Q4 2019 Earnings Call
Welcome to the fourth quarter 2019, Cedar Realty Trust earnings Conference call.
As a reminder, this conference is being recorded.
At this time all audience lines.
I've been placed on me.
We will conduct a question and answer session. Following the formal presentation I.
I will now turn the call over to Nicolas Partenza. Please proceed.
Good evening. Thank you for joining us for the fourth quarter 2019, Cedar Realty Trust earnings Conference call.
Participating on today's call.
I'll be Bruce Schanzer, Chief Executive Officer, Robbins, <unk>, Chief operating Officer, and Philip Mays, Chief Financial Officer.
Before we begin please be aware that statements made during the call that are not historical maybe deemed forward looking statements and actual results may differ materially from those.
Indicated by such forward looking statements.
These statements are subject to numerous risks and uncertainties, including those disclosing the company's most recent form 10-K for the year ended 2018 as updated buyer subsequently filed quarterly reports on form 10-Q, and other periodic filings with the FCC.
As a reminder, the forward looking statements speak only as of the date of this call February six 2020, and the company undertakes no duty to update.
During this call management may refer to certain non-GAAP financial measures, including funds from operations and net operating income.
<unk>.
Six years earnings press release, and supplemental financial information posted on its website for reconciliations of these non-GAAP financial measures what the most directly comparable GAAP financial measures with that I'll now turn the call over to Bruce Schanzer.
Thanks, Nick Good evening and thank you all for participating in.
Meters fourth quarter 2019 earnings conference call.
Joining me as always our my senior executive colleagues.
And the dialed in on the call as well our most of the members of team theater.
I want to thank our board of directors and all the teams theater for their tireless efforts on behalf of the company and for consistently doing there.
Work with collegiality collaboration and everyday excellence.
As a small retail read we had been buffeted by stepped capital market headwinds as reflected in our share price performance of late.
As I've noted previously we have a tough time reconciling that's trading level with both the intrinsic.
Are you about our real estate.
The progress we are making in executing our value add renovation projects as well as our more ambitious urban mixed used redevelopment projects.
This cognitive dissonance has been exacerbated as we have seen a pickup in transaction activity in our footprint from our last earnings call and.
Pretty solid visibility into the weren't at cap rates for our assets.
That said it continues to be challenging operating environment would acres at risk of vacating such as easy more vacating at two of our centers.
But other anchors being open to vacating space relatively willingly such as what we recently experienced with.
Marked at Valley Plaza, and with shoppers and Metro square.
Greater detail I Miss is included in fills guidance comments.
On top of the pressure from anchors the capital intensity of our asset type continues to drift up as we endeavor to maintain and hope we grow occupancy in earnings in the face of secular changes and.
Just.
This dynamic is not necessarily entirely on favorable for example, we agreed to an attractive lease termination payment that metric square and we hope we monetize the asset further as we have placed it in our held for sale pool.
Another example of how the secular dynamics in retail aren't entirely on favorable is I'd probably plaza.
Where we were able to nudge out Kmart for free after having been asked to pay them a few million dollars for the same outcome not two years ago.
We have identified probably plaza as an addition to our value add renovation pipeline with some exciting merchandizing options and well hope we provide further detail on this opportunity in the quarters to comp.
[music].
I will let robin spend more time on the three large scale urban mixed use assets we are pursuing.
As a general characteristic characterization I would state that we continue to make terrific progress on advancing all of these projects with Robin at the helm aided by Michael Summer, our new head of construction and development. We are evolving this pool of assets into.
What will truly be first class assets when completed not to mention important amenities for the communities they serve.
At South corridor crossing in particular, we commenced demolition this past quarter and are excited to commence construction in the coming months.
I would be remiss, if I didn't know what our positive leasing results for the quarter in year.
At least.
Stock, even see a 93.2% represents the highest leased occupancy level in over four years.
This is significantly a result of moving our do boys asset the common to held for sale. However, it also represents the fruit of the labors about leasing team headed by 10 Heavner.
The team has worked tirelessly to maintain and grow.
Occupancy in this challenging environment, and I think that sincerely for their efforts.
So the move outs described in the 2020 guidance section of our press release, and then what Phil will discuss further in his remarks are realistically go to bring occupancy down a little heading into 2020. However, we're keenly focused on backfilling those spaces not to mention means.
Painting and growing occupancy more generally.
With that I will conclude by reiterating my thanks to our board of directors and all teams theater for their efforts I'd be happy to our shareholders and assure you that we continued to be laser focused on making astute capital allocation decisions across all our endeavors with that I'll give you Robyn.
Thanks, Brett good evening.
Peter leasing team finished the year strong with 41 deals totaling 297100 square feet at an average base rent of $15, an eight cents per square foot, bringing total leased occupancy up to 93.2%.
This occupancy.
As 91 basis points above prior quarter, and 220 basis points above the prior year.
28 renewals were executed this quarter at an average base rent of $15, an 84 cents per square foot, well, then well they spread of 5.9%.
During the quarter, we executed.
Well comparable leases for wish I would like to provide some detail.
Six comparable new leases were executed and historically difficult police spaces at an average base rent a $14, an 11 cents per square foot and a spread of 8.4%.
Excluding grocery outlet a.
New junior anchor growth sure at suites, where we executed an additional five new comparable leases at an average base rent of $11 in 37 cents per square foot and a spread of 20%.
Despite the negative spread of the newly executed grocery outlet deal. We're excited about the introduction of this.
New merchandising to sleep, where at the addition of a grocer positively impact overall traffic at the center as well as its valuation.
Grocery <unk> place a currently vacant space and the tenant that was in arrears without a strong daily traffic driver. We expect this new tenancy in conjunction.
And with existing Alley, fitness, well, how catalyze renewed energy antenna performance for this center.
The two theater development platforms, the value added renovation platform and our mixed use redevelopment platform continued to advance and execute exciting projects.
The value out of innovation pipeline.
Currently includes fish sound crossing Karremans Plaza and Yorktown Plaza.
Graham groundbreaking occurred, especially around crossing in Philadelphia in October 2019.
The construction of a new small shop building is underway, creating a home for nifty 50, and exciting regional diner concept.
And vertical construction has commenced for Starbucks pad building.
There are several leases the negotiation and we are very eager to unveil the Reimagine shopping center. This redevelopment will bring to the fish town in northern Liberty's neighborhoods.
Similarly, we have completed construction of Karremans Plaza located on long.
Well in New York and the anchor leasing lineup is firmly in place with Keith Foods and 24 hours fitness.
Approximately 24000 square feet of new small shop leasing has been executed to junior anchors restaurant service and retail uses to round out the tenant mix at an average rent of approximately $22.
<unk> per square foot, replacing previously vacant spaces and poor credit quality tenants.
Once the remaining small shop spaces are released this project will be fully stabilized and is on pace to achieve very healthy double digit return.
Yorktown Plaza in Baltimore, which historically have been.
Difficult to lease due to its lack of visibility and poor merchandising is now benefiting from physical repositioning and upcoming facade renovation and healthy leasing activity.
Leases are executed with I hop Panda Express and Duncan with several others and mature negotiations. This project is fully.
Titles and construction is anticipated to commence in late 2020.
We anticipate adding a fourth project to our value added renovation platform due to the opportunity presented by taking back the below market rent Kmart at Valley Plaza in Hagerstown, Maryland.
Coupled with some adjacent space, we will be.
Freeing up at the center, that's the theater leasing and development team hopes to reposition the center to allow for a better junior anchor line up and improved property performance.
Additionally, we have three projects in our mixed used development platform south quarter crossing the mixed use redevelopment of South Philadelphia shopping.
Center and Quartermaster Plaza will consist of 800000 square feet of retail and 277 apartment units.
The project is anticipated to be built in five phases and preliminary demolition has begun.
The rental apartment units are expected to be it a first new apartment product at this scale.
To lever to south Philadelphia to provide a compelling value alternative to center city.
Our plan calls for residential to be complement it with ground floor retail comprising a combination of existing anchor tenants along with new anchor deals that will be announced soon coupled with a diverse group of local regional and national retailers to.
Round out the small shop merchandising mix.
The redevelopment is anticipated to drive an overall AB our increase of almost 40% over today's read it at the two properties that are being combined.
Rebel reap formally river view Plaza also in Philadelphia is programs have been.
But at a restaurant oriented mixed use project, we anticipate constructing approximately 155000 square feet of ground floor retail and 343 apartments in the first phase of the project.
The project is slated to come as an early to mid 2021.
North these highlights the combination.
Of East River shopping center and Senator square in Washington, D.C. is our third urban mixed use project. This project is expected to be completed and three phases and the site plan for the project is rapidly crystallizing.
The total project is expected to comprised 190000 square feet of retail over 1000.
Units of residential as well as an office component.
We anticipate northeast heights upon completion to be transformative for the neighborhood and the surrounding communities.
It takes a village to do what we do our development team led by Michael Summer, our leasing team led by Tim Haven, Our our operations team led by rich.
Boy and our asset management team led by gender Jennifer Bittermann truly worked together everyday along with the rest of team theater to advance. This company on all fronts and create opportunities for future value creation with that I will give you to sell.
Thanks Robin on this call I will briefly highlight operating results and provide.
Provide detail on our initial 2020 guidance.
Starting with operating results for the quarter operating FFO was $9.7 million or 11 cents per share and for the full year operating FFO was $40.8 million or 45 cents per share.
With regards to same property NOI growth.
For the year same property NOI increased 0.3%, excluding redevelopment properties and decreased 0.3% when including those properties.
The decrease relating to redevelopment properties was driven by intensive all they can see necessary to facilitate our urban mixed use project at South corridor crossing slightly offset by at least.
Lease up carbons Plaza, one of our value add renovations.
Operating FFO and same property results are both consistent with our expectations and guidance discussed last quarter.
Moving to 2020 guidance, we are establishing an initial 2020 operating EPS guidance range of 49 cents to 50.
One cents per share.
As detailed in our press release this guidance is based in part on the following.
Same property NOI growth, excluding redevelopment is relatively flat.
This reflects less than a full year of contractual rent from our two AC more locations given the uncertainties surrounding this tenet.
While we are only excluding slightly more than five.
$1000 or contractual rent relating to this uncertainty due to the relatively small size of our same property pool. This represents almost 1% same property NOI.
Next when Redevelopments are included we expect same property NOI decreased 1% to 2%.
And by vacating tenants to facilitate our urban mixed use.
Along with proactively recapturing the Kmart space at Valley Plaza in early 2020.
To facilitate a future value add renovation.
It also includes lease termination income from shoppers food warehouse for the early termination of at least at Metro Square.
Net a foregone rental payments of approximately seven cents.
Per share.
And a decrease in amortization income from intangible lease liabilities of approximately two cents per share.
And finally dispositions approximately $15 million to $25 million, primarily in the second half of 2020.
And with that I will open the call to questions.
Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Q you May press Star too if you would like to remove your question from the Q for participants using speaker equipment it may be necessary.
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Your first question comes from a line of R.J. Milligan with Baird. Please proceed with your question.
Thanks.
Good evening guys Phils question on the issue more locations, you mentioned 500 Kaye of rent being excluded.
That is partially here is that correct.
Yeah, just you know you've probably read some of the news related to AC more but giving all the uncertainty around that 10 it.
We have them in generally for the first quarter and not for the last three quarters, that's a little more than 500000 it.
Close to 600000 for the for four for the year.
If we looked into 2021, oh, assuming that those properties or re tenanted would that be that one.
<unk>.
Would it be slightly higher than that yeah. So the same store pool, excluding redevelopment or on an annual basis is about $70 million at this point because our redevelopment pools have grown so 700000.
That's or one 1% to same store NOI, partially or there it's about.
600.
For full year, you know the 800, so either way approximately 1% of same store NOI.
Okay. That's helpful.
And then for the properties listed as held for sale that are expected in the back half of the year can you talk about the decision to to list those for sale.
And any characteristics of those properties that are driving to make that.
You know, it's actually a yeah, it's a pretty straightforward analytical process you know you ultimately.
Until we need the capital more generally for.
Elements and things of that nature, largely the assets that you are seeing us they've asked for assets that from an asset management perspective, we feel of ripe and enter optimally situated to be sold and I would tell you that that's just a good way of thinking about virtually everything that you see coming out and the held for sale bucket.
Yeah as we.
Start executing on our redevelopment as we've spoken about your thoughts are that one way that they might be permanently capitalizes on the capital that's embedded in our lower core tile assets, but at this juncture assets that we're selling are more.
Attributable to that God that it first ration I was just assets that have ripe and and where they're in a good situation to be sold now as opposed to sitting on them where value could potentially diminish.
And so for the most part there stabilized.
Not necessarily but it's more that we think that their right to be.
So old a in as much as either they are stabilized and therefore their rights be sold or there's a risk that their value could diminish or whether or not stabilized in which case both of those instances, we would look to divest them.
That's helpful and my last question.
There was a one and a half million dollar.
Item in the F.F., though which was a reversal of management transition costs and if you could give any more color on that.
Hey, I gave myself, but.
Let me check you get them color on that in 2016, we include a contingent liability when a half million.
Shaded with determination of our former celo.
Recently to arbitration related to this contingent liability concluded and we reverse their cruel.
So while our gap earnings this quarter reflect the benefit of this reversal with excluded it from operating of of though and you can see that as it's noted and I thought, though reconciliation table that we've excluded it there.
Hopefully that gives you a little clarity and helps with your analysis for the quarter.
And it was excluded when it was a crude is that right. Yeah. So yeah. Originally when it was a crude and 16, we excluded from operating about both the this quarter. When we had the favorable benefit of reversing it we likewise excluded from operating I thought but to be consistent.
Makes sense thanks, guys.
Thanks.
[noise]. Your next question comes from the line of Todd Thomas with Keybank Capital markets. Please proceed with your question.
Thanks. Good afternoon first I just wanted to ask a little bit more about your capital plan here over the next few years and and ask specifically about leverage. So you know funding for the the larger mixed use development is is is expected the rampant starting to ramp up a little bit here and leverage increase in the corridor.
And when you come curious when you look at the corporate model, where do you see leverage, peaking on a debt to either databases and and when do you see begin ratcheting down.
Todd I'm Gonna take a little bit of this and then I'll hand, it off to fill to take a little bit of this you add a high level. Our view is that we need to keep our eye on leverage we recognize that as part of endeavoring to transform this company I'm from one that has historically owned a secondary market grocery anchored shop.
Centers to one that owns first class urban mixed use assets that there's going to be a period, where leverage is going to drift up.
Yeah, we have a a model that gives us a feel for that but what I would tell you is is that beyond the model you know, they're a number of different ways that we're going to manage both the capital spend.
And the recapitalization of assets along the way to make sure that we're we're managing debt.
<unk>. So certainly it's something that we have our eye on we do recognize that leverage is is of course going to drift up along the way, but it's not something that we're we're being flip about right now at least.
Focus is on capitalizing south quarter crossing in particular.
This is Rob and noted and it's I alluded to as well we commenced a demolition in the last quarter and we anticipate hopefully breaking ground.
In short order, we just need to button up the last few deals, but I'll, let still talk through how we're going to be capitalizing that project.
Yeah. So is Bruce discuss a little earlier, you know asset sales will play you know a portion of the role there and how we capitalize those more so long term, but also they'll help a little bit in the short term as well so some of those.
But it just thinking about south border crossing since it's first up you know that combination at two properties South Philadelphia on one side.
Mass or on the other by far the bulk of the construction cost or on the South Philly side, and that's where the work gets initiated a burst.
What I'll tell you is wearing conversations with several the banks in our bank group. They are all very interested in doing the construction loan there.
What's nice about it is you know that three anchors that are currently there shop, right L.A. fitness and Ross or all staying and continue to pay so there's an m. place value there that stays there the whole time, so that while the lone devalue amazing you know it'd be kind of what it typically is a construction loan the loan to construction costs will be.
Very high so the loan to construction costs could be like 80% or more so we can find pretty much everything that's happening on the south Philly side, which will though first through a construction loan. If we go that route and that will probably play a part of the role here.
Okay got it Oh, well when you when you think about you know the trajectory of leverage here I guess near term I mean can you can you sort of comment or you know describe.
How we should think about leverage maybe you know at year end you know it sounds like it's it's you know you're expecting it to.
Continue increasing I mean, how how much more of an increase are you comfortable with in terms of you know taking your leverage up from here.
So when thinking about you know <unk> there either.
Is.
Circa $18 million. It's obviously, a full turn is 80 million and I would think that this year and thinking about our capitals band is certainly not having an approach that.
And you know even going into next year.
The aggregate spend probably won't even get there and.
You know, we expect to stabilize the first apartment building call. It I'm just kind of good food on the fly looking around I think in about two years <unk> yeah.
I would say that you know at that juncture right. After we stabilize the first apartment and we've spent you know again less than a an incremental turn a day to pay for it.
Point, we would obviously assess where we are in terms of how we think about the overall corporate capitalization recognizing that oh, the incremental that as still is describing will be.
We'll be incurred through this construction financing that we anticipate taking on to pay for the construction costs. So that will be the juncture I, which I think we decide the further trajectory of leverage but certainly to get there you know to get to the point that completing what we think.
The first phase will require.
You know significant meaningfully less than a full turn of.
Incremental leverage on a d., but that basis.
Okay.
And then Bruce you you mentioned you talked about the least termination of shoppers food at Metro Square <unk>. I think you commented that you might look to further on lock value or monetize had asset further and you know I don't I don't see that asset held for sales. Just curious if you can discuss you know what's what's happening there.
Well, Yeah, I think it is held for sale or at least certainly we intend to bring it to market. If it's not formally on health per se I list and so the thought <unk>. It's an interesting one tied in as much as this is almost.
You know, where you know being in the particular vertical or four area focus there were in another's, we focus on secondary market predominantly grocery angered shopping centres, coupled with our redevelopment efforts and a lot of these assets require some fairly thoughtful asset management and so when looking at this particular asset which was made up of a dark.
Grosser and then Outparcel building that has a number of tenants what we did as we go out through what was the way to optimize the value of that asset Interestingly, we had two choices one was to divest the asset.
With a dark anchor as well as with this outparcel building and we compared that with negotiating with the dark anchor tenants a termination payment and then selling the asset where it would have a vacant anchor building as well as an hour parcel building.
Remarkably and of course, and I'm going to spend money that we haven't yet made but it appears that the process of negotiating that termination payment, which again I commend the team for doing a very good.
Good impatient job they meaningfully increase that termination fee during the course of the negotiation, but that termination payment coupled with what we anticipate as the sales proceeds from the asset will represent an increase over the valuations that we had received from <unk>.
<unk> for the asset as is.
Close to 40, or maybe even 50% depending on how successful we are in the sale process. So again. It's a great example, you know we're talking about relatively small dollar amounts, but still a great example of where.
Through some thoughtful last imagine we were able to create no real material value.
Out of that asset.
Okay. That's helpful. And then just start too quick ones for for fell here. One is the the seven seven per share the least termination fee that's expected to be recognizing the first quarter is that right.
Yeah that should be recorded in the first quarter. Okay. And then also was the $1.5 million.
They that you discussed.
Reversal for the the.
For it for the former C.O.L. <unk> is that was that also was that a benefit and a quarter to G.N.A.
So when we recorded it went to G.N.A. So the reverse also came out to G.N.A.
And.
Just to to be clear I want it back up to the termination fee. The seven fences net of what of rent that they would have paid for the year. So you know the feed it the first quarter will impact a little more favorable than that but over the full year tied once you kind of lose the rent that they paid over the full year the net impact for the full year seven cents.
Okay got it alright, that's helpful. Thank you.
Huh.
[noise]. Your next question comes from the line of floors, then dish come with Compass point. Please proceed with your question.
Great. Thanks, guys for taking my question I just following up on something taught asked about can you quantify I mean, I'm just trying to do the math here myself, but the total redevelopment.
Plans and spend time it it sounds like you're adding about 1.1 million square feet of retail one 1600 apartment units.
To build all of that out yourself on your balance sheets.
Potentially could could see you double leverage from your current levels. If it's in urban locations, which is where I think most of the spaces could you just walk us through the plans and and the funding because.
It appears like.
The the leverage would would shoot up quite a bit more maybe overlooking something.
Yeah of course, I'm not sure those numbers don't reconcile with anything that we're doing.
So maybe we might make sense, either we can probably just makes sense, maybe what we should do is talk about this off line after the call, but those aren't you know the numbers that reflect either the three projects in the aggregate or any one of the three projects and of course. These projects are to be happening over call. It now.
Maybe even 10 years and so I think that would probably make sense to do is we're happy to have a call or you could have.
The whole see suite on the call with you know we could walk you through everything that we're doing there and walk you through our thoughts a rabbit.
Okay, and and so and can you quantify perhaps what you expect to spend in both.
Maybe just to you know.
Make me feel a little more comfortable but and also the the capital outlays in 2020 as well as 2021. If you have you put together a a plan or do you have like a schematic up for each of those projects yet.
So when you see each of those projects ready we have a number of projects I'm Gonna led robbing to to some of this in more detail we have as Robin described three.
Oh, you add renovations and then we have three what we call or mixed use redevelopment devaluated renovations are all just in the ZIP code of tend to maybe you know you know in the teams you know, they're generally speaking less than $20 million each and Robin described one of them Karremans Plaza, which is basically done you know again yeah.
Very stout double digit returns all these value add renovations relatively small numbers with very very attractive returns a in generally speaking they get paid either had a free cash flow, where they can get paid with relatively modest incremental capital outweighs that don't meaningfully increased leverage 'cause there I supported by.
Significant pick ups in earnings now on the mixed use redevelopment over the long term. These will also be supported by meaningfully meaningful pick ups in the earnings but of course, there's gonna be as a weird describing earlier I guess with Todd.
An increase in leverage over the next couple of years the increase in leverage as again I was describing to tide is not is not a very very significant number. So when you talked about the next two years, you're talking about less than a full turn.
Incremental dead on it that even databases and Furthermore, you know much of that is going to be coming from the construction facility that Phil was describing earlier.
Okay.
So I'll I'll I'll I'll reach you guys off line in Oh, we'll go through it it's more detail.
Just to make sure that I I understand the the the guidance that you put out there that includes the the seven cents of of term income is that correct.
Yes, the 2020 got instantly and yeah, and <unk> I am I prepared remarks, there's I noted those in a few other items, they're in the press release.
You know you know all studying that's a large nine cash item this mark to market it or you know amortization of.
Leeson tangible is decreasing.
<unk> it'll be a negative impact of about two cents per share, which is you know obviously a non cash item.
But it does impact you know gap N.F.F., though but you know didn't especially all bullet it out there and if you have any questions you can give me a call.
Okay, I'll I'll follow up with you guys. Thanks.
Mm.
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Your next question comes from line of Collen meetings with Raymond James. Please proceed with your question.
Every one.
[noise] like Huh.
First question for me I, just Wanna go back to our J.'s question real quick on a c. more just given the outlook bear any update on where you stand as far as any sorta recounting efforts.
Oh sure high confidence Robyn.
That we have we have to a seymour's one of them at our new London property, we do have a backfield 10, it there and so we expected that that there'll be a fairly short turn around.
For for that at that and then for the other location. We are actively you can't backfill for for that one so for the one location we expect.
Sure.
Or at least.
Huh.
And the the second one we are worth.
For the second location.
Okay.
And then switching gear gears I didn't want to come back to the to the leverage discussion, but just from a different angle I. Just was curious how do Ya you balance a lot of focus on some of the part questions around kinda that debt to eat but other than that metric, but just trying to think about how you you bounce out versus your debt maturity profile as you think about some of the capital spanned on some of these.
Objects, maybe just talk talk about it from that angle for a second if you again.
Sure. It's all him this over to fill again in a second I think that yeah. We've been very focused of course I, maintaining a cushion on our debt maturities him will certainly endeavour to do that I think that thematic Lee an important idea to understand with respect to these mixed use redevelopment is that this is.
The reflection of ambition that we have to meaningfully improve our asset quality from where it is historically been.
And that will require us to embark on a journey, which is what we're embarking on that will represent a departure from an asset tight.
You know grocery angered shopping centres in suburban markets to urban mixed use assets and what's interesting is when people think of Cedar. They don't think of cedar owning those kinds of assets and a lot of the questions that we get in that we get on calls like this I relate to that.
Most of discomfort with the unfamiliar with the fact that you know people are used to thinking of Cedar in one way and we're asking them to think about theater in a different way and so again, we're happy to walk you through that but I think that the thing to understand is that you know this is the beginning of a process that runs are taking that will involve us taking on a little bit more leverage of course, we're going to.
The keenly focus on making sure that there's no existential risk associated with that but certainly I. This is the beginning of a process, where you hope to again transform the portfolio a and so that's a very much part of this undertaking.
That I'll I'll, let filled speak to a little bit about the debt maturities, yeah, Collin I think you know.
System was how we've behave than what we've done over the last few years you know we acknowledge you know our our leverage is elevated and you know one of the lazy mitigated is not having too much come due in one year and also by you know trying to avoid any near term that met charity. So if you look our schedule apparently there's no debt maturities and 2020.
In the revolver has an extension 70 move that out then there's only 75 million and 2021.
So I think you should continue to expect us to address our maturities early and try to avoid having any near term maturity and.
Trying to keep them also well ladder and then additionally, I've just add you know Ah.
Most of these urban next biggest projects have residential compelling, though as those residential.
Buildings are completed and stabilize one thing we can consider doing is you know looking at agency debt to really term those out for a long time.
So that'll that'll give us another option there once those buildings start to come on line.
Helpful.
Helpful color. Thank you for that <unk>, one last one for me and just going back to the prepared remarks in recognizing this has been a topic on a number of calls recently, but again in today's prepared remarks, just highlighted that the pickup transaction activity during the quarter. Bruce I don't know if you can maybe expand upon that a little bit more just again given the.
Disposition and a plant here for the year and getting a potential to continue to recycle some capital just just your latest thought there would be helpful.
And and I'll I'll be honest with you you know I actually inserted that comment really with you in mind.
So I'm glad you picked up on that as you correctly note last quarter I.
Made mention of the fact that transaction volume had been light.
I was concerned because of course that could have been a canary in the coal mine so to speak in as much is you know one way that you start seeing the market deteriorate is that you see transaction volume dry up it turns out that again, we you know you talked about one quarters transaction volume in a relatively small.
Market and ultimately I think the the issue was around the sample size because we have seen a transaction activity pick up in the fourth quarter a lot of deals that were struck in the fourth quarter in fact I'm in closing in the first quarter and so we've in fact scene you know very healthy level of.
Volume in our markets relating to our asset type I and so I just wanted to.
Update you and I've seen anybody else and keeps track of this stuff with respect to that dynamic because I do think that one of the important things to understand about grocery anchored shopping centres in particular and this is in.
Contrast, certainly malls I, but even to big box retail or other types of open air shopping centres is that these assets are on the smaller side and what we again continue to see is is very high degree of liquidity. When it comes to these types of assets sensors.
Just a significant amount of transaction volume around them and therefore ready a number of transactions that you can point to to get comfortable with you know views on value for Mccaffrey perspective.
So it just overall it sounds like just pick up and transaction activity gives you confidence could be able to execute on your on your disposition target to continue to use that as a mechanism to help find some of the the apprehension projects.
You know not as much that's part of it <unk>, it's not so much that as much as just that one of the things and again, you and I have spoken about this a fair amount. Yeah. We are continually focusing on a number of metrics as we think about various capital allocation decisions. So one of them is of course are weighted average cost of capital them or <unk> updating our wack.
To make sure that we understand what are of course or what our cost of funds is in a similar vein. We're continually updating our net asset value and so it's really in that calculation that we really need to have a pretty good feel for a while the prevailing caprine environment so that.
We could comfortably point to all the transaction activity in the market when we develop a view on the evaluation for our assets.
As you probably know and certainly as as publically available we put out in our corporate presentation. We updated every quarter a graph that walks through the distribution of cap rates for all the transactions in our market and again, we plan on updating that as we do every quarter and so this information.
It will be embodied in that slide in our corporate presentation.
No always look forward to that slide out with that Bruce I'll turn it over thank you.
Yeah, you're next question as a follow up from floor spend dish come with Compass point. Please proceed with your question.
Right sorry, guys. So one I have a follow up here <unk>, if I add all the apartment potential developments together I mean, you're looking at you know over a thousand units as you indicated do you have eternal people who can.
I hope you manage that process, because it's a different asset class than when you're currently investigating or is the idea to bring along J.P. partners in each of those three mixed use projects.
Great question floors.
I'm not gonna have Robin Kansas question, because I don't need her to read off her own resume and certainly Michael Summer ahead of construction development I would do the same we have the people overseeing both <unk> overseeing these read 'em is both Robin and Michael has incredibly specific relevant.
Experience, whether it relates to overall mixed use redevelopment in urban markets again Robin has an extensive track record I've seen these types of project through I'm from beginning to end and of course that includes many mixed use projects with department and then you just could look at you know federal Realty's.
You know website, if you want to get comfortable with that and Michael Summer has argued more extensive resume doing residential and doing multi family. So certainly we have real subject matter experts in the geography in which we're focused on to execute these projects now will that said.
You know, we're certainly leveraging third parties I to execute it because that's part of what folks like Robin and Michael do.
You know when executing these projects and so we'll have third parties overseeing leasing we'll have third parties, who will be doing property management, but the expertise that goes with developing these types of projects is certainly in house and again, we have tremendous confidence in our in house experts in.
Very frankly getting to see it every single day gives me tremendous confidence that that we have a great team her to execute these types of projects.
So is is is that right Bruce to think that you're you're unlikely department with a apartment developer for for for these projects.
Again, you know these are we're using you know I'm not sure. If these are upper case terms or lower case terms in terms of developer and J.D. partner and things like that we're we this is not something that's being done entirely in house, It's eater I and so we are of course working with third parties in the process of doing the construct.
And during the development doing the leasing doing the design all facets of this project are being done with third parties, because that's just the nature of the development process and so.
While we may or may not.
Joint venture from a capital perspective, we might we might not depends on the situation and it also could vary depending on where we are in the course of executing the redevelopment certainly in terms of the just nuts and bolts of doing one of these project. Yeah. We have a very very good team here, but certainly we don't have a team that does.
This without leveraging.
You know professionals, who.
We contract with to help us execute these projects. So it's just you know and that.
Is.
No just the way all of these projects get done.
Okay and and.
The assets held for sale, though it's it's it's $12 million to obviously, presumably that'll have to get increased to help and how much digital assets sales do you have to in your expectation no, but turn increase in in leverage you know by the end of next year.
It it may be any other.
That's that's kind of contemplated being being put in in that bucket.
Alright, so floors, let me be clear the obviously, we're selling snowfall $12 million or so of assets is not meaningful you're going to change or even die. So my comment about that the but I was not accounting for the fact that I'll be reduced a little bit by these asset sales are these assets that we're selling now we're not telling you know.
Capitals fungible someone you could argue that you know, it's helping financed the projects, but but ultimately the reason why we're selling these assets now is because.
These assets and I was describing earlier in response to an earlier question are right for sale and that's why we're selling them now.
The thought process behind divesting assets.
Before it is over the medium term as we execute these projects and of course as we take on average the thought is to permanently capitalize these projects by migrating the capital of Cedar from.
Hour lower court tile assets into these projects however in the near term.
What we hope to do is to maintain cash flow by holding onto these assets taking on some leverage.
And then delevering or permanently capitalizing these assets through the proceeds of assets house, but the interim measure as we discussed a little bit Tonight is going to be by taking on construction debt to finance the project.
Okay. Okay.
Oh, one more question on the on your <unk>. Your you mentioned in your estimates you're counting for the A.C. more you taking them out of your so what any additional incremental bad debt or or credit lost that you have when you're estimates for for 2020.
Mm.
You might have said for it but.
Specifically, they see more just more in general more in general I'm talking about I started the A.C. more that you talked about is are there any other how do you see how do you look at the the credit lost environments and and your bad debt environment for for 2020.
And when we look at it for 2020, I think it'll be fairly consistent with 19, it could actually be little improve because our team is working pretty diligently.
On addressing tenants that we're having you know problem staying there full rent.
And either you know helping them at the property through you know marketing or whatever or you know getting rid of them and you know coming in agreement to let them exit and replacing them with better more improved in it and I don't see anything new on the watch list that concerns me. So I would expect it to be similar to 19, but you know likely.
Slightly better than 19.
Okay. Thanks so.
Yeah.
Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn to call back to <unk> for closing remarks.
Thank you all for joining us. This evening, we look forward to keep you posted on our progress in the months ahead.
This concludes today's conference you may disconnected lines at this time, thank you for your participation.
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