Paramount Group Inc (PGRE) 2015 Q1 法說會逐字稿

Good day ladies and gentlemen. Thank you for standing by. Welcome to the Paramount Group's first-quarter 2015 earnings conference call.

(Operator Instructions)

Please note that this conference call is being recorded on today, March 8, 2015 (sic- "May 8") I would now like to turn the call over to Jacques Cornet with ICR. Thank you, please go ahead.

Thank you, operator, and good morning. By now everyone should have access to our first-quarter 2015 earnings release and supplemental information. Both can be found on the Paramount website at www.paramount-group.com in the investor's section.

Before we begin our formal remarks we need to remind everyone that our discussion today will include forward-looking statements. These forward-looking statements, which are usually identified by the use of words such as will, expect, should, or other similar phrases, are not guarantees of future performance.

These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect, and therefore you should exercise caution in interpreting and relying on them. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition.

We also encourage investors to review our form 10-Q for the quarter ended March 31, 2015 when it is filed with the SEC. During today's call we will discuss 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 earnings release and our supplemental package.

Hosting the call today we have Albert Behler, Chairman, Chief Executive Officer, and President of the Company; Michael Walsh, Executive Vice President, Chief Financial Officer, and Treasurer; Ted Koltis, Executive Vice President, Leasing; Vito Messina, Senior Vice President, Asset Management; and Wilbur Paes, Senior Vice President and Chief Accounting Officer.

Management will provide opening remarks and then will open the call to questions. With that, I'll turn the call over to Albert Behler.

Thank you, Jacques, and good morning. We appreciate everyone joining us today. Before we get started, I would like to take this opportunity to welcome Mike Walsh, who joined us during the first quarter as our new Chief Financial Officer.

Many of you know Mike and also know he brings nearly 30 years of financial leadership and office REIT industry experience to Paramount. We thing he is a terrific addition to our team. Welcome aboard, Mike.

Turning to the quarter, in summary we had a productive start to 2015. Regarding our leasing, as we mentioned on our year-end call, activity has been and continues to be robust.

From January 1 through today we have executed leases on 249,000 square feet of space. Over the last seven months we have leased 786,000 square feet, which represents 7.6% of our portfolio.

Our proactive leasing approach and proven property management model combined with our top tier assets places us in a strong competitive position in each of our markets. Availability for Class A space in our top markets remains tight and is getting tighter, especially in New York City and San Francisco.

From a macro perspective we are optimistic given the market indicators. The prevailing economic environment, one with low interest rates and considerable liquidity, continues to drive down cap rates to support strong asset pricing trends especially in our supply constraint markets of New York, Washington, D.C., and San Francisco.

Through our front business we have a direct window into underlying financing trends warranting these asset values. Long-term financing is readily available at historically low rates on moderate leverage for strong sponsorship and good assets.

We also see spreads on junior debt tightening as life companies and offshore investors who are new to the market create additional competition. Investor and capital demand are outpacing the amount of available product.

We look at these trends and consider any vacancy over the next couple of years as a great opportunity and driver of same store growth. Given the Class A space that we have and the markets we are in, we will generate considerable internal NOI growth to the benefit of our shareholders.

With current availability and lease expirations through 2016 representing many of the best tower floors, we have approximately 23% of our portfolio where we can further capitalize on the strength in the market. This is our primary focus and our first quarter results underscore this.

As in the fourth quarter, on both a leased and occupied basis, we have positive net absorption. At the end of the quarter our portfolio-wide leased occupancy percentage improved 70 basis points to 94.6% with 110 basis point increase on our New York portfolio up to 95.5%.

Since the IPO we have leased approximately one-third of our vacant space and have seen leased occupancy increase 250 basis points. Across the portfolio we achieved an initial rent of $75.70 per square foot with a positive cash mark to market on second generation space of 17.3%.

In New York, where the bulk of our leasing took place, our cash mark to market was even higher at 20.7%. At the end of the quarter we have approximately 400,000 square feet of space that is leased but not yet occupied.

Vito will go into more detail, but during the quarter we signed a 102,000 square foot lease with a new high quality tenant, Norton Rose and Fulbright, a law firm that is relocating its New York office to 1301 6th Avenue. Given the supply constraints in our markets, we continued to see an increase in leasing activity for larger spaces.

This is the third consecutive quarter where we have been able to add a new 100,000-plus square foot tenant into our portfolio. We are happy to announce that since the end of the first quarter we have continued our positive leasing momentum.

In just the past month we have executed leases for an additional 93,000 square feet. A large portion of this space is second generation space that we leased at cash mark to market levels similar to levels recorded in the first quarter.

While the majority of this space was in New York, in San Francisco Google has decided to further commit to our One Market Plaza property by increasing the size of their lease by an additional 8.5% or 22,000 square feet through 2025. Also related to One Market, some of you may have noticed the recent opening of CNBC's new San Francisco bureau. The new location is called CNBC at One Market and includes a broadcast studio with views of the Bay Bridge that prominently promotes the premier location of our asset.

On our redevelopment plans, the 1633 Broadway public plaza project nears groundbreaking and we continue to have discussions with prospective tenants. One Market Plaza's lobby and retail renovation remains on budget and on schedule for substantial completion by the fall of 2015.

Again, our progress to date is on plan and continuing on a strong path. The activity we have seen over the past seven months provides us with the groundwork to generate strong NOI growth in 2016 and beyond.

With that overview, I will now turn the call over to Vito to discuss the leasing activity.

Thank you, Albert. In the first quarter we leased approximately 156,000 square feet at a weighted average initial rent of $75.70 per square foot and an average term of 14.3 years. Tenant improvements and leasing commissions were $7.83 per square foot per annum, or 10.3% of initial rent.

This activity, offset by lease expirations, increased our leased portfolio-wide occupancy to 94.6% at March 31, 2015, up 70 basis points from year end. Of the 156,000 square feet leased during the quarter, 23,700 square feet represent leases on second generation space for which we achieved a positive mark to market of 17.3% on a cash basis and 13.6% on a GAAP basis.

The bulk of our first quarter leasing activity was in New York with one lease in Washington. In New York we leased approximately 152,000 square feet at a weighted average initial rent of $75.81 per square foot and an average term of 14.5 years.

Of 152,000 square feet leased, 19,400 square feet represents leases on second generation space for which we achieved a positive mark to market of 20.7% on a cash basis and 14% on a GAAP basis. Tenant improvements and leasing commissions were $7.76 per square foot per year or 10.2% of initial rent.

As Albert highlighted earlier, we signed a 102,000 square foot lease for a 16-year term with a law firm that is relocating in New York to 1301 Avenue of the Americas, demonstrating the desirability and competitive nature of this asset. This tenant will take possession during the fourth quarter of 2015 with rent commencement in the first quarter of 2017. This transaction increased the lease percentage of this property to 91.2% at March 31, 2015, up 580 basis points from year end and 940 basis points from the IPO date.

Turning to Washington, D.C., the portfolio is 88.5% leased as of March 31, 2015. The leasing activity for the quarter was a 4,300 square foot second generation lease with a TAMI tenant at 1899 Pennsylvania Avenue for which we achieved a positive mark to market of 5% on a cash basis and 11% on a GAAP basis. Tenant improvements and leasing commissions were $14.10 per square foot per year, or 19.6% of initial rent.

This transaction continues the positive leasing momentum we are experiencing at this property. At March 31, 2015, 1899 Pennsylvania Avenue was 88.8% leased, up 230 basis points from year end and 1,690 basis points from the IPO date.

In San Francisco our property was 96.7% leased as of March 31, 2015. We own one of the best assets in San Francisco and continue to see strength in leasing trends and mark to markets. We expect to benefit tremendously from these trends as approximately 17% of our leases roll through the end of 2016.

As Albert mentioned, Google has recently increased the size of their lease and now leases approximately 18% of the property. They have begun to occupy the building over this past quarter and will continue to do so over the coming quarters.

With that I will turn the call over to Ted who will provide an update of what we are seeing in each of our markets.

Thank you, Vito. The pipeline continues to be strong across all three of our markets, supporting the leasing momentum we have seen so far in 2015. And as evidenced by the large deal we just completed at 1301 Avenue of the Americas, we continue to see consistent activity, especially on a large deal scale that we are converting into leases.

As Albert mentioned, this is the third quarter in a row that we've completed a lease of at least 100,000 square feet. And as deals of size take a fair amount of time and process, converting these deals speaks to the strength of our assets and our approach.

In Manhattan the availabilities at 1301 Avenue of the Americas and 1633 Broadway are top of mind for us. These assets continue to benefit from low market inventory levels along the Sixth Avenue and west side sub markets.

Building on our recent success, the remaining vacant floors at 1301 Avenue of the Americas and the space coming up next year are essentially at the top of our building. This is arguably the best available large block on 6th Avenue right now. And the floor plate lends itself to a very efficient, traditional perimeter office user, and given the quality and efficiency of this space combined with a tight sub market we are seeing very strong activity continue.

At 1633 Broadway activity is also brisk. The booming TAMI segment is looking for a larger floor plate for an open plan type use which already exists at 1633. The building has always been a place where media and entertainment companies have called home, so we are seeing excellent activity from this segment along with the traditional larger office user.

Finally view space in the 5th Avenue sub market continues to march upward on price and downward on availability as evidenced by our strong deal activity at 712 5th Avenue. With very limited inventory and continued strength in the financial markets, especially among boutique finance firms, we also expect this trend to continue.

In Washington, D.C. as we mentioned last quarter, we are encouraged with our recent success over the last several quarters and by where our assets fit competitively within this market. We see limited supply of trophy product in the CBD and continue to expect our assets located along Pennsylvania Avenue to be the beneficiary of these market dynamics as we progress into the year.

Through the first quarter and now into the second, we are seeing a stable flow of prospective tenants for our available space. Notably, we are also seeing strength in the NoMa section of D.C. where 425 I Street is located. Our top floor has partial availability, and despite a strong GSA presence in the building we are seeing multiple private sector tenants look at the space due to its quality and the strength of this sub market.

Finally in San Francisco as mentioned previously, we don't have much space available this year, but the redevelopment of the lobby and retail enhanced an already strong competitive position that we have. We feel very good about San Francisco looking at our role in 2016 and beyond. The market overall remains very healthy with very low inventory especially along the Mission Street and Market Street corridors which is certainly to the benefit of One Market Plaza.

With that I will turn the call over to Mike to discuss the financials in more detail.

Thanks, Ted. First I would like to say how excited I am to join this talented team and I look forward to a strong future for Paramount. Now let's get down to business.

Core FFO was $0.18 per share for our first full quarter as a public company. FFO for the quarter was $0.20 per share and included $9.9 million for our share of unrealized gains on interest rate swaps partially offset by $1.1 million of acquisition and transaction related costs and $3.3 million of severance costs.

Our portfolio ended the quarter at 91.3% occupied and included $16 million of straight line rent and $900,000 of net mark to market leases. Approximately $7 million of this quarter's straight line rent is attributable to free rent and will burn off in the coming months. However, we have a significant amount of signed leases that have not yet commenced which will have a free rent component to them.

During the quarter we paid our first two dividends. The initial dividend of $0.039 per share was for the 38-day period in the fourth quarter during which we were public. We also paid our first regular quarterly dividend of $0.095 per share on March 30, 2015. The aggregate payment for the first quarter distribution was approximately $35 million.

Our FAD payout ratio for the first quarter was 117%. Adjusting for the free rent in the first quarter, our FAD payout ratio would have been 89%. In other words our high payout ratio is temporary.

Subsequent to quarter end the compensation committee of our Board of Directors adopted our 2015 performance program, a multi-year performance based equity compensation program that is similar to our peers. The fair value of the awards granted is approximately $7.9 million which will result in a non-cash quarterly G&A expense of approximately $500,000 beginning in the second quarter of 2015.

In response to feedback we received last quarter from our investors and analysts, we enhanced our supplemental package to include certain additional disclosures that we thought would be helpful. We include a disclosure with respect to occupied percentage, which is the percentage of space for which we have commenced rental revenue in accordance with GAAP, balance sheet and operating data for our consolidated joint ventures and funds, as well as a summary of our fund investments which as a reminder are recorded at fair value each quarter.

Turning to our balance sheet, we ended the quarter with ample liquidity with $380 million in cash and $800 million available under our unsecured line of credit. Our outstanding consolidated debt of $2.9 billion is effectively unchanged from year end with an average interest rate of 5.5%.

Our nearest maturity in December of 2016 is a $926 million mortgage on 1633 Broadway with a current blended rate of 5.35%. We are monitoring the debt markets and exploring our options to refinance early or maturity.

We view refinancing our existing debt portfolio as an additional driver of our future cash FFO growth. Overall our net debt to total enterprise value is a very conservative 28.4%, and our net debt to first quarter adjusted EBITDA is 6.1 times at just 91.3% occupancy.

Although we are not providing specific earnings guidance at this time, during the call and in our supplemental we have provided occupied and lease percentages and our 2015 lease expirations that outline a range of occupancy levels understanding that our expirations include several large maturities in the second half of 2015. In addition, we outlined adjustments to our first quarter G&A.

Our capital structure is more binary where the current debt service will remain unchanged unless we proactively complete a transaction. As was mentioned on the year-end call, we will discuss earnings guidance when we report the second quarter in August of 2015.

With that operator, if you would please open the lines for questions.

(Operator Instructions)

Our first question comes from the line of Jamie Feldman with Bank of America. Please go ahead with your questions.

Thank you and good morning. I guess just starting out, can you walk us through your latest thoughts on the largest leases expiring through year end 2016? Maybe just let us know where you think you'll definitely see a known move out and maybe an update on leasing progress?

Good morning, Jamie. Ted will take that question.

So at 1633 Broadway we have a number of floors that are expiring through the end of this year, through 2015. We continue to talk to some of the existing tenants, specifically Morgan Stanley, that's still in the building and we continue to have discussions with them. And we have a number of prospective other tenants and showings that we are doing right now. And we're in a handful of negotiations for those floors and including the floors that expire in 2016 as well.

The floors further up, the Deloitte floors, we have activity on those as well. And over at 1301 as mentioned we just completed a 100,000-foot lease. The remaining floors also have significant activity, significant showings, and a handful of negotiations going on on those floors as well.

Okay. So I guess thinking about 1633, it sounds like maybe Morgan Stanley might stay over beyond their short-term renewal?

Can't really comment on that at this point.

Sounds like you are talking to them?

We are having discussions.

Okay. All right. 1325, you've got ING expiring at the end of 2016. Any conversations there or still too early?

It's still too early.

Okay. Then One Liberty we saw vacancy or occupancy decline during the quarter. Can you talk about the lease there? And I know you gave some color on D.C., but a little bit more detail on that building specifically in terms of leasing prospects?

At that building we have currently vacant about a floor and a half. We have significant activity for tenants for the full floor and also for the half floor space.

Okay. And then finally we saw on the news potentially FAO Schwarz might be looking at space at 1633 Broadway. Is that the kind of retail tenant you would be looking for on the ground floor?

I can't really comment on what is in the news. We think FAO is a quality tenant, but we can't really comment on that.

All right. Thank you.

Our next question comes from the line of Vance Edelson with Morgan Stanley. Please go ahead with your question.

Good morning, everyone and congratulations to Mike. So, I guess just sticking with 1633, if you can't comment specifically on FAO, could you expand on the retail potential at 1633? Is there anything new to report the past few months or are you more optimistic than at the start of the year? Just wondering if you could add some color around the number and type of potential tenants you are speaking with?

Vance, with the retail redevelopment at 1633, we are starting the plaza renovation this month and as Ted was saying, we have quite a lot of activity there. Rental rates are going in the right direction. We are very confident that something will be signed up in the course of the year.

Okay. Good to hear. Then turning to One Market in San Francisco, it's a real cash cow if there ever was one. Can you tell us about the asking rents and whether $100 a square foot is a reasonable near-term possibility given what's a fair amount of expirations this year and next?

Well, we are asking over $100 a square foot already on some of our spaces. We are confident that we will be completing leases at those levels shortly.

Okay. Great. Sticking with One Market, in terms of finishing the retail renovation downstairs, sounds like it's on schedule for completion in the fall. Can you tell us anything about any success you are having finding new retail tenants and how those conversations are going?

I can't really comment on that right now, but the showings are going very well and the activity is pretty strong. So we hope shortly to be able to report good news there.

Okay. One last question then I will get back in the queue. Just thinking about the larger cycle, Albert, and the fact that cap rates have continued to compress as you mentioned, and we're hearing talk of more money from Japan looking for a home here and so forth. Do you give any more thought to dispositions, or do the tax implications and other factors essentially rule out moving more toward harvest mode?

Well, as we had stated in our prepared remarks, Vance, we do see asset prices at all time highs, but our properties are still in -- as we had mentioned before, even on our road show we are creating value over the next couple of years through releasing effort. We continue to see significant embedded value in our portfolio that may not transfer 100% in the private markets. But at the end of the day we, of course, we are capitalists as I mentioned before.

Fair enough, thank you.

You are welcome.

Our next question comes from the line of Brendan Maiorana with Wells Fargo. Please go ahead with your questions.

Thanks, good morning.

Good morning, Brendan.

Hey, Albert. This question, probably start off probably for Ted. Jamie went through a couple of the big tenants. Kasowitz has an expiration for a portion of their space later this year, I think about 100,000 square feet. Do you know whether or not they are planning on giving that space back to you or whether or not they may keep some of that?

They are planning on vacating that space and moving down in the building. This was part of the deal. They are relocating to new space in the building. They were building out new space. So they seem to be on schedule.

Okay, great. And then so it was in the news that Morgan Stanley is going to renew at 757 and I think probably take their space at -- renew at 1585 Broadway. So, not to comment on what they might do at 1633, but from a competitive positioning standpoint at 1633 is renewal in and around the building there much better for you guys given that there wouldn't be that vacancy? Or does that not change the competitive set much around 1633?

With the level of activity that we have right now, it doesn't really change the competitive set.

Is there much vacancy in and around the 1633 in competitive buildings?

Definitely not. Not right now.

Okay. Great. So, Mike, that was very helpful, $7 million of free rent kind of in that number. If I add that back to your NOI run rate gets to around $330 million.

I think at the time of the IPO expirations that were expected not to renew were probably around $25 million if I remember correctly for impact for 2015. Is it fair to think that most of that -- those tenants, non-renewed tenants haven't hit yet as of March 31?

Yes, I think so. I think Vito could probably answer this better though.

I was just going to add in most of that non-renew is obviously in the second half of 2015. So it's not going to have an impact on the first quarter.

Okay, great. Thanks, guys.

Thank you.

Our next question comes from the line of Vincent Chao with Deutsche Bank. Please go ahead with your questions.

Hey, good morning, everyone. Sticking with the free rent for a second, the $7 million, over what period do you think that will burn off? I know there is more coming in with new resignings, but just that $7 million. How do you expect that to roll into the cash numbers?

Vince, most of that will roll into 2015.

Is it back half weighted so it burns off mostly in the back half or fourth quarter?

It's going to be pretty even.

Pretty even. Okay. And then just bigger picture, the leasing velocity that you are seeing sounds pretty good. You've historically done around 1 million or so for the full year. Given your pipeline that you have today, what you have done so far, do you think 1 million square feet is a realistic target here for 2015, or do you think you could come in above that?

We think that the 1 million is a realistic target for 2015 plus/minus, yes, absolutely.

Can you give any color on the pipeline today or what the size of the pipeline is in terms of leases or the negotiation or for OI?

We have a lot of activity. It really spans a number of different types of tenants; finance, law, media, insurance, technology, consulting. So there really is a really broad gamut.

Given the product that we have, 1301 really lends itself to a perimeter office type use. 1633 lends itself to an open plan type use. So for these larger tenants we can really satisfy a broad range of tenants. So it's very healthy. As I said earlier, there is not many comparable offerings right now either on the Broadway corridor or the 6th Avenue corridor. We feel pretty good about where we are.

Thanks. Mike, maybe one for you just as you start your tenure here at Paramount, just curious what your initial thoughts are? Obviously you've been in the industry for quite some time, just curious if you could share some of your thinking here?

The team has been very welcoming, it's incredibly talented. There is a tremendous amount of similarities in all areas. I'm really excited to be here. It's been a month and a week now, so I'm still working my way in and trying to learn everything, but I am so excited about the opportunity and to work with everybody here.

Okay. Thanks, guys.

Thanks.

The next question comes from the line of Brad Burke with Goldman Sachs. Please go ahead with your questions.

Good morning, guys. Question on occupancy. Trying to get a general sense of direction. I realize you're not giving guidance yet, but was hoping for maybe some qualitative comments. How should I think about the timing of the leases that are signed but not commenced? Just how quickly you think you could get those to be occupied and recognize revenue on those leases?

And try to compare that against you had mentioned back half of the year has a number of lease expirations and potential move outs. Are you able to give any qualitative comments on how we ought to think about occupancy trending over the course of the year?

Sure. Let me jump in a little bit, Brad. As we had mentioned in the script earlier with the Norton Rose, that is we're going turn that -- we're first demolishing that space. We turn that over to the tenant in the fourth quarter of 2015 and then revenue recognition begins in the first quarter of 2017. So that's about 102,000 of those square feet. You can do the math on that. On the remainder, it's really going to be pretty even throughout 2015 and 2016.

And just to be clear the revenue recognition first quarter of 2017, you are talking about actual cash revenue I assume for GAAP purpose?

That's correct. So the possession will be in the fourth quarter of 2015 and therefore GAAP basis recognition will begin then. Cash basis recognition will be in the first quarter of 2017.

Got it. Okay. And do very much appreciate the additional disclosure in the supplemental. Since you are giving us now occupancy at the portfolio level can you let us know where it was at year end?

It was about 89.5% at year end.

89.5%. Okay. So, I guess that is a nice tick up from where you are -- to where you are right now. Was that front loaded in the quarter or even through the quarter? Is there anyway that we would think about, I guess, the cadence of how that occupancy increased?

We definitely think it was a nice tick up. It's good to hear you think that as well. It was pretty much even through that period.

Okay. Mike, you had mentioned that the payout ratio is temporarily high. I think that the expirations that you have, obviously free rent is going to be something we're seeing for a couple of years. I was hoping that you could elaborate on temporary. Is it temporary due to something that's happening in the quarter or is it something that is temporary through 2017?

It's temporary for a period of time. A portfolio like ours will run, once we get through this lease up phase and these rollovers, it's somewhere north of 95%. To look at a snapshot, coverage ratio today over the next year, year and a half, two years isn't really appropriate. I just wanted to highlight that although it was high at this point in time, we see that this will improve over the next, relatively from a real estate perspective, short period of time.

Okay. But it wouldn't be inappropriate to think that your payout ratio could be over 100% for the next couple years?

We expect because of our leasing and are hopeful because of our leasing that that will be the case for a period of time.

Got it. Last one for me, the newest lease at 1301, are you able to give us any metrics on how the economics of that deal shape up versus what you were expecting -- the expectations laid out during the IPO process?

We were on target with what we were expecting.

Okay. That's it for me. Thank you, guys.

Thank you.

Thank you, our next question comes from the line of Jed Reagan with Green Street Advisors.

Just following Brad's question, sorry if I missed this in your comments, but can you quantify the cash NOI value of leases that are signed but not commenced that you expect to hit the numbers in 2015?

No, at this point we can't. As we reiterated, we are not provided guidance. But we felt we've given you sufficient disclosure in our documents and as Mike pointed out some range of occupancy levels to help you guys get there. And we hope that when we do provide guidance in the second quarter it will be much, much clearer.

Fair enough. On the 1633 retail space, do you see that all getting taken up by one tenant, or is there a decent chance you end up splitting that up? How are you thinking about that?

Jed, we think that this is most probably being taken up by one tenant. It is a very unique opportunity and the discussions that we have so far are with one tenant occupancies for that space.

Okay. Can you talk about how much you are able to push rents in your New York buildings on a year-over-year basis at this point? And maybe give a little flavor for maybe some -- the variation you are seeing depending on building or sub market?

So, for us really in midtown and 6th Avenue along Broadway, the west side, we have seen -- we may be able to push rents in the single digit type range from last year, percentage wise. As I mentioned earlier, the 5th Avenue corridor, or view space, 712 5th avenue, we've really been able to push double digit rent growth there.

And also even on 3rd Avenue with the lack of space along 3rd right now, 3rd Avenue is one of the lowest vacancy rates in midtown. We have also seen probably close to double digit rent growth on our deals there.

Is that consistent with what you think other landlords are doing on 3rd Avenue? Or is that just specific to your building?

I think it's fairly consistent with what is going on across the market.

Okay. And then on the 6th Ave. and Broadway stuff, would you say lower single digits, upper single digits? In between?

Middle.

Okay. Thanks. Then maybe just last one, I wonder if you guys can talk a little bit about how the acquisition pipeline is looking today or are you chasing anything? Which markets or sub markets are you focused on? And do you think that most likely be acquisitions through the fund?

We have really nothing definite, Jed here to report. Fund 7 has a very small pocket to be invested. It's about $50 million. And Fund 8 is really focused on mezzanine financing. So that is not competing with the interest of the REIT.

We are focused on New York and we are looking also in D.C. and San Francisco. But we are very cautious and we want to be a prudent investor for our shareholders.

Okay. Thank you, appreciate it.

Sure. You are welcome. Thank you.

Our next question comes from the line of Gabriel Hilmoe with Evercore.

I guess maybe Albert or Vito, I think you mentioned you've done 93,000 square feet of leasing since quarter end. Can you give a sense of where that was done? I think Albert you had mentioned the Google expansion at one market?

Vito will take the details.

Hey, Gabe, good morning. We did about 93,000 since the end of the first quarter. It's really split between New York and Washington. As we had mentioned Google took some additional expansion space, another 22,000 square feet. The remainder really came in New York.

That was primarily renewal driven?

Yes. For the most part they were all second gen type space.

Okay. And then just on the retail at One Market. Is there any revenue currently coming off that space right now? And can you give a sense of maybe what that looks like when things start to come on? I realize you're not giving guidance, but I'm trying to get a sense of what's actually cash flowing there.

Retail in One Market, we are pretty much on pace with what we expected at One Market in terms of our retail. Activity I think has actually been a little bit stronger than we thought it would be at this point, just with where we are in the construction process. Because a lot of these units haven't really been built yet. So we're selling the dream a little bit to some of these retailers on interior space. But with the activity and the quality of the tenants in that building, we are really seeing great progress.

Okay. Thank you.

Thank you. It seems that we have no further questions at this time. I would like to turn the floor back to Management for additional remarks.

Well, thank you everyone for joining us this morning. We look forward to seeing many of you at the NAREIT conference and also look forward to updating everyone on our progress when we report our second quarter results in early August. Bye-bye.

Thank you, ladies and gentlemen. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.