Q3 2019 Earnings Call
At this time I'd like to turn the call somebody Stephanie Krewson, Kelly CLP piece, Vice President Investor Relations Ms. Krewson Kelly. Please go ahead.
Thank you Valerie good afternoon, and welcome to Cop third quarter Conference call with me today are Steve Budorick, President and CEO , Paul Atkins Executive Vice President and COO, and Anthony Mifsud, VP and CFO . In addition to the supplemental package in press release related to our results we posted slides on the investors section.
Our website to accompany management's remarks.
Conciliations of GAAP and non-GAAP financial measures management discusses our available on our website and the results press release.
Before I turn the call over to Steve a quick reminder, that forward looking statements made during today's call are subject to risks and uncertainties, which are discussed it likes in our press releases wells are FCC filings actual events or results can differ materially from these forward looking statements and the company does not undertake no duty to update them Steve.
Thank you and good afternoon.
We delivered excellent results to a third quarter.
We continue to capitalize on the opportunities we anticipated.
The defense budget increases began in 2017.
Demands continue to build throughout 2019.
And our team has been very successfully converting it into leasing achievements.
The celebrated opportunity set is translated into record leasing volumes.
Third quarter and for the first nine months of either.
Every quarter, we said three new quarterly leasing record.
Total we've seen a 1.7 million square feet.
The probably see another 875000 square feet.
And they can see leasing of 251000 square feet.
Year to date, or 2.1 million square feet or development leasing exceeds our prior annual record by almost 40, 70%.
And it's two and a half times or initial guidance.
Your operating portfolio.
The 642000 square feet, a vacancy leasing we executed during the first nine months exceeds 2018 for your achievement.
And we're on track to establish our best ever in Europe , They can see leasing volume.
Including over 40000 square foot lease completed earlier this month.
To date, we've executed 586000 square feet subleasing with the government a new annual record.
Within or operating portfolio.
Released 264000 square feet to the government.
Also a new annual record.
422000 square feet of development leasing we've completed with the government is our second highest annual volume ever and by yearend. We may surpassed our all time records established in 2005.
Furthermore, healthy defense spending continues to generate broad based demand in all five categories of demand.
First.
Defense contractor expansions continue to drive or vacancy leasing.
In the third quarter, 93% or vacancy lease in occurred at the trends like T locations.
It's kind of tractors require incremental space to accommodate new business.
Year to date, we've completed 47 leases.
Totaling 330000 square feet of defense contractor expansions.
Representing 55% of vacancy Lucy.
Secondly, U.S. Gerbig continues to lease additional space as agency says Friday deferred demand.
During the first nine months, we completed 12 leases with the government.
Totally 198000 square feet that represented deferred demand.
77% of these transactions were in the Fort Meade market.
Third we continue to build limited amounts of speculative development in markets, where demand is strong and we have limited inventory.
[laughter] Redstone gateway in Huntsville.
We completed 435000 square feet of development leasing in the first nine months.
Yes, no contractor space available.
Accordingly, we plan started 100000 square foot spec building this quarter to accommodate defense contractor demand.
At the discovery district at the University of Maryland.
The study 1000 square foot spec building that we completed in 2018 is 100% lease.
We're tracking strong demand there's no inventory left in this market.
And in September commence construction.
4600 River Road 100000 square foot building.
The fourth category demand is build to suit major preleasing activity with defense contractors.
In the first nine months, we completed 1.7 million square feet, a build to suit major pre leases with defense contractors. This includes five data center show leases, Northern Virginia, totaling 1.2 million square feet.
483000 square feet, a build to suit and pre leasing transit transactions for contractor office facilities.
The fifth demand driver is the government returning to long term planning for new facilities that are secure campuses.
Year to date, we've completed 390000 square feet of government leases for Antiterrorism forced protected buildings in secure campuses, including a 350000 square foot prelease.
The U.S. government for Nova Sea.
Wendover see as operational 2022.
Is fully leased secure campus will contain 910000 square feet.
And can accommodate up to another 700000 square feet of development.
As I mentioned earlier this month, we completed the 40000 square foot lease with the first government user at 100 secure gateway or initial building in Redstone secure campus.
We continue to execute on an expanding set of leasing opportunities.
The past several years of defense spending increases are precipitated.
Having more than doubled their initial development leasing expectation for this year. We also doubled our asset sales to responsibly fund this growth.
These additional asset sales real time per episode growth and 2020 and set the stage for strong AFFO growth and 2021.
With that I'll turn call over to Paul Thanks, Steve.
As a result of record vacancy leasing in the quarter. Our core portfolio was 94.5% leased at September Thirtyth 40 basis points higher than the last quarter, our Fort Meade BW corridor sub segment is now 93.5% leased up 100 basis points from last quarter.
At the National Business Park, we executed on 52000 square feet, a vacancy leasing in the quarter and the park is now 91% occupied at least.
We continue to track strong demand for the parks remaining inventory.
Our redevelopment at 60 950, Columbia Gateway is now 80% leased and we are in advanced negotiations with the defense technology from that would increase this project to 98% leased by year end.
In Northern Virginia, we scored a major when on the development leasing front executing a 350000 square foot pre lease with the government at our secure campus.
In the third quarter. We also completed 92000 square feet a vacancy leasing in our know the defense I T portfolio 20000 square feet, which was that Patriot Ridge.
And then earlier this month, we completed another 20000 square foot leasing that building, which is now 80% leased.
Defense demanded Patriot Ridge is a direct byproduct of recent budget increases at the National Geospatial Intelligence Agency.
Turning to Huntsville, we completed a total of 717000 square feet of leasing in the first nine months, including 435000 square feet in development projects, we have zero uncommitted space and that park and we anticipate starting our next spec building this quarter to capture strong contractor demand.
Earlier this month, we completed a 40000 square foot lease with our first government tenant at 100 secured gateway.
Negotiations with the second government customer are progressing well and would bring that building to 80% leased in the coming months.
In terms of our active construction projects.
We have 2.6 million square feet under development and redevelopment that are currently 82%, Preleased and which will increase our existing core portfolio by nearly 15%.
And the first nine months, the 804000 square feet of developments, we placed into service were 100% leased.
We expect to place another nine properties.
Containing 1.3 million square feet of 100% leased contractor space into service between now and the end up 2020, plus approximately 200000 square feet at 100 secure gateway.
These 10 highly preleased developments should support strong FFO growth in 2021.
In terms of future development projects, our Shadow development pipeline contains up to 1.7 million square feet a potential transactions.
Which two thirds, our data center shells and up to 20% our government deals.
We expect to execute on at least another 100000 square feet of leaves leases before year end and are increasing our development leasing goal to 2.2 million square feet.
With that I'll hand, the call over to Anthony Thanks, Paul.
Third quarter FFO per share met the high end of guidance driven impart by some accelerated lease starts and ongoing expense management.
We are modestly reducing our year end guidance for same property occupancy to a new range of 91.5% to 92%.
This change reflects the impact of commencement dates on a few late December starts slipping into the first quarter of 2020 and the impact of the tenant at DC three terminating at least three months earlier than expected.
Even with these modest decreases to year end expected occupancy, we're raising our full year guidance on same property cash NOI growth again to a new range of three in a quarter to 3.5%.
The 37, and a half basis point increase at the midpoint versus prior guidance reflects early commencements lower rent abatements and lower property operating expenses.
Tenant retention was 72% in the quarter, marking the 10th consecutive quarter in excess of 70%.
We expect it to be between 75 and 80% for the full year.
Although one and a half million square feet of renewals to date have been executed at current market rents cash rents on renewals rolled down 6% in the quarter and 5% in a nine months.
To date, 82% of expiring leases rolled down within our original guidance of down 1.5% to 3%.
The renewal of three expiring long term leases totaling 280000 square feet brought down the average to negative 5%.
On these larger roll downs, we still achieved new market rents of approximately $35 a foot.
As a reminder, slide 14 demonstrates that high retention with modest cash roll downs is more effective on preserving FFO and growing a AFFO and achieving rank growth on lower retention and incurring retenanting costs.
Lastly, we're tightening our guidance for FFO per share for the full year around $2 in our $2.03 midpoint to a new range of $2.02 to $2.04 and are establishing fourth quarter guidance of 49 to 51 cents.
This guidance assumes we sell a 90% interest into more datacenter shells to our be reach joint venture in December raising additional equity to fund development.
With that I'll turn the call back to Steve. Thank you Anthony.
The three key messages to this call our one record leasing driven by healthy defense budgets.
To record development investment to drive to AFFO growth.
And three elevated asset sales to ensure appropriate funding of development activity.
We're now 30 months beyond the first material defense budget increase that occurred in may of 2017.
We expected our opportunity set to leg appropriation dates.
12 to 18 months and indeed it has.
Or at least in achievements have strengthened consistently to new record levels.
Manford Translocations remains strong we look forward to continuing to deliver incremental gains throughout 2020 and 2021.
With that operator, please open up the called questions.
Thank you Mr. the dark.
Ladies and gentlemen, like that's a question. Please press Star then one when you touched on telephone.
Again, if you like to ask a question. Please press Star then one.
Our first question comes from Jason Green of Evercore. Your line is open.
Good morning.
The extent, you're able to comment as Microsoft being awarded the jet ideal versus say other competitors have any positive or negative impact from sea and is there already relationship in place with Microsoft utilize moving forward.
HM tough question.
So with regard to our shoulder enrollment program, it's a matter of in difference we've.
Never discussed with our tenant anything to do it back on track.
And our opportunities and shale development should remain strong.
I can't comment on our relationship with Microsoft.
Okay, and then I guess, we think about leasing spreads over the next 12 to 18 months not necessarily looking for guidance, but do you expect broadly speaking for those spreads to be in the kind of negative mid to low single digits or is there something unique about fiscal year 19 that was a little bit more pressured.
Thank you Anthony hit the right I'm the head.
We guided to minus one and a half the three.
And I wanted to see 83 of the 86 leases we renewed in total so right in that range. We had three large very long term leases where that market rent. There were the lease rented escalated above current market and those really drove the higher percentage roll down.
If you look at the average leases we tend to have in place for five years, we don't have that kind of.
Imbalance between in place and market. So we expect them to come back into the zero to minus three.
Got it thanks very much.
Thank you. Our next question comes from Manny Korchman Korchman of Citi. Your line is open.
Hey, everyone how are you.
Yes, I don't recent conference you had put out a presentation that showed consensus of AFFO growth from 2020, and you'd highlight a midpoint about 4% growth. If I look at consensus now, it's probably closer to 5% growth.
Did you presented as a good metric to go off of or where you sort of just presenting the facts and I really do you haven't given 2020 guidance yet.
So we're a little confused brother question I'm not sure what your question isn't as Jeff for 4% to 5% AFFO growth for 2020 and appropriate baseline to go off of as we think about our numbers for next year.
Actual representations first.
That was so that was representing was a first call was presuming that's not our number.
And we're not giving out guidance yet.
But I think first call is.
Changed since we.
Reported that data.
Okay.
Let me the expense savings that you highlighted that helps your same store NOI numbers are those sort of more permanent and we should expect and going forward or is there anything one time about this.
They were split about half one time in half ongoing.
Ongoing related to just ongoing.
Operating expense management and the other half related to.
A one time real estate tax refund that we received as a result of our.
Work on changing assessments.
Great. Thank you.
Thank you Manny.
Our next question comes from Blaine Heck of Wells Fargo. Your line is open.
Hi, Thanks, I guess, Paul just thinking about the total portfolio occupancy I think in the path than it has recently in 2017, you guys have increased occupancy into the kind of 93.5% to 94% range. Yeah. I do you think about the portfolio now and the demand environment. You guys are in is that an achievable.
Stabilized occupancy target or is there maybe something about the portfolio, that's changed and stabilization might be a little lower and closer to where you guys are operating now.
I think if you I think you referenced 2017.
Then in January one of 2018, Nova B and 310 went into the pool.
That knock it down almost 200 basis points. So we've now with climb back up then has driven by the demand in the portfolio.
In the occupancy and yes, I think it's sustainable to get back to those levels.
Over the next up end of 2020, and the 2021. So you know in short we see that demand that's gotten us from that point at the beginning of 2018 to continue for the next 12 to 18 months at least.
Great that's helpful and then.
On the balance sheet you guys last issued the forward equity at 31 Bucks a share and you guys have the ATM in place you haven't really used in a while.
You guys aren't quite back to that $31, yet, but does this year's performance certainly helps I guess, just what that context, how do you think about the mix of funding between the sales and jvs versus issuing equity if we do get closer to kind of the low thirtys levels.
You know in terms of the capital that we need to execute the plan over the next several years.
Over equitizing of the the JV, increasing asset sales for 2019 really puts us in a position where we can execute on died.
Element that's in the ground right now plus what we see on the horizon for 2020 with relatively limited needs for equity capital.
I think we'll leave our.
Leave the choices sort of out there right now you know the ex the equity that we raised through the be we'd be re transaction was.
Incredibly price effective.
And we know that our partner there has that.
The capital and the demand for future transactions. So yeah, I think right now we would.
We would see that is that the Avenue, we would go for next year.
But again, we'll continue to to look at that as our price changes.
Very helpful. Thanks, everyone.
It's been.
Thank you. Our next question comes from Jamie Feldman of Bank of America Merrell last your line is okay.
Great. Thank you and I apologize if I missed it but in the presentation you talk about your honor thousand square foot and larger blocks can you just talk us through your thoughts on that 2020 expirations I guess for those than anything else that.
Meaningful kind of which ones, we should be keep our eyes on.
[noise] right now we out of all of our 100000 square foot and greater blocks for 2020, we only have one nonrenewal that we see partial and that's a partial nonrenewal, but it will bring back to us.
130000 square feet in Columbia Gateway.
Other than that we expect to renew all of the other 100000 square foot plus leases. So that's not anything we havent known about and we're well underway in our marketing efforts to backfill that space and to be clear the leases expiring teams executed 10 years ago.
The tenant who sublease that almost immediately so it's been occupied by sub tenants for more than eight years.
In the existing sub tenant will renew some of it but we do have some really seem to do a man one.
Maturity.
Three floors and one building.
So is the 130 net of the renewal you expect there that's the total amount.
Total amount.
So how much you think here how much is that tenant currently occupied.
All right.
Only occupied Justin.
And I'd say, a four four building they will keep on one floor long term out of those four floors.
Beyond April of next year.
The little over 100.
They you'll get back.
Yes, well over 101 31 was the whole building.
And then anything else that still sizable like 75 and larger or.
No not really.
Our next year's Retentions, you know we.
We expect to be you know.
You don't know all of them yet obviously at this juncture, but we expect to still perform.
In the mid Seventys range.
But hopefully better.
Okay.
And then I know you had mentioned using the data center JV for additional sorry. If you decide you want additional that can be capital, but what are your thoughts on just continuing to prune the portfolio.
Got it in more traditional office and defense assets.
Well right now, we're very happy with the composition of our portfolio and.
Throughout throughout our defense segment was getting increasing demand and that to me the.
Additional value in those buildings. So there's nothing that we would want to so.
Currently.
The.
Pricing strength of the data center, Jay fee is extraordinary that would probably be or.
First preference.
Okay.
Alright, thank you.
Thanks.
Our next question comes from Tom Catherwood of B T. Your line is open.
Thank you so in the.
Doesn't station you put out you mentioned that the expectations are that the fiscal year 2020 budget will be funded through continuing resolution up until December .
But you also mentioned as <unk> as a risk that you.
You know leases commencement can lift due to continuing resolutions.
With there being some talk about potential shutdowns in the future in DC yet again.
How much of an impact is kind of operating under a continuing resolutions having on your business right now and kind of how do you think about that going forward.
Well.
Fortunately.
Because of the lag between appropriations in demand.
I wouldn't expect the continuing resolution to materially affect our demand profile.
Most of the opportunities that we're working on currently are really based on prior year fundings that are flowing through the system. So I don't believe continuing resolution this year will affect us at all frankly.
[noise] currently its expect its continued through about November twentyth.
With regard to a government shutdown.
Our rents always gets paid we have no real impact from those shut downs other than some unhappy tenants and some traffic situations and Barry various areas.
But it's not a concern of ours.
This year.
So the leases then moving from kind of late 2019 into 2020 were not related to any issues around continuing resolutions or any budget challenges.
Oh another though.
It's just getting space built in fit out.
Were evident record volumes of leasing then.
Just a few timing delays that are weeks not months.
Got it got it and then kind of moving over to Huntsville, you guys upsize the development at 100 hundred unsecured gateway this quarter, what was kind of the driver behind a kind of changing that design.
We who were able to identify expansion needs for both the tenants that we expect to anchor. The building you made a decision incorporate future expansion into the current development.
The most economical way to provide it.
So there has to do with a mission growth.
When you talk about that mission growth and I think Paul you mentioned, obviously the.
Research and demand in Huntsville is.
Is this.
Relocations from some of the older products that's out in my humble markup on the office side or is this.
New just pure expansions by contractors, what's the kind of composition of this demand.
It's both it's both its relocations from outside the market, it's relocations from older inventory in Huntsville market.
And it is new expansions of new missions.
Going on at Redstone Gateway.
And that includes defense contractors as well as the U.S. government Yep.
No I think yes.
Okay. Thanks.
Our next question comes from John Guinee of Stifel. Your line is open Oh, John Guinee here, a nice quarter guys.
Thank you you are nice enough on page 21 of the or a slide deck I think Stephanie put it together, where you outlined a D. C. Three RASK and then also you addressed DC six I think DC six is the I'll hold sale data center with about a.
Two thirds of the ally.
Lease expiration in 2020 can you elaborate more on what you see happening to both D C and the wholesale data center.
Otherwise known as DC six.
I'll take the C. D C. Three is a legacy yes, the Companys zone for.
Many many years back we're going through a strategic reallocation.
Plan, we identified this is.
Yes, it was the highest and best uses raw land.
So is very profitable full building lease that we mill.
To the lease expiration weve already lease that plan through a retail user.
On a long term land lease was to create additional value so is that lease expires.
We will complete our obligations by demolishing it.
Doing various things comparative going for the retail user and deliberative for their use under very long term land lease if he wants to see six.
Okay I'll take it.
So I think a DC six I.
Just want to note first that this is the time, where the original leases that filled up 87% of DC six our where expiring. So we have a flurry of expirations earlier in the second quarter. This year, we had a tenant that has exercised a REIT to contract giving back one megawatts. So that's been in our information for.
For two quarters now.
We have another megawatt to nonrenewal of that.
Commences October 1st.
In the building.
And we have two contractions of existing tenants, one who gave back one half of a megawatt of one megawatt user but they did extend their lease for three years and [noise] that another user that was under lease for one megawatt gave back three quarters of a megawatt.
And also has at least that the remaining lease expires in 2022.
The impact of all that contraction to non renewals is factored into our internal forecast of growth modest growth for next year, that's important point to make and the good news is that with these give backs. We now have a larger contiguous block of capacity that frankly conserve the larger.
Deployments that are out in the marketplace and more characterize the marketplace demand right. Now in fact, we are in pursuit of a three megawatt requirement as we speak for next year occupancy.
And lastly in most importantly, I think is that the the largest tenant that we have in the building at 11 in a quarter megawatts out of the totaled 19 in the quarter.
We are in discussions and our highly optimistic to renew that user.
For it for a new for their from renew their lease so that's the.
And the 11 in the quarter megawatt Ah that's the five year lease done in 2015, but you feel good about that.
Very yep <unk>.
This is that a roll up our roll down.
Yet to be determined.
If you're modeling I'd just modeling for flat.
Perfect perfect all right nice job. Thank you.
Thanks.
Thank you. Our next question comes from Rich Anderson F.C. excuse me of S.M.B.C. Your line is open. Thanks, a good afternoon folks.
So Steve you don't want one thing to think about all this kind of exciting development and leasing stuff that's going on but it's kind of it weighs down on your growth profiles. You mentioned for 2020, you know it's going to extend into 2021 to get some real meaningful AFFO growth is it correct to think about it is like the the the pie.
I have the operating portfolio becomes big enough that you could actually have some f. AFFO growth. While you continue to do your development at this at this point in time development redevelopment effort in the funding of it is is basically overwhelming the stuff that the stock market likes which is FFO growth is that a fair way to think about it.
Yeah I think it is you know we've we've secured twice the annual developments.
Spend opportunity this year and we had to raise the capital. So if sell some earnings to get the capital to add to it.
And as we get through that I think Paul mentioned that you just look at sheer magnitude the portfolio. We're building, it's 50% growth.
Our current operating portfolio and that all kicked in in 2021, 2022 and becomes pretty accretive and.
As we've said, we'll have impressive growth and 2021.
So you said capital so funded occurring and rich the one thing to fit to just add to that is we as I said earlier, our equity capital needs in order to execute the development pipeline going forward do diminish over time as the benefit of the EBITDA comes online from.
The development pipeline, but also the lease up of the operating portfolio. So not do you know we can continue at 300 or $400 million forever without raising additional equity capital, but we do get to a point where it.
We have a year or two of the benefit of that EBITDA kicking in.
And the need for incremental capital does or does go down right, but did you say, 15% on the current <unk> operating portfolio today. That's the that's the growth profile just on a square footage basis yeah. Okay.
Okay Thunder action development right now.
Got you now last quarter I I wrote a note falling in a earnings and perhaps a part of it wasn't the most popular which I mentioned you know you're taking a rent roll down those three bulky releasing a situations to you know off too.
Resolve the situation and not have to release, it and spend the capital all that sort of stuff and I understand the economics of that of those transactions, but now that I'm on the phone with you and you have a chance to you know.
Flatmate around a little bit.
You know like why is it okay. It too I understand the short term benefits of the economics. The why did okay to kind of discount the rent for the in these three cases to keep people there that couldn't pay you know the current rent as it was in place.
Well in those three I'm talking longer term longer term you know long looking further out not just in the short term.
And all three cases, we achieved a really strong market rent.
And the important thing for us.
Yes.
Our shareholders good value a role to market basis.
One of the lease had been in place for very long period of time and escalated to a point, where we wouldn't be able to replace the lease with the new tenant at the same amount why lose the tenant whose though.
In our defense family of tenants.
Okay and have put up capital to re tenant at the same market.
The average rent we achieved was over $35 on those three leases, which is strong rent.
Could you have could you have gotten another tenant and maybe not.
Maybe you wouldn't have been able to avoid the roll down, but perhaps at a better rent than $35.
I don't believe it would have.
Okay.
Uh huh, Okay. That's all I got thanks.
Thanks, Thank you.
Our next question comes from Craig Melman of Keybanc capital markets.
Hey, guys could we go back to the DC six commentary Paul I know you said, it's kind of embedded in your budget for next year could you give a sense of what the a the NOI roll down will be from the contractions.
Yeah.
The roll down will be about $4 million annually.
For 2020.
And that doesn't include any potential impact from the 11 in a quarter megawatt tenant depending on what.
Kind of where their rent ultimately settles out if they do renew.
That's correct it doesn't affect or in a change there and it doesn't factor in any new leasing.
I know that you guys. This many times the past but.
This assets kind of a lot of value kinda tied up in it.
Is there any view point here on ultimately monetizing this asset as you guys look to fund.
Feature development.
So I would say a few years all that something that we consider right now.
Make sense for us to hold onto it makes sense for us to reestablish the income that is currently going to be diminished three years, So and we'll keep our options open for.
What to do that as a long term.
That's helpful. Then I'm just going back I know the 1.7 million square foot development pipeline, you guys said about.
Two thirds of that is data center shells that are those potential leases with your current existing tenant who you do business with or are there kind of a new tenants rolled in there and just curious how you know that tenant.
Getting.
Hi Inn buying another piece of land and Herndon kind of effect.
That demand or if that's kinda.
Locked down from your standpoint.
Well.
Our relationship with that tenet.
As long as we've ever done all the development for the tenant so the fact that we've always done some of their own so they're buying land is.
His though impact on us.
The.
Developments in the 1.7 million square foot show development pipeline, we have the land as byproduct of the Love and data Center show a program we built.
We have demand for those sites.
We fully expect to realize those developments over.
12 18 months.
Right and then just the last one I guess you see three came back to you at the beginning of the fourth quarter is that correct, that's what a little bit less than a penny drag is there any lease term fee associated with that or do you guys just let them off the hook.
I know they that that lease actually had an initial termination date of the end of last year and then they had some.
Renewal options in month increments that they they exercise through the end of.
September our initial thought back at the beginning of the year was that they were going to extend through the ended the year.
And it is about 600, plus or minus $600000 a quarter.
Great. Thank you.
It's Craig.
Thank you again, if you like to ask the question. Please press Star then one when you touched on telephone.
Our next question comes from Dave Rodgers of Baird. Your line is open.
Yeah. Good afternoon, guys, Paul maybe I'm just three questions for you all around vacant demand that you've been leasing as well as kind of the deferred U.S. government demand and I realize there's some overlap but first question I guess, how much more of that deferred U.S. government demand do you guys sense is still out there.
The second would be kind of of that uptake of 800000 square feet or more this year, how much of that has commenced and how much still has to commence from my rent perspective.
On a GAAP basis and then the last question is can you dive a little bit further into 310, and how that fits and what your updated thoughts are thanks.
Sure.
Thanks, a the first question on the deferred demand Oh, we still have deferred demand we defined as conversations that we've been having what the U.S. government that have been going on for one or two years, where there's an identified need for space.
Additional space and yet it was kind of cap captivate captured by the funding or there was a lack of funding so that funding spec. It has now been turned on leading to Steve's points about our record amount of government leasing.
So our sense is that deferred demand we are having those conversations there is additional demand.
In our portfolio.
Where we expect the government to continue to lease through the end of this year and into next year.
Second question.
Three to 310.
310, or the saga continues but that the truth matter is is that we are feel like we are also having.
Great discussions with the government. There is that is deferred demand there is identified need by the users to take that space. The building as one third lease now and you.
No I think it's been around for awhile, but the conversations are such that we hope that that.
Demand is met and that situation is resolved in the in the coming months.
And then the third was just on the timing of the lease commencements of the vacant and deferred leasing that you've done how much of that's commands how much is still going to kind of be an incremental contributor to revenues and a wide going forward.
So I would guess of the hundred 60000 square feet of operating leasing.
Maybe 30% commenced.
HM.
So call it 50000 square feet Rubone hundred or so.
Scheduled to commence later, when we get space build out.
With regard to the bigger number the record U.S. government leasing that includes Nova Sea and that's a first quarter 2020 twos.
Target commencement date.
And then a the 40000 square feet and Alabama.
2020 commencement.
We have yet to do we're not prepared to give you a month.
And then just sorry last one on the 622 that you kind of quotas vacancy leasing in the first nine months and it sounds like maybe there's some different components to that is there a remainder amount to that that would still contribute or is that taking care of and the other buckets as well.
Well, that's 620 twos, all defense contractor operating leases.
And quite a bit of that has yet to commence after.
That's that's correct. There's some of that has commenced through the through this year, it's a big difference between our occupied and lease percentage at the end of the corridor and the benefit of that is really going to of most of that is going to flow through the.
The results in 2021.
To me 2020.
Okay.
In 2020, Okay. Thanks, guys.
Thank you. Our next question comes from Daniel You smell of Green Street Advisors. Your line is open.
Just going back to DC, six and maybe I missed it but we'd be putting any additional capital.
Into the property and is there any associated free rents with any of the renewals or Ah I discussions you're having with the 11 in the quarter on megawatt tight.
No there's no discussion about free rent.
There's minimal capital associated with.
What we're doing nothing more than I would consider just routine capital investment for property, we've grown for a doctor.
Okay and are you able to share when the lease expires without 11 in a quarter nickel attack.
The 30 for July next year.
Okay, and just on a on the DTC redevelopment or any expectation of having any pre additional pre leasing done by yearend.
Oh, Yeah, I'd say that.
Okay.
Hi, likelihood to decent likelihood that we'll have another.
10 to 20000 square feet leased by the end of the year.
And and we have.
A handful of prospects that are doing test fits and chosen 2100 to l. as one of their shortlisted options for new space in DC, but feel good about 10 to 20000 more square feet.
Again that our lead tenant doesn't occupied lease commenced until January one of 2021.
That's helpful. Thanks, guys.
Thank you. Our next question comes from John Stifel. Your line is open.
Oh, Great Hey, what's the status on Nova B and what's the.
Locational difference between B and C.
So don't be fully leased a one to commence its commence started increments.
No see is.
Which [laughter] right next door. Okay are they are they both are behind the fence secured facilities.
Well there.
Okay, great. Thank you.
The entire campus is then we'll be funds.
Perfect Alright, thank you.
Thank you.
I'm showing no further questions at this time I'd like to turn the conference back over to Mr. Mitchell work for any closing remarks.
Thank you all for joining our call today, we are in or offices. This afternoon. So please coordinate any request for information through Stephanie if you'd like follow up calls like very much.
Thank you.
Thank you for participating today and the corporate office properties Trust third quarter Conference call. This close the presentation. You may now disconnect good day.
Oh.