Q4 2019 Earnings Call
Ladies and gentlemen, Hello, and thank you for joining todays Piedmont Office Realty Trust Inc. fourth quarter 2019 earnings Conference call. All participants are in a listen only mode, but you will be given an opportunity to ask questions. After todays prepared remarks and as we're friendly reminder, today's session is being recorded with that I'm pleased to turn the floor over.
To your host.
[music]. Thank you operator.
Good morning, and thinking for joining us for Piedmont's fourth quarter 2019 earnings call.
Last night, we filed an 8-K containing our quarterly earnings release and supplemental information.
These items are available on our website under the Investor Relations section for your review.
On today's call the company's prepared remarks and answers to your questions will contain forward looking statements is defined as a private Securities Litigation Reform Act 1995.
Forward looking statements address matters, which are subject to risks and uncertainties that may cause actual results to differ from those that we anticipate you can discuss today.
Examples of forward looking statements include those related to Piedmont Office Realty Trust future revenues operating income dividends and financial guidance as well as future leasing and investment activity.
Should not place any undue reliance on any of these forward looking statements and these statements speak only as of the tight there right.
We encourage all of our listeners to review the more detailed discussion related to risk associated with forward looking statements contained at the company's filings with the FCC.
In addition, during this call will refer to certain non-GAAP financial measurements, such a definite FFO core I thought, though I got that though in same store in a why.
The definitions and reconciliations of these non-GAAP measures are contained in the supplemental financial information available in the company's website.
After our prepared comments are made our senior management team will be available to address any questions that you might have.
This time, our Chief Executive Officer, Brad Smith will provide some opening comments and discuss our fourth quarter's results and accomplishments right.
Thank you Bobby good morning, everyone. We very much appreciate you joining us on today's call.
In our last two earnings call I reported the Piedmont is experiencing solid momentum across all aspects of our business and more specifically the strong leasing operations in capital markets activity. The company was generating would carry throughout the remainder of 2019.
While positioning Piedmont for meaningful earnings growth in 2020.
I believe the results for the fourth quarter 2019, and now our outlook for 2020 confirmed this previous guidance our optimism is centered around the following.
Continued strong leasing activity in most of our targeted submarkets.
Along with the realization of the benefits from further concentration of our portfolio in unique mix do you amenity rich submarkets there in close proximity to major education centers and transportation note.
And capitalizing on the earnings growth strategy from the disposition of noncore assets and the subsequent accretive redeployment of proceeds into select assets within our targeted submarkets they generate higher cash an accrual base yields with greater growth in cash flow projected over time from a far more.
He said portfolio.
We were pleased with our fourth quarter results.
It's typically the positive leasing and transaction momentum that we continued to experience across the portfolio.
Most of our core office sub markets, particularly those the Boston, Dallas, Atlanta, and Orlando, where job growth is strong.
And in Minneapolis, and the RB corridor, where the outlook continues to improve.
As we announced previously during the fourth quarter, we sold 500 West Monroe Street 46 storey approximately 967000 square foot, 100% leased Trophy office building located in the West sleep Submarket of downtown Chicago, where gross sales price of 412 million or 400.
$26 per square foot.
500, West Monroe was a phenomenal round trip investment for Piedmont acquired in 2011 for approximately 235 square foot and with an occupancy position to drop below 20%.
The sale of fiber West Monroe resulted in the recognition of an approximately $158 million gain on sale of real estate, which is included in the fourth quarter's results of operations.
We were able to match the transaction with our Atlanta Galleria acquisitions earlier in 2019 in a reverse 10 31 exchange and therefore, no special distribution will result from the significant gain.
In terms the disposition agreement included the people well also managed to building for a buyer for initial three year term.
Bringing our total third party management services to over 2 million square feet in Chicago.
Subsequent to year end, we entered into a binding contract to purchase a 1.4 million square foot project in Dallas, Texas for approximately $400 million. This represents a significant discount to replacement cost.
Since the transaction has yet to close you will not be providing a full description. The project. This time. However, its acquisition will allow us to capture additional marketing and operational synergies within our existing 2.1 million square foot Dallas portfolio.
Our forecast and planning team will be happy to work with individual analysts a modeling the acquisition, but under the terms of the purchase agreement, we will not be disclosing more specific information about this transaction until it closes.
That said.
The Dallas market continued to be one of the most dynamic office environment, the state of Texas and in fact the nation.
2019 to 2023, according to Oxford Economics, Dallas Fort Worth is forecast is ranked number one number two in the nation in terms of population and job growth respectively.
Rapidly growing high energy atmosphere is attractive to large corporations, a blue chip firms, including JP Morgan Chase Toyota Liberty mutual Amazon Gartner in doing among many others on call at home.
As a result theory is a magnet for talk town in U.S. in a frequent target corporate relocations.
As a result at this nishu, leading employment growth over the last five years.
Costar indicate the Dallas Fort Worth office market has absorbed more total square feet than any other metro in the country.
With over 26 million square feet of net absorption.
Morgan would your acquisitions located fits our description of the Hubbard.
Based on the concentration of business activity you your by residential communities, you make Houston amenities and direct highway accessibility to DFW Airport.
Upon completion of this transaction almost 50% of piedmont's portfolio will be located in the sunbelt markets of Atlanta, Orlando and Dallas.
With Dallas soon becoming our second largest market by annualized lease revenue.
The transaction is expected to close later this quarter and again, we provide more details at that time.
Similar to how we usually pointed our Atlanta Galleria purchases in 2019, we anticipate the Dallas acquisition initially using a 500 million dollar line of credit which is currently almost fully available.
Plus we intend to add $150 million of available floating rate capacity.
However, on a long term basis, we tend to fund the asset largely through a reverse 10 31 exchange from the disposition of our 90 to one market Street property in Philadelphia.
10, 31 exchange structure will do lose the necessity for special dividend in 2020 related to the anticipated gain from the sale at night, you know one market Street.
Consistent with our capital recycling activities over the last few years, the potential Dallas purchase coupled with the anticipated market Street shale well continue our growth strategy of disposing of mature assets in our strict nonstrategic markets and reinvesting the proceeds accretable eat into value add projects in our targeted immunity.
Rich submarkets.
Since 2014. This strategy has resulted in historical accretion of 180 basis points between the buys versus cell based on 2.8 billion of dispositions, while improving the quality and growth profile of our portfolio.
In keeping with this trend we estimate that this Dallas transaction resulted a 2020, you cruel yield a greater than 8%.
Looking further out in addition to our Philadelphia property it to peers placed building, which is our only remaining Chicago assets along with our two Houston properties in the energy corridor.
Some of our larger noncore assets that will likely be recycled over the next 12 to 24 months.
I do want to point out that earnings accretion initially coincides with the completion of capital transactions, but then it also comes due to grow through occupancy increases as well the synergies inefficiencies garnered with mounting dominance within our target submarket.
Furthermore, we look to generate outside rental rate growth through the creation of enhanced amenities and improved 10 experiences.
In terms of development activity the gallery in Atlanta, and Lake Mary in Orlando continue to be garnering the most attention for ground up development, although we have nothing specific to announce at this time.
We do you have two major redevelopment projects underway, approximately 10, and 18 million at the Galleria and it to it or south Orange in Orlando, respectively, creating unique and vibrant environment with new lobbies and indoor outdoor collaboration space updated conference in fitness facilities, along with food.
Courts, an additional retail offerings that will drive the tuning experience in demand, we didn't anticipate corresponding growth in rental rate.
Turning to our leasing activity for 29 team, which totaled almost 2.3 million square feet, nearly 40% of that leasing or 867000 square feet occurred during the fourth quarter. The largest leases executed during the fourth quarter was the previously announced 20 year renewal and expansion with one of our largest 10.
The state of New York at 60 Broad Street in New York City.
The $550 million. These totals 520000 square feet and commenced in November 1st.
Beginning cash rents decreased slightly over weeks creates substantial roll up an accrual basis Ren.
Evidence in the 22% increasing GAAP rents for leases executed during the fourth quarter of 29 team.
The New York State lease provides for the tendency of eight separate agencies and one crew to face construction period during which several agencies will move around within their dedicated space in the building.
Which includes about 80000 square feet, a space on which the tenant won't pay rent were short period of time during the reconstruction.
The total capital spend for the leases approximately $7 per square foot of lease term.
Despite the winky renewal process, which is not too unusual in dealing with large government tenants. This was a phenomenal outcome for investors.
Somebody other notable leases executed during the fourth quarter included.
Orlando Orange County, Florida renewed for five years for approximately 449000 square feet. It turned south Orange Avenue.
In foundry commercial extended their lease for approximately 24000 square feet through 2025, It's you know scitor too.
In Minneapolis churn contracting Corporation signed a new eight year lease for approximately 32000 square feet. It Norman 0.1.
In Washington, Lightest Inc. renewed approximately 27000 square feet for 11 years at 400, Virginia.
In Dallas Drees custom homes renewed for over five years on approximately 80000 square feet at 161 corporate center.
In Atlanta property investment Council incorporated signed a renewed in expansion through 2026 totaling approximately 17000 square feet at Galleria 600.
It's other communication services renewed through the into 2025, approximately 16000 square feet Glenridge Highlands one.
And finally in Chicago, Konica Minolta business solutions renewed 16000 square feet for six years it to Pierce please.
As of year in the overall in service portfolio lease percentage was 91.2% with our only major expiration over the next 18 months being with the city of New York 60, Broad Street, where we remain engaged in active negotiations for renewable substantially all their existing 313000 square feet that is scheduled to expire in April this year.
Sure.
Like the New York State lease the city's premise. This incorporates numerous agencies and we're working diligently with each on detailed design space planning.
Ultimately, we anticipate the multiyear leased to be encompassing significant roll up in both cash accrual rent.
However, as Bobby will discuss in more detail in a moment for the purposes of our 2020 guidance. We have conservatively assume the city will go into holdover status beginning in April 2020.
As happened within New York State. These.
Longer term renewal is anticipated to be wrapped up closer to the ended the year.
Finally, I want to address the development of the co working industry sector over the last few years in Piedmont limited exposure to that business model.
We do believe that co working as a service offering that will remain in some form in the office space industry. If for some of our location. It's an ideal means for tracking in serving smaller size 10.
As we mentioned on last quarter's call. Our overall exposure to cooling tenants in general is minimal representing approximately 2.5% of our annualized lease revenue.
And all of our COO working leases or street easing arrangements with standard. These credit terms as opposed to many management agreements that were seeing others engage in today.
About 1.2% of our annualized lease revenues attributed to our largest co working service provider we work.
Occupy space the three locations within our portfolio.
As of today.
Two of these leases have commence with tenants, taking our occupancy at the Washington, D.C. and Atlanta locations in construction permitting and build out plans underway in Orlando without lease currently expected to commence during the fourth quarter of 2020.
For more information regarding the company's industry diversification TCR quarterly supplemental information, which details the number of tenants square footage leased and annualized lease revenue related to our larger industry sectors.
At this point I'll turn it over to Bobby to walk you through the financial highlights the quarter in guidance for 2020 Bobby.
Thanks, Brad as always well I've discussed some of our financial highlights for the quarter I encourage you to please review the earnings release and supplemental financial information, which were filed last night more complete details.
Fourth quarter 2019, we reported 46 cents per diluted share core AFFO.
A penny ahead S and l's consensus NAV penny over the fourth quarter 2019.
Despite the disposition of to almost fully leased assets during 2019, and the expiration of leases at charter South Orange and 11, 55 Forever Center Wes.
These losses of income were more than offset by accretive acquisitions in Atlanta.
Well as part of commencement roll ups of several leases, including the 301000 square foot lease commencement with transaction that I called the place in Houston.
And the 520000 square foot lease roll up with New York study.
60 brought both of which occurred late in 2019.
And by the growth in rents that occurred throughout the portfolio during the year.
I will know that while the reported quarterly Julian I expense was flat compared with fourth quarter of 2018 total DNA expense was higher for the year than original forecast due to over $8 million at higher cool why did almost equally the to life.
Non cash accruals, resulting from the company's top Cortile stock performance and one two or three year basis.
Due to certain retirement termination costs associated with the senior management transition.
Place on June Thirtyth 2019.
I guess, if I was approximately 36 million for the fourth quarter, which is well in excess of our current 26 million dollar quarterly dividend level.
As detailed in our quarterly supplemental information same store NOI was up over 8% on a cash basis for the fourth quarter of 2019 and up almost 6% for the year.
On a GAAP basis same store NOI was up over 5% for the fourth quarter and up to and a half for set for the year.
I will point out that individual quarters will vary greatly in terms of a number of leases executed and they average size of those leases.
When looking overall at the entire year cash rents on executed leases increased almost 10% during 2019.
GAAP basis for has increased over 21% with an average lease term remaining at December 31st increasing to seven years.
Also at December 31st we reported occupancy of 91.2%.
Well, we're pleased that almost 800000 square feet of leasing was completed during the year for currently vacant space. The disposition of two large fully leased assets totaling over 1.3 million square feet combined that's a 500 west Monroe in Chicago, and one independence square in Washington D.C.
More than offset the strong leasing vacant space during the year. The good news is even when including the impact of the large 320000 square foot City of New York lease. That's currently in active renewal piedmont's expiration schedule for the next four years still averages around 7% for.
Sure.
Turning to the balance sheet.
Our average net debt to core EBITDA ratio for the fourth quarter 2019 improved to 5.4 times and our debt to gross asset ratio was approximately 32.5% at the end of the quarter.
We currently have almost full availability on our 500 million dollar lot of credit and no debt debt maturities until late 2021.
At this time, we'd like to introduce 2020 guidance in the range of $1.90 cents to $2 per diluted share for core AFFO.
This guidance includes the following items.
Looking only at 2020 same store cash NOI growth is expected to be approximately flat, but a pool growth is expected to be in the 4% to 7% right.
As is evident with the guidance range when compared to our performance in 2019 year 2020 is expected to have attractive accrual based rent growth.
This is related to lease commitments like the 301000 square foot Trans Ocean lease and Houston.
And the 520000 square foot Louise with the state of New York.
And related to the full year impact from the accretive recycling of assets from Chicago into Sunbelt assets in Atlanta.
And the projected recycling from Philadelphia into Dallas assets.
This is a cool in a wide growth will be followed in 2021 with a significant cash growth.
After the burn off of current abatements on the trends Ocean and via Moyer leases.
And with a projected end of Downtimes between leases at 200, South Orange in Orlando, and 11, 55% or soon or west in Atlanta.
And with forecasted roll off of below market rents with the city of New York is 60 broad and throughout our portfolio.
The consummation of the Dallas acquisition this model to incur during the first quarter of 2020.
And the disposition of Nike No one market is anticipated to close around the ended the second quarter.
No other speculative capital markets activities embedded within this guidance, we'll keep you informed of any further capital markets transactions as they occur.
And what we expect the impacts such activity will have on our annual projections.
We believe the renewal of the city of New York lease will not be completed before it goes into holdover during the second quarter that escalator hold over rights. However, the lease renewal was anticipated by the end of year, which is expected to generate significant accrual roll offs and cast roll ups or product.
Sure.
[noise] are one out of service property to fears place that was recently Redeveloped and is currently 42% lose will be reclassified the in service and well that's lower our in service 2020, least statistics to approximately 90% during.
The first quarter of this year.
Even with the addition of two pairs place.
And do you anticipate itself at 100% leased 801000 square foot market Street building.
We estimate overall occupancy approximately 91% to 92% by the end of 2020.
General and administrative expenses, including compensation levels and target are estimated to be approximately 28 million for the here.
Current projections anticipates that the first quarter of 2020 will be our lowest earnings quarter for the year, yet it will be comparable to our fourth quarter 2000, a night teams core FFO results.
It's also important to note as you prepare your financial models that our quarterly earnings can vary by a penny or two based upon the timing of seasonal expense items and accruals related to potential stock based compensation.
Well be happy to work with each of the lighter individually on your financial models.
On chip to answer all of your more granular modeling questions at that time or if that's the third we'll make appropriate lighter public disclosure.
With that I'll now ask the operator to provide our listeners with instructions on how they can submit general and overall corporate questions at this time.
Operator.
Very good thank you to our phone audience joining today, if you would like to ask a life question simply press Star then one on your telephone keypad pressing storm on a place your line into a Q and we are affirming reminder, that if you're joining us today on a speaker phone. Please ensure that you returned to your handset prior pressing star and wanted to make sure that that signal does recharge equipment again.
That is star and one if you would like to ask a life question over your telephone line well pause for just a moment to give everyone a chance to signal.
Well take our first question from Nick Tillman with Baird.
Hey, guys mix coming here with Dave Rogers I was wondering if we could go over the one peers task that in particular I'm. Just wondering what you guys have for like leasing activity there.
Hi, Nick Dave This is Brad I appreciate you joining us this morning, I think you're referencing our two appears asset which is our loan asset a in Chicago in suburbs of Chicago and Middle East that's been a a difficult market I you know, we just completed the renovation of the project.
Got it will go into service this quarter as Bobby mentioned in his prepared remarks, and as I also mentioned in our prepared remark remarks, we did about 13000 square foot lease was conoco MINOSA. There are so we're getting more than our fair share, but I will will admit that that is probably the most difficult a submarket within our portfolio.
No I Wouldnt high vacancy rates. The good news is we've got a I like I said, a pit building has been repositioned and is best in the market to garner more than its fair share leasing we do think a as I noted also my prepared remarks, that's likely to be a disposition candidates over the next 12 to 24 month, a and not all removes the capital.
So out of Chicago entirely front for the company at this point in time.
Okay, and then like looking out in your market positioning I know you mentioned some of the development parcels that you've seen activity do you guys see you. Some of these development starts potentially happening later in this year in like late in Lake Mary or Atlanta.
We do I see a lot of interest and those assets and those parcels rather but I think that's a little.
I'm hopeful to be able to get something into the ground and good going this year. It takes time for these types of transactions, even if we're able to real in the tenant there's a lot of work that has to go on in the background in preparation. So unfortunately no nothing this year thatll be be able to put a shutdown of the ground, but we're hopeful for 2021.
And we continue to entertain a number of opportunities around particularly as I mentioned Galleria and Lake Mary.
And then lastly on your guidance numbers, how much what do you attribute to the purchase in Dallas and then the sale of the Philly asset.
Yeah, Hi, Nick.
It's always complicated when you think about five cells in capital structure impacts and particularly given the Dallas deal is not closed yet so we want to be very mindful of what we can and cannot say around that at this point, where and very excited to share. What we we can when we can upon closing, but I think to give you a rough.
All Park, a we think that's probably net between the two transactions about six to seven cents on an annualized basis.
Alright, thank you.
And we look forward to give me more details again later this quarter on a on that round trip potential.
Alright perfect.
Next we'll hear from Green Street Advisors and the line of Daniel is now. Please go ahead. Your line is open.
Great. Thank you good morning, everyone I, just a quick question on share buybacks and where they sit in the equation. These days is it fair to say that given that the discounts any V has shrunk recently that you're finding better opportunities for your capital elsewhere. Then your current share.
Repurchasing shares.
Hi, Danny I appreciate you joining this morning.
Well I think we always said that we look at or the ability to buy back stock not mutually exclusive from assets in other words, you can be doing both the same time.
And we've shown that propensity having bought back almost 800 million of our stock over a decade since we've lifted that said as you point out at this point in time, where we trade we see a number of opportunities to continue to build up positions within our core markets are accretive in nature increases from our.
Dispositions, but also at this point as you point out accretive to our stock. Although there is no anticipation to need to issue equity at this time, we still find a lot opportunity to recycle assets continue to grow our earnings in that manner.
And we see a good pipeline to continue that process into 2020.
And then just last one for me on the pace of concession group as a growth across our markets can you just maybe frame how T.I.s have trended over the last 12 month 12 months across your major markets.
From a can stashed concessions basis, just focusing on T.I. I think is.
Somewhat.
Incomplete picture it well I think the phenomenon. We've continued to see is free rent has continued to come in and as a result T.I.s are also.
Growing I think we benefit from focusing on tendency that does longer term leases, so putting out that higher tier I capital on there's a little bit more palatable I think if you look at our in our supplemental we've continued to kind of be averaging around the total of call up capital per square foot per year on the T.I. side of call. It in the mid $4 per se.
Where foot per year, and we think that that's a good basis for the portfolio now that said, we have continued to see construction costs trending up really across the United States, probably most so in our markets of New York, Indeed, see but Ah you know less so in Boston Atlanta.
Orlando Dallas in Minneapolis, where there there are just a little bit right now up more palatable for landlords in terms of T.I. capital required.
And are you guys expecting a relatively steady state for those type of leasing economics.
In your markets.
I think this point, yes, I'm you know it does vary by market, but you know that trend I think we're going to continue do you see elevated I think that's one of the reasons why you've continued to see the office sector trade at a difficult discount to any V is because the construction costs have become elevated and as an industry we need to figure.
Ralph how to begin to rein that in and I think only says on us to continue to be creative around construction. We continue to look at also creative ways to to reduce cost and one of the benefits of scale and somebody larger projects that we've talked about the Atlanta Gallery. As an example is to be able to spread high capital cost.
At the base building level across a large portfolio that's it.
Okay, Great franchise.
Thank you for your question Daniel.
Next we'll move to John Guinee, with stifle or stiefel, rather I apologize I misspoke, Mr. Guy to your line is open.
Great. Thank you.
I have you guys announced to me I think you're buying Galleria towers in Dallas can you talk a little bit about that.
I'm not familiar with that description John at this point in time I can't go into any details as to what we might be acquiring in Dallas as we didn't know we do have a purchase a under contract to $400 million. It isn't the city of Dallas, We're excited about that it would become our second largest market should we consummate that transaction.
And we think given the job growth population growth the education center humidity basis. These assets, we're pretty excited about what we can accomplish but at this point in time I can't go into any more detail than that.
Great. Okay, great. Thanks, a couple sort of a detailed questions first.
It looks to me like you're sitting at least 313000 square feet at 60 broad maybe 30 $637 full service.
Is it safe to say that the deal you would do there would be similar to the state.
Maybe in the 50, plus or minus full service.
I think about $140 total per square foot total span long term lease.
And then the second question regarding both the stayed in the city, what's sort of tax receipts or I'm, sorry, operating expense and tax reset do you get.
And what's the resulting increase or decrease in net rats.
Yeah, a number of parts to that so again, you are talking about it and potential lease that we have not completed so I want to be very a clear that I can't give you any specifics of around that dialogue what I can share with you is a you know as you point out the state.
Metrics, a roughly a $50 rent that state space is below or the New York City space within the building. So I wouldn't say the New York City space is a little bit better located and but in terms of a capital.
Requirement you know I think it's maybe a little bit more favorable but in generally in line with what you're describing the that occurred within New York State.
In terms of Opex read that you know anytime you had a long term lease you're going to reset the base year. So that is occurring within New York State I can't comment on the city at this point, but that will occur a and the net effective rents are still gonna be very very strong at the asset.
Although they will diminish a little bit initially they will be climbing considerably given the rent bumps in the term of that lease.
So does just that think on a up on it either cash or GAAP basis than just focusing on the state lease.
Does your net.
And it does your cap com side does your cash and GAAP net rat after opex reset tax freesat.
Does it go up or down what happens there.
Well, you've got you're getting to a lot of detail, but on a GAAP, obviously, you're getting the benefit of the significant gap role at that we've shared with the street and the high 20 percents level as we've noted on a cash basis, there's a slight roll down from the holdover Ray but.
Meaningful cash roll up over time because of the bumps inherent in the lease the net effective rents on those on a GAAP basis, therefore are up considerably and on a cash basis initially slightly down from the holdover rate.
Net rents yeah, okay, great. Thank you very much.
And once again to our phone audience. Joining today. If you have a question I need clarification or anything covered in today's meeting star and one on your telephone keypad star in one well move next to Tony Palone with JP Morgan.
Hi, Thanks apologies for jumping on rates and certainly I missed this but can you spend a minute on just how to think through.
Cash flow through the course of this year and source abuses just given a you know the pre ran some outsized checks that'll be written over time relating to state lease and just you know other factors that probably made after though.
Let's move compared to elaborate furniture.
Hey, Tony its Bobby I hope you're doing okay. Thanks for the question. There certainly are a number of moving parts that impact the cash NOI this year.
As you know the start of the Trans Ocean lease and the New York State lease really have a dramatic impact on the gas side, where you've got an ice rollout, but we're really projecting there are flat cash NOI. This year. If you looked specifically for example, the benefits from that transaction lease remember, it's kinda basement and not only is the then abatement.
The operating expenses associated with that opening in the basement. So we'll get a negative impact on cash simply because we're covering those opex costs throughout this year.
A number of Downtimes that are outstanding or abatement says well throughout our portfolio I'll point out a couple of assets. Then we can go through this in more detail with your individually, but for the benefit of most of the people on the phone.
Less than 55% or west remember, we had a they paid 125000 square feet that's been lease back up.
Those leases commenced you'll pick up the cash will go into it but even at that time with him where and when we works. We got Downtimes associated at 14, 30 enclave, where there's 50000 square feet.
Between this technique blaze and the starting of the Slumber JD Williams, He's got a 200, south barge that they paid 125000 square feet from Suntrust, but the starting a later this year with police.
During the fourth quarter. We works also 60 31, we've got 55000 square feet at Santa Fe, but they are all those things combined put a damper on or this year on our cash projection, but you get a significant roll up in cash taking place next year, probably on the same scale that you're seeing the capital.
This year.
And he did you have anything you wanted to ask.
[laughter] covered it okay.
It is there by the way to cover from that.
Standpoint.
That we were I think Bobby was saying.
Final point, we will be covering it though with the different covering the dividend would they have to though.
Okay, and and remind me the EUR $800, but for state and then perhaps you know depending on how the city lease works out well all of that capital be deducted. When do you think of your your AFFO or will some of that just be considered a bit a more redevelopment cost that won't be.
NFL and then also.
Likely timing of that spend.
Yeah, Hi, Tony yet will include what would be deemed that the non incremental component.
As we have always but you know there will be a small component there always is that deemed incremental but it would be kind of regular way business de minimis for the most part.
Okay do you think that spending that will happen, mostly this year do you think that drags out for few years, we see that you're hitting here well into it is a eight agencies at the state a 520000 square feet. It's a into construction project that will span multiple years likely to two half years.
Okay.
Great so it'll be spread out.
Not all this year.
Okay.
And ladies and gentlemen, thank you all for your questions as well as your participation today with no questions remaining in the queue I'll turn it back to Mr., Brad Smith for any additional or closing remarks.
Thank you I appreciate everyone, taking the time to join US today. Appreciate Oh, So just want to give especial. Thank you to our investors and analysts for giving US your time and support a we had a great year in 2019, <unk>, providing investors with over a 35% total return a I'm very proud of what the.
Team at Piedmont is accomplished and we look forward to an exciting 2020, thank everyone for joining.
Take care.
Ladies and gentlemen, this does conclude todays teleconference. We thank you all for your participation you may now disconnect your lines and we hope that you enjoy the rest of your day.
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