Good day, ladies and gentlemen, and welcome to the Piedmont Office Realty Trust, Inc., First Quarter 2020 Earnings Call.

All lines have been placed on a listen-only mode and the floor will be open for questions and comments following the presentations [Operator Instructions].At this time, it is my pleasure to turn the floor over to your host, Robert Bowers. Robert, the floor is yours..

Thank you, operator. Good morning, and thank you for joining us for Piedmont's first quarter 2020 conference call. Last night we filed our Form 10-Q and an 8-K that includes our earnings release and our unaudited supplemental information for the first quarter.

All of this information is available on our website under the Investor Relations section.On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements address matters which are subject to risks and uncertainties that may cause actual results to differ from those we anticipate and discuss today.

Examples of forward-looking statements include those related to Piedmont Office Realty Trust's future revenues, operating income, dividends and financial guidance as well as future leasing and investment activity.You should not place any undue reliance on any of these forward-looking statements, and these statements speak only as of the date they are made.

We encourage all of our listeners to review the more detailed discussion related to risks associated with forward-looking statements contained in the company's filings with the SEC, including our first quarter 10-Q.In addition, during this call, we'll refer to certain non-GAAP financial measures such as FFO, core FFO, AFFO and same-store NOI.

The definitions and reconciliations of these non-GAAP measures are contained in the supplemental financial information available on the company's website.

After our prepared comments are made, our senior management team will be available to address any questions that you may have.At this time, our Chief Executive Officer, Brent Smith will provide some opening comments and discuss our first quarter results and accomplishments.

Brent?.

In Boston, Advanced Micro Devices renewed to 2028 approximately 107,000 square feet at 90 Central Street.

In Orlando, the law firm Greenberg Traurig renewed approximately 37,000 square feet to the year 2031 at CNL Center 1; and at 200 South Orange Avenue, Jones Lang LaSalle signed a renewal and expansion through 2025, totaling approximately 20,000 square feet.Finally, in Washington, the Association for Unmanned Vehicle Systems signed a new lease through the end of 2030 for approximately 15,000 square feet at 3100 Clarendon Boulevard.

A listing of leases executed during the quarter for 10,000 square feet or more is included in the quarterly supplemental and an earnings release for your review.As of quarter end, the portfolio was approximately 90% leased.

The lease percentage at the end of the quarter includes the transfer in service of our previously out of service asset, the recently redeveloped now 41% lease to [Indiscernible] tower in Chicago.Regarding upcoming lease expirations, we have low lease expiration over the next 18 months, with the only sizable lease being the city in New York at 60 Broad Street, where we remain in discussions for a long-term renewal of substantially all of the city's existing 313,000 square feet lease that expired this month.As common with government tenants, the lease entered home owner status on April 15, with the lease specified post expiration increase in cash rent approximating the current market rental rate.

I would note, the benefit of increased straight-line rent would not be recognized until a long-term renewal could be executed, which given the tenant, the decision is likely to be further delayed due to the pandemic.Therefore, for forecasting purposes, we have delayed the potential full roll up in straight-line rent associated with a long-term lease by approximately six months or until the middle to latter part of next year.Turning to transnational activity.

As we previously announced, during the first quarter, we completed the debt purchase in Dallas, Texas of the Galleria Office Towers comprising 1.4 million square feet and an adjacent two-acre development parcel for a total of $396 million or approximately $273 per square feet, which represents a significant discount to replacement cost.The acquisition allowed us to establish a sizable position in a strong submarket, so that along with our other assets in Dallas, we can present prospective tenants with a spectrum of high-quality office throughout this growing and diverse Sun Belt market.With the acquisition, we expect that we'll be able to realize additional marketing and operational synergies with our existing operations.

The Galleria Office Towers were acquired through reverse exchange and will be matched with the disposition of 1901 Market Street in Philadelphia that is expected to close in the middle of the summer.

Therefore, there is not a need to make a special dividend distribution related to the substantial nine-figure gain we anticipate on the sale of our only Philadelphia property.I'll share with you today how Piedmont is committed to protecting our people and preserving our capital and liquidity.

As one last point, we remain optimistic about the future of commercial office real estate. But trying to predict the outcome of this event leads to many more questions than answers.

One thing is certain, the industry will change and Piedmont will be positioning itself to succeed.At this point, I will turn it over to Bobby to walk you through the financial highlights.

Bobby?.

Thanks, Brent. While I discuss some of our financial highlights for the quarter, I encourage you to please review the earnings release and supplemental financial information which were filed last night for more complete details.For the first quarter of 2020, we reported $0.47 per diluted share of core FFO.

That's a two-third increase compared to the first quarter of 2019.

Even with the loss of earnings contribution due to dispositions of two almost fully leased assets during 2019, that's the One Independence Square building in Washington, DC and our 500 West Monroe property in Chicago, we were more than able to offset these sales with newly acquired Sun Belt properties in Atlanta and Dallas as well as with new lease commitments and with the continued roll-off of rents across the portfolio.AFFO was approximately $19 million for the first quarter, which is lower than typical and impacted by onetime payment of lease commissions on a 520,000 square foot 20-year lease to the State of New York at 60 Broad Street in New York City.

With several leases commencing in Atlanta and in Houston late last year, same store NOI was up approximately 2% on a cash basis and 4% on an accrual basis for the first quarter of 2020.Turning to the balance sheet, our average net debt core EBITDA ratio for the first quarter of 2020 was 5.7 times and our debt to gross asset ratio was approximately 38.7% at the end of the quarter.

Both metrics reflects higher outstanding debt during the quarter as a result of the purchase of the Galleria Office Towers in February.

During the quarter, we entered into a new $300 million unsecured term loan and used the proceeds to pay down our $500 million line of credit, leaving approximately $350 million of availability.As Brent mentioned earlier, we plan to pay off the remaining balance on the line as well as $160 million mortgage using the proceeds from the sale of 1901 Market Street, which is expected to close this summer.

After doing so, we expect our leverage ratios to decrease and to be similar to our metrics as of the end of the fourth quarter of 2019. I would add, there are no scheduled debt maturities until late 2021.

And there are investment grade ratings from Moody's and Standard & Poor's we're both recently reaffirmed with stable outlooks.Given our low leverage, strong liquidity position and quality of our tenants, we do not currently anticipate any changes to our present dividend level.

As we said in our earnings release, since the duration and severity of the COVID-19 pandemic and the longer-term consequences on the economy and on our tenants are unknown at this time, we are withdrawing our guidance for 2020.That said, we believe our strong diversified tenant base, a majority of which is investment grade quality; and our attractive portfolio of assets located in highly amenitized, easily accessible business centers; and our prudent balance sheet, which provides us with excellent liquidity all position us well and will mitigate the adverse effects of the pandemic on Piedmont.I do however, want to provide you with a few additional thoughts on trends that we've seen so far in the second quarter that are guiding our assumptions for how the pandemic could impact us during the rest of the quarter and the back half of the year.

While we continue to execute lease renewals, new tenant leasing activity during the second quarter has been slow.

And we think this trend will continue throughout the quarter likely pushing all new tenant leasing goals out at least a quarter; which will in all likelihood, modestly lower annual operating revenues for 2020 by $1 million to $2 million and lower our originally anticipated year-end leased percentage.We expect most of our transient parking income for the second quarter will not occur.

That would equate to a reduction of approximately $1 million of net operating income. And with respect to retail tenant income, which is about 1% of our total 2020 revenues, retail NOI is estimated to decline by approximately $1.5 million.

Cash NOI rent receipts would likely be negatively impacted on a same-store basis when compared to 2019, due primarily to rent deferral amendments that I'll discuss in a moment.The few redevelopment projects within our portfolio will be delayed for a few months but are not expected to impact 2020 net income materially.

The sale of 1901 Market Street in Philadelphia is expected to close during the summer. And while no other deals are underway, any other acquisition or disposition during the year will be pricing property and market dependent.

Now as Brent noted for the month of April, to date we've received 96% of our regular monthly rents with all of our 20 largest tenants, representing over a third of our cash receipts, paying their April rents.Out of the unpaid 4% amount, we do have a number of tenants requesting their leases be restructured.

The focus has primarily been on providing appropriate tenants with typically up to three months of rent deferral that will in most cases be paid back later in 2020 or with interest in 2021. Although we have accepted some lease extensions in exchange for deferrals.

To date we've agreed to about $1 million of rent deferrals per month for three months for 27 of our tenants representing approximately 400,000 square feet of leases.

These lease amendments, as you would expect are primarily with retail, hospitality and smaller co-working tenants.Regarding our seven tenants in the co-working sector, all but one are under traditional lease structures with standard credit requirements and combined total about 2% of our originally forecasted revenues.

No one today knows how long this pandemic will last, nor the impact it'll have on so many businesses across the broad spectrum of our economy.However, we do expect to reevaluate guidance when we have a better grasp of the pandemics broader economic impact after current shelter in place orders that are in effect for all of our operating markets are lifted and the longer term consequences of the COVID-19 pandemic on the economy and more specifically on our tenants can be more thoroughly evaluated.However, we do believe we are in a fortunate position with no major development projects, with a sound balance sheet, with the team of employees dedicated to providing outstanding service and safety to our tenants and with a client roster position to recover financially.

We are thankful and appreciative to our colleagues, to our cooperative tenants and to our supportive stockholders.With that, I'll now ask our operator to provide our listeners with instructions on how they can submit their questions. We will attempt to answer your questions now or will make appropriate later public disclosure, if necessary.

Operator?.

Thank you. [Operator Instructions] And our first question is from Michael Lewis. Please go ahead, Michael..

Great, thank you. You mentioned in your prepared remarks about having a deposit on 1901 Market. Could you just maybe give us a little more on your confidence of getting that across the finish line? Any chance that the buyer could re-trade or to let or anything like that..

We don't like to get into too many specifics on transactions that haven't closed. That said, I would point out and as I noted in my prepared remarks, the purchaser of the building did have a deposit that went hard on March 31 with good visibility into what was going on.

And in addition, I think we've seen a continued interest in that asset despite going with one bidder.Given the long-term least credit-worthy tenant in that building, that's really been the quality of asset that we've seen continue to garner interest. And we think it has a very good likelihood of trading.

There are no financial contingencies and no else in the contract. And as I noted before, if they were to pull out, I think we're still very confident in our ability to accomplish the 10-31, given the interest from non-traded REITs. We've seen Asian capital now have positive ForEx exchange that's improved a lot.

But again I think the purchaser of all the indications are they intend to close, again middle of the summer.There are no financing contingencies and we do think that they have the all-cash on hand to complete the transaction. So we feel very confident that they are going to perform..

Great. My second question and you talked a little bit about this, too. I mean New York City lease. I think we all expect that to be delayed a little bit anyway, it's just the nature of the tenant. Could you talk a little bit more - again on that one, you've mentioned it may be pushed back, which I think we could have expected.

But what about the pricing on that? Do you think that this has a negative impact on what we expected to be really strong rent spreads?.

I think it's a little early overall to start speculating on impact to market rents from the virus and the pandemic. It's a demand and supply issue and I don't see right now any insight into the supply and demand. That said specific to our deal, we continue to work with New York State in our advanced planning in negotiations.

I think that building is very unique and that it satisfies a lot of their needs. As we've noted the building within a - sorry, the city. As I noted, it's the building within the building.So they have their own envelope if you will. I think in this environment that even becomes more valuable in some ways.

But I do think that given where we are in the transaction, we feel very comfortable that we're providing a very high-quality location at a very competitive price versus what it could exist elsewhere on the island. And so we continue to engage them and move forward on dialog and that has not wavered at all.

I would say though that there is part of doing a lease with New York City. There is a public hearing process that in typical it would take anywhere from three months to six months.Obviously given the pandemic, we don't really know of how that process will start back up, what the backlog might be and how that will ultimately play out.

And so that's why you heard me in my prepared remarks really effectively push that back six months into the latter part of next year.I would note that we did not have and expecting it to get and not expect it to get signed really until the end of this year anyways, at the earliest.

So we're really pushing it back with the expectation that that process will be slower, both given the nature of the tenant and the city in which it resides.As I would remind you though, they are in what we would call, for lack of a better word, the lease specified rental rate increase beyond their expiry.

Some might call it a holdover rate, but I wouldn't necessarily deem it that way, but it is a specified increase in rent. And that will benefit us both on a straight-line rent basis recognition in cash - sorry accrual basis in cash and somewhere roughly roll up.

If you look in the supplemental, they're paying somewhere mid-30s, right now on a cash and GAAP basis.And now, as I noted before will be closer to a market level. So there is a meaningful roll up there to be experienced just naturally in the - approaching roughly a 30% level on the rollover - I'm sorry, on the holdover rate..

Great, that's helpful. And then just lastly from me. Page 39 in the supplemental, it doesn't have - at least my copy here, I see the land parcels. I don't see the redevelopment projects. It sounds like you got started on 200 South Orange. I don't know if Two Pierce is still underway, that's the other redevelopment that was alluded to in the tax.

Could you just give an update on the redevelopment projects, maybe how much is left to spend there and how that's progressing?.

Yes. As Two Pierce Place first to address your question there. That was actually completed and it is now been put back into service. This quarter is the first quarter that that will go back into service. And that is currently 40% - 41% leased.

And we continue to have - prior to the crisis, good tours and interest at the asset.The other kind of bigger project as you noted, would be Orlando. Right now, obviously given the delay and being able to get construction permits and other kind of continued involvement with the regulatory entities there.

As you may recall, our tenants at that building, we work with in discussions around with the fire marshal in terms of the density of its space. They continue to have that dialog.

We recognize that there is base-building work that we're going to continue to do but inherently that will be slowed down by the pandemic.The total size of that project we were estimating roughly in the neighborhood of $18 million to $20 million.

And so we continue to move forward with the project, but inherently that capital spend will be slower than anticipated. And so we'll revisit. The magnitude of that dollars is not even yet to be spent. So it's very de minimis to date spent.

And we'll revisit when to kick back up construction once it's safe and we're able to do so at the building.The other big project that I would note isn't really redevelopment, but it is the New York State build out. We continue to make good progress in the plans, we are prepared to be active on site at the building.

But obviously given the pandemic that has been put on pause, but we really see no material impact to the income stream related to that delay.But we continue to keep a close eye on it.

We're hopeful that it would be no more than maybe a month or two or unless the governor would come back and deem it to be an essential construction project and then we would pick back up with our on-site activities. So those are probably the ones most impacted.

Anything else that we have in the portfolio would be very small in scale and more regular base building for the most part..

That's helpful Thank you..

Again, thank you, Michael, for joining today. Sorry I jumped in here and answering your questions. But one, I hope you and your family are safe; and then two, apologize for the technical difficulties at the beginning of the call. Just one of those things. We're all getting used to a virtual world here and there..

Our next question is from Anthony Paolone. Sorry if I didn't say that correctly..

Very good, thanks. I guess first question on the Galleria acquisition and Dallas. Can you give us a little more color on the cash yield, any CapEx plans there? I think in the K that you filed, it looked like you're back into the high fives cash. It looks like the Amazons rent was still fully coming on board.

So I'm just wondering if you could just put a little more color around that asset, where you're taking it..

Thanks, Tony, for joining us today. Again, I hope you and your family as well are safe and healthy. In relation to Galleria office towers in Dallas, as you know we completed that transaction in February.

But during the course of that transaction we were engaged with a large e-commerce company in terms of their - it continued expansion at the project and as part of that deal, there was additional square footage taken.

So as [Indiscernible] - we had about 130,000 square feet of signed, but yet to commence square footage at the asset.So the majority of that could be coming on later on this year.

And so that should - you think about kind of roughly $30 net and we have some management income et cetera that's going to equate to equate at $4 million to $5 million of additional income at the building. So that's going to land you I think by your math, that $5 million-$7 million, should come up closer to a $7 million on a cash basis.

And of course the GAAP yield is going to be well north of that as a result of those below market leases.And again, the majority of that 130,000 square feet is related to a large e-commerce company and that has no free rent related in that transaction. And that would come online again later this year..

Okay.

And is there much just otherwise in the planning of the asset in terms of CapEx or any repositioning you intend to do there?.

That's a good question and I appreciate you following up with that. The buyer that we acquired the asset from was a high-quality institutional owner themselves, who had done a much of the modernization, if you will of the amenities of the building.

So it's got a great set of amenities for the tenants that reside there including gyms, conference centers, board room as well as obviously the benefit of a lot of retail right at the base of the building.So at this point, there isn't really heavy lifting that needs to be done at the building in terms of capital plan and program.

We feel like we've got a great basis and a good runway to continue to lease the project and alleviate rents with a phenomenal product available today without the need to modify it. Great..

Okay. And then on the co-working side, it sounds like you're working through some deferrals or something there. But in an instance, you get that space back.

How do you think you all would approach it? Would you try to operate it yourself, visiting enough condition to just take it to market for a user? How would you think about that piece of the portfolio if the deferral situation work?.

I'd say, first, just in terms of how we approached co-working in general. We had for the most part diversified our exposure across a number of operators so that we don't have a lot of a single counter party risk. We do have three WeWork locations and then other providers.

But really no single provider makes up more than calling the low-teens percentage of the building in terms of its square footage.If we were to have a situation where one of those tenants were to be able to no longer to pay the rent and we took back the space, I could see a situation - right now again, it's very early.

But as we have tenants come back into the workplace, there may be the need for a release valve if you will for additional space. Many of those spaces that we have are not of the dense, typical co-working type.

They're more I would call it small shared offices that are geared towards teams of five to 20 people with individual suites that our glass front. That will be more well-positioned to provide, I think a healthy environment.

And it also benefits those operators don't rely as much on a very dense and jam-packed environment.So we would operate those is release valve, bringing a management company more likely and we have a number of those that we've talked to have relationships with even though we've never done a management deal.

But clearly, that's where the industry is headed or at this point.So, we feel like, again, where we've chosen to implement it makes a lot of sense is amenity and offering into the marketplace.

So I think we still deem a good use of space and we'll continue to operate that ourselves and again use it for existing tenancy as they come back to the buildings. But again, I think it's still very early to tell and the majority of our co-working operators, including our largest co-working operator we work are current on their rent..

Okay, thanks for that. And then last question from me putting, New York City aside.

But what are the larger 2020 and 2021 expirations you are watching right now?.

I think one of the good things we have, Tony, in our story right now is that low expiry schedule. If you exclude New York City, you're looking at about 4% this year and call it 5% next year. In terms of ALR, I wouldn't say there is a tremendous amount of exposure concentrated.

If you look at our tenants' schedules and stuff, we typically provide a list of all of those that are greater than 1% on ALR and you'll notice the city is the only one on there.But if I look out through 2020, we do have some expiries with various tenants in Dallas, as well as in Atlanta later this year.

And so we continue to make some progress on those.

But as we've kind of projected, there are a few that will vacate and we've got those already built into what was previously provided our guidance.So I don't think the difficulty in leasing right now and get it - get tenants to spaces will really have a significant impact overall on the income stream for 2020 just given those vacates are more geared towards the back half of the year.

And again we didn't have them leasing up in our numbers. So we're thankful that we do have that low expiration schedule right now..

Okay, great, thanks for the color..

Thank you. Our next question is from Dave Rodgers. Please go ahead, Dave..

Yeah, good morning everybody. I hope you're all well. I wanted a couple of quick follow-ups. First on co-working, you said seven tenants, they're all current.

How much of those were already on cash pay versus kind of still building out or in rent deferral?And then maybe, Brent, what are your discussions with them? Do they all want to stay or have they approached you about converting the leases or departing the spaces?.

I guess, first, I just want to make a small clarification, I know is that WeWork was fully current. We have had discussions with the smaller operators and we're working with one of them currently right now as we speak. But I would say all of the operators is still a very positive overall in our business, how they built out the space.

Again, I would note that really all of them of focus more on the small business, small teams and less on bench style seating. And so, I think that does position them better when things come back.If we think about the discussions that we've had. Specifically, with WeWork, two of their locations are completed and built out.

And one of them is in free rent, one of them is paying rent. And so, we are current with that.

We do have one location as I mentioned before in Orlando, where they have been going back and forth with the fire Marshall in that market, trying to get final approval of their plans.And so that, as we noted we anticipated that that would probably be wrapped up sometime later this year and therefore we never really included in our 2020 numbers, even at the beginning of the year.

But clearly given the disruption and in construction and the delay and likelihood we may see a reversal of densification in the marketplace. And so, they may need to rethink that space.

But again, we didn't have any of that coming online expecting it in 2020 previously.I would also note that all of our leases with co-working operators have significant credit enhancement as you know something that we've always been very focused on. We provide a high-quality service to high quality companies.

And so we often look for in those instances where they're not rated or public additional security. And we look for that significantly with our co-working operators. So, we think that's a positive for those locations as well..

Great, helpful. Maybe question for Bobby. I think you had mentioned you didn't expect any significant delays in the move-ins around the Tis, I guess to confirm that for me of two big move-ins including Amazon, in the fourth quarter. And then the second part of that question is Amazon, I think, moved into your top 5 tenants.

Does that include the extra 130,000 square feet signed, but not commenced or will that be additive to that position?.

Yeah, I hope you doing okay, Dave. I'll answer the last question first. Amazon's 130,000 square feet is included in our calculations of the 5% of our ALR. The first question was, is there any anticipated delay associated with the Amazon starting later this year, I think in the fourth quarter. And no, there is no anticipated delay..

Okay. And then maybe just lastly on the accounting side for me in terms of bad debt reserve straight-line rent write-off.

I think you alluded to it that you'd wait and see and kind of take that approach for the year, have you increased any of those reserves made any write-offs? And how do you view that I guess sitting here today at the end of April?.

Well, historically we have not had much bad debt expense. I think I looked back over the last several years, one year was less than $50,000.

I think last year was $150,000 a total bad debt expense.Obviously if you look back 30 days ago, you could have imagined that there will be 30 million people filing for unemployment and the number of shutdowns and furloughs that we've seen. We've got 1000 tenants representing 70,000 individuals.

It's hard to get your mind around what the impact has been from the pandemic for how long this is going to last. And that's why you see us take the more prudent avenue to evaluate a little more closely. But I have not made any significant bad debt accruals at this point nor have we have been requested to make such..

Okay. I appreciate the color guys. Thank you..

Thank you. Our next question is from Aaron Wolf. Please go ahead Aaron..

Hi all, this is Aaron Wolf. I am with John Guinee. I hope all as well. Just a quick question turning back to the Galleria in Dallas.

What are the parking ratios there?.

Hi Aaron and John. I hope you both are safe and healthy. I appreciate you joining today as well. The parking ratios at the building are roughly a - call it 3 per 1000. I would note that it's an exciting project that again we closed on in the beginning of the first quarter. What's interesting about that deal as well as we recognize.

It's just the base of a large retail center.

And obviously retail is experiencing a lot of disruption.I think what we like about the opportunity was it's not reliant upon what goes on in the base of building and there is ample parking at the site, not only with was extended to us, but a relationship with the retail owner to flow the space nights and weekends etcetera into harder on in various it's during the workday we need additional space in their garage.So, what's unique about that is the, of course, we own 3 per 1000, but we can go much, much more dense in that location given the relationships we have in the scale of that project and the other mixed-use components.

We think that's a really exciting opportunity in that regard..

Great, that's very helpful. Thank you. And onto redevelopment so Pierce is about what you said 42%, the economic occupancy.

What's the NOI look like coming through there now?.

I'd say the NOIs is, we're property expenses, but we're not making a significant amount of NOI overall in the project at the moment. We're basically pocketing a little bit of cash flow. We're hopeful and continue to see positive momentum at the asset obviously looking for a larger user given the size of the availabilities.

And the disruption did slowdown that process, but it's vacant space. We're hopeful once some of the governor's orders of shelter in place get removed, people will come back to the building to start touring again.It's obviously a little bit easier in this environment for people to feel comfortable touring vacant space and occupied space.

And so we think that will obviously be a little bit of beneficial to helping to fill that call it 200,000 square foot availability..

Okay, great.

And 200 South Orange, that's why the 640,000 plus square feet, when that construction resumes, what portion is going to be coming offline? Is it all of it or what type of square footage will be coming offline?.

Well, our project, the base building component is really at the base of the building more lobby and amenity focused..

Okay..

That is where if you recall SunTrust resided. They've since vacated roughly about 120,000 square feet prior through '19 in various stages. So that space has been part of it has been re-led to WeWork. And that again as we've talked about previously. It's going to take some time for them to build out the space work through the fire marginal etcetera.

And will resume our base building construction when it's appropriate..

Okay, perfect. And then one last quick one, you obviously review tenant credit very carefully.

Do you think WeWork will be in business paying rent in 2021?.

You know I think it's a little bit to get ahead of ourselves to speculate on tenants' financial balance sheet capability and liquidity. But we have been very pleased with their performance and working with them as a customer and tenant.

They continue to pay rent and meet all their obligations.So, at this point in time, we think that that along with the security deposits we have in place, makes us feel very comfortable with those an operator and a tenant and.

Of course, the duration of the pandemic, we'll probably have a large variability on the impact overall on that type of business. But as I mentioned before, we'll see how this goes, but you could see a situation where they are a nice release valve, if you will to help people get to a 6-foot spacing within their own build out.

And so, we have to kind of continue to see how that plays out..

Great, thanks for taking my questions and stay safe..

Likewise, thank you..

There are no other questions at this time..

Great. I want to thank everyone for attending today's call. Again, I want to stress that our hearts and thoughts go out to those who have been dramatically impacted by the virus.

But we do recognize that as the months go on, we're going to continue to get back to the office place and we look forward to welcoming our tenants and our customers and communicating what we're seeing in the marketplace with our investors.To that end, we look forward to seeing many of you virtually at NAREIT's REIT Week in June but please reach out to management.

If you've got any other questions or concerns. Thank you everyone. Have a great day..

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. And have a great day..