense to redevelop that asset or potentially sell it. And I would hope that we can give you better guidance on our third quarter earnings call.

是的。我認為我們正在考慮重新開發該資產或可能出售它是否有意義。我希望我們能為您提供第三季財報電話會議的更好指引。

Got you. Understood. And then just 1 more. Just on the mark-to-market for nongovernment tenants this quarter coming in at negative 4.6%, is that sort of any big onetime leases that maybe skewed that number to the downside? Or is that something that you're kind of seeing as maybe a broader headwind as far as fundamentals?

明白你了。明白了。然後還有 1 個。僅以本季非政府租戶的市價計算，租金成長率為負 4.6%，是否有任何大型一次性租賃可能導致該數字下降？或者說，就基本面而言，您認為這可能是一個更廣泛的阻力？

I do not think it's a broader headwinds We've had a fair amount of leasing with some of the First Potomac assets. And it's really hard when you're leasing space that was vacant at acquisition to really be precise in your roll-up roll-down. So I wouldn't consider it broader headwinds.

我不認為這是一個更廣泛的阻力，我們已經對第一波托馬克的一些資產進行了相當多的租賃。當您租賃收購時空置的空間時，要真正精確地進行匯總匯總總是非常困難的。所以我不認為這是更廣泛的阻力。

The next question comes from Jim Lykins of D.A. Davidson.

下一個問題來自 D.A. 的 Jim Lykins。戴維森。

Just a couple things. First of all, with the 2 portfolios being marketed, is there anything else you can tell us regarding the timing? And also, are those -- can you give us any color on whether or not those are the legacy properties or some of the -- ones you acquired from FPO?

只是幾件事。首先，隨著這兩個投資組合的上市，關於時間安排您還有什麼可以告訴我們的嗎？另外，您能否告訴我們這些是遺留財產還是您從 FPO 獲得的一些財產？

Sure, Jim. We have already expected that we would get those closed by year-end 2018. We feel like we are on track to do that. I think it's probably a late fourth quarter close, but I do feel like we can get them sold this year. And these -- I think as we have talked about before, we are selling some of the flex assets that we acquired from First Potomac. And these larger portfolios are acquired properties from First Potomac.

當然，吉姆。我們已經預計這些項目將在 2018 年底前關閉。我們覺得我們正在實現這一目標。我認為這可能是第四季末結束的，但我確實覺得我們可以在今年出售它們。我認為正如我們之前討論過的，我們正在出售從第一波托馬克收購的一些靈活資產。這些更大的投資組合是從第一波托馬克收購的財產。

Okay. And also the reversal on business management incentive fees, any color on that? Can you just walk us through why the reversal?

好的。還有企業管理獎勵費的逆轉，有什麼意義嗎？您能告訴我們為什麼會出現逆轉嗎？

Yes. We -- at the end of each quarter, we calculate where we are with respect to any incentive management fee liability. And at the end of the first quarter, we, I think, were up about over the index by a little over 7%. And that outperformance had declined to about 1% at the end of the second quarter. So when we remeasured liability at quarter-end, we had to reduce the amount of the accrual.

是的。我們在每個季度末計算我們在任何激勵管理費負債方面的情況。我認為，在第一季末，我們的漲幅超過了該指數 7% 多一點。而到第二季末，這一表現已下降至 1% 左右。因此，當我們在季末重新計量負債時，我們必須減少應計金額。

This concludes our question-and-answer session. I would like to turn the conference back over to David Blackman, CEO, for any closing remarks.

我們的問答環節到此結束。我想將會議轉回執行長大衛布萊克曼 (David Blackman) 發表閉幕詞。

Thank you, operator, and thank you for joining us on today's call. Mark and I look forward to seeing many of you at some of the upcoming conferences in the fall. Thank you.

謝謝您，接線員，也謝謝您參加我們今天的電話會議。馬克和我期待在秋季即將舉行的一些會議上見到你們中的許多人。謝謝。

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

會議現已結束。感謝您參加今天的演講。您現在可以斷開連線。