Parkway Properties Inc (NYSE:PKY) Q1 2016 Earnings Conference Call May 6, 2016 9:00 AM ET
Executives
Jeremy Dorsett - Executive Vice President and General Counsel
Jim Heistand - President, Chief Executive Officer, Director
Jayson Lipsey - Chief Operating Officer, Executive Vice President
Jason Bates - Executive Vice President, Chief Investment Officer
David O'Reilly - Chief Financial Officer, Executive Vice President
Analysts
Manny Korchman - Citi
Jamie Feldman - Bank of America
David Rogers - Robert W. Baird
Tom Lesnick - Capital One Securities
John Guinee - Stifel
Rich Anderson - Mizuho Securities
Bill Crow - Raymond James
Alex Goldfarb - Sandler O'Neill
Operator
Greetings, and welcome to the Parkway Properties First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Jeremy Dorsett, Executive Vice President and General Counsel. Thank you, you may begin.
Jeremy Dorsett
Good morning and welcome to Parkway's first quarter 2016 earnings call. With me today are Jim Heistand, Parkway’s President and Chief Executive Officer, David O'Reilly, Parkway's Chief Financial Officer, Jayson Lipsey, Chief Operating Officer and Jason Bates, Parkway's Chief Investment Officer.
Before we begin, I would like to direct you to our website at pky.com, where you can download our first quarter earnings press release and the supplemental information package. The earnings release and supplemental package both include a reconciliation of non-GAAP financial measures that will be discussed today to their most directly comparable GAAP financial measures.
Certain statements made today that are not in the present tense or that discuss the Company's expectations are forward-looking within the meaning of the Federal Securities Laws. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions. We can give no assurance that these expectations will be achieved. Please see the forward-looking statements disclaimer in Parkway's first quarter earning press release for factors that could cause material differences between forward-looking statements and actual results.
In addition, as you are aware, we recently announced a merger transaction with Cousins Properties. We recognize that you may have many questions regarding this pending merger. So we refer you to information that has been or will be filed with the SEC regarding this transaction. The purpose of today’s call to discuss our earnings results for the first quarter of 2016 and we will not be speaking today about the pending merger transaction either in our prepared remarks or in response to any questions.
With that, I will now turn the call over to Jim.
Jim Heistand
Good morning. Thank you for joining us today. Our strong first quarter results are highlighted by the reduction of G&A expenses by 21% this quarter, as compared to the first quarter of 2015. The reduction in G&A expenses is the result of the G&A optimization program we implemented due to our aggressive capital recycling program in 2015.
We also began to realize the positive impact of past year’s strong leasing activity this quarter. In particular, despite the previously announced BMC software contraction in this quarter our occupancy and leasing levels remains strong at 89% and 90.8% respectively. We also achieved impressive same-store recurring cash NOI growth of 7.3% at Parkway’s share.
On the investment front, we closed on the sale of two assets in Houston for an aggregate gross sale price of $60 million and completed the recapitalization of Courvoisier Centre at a gross asset value of $175 million. We also have continued to make notable improvements on our balance sheet.
We reduced our net debt-to-adjusted EBITDA multiple to 6.1 times and subsequent to quarter end, we’ve paid off all of our remaining 2016 maturities, which totals approximately $162 million and had a blended cash interest rate of 6.1%.
Our focus going forward is to continue to unlock the embedded growth that remains in our portfolio and addressing the remaining vacancies in the portfolio particularly in CityWestPlace in Houston and our corporate center assets in Tampa.
I will turn the call over to Jayson Lipsey to give an update on operations.
Jayson Lipsey
Thank you, Jim. I am pleased with our first quarter operational performance. We completed 385,000 square feet of total leasing in the first quarter. While our leasing philosophy has decreased from 2015 levels, impart due to decreased inventory in our portfolio and historically low lease expirations, our leasing and occupancy percentages remains strong.
As Jim mentioned, our portfolio is 90.8% leased and our occupancy is 89%. Excluding BMC’s contraction of 403,000 square feet at CityWestPlace One, our occupancy at the end of the quarter was 91% and our lease percentage was 92.8%. We continued to execute leases at impressive average rental rates this quarter. The average rates for all leasing activity for the quarter was $32.81 per square foot, which represents an 11.3% increase for the first quarter of 2015.
We decreased our average cost of total leasing by 6.4% quarter-over-quarter and 13.5% year-over-year. In our concession ratio to total leasing activity was 14.7%, which was below both the previous quarter and the first quarter of 2015.
During the first quarter, we executed 80,000 square feet of new leases at an average rate of $36.96 per square foot representing an increase in average rental rates for new leases of 20.7% as compared to first quarter 2015 and leasing cost for new leases decreased by 9.3% quarter-over-quarter.
Much of our leasing for the quarter was comprised of our newer leasing, which totaled 280,000 square feet. First quarter renewal leases were executed at an average rate of $32.98 representing a negative renewal spread of 6.2%.
As was the case last quarter, this roll down was primarily driven by renewals in Jacksonville and Tampa that were originally long-term leases and due to the impact of annual rent bumps in these leases, in-place rent growth had exceeded market rate growth in these markets.
In particular, two renewal leases in Tampa totaling approximately 114,000 square feet had a significant impact on our renewal spread for the quarter. Excluding these two renewal leases, the renewal spreads in the quarter would be positive 3.4%.
These two renewals represent a weighted average at 9.2 years in term and were consistent with the market rates set forth in our supplemental disclosure. We did achieved very positive renewal spreads at 111 in Austin where we executed a 10,000 square foot renewal lease at $51.87 per square foot and Phoenix Tower in Houston, where we executed a renewal lease for approximately 51,000 square feet at $31.27 per square foot, which represent positive renewal spreads of 14.3% and 6.8% respectively.
The weighted average terms of these leases is 10.1 years. Not surprisingly, our customer retention of 55.2% was lower for the quarter largely due to BMC’s previously announced contraction. Excluding BMC’s contraction, our customer retention for the quarter was 87.6%.
Strong leasing and rent growth continue to drive outperformance within our same-store pool of assets, especially with respect to same-store recurring capital NOI which increased by 7.3% at share, as compared to the same quarter last year. This increase was particularly impressive given the BMC contraction; it was primarily due to the burn-off of free rent periods as well as increased occupancy due to recent leasing activity.
Recurring same-store GAAP NOI fell by 3.1% at share, compared to the same quarter last year, largely as a result of the burn-off of the BMC mark-to-market and the resulting GAAP adjustment.
Looking forward, as Jim discussed, we remain focused on leasing up the few remaining vacancies in our portfolio, specifically in Houston and our corporate center assets in Tampa where we believe there is significant value that remains to be unlocked. I’ll now turn the call over to David to provide an update on the financial results.
David O'Reilly
Thank you, Jason. We completed the first quarter with FFO of $0.34 per diluted share. Our FAD during the first quarter was $0.14 per diluted share. We provided reconciliation of FFO and FAD to net income on Page 9 of the supplemental report. While not included in FFO, we recorded gains on the sale of real estate of $63.1 million during the first quarter.
We continue to strengthen our balance sheet this quarter. We’ve reduced our net debt-to-adjusted EBITDA multiple to 6.1 times from 6.4 times at the end of the last quarter and 7.1 times at March 31, 2015. Our weighted average GAAP interest rate was 3.6% for the quarter, down 10 basis points as compared to the first quarter of 2015 and our interest coverage ratio ended the first quarter at 4.0 times, up from 3.7 times as the corresponding period last year.
Further, in April, we paid off at par, $162 million of debt secured by Lincoln Place and CityWestPlace buildings One and Two with the net proceeds from the sales of 5300 Memorial, Town & Country, and Millennia Park One, as well as the recapitalization of Courvoisier Centre.
We expect to record a gain of $458,000 on extinguishment of debt in the second quarter of 2016 related to the write-off of the remaining GAAP mark-to-market adjustments associated with these bonds.
Given the pending merger, we will not be updating or affirming our previously issued guidance range for the full year 2016 for earnings per diluted share or FFO per diluted share.
This concludes our prepared remarks. We’ll now open the call up for questions. Before we do, I want to reiterate that we will not be discussing the pending merger transaction on this call, so we ask that you please limit your questions to those related to our first quarter earnings results. Thank you.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from the line of Manny Korchman from Citi. Please go ahead.
Manny Korchman
Hey, good morning everyone.
Jim Heistand
Good morning, Manny.
Manny Korchman
So we are not let outside Houston or this merger, it’s going to be tougher, but I will ask you, a few questions…
Jim Heistand
Okay, but be shorter.
Manny Korchman
Maybe, just on CityWestPlace specifically, has traffic was showing some interest or however you want to categorize it, change, given at the recent recovery in oil or people fitting the recoveries sort of at a – maybe a one-time related, an unsustainable event and really hasn’t changed the way they are thinking about leasing?
Jim Heistand
Well, I think the best way I can answer that Manny is, if you look at our leasing velocity last quarter versus this quarter, things have certainly picked up. And so I think in terms of activity, the signs are encouraging right now. I don’t think that oil prices have yet had any positive impact on what we believe to be the current state of fundamentals in Houston right now.
And so, I think that, as it relates specifically to CityWestPlace, the velocity has remained pretty steady, but I wouldn’t say that there has been some kind of marked increase from last quarter to this quarter, it just remains steady. We did get a couple of deals done there. One of which was about an 8000 square foot deal at very good economics. So we remain optimistic about our prospects at CityWest. I think we are just realistic about the fact that, backfilling that is not going to happen overnight. The good news is, that this quarter we did do, just under 70,000 square feet of total leasing in Houston at good economics and positive mark-to-market. And so, generally, we think that we still have the ability to outperform the market in Houston.
Manny Korchman
And then, David, on the timing of the FMC move out sort of the grants on NOI lost there, how much of that was already reflected in 1Q number and how much of that we need to think about coming off in 2Q in to the September quarter?
David O'Reilly
BMC moved out during the first quarter. They were in occupancy for January and had a small amount of space for a portion of February. So I’d say, if you thought about the impact, we felt about two-thirds of it as we had them in for one of the three months during the quarter and it will be a smaller impact downwards next quarter vis-à-vis for the entirety of the quarter.
Manny Korchman
Great guys. Thanks.
David O'Reilly
No problem.
Operator
Thank you. Our next question comes from the line of Jamie Feldman from Bank of America Merrill Lynch. Please go ahead.
Jamie Feldman
Thanks, I guess, picking with Houston, we are seeing more news of potential bankruptcies in the market. Just a little more buzz on what the sentiment is down there and just thoughts of whether broader market conditions get worse before they get better?
Jim Heistand
I think, we expect that things are going to get worse from here before they improve. The good news is, is that oil prices seem to have stabilized. I think that that has encouraged increased activity within the marketplace because people feel like they finally have solid footing and some visibility into the future. We have not yet seen any material impact to the credit quality of any of our customers. We are watching it very closely. We are looking at a variety of different metrics in terms of defaults or are there any late pays, any kind of credit rating changes among our large customers where property people are walking the floors to see if headcounts are changing dramatically and we have not had any really material bad news as it relates to our customers. We are not naïve about the fact that that could change, but we are watching it very closely and right now, there is really nothing on the horizon that is concerning us.
David O'Reilly
Yes, I think Jamie, too, just if you think about the quality of the portfolio that we have there and I think that’s just [Indiscernible] high quality tenants and I am not saying that we could never be affected, but I think, certainly some of the stuff that we had sold from the prior Parkway portfolio would have had more issues relative to credits and the stuff that we own today.
Jamie Feldman
Okay. And then, to the extent you can talk about it, having more assets down there, how do you think that changes your strategy or your competitive position?
Jim Heistand
Well, I think, it helps us tremendously to have that kind of portfolio overlapping in some cases, our existing locations as well too, so it’s not what it is, it’s almost like our – the strategy that we’ve incorporated into the sub-markets we’ve been in and by having that scale, given the proximity at some of these sub-markets you could actually move some tenants within our system if there was a need to upsize or downsize and keep them in the buildings even if it wasn’t in the same particular location by having that mass.
David O'Reilly
In addition, you will just be able to operate that on a cheaper cost per square foot from an employee standpoint. So, having almost 9 million square feet in three sub-markets and close proximity, I think just works for you in a lot of different ways.
Jim Heistand
I think, we’ll also have phenomenal pricing power as it relates to our ability to scale vendors, our ability to source and retain the best town in the marketplace. From a leasing standpoint, we will be able to do some really, I think effective things in terms of deploying the leasing strategy in a continuous way across this portfolio. So this kind of scale will – I think really enable us to do some phenomenal things operationally.
David O'Reilly
And you’ve got a number of different price points, Jamie too, so that if a tenant has an interest in that particular sub-market, we should be able to accommodate them. And I think too, just by having that scale, in terms of the brokerage community as well too, we’ll be touching a lot of different people on how we do business there and I think, that – I think that’s just expands our position in the Houston market.
Jamie Feldman
Okay, that’s helpful. And then, Corporate Center, can you maybe just give us an update on how things are going in Tampa? And thoughts on raising occupancy there?
Jason Bates
Yes, I know I keep saying this every quarter, but our pipeline remains very, very full. We have significant large deals that have been and are looking at the Corporate Center buildings. And so, I would continue to be very optimistic about our prospects to continue driving occupancy there. We had pretty decent leasing activity this past quarter in Tampa. We did about 150,000 square feet in total. Much of that was driven by renewal activities.
And so, I think that my expectation will be over the next couple quarters, we will be able to land some of the leases that we’ve been working on for sometime which should have a positive impact on occupancy.
Jamie Feldman
Okay, great. Thanks, guys.
Operator
Thank you. Our next question comes from the line of Dave Rogers from Baird. Please go ahead.
David Rogers
Yes, good morning guys. Just to go back to Houston, I guess, I think there was, obviously reports and you talked about listing Phoenix Tower ahead of the merger. So I guess, before any contemplation of the merger, have you received any offers or indications of interest on Phoenix Tower that you can share?
Jim Heistand
Well, I mean the interesting thing is, we had an awful lot of interest in the property. But, I think, given the strategy that we are going to employ, going forward and the synergies and benefits of maintaining that within the Greenway Plaza, our position is to not sell that as part of the Houston Company.
David Rogers
So, any pricing that you could share on kind of where the bids were coming in from that, Jim?
Jim Heistand
Well, we – no, because we never got to the finish-line. We never reach back out and…
David O'Reilly
We pulled that before the process was completed.
Jim Heistand
That’s right.
David Rogers
Okay.
David O'Reilly
As you can imagine, Dave, we are working on this for sometime and once we knew we have some certainty around it. We’ve pulled that out before we got to the point where, we do want people to do too much work now and we were going to what we were doing.
David Rogers
Yes, I think it makes sense to keep that and that makes sense. So, thanks for the color on that. I guess, maybe to go back to Jayson a little bit on new lease activity, maybe a little more broadly leasing relative to availability was down in the quarter. You talked about in your comments lease velocity is slowing. Is that just a decision-making timeframe or people just slow in the first quarter? I guess, talk a little bit more about what you are seeing across the broader portfolio in any of the markets that we haven’t really touched on, I guess which is everything about Houston, and Tampa?
Jayson Lipsey
Yes, don’t believe that lease velocity has slowed at all. In fact, I mean, we continue to see very positive signs in all of our markets that leasing velocity continues to be very robust. I think that, as it relates to our portfolio, we just have fewer places to fill. And so, I think that that just creates a more challenging and slower lease up timeframe just because of we have fewer vacancies or just fewer deals that fit. If you look at our lease percentage, we are above 90% leased in every market except for Houston and Tampa. And so, it really narrows down our opportunities to move the needle for those two markets principally. But generally, as it relates to some market color, my belief is that, the fundamentals remain very, very good in every single one of our markets except for Houston.
David O'Reilly
Not only that, I think given the occupancy levels and the vacancy levels in the submarkets where we are in and the scale that we have in those markets, we have been able to aggressively push rents on any new leasing that we do there as a result.
David Rogers
Okay, thanks. Maybe last from me, just in terms of the property operating expense in the quarter. It just seemed higher with a lower margin. Was there anything in there? Was that just accrual-related or should we kind of expect the lower margin going forward?
Jim Heistand
No, I think what’s showing up in our same-store NOI number is in the increase in operating expenses specific to property taxes. The good news is, is that, our values have climbed steadily in all of our markets. The bad news is, is that the local municipalities have used that as opportunity to raise property taxes. And so I think that the predominance of that is driven by increasing property taxes.
David Rogers
Okay, great. Thanks, guys.
Operator
Thank you. Our next question comes from the line of Tom Lesnick from Capital One Securities. Please go ahead.
Tom Lesnick
Hey, guys. Good morning. Most of my questions have already been answered, but I was just wondering if, generally you could talk about the transaction market a little bit? Are you seeing more or fewer bids for your type of property in your markets and just any color you can share would be great?
Jim Heistand
Sure, for the high quality assets, certainly, the activity remains very high. Pricing seems to be very strong still. I think, when the market went bumping in January and February, the debt markets tightened up for all but the best products. That has certainly loosened backup, but for the best product generally, the bids seem to be strong, activity is good, pricing is meeting or exceeding expectations and I would continue to characterize that segment as being very strong. As you move further away from that and it’s a little further outside the box, it’s certainly been a little choppier. The number of folks participating in processes seems to be lower and the activity seems to be lower is I hear sort of feedback from the brokerage community often times bid sheets are thinner or pricing is not meeting the – sort of the expected high-end of the range, but certainly moderated there. So, I think it’s been bifurcated a little bit between what we had all described as a very high quality stuff and then as you start to work away from there it certainly changed.
Tom Lesnick
Got it. Appreciate it and then, real quickly, if you could just remind us, when is the timing of the openings for the retail redevelopment when Congress done in Austin. Is that open yet?
Jim Heistand
It’s not open yet. It is fully underway. We are making very good progress. Our expectation is sometime in the next 120 days or so, we’ll be looking to an open.
Tom Lesnick
Got it. All right. Great, thanks, guys.
Jim Heistand
Thanks, Tom.
Operator
Thank you. Our next question comes from the line of John Guinee from Stifel. Please go ahead.
John Guinee
John Guinee here. Great. Hey.
Jim Heistand
Morning, John.
John Guinee
Jim, just a little bit off point, but some sort of relevant relative to the last question. If you look at a lot of investment in sales, were you’ve been the seller on occasion for the Stelmec, Liberty, OFC also selling B&C product in generic suburban sub-markets. They tend to be trading at an 8 to 10 cap based on in-place 75% to 85% occupancy. Pure commodity product, buyers leveraging up 75 plus percent levered. Usually, shorter term debt and if over a 5 to 10 year holding period, the assets appreciate, it’s probably a pretty damn good deal for the buyers, if they depreciate, decline in value, these guys are not doing very well at all. When you are looking at this as an objective investor, do you think these buyers who are buying B&C assets, B&C markets at a 8 to 10 cap are making smart decisions or do you think they are going to be very disappointed at the end of the day?
Jim Heistand
Well, John, that’s a great question and it really varies depending upon, it depends on the sub-market you are talking about. My view generally is, and I think that’s one of the reasons we tried to exit that type of product as quickly as we could. I think long-term a lot of those and again, it depends on the sub-market and this is not broad for every single suburban asset. My point is, I think there is just going to be less demand for the commodity, true suburban with no amenities and a close proximity, just because they could build it cheap. I would be concerned on some of those transactions that there is a reason that cap rate is so high. You probably have and in fact negative rent growth, because expense will increase and I don’t think you are going to be able to increase rents in many cases. So unless you got a vibrant submarket, that you could get in, make those improvements, get it leased, and then get out. I would be hesitant personally to get into that investment.
John Guinee
Great. Great insight and I wish you great success at Houston.
Jim Heistand
Thank you, so much, John.
Operator
Thank you. Our next question comes from the line of Rich Anderson from Mizuho Securities. Please go ahead.
Rich Anderson
I can’t believe this call is half-an-hour. So, but I want…
Jim Heistand
I got a pointing that second part.
Rich Anderson
Not really to the merger of course, a down the line on that. But, I do - do I ask, I think it was mentioned on the conference call this week that, some putting aside plan is to sell assets and you mentioned, you already referenced the Houston deal. The question is, what about outside of that? And I am wondering if you are willing to just whether write from here on now or are there some asset sales outside of Houston, you could still consider executing on? One of the markets I am thinking about mostly is Jacksonville, which is one of the more, if there is any market in your rest of the portfolio, ex Houston, that is not as ‘institutional’ it’s probably that one. So I am just curious what you think about dispositions going forward? And if the answer is just zero from here on out and then that’s the answer?
Jim Heistand
Well, I think, we were as a standalone Parkway largely complete with our asset recycling.
Rich Anderson
Okay.
Jim Heistand
I think, so, if you look at where our portfolio sits today, there would only be two or three and we still have that one in the market for sale and downtown in Jacksonville if you recall.
Rich Anderson
Okay.
Jim Heistand
There is only two other assets that were part of the original Parkway portfolio and both of those properties have been completely renovated and repositioned and leased. So, I think, we were, as we sat here by ourselves, we are not intending on selling additional assets. I do think though that as was announced in the presentation that the Jacksonville asset will be looking to be sold as part of the merger and that was announced as part of the presentation.
Rich Anderson
Okay. I am now remembering that. I apologize. So, you don’t have any different motivations, it would be just that, that’s kind of the change in strategy that Jacksonville sale, other than that it’s going to be it’s going to straight-line till the merger.
Jim Heistand
Yes, certainly to the merger and I certainly don’t want to speak for what Cousins may do going forward. But in terms of where we sit right now, the only thing that’s been identified will be Jacksonville.
Rich Anderson
Okay. Fair enough. Thanks and good luck.
David O'Reilly
Thank you.
Jim Heistand
Thanks, Rich.
Operator
Thank you. Our next question comes from the line of Bill Crow from Raymond James. Please go ahead.
Bill Crow
Hey, good morning guys. A quick question about Tampa. As you are discussing the options with potential tenants, are you finding more choosing to opt or choosing to look downtown with the next project now starting to pick up some steam. Is there any threat to kind of the shifting of the center or the office universe from Westshore towards Downtown?
Jim Heistand
As we have been working on a variety of these deals, we have not really seen many – any that I can think of that have chosen to go to Downtown over Westshore. I am sure that – that’s part of the mix and I think that it’s certainly improving from our assessment in terms of a viable competitive submarket. But we still think that most of our customers who choose to come to Westshore, choose to come because of its superior access, because of its access and proximity to executive housing and decision-makers. It’s amenity base in Westshore. And so, from our perspective it has not emerged as a substitute submarket to Westshore.
David O'Reilly
And I think one of the things too, Bill, if you think about it and we have some larger contagious blocks in there and if we recall, we bought the portfolio at about 69% leased at that point. And there are a number of sizable transactions that are looking to go into Westshore, couple of which are basically relocations in the town. And so, we’ve intentionally kept some of those lots available because there has been a quite a bit of activity in that regard and from what we’ve seen for those larger users, the preference is Westshore as we sit here today.
Bill Crow
Okay, thanks for the color.
Operator
Thank you. Our next question comes from the line of Alex Goldfarb from Sandler O'Neill. Please go ahead.
Alex Goldfarb
Good morning.
Jim Heistand
Good morning, Alex.
Alex Goldfarb
Got a few questions here. Jim and hopefully, you can talk about those. But just from a building management, as far as leasing goes and really it’s more specific to Houston, but are you guys and Cousins coordinating throughout the markets? And as I say, you are really thinking about the way that you guys are going to be trying to, obviously, continue to generate activity around the BMC space and other vacancy in the Houston portfolio? Are you guys coordinating in conjunction with what Cousins is doing or if each company literally operating on its own until the closing date?
Jim Heistand
Alex, clearly, right now, we are operating based on our own business plan for the assets we have. But there is, there is transition, there will be transition work that will be going in terms of incorporating employees, as we do this. So, it’s more along the transition from an employee standpoint and less about coordinating our efforts on our properties. That each company will focus on their own individual plan, business plan for that.
Alex Goldfarb
Then if I can ask about Houston specifically, as you guys think about the vacancy that you have and obviously most of it’s BMC, but there is some other blocks in the portfolio as well. None of us know when oil will recover. Is it conceivable that you guys could maintain those buildings, let’s call it, into the low to mid-90s, if the rest of the market is well south of there? Is that a realistic thing or because not all buildings are equal, it’s conceivable that you guys could achieve that without the rest of the market having a similar left?
David O'Reilly
The reason we are doing this, the reason I am doing this, the reason I believe in this, is I think, this portfolio will outperform the broader market. That’s why – that’s the reason we don’t want to sell with this point in time. So the quality and location of the assets, I can’t tell you what occupancy will be exactly, Alex, but I do think these assets should outperform the slower market and then, hopefully when things pick up, we’ll be the first ones to be pushing the rents on a going forward basis.
Jim Heistand
And I’d add Alex, and if you look at our current portfolio’s performance, our submarkets outperformed the broader markets, and our portfolios within those submarkets outperform their respective submarkets. It’s our view that, Houston will have the potential to absolutely perform at those kind of levels. Then, as you know, from having recently toward CityWestPlace, I think that’s a great example of an asset that will absolutely outperform its broader submarket, just because of its quality and its differentiation. So it’s our view that this portfolio absolutely should outperform the market.
Alex Goldfarb
Okay, and then just finally, in Austin, Textron continues to be a popular topic on these earnings calls. Have you guys noticed just in Austin overall, any change in the leasing activity or the demand of tech tenants, whether it’s taking longer to do deals, or any sort of change in pace of activity or employment beyond that the companies have done there?
Jim Heistand
We are probably not the best proxy in Austin given that our portfolio is essentially full now.
Alex Goldfarb
Yes, I understand.
Jim Heistand
But I can’t say that, in the last few months, I think that technology companies have adopted a little bit more of a prudent pace. So they are still growing, they still have a lot of activity, but they – where I think there is some of their expansion plans were very aggressive 12 and 18 months ago. Those expansion plans seem to have abated a little bit in terms of the scope of them. Well, there is still a lot of velocity in activity from everything that we can tell in the marketplace and they still remains the most active industry sector in that city.
Alex Goldfarb
Okay. Thanks a lot.
Jim Heistand
Thanks Alex.
Operator
Thank you. Ladies and gentlemen, we have no further questions in queue at this time. I would like to turn the floor back over to management for closing comments.
Jim Heistand
Listen, we thank you all for getting on the call. I know we just – we spoke this last week and we do appreciate you narrowing the call, the questions to our first quarter results. And I look forward to seeing most of you, if not all of you at [Indiscernible] since. So, take care. Thank you.
Operator
Thank you, ladies and gentlemen. This does conclude our teleconference for today. You may now disconnect your lines at this time Thank you for your participation and have a wonderful day.
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