City Office REIT's Q4 2024: Navigating Contradictions in GSA Exposure, Acquisition Strategy, and Market Conditions

These are the key contradictions discussed in City Office REIT's latest 2024Q4 earnings call, specifically including: GSA Exposure and Lease Renewals, Acquisition Strategy, Spec Suite Strategy and Leasing Activity, and Market Conditions:



Office Leasing and Rental Trends:
- City Office REIT reported 806,000 square feet of new and renewal leases signed in 2024, a 35% increase over 2023, and a 5.9% cash rent roll-up upon renewal.
- The improvement in leasing was attributed to favorable supply-demand dynamics for office leasing, particularly in high-quality buildings in great locations, and the company's proactive efforts in upgrading properties and constructing modern spec suites.

Portfolio Occupancy and Geographic Performance:
- The company ended the quarter with a portfolio occupancy rate of 85.4%, up 2 full percentage points from the prior quarter, with Sunbelt markets leading the recovery.
- The increase in occupancy was driven by strong leasing momentum in Sunbelt markets, which are expected to continue outperforming due to favorable demographic and employment trends.

Disposition and Redevelopment Plans:
- The company sold Superior Pointe, a 132,000 square foot property in Denver, for a gross sale price of $12 million.
- The sale decision was driven by the company's view that selling the property would achieve more value than investing in leasing efforts in a challenging submarket.

Financial Performance and Guidance:
- City Office REIT reported core FFO of $11.7 million or $0.28 per share for the fourth quarter, a $0.02 per share increase from the third quarter, primarily driven by higher occupancy.
- For 2025, the company anticipates an increase in overall portfolio occupancy, driven by leasing momentum in Sunbelt markets, and expects same-store cash NOI to grow by 2.5% to 4.5% as compared to the prior year.