Analyst: I want to start with rents, because what gets reported and what I hear from tenant reps don't line up. Your old portfolio was printing face rents roughly flat, up a couple of points in the better assets. Was any of that real?
Expert: The face rent is real in the sense that it's the number in the document. Past that, no. We defended face rent on purpose, but if you're modeling cash off face rent you're going to be wrong by a mile.
Analyst: Defended it how?
Expert: By paying for it. That's the whole trick. A tenant will sign at whatever headline you want as long as you hand it back somewhere the market can't see. So you say fine, fifty-seven fifty a foot, and then it's seventeen months free on a hundred and thirty-two month term, a hundred and forty-three a foot of improvement allowance, turnkey, meaning we do the work and we eat the overrun, plus we buy out eleven months of whatever they're still on the hook for down the street. And the release says fifty-seven fifty.
Analyst: Walk me through a before and after on a comparable deal.
Expert: Trophy asset, one of the coastal gateway markets, high floors, the good elevator bank. Late-2018 deal in that building: face fifty-one, nine months free on a ten year, seventy-eight a foot of TI. Net effective after capital and commissions, we'd land around forty. Sorry, that's not right, it was under forty but not by much. Thirty-nine four, something like that. I'm doing it from memory. Same building, deal we signed in the back half of 2024, similar floor, similar credit: face fifty-seven fifty, so up twelve, thirteen percent on paper. Net effective, thirty-two eighty.
Analyst: So down about sixteen percent while the disclosed number was up thirteen.
Expert: Correct. And that's the good building. That's the one we put on the cover of the deck.
Analyst: How do you know it's thirty-two eighty? Where does that number actually come from?
Expert: We ran a schedule every quarter. Internally everyone just called it the capital sheet, nobody was being clever about it. Take every executed lease, strip out TI, strip out commissions both sides, strip out free rent, strip out any buyout of a prior obligation. Spread the rest across the term. Net effective rent after capital, per foot per year. That went in the board deck. It's the number I'd want if I were you. I don't think most of them run it that cleanly. None of them publish it.
Analyst: Why wouldn't you publish it?
Expert: Because of the answer.
Analyst: Alright. Do the same math on the commodity assets. The Class B, the suburban stuff you'd owned for twenty years.
Expert: That's where it gets genuinely ugly, and I'd caveat it's a much smaller sample, nine or ten deals a year I'd call comparable —
Analyst: Caveat noted. Give me the number.