Jacques Cornet - ICR Managing Director Albert Behler - Chairman, CEO & President Ted Koltis - EVP, Leasing Wilbur Paes - EVP, CFO & Treasurer.

Tom Lesnick - Capital One Rob Simone - Evercore ISI Blaine Heck - Wells Fargo Jamie Feldman - Bank of America Merrill Lynch Jed Reagan - Green Street Advisors Tom Catherwood - BTIG.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Paramount Group First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference call is being recorded today, May 05, 2017.

I would now like to turn the call over to Jacques Cornet with ICR..

Thank you, operator, and good morning. By now everyone should have access to our first quarter 2017 earnings release and the supplemental information. Both can be found under the heading Financial Information Quarterly Results in the Investor section of the Paramount website at www.paramount-group.com.

Some of our comments today will be forward-looking statements within the meaning of the federal securities laws.

Forward-looking statements, which are usually identified by the use of words such as “will,” “expect,” “should” or other similar phrases are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them.

We refer you to our SEC filings for more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our 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 most directly comparable GAAP measure is available in our first quarter 2017 earnings release and our supplemental information.

Hosting the call today, we have Albert Behler, Chairman, Chief Executive Officer and President of the Company; Wilbur Paes, Executive Vice President, Chief Financial Officer and Treasurer; and Ted Koltis, Executive Vice President, Leasing. Management will provide some opening remarks and we will then open the call to questions.

With that, I'll turn the call over to Albert..

Thank you, Jacques, and good morning everyone. We had a nice start to the year marked with strong operating and financial results. Our core FFO for the quarter was $0.22 per share and our same-store cash NOI growth was in line with expectations. We still anticipate that 2017 same-store cash NOI growth will be 6% to 9%.

Wilbur will go over financial results in a bit. I will address a few key takeaways from the quarter. We leased over 285,000 square feet with cash mark-to-markets of 18.5%. This quarter's leasing included 187,000 square feet in San Francisco and over 93,000 square feet in New York. We remain laser focused on our large block availabilities.

From a portfolio standpoint, we ended the quarter with leased occupancy of 90.8%. This was expected and primarily due to ING vacating the 140,000 square feet they had been occupying at 1325 6th Avenue.

As we mentioned on our February call, this was the last in a series of known large block moveouts that have occurred during the past 12 months, which has taken a toll on the occupancy, but also provides for the significant embedded opportunity in our portfolio. Turning to each of our markets, in New York, we leased over 93,000 square feet.

Activity for the quarter includes a full floor at 1633 Broadway leased to a large public media company for a 15-year term at a healthy starting rent. This is the second consecutive quarter in which a large quantity nonfinancial services tenant has moved into our portfolio.

The flexibility of our floor plates and the location of our assets continue to attract a diverse tenant base. Furthermore, in both instances over the past two quarters, tenants are moving to the 6th Avenue and West side submarkets from other Manhattan sub markets. We also made progress on the retail front.

At 1633 Broadway we just signed a lease with a new Italian boutique bakery and Café called Princi. Princi, which currently has locations in Milan and London has partnered with Starbucks to expand into the U.S. market and 1633 Broadway will be home to one of its first U.S. locations. Ted will discuss the retail strategy further.

Also during the past quarter, at 903rd Avenue, Goldman Sachs renewed 30,000 square feet with us. We view the Goldman renewal as a testament to the quality of our building in addition to the continued appeal that the 3rd Avenue market provides.

In Washington DC, our portfolio remains leased at historic levels and with no meaningful explorations until 2021 we continue to push occupancy higher. Leased occupancy at the end of the quarter was 95.8% up another 30 basis points from year-end. We just don't have much space available right now and that is a great situation for Paramount.

As highlighted earlier, in San Francisco we leased over 187,000 square feet, the majority of which was at a newly acquired One Front Street, where we have been executing on our leasing objectives.

When we purchased the asset late last year, the opportunity for us was the need to midterm role there 500,000 square feet of below-market leases were set to expire over a five-year period and we felt we could achieve a 20% upside upon renewal. We were right and now are ahead of our targets.

Ever since we acquired the assets, we have been in active discussions with our tenants including our largest tenant First Republic in order to renew and expand its lease at the building.

In a short span of less than four months since our acquisition, we have renewed and expended First Republic's 120,000 square foot lease by 50% to 179,000 square feet resulting in a 21.5% cash mark-to-market. With this lease, we have extended nearly 30% of the building with additional opportunity to create value.

This was a great transaction for the building, a superior effort by our leasing team and an outstanding result for all. We will continue to maintain our proactive and disciplined approach in engaging with our tenants and taking advantage of momentum in the San Francisco market.

Our buildings sit on the mission and market street corridors and demand there remains very active. From a balance sheet and capital allocation viewpoint, we had announced the sale of Waterview earlier this year for $460 million or just over $720 per square foot, a record price for an asset in that market. The transaction closed earlier this week.

Our decision here was to recycle capital from Rosslyn, Virginia into San Francisco's CBD into an asset where there was tremendous upside and we did it in a tax-efficient manner, deferring over $393 million in capital gains. Our decision was a sound one and has already started paying off.

With the appropriate cost basis, the San Francisco market continues to offer us opportunity to create value for shareholders. We use of proceeds from the Waterview sale to repay over $371 million of outstanding debt including mortgages on Liberty Place and 1899 Pennsylvania Avenue and amounts outstanding under our revolving credit line.

As we highlighted on our last call, we also closed on a $975 million refinancing of One Market Plaza and now having repaid the Liberty Place and 1899 Pennsylvania Avenue loans our next significant maturity is not until 2021. In addition, earlier in this year, we recapitalized 60 Wall Street through a 95 joint venture with GIC.

For us, this was a win-win. We continue to operate and manage the property, maintain a similar economic ownership interest in the asset post the recapitalization and are excited to have extended our partnership with GIC.

The acquisition price was approximately $1 billion or $640 per square foot and was funded with fresh equity capital and $575 million of new property level debt. Wilber will talk about the accounting for this transaction and how it appears in our financials pre-and post-acquisition.

Let me conclude with a few remarks on the macro environment, which has remained steady since we last spoke. In regards to the specific markets in which we operate, we see a stable and improving environment for the types of assets we own. Growth remains relatively positive.

Employment in our markets continue to improve and we continue to see underlying strength in each of our markets. Demand-wise there is a sense of cautious optimism in our conversations with tenants and the way they feel about their business models. With that I'll turn the call over to Ted to provide additional insights on our leasing efforts..

Thank you, Albert and good morning. We had a really strong quarter of leasing activity and we feel we have good momentum as we continue to see solid demand in our markets. With this momentum, we remain highly focused on leasing our available space. Turning to our markets, starting in New York.

Overall, we continue to be optimistic about the level of activity and the number of tenants in the market. We see a good number of tenants that are out there touring our space and sending us proposals and at 1633 Broadway, we are seeing progress for our efforts.

As discussed on our last call, we've moved into early proposal stage on some of the space and we forecasted execution on leasing next time we speak. Delivering on that statement, during the quarter, we leased approximately 50,000 square feet to a large media company at a solid starting rent.

The deal is reflective of the diverse tenant base that 1633 attracts due to its location and efficiency for open plan users.

As for the remainder of the available space, we continue to see a diverse level of activity from perspective tenants that include the traditional financial services companies, law and other professional service firms, as well as established media and entertainment firms, which gravitate to the building and to the area.

And similar to last quarter, we've moved into a more advanced level of proposal discussions on some of the space and expect we'll have more leasing to announce next time we speak. Related to retail space at 1633, as Albert mentioned, we signed Princi after the end of the first quarter.

We are happy to welcome this high-quality tenant to the building where they’ll occupy the former cozy space adjacent to our lobby entrance. Princi is well operated and well financed and will serve as a terrific amenity to the building's tenants.

This deal is a good example of our stated retail strategy, a selective approach in deciding who we put at the front of our buildings. This has been our approach historically and you can expect this to remain strategic and disciplined in how we fill our retail space.

Turning to 1301 Avenue of the Americas and 31 West 52nd Street, we are seeing a strong level of market interest in both spaces.

This level of interest is reflective of what we see as a continuing trend along the 6th Avenue corridor, which once again let all submarket to this past quarter in large block deals and as an overall market, offers large tenants the most viable, established location in Midtown.

Our specific interest at 1301 is coming from traditional financial service and law firm type tenants that are typical users of this space. At 31 West while we see those same types of prospective tenants because of the boutique nature of the building, we are also seeing a more diverse type of potential tenants showing interest.

At 1325 Avenue of the Americas, early in the quarter as Albert touched on, we took back 140,000 square feet of the old ING space.

Work to whitebox a portion of the space is ongoing and expected to be completed during the second quarter and as we begin the marketing process here, it is evident to us that this space will offer an attractive price point for more value tenants in the Midtown market and we've a variety of tenants that are looking at this space, both in a build condition and as the mall space.

Turning to Washington DC, we slightly increased our portfolio occupancy from our last call up to 95.8%. We have great assets and with no meaningful expirations in the next four years and only one full floor available in the portfolio at 29 Pennsylvania Avenue, we don't have much space to lease.

We remain well positioned in the market proven by the fact that we've continually outperformed during the last several years of a stagnant DC office market. In San Francisco, we had a very productive quarter.

As Albert said, we started making great progress on some of the one front expirations and have good momentum as we continue to unlock the value in that property. Most of the 187,000 square feet we leased in San Francisco during the first quarter, relates to renewals and expansions at One Front.

The cash basis mark-to-market of 21.5% this quarter in the San Francisco portfolio is indicative of the value we see in One Front and in some of the existing leases at One Market Plaza. We are not done yet at One Front.

We have a number of other deals that we are working on to continue to execute on our acquisition strategy and continue to think the opportunity to create value in this property is substantial and we're working to achieve that value sooner rather than later.

The San Francisco market in general continues to exhibit healthy activity with rent growth having moved to a more sustainable level and with most of the new product either leased or in discussions, we see this market continuing to offer stability and growth.

With that summary, I'll turn the call over to Wilbur, who will discuss the financial results..

Thanks Ted. Yesterday we reported core FFO of $0.22 per share for the first quarter versus $0.23 per share for the prior year's first quarter. This decrease was driven primarily by a 540-basis point decline in the pro-rata share of occupancy from 93.8% at March 31, 2016 to 88.4% at quarter end.

The decrease in occupancy was largely attributable to the previously highlighted four large block vacancies aggregating 596,000 square feet, which became vacant subsequent to the end of the first quarter of 2016.

So, while they fully contributed to earnings in the first quarter of 2016, there was zero contribution from it in this year's first quarter. That said, our first quarter 2017 earnings, does include a $0.01 impact from higher fee income, net of income taxes. Recall that our fee income flows through our taxable REIT subsidiary.

So, the bottom line impact to earnings is mitigated because of higher income taxes. Our share of cash NOI for the first quarter was $79.1 million down 9.3% from the prior year's first quarter, which included $10.9 million of termination income.

Current year's cash NOI includes the acquisition of One Front Street and our 5% interest in 60 Wall Street, more on 60 Wall in a second. Same-store cash NOI, which excludes the impact of lease termination income and acquisition and disposition activity was $72.8 million down 5.1% from the prior year's first quarter.

As Albert touched upon, our guidance earlier this year assumed positive same-store cash NOI growth of 6% to 9%. With the first quarter being negative 5.1% we are now at an inflection point.

In order to achieve the positive 6% to 9% same-store growth this year, notwithstanding the negative first quarter results, we would need to deliver double-digit same-store growth in each of the next three quarters and we will as free rent on previously signed leases starts to burn off and with occupancy being at 88.4% and lease expirations being way below average, we expect to deliver tremendous same-store growth for years to come as we continue to lease the portfolio.

Let me spend a minute on 60 Wall Street. On January 24, we acquired a 5.2% interest in a venture that owns the asset. Prior to the acquisition, we held a similar interest in the asset through two of our legacy private equity funds.

Because these funds were accounted for at fair value, earnings from 60 wall would be recorded only to the extent there was any appreciation or depreciation in the value of the asset. Post the acquisition of the asset by a new venture, is no longer accounted for at fair value.

Instead it is accounted for at historical cost using the equity method of accounting. So, earnings are now recorded based on property operations.

Notwithstanding that we own the same 5% interest in this asset this year and last, we have kept our accounting transparent and immaculate and have treated 60 Wall Street as a non-same store property because had we treated it as a same-store property, our same-store results would have benefited from it contributing to cash NOI in the current year whereas it did not in the prior year, simply due to a different accounting convention.

As Albert touched upon earlier, in the quarter we leased over 285,000 square feet. To put this in perspective, that is over 130,000 square feet or more than 80% than the average we have leased in each of the past two first quarters as a public company and we did it at very strong mark-to-markets of 18.5% on a cash basis and 18.3% on a GAAP basis.

Turning to our balance sheet, on January 19, we completed a $975 million refinancing of the 1.6 million square foot One Market Plaza in San Francisco. The new seven-year interest-only loan is fixed at 4.03% and matures in February 2024.

We retained 23 million for our 49% share of net proceeds after repaying the existing $873 million loan that had a weighted average interest rate of 6.12%. We ended the quarter with over $800 million in liquidity comprised of $201 million of cash and restricted cash and $600 million available under our revolving credit facility outstanding.

Our outstanding debt at quarter end was $3.4 billion at a weighted average interest rate of 3.5% and a weighted average maturity of 4.9 years. 80% of our debt is fixed at a weighted average interest rate of 3.7% and the remaining 20% is floating at a weighted average interest rate of 2.6%.

On May 03, we completed the sale of Waterview and used the net proceeds to repay $171 million of debt on 1899 Pennsylvania Avenue and Liberty Place that had a weighted average interest rate of 4.7% and $200 million outstanding under our revolver.

A pro forma debt balance post these repayments is $3 billion at a weighted average interest rate of 3.5% and a weighted average maturity of 5.9 years. Our maturities are well laddered. We have no debt maturing in 2017 and only $123 million of pro rata joint venture debt maturing in 2018 and we're already in the market to refinance this debt long-term.

With that, operator please open the lines for questions..

Thank you. Ladies and gentlemen, at this time and will be conducting a question-and-answer session. [Operator instructions] Our first question comes from the line of Tom Lesnick from Capital One. please proceed with your question..

Good morning, guys.

I guess first just with regards to cash NOI in the quarter, the number for the full quarter is obviously impacted by the ING moveout, but was just wondering if you guys could provide what the quarterly cash NOI run rate was as of March 31?.

Hey Tom, it's Wilber. The quarterly cash NOI as you see the reported number was around $79 million. To think about it from a run rate perspective, I would use the $73 million number, which is the same-store cash NOI and the reason being that in the first quarter, obviously you have the full inclusion of Waterview as well as One Front Street.

So, in the same-store number, we've excluded One Front, so you get to a much more run rate number, notwithstanding that theoretically on a cash NOI perspective, Waterview did contribute greater than One Front, but that's a good starting point I would say..

Got it. That's very helpful.

And then regarding One Front Street, I guess first congrats on the lease there, but going back to your comments when you acquired the asset, I think you made mention of substantial value add opportunities at that building, just wondering how those are progressing, what you guys are thinking in terms of ideas and designs?.

Well we're not really focusing on structural changes at this point Tom. We are really talking specifically about expanding and extending some of the tendencies in that building and I think the first example here was First Republic speaks for itself and we're on track to do a couple of other of these transactions.

So that's really the value add strategy first..

Got it. That's helpful.

And then I guess my last question relating to leasing volumes and this isn’t specifically the paramount, but generally still appears relatively soft in New York, do you get a sense that it's just due to a lack of overall demand or is the demand there and it's just tenants delaying in light of potential uncertainty regarding the new administration?.

I think leasing balance are certainly up front from where they were last year, it's tracking more towards at a five-year historical average I think is what we've seen this quarter, but for us in general, we still see very good and solid leasing activity that's out there.

I think we're in terms of tours and proposals that we're seeing in tenants coming through our space because certainly we've got a variety of space and variety of price points. So, it gives us a good vision to the market We think the market is strong, but we think it is taking a little bit longer to get deals done maybe than we would have liked.

I am not sure what I attribute that to, but the market remains quite strong we think in New York. I don't see a big change in fundamentals from what we've seen in the last few quarters..

Tom and as we've said over and over, over the last two years, leases in New York take longer to be concluded, especially the larger ones and we normally have a lot of leases going to be executed by the end of the year and I've mentioned in the last quarter, this might be a more balanced year in this year.

But the first quarter is very typical for our previous years what we delivered here in New York and the activity as such I have seen is pretty good and pretty healthy and I think that we will do our share of leasing for this year as expected..

Got it. Appreciate all the insight, thanks guys..

Sure. Welcome..

Our next question comes from the line of Rob Simone from Evercore. Please proceed with your question..

Hey guys. Good morning. Thanks for taking the question. I was wondering -- the commentary on the leasing is really helpful. I have kind of a two-part question for Ted mostly I think, would it be possible to kind of quantify or give us some metrics as to the leasing pipeline and kind of like how that looks now versus maybe two three months ago.

And then also you guys have said in the past that you feel confident that you can address the very least majority of the large block vacancies by the end of this year, did you still think that's a fair assumption to make at this point?.

So, I think it's a fair assumption to say that we see that with the activity level that's out there, we should be able to tackle a good chunk of the leasing by the end of this year. We would be surprised if we didn't.

I think that the level of activity that we continue to see, I think what's really encouraging for us is just kind of the broad range tenants that are coming into our space and looking at our space.

We comment on the last couple of big deal that we did have been outside of financial services and so we think that that trend is continuing and probably a good chunk of we'll get our fair share of financial service and law firm. Deals I think on this available space, but I think we'll see a better variety of other tenants as well on it..

And then on the pipeline, can you guys share like at least at 1633 and 1301 and such what the total square footage of deals is kind of either in the works or under active negotiation?.

I can't really -- I cannot give us square footages. I can tell you that ranges from tenants of -- certainly with that 25,000-floor place at 1325. So, it starts from there and goes up to 200,000 for tenants. We have proposals out on all of our available space. I would say that, but they are on various stages.

So, I really can't comment much further than that right now..

All right. Thanks guys..

Our next question comes from the line of Blaine Heck with Wells Fargo. Please proceed with your question..

Hey guys. Good morning. At 1633, great job on the 50,000-square foot lease, but it looks like the lease rate stayed pretty much the same sequentially.

So, was there a move out there as well?.

Yes..

And care to elaborate on that..

Yes, there was tenants on the 47th floor that vacated their space in the quarter. So obviously we were not telegraphing tenant by tenant. Everybody focus was on the four large block vacancies we had and timing wise, you didn't see a change in the lease rate notwithstanding that we signed a full floor tenant in the quarter.

It was offset by a full-flow vacancy..

That's fair. I guess following up on that, on your top tenant’s page, I could see that Morgan Stanley has a 50,000-square foot expiration in June.

I think that's a 31 West 52nd, first of all, is that right? And second, should we expect a move out or renewal there?.

Morgan Stanley will be moving out their space and it is in 31 West 52nd Street that's correct..

Okay. Lastly there been some concerns about street retail in the city.

So, I'm wondering if you've noticed any change in the demand for the large retail space you guys have at 1633 and maybe just give us an update on where you are on that?.

Yes, as we had pointed out on the call, we're very excited about the Princi lease that we just signed, the first one here in New York and that shows how capital and focused we are on finding the right tenant for the asset.

We're not really competing here on Broadway with the markets that are mainly affected by the slowdown in the retail rent, which is maybe Fifth Avenue and Madison Avenue. And we don't feel that our market segment here at 1633 is affected..

All right. Thanks guys..

Sure. You're welcome..

Our next question comes from the line of Jamie Feldman from Bank of America. Please proceed with your question..

Okay. Thank you. Good morning. So, Ted you had mentioned you had some square footage under advanced proposals.

Can you quantify maybe the amount of square footage in that category of leasing?.

I would rather not comment on that, but as we said, there are big blocks of space in its various sizes. So, you can expect that we have some proposals out that would take up an entire block and others that will take just a portion of it..

Okay. And then going back to the 1633 retail, so does that lease take up all the space or is there still more to lease there..

Jamie, that's the former cozy space, if you remember, that's a street-level space if you enter the building from Broadway on to the right side of the building that's taking that entire space that cozy space..

Okay.

Did you still have space for the grade to lease there? How much space is there? How much you've left the lease there and just what your thoughts on it?.

It's about 40,000 square feet, that's a space related to the -- to the queue and that we have a couple of interested parties, as we had mentioned before and as I pointed out before, we want to be very selective. This is our headquarter building and we are having discussions with Swiss retail tenants, but we don't want to talk about it too early..

Okay.

And then I guess just thinking about obviously some impressive same-store coming, can you talk about how people should be thinking about the CapEx spend, but just as we're modelling the next year or two as these leases come online and you get leasing done, like what kind of capital commitments are you anything here overall?.

Sure. Jamie, when you look at FAD and you look at CapEx spend, obviously the FAD this quarter was much more positive than it has been in previous quarter, but the function of that is driven due to the timing of CapEx spend, which is going to be lumpy quarter over quarter. So, I would not look at this quarter's FAD ratio as a appropriate run rate.

Obviously, we have 596,000 square feet just on this large block vacancy that when CapEx starts to get spent on that it will fluctuate quarterly..

So, what's a good estimate for TI?.

Our TI packages and as a percentage of initial rent over the last few quarters has been fairly consistent. So, if you're looking for a number and estimate to model, I would go back to historical results, which is necessarily indicative of what we expected during the future..

Okay.

And then just last question for me, you sold Waterview, any thoughts on other assets you might be up for sale here or just thoughts about portfolio repositioning?.

Well we, Jamie we're looking always as I mentioned before for opportunities to prune our investment, but we want to be prudent about this and we have no immediate plans here, but if an asset has gotten to pretty much the peak of its value, we might consider potentially more a 49% sale of an asset because it gives us still some upside and makes us earn fees for our shareholders, that might be in the cost potentially..

Okay.

And I guess on that note softened valuation right now for asset or what do you think of the private part of the sales market?.

Well the sales market is still very strong as you can see why we recently executed transaction on 245 Park Avenue. There is a tremendous amount of liquidity in the market not only on the debt side, but also on the equity side. We saw that when we refinanced our debt as well as when we looked at Waterview.

So, we're very confident that for the time being, the asset prices will stay at the high level where they were..

Okay. All right. Thank you..

Sure. You're welcome..

Our next question comes from the line of Jed Reagan from Green Street Advisors. Please proceed with your question..

Hey. Good morning, guys..

Good morning, Jed..

I guess if you -- just following up on the last question, if you did move to do another JV sale, how would think about use of proceeds or something like that sort of weighing acquisitions versus additional debt paydown, versus potentially share buybacks, and how are you kind of prioritizing those at this moment, at this point?.

Jed, we're looking at all these opportunities, different alternative. We want to stay opportunistic and we constantly evaluate all of our options here.

If there was an opportunity for an acquisition like we did at One Front, that is accretive with a lot of upside for our shareholders, we would consider it, but we are not aggressively looking for acquisition. We also used as you could see from what we did with Waterview paying down our debt and keeping the credit line at zero.

So, we're very conscientious about keeping a conservative balance sheet as well..

Do you guys like where your balance sheet sits now, following some of the recent paydowns or do you have some additional merger plan to de-lever?.

Currently we like the balance sheet the way it is.

If there was any kind of opportunity that makes a lot of sense for our shareholders ultimately, otherwise we're comfortable with the leverage at this point because remember we will increase our cash flow over the next 12 months and thereafter once all the space that came up to -- up to be leased in the last year once the lease is commenced and come into cash flow the NOI will increase and the EBITDA will increase and that should really improve the balance sheet relations better..

And just to add to Albert, Jed, when you look at we've been very, very focused on our maturities. Today other than $123 million of pro rata JV debt that's coming due in 2018, which I highlighted we're already in the market to refinance that long-term. Beyond that our next maturity is in 2021. So, our balance sheet is really, really well positioned.

It's well laddering. Maturities have been pushed out today at 5.9 years and with the refinancing of that JV debt over a long term, that would take that even further. So, I think we're happy where we sit..

Okay.

That's helpful and then just in terms of share buyback, is that something that's kind of an active part of the discussion of this point or probably less likely where you sit today with your stock price?.

Jed, I wouldn't like to comment about that. We are discussing this with our Boards from time to time from time to time and the Board is fully aware of the opportunity and we'll take the steps that are necessary to be taken..

Okay.

In terms of kind of the remaining larger blocks in New York, just following up on a previous question is your expectation that these would go more maybe a floor at a time or do you I think there's a decent chance that you could knock off one of the entire blocks and what flows through?.

As Ted was saying, we have proposals out on most of our spaces, large block spaces and some of them are for the entire blocks and some of them are floor by floor. It's a healthy mix of different opportunities..

Okay.

And then last one on One Front, can you remind us if there are some larger expected move out that are coming up in the building or is it more renewal type conversations at this point?.

As we said, I think part of our acquisition strategy was really to tackle in a number of the renewals early close to 80% of the building rules within the next five years, but it was spread over probably four or five larger tenants and a number of smaller tenants.

So, we were busy speaking to the large tenants in the building and trying to accelerate those renewals and I think that the First is a great example of that and I think you can expect to see more of that in the near future..

The one thing Jed, I'll point out to Ted's thing is obviously you saw occupancy tick down at One Front because the non-move out that was there in that building that took place in this quarter. So that affected the occupancy of that building by about 550 basis points.

So, in terms of non-move outs that was the one we knew was happening at the time we acquired the building..

Okay. But at this point no other tenants have indicated to you that they're definitely moving out..

We have one tenant, that's a two floor tenant that looks like they're moving out..

Okay.

Timing on that?.

Timing is end of this year, but we're also in discussion with other tenants who want to increase their occupancy..

Yeah, a portion of that space, we're having discussions on already, so we may have some leasing on it before the tenant moves out..

Got you. Okay. Thanks very much..

You're welcome..

Our next question comes from the line of Tom Catherwood with BTIG. Please proceed with your question..

Thanks. Good morning, guys..

Good morning, Tom..

Just one question from me. As I look at the DC portfolio based on incredible work over the past two years leasing that out right look back to 1Q '15 I think the occupancy was low 83%. So obviously you're up by 95% now, but Ted you made the comment that there's really no meaningful role there until 2021.

So now that that portfolio is at stabilization what's the strategy there? Are you thinking of adding more? Is it just we're going to sit there and let it ride its course? How you thinking about your investment down there?.

Well thank you for the compliments on the leasing first. Ted and his team have really done a terrific job and it speaks also for the quality of our assets and the locations that we choose in Washington DC. We are very opportunistic as we had mentioned before within our portfolio.

So, if we're evaluating acquisition opportunities and joint venture opportunities all the time and we will look at the opportunities in Washington DC as well and we want to see how the market develops within the next 12 months.

How the new government is gearing up to taking step and so it's a little bit of a wait and see, but watch very care where opportunities approach..

The season leasing, I probably should never say that we don't have anything coming until 2021 because something always comes up, but that's just what's actually on paper right now.

As always when you have an asset that's 100% leased, you in a good position because of the market rates increase and you have opportunities potentially to if a tenant wants to grow, they might want to move out, they have to pay you a cancellation payment.

So, there is upside potential in a portfolio even so it's 100% leased, it never stays the same even so its leased because the business is vibrant, the business of the tenancy and they might ask for changes in their leases. So that gives us as a landlord opportunities to generate additional returns for our shareholders..

That makes sense, but it sounds like I guess is it fair for me to say it sounds like you're agnostic when you look at your markets where you want to allocate capital and if you found the right deal in the DC market you would go for it more deal by deal specific as opposed to I want to overweight DC now or I want to overweight San Francisco now.

Is that a fair assessment?.

Yes, that's a fair assessment. We have said this in the past we're not really focusing on a certain percentage of our portfolio to be in a certain market. We want to approach it opportunistically. We have boots on the ground in all three markets. We have our leasing team there. We have the market experience. We have property management there.

So, we feel very comfortable in all these three markets and we will take advantage of opportunities once they arrive..

Got it. Thanks guys..

You're welcome..

[Operator instructions] It appears there are no further questions in the queue. I would like to hand the call back over to Mr. Behler for closing comments..

Thank you. Well, thank you very much all for joining us today. We look forward to providing you an update on our continued progress when we report on our second quarter results in August. Good bye..

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day..