Q1 2020 Earnings Call
This property is leased to Amazon for 15 years Following last year's 5% growth in our gross leasable area at the end of the first quarter are gross leasable area has increased to approximately 22.9 million square feet representing 6% growth over the prior year. And a 3% increase on a sequential basis.
The quarter-end our portfolio consisted of 115 properties geographically Diversified across Thirty States.
A quarter and or weighted average lease maturity was 7.6 years. We continue to experience strong demand for our properties as evidenced by our 99.2% occupancy rate at quarter off.
Subsequent to the quarter. We leased up our 105,000 square-foot facility in the Buffalo New York MSA, thereby bringing our occupancy rate up to 99.6% off during the quarter. We grew our acquisition pipeline to include five new built-to-suit properties containing 1.2 million total square feet representing one hundred seventy eight point five million dollars in fact your acquisitions.
All five properties or leased to investment-grade tenants. These future Acquisitions will have a weighted average lease term of 13.4 years subject to our customer due diligence. We anticipate closing each of these transactions upon completion and occupancy, which is currently expected to be during fiscal 2020 and the first half of fiscal 2021
connection
One of these five properties we've entered into a commitment to obtain a tenure fully amortizing mortgage loan of 9.4 million dollars with a fixed interest rate of 3.47% off we expect to continue to grow our high-quality acquisition pipeline further during fiscal 2020.
During the quarter. We raised approximately 15.5 million dollars in equity Capital through our dividend reinvestment plan of this amount a total of 4.2 million dollars in dividends were reinvested representing a 26% participation rate. We also raised 43.2 million dollars in net proceeds through our preferred stock ATM program with the sale of 1.8 million / 6 and 8 series C preferred stock at a weighted average price of $25 per share.
Subsequent to the quarter and we raised an additional twenty seven point seven million dollars in that proceeds through our preferred stock ATM program with the sale of one point 1 million shares out of waiting a price of $25.04 per share.
Yep.
Saturday we established a common stock ATM program that provides for the issuance of up to 150 million dollars of our common stock and prevailing market prices. We are implementing the common stock ATM program for the flexibility that it provides to opportunistically access the capital markets and two best time are Equity Capital needs as we close on acquisitions.
ATM programs is most of you know, or widespread throughout the industry our preferred ATM which has been in place since 2017 has proven to be a very useful source of long-term capital to help fund our growth strategy why we intend to opportunistically raise Equity under our ATM program based on current prevailing prices. We do not expect to utilize the common ATM extensively at this time.
Turning to the overall us industrial Market or property sector continues to perform exceptionally. Well as per Cushman & Wakefield fourth quarter report net absorption for the fourth quarter of 68.8 million square feet this brings year-to-date net absorption to 233.8 million square feet representing the 39th consecutive quarter of positive net absorption net absorption has been greater than 200 million square feet for six consecutive years us industrial vacancy rate remained unchanged during the quarter at a record low of 4.5%
We did.
Which asking rents increased 2.4% over the prior-year period to $6.51 per square foot currently, there is approximately 321 million square feet of industrial product under construction representing a 14% increase over the prior year. The overall US economy remains healthy with Q4 real GDP growing at 2.1% and a 2.3% for the full year driven primarily by strong retail spending and record employment us manufacturing expanded last month for the first time in six months.
Lastly while remains to be seen how the coronavirus situation plays out. It is a reminder that Black Swan events do appear suddenly surprising and disrupting the global Marketplace and found ways that algorithms are in my opinion. It will prepare for widespread growth of passive index investing has resulted in the two largest components of S&P 500 now becoming bigger than the entire Russell 2000.
further
Creating this point the five largest companies now make up 20% of the entire S&P 500. In other words. The broad Market has narrowed substantially doing those small mayonnaise to the widespread growth of passive index investing because Mom is income streams are secured by long-term leases to investment-grade tenants. We have been a safe harbor in turbulent times even during the depths of the Great Recession or shareholder dividends were paid without missing a beat with reliable dividends should come patience and less volatility and now let me turn it over to Rich so we can provide you with more detail on the property level as well as our progress on the leasing front.
Thank you Mike with respect to our property portfolio. Our occupancy rate at quarter-end was 99.2% representing a 30 basis-point increase from a year ago off subsequent to the quarter end or occupancy is increased further to 99.6% are weighted average lease maturity was 7.6 years as of the quarter end as compared to 8.0 years in the prior-year. Are weighted average rent per square foot increased by 1% to $6.27 as of the fiscal year end as compared to $6.22 a year ago from a leasing standpoint in fiscal 2020, approximately 2% of our gross leasable area representing five leases for calling approximately 410000 square feet is scheduled to expire
two of these five
Says have been renewed and one of these properties consisting of fifty five thousand square feet in the Hartford. Connecticut. MSA is under contract to be sold. The two leases that have been a renewed representing a hundred fifty-seven thousand square feet or 38% of the expiring square footage.
These two lease renewals have a weighted average lease term of 5.9 years and a weighted average lease rate of $5.61 per square foot on a gaap basis and $5.28 on a cash basis this represents an increase of 15% on a gaap basis and an increase of 2.3% on a cash basis the remaining two boxes totaling 198000 square feet that are set to expire during fiscal 2020 are currently under discussion.
Effective last month in January 2020 we entered into a new two-year lease agreement with San web distribution a 3pl for a hundred and five thousand square foot facility located in the Buffalo New York MSA which increased our current occupancy to 99.6% annual rent is $630,000 representing six dollars per square foot over the life of the lease illustrating the strength and visibility of our income streams. Our occupancy rate has been over 98% for five consecutive years now and our wage average lease maturity has provided over seven years of lease term for six consecutive years out of our entire hundred fifteen property portfolio. We currently have only one vacant building representing approximately 40 basis points of our total GLA and now Kevin will provide you with greater detail on our financial results.
Thank you.
Adjusted funds from operations or a f f o was Nineteen point nine million dollars or Twenty One cents per diluted share for the first quarter as compared to $21 or $0.23 per diluted share a year. Representing an 8.7% decrease. This decrease was largely the result of an increase in preferred dividend expense of one point seven million dollars and a reduction in dividend income of 1.1 million dollars partially offset by an increase in net operating income of 2.1 million dollars. This quarter's a f f o of Twenty One cents per diluted share name is flat. Sequentially when compared to r a f f o of Twenty One cents per diluted share in the prior quarter.
Rental and reimbursement revenues for the quarter were forty one point seven million dollars compared to thirty eight point two million dollars or an increase of 9% of the prior year.
Net operating income or noi which we Define as recurring rental and reimbursement revenues less property taxes and operating expenses was 34.5 million dollars for the quarter affecting a 7% increase over the comparable period a year ago.
Our net income was nine point six million dollars for the first quarter as compared to net loss of 27.9 million dollars in the previous year's first-quarter this increase in our net income was due to an accounting rule change which became effective at the beginning of our prior fiscal year in which unrealized gains and losses on our Securities Investments are reflected in our income statement as we mentioned on prior cause this will at times result in large swings both up and down in our net income this large increase in our net income. This quarter was primarily driven by the $39 decrease in the undead like loss on a Securities portfolio.
As Michael mentioned earlier during the quarter. We acquired one newly constructed industrial property for 81 and 1/2 million dollars this 616 thousand square foot Distribution Center in the Indianapolis. MSA is least the Amazon for fifteen years. We Finance this transaction with an eighteen year fully amortizing mortgage loan in the amount of 52 and 1/2 million dollars at a fixed interest rate of 4.27%
same
Decreased by Thirty basis points on both the Gap and cash basis over the prior year. This slight decrease was primarily driven by a 90 basis-point decrease in noi from the vacancy of our Buffalo New York property and was partially offset by a 20 basis point increase in st. Property occupancy to 99.1% at quarter-end as Rich mentioned subsequent to quarter-end. We entered into a new two-year lease agreement for the Buffalo New York property during the quarter. We amended our unsecured line of credit facility increasing the maximum availability of our revolver from $200 to $220,000 with an additional 100 million dollar recording feature bringing the total potential availability up to 325 million dollars.
In addition the amended credit facility extended the maturity date of our revolver from September 2020 to January 2024 with options to extend further.
Furthermore the amended facility was enhanced with the $75 Term Loan which matures January 2025 resulting in total potential availability on the both the revolver and the term of up to $300 and up to $400 including the $100 accordion feature.
Amended line of credit and new Term Loan increases are borrowing capacity extends our maturity and reduces our borrowing rates by a range of five to thirty five basis points, depending on our leverage ratio Dead Revolver currently best interest at a rate of 3 and a quarter percent. We currently have the full $225 million dollars available under our new revolver as well as an additional $100 off potentially available from the accordion feature.
To reduce floating interest rate exposure on our Term Loan and to lock in the current historically favorable rates. We entered into an interest rate swap agreement to fix Libor on the entire $75 million dollars for the full duration of the term loan, which is at an all in interest rate of 2.92%
At the end of the quarter our capital structure consisted of approximately $864 million dollars in debt of with $784 million dollars was property level fixed rate mortgage that and eighty million dollars were loans payable 91% of our debt is property level fixed rate mortgage that with the weighted average interest rate of 4.05% as compared to 4.08% in the prior year. A weighted average debt maturity for a property level fixed rate debt was 11.5 years at quarter-end as compared to eleven point eight years in the prior-year. Seventy-five million dollars of our loans payable is made up of a Term Loan that has a corresponding interest rate swap agreement to fix Libor at an all in interest rate of 2.92%
including the term law
Ninety-nine percent of our debt is fixed rate with the weighted average interest rate of 4% along with the weighted average debt maturity of 10.5 years this represents one of the longest that maturity schedules suck entire read sector taking on maturities out even further. We also had $392 outstanding on our series see six and eight percent Perpetual preferred Equity across friend combined with an equity market capitalization of one point four billion dollars or total Market capitalisation was approximately two point seven billion dollars a quarter end.
From a credit standpoint we continue to be conservatively capitalized with our net debt to Total Market capitalisation at 32% are fixed charge coverage at two point three times and arnaud to adjusted ebitda at 6.1 times for the quarter from a liquidity standpoint. We ended the quarter with 16.4 million dollars in cash and cash equivalents. And as I previously mentioned home currently have no borrowings on our revolver.
and it's
We have one hundred eighty one point eight million dollars in marketable Securities represent the 8.2% of our under appreciated assets with an unrealized loss of 53.1 million dollars a quarter of a Securities portfolio currently generates approximately $13 in annual dividends as we announced last year. It is our goal to opportunistically reduce the size of all marketable Securities portfolio to approximately 5% of our on depreciated assets. There have been no open market purchases or sales of Securities since this announcement was made off and now let me turn it back to Michael before we open up the call for questions.
Thanks, Kevin us industrial real estate has experienced a protracted period of cap rate compression. It is estimated that industrial real estate values have more than doubled during the past ten years and have increased by 15% in the past year alone consequently, the value of our properties has appreciated substantially looking forward. It is true that the total u.s. Parcel Market will double from $50 million packages per day currently to a hundred million packages per day by 2026 because of this surging demand FedEx Ground recently began delivering packages 7 days a week all year round.
this means
That are mission critical properties lease to FedEx have now become more mission-critical than ever before lastly before we open it up to questions. I'd like to point out that are recently published annual report is now up on our website this report represents an excellent resource for understanding our company and our Outlook. We encourage you to read it. Please contact our department. If you'd like to receive a hard copy and we'd be happy to FedEx it right out to you. We would now like to open it up for questions.
We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two at this time. We will pause momentarily to assemble our roster.
And our first question comes from Jeremy Mets of BMO, please go ahead.
Hey, good morning, guys. I'm on with frankly here. My just first on the pipeline. Obviously, there's been some challenges FedEx has talked about granting a lot of that seems more on the global scale and and some of their Global operations versus our ground Network. Obviously, you mentioned the expansion of the package delivery needs but just as a historically big component of your life pipeline. Are you seeing any sort of concerted pull back from them? And if so, is it increasingly making you shift at all or or shift Focus to look at other issues but non FedEx opportunities
Well, you know FedEx is a public company, they report quarterly and consistently the US ground operation is performing very very well Shipman were up 7% year-over-year for FedEx Ground FedEx ground is the backbone of their e-commerce business. So like you said the weakness is largely in Asia and Europe and from the beginning of this year. They announced that they're shipping out of our building 7 days a week. So the fact that they're utilizing our buildings all week. All year long is a big factor in why we've had over 98% occupancy for over five years now. So capex for FedEx is projected to be five point nine billion this year 5.5 billion for next year. And that's because the pie is expanding the demand for increased package shipments is growing from fifty million packages A Day in the US currently to project it to be as high as a home.
million packets of the day and 2026
So so I think the demand is very strong. And yeah, I think maybe some of the projected metrics for FedEx were a little too optimistic given the birth of global trade slow down and Greg's it and and weakness in Europe.
Okay, and and yeah, and I respect I think it's just more of thinking through of other thing about expanding with new acquisitions versus maybe this creates an increasing opportunity for expansion out for you and maybe less on the acquisition front just trying to think through the next 12-24 months. You know how we're supposed to be thinking about one versus the other in that context of those off, but maybe they want to flex their existing facilities more in the current environment any thoughts well by going to seven days shipment, obviously, their their term is with their assets. They're clearly using their assets more than ever, but there are new FedEx buildings going up in the us both FedEx ground and FedEx Express and in our pipeline took a few of each and we continue to look at additional FedEx deals FedEx has a percentage of our total square footage went down in 2019 versus a table.
and it will probably
Continue to come down, but but that's just because we're doing a lot of buildings with large that's been great tenants other than FedEx.
All right, and then in terms of the renewals the two you have left in 2020. I don't think either is FedEx which historically get done almost right at expiration date. So maybe you can just give some color on how we should be thinking about the renewal probability here. And in terms of spreads should those to renew should we see a similar modestly positive cash read or they or their any Supply raised in those markets where we could potentially see a rolled on?
Yeah, well, I'm going to turn that over to Richie handles that but I'm told the prospects are very high for Renewal and the high for rent increases Richie want to add to that. Yeah, Mike you're correct, you know we're down to the end of our negotiations and and that's about as much as I'll say but those both of those should get renewed shortly.
And similar spreads to what we saw similar positive spreads both bases cash and Gap.
All right, and then I think Frank had one question. Yeah, hi. Hi guys in regards to your goal of bringing down to Securities portfolio to 5% is the plan still for this reduction to come down. Naturally, you know as you walk in acquisition pipeline, or could we expect some near-term Securities sales? And also is there expected timeframe on when you think you can reach the target at 5% Thanks.
Yeah, well, there's so many variables out of our control as to it coming down as Kevin mentioned there have been no purchases or sales since we announced Our intention to take the ceiling from 10% off. It's down to 5% of gross assets and and because it's gone up in value. That's a variable we can't control it's it's actually higher as a percentage of of assets but given our pipeline wage, it will organically shrink but as far as sales, you know, we'd like to convert unrealized gains to realize gains off the whole portfolio in a total loss position. I'll be at a smaller lost position than a year ago a much smaller lost position than a year ago. But but as the unrealized losses come closer to New Jersey role and realized gains then as we've done in the past, we will harvest realize gains and you'll see the portfolios shrink faster. But when if and when that's going to occur is beyond our
Sure.
Thanks for the time.
Our next question comes from Michael Carroll of RBC Capital markets, please. Go ahead.
Hey, this is Jason calling from Mike. I just had a question about the lease up of the Buffalo asset looks like there was a rent roll down there. So I was just wondering if you could talk about the lease the process.
Sure, I'll turn that over to Rich. Yeah, sure. So we've on that asset for Seventeen years and that building was expanded twice at a 10% CAF on coughing. So those rents kind of went higher above market and it's free and clear now and the rents are back at market and we're we're happy with the the performance of the asset over time so I can just add to that. So we bought the building in two thousand to FedEx expanded it twice and all the capital it took to expand it. We got repaid over the lease term. So the good thing is we got free additional square footage you could say and and and we got all our money back on additional parking. However, because of a 10% return unlevered return on all the money we put into the building the grants went well above market and and then Rich in leasing the building had to roll down to Market, but we're happy to to fill the space and we're happy to have had to
very profitable expansions with
since 2002
Yeah, definitely. Okay, that makes sense. And then I'm wondering if you could put any numbers to a shadow pipeline seems like you were able to quickly backfill the bills to pipeline after closing that Amazon. So just curious what other deals you're looking at.
Yeah, I would say the shadow pipeline is another its highest another quarter billion. But you know, it's it's remains to be seen of that how much we actually win if any because the market is so competitive. Um, but yeah, we hope to grow the pipeline and we don't announce Shadow pipelines. We really just talk about things under contract and Thursday. We have long-term relationships with the merchant Builder Community the deals we win. There's no broker involved. It's just us doing business with Partners we've done business with for decades. So I think that's a distinct advantage and it is very competitive. We do have to bid very record-low cap rates, but fortunately we're financing these transactions with record-low interest rates. Am Kevin you want to talk about what sort of interest rates are seeing these days. Yeah sure. I mean as we mentioned on the, you know in the prepared remarks we have one deal in the pipeline logged in currently at three point.
for 7% so less than
Three and a half percent and as a few more out there that we've gotten bids to to lock in at even lower rates that you know, we just can't announce yet. So we'll be able to announce and and I could say I'm going to be record-low, you know interest rates on on 15 year loans.
Got it. Thank you guys. Thank you.
Our next question comes from very Oxford of d a Davidson, please. Go ahead. Did you give us a little more color behind the sale of the building that was empty and and how you decided to sell it versus Pay. Maybe I should wait and lease it up. Did you get kind of pricing that was close to that?
Yes, the buildings we've sold have been a result of Kellogg Keebler changing their supply chain to bigger modern buildings and and the buildings and and these buildings are not indicative of or folio at all. They're small buildings. We purchased them for a very low purchase price and we're selling them a good profits, but I wouldn't extrapolate any of the economic returns from a sales as indicative of our portfolio cuz we're really pruning our portfolio and and our portfolio average building age is about 9 years average building size is about two hundred thousand square feet average land to building ratio is over 6 to 1 and and the buildings were selling or smaller buildings that we we've been selling consistently am rich you want to talk to about that any further? No other than it just not as much acreage and not as configurable as some of our other assets. So yeah, is that correct?
Micah the current vacant building too
Well, okay, the current vacant building is is also a unusual for a portfolio. It's in an industrial park. Everything we own is a single-tenant at least industrial with a long-term investing great tenant, but but that property is on an industrial park we've owned for decades. It used to be our one multi-tenant asset other than the shopping center on in Somerset, New Jersey, which is also a an outlier in our portfolio. But but in Monaca, Pennsylvania outside of Pittsburgh a suburb of Pittsburgh is this industrial park and off the 110 it there in the titanium business their business is strong and growing and now there are sole tenant and they're talking about taking some of the eighty thousand square feet of vacancies. So Thursday, we do feel optimistic that that our occupancy will go up and we'll fill some of that space. It's just a question of if it's you know, 25% or more. Hopefully, they're busy.
keep growing and and they'll take all the
XS space in that building but as Gene mentioned on our last call and I will turn over and he wants to talk about it further but it's e mentioned on the last call the largest construction site in North America is five miles from the property. It's the shell cracking plant going up. It's a seven billion dollar investment. It's going to come online in the next couple of years. And so there should be strong demand for for our real estate. Once she comes online. Can you want to answer this at all? The only other thing I add is I know how River and it's on the navigable portion and I just think it's a wonderful property for the future and that's why I take a long-term view of things here. But here's one empty building and the prospects for it long-term or excellent and we don't intend to get rid of it. We tend to them though with the areas is the cracker plant comes in. There's going to be great demand for space and Riverfront properties.
Great. Thanks. Mike. One last question switch gears a little bit. How do you guys think about unsecured debt going forward?
well
They Kevin mentioned we're locking in 15 your money in the low low threes fully amortizing as we grow and build up our unencumbered asset pool that Catherine of the capital markets will become more accessible for us but a company our size with long-term relationships with the life Coast is very happy to go secured advertising debt and generate levered Returns on equity in the low teens. It's very favorable the current process but we are building up our unencumbered asset pool and has that gross. We we can start looking at the unsecured Market Kevin anything you want it to that. Yes. Yeah. I'd like to either the hundred fifteen properties that we own fifty five of them are free and clear and and unencumbered and and as Mike mentioned we in the new acquisitions we get secured amortizing debt and as that advertising debt amortize has out and and and it's paid off we we leave it for free and clear rather than reform.
missing it and then you know as I mentioned on the prepared remarks, we we just refinanced our line of credit with now we have the full capacity the full $225 million dollar revolver available to us, you know, so
That's a great liquidity tool that we have in in our tool belt. And and that's how we look at it. And it's it's right now the it's it's it's a floating rate debt that that's right. Now in the low threes wage if we choose to use it.
Right. Thanks so much guys. I'll yield the floor. Okay, thank you. Very our next question comes from Rob Stevenson, please go ahead. Good morning guys named Mike or Rich you talking about the Cadence of the closings of the five acquisition pipeline properties. You said some of them will close this year fiscal year or next is this essentially one a quarter for the next 5 quarters is this point in time? We're more of these are expected to close. Just trying to think about it for modeling purposes when we should be bringing these assets on to your balance sheet. Yes, I broke that down cuz I anticipated this question. So our pipelines 178.5 million dollars and on a dollar basis, you should expect approximately 10% of them to close in the second quarter of fiscal twenty another 7% in Q3 approximately 27% in Q4. Yep.
that totals to 44% of the
Blind closing and fiscal twenty and then the other 56% you should expect to close in the first two quarters of 2021 with 40% of the $178,000 million dollars closing in q1 of 2021 and the remaining 16% in Q2 of twenty Twenty-One. Now all that's approximate and all that subject to the slippage. That's where it stands right now. All right, perfect. That's great. The the the sonwil distribution in Buffalo that you just leave. Is this an asset to now hold off or given that it's not investment-grade tenant and his income producing is this a disposition candidate how you guys thinking about that asset now, there's a lease on it is more desirable out there in the market.
Well, like Gene said we we really don't like to sell anything. We're looking to grow and looking long-term having said that and and that that doesn't have a lot of lease term on it. But having said that it's certainly a candidate for this position most of our assets, uh, you know, long-term leases to investment-grade tenants. That's a short-term lease to a not invest in grade ten. So it would be a candidate wage do get unsolicited offers to buy our properties all the time. And as a company with going on 3 billion in Enterprise Value, we're really, you know, not of the critical mass to be public that you need to be these days. So so we're looking to grow I'll be at qualitatively I'll be at slowly and methodically we've seen new entrants to our space, you know, Leap Frog up out of nowhere to become multiples of our size and and as a fifty-two-year-old company, we know you don't get to be fifty-two years old growing at such a rate so so dead.
we're looking to grow we're we're happy with our portfolio, but we're going to continue at
Our own pace and then putting together the breadcrumbs. I think that you were talking about earlier Rich the property that you're selling for 4 million with the expiring lease. That's the Newington Connecticut a setting a table, correct? Okay, and then one for Kevin, what was the nearly 800,000 a severance in the quarter?
Yes, so we made an announcement. We had a general counsel who was here nearly twenty years, you know, and and in in its part of the agreement of her retirement, you know to to recognize them as a service, you know, that that was just the agreed-upon amount and you know, Mike Prasad is now our new general counsel. He's been working alongside our former general counsel for the last few years now. I'm up to the task and has been doing a great job. Okay, so it wasn't an $800,000 Payday for Susan in her retirement knows with the general counsel. Okay. Thanks.
I don't want to Susan to feel left out. We certainly is Susan had a compensation recognizing her service as well.
Our next question comes from Craig to Sarah of B Riley FBR, please go ahead.
Hey, good morning, guys. I think last quarter you disclose that your pipeline at that point in time was three FedEx's and one Magna seating is the new addition to the pipeline another FedEx or something else.
Something else. It's a Japanese earth-moving manufacturer there like the Japanese caterpillar called Komatsu a rated credit. It's outside of Pittsburgh market and it's a good new addition to our to our tenant roster.
Got it. And I think last quarter. The the pipeline at that point in time was was a little higher than a than a 6-2 or so. Is that still the case on on where things stand today with this new edition wage? Yeah, the the pipeline average cap rate over thirteen point four years of lease term is just shy of 6.3.
Got it.
What a shift gears and talk about the the balance sheet, you know curious about the the capital raising this quarter particularly on the preferred front and you know subsequent to quarter-end did that pick up as you're pleased with pricing or or is that more a function of you know, kind of alluding to this Shadow pipeline that you're working on where you could you know, really see an acceleration and an acquisition volume.
Do you know that you handle that and then I'll try Min balance sheet will also believe it's very important that we think long-term Thursday. We have we had trying to build up a balance sheet that can withstand changes in the economy not to be susceptible to increases in interest rates and you'll pay six in a daze for preferred and we could borrow money at 3% and that makes a difference of between five and ten million dollars a year. We're very happy to do that because we're getting our portfolio free and clear. We have Securities we can borrow against we are really trying to build up a very strong financial statement. So that whatever happens over the next couple of years. We're here for the long term and the long-term view is excellent. The country is growing too.
sleep this out a year and
But you said it's to 3% a year at properties a relatively new we have two and half billion in assets. What are they going to be with ten years from now, you're really talking about large box is and I I find it interesting people look at a million two million change in one year. And actually we're looking at much larger numbers and the preferred the decision on the preferred. We realized cost us money short-term, but long-term there's nothing longer as Michael points out that a Perpetual preferred and there's no cheaper Capital than Capital that you don't have to repay. It's part of our Capital stack and it's going to ten years from now people going to see that the balance sheet. We've built the properties. We build have really produced a goodly turn over over 10 year.
Okay, great. And I guess just kind of dovetailing with that and your thoughts on on utilizing that preferred I think from a leverage perspective, you know historically you guys were closer to maybe seven times a month and that's been drifting down closer to 6. It should we think of that as sort of how you're going to manage the balance sheet going forward or or do we you anticipate may be leveling up a bit in the future.
Well his store.
We are net debt-to-ebitda has fluctuated between the high fives and high 60s. If it was in the low seventies, it was just by virtue of closing a lot of Assets in in one lump e. And not having the their earnings come in yet the debt hits immediately. But but historically it's it's in the low sixties is good average and Thursday. I think right now it's six one and certainly gives us the capacity to lever up cuz as Rich mentioned with occupancy being over 98% for so many years and
At least terms going out over seven years and our debt maturity is going out over eleven years. I think 6.1 times net debt see but it's very low Leverage.
Okay, great. So I can just add one thing just about you know, that that that's the number you know, it's just a simple math equation. You take it your net debt, / you're even though but if you look at the components of our life at 90% of our debt is amortizing debt. So there's no looming maturities with balloon payments. So I think that's a big factor when you look at how that number, you know could be maybe a little higher in our case off the other end of the equation our Revenue eighty percent of our revenue is investment-grade tenants and we have one of the longest, you know, we have a long lease term of 7.6 years or are weighted average debt maturities 11 and 1/2 years. So I think you know, if you look at the components of what makes up that ratio you could maybe you know, you could feel that it could be a little higher maybe than some some another another type of company. I just had another issue with with increasing our free and clear properties. I preferred to getting to a point they we have the flexibility of calling them in the in the near future. We're keeping. Yep.
a flexible situation and we
Take advantage of changes in interest rates and changes in the capital markets. That could be very very positive for my monthly.
Okay, just one more for me just as relates to the the common ATM you filed yesterday appreciate the commentary that you're you know, looking to have opportunities opportunities that they take advantage of where the market wage. But is there any thought or is that any in the service any sort of a replacement for the drip which I think you raised about 15 and 1/2 million this quarter or is it really just to augment that in the drift of more or less? You know continue as it is today and has been in the past. Well, it certainly enhances the flexibility and optionality to go to different arrows in our quiver. So to speak we've used up in sip for a long time. It's worked for a long time. It's Kevin mentioned participation was about 26% Your number is correct. We raised about fifteen point two million over the quarter but have not done a preferred ATM since 2017. We saw how that's a more flexible mousetrap as far as accessing the capital markets the the drip and sip the drip is quarterly the
Gerald investment plan is in the middle of every month.
You can now Access Capital just in time as the pipeline deals come online. And if the stock is favorable and the pipelines growing you could time things seem more precisely. So so, uh, you're correct that if things are working with the pipeline timing and and the stock price is more advantageous. You'll see less money raised through the Sip the drip will keep the trip the same but through the Sip and use the the ATM instead. But but as I said at this time, we don't need to use the common ATM extensively. It's a new year. We thought the preferred ATM did so well it behooves us to have a common ATM in our Arsenal.
Got it. Okay. Thanks. Our next question comes from Michael Mueller of JPMorgan, please go ahead. Hi. I was wondering can you talk a little bit about what you see is the early read on the 10 lease is expiring in in 2021. Are there any known renewals or move-outs at this point?
Currently, there's no known move-outs. We've been talking to a few of those tenants in the in the first part of that fiscal year, but nothing definitive at this time.
Got it. Okay. That was it. Thank you.
Thank you. Just just add the Mike's comments, you know the ten leases role in twenty twenty one point two million square feet. That's 5% of our g l a 300% of our base rent. There's a slide down in our slide decks like 24 that shows or lease expirations and I believe the rents expiring next year or well below Market. The average is $4.61 a square foot rolling in in 2021. So good prospects for positive renewal rates.
Okay. Thank you.
This concludes our question-and-answer session. I would like to turn the conference back over to Becky for any closing remarks.
Thank you.
Operator I would like to thank everyone for joining us on this call and for their continued support and interest in mom, and as always we are all available for any follow-up questions. We look forward to reporting back to you after our second quarter. Thank you.
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