Jacques Cornet – ICR Albert Behler – Chairman, Chief Executive Officer and President Wilbur Paes – Executive Vice President, Chief Financial Officer and Treasurer Ted Koltis – Executive Vice President, Leasing..

Rob Simone – Evercore ISI Blaine Heck – Wells Fargo Nick Stelzner – Morgan Stanley Vincent Chao – Deutsche Bank Chris Lucas – Capital One Securities.

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Paramount Group Third Quarter 2017 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded today, November 7, 2017. I will now turn the call over to Jacques Cornet with ICR. Please go ahead sir..

Thank you, operator, and good morning. By now, everyone should have access to our third quarter 2017 earnings release and the supplemental information. Both can be found under the heading Financial Information Quarterly Results in the Investors 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 a 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 the most directly comparable GAAP measure is available in our third 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. Thank you for joining us today. We once again had a terrific quarter as we continue to execute on our goals and create significant value for our shareholders. Our same-store cash NOI was up 21.3% compared to the same period last year, and our core FFO was $0.22 for the quarter.

Given these results and our outlook for the fourth quarter, we have raised our core FFO guidance for 2017 to $0.89 at the mid-point. Wilbur will cover our financial performance in greater detail. Let me focus on leasing. Leasing is the heart of our business and a key driver of our performance. And we continue to execute on that front.

During the quarter, we leased over 369,000 square feet, positive cash to mark-to-markets of 10%. As I had said previously our leasing activity for 2017 would be spread our fairly, evenly over the year as it has been.

The leasing activity this quarter was our highest for the year, bringing our year-to-date total to about 947,000 square feet at cash mark-to-markets of 16%.

This is well ahead of our initial goal of 750,000 square feet for the year and just shy of our revised 1 million square foot leasing goal for the year, which we expect to fully surpass before the year is done. We have not only made considerable progress on our large block vacancies, but have also been executing on a number of early renewals.

To put this in perspective, our 2018 lease expiration today stands at about 158,000 square feet, which is less than half of what it was at the beginning of the year. If you factor this together with the remaining 388,000 square feet of large block space, which we have yet to lease, it puts our total availability at less than 550,000 square feet.

For a Company that has leased on average over one million square feet per year since going public and is expected to once again surpass that figure, we feel great about our ability to lease this remaining space. Before Ted provides further details on leasing, I want to share my observations on each of our markets, beginning with New York.

Looking at the overall market, we continue to see solid demand in Midtown. During the third quarter, the Midtown market as a whole had the most quarterly leasing activity in more than two years. Year-to-date, net absorption at Midtown is positive.

Just as we did in the first half of the year, we continue to capture more than our fair share of this activity. Our year-to-date leasing activity was balanced across industries. About 30% came from traditional fire tenants, 20% came from legal services and the remaining 50% came from a variety of other industries.

This diversity in tenant demand continues to demonstrate the resiliency of the market for high-quality CBD space like ours. A great example of this is a lease that we signed this quarter with an existing tenant for over $200 per square foot at 712 Fifth Avenue, a premier toll-free asset in the Plaza district.

Considering the much talked about softness in the Plaza district, this speaks to the appeal and the quality of this asset. Looking more specifically at each of our vacancies. Leased occupancy at 633 Broadway now stands at approximately 91%, up 440 basis points from last quarter.

As we mentioned on our last call in July, we completed 106,000 square foot lease on floors 35 and 36, two of the four former floors occupied by Deloitte. And we currently have a lease out for the remaining two floors, which we expect to get signed by year-end, bringing the occupancy in the building close to 95%.

We also made tremendous progress at 1301 Sixth Avenue, where we signed a 76,000 square foot lease for the 41st and 42nd floors as well as part of the 38th floor. With this lease, we have not only fully backfilled the Commerzbank space, but also leased a partially vacant floor. The building is now effectively full and stands close to 98% leased.

On our last call, we also indicated that we had 24,000 square foot lease at 1325 Sixth Avenue, that was out for signature. That lease got executed in the quarter and demand for this value space in our portfolio continues to remain strong. Turning to 31 West 52nd Street.

As we mentioned on our last call, two floors aggregating about 52,000 square feet expired in July. These floors, together with the other available space, provide us with 167,000 square feet at the top of the building.

With its boutique and discerning tenant base, along with the unique design, 31 West has been fully leased over the last 10 years and has never had any real vacancy, which is reflective of the fantastic location and demand this asset generates, presenting us with a terrific opportunity.

To fully capitalize on this opportunity, we have completed renderings and are in the final design phase of our lobby upgrade. This investment will cost approximately $17 million to $20 million, and construction will begin in the first half of next year. We are excited about this project and expect this investment to create meaningful long-term value.

Let me spend a few minutes on our D.C. portfolio. Washington is still a levered market. Demand is tepid and concessions remain elevated. Yet, we have continued to outperform, a direct testament to our approach and the quality of our portfolio.

We continue to increase occupancy in the portfolio, and it now stands at 95.5% leased, up 90 basis points from the prior quarter.

In a market that has not seen any net absorption over the last few years, we have increased occupancy on our four D.C properties from 68% to 95% And with no significant expirations for the next four years, ours is an envious position to be in. In San Francisco, our portfolio stands at 96.1% leased.

And that includes the impact of the recently acquired 50 Beale Street, which is 78.2% leased. We signed leases for approximately 57,000 square feet during the quarter with very strong cash mark-to-markets of plus 39%. Overall, the market remains healthy.

Operating conditions have been favorable as we have been very active signing leases in 2017 and are still seeing rent growth in the market. One Market Plaza is basically full at 97% occupancy, and whatever we do have space in this trophy asset, it has leased very quickly with tremendously positive marks.

At One Front Street, we continue to execute on our strategy and are ahead of our underwriting. To date, we have now taken care of approximately 60% of the five-year roll we had at the time we closed the deal with cash mark-to-markets in excess of 30%.

As previously announced, during the quarter, we increased our ownership interest in 50 Beale Street to 31% up from 3%. The transaction valued the building at $517.5 million or about $780 per square foot. This is even better pricing than One Front Street that we bought about 10 months ago, which has proven to be a valuable purchase.

The property is currently 78.2% leased and is under rented. With our proven track record in this market, our focus remains on the lease-up opportunity at this property.

At a time, when we still see others in San Francisco market willing to pay in excess of $1,200 per square foot for stabilized buildings with no immediately clear way to add value, we have been able to find attractive opportunities like One Front and 50 Beale, where we are able to create meaningful long-term value for our shareholders.

In closing, demand for quality assets like ours continues to attract first-class tenants. And we see a healthy flow of global capital that views our markets as long-term safe havens. Our focus continues to be on leasing, our available space and derisking our lease role, unlocking the significant embedded growth in our portfolio.

With that, I'll turn the call over to Ted, to give additional insights on our leasing..

Thanks, Albert, and good morning. Our third quarter results reflect a steady and significant leasing progress we've been reporting throughout the year. Across the portfolio, we continue to see good tenant demand, where we have space to market, which, for the time being, is primarily in New York and San Francisco.

Let's turn to our recent activity by market. Beginning in New York, at 1633 Broadway, during the quarter, we signed the 106,000 square foot lease on floors 35 and 36, bringing the occupancy in the building to 90.8%.

The new tenant is another example of 1633 Broadway's appeal to all types of users across the board, not just relying solely on traditional finance and legal services firms, a trend we expect to continue at this asset. As Albert touched on, we have leased out on floors 37 and 38, which would bring occupancy to approximately 95%.

Our team is hard at work and we are optimistic that we will get this deal signed by the end of the year.

Touching on what Albert mentioned regarding 1301 Avenue of the Americas, during the third quarter, we signed a long-term lease with a law firm for approximately 46,000 square feet on the previously vacant 41st and 42nd floors and a portion of the 38th floor.

The leased occupancy stands at 97.7%, and we have no significant expirations until the end of 2021. At 1325 Avenue of the Americas, we closed on the deal mentioned last year for a 24,800 square foot lease for space on the 10th floor with a law firm.

That deal was for the top floor of our available block of space and leaves us with 115,000 square feet of the former ING space at the base of the building. White boxing of that space is now complete and the marketing process is well underway.

We have several prospective tenants in various stages of assessing this space with their needs, including those that can take the entire space or others that can take either a single floor or two.

We are confident that this space offers an attractive price point in Midtown for more value tenants, especially given the strong activity we have seen along Sixth Avenue. At 31 West 52nd Street, we have about 167,000 square feet available across the top seven floors of this building that has been 100% leased for many years.

As Albert mentioned, to ensure that this property continues to be the most high-quality assets straddling the Fifth and Sixth Avenue corridors and continues to attract discerning tenants in the market. We will be undergoing a lobby upgrade.

Similar to what we've successfully achieved in several other property renovations, the lobby upgrade will build on existing building elements that will enhance and modernize the atmosphere of entering the space.

The lobby will feature a modern design combining entirely new high-quality wood and stone in a way that will complement the high ceiling and large windows already present. The scaffolding will be going up with a preconstruction phase beginning this month and we expect full construction to begin in the first half of 2018.

From a marketing standpoint, we've shared this vision through renderings with several prospective tenants and are in the proposal stage with three to four different prospects, covering majority of the space. However, it is early stages and we view any signed deals as more likely to be 2018 events. Turning to Washington, D.C.

We have a few pockets of available space, about 23,000 square feet at 2099 Pennsylvania Avenue and roughly 13,000 square feet at Liberty Place. With no large vacancies, the portfolio has limited exposure to the current market environment. We are concentrating on keeping existing quality tenants and being selective with our remaining spaces.

We did a small lease during the quarter at 2099 Pennsylvania Avenue, bringing the property leased occupancy to 89%, up significantly from 74% last year. Our overall D.C. portfolio lease percentage is now 95.5%.

For the rest of this year, we expect to make additional progress at Liberty Place, where we're in advanced discussions on a few of the remaining spaces. We have great assets and no meaningful expirations in the next four years and remain very well positioned in this market. In San Francisco, at One Market Plaza, we are currently over 97% leased.

And the lack of quarterly leasing activity simply reflects the fact that we're very limited space to market. At One Front Street, we continue to focus on our acquisition strategy of addressing the future role early.

During the quarter, First Republic bank had expanded their footprint in the building by an additional 53,000 square feet, taking space left behind by a vacating tenant. Leased occupancy in the building is up to 99.5%. We have good momentum and expect to have further renewals completed by year-end.

And thus, we anticipate we'll have more to report next quarter. With our significant leasing success so far this year in San Francisco, we've eliminated over 60% of our 2018 lease expirations in this market. And we now face only 45,000 square feet of expirations in 2018.

At 50 Beale Street, we've had significant tour activity on our block of 130,000 square feet in the last 60 days. The market remains supply constraint for big blocks of space in the CBD and availability is continue to dwindle. 50 Beale is one of the very few buildings with an available 100,000-plus square foot block in this market.

In terms of pipeline, we are in negotiation on a couple of leases and are confident we will see an increase in the leased occupancy before year-end. With that summary, I'll turn the call over to Wilbur, who will discuss the financial results..

Thanks, Ted. We had another very strong quarter of financial and operating performance. Our core FFO for the quarter was $0.22 per share, driven once again by outsized sector-leading same-store cash NOI growth. Our same-store cash NOI grew by 21.3% when compared to the same period last year as a result of our past leasing efforts.

Year-to-date, same-store cash NOI is now at 9.2% or 30 basis points shy at the midpoint of our range of 8% to 11%. Mathematically, we would need to deliver another double-digit growth of same-store performance next quarter to achieve our guidance at the midpoint, and we will.

Based on our year-to-date results and the outlook for the fourth quarter, we are narrowing our full year 2017 core FFO guidance to be between $0.88 and $0.90 per diluted share. This represents a $0.01 increase at the midpoint of our guidance.

Our third quarter leasing results that were highlighted by Albert and Ted resulted in a 170 basis point sequential increase in same-store leased occupancy. This leasing will once again propel us to deliver sector-leading same-store growth well beyond 2017.

While we will be providing our full year 2018 guidance on our next call in February, we fully expect 2018 same-store cash NOI to once again be in the high single digits when compared to 2017. And a disclosure in our supplemental package and our investor deck will help you with the building blocks.

Let me spend a minute on some transaction activity and accounting-related items. First, 50 Beale, as Albert touched upon, during the quarter, we increased our economic interest in 50 Beale to 31.1% from 3.1%.

50 Beale, which was previously accounted for as an investment and unconsolidated funds, is now consolidated into our financial statements and the 68.9% that we do not own is reflected as non-controlling interest. Second, 2 Herald Square, a little background here.

One of our legacy private equity funds, before we went public, made a $17.5 million preferred equity investment in the partnership that owns 2 Herald Square. That investment had a component of big interest, which resulted in the amount that you see in our financial statements of approximately $19.6 million.

Our ownership interest in this fund is 24.4%, which puts our economic interest in the investment at $4.8 million. During the quarter, we fully reserved against that investment.

Because we consolidate this preferred equity investment, our income statement reflects the full $19.6 million impairment loss with an interest in other loss on our financial statements with an adjustment in non-controlling interest to capture the $14.8 million loss not attributable to us. Turning to our balance sheet.

We ended the quarter with about $1 billion in liquidity, comprised of a $198 million of cash and restricted cash and $800 million of availability under our revolving credit facility. Our outstanding debt at quarter end was $3.1 billion at a weighted average interest rate of 3.5% and a weighted average maturity of 5.8 years.

87% of our debt is fixed and has a weighted average interest rate of 3.6%. The remaining 13% is floating and has a weighted average interest rate of 3.1%. We have no debt maturing until the fourth quarter of 2021, and beyond that, our maturities are well-laddered.

As of September 30, we have $57 million of pro rata annualized cash rent that has yet to be realized. I encourage you to look at our investor deck, which is available on our website, to see how this burns off over the next couple of years. With that, operator, please open the line for questions..

Thank you, sir. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question today comes from Rob Simone of Evercore ISI. Please go ahead..

Hey guys, good morning. Thanks for taking the question. On 50 Beale, just wondering if you could share, I know some of your other assets, you've talked about expectations for leased occupancy by the end of the year. I know 50 Beale is obviously around 78%, so that's a long runway.

But could you kind of share your thoughts on, at this stage, how long you think that asset could take to lease up? And also, when you consolidated the asset, what were your underwriting assumptions in terms of deals on that deal?.

Sure, this is Albert Behler. We have a lot of showings in that asset. It's in a terrific location. And we had that property before in a fund that we control as a general partner and manager. We expect to have some leasing done by the end of the year.

It's always hard to say exactly when it's going to be, whether it gets achieved before the end of December or early next year. And we're also talking about the minor renovation in that asset. So we have a lot and lot of things moving. And we expect this to be a terrific investment for the public company.

We expect, on the return side, that the stabilized yield in the near-to-medium term to be in the mid-6s, very similar to One Front, the investment that we did in December of last year..

Thanks, Albert, that’s great. Thank you..

Sure..

The next question comes from Blaine Heck of Wells Fargo. Please go ahead..

Thanks, good morning. So Wilbur, when I look at the new disclosure on free rent and signed leases now commenced, first of all, thanks a lot for that. It looks as though most of the recently signed leases you have on earlier move out won't be increasing revenue on a GAAP basis until 2019.

Am I reading that right? And if so, is the delay just a matter of extended build-out in that space or is there something else?.

That's partially correct, Blaine. But from a GAAP basis, a lot of it is not coming in through 2018. And most of it will come in through the tail half of 2018 as well as 2019 similar to cash basis as well.

That said, I mean, the disclosure that we provided obviously has increased in terms of the amount of cash NOI that's going to be coming in 2018 and 2019 compared to our past disclosure. The new number now is that $57 million. But that schedule really is not necessarily translating to GAAP. It's really time to give you a cash burn off.

The intent of that schedule to show the cash burn off that was actually not captured in the GAAP earnings. So it fully does not capture all of the GAAP impact that you see in 2018.

It was really intended to show you the cash impact that you should capture in 2018 that effectively, there should be another $30 million contributing to 2018 based on the updated disclosure..

Got it, again thanks for the disclosure, and that's great. So, I guess, Albert or Ted, you guys have been focused, as you said, on derisking the upcoming role on One Front Street and you’ve done a great job addressing the majority of it so far.

But are there any large leases left in the, I guess, around 200,000 square feet of remaining expiring leases? And do you have any sense for maybe what a retention rate could be on that remaining 200,000?.

There is one tenant in there that we have relationship with. And Ted and his team are talking about renewing that tenant early as well. And the tenant occupies three floors currently. And we think there is a very good chance to keep that tenant as well.

Ted and his team have done a terrific job in catching those extensions early and doing a great job in a short period of time to way outperform from what we had basically underwritten. And I think we will proceed to be successful there..

Got it. Great job. Thanks, guys..

The next question is from Jamie Feldman of Bank of America Merrill Lynch. Please go ahead..

Great, thank you. Congratulations on the leasing progress. I guess, one of the downsides of the success is now you got – you’re getting close to have some stabilized assets here in New York City.

How do you think about these assets as a long-term hold and your ability to kind of continue to drive growth in the business as these assets free fall?.

First of all, Jamie, we are very happy to have stabilized assets. It was for the long, as you know, a long road. And the leasing team has done a terrific job and being very focused. And we will look at each opportunity over time. And as I’ve said before, there might be opportunities to maybe recapitalize by partly bringing other investors.

But that’s something we are looking at maybe later in 2018..

Okay.

Do you anticipate this portfolio is a long-term hold or you seeing the portfolio being a long-term hold?.

Yes, absolutely. We still see significant embedded value in the portfolio. And we definitely look forward to generating that for our investors..

Okay. And then can you talk about – I know you guys briefly mentioned 2 Herald Square.

Can you just give us an update on where things stand there, what the likely outcome for that asset?.

Yes, Jamie, as you know, from before, this was a – an investment of one of our funds that was done before we went public, and we are still in the workout mode of that situation. And we have just to be cautious, take an adjustment for this quarter. And Wilbur can fill in..

Sure. And Jamie, again, we don’t want to speculate on what will happen with the asset or not. The situation is very fluid. But our intention and – is to make sure we do what’s best for our fund investors in that fund as a general partner. We have a fiduciary towards our investments, and we’re going to look to do what’s best for our fund investors..

Okay.

So like what are the next mileposts or just kind of steps in the process to get into resolution that we should be watching for?.

Jamie, I don’t think we want to go. This is a complicated process with a lot of different parties being involved. I really wouldn’t like to go into details on this call, and that I hope you appreciate that..

Okay. That makes sense. And then just my last one for Ted.

Can you just talk about what you think net effective rents have done across the three markets over the last year or so?.

I mean, as we talked about this a little bit, I think, in San Francisco, you’ve seen constructions go up. So I think they are down a bit in terms on a net effective side, but obviously, that’s following years of fantastic double-digit rent growth. And D.C. is pretty much flat as where it’s been. And New York, I’d say the same thing.

I mean, you’re even seeing, I think, for us, I think, our net effective rents are a little bit better actually this year than they were last year. So the New York market kind of is moving along in a flat way as well, I’d say..

All right. Great. Congratulations again..

Thank you, Jamie..

The next question is from Nick Stelzner of Morgan Stanley. Please go ahead..

Hi, thanks for taking the question. You mentioned having a lease out at 1633 for the 37th and 38th floors.

Can you share any details on the economics there and then also, when do you expect the lease to commence?.

Well, we don’t want to go into details of the economics of something that hasn’t been signed yet for sure. And as I mentioned in my remarks, we expect this to be coming in by the end – before the end of the year..

Okay, great. And then just another question. So leasing at 1325 and 31 West 52nd Street seems to be pressing a little bit slower than some of your other buildings.

What are your expectations for timing of lease-up and then mark-to-market of those properties?.

1325, as you’d recall, we just got the space back early this year and we had to go through white boxing and doing the necessary work to get it on the way to be leased. It’s a attractively priced lower floor space in the building. So we have good showings. And I don’t doubt that we have any kind of difficulties in leasing this space.

31 West 52nd Street is a total opposite. This is top of the building, terrific building, that, as I mentioned on the call, has not been vacant for – there has been no vacancy in this asset since 10 years. So we want to make sure that we are well prepared to grab some of the best market rates available. And we have very good showings.

And we’re shooting for mark-to-market of 30%. Because, as you recall, we created that opportunity by moving in a tenant that had a long-term lease way below market and moved that tenant into 1633 Broadway. And it took a little while to get the lobby renovations and design drawings ready.

But I am very confident that this is going to be a very successful lease-up situation during 2018..

Great. If I could just squeeze another one in really quickly. So there was a recent realty article suggesting a family office was vacating, I think, about 26,000 square feet at 712 Fifth and I believe that was in 2018.

Can you just share anything on the economics of the lease there and then if you started marketing the space yet?.

Well, that was a tenant that you’re referring to that really needed more space and they couldn’t get that in the building. We discussed it with the tenant. We had a very open negotiation.

Unfortunately, that building, as you might recall, is very attractive, but has smaller floors, and they wanted to be on one floor, and we couldn’t offer that at that building. But we are not speculating on the rent that we’re getting on this floor in the future..

Thanks for taking question..

Sure. You’re welcome..

[Operator Instructions] Our next question is from Vincent Chao of Deutsche Bank. Please go ahead..

Just going back to 31 West 52nd lobby upgrade. Sounds like that will be underway in the first half of 2018.

I’m just curious how long do you think that renovation will take, and you think it will need to be largely complete before you’re able to sign any tenants there?.

No, we are not expecting that. You need to finish lobby renovation from previous experience that we had at One Market Plaza and 1633 Broadway. You have the renderings ready today, and you can show confidently that this is going to be executed that way. So the leasing activity is go parallel with doing the work..

Okay.

But how long do you think it will take to get the lobby done and then if you think about the lobby costs as well as the 30% mark-to-market, I mean, what kind of incremental returns do you get on the incremental capital here?.

We are starting with the construction of the lobby in the first half of 2018, and hopefully, get it done by the end of the year. And we should get a double-digit – low double-digit return on that investment..

Okay. And then just one other question, Wilbur, on the same-store NOI outlook. It sounded like you’re pretty confident seeing the midpoint, which seems pretty likely.

But I guess, at this point, you kind of have a sense of the move out, you have a sense of the free rent burn off, I guess, why not update the same-store outlook for the year?.

I mean, look, the answer is, we have a range of 8% to 11%. We think at the end of the day, we’ll fall within the range, whether it’s at the high end of the range or about the midpoint of the range. So we didn’t think necessary to update that at this point because we believe we’ll be within that range..

Okay, thanks..

Sure. You’re welcome..

The next question is from Chris Lucas of Capital One Securities. Please go ahead..

Yes, good morning, everybody. Just two quick questions for me. You described your cash position and the strength of your liquidity position overall. I guess, just curious we got an environment, where the transaction volumes are way down.

Whether – I guess, the question I would have is, should we expect that your capital be more likely to be invested in something new or an increase in the ownership of your joint ventures that you currently have invested in at this point?.

Well, we have all the time evaluating all of our options. So we’ve been active, but very, very selective in the acquisition market over the last 18 months. And we’re always considering all of our options here, and we’ll evaluate those before we make a decision..

Okay. And then, I guess, on the guidance, that’s in the investor deck, that notes $0.06, I guess, of lease termination fee income as part of the adjustment to core FFO. And it looks like on a year-to-date basis, you guys have probably done about $0.01 or so of that.

Is that GAAP going to be closed in the fourth quarter? And if so, maybe if you could give us some sense or give me some sense as to sort of where those tenants are coming out of?.

Chris, you might be misreading that a little bit. The intent of that $0.06 is really showing negative $0.06. What that saying is when you look at 2016 compared to the 2016, the 2016 results had $0.06 more of termination income than the 2017 results. That’s what that saying because in 2016, we received a very hefty termination payment from one tenant.

So the 2106 results included, call it, $0.08 of termination income versus what is showing up in 2017 of roughly about $0.02. So that’s a $0.06 diminution in 2017 compared to 2016. And what that chart is trying to depict rather is the organic growth in the portfolio. So when you think about earnings, everybody talks about FFO.

What this chart – we’re trying depict is the quality of that earnings that comes through in our portfolio. It’s really driven largely by the same-store portfolio and outsized sector-leading same-store cash NOI growth..

Okay, great. Thank you for that clarification. I appreciate it..

Sure..

There are no additional questions at this time. I would like to turn the call back over to Albert Behler for closing remarks..

Thank you all for joining us today. We’re looking forward to providing another update on the continued progress that we have made. And we report our fourth quarter results in February. Thank you..

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation..