Q3 2019 Earnings Call
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Oh whatsoever to Bonni Rosen. Please go ahead.
Thank you for joining us today for the Verint 2018 third quarter earnings call. Joining me today, our Glenn Rufrano, our Chief Executive Officer, and Mike, but a lot of our Chief Financial Officer.
Today's call is being webcast on our website at <unk> Dot com and the Investor Relations section there will be a replay of the call beginning at approximately 230 PM Eastern time today.
For the replay is 187734475 to nine with a confirmation code of 101 brief five 550.
Before I turn the call over to Glenn I would like to remind everyone that certain statements. In this earnings call, which are not historical facts will be for booking greets actual results may differ materially from these forward looking statements factors that could cause. These differences are detailed in our FCC filings, including the quarterly report filed today.
In addition, I stated more fully in our FCC reports breed disclaims any intent or obligation to update these forward looking statements, except as expressly required by law.
Let me quickly review the format of today's call.
First Glenn will begin by providing a business an operational update followed by Mike presenting our quarterly financial results. Glenn will then wrap up with closing remarks, we will conclude today's call by opening the line for question Glenn Let me turn the call Liberty.
Thanks Bonnie.
Thanks for joining our call today.
We've made a great deal of progress this quarter.
Yeah AFFO per diluted share was 18 cents.
Year to date acquisitions totaled 284 million and dispositions 847 million, including three in 26 million from our industrial partnership.
We announced a global litigation settlement at a net cost to the company up 765.5 million.
Included an equity offering of 887 million.
Yeah, that's a normalized EBITDA ended at 5.5 times, which included the stock issued.
Settlement funding.
Based upon this activity we are reaffirming our guidance for this year 68 to 70 cents and expect will be and they will be closer to the middle of the range.
Leasing for the quarter was a very active was very active at 1.6 million square feet leasing and occupancy ended at a healthy 99%.
Same store rent was up 1%.
Year to date, we at least 2.8 million square feet, representing 191 leases of which 1.7 million square feet, where we know.
An 838000 square feet early renewal.
Leasing activity, including 1.3 million square feet a retail.
664000 square feet of industrial.
Pardon 42000 square feet of office.
370000 square feet of restaurants.
Well, we know leases, we recaptured approximately 97% of prior rents.
From Q2 2015.
When we announced our business plan.
Capital markets, everybody, that's a great deal of liquidity and we've executed well.
In total we've had 13 billion up capital activity, including acquisitions dispositions debt and equity financing.
In 2016, we were net seller about it.
Completed successful debt and equity offerings.
At the bolstered our balance sheet.
During 2017 2018, we match funded acquisitions and dispositions.
Moving our portfolio, while continuing to reduce debt.
This year, we plan to be a net seller, reducing our debt ratios to cushion our ultimate litigation resolution.
But this legacy issue behind US we have now reset the bar starting in 2020.
And expect to be a net acquirer in next year.
But that background.
Year to date acquisitions totaled 284 million comprised of approximately 85% retailing, 15% industrial.
And believe we believe that will be within our guidance range of 400 to 600 million.
Retail included up preferred matching that a preferred merchandise categories convenience entertainment fitness specialty grocers automotive and discount retail.
Portfolio dispositions totaled 521 million all within our strategic categories.
In addition, there was 326 million from the industrial partnership with care, Yes.
Through this partnership we have extended our sourcing opportunities to both investment grade and non investment grade quality industrial properties.
We're seeing good deal flow and expect to have more detailed report at a later date.
Looking back to 2015, our debt load and poor balance sheet liquidity placed us in a challenging position.
But the business went prioritize not only debt reduction.
Liquidity needs the litigation.
We achieved that goal this year with a $2 billion undrawn revolver.
And expected litigation to be funded long term by various means at a time apart choosing.
However, we found good market reaction to our settlement announcement. They concluded funding quickly <unk> position as fast as we move forward.
Not often the market signals your decisions are appropriate correct, but one of our rating agencies. Mitch has moved us from triple B minus with a stable outlook, the triple B flat with a stable outlook.
Our next you have to normalized EBITDA ended at 5.5 times, which includes the effect of our equity offering and settlement funding.
Well, Mike reviews, our financial results, let me provide a brief update in summary.
On our recent litigation settlements.
On September nine we announced that we had entered into agreements to sell outstanding litigation at a net cost as a company approximately 765.5 million.
So I went to the class action settlement certain defendants agreed to pay a total of 1.025 billion made up of turning 25 million from the company's former external manager and its principle.
<unk> point 5 billion from the company's former CFO .
49 million from the company's former order and the balance 738.5 million from the company.
In addition, we settled with the remaining to opt outs for 27 million, which brings our total to the 765.5 million outlined above.
The company also entered into an agreement providing for the settlement of a derivative action lawsuit that was pending in the southern district of New York.
A couple before the court gate. The court gave preliminary approval to both the class action settlement and derivative settlement that schedule. The hearing on January 21st 2020 to consider final approval of both settlements.
Funding of the settlements was required 10 days after parliamentary approval and this is what occurred on October 15.
Mike will discuss the accounting associated with this funding.
Additional details regarding these settlements can be found in our 10-Q filed today.
We believe that settlements run the company is best interest [laughter] very happy to put them behind this.
Now, let me turn it over to Mike.
Thanks, Scott and thank you all for joining US today, we had another solid quarter, achieving a AFFO was 18 cents per diluted share and for the quarter rental revenue decreased 9.1 million or about 3% to 303 million, mostly due to net dispositions year to date.
Net income decreased by approximately 1 billion to a net loss of 741.5 million, primarily due to the higher litigation and non routine cost of 835.8, now and along with the lower gain on the disposition of real estate of 203.2 million, mostly attributable to the large gain realized for the industrial partnership in Q2.
The higher litigation and Nonroutine cost included the impact of litigation settlements, which I will discuss in more detail in this presentation.
FFO per diluted share decreased 83 cents from 18 cents to a minus 66 cents, mostly due to the higher litigation and Nonroutine cost discussed above and I am sure.
Oh per share was essentially flat quarter over quarter already 10 cents.
DNA decreased 1.9 million quarter over quarter to 14.5 million, primarily due to certain equity compensation and I know proxy costs that are always recorded in the second quarter and other cost reductions, including reduced rent due to the disrupted the restructuring of our Phoenix in New York offices.
We anticipate fourth quarter DNA to be higher due to normal seasonality that we will end up being just below our guidance range of 66 to 69 million for the year.
Year to date litigation related expenses have totaled 69.5 million, which includes the increased activity in Q3 with the litigation settlement.
And as Glen discussed the court gave preliminary approval to the class action on October four.
As such we funded 966.3 million for the class on October 15, which included the cash value of the LP units and dividend surrendered by the former manager and former CFO .
The amounts payable in cash pursuant to the class action settlement is included in the net debt as of September Thirtyth as was made up of the following them out.
738.5 million owed by the company 227.8 million comprised primarily of 19.9 million LP units, along with 1.4 million of dividends, which we're surrounded by the former manager and former CFO .
And includes credit for the second quarter FCC settlement with the former manager.
The difference between the 225 million and 12.5 million of total contributions for the former manager on former CFO mentioned by Glenn earlier was made in cash by them.
The LP units that were surrendered were treated as a reduction of non controlling interest and additional paid in capital on the statement of equity and an increase in our accrued liabilities as of September Thirtyth 2019.
The 19.9 million in units won't be removed from the diluted share count until next quarter.
Turning to our third quarter real estate activity. The company purchased seven properties for 60 million at a weighted average cash cap rate of 7%. In addition, the company invested 11 12 million in one build to suit project within investments today to 27 million, which was placed into service after quarter end.
During the quarter, we disposed of 32 properties for 100, a 9 million and as this amount 106 million was used in the total weighted average cash cap rate calculation of 7.3%, including 44 million a net sales of Red lobster, which now brings us lower 5% threshold.
The gain on the third quarter sales was approximately 19 million and subsequent to the quarter. The company was supposed to two properties.
For seven.
As Glen discussed since 2015, we've worked hard to put our balance sheet and liquidity in order upon the announcement of the litigation settlements. We found good reception the market conditions, and thus decided to raise equity in order to provide the permanent financing for announce settlements on September 23rd we executed in an underwritten offering for 71 million.
Shares we were almost two times oversubscribed, which allowed us to upsize, our offering to 94.3 million shares, including the greenshoe letting us approximately $887 million and then subsequently the rating agencies view. This as a positive development would Fitch upgraded house and Triple B minus the triple B.
In addition, during the quarter, our previously announced park. In addition, during the quarter. Our previously announced partial redemption at 100 million a preferred stock was completed on July 15, which was from proceeds of the industrial partnership thus our balance sheet remains a very healthy spot with plenty of liquidity and flexibility.
Our net debt to normalize EBITDA ended at 5.5 times are fixed charge coverage ratio remained healthy at three times and our net debt to gross real estate investments ratio was 38%.
Our unencumbered asset ratio was 76% the weighted average duration of our debt was 4.2 years and at this point, where 99.8% fixed.
And with that I'll turn the call back to one.
Thanks, Mike.
Greetings had three main goal since 2015 one.
And an enhanced and diversified portfolio.
We've done so by selling over 4.6 billion of assets in acquiring 1.7 billion.
To build the secure well laddered balance sheet.
We've reduced debt from 10.5 billion to 5.7 billion and manage the company's ratings from Noninvestment grade to investment grade with between Triple B minus and our goal of Triple B glut.
And three.
Maintain an experienced management team.
We've been in place for the last four years executing on all of those goals above.
With regard to our portfolio, we established a series of diversifying metrics, such as no tenant greater than 5% no industry more than 10%.
Retail and restaurants, approximately 60% industrial and office, both between 15 and 20%.
Investment grade tenants between 30, and 40% and flat leases low 20%.
I'm pleased to report we have virtually met every single goal.
Reducing our need for outsize dispositions next year.
As we moved past the litigation overhang.
Experienced management team has positioned us well.
And we're ready to be on the often at the lead into 2020.
Oh, Thank you very much for listening and now I'll open the line for questions.
Yes. Thank you we will now begin the question answer session.
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This time, we'll pause momentarily to assemble the roster.
And the first question comes from Sheila Mcgrath with Evercore ISI.
I guess, Glenn it looks like you couldn't refocus your efforts on growth again, which must be a release, but what are you seeing the best opportunities in retail restaurants, or industrial and should we assume no additional office and all industrial through the JV.
So good series of questions. Joe Let me, let me, let me start out with the first concept you brought up which is growth in terms of us now focusing on growth and I would say that we have always focused on growth and let's let's define growth is the growth in our share price.
And in order for our share price to grow we want a very good multiple and we want growth and they AFFO.
We have been focusing on the multiple since 2015.
If you just if I go through a bit of what Mike and I just said.
We had 10.5 billion in debt in 2015, and we've reduced that to 5.7, roughly 5 billion.
We've had to work through litigation, which has cost us $1 billion and 180 million and legal expenses net.
So we've had $6 billion of issues to take care of over the last four years by taking care of those issues. We clearly believe we've been working on multiple and growing the share price.
We were able to take care of those issues by selling 4.6 billion of assets.
And not only providing capital, but improving our portfolio and the market provided for us $1.6 billion and equity. So we we had $6 billion a problems, we had $6 billion of capital.
30 seconds as they will explain for years and work.
But that clearly helped our multiple so we're now in a position where we can focus on the next level of growth and that level of growth is to increase our multiple and increase our assets. So that that is where we are.
And we certainly intend to focus on both in terms of increasing HFO, we've done a reasonable job and same store.
And we need to be Annette acquire and that's the position that we find ourselves in today and we're very happy for it in terms of acquisitions, which will lead that.
We.
We'll continue to look at those areas that you just mentioned.
Discount oriented retail.
A quick service restaurants.
We now from sourcing capability can do both investment grade and non investment grade industrial so weve spread our wins a bit.
And those that those will be our primary targets as we move into next year well, we'll we'll look at those targets. So my shares of ways.
Sale leasebacks.
Build to suits forward commitments as well as just by leases or groups of leases on the marketplace.
In terms of the industrial JV I think the last part.
We we certainly intend to work through our industrial joint venture for investment grade product.
Very expensive and we don't intend to buy that on the balance sheet. Although we have no exclusivity as we've mentioned before but we intend to put investment grade assets through the partnership.
And there may be assets that don't fit that partnership that we feel very good about and our price correctly that will put into the balance sheet.
So long answer I think I answered most of whats yet that was that it was great and just one follow up how should we think about the preferred it's a fairly accretive opportunity did you pay that down just how are you thinking about that going forward.
Sheila it's Mike we've we've continue when we looked at our options on that as you know we took a $100 million of it out of the out of the industrial partnership and receive that liquidity that we did on July 15, and we'll continue to look at what we can do with it and whether you know we're constantly looking at where the pricing of it is in.
Also what the options are you know whether they'd be 10 year bonds in a 30 year bonds and a new traffic, where we'll continue to look at all of those options.
Okay. Thank you.
Thank you.
Thank you and then next question comes or frankly with BMO.
Hi, Glenn you mentioned that you were now ready to be on offensive heading into 2020, I just want to get a better steel on your thought process on how you're looking to find acquisitions, while balancing the upcoming debt maturities you guys have.
My question could you just touch on the debt maturities I mean on on the debt maturities on that it sounds like a little bit like I answered. The question for Sheila. We we are working we have a 19 Bank Bank group, we're always working with them looking at our options and we'll continue to look at those obviously were very aware that you know the ones that come to mind.
The vast besides all the perhaps that we just talked about is that we've got to convert that's coming due and 12 15 of 20 375.
We've got a bond coming due in June of 21 at 4.1 too.
And so basically and the perhaps any of those three have the potential to be accretive. If we can do the right type of transaction and we'll we'll continue to look at those I think if you look at our past we've done a reasonably good job of being opportunistic as the market allows and we'll continue to look at those.
The only I I'd add to that is.
The Triple B rating.
That's helpful right and.
We where we're going to work hard on the two of the rating agencies to see if we could get them all to conform and then in terms of funding acquisitions, we when we when we find anything its capital allocation capital allocation to us means that has to be accretive or in some cases at least dilutive. It has to help the portfolio and it's got to help our balance sheet.
We never want to be putting the corner.
Just as we talk to everybody about funding litigation, it's at our time and our option.
We have options and that's the most most important thing we have internal equity, we can sell assets with and generate spreads between what we sell in what we invest that.
We have a partnership.
Which we can use to take some of our assets, if we choose and put in that partnership.
And perhaps we could have equity so our funding needs.
Have options and we're very comfortable with those options.
Okay, Great and it's now that you got the upgrade from Fitch, how does this impact your cost of financing and well rate do you think you can issue debt at today.
Well I think you know right now we we were more we renegotiated the credit line as an example that we have one of the changes we made when we renegotiated a year and half ago that we get an upgrade we only need one agency so with the filtration. She is an example.
And our margin on our revolver went from 1.2 to one on our term debt one from 135 to one in our facility for you got better by five Bips.
Though so there's a significant improvement that will happen just on on that alone our spreads if for those of you follow our bonds, our spreads were already pretty reasonably tight, but we expect that they will tighten up more and.
As and as Glenn said, obviously, we're working with S&P, and Moody's, which would then or improve that situation.
Additionally.
Okay. Thank you.
Okay.
Thank you and the next question comes from Alison just with Mizuho.
Yeah.
Hey, there a good morning.
Afternoon.
Glenn I want to go back to your comment.
Next year, you mentioned being a net acquirer or but I'm curious just hoping you could be a net apple earnings growth story in 2020, I'd ask because your stock is it performed well this year certainly some of that have been yes, it's basically the litigation settlement, but now the bar gets raised and I think earnings growth because they're not much more important for your story so.
Do you think you can be an onshore during 2020 was that more of a 2021 expectation.
And if so does that imply that leverage remains here in the mid six range, including the preferred.
Well, we're setting the bar for the a our base level I AFFO in 2020 until I think Thats part of your question and from that bar, we expect to grow. So we can grow in 2020, but your points will take in 2020 is a bar set on which we we grow from.
In terms of how we grow.
We have some same store, but net acquisitions is a key element, we don't have a bad weighted average cost of capital right. Now we believe we can spread invest from our way the Catholic average cost to capital today.
And we have as I've, just mentioned multiple options to keep our debt in order. So were comfortable that they will be growth from our base level of 2020.
Okay fair enough. Thank you for that and so.
On the balance sheet I'm curious if you.
Having expectations for perhaps leverage goals by yearend 2020, or 2021 and.
If you'd be willing to share those and then would you be open to perhaps opportunistically over Equitizing acquisition as a means to accelerate some de leveraging going forward.
We were yeah I understand the question then I'm sorry, we're not giving guidance, we will give full guidance out on the fourth quarter for for next year and in terms of keeping our ratios where they are or perhaps if we choose taking our ratios down as I mentioned there are a number of ways to do that which include over equitizing.
The transaction if we believe that's the best way to finance it. So the answer is yesterday.
Okay. Thank you.
Thank you.
Thank you and the next question comes from the color harder with Morgan Stanley .
Thanks for taking the questions getting then you talked about sort of the two goals going forward, the multiple and growth and you've talked extensively about kind of how you plan to grow externally I I'm just curious I know one may follow the other but if you think about the multiple works is spears up from here on.
Can you talk about what you're thinking what actions you can take the kind of demonstrate a why the multiple should be higher and then just from me a from a from a broader portfolio perspective, I'm just curious to hear thoughts in the portfolio today in terms of the that the four different buckets.
Do you envision a remaining in those buckets do you envision them being different over the next call. It two to four years.
Either larger or smaller.
The the it's I think about the multiple and you can correct me become it's a combination of safety and growth and AFFO. It's both as I say it and we've worked hard to get that first component in place if you.
Looked at US in 2015, we were very unsafe at $10.5 billion and litigation hanging over ahead and very in a dip in the portfolio that had 11.5% red lobster and not diversified. So if you looked at US back then I you you'd worry about us and you needed to be rewarded for that the only way you can be rewarded for that but to give us a low multiple.
Weve corrected almost all of that in our view.
Moving forward. Therefore, we think the multiple increase should be based on our ability to increase a though.
And that's where we sit here today and Thats what were dedicated to do.
That's how we think about the relationships of the too in terms of the portfolio itself. We we've laid out a series of.
Diversifiers that I went through on this presentation, we did that 15 in 2015 not 15 here.
Feels like 15 years ago, sometimes.
40 years ago, and and where we're just about there and the proof is always in the putting.
Paul has put this portfolio in really good shape.
99% leased same store has as has gotten better we've reduced our top 10 from in the mid Thirtys to 27%.
If you look at our top 40.
Seven tenants that are over <unk>, 0.5%, they're really in good shape, well over half our investment grade and mostly public companies. So it's not only the portfolio metrics that we have focused on its the credit within those four portfolio metrics and we believe not believe we have Peru.
With that this portfolio is has been acting well should remain that way is your point, we're always thinking about that we do a five year plan every year, we reevaluate our relationships and we will do that once again, the clearly the one that that.
People point to his office and we were in the mid Twentys were down 18 into how we want to be closer to 15 than 20, there. That's it that's clearly a goal.
I think you mentioned flat leases flat leases have a good really good characteristic and that they are investment grade almost all that's why they're flat.
But but as we sell those and bring that down and I think we'll do some more of that.
It provides a really good spread cost of capital because we sell a lot of those in the fives and maybe six so we can spread that so we'll consider both of those being changed red lobster would be the last one I would mention of getting into get breaking five was it was a pretty big deal for us and just.
Think about it we sold $1.2 billion of Red Lobster's, who would have thought there's that much red lobster product in the world.
We sold that.
We will slow down on some of that now I mean, those are good 20 year leases at 2% growth, we're happy with their metrics, so that will slow down a bit.
But that will give you a sense of how we're thinking about the portfolio in the future.
That's helpful. Thank you I I was just sort of trying to get a sense of.
Relative to some of the you'll you'll peos, you're one of the few I guess that have this diversity in terms of industrial off et cetera, clearly the retail and restaurant seminar. So I'm I'm. Just wondering you know bigger picture now that you're done with a lot of the heavy lifting.
How are you thinking about portfolio composition more broadly and you do you feel you need to kind of the advantages to have these different buckets or is there a view that maybe focusing on on a on a couple on fewer.
I think of the four buckets.
I would think we in most of them onto would feel very comfortable with our retail restaurants and industrial.
The one like you would be pointing to his office and we understand that but we're very comfortable with the first three and in the fourth we've not bought an office building and though since we've been here.
We have sold 1.2 billion of our office portfolio.
And what we believe it.
At fairly good cap rates and hasn't destroyed and Navy and so that's the one we would continue to to work on the.
For the one point I would make though is having some diversification and property type whether it's three or four.
Has worked well for us.
We used together a lot we have used to have a lot of conversation about office and whether we should have any of it till the first quarter of 17.
When the retail world blew up.
And all of a sudden.
Retail wasn't so hot.
Our retail has been very well as as I believe many in the triple net space, but having a little diversification is in a bad thing and the second part is sourcing optionality.
When people or we speak about beacon, Nick acquirer, we prefer not to have to buy one of the anything.
Well, that's a box that you don't want to begin.
We like the fact that we can buy retail weakened by restaurants, we can buy industrial and as we've mentioned, we're considering not having office on our balance sheet to any great extent, perhaps an office JV because we haven't really good infrastructure just to give us sourcing opportunities and create income to grow.
We're not going to sit back and just hope and expect to find properties that we could spread against.
We're going to look for opportunities to grow and will never stop doing that.
More property type give us those opportunities.
Fair enough. Thank you.
Thank you and the next question comes from Mitch Germain with JMP Securities.
Afternoon Glenn.
Represents the best opportunity for capital to work right now one off granular investments that you can kind of pick and choose the operator the credit location.
Or do you see yourself, maybe getting involved in some portfolio or entity level trades, where maybe you are not as thrilled with everything but the population of buyers isn't as a significant.
Of the two pricing is clearly better on the second edge and we've done a little this where where we have bought a.
Perhaps portfolio up six or eight industrial buildings and sold off two or three because we just no. We didn't like them. So we have we have actually participated in that arena for the last few years and that will be that will be better price you take a little more risk, but if you believe in your infrastructure as we do you have mitigated that red So I I'd point to that another another.
Form that we're looking at and we have placed some in our portfolio our build to suits, where we have capital and we have expertise we have construction expertise and we could find along the way and then provide the take out so we get a very good property at the end of the day and reasonable very reasonable returns on our funding.
Along the way we were equipped to do that and we're finding more of those transactions as well. So it's a combination to your point is just buying a single deal at 5% makes no sense, we agree with that.
There are other ways that we can access the market and the more opportunity. We look at in terms of different property types as well as geographies will give us the ability to spread invest.
Gotcha.
I think about the weighted average share count I'm, just Mike Im just from moving that 19, or so million partnership units right isn't the way to think about how that winds up it will wind up going in in Q4, though yes. That's how it goes yeah, so what sort of Yang satellite around the mid October I guess.
October 15th.
Great.
And then.
If I considered the the litigation is that.
Should we have a hearing in January right and then.
What's left.
I guess is what I'm trying to figure out if there is anything left.
They're the FCC has not close the case on us.
We continue to have conversations with the FCC.
We've been.
A good stewards of working with them.
They're pleased with us.
So we don't have a conclusion yet.
We are hoping to.
Have a conclusion, but we do not know it's at their time.
And.
We can't control that.
Is there any precedent.
That.
You could point you.
You know the problem is if I'd point to precedence I get in trouble.
[laughter], but to answer it are there presidents, yes, and so many but I do mentioned you. If you if you looked around all that one president that's clearly out there that I don't get in trouble about because it's out in the open.
The former manager in their principles.
Did.
However, the case close with the FCC and they had a fine of $22 million Thats out there other than that I think you'll have to look around yourself a little bit.
Thank you.
Thank you.
Thank you and the next question comes from Chris Lucas Lucas with capital one Securities.
Glenn just kind of a follow up to some earlier questions is just relates to sort of moving towards a more.
Sense of perspective, I guess first question for you would be.
Do you have the team in place to sort of quickly.
Get ramped back up from an acquisition front or are there holes in the team right now that you need to be thinking about filling.
Okay.
I'll come back to some real numbers, but crystal what I remind you of as.
We bought 1.7 billion of assets. This year, that's on our balance sheet, but we have also bought 2.8 billion of assets for coal.
With the same team leadership, so as a team we bought 4.5 billion of assets over four years, which is over 1 billion a year.
I'd also point out that we have sold 4.6 billion of assets. So we have a team.
In total has done over 9 billion of capital activity over four years.
All the leadership of that team is here.
It remains.
We have between underwriting in acquisitions.
15 people, we feel comfortable with.
If we needed some more staff because we see activity really growing we'd have no hesitation, but we're in pretty good shape right now.
Okay, great. Thanks, and then I guess, just as it relates to sort of the questions related to sort of fine tuning.
Full year perspective, it just one of the issues that you're also going to be facing is a bit of a ramp in lease expiration schedule going forward. So we think about that we think about flat leases or think about the office exposure or are we looking at growth to sort of get you through this or is this a combination of multiple factors to sort of manage that risk.
It is a combination of multiple factors, but but let me just cut you've hit on important so, let's let's say the lease expiration schedule.
We we very much focused on that and.
This if you look at 2019, we started the year with but with 3.1% expiring.
He went back to 2017, Chris we had 4.7 expiring. So we got ahead of that by leasing 1.6% before 2019.
Paul and his group are continually looking at that if you. If you look at 2020, we have a 3.2% coming do it was 3.9 in 2018, we've already taken care of 0.7. So we are in front of the expiration schedules.
Daily basis, and that is very important as as we look at ramping up growth your point, which I understand is growth is a combination of not only net acquisitions, but are you, losing anything and that both of those are built into our equations yes.
Okay. Thank you that's all I have.
Thank you.
Thank you and then, especially when it comes from Caitlin Burrows with Goldman Sachs.
Hi, there I don't think we talked about this yet but it looks like the Threeq you acquisition volume with the lightest quarter in awhile.
The full year guidance.
Hasn't changed that means there's a noticeable pick up assumes I was wondering if you could just go through some of the pieces and how confident you aren't getting to that near term for Q.
Okay Lindy.
As we plan to year as we spoke to about.
We were going to be a net disposition.
The net disposition position in a very deep way right because the purpose of this year was to make sure our debt was going to be down we did not know when the settlement was going to occur, but we wanted to be in position. So we position ourselves for that and that's what you see in the third quarter.
Where we are we certainly believe that will be in the four to $2 million to $600 million range of guidance for acquisitions for the year.
Keeping that down we we believe will help us, though because we like being in a nice debt position by year end.
Got it okay, and I guess, when we look out to 2020 and being on the offensive.
I think you did talk about how you have options, but how do you think your share price.
Got your acquisition activity and how that impacts reliance on your ATM or just the ability to <unk>.
Required to the extent that you want.
All the above right.
Certainly our share price.
In caustic fixed cost to capital which will.
Within our thoughts anytime we're thinking about capital allocation, but thats why we always want options and having options will give us the ability to maximize.
Our our.
Net acquirer position, so absolutely it's important but we don't want it to be the most important.
Okay, and then maybe just.
I think you also talked a little bit before about how there are some pieces that you could consider still I pruning and doing dispositions to some extent next year. When you do those do you think those could be at positive cap rates spreads versus the acquisitions, you're doing or kind of what they would we be thinking of that not necessarily its funding the acquisition.
It will depend where it comes from its certainly they could be some office.
Dispositions, which could be dilutive.
Flat leases, but absolutely be accretive.
Anything into a joint venture would certainly be accretive so that they will be a mixture of where we are and if.
If you if you looked at everything.
This year.
Well that we've sold we have had an average cap rate of 6.7% on what we've sold versus what we've acquired which is about seven one. So there are ways to certainly spread invest that but it will depend upon where those pockets or.
Got it okay. Thanks.
Thank you.
At this time I would like to return the floor to kind of roughly call. It any closing comments.
We thank everybody for joining us as as I mentioned in the beginning.
This team has done a great job, we've had a very good in active quarter and really look.
Look forward to positioning ourselves into Two Q2 020, Thank you very much.
Thank you. The conference has now concluded thank you for attending today's presentation.
Thank you Roger.