Q1 2020 Earnings Call
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Good day, ladies and gentlemen, and welcome to the Piedmont Office Realty Trust Inc. first quarter 2020 earnings call. All lines have been placed on in listen only mode and the full will be open for questions and comments following the presentation.
Require it throughout the conference. Please press star, though on the telephone keypad reached the operator at this time. It is my pleasure to kind of for older to Yahoo, Robert Bowers, Robert before Youre.
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Thank you operator.
Good morning, and thank you for joining us Piedmont's first quarter 2020 conference call.
Last night, we filed our form 10-Q, and then I tell you that includes our earnings release.
Hi, good supplemental information for the first quarter.
All this information is available on our website under the Investor Relations section.
On today's call the company's prepared remarks and answers to your questions will contain forward looking statements is defined in the private Securities Litigation Reform Act 1990 pounds.
Forward looking statements address matters, which are subject to risks and uncertainties that may cause actual results to differ from those we anticipate discussed today.
Examples of forward looking statements include those related to Piedmont Office Realty Trust feature revenues operating income.
And financial guidance as well as future leasing in investment activity.
You should not place any undue reliance on any of these forward looking statements and these statements speak only as of todays favorite right.
We encourage all of our listeners to review the more detailed discussion related to risk associated with forward looking statements contained to the company's filings with the FCC, including our first quarter two in Q.
Sure in during this call will refer to certain non-GAAP financial measures such as happened though.
Well I suppose in same store NOI.
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 may have.
At this time, our Chief Executive Officer, Brian Smith will provide some opening comments and discuss our first quarter results and accomplishments.
Uh huh.
Thank you very much.
Good morning, everyone. Thank you for participating in our first quarter 2020 earnings call on todays call belongs Bobby you myself or Laura.
Our Chief Accounting Officer, George Wells, our executive Vice President of operations any Gilmore, our executive Vice President Finance trainer.
Call Me, our executive Vice President Finance strategy.
Library, with our executive Vice President of the North Eastern Canada.
Well, it's Kevin Farr E and head of property management.
Before I address our quarterly results.
Again with a topic that at the forefront of all are fine because 19 pandemic and impact on the economy are kinda.
Finally on Pete.
First let me state of P. box customers, our tenants in our investors.
Thank you for trusting us with your business.
More importantly, your professional friend and colleague and our buildings.
Colin 19 pandemic has had a profound impact on our daily life and communities, even more difficult to fully comprehend.
Many have endured in our sympathies go out to the Stanley She's lines have been forever changed.
Well the outbreak of the pandemic the Piedmont already management teams that three specific priorities.
First make sure we're taking all the necessary steps to protect our tenant and our people.
Second I.
Preserve our other precious resource, which is our capital.
And third.
We prepare within right in the future two data business due to our very best to anticipate the needs of our customers.
Creative.
And engineered new solutions in ways of doing business and not rely on simply what worked in the past.
As with most other businesses our top priority is to protect our customers contractors in employees and I want to reassure you that all of us at Piedmont, focusing our efforts to confront this new global issue.
I cannot be proud of how our team has responded to the challenges that were on imaginable, just a few months ago.
During the crisis, our buildings have remained open to a central workers.
Today, all of our seven core markets are operating under a governors orders for shelter in place.
Into our second largest market and where our headquarters is located the governor has begun to reopening select business is just start to rebuild the economy.
That said I think it's going to be challenging at a slower than we would like it to be.
Ultimately the recovery is largely dependent on the duration of the pending an unknown factor.
At Piedmont, I believe we're taking proper and conservative precaution.
We've done well down in fact trickle down on sanitation hygiene housekeeping striving to make our buildings safe and helping our tenant communicated their employees to ensure that you're doing everything they can to social justice to remain six feet apart throughout the building lobbies elevators and other common areas as well their offices.
Brent.
Spread of infection.
Today are essential employees and contractors continue to report to work on site.
She is utilizing appropriate pee dee, while the remaining employees continue to work from home without disruption.
The portfolio he bought.
The entire team is working tirelessly to implement new policies and procedures extensive signage expansive cleaning protocols, while evaluating new products in measures to ensure our buildings promote a healthy environment.
Finally, we're providing all the sport weekend at a local communities and businesses we operate with.
Those who need it to get back other fee.
And as part of those efforts Piedmont and its related foundation at their needed over $40000 to local charities across all our southern markets, including seniors first in Orlando and why you think other hospital in New York City.
On wheels in Northern Virginia, and every hospital coded 19 impact on here in Atlanta among others.
Turning our attention to pay much attention the performance of the first quarter 2020.
Overall, the consequence is the code 19 virus outbreak had minimal impact on our operations.
<unk> financial results for the first three months of the year.
The high quality nature of our attendance he has never been a more powerful depreciating component of our strategy.
And today.
Enjoy your attendance investment grade quality and approximately seven your weighted average lease term remaining in the portfolio, we are well positioned to weather the storm.
That said, we're closely monitoring a couple areas our tenant base.
Today, we had a limited number of tend to businesses and financials have been significantly impacted by the end of it.
We feel fortunate try to limit exposure to some of the industry's most disruptive about 1% of our forecast at 2020 revenues are related to retail Ted.
And likewise about 2% of our 2020 budgeted revenues are associated with the co working sector.
Looking into rents collection specifics.
In the first quarter rental receipt came in as anticipated what do they progressed, we had a number of select tenets unable to pay their rent.
So far Piedmont has had 96% of its 10 summit full risk painted with many of the remaining seeking some form of rent deferral for the month of April.
Most of these deferral requests are coming from our smaller tenants largely food traveling consulting retail co working related provided in many services at our properties.
Most of them and subsequently begun to avail themselves of the various federal and state really fun such as the care that closed in the payment protection program, which can be utilized partially to meet rental obligations.
All the requests major unless we're carefully reviewed we have a call me in a limited number of the 10 instead of a question deferrals of rent for typically after three months.
And repayment schedule for later this year without penalty always payback in 2021 with interest.
Regarding P. my second most precious resource, it's capital and liquidity.
We firmly believe we have ample financial capacity she can front the effects of the economic slowdown associated with Koby 19.
The company comedians financial obligations, including the servicing of its debt as well be all its debt covenants with significant positive margin.
Piedmont also has a favorable liquidity position with access to our largely on used 500 million dollar line of credit.
[laughter] further bolstering our liquidity, we have entered into a binding contract to sell or only asset in Philadelphia. Thank you know one market Street.
$360 million.
I would also note that a significant deposit for the transaction went non refundable on March 31st.
We intend to use the proceeds from the sale to repay the properties 160 million to our mortgage as well as eliminate the balance on our line of credit, which will result in only one small mortgage remaining in our portfolio.
The other 56 properties being unencumbered.
Well, we are seeing signs the virus, how thick break slowing any infection curve flattening. We know this disruption is not over the short term financial impacts caused by the time pandemic on 2020 results are still to be fully realized no longer term in past will depend on a great extent upon the duration of the tangible.
Okay.
The impact on our tenants and the speed at a recovery.
Certainly leasing activity has slowed although we continue to execute some leasing primarily renewals.
We believe the pandemic will likely push out new leasing activity on the whole about a quarter and delayed some expected growth in the portfolio.
Likewise, if you turn improvement and redevelopment projects, we have scheduled will also be delayed.
Well, we currently believe the impact on <unk> earnings will be contained.
The majority of those impacts will occur primarily in the second quarter 2020 extend the pandemics impact on our economy on our tenants and on Pima will be dependent upon the duration and didn't make a death of financial disruption to our tenant.
Oh, you want to more detail a moment on some of the factors that could impact the second quarter and the back half a year.
Focusing back to the first quarter, we're pleased with operational results from a lease transaction perspective.
During the quarter when completed approximately 417000 square feet of leasing, which is well dispersed across our operating markets and included approximately 120000 square feet of new tenant leasing.
First quarter executed leases for recently occupied space reflected a 5% roll up in cash rents at 15.4% increase in coal rent.
The larger leases for the quarter include the following.
In Boston Advanced micro devices renewed 2020, approximately 107000 square feet Nike Central Street.
In Orlando the law further Greenberg traurig renewed approximately 37000 square feet.
To the year 2031, CNL Center one.
And it's 200, South Park Avenue Jones, Lang, Lasalle signed a renewal and expansion through 2025 totaling approximately 20000 square feet.
Finally in Washington, <unk> Association for unmanned vehicle systems signed a new lease through the end of 23 for approximately 15000 square feet 3100 Claritas Boulevard.
Lifting hauled leases executed during the quarter for 10000 square Peter Moore is included in the quarterly supplemental and an earnings release for your review.
As of quarter in the portfolio was approximately 90% leased leased percentage at the ended the quarter includes the transfer into service. Our previously out of service asset. The recently Redeveloped now, 41% leased to pick <unk> place tower in Chicago.
Regarding upcoming lease expirations, we have a low lease expiration over the next 18 months.
With the only sizable lease being the city of New York and 60 brush tree, where we remain in discussions for a long term renewal of substantially all the city's existing 330000 square foot leases that expire this month.
It's common we got right chance the lease entered hold her status on April 15th with a least specified post expiration increase in cash rent approximating the current market rental rate I.
I would note the benefit of increased straight line rent would not be recognized into a long term renewal could be executed which given attended the decision is likely to be further delayed due to the pandemic.
Therefore for forecasting purposes, we have to lay into potential full roll up in straight line rents associated with a long term lease by approximately six months or until the middle to latter part of next year.
Turning to transactional activity as we previously announced during the first quarter, we completed the death purchase in Dallas, Texas, Galleria Office towers, comprising 1.4 million square feet and an adjacent to acre development parcel for a total of 396 million or approximately $273 per square foot.
Which represents a significant discount to replacement cost.
The acquisition allowed us to establish a sizable position in a strong submarket so that along with our other assets in Dallas, We can present perspective tenants for the spectral high quality office throughout this growing into her sunbelt market.
With the acquisition, we expect that we'll be able to realize additional marketing and operational synergies with or our existing operations.
The Gallery office towers were required to reverse exchange and when we matched with the disposition of 90 to one market Street in Philadelphia that is expected to close in the middle This summer.
Therefore, there's not a need to make a special dividend distribution related to the substantial nine feet. Your gain we anticipate on the sale of our only Philadelphia property.
I've shared with you today, how Piedmont and committed to protecting our people and preserving our capital and liquidity is one last point, we remain optimistic about the future commercial office real estate.
I'm trying to predict the outcome of this event lead to maybe more questions and answers.
One thing is or the.
The industry will change and Piedmont will be positioning itself to succeed.
At this point I will turn over to body to walk you through the financial highlights Bobby.
Alright, sprout, well I'll discuss 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 for more complete details.
Well the first quarter of 2020, we reported 47 cents per diluted share a core I thought, though that's a two cents increase compared to the first quarter of 2019.
Even with the loss of earnings contribution do dispositions up to almost fully leased assets. During 2019, that's the one independence square building in Washington, DC, and our 500 West Monroe property in Chicago.
We were more than able to offset these cells with newly acquired Sunbelt properties in Atlanta, and Dallas as well as with new lease commitments and with the continued roll up of rents across the portfolio.
Yeah, FFO was approximately $19 million for the first quarter, which is lower than typical and impacted by one time.
Hi, Mike I believe conditions on a 520000 square foot 20 year lease to the state of New York at 60 Broad Street in New York City.
Well several leases commencing in Atlanta and in Houston late last year same store NOI was up approximately 2% on a cash basis and 4% on non accrual basis for the first quarter of 2020.
Turning to the balance sheet.
Average net debt to core EBITDA ratio for the first quarter 2020 was 5.7 times and our debt to gross asset ratio was approximately 38.7% at the end of quarter.
Both metrics reflect higher outstanding that during the quarter as a result for the purchase of the Gallery office towers in February.
During the quarter, we entered into a new 300 million dollar unsecured term loan and use the proceeds to pay down our 500 million dollar line of credit, leaving approximately 350 million of availability.
As Bret mentioned earlier, we plan to pay off the remaining balance on the line as well as a $160 million mortgage using the proceeds from the sale of nice you know one market Street, which is expected to close this summer.
After doing so we expect our leverage ratios to decrease and to be similar to our metrics as of the end of the fourth quarter of 2019 I.
I would add there are no scheduled debt maturities until late 2021 and that are investment grade ratings from Moodys and standard <unk> Poor's. We're both recently reaffirmed was stable outlooks.
Given our low leverage strong liquidity position and quality of our tenants. We do not currently anticipate any changes to our president dividend level.
As we said in our earnings release since the duration of the severity of the cobot 19 pandemic and the longer term consequences on their economy and on our tenants are unknown at this time, we are withdrawing our guidance for 2020.
That said, we believe our strong diversified tenant base, a majority of which is investment grade quality.
And our attractive portfolio of assets located at highly amenitized easily accessible business centers.
And our prudent balance sheet, which provides us with excellent liquidity all position us well will mitigate the adverse effect so the pandemic on Piedmont.
I do have or want to provide you with a few additional thoughts on trends that we've seen so far the second quarter that regarding our assumptions for how the pandemic could impact us during the rest of the quarter in the back half a year.
Well, we continue to execute lease renewals new tenant leasing activity during the second quarter has been slow and we think this trend will continue throughout the quarter likely pushing all new tenant leasing goals out at least a quarter, which will in all likelihood modestly lower annual operating revenues.
For 2020 about $1 million to $2 million and lower our originally anticipated year end lease percentage.
We expect most of our transient parking income for the second quarter will not occur that would equate to a reduction of approximately $1 billion of net operating income.
Yeah with respect to retail tenant income, which is about 1% of our total 2020 revenues retail it'll why is that somebody to decline by approximately $1.5 million.
Cash NOI rent receipts will likely be negatively impacted on a same store basis, when compared to 2019 due primarily to rent deferral of great amendments that I'll discuss in a moment.
The few redevelopment projects within our portfolio will be glide for a few months, but are not expected to impact 2020 net income materially.
Sellout nights, you know one market Street, and Philadelphia is expected to close during the summer well no. Other deals are underway any other acquisition or disposition during the year well be pricing property in market dependent.
Well as Greg noted for the month of April today, we've received 96% of our regular monthly rents well all over our 20 largest tenants representing over a third of our cash receipts paying their April ramps.
I'll be on pay 4% amount, we do have a number of tenants requesting their leases be restructure.
The focus is primarily been on providing appropriate tenants with typically up to three months of rent deferral that will in most cases be paid back later in 2020 or with interest in 2021, although we have accepted sub lease extensions in exchange for deferrals.
To date.
We have agreed to about $1 billion of rent deferrals per month for three months for 27 of our tenants representing approximately 400000 square feet of leases.
These lease amendments as you would expect are primarily with retail hospitality smaller co working tenants.
Regarding our seven tenants and the co working sector, all but one or under traditional lease structures with standard credit requirements and combined total about 2% of our originally forecasted revenues.
No one today he knows how long this pandemic will last nor the impact will have on so many businesses across the broad spectrum of our economy.
However, we do expect to reevaluate guidance when we have a better graph at the pandemics broader economic impact after current shelter in place orders that are in effect for all of our operating markets are lifted and the longer term consequences of the cobot 19 pandemic only economy and more specifically on our tenants.
Can be more thoroughly evaluated.
We do believe we're in a fortunate position with no major development projects with a sound balance sheet.
But the team of employees dedicated to providing outstanding service and safety to our tenants.
With a client roster position to recover financially.
We're thankful and appreciative to our colleagues.
Our cooperative tenants into our supportive stockholders.
With that I'll now ask our operator to provide our listeners with instructions on how they can submit their questions. We'll attempt to answer your questions now or will make appropriate lighter public disclosure if necessary.
Operator.
Thank you if you have a question or comment.
Please press star one on your telephone keypad.
Once again, if you ever question or comment. Please press star one on your telephone keypad. If your question has been answered you me press one to be removed from <unk>.
[noise] and our first question is from Michael Lewis. Please go ahead Michael.
Great. Thanks.
You mentioned in your prepared remarks about having a deposit on nights you know one market.
Just maybe give us a little more on your confidence is getting that across the finish line.
Any chance that the buyer Kurt.
Trade or delay or anything like that.
You know, we don't like to get into too many specifics on transactions that haven't closed.
That said I would point out and I as I noted in my prepared remarks, the purchaser of the building did have a a deposit that went hard on March 31st with good visibility into what was going on.
And in addition, a you know I think we've seen it continued interest in that asset despite kind of going with one bidder.
Given the long term leased creditworthy tenants in that building, that's really been the quality of assets.
That we've seen a continued to garner interest and we think it has a very good likelihood of trading there are no financial contingencies and no out in the contract.
And as I noted before if they weren't as well I think we feel very confident in our ability to accomplish the 10 31, given the interest from non treated reach we've seen Asian capital now how positive Forex exchange that's improved a lot.
But again I think the purchaser of all indications are they intend to close a again middle of the summer there are no financing contingencies and we do think that they have that the all cash on hand to complete the transaction. So we feel very confident that they are going to perform.
Great.
My second question any kinda talk a little Ducs too on the New York City.
I think we all expected to be delivered a little bit anyway.
The nature of the tenant.
Could you talk a little bit more again on that one.
That's a good it may be pushed back, which I think we could have expected, but what about the pricing on that.
That this has a negative impact on what we kind of expected to be really strong rent spreads.
I see too it's a little early overall to start speculating on impact market rents from from the the virus in the pandemic.
It's a demand and supply issue.
And I don't see right now any insight into supply and demand. That's it's specific to our deal. We continue to work with New York State in our in bad advanced planning a in negotiations.
You know I see that building is very unique in that it satisfies a lot of their need yeah. As we noted the building within a bill I'm sorry the city.
Noted at the building within the building so they have their own no I'm a little bit you will I think in this environment that even becomes more valuable.
In some ways.
But I do think that you know given we are in the transaction, we feel very comfortable that we're providing a very high quality location in a very competitive price versus what it could exist elsewhere on the island and so we continue to engage them and move forward on dialogue and that has not wavered and all I would say, though that there.
As part of doing a leased with New York City, either as a public hearing process that any typically would take anywhere from three to six months, obviously, given the pandemic. We don't really know I kind of how that process will start back up with the backlog might be and how that will ultimately play out and so that's why you heard me my.
Prepared remarks, really effectively pushed that back six months into the latter part of next year I would note that we did not have it and expecting it to get a and not expected it to get sign really until the end of this year anyways at the earliest so we're really kind of pushing it back with the expectation that that process will be slower.
It was given the nature the tenant in the city city and we should reside.
I would remind you though they are in what we would call.
For lack of a better word the lease specified rental rate increase or beyond their expiry semi calling a holdover rate I wouldn't necessarily deem it that way, but it is a specified increasing rents.
And that will benefit us both on a straight line rent basis recognition in cash sorry accrual basis and cash.
In somewhere roughly roll up if you look in the supplemental they're paying somewhere mid thirtys right now on a cash and GAAP basis, and now as I noted before will be closer to a market level. So there is a meaningful role up there to be experience just naturally.
In approaching roughly a 30% level on the on the role or I'm, sorry on the holdover rate.
Great. That's helpful. And then just lastly from me.
Page 39 in the supplemental it doesn't have.
At least my copier I see the land parcels I don't see redevelopment projects. It sounds like you've got started on 200, South Orange I don't know superior cylinder, where maybe that's the other redevelopment that was alluded to in the tax can you just give an update on the on the redevelopment projects, maybe how much is left to spend there and how that's progressing.
Yes, so to peers placed first to address your question. There that was actually completed and is now been put back into service. This quarter is the first quarter that that will go back into service in it and again that is currently 40%, 41% leased and we continue to have.
Prior to the crisis, good good tours and interest at the asset.
The other kind of bigger project as you noted would be Orlando right now, obviously, given the delay in being able to get construction permits and other kind of.
Continued involvement with the regulatory entities there as you may recall, our tenant that building, we work with any and discussions around.
Around where the fire Marshal in terms of the density of its space.
They continue to have that dialogue, we recognize that there is some base building work that we're going to continue to do but inherently that will be slowed down by the pandemic been total size that project. We were estimating roughly in the neighborhood of caught 18 to 20 million and so we continue to for the project.
That inherently that capital spend will be slower than anticipated and so we'll revisit.
The magnitude of that dollars is not even yet to be be spent so it's very de minimis to date spend and we will revisit when to kick back up construction once it's safe and were able to do so at the building. The other big projects that I would note isn't really redevelopment, but it is the New York State build out we continue to.
Made good progress in the plan and we are prepared to be active on site at the building, but obviously given the pandemic that has been put on pause, but we really see no material impact to the income stream related to that delay, but we continue to keep a close eye on it we're hopeful that.
It would be no more than maybe a month or two or and less the governor would come back and deemed to be an essential construction project and then we would pick back up with onsite activities. So this would probably be the ones. Most impacted anything else that we have in the portfolio would be very small in scale and more regular way base building for the most part.
That's helpful. Thank you.
Again, thank you Michael joining today, sorry, I jumped in here on answering your questions, but one I hope you in your people need to save and then to.
I apologize for the technical difficulties at the beginning of the call. A you know just one of those things were all getting used to a virtual world here in there.
Our next question is from Anthony Paolone.
Sorry, [laughter] that correctly.
Okay very good thanks.
I guess first question on the Galleria acquisition, Dallas can you give us a little more color on a cash yield any capex plans there.
Yes, I think in the K that you filed it looked like.
Back in like the high fives cash worldwide to Amazon's rent, which still you know for the coming onboard. So just one of its pro or more color around that that asset where are you taking it.
Thanks, Tony for joining us today again, I hope you and your family as well or are safe and healthy.
And really relation to gallery office towers in Dallas, a as you know we completed that transaction in February I. During the course of that transaction. We were engaged with a large ecommerce company and in terms of Derek continued expansion at the project.
And as part of that deal there was a additional square footage taken so as of the acquisition. We had about 130000 square feet of signed but yet to commence a square footage at the asset sales.
Already that's going to be coming on late later on this year.
And so that should you know do you think about kinda roughly $30 net and we'll have some management income et cetera, that's going to equate to want $4 million to $5 million of additional income at the building. So that's going to land you Ah you know I think by your math that Fiveseven should come up to closer to a seven on a cash basis.
And of course, the gap yields going to be well north of that as a result of those below market leases and again the majority of that 130000 square feet is related to a largely commerce company and it has no free rent related in that transaction and that would come online again later this year.
Okay and is there much just otherwise in the planning at the asset in terms of Capex or any repositioning you intend to do there.
Ah that's a good question I. Appreciate you follow up would that be a buyer that we acquired the asset from with a high quality institutional owner themselves.
Who had done much of the.
Modernization, if you will have the minute ease of the building. So it's got a great set of minis for the for the tenants that reside there, including Jones conference centers or board room, as well as obviously the benefit of a lot of retail right. The base the building so at this.
Point, there isn't really heavy lifting that needs to be done at the building in terms of capital plan and program. We feel like we've got a great basis and a good runway to continue to at least a project and elevate rents with a phenomenal our product available today without the need to modify it great.
Okay, and then on the co working side or it sounds like you're you're working through some deferrals or or something there, but an instance, you get that space back how do you think you're all would approach. It would you try to operate your Sal preserving conduct conditioned to just take it to market for user.
How would you think about that piece of portfolio it.
Yeah, good for all situation can work.
I'd say first it just in terms of.
How we approach to co working in general we had for the most part on your diversified our exposure across a number of operators. So that we don't have a lot of single counterparty risk. We do you have three we work locations and then other providers, but really no single a provider makes up more than.
In call it a low teens percentage of the building in terms of its square footage. If we weren't to have you know situation. We're one of those tenants where it up to be able to no longer to pay their rent and we took back to space. You know I can see situation right now and again, it's very early but as we have 10, it's come back into the workplace.
Yes.
There may be the need for a release valve if you will for additional space.
Many of those spaces that we have are not of the dense typical co working type they're more I would call us small shared offices that are geared towards teams of five to 20 people with individual suites that are glass from thatll be more well positioned to provide I think a healthy environment and it's also benefit that those operate.
Raters don't rule.
I guess rely as much on a very dense and.
Jam packed environment. So we would operate goes as relief valve, bringing a management company more likely and we have a number of those that we've talked to have relationships with even though we've never done a management deal, but clearly that's where the industry is headed.
Or at this point, so we feel like again, where we've chosen to implement it makes a lot of senses amenity in an offering into the marketplace. So I think we still demo a good use of space and we'll continue to operate that ourselves and again use it for a good thing tenancy as they come back to the buildings, but again I think it's still very.
Three early to tell a in a majority of our co working operators, including our largest coking coal working operator, we work our current on their rent.
Okay.
Thanks, a lot and then last question for me, putting New York City aside.
What are the larger 2020 2021 expirations you are watching right now.
I think one of the good things, we have Tony and our story right now is that low expirees schedule. If you exclude New York City, you're looking at about 4% this year and call. It 5% next year. We're just in terms of alar I wouldn't say, there's a tremendous amount of exposure.
Concentrated if you look at our tenant schedules itself. We typically provide a list of all those that are greater than one personnel are and you'll notice. The city is the only went on there, but if I look out through 2020.
We do have summit expirees with various tenants in Dallas as well as in Atlanta later, this year and so we continue to make some progress on those but.
As we've kind of projected there are few that will vacate and we've got those already built into what was previously provided our guidance.
So I don't think the the difficulty in leasing right now and get it and eating tenants to tour spaces will really have a significant impact overall on the income stream for 2020.
And then those vacates or more geared toward the back half a year and again, we didnt have the leasing up in our numbers and so we're thankful that we do have that low expiration schedule right now.
Okay, great. Thanks for the color.
Thank you. My next question is from Dave Rodgers. Please go ahead Dave.
Yeah. Good morning, everybody up your old well wanted a couple of quick follow ups first on co working.
Seven tenants and they're all current how much of those were already on cash pay versus kind of still building outdoor or in rent deferral and then maybe Brian what are your discussions with them to they all want to stay or they approached you about converting the leases or departing the spaces.
I guess first I just want to make a small clarification I noted that we work was fully cry, we have had discussions with the smaller operators and we're working with one of them currently right now as we speak but I would say all of the operators still a very positive overall in their business how they built out the space again I would note that I really all of them a focus.
More on a small business small teams and less on bench Dallas eating a and so I think that does position them better when things come back.
If we think about the discussions that we've had specifically we work.
Sure there locations are completed and built out and one of them is in pre rent one of them is paying rent and so we are correct with that we do have one location as I mentioned before in Orlando, where they have been going back and forth with the fire Marshal in that market trying to get final plant approval of their plans.
And so that as we noted we anticipated that would probably be wrapped up sometime later this year and therefore, we never really included in our 2020 numbers even at the beginning of the year.
But clearly given the disruption and in construction and their delay and likelihood we may see a reversal densification in the marketplace. So they may need to rethink that space, but again, we didnt have any of that coming online expecting it in 2020 previously.
I would also note that all of our leases with co working operators have significant credit enhancement.
You know as something that we've always.
And very focused on we provide a high quality service to the high quality companies and and so we often look for those instances, where they're not rated or public.
Additional a security it and we look for that significantly with our co working operators. So we think that's a positive for those locations as well.
Great unhelpful on maybe a question for Bobby I think you had mentioned that you didn't expect any significant delays in the move in and around the T.I.s and I guess confirm that for me you have two big move ins, including Amazon The fourth quarter and then a second part of that question is Amazon having moved into your top five tenant last does that.
Include the extra hundred 30000 square feet signed but not commenced or that will that be additive to that position.
Hi, I hope you're doing okay guys.
I'll answer the last question first Amazons 130000 square feet is included in our calculations up to 5%.
All right how are.
The first question was is there any anticipated delay associated with the Amazon starting that's lighter this your effect in the fourth quarter and now there's no anticipated delight.
Okay, and then maybe just last on accounting side for me in terms of kind of bad debt reserve straight line rent write off I think you kind of alluded to it that you'd wait and see into kind of take that approach for the year have you increase the need those reserves made any write offs and.
How do you how do you view that I guess sitting here today at the end of April.
Well historically, we have not had much bad debt expense I think I looked back over the last several years, one year was less than $50000. I think last year was 150000, the total bad debt expense.
Obviously, if you look back 30 days ago.
It could have imagined.
That there would be 30 million people filing for unemployment and the number of shutdowns at furloughs that we've seen we've got a thousand tenants representing 70000 individuals.
It's hard to get your.
Mind around.
But the impact has been from the pandemic for how long this is going to last and that's why you see as take the more prudent.
Avenue to evaluate a little more closely but I have not made any significant Baghdad accruals at this point nor have we been requested to make such.
Okay. Appreciate the color guys. Thank you.
Thank you. Your next question is from Aaron Wolf. Please go ahead Aaron.
Hi, all this is there and we'll find more John Guy in the I Hope all is well I'm just a quick question turning back to the the gallery in Dallas Galleria in Dallas, what are the parking ratios there.
Hi, Aaron and John I Hope you both are safe and healthy I appreciate you joining today as well.
The parking ratios the building or roughly call. It three per thousand a I would note.
I exciting project it again, we closed on in.
Many of the first quarter, yeah, what's interesting about that deal as well as we recognized.
The base of a large retail center and obviously retail is experiencing a lot disruption I think what we like about the opportunity was it's not reliant upon what goes on debate the building.
And there is ample parking at the site and not only with was needed to us, but a relationship with the the retail owner to flow to see a.
Nights, and weekends et cetera, and our garage and various it during the workday, we needed additional space into their garage. So what's unique about that is the of course, we only three per thousand but we can go much much more dense in that location given the relationships. We have in the scale that project and the other mixed used components, we think thats, a really exciting opportunity.
In that regard.
Great. That's very helpful. Thank you and onto redevelopment.
Yeah. So peers is about where you said, 42% or the economic occupancy.
Is there what's the I know I look like coming through there now.
Oh I see you know wise is work operating expenses, but we're not making a significant amount of then ally overall in the project at the moment were basically talking a little bit of cash flow.
We're hopeful and continue to see positive momentum at the asset obviously looking for a larger user given the size of the availabilities.
And the disruption did slowdown that process, but it's vacant space and we're hopeful once some of the governor's orders a shelter in place get removed.
You know people will come back to the building to start touring again, it's obviously a little bit easier in this environment for people to feel comfortable touring vacant space and occupied space.
And so we think that will obviously be a little bit of beneficial to us helping to fill that call. It 200000 square foot.
Availability.
Okay, Great and 200, South Orange, that's why the 640000 plus square feet, what's what what when that reconstruction resumes what portion is gonna be coming off line is it all of that or.
What yeah, what type of square footage will be coming offline well it our project. The base building component is really at the base to the building more lobby and admitted he focused on okay that is where if you recall suntrust resided they've since vacated roughly about 120000 square feet. Prior.
Through 19 in various stages.
So that space has been part of its been re let to we work and that again as we've talked about previously.
It's going to take some time for them to build out the space work for you to fire Marshal et cetera, and will resume our base building construction when it's appropriate.
Okay. Perfect. Then one last quick one you obviously review tenant credit very carefully.
Do you think we work will be in business paying rent in 2021.
You know I think it's a little bit you get ahead of ourselves to speculate on tenants financial.
Our balance sheet capability and liquidity, but we have been very pleased with their performance and working with them as the customer and tenant.
They continue to pay rent and meet all their obligations.
So at this point in time, we think that.
That along with the security problems, we had in place makes us very feel very comfortable with that as an operator and attended.
Of course, the duration of the pandemic, we'll probably have a large.
Impact I'm, sorry, I large variability on the impact overall on that type of business, but it is as I mentioned before we'll see how this goes but you could see a situation where they are a.
A nice for lease valve, if you will to help people get to a six six foot spacing within their own.
Their own build out and so after kind of continue to see how that plays out.
Great. Thanks for taking my questions and does they said.
My question. Thank you.
[laughter] no other questions at this time.
Great.
I want to thank everyone for attending today's call again, I want to ER stress that.
Our hearts and thoughts go out to those who've been.
Dramatically impacted by the virus.
But we do recognize that is the months go on we're going to continue to get back to.
Back to the office place and we look forward to welcoming our tenants our customers and communicating what we're seeing in the marketplace with our investors to that end, we look forward to seeing many of you virtually at near each refi in June but.
But please reach out to management, if you've got either questions or concerns. Thank you everyone have a great day.
Thank you. This concludes todays teleconference. You may disconnect your lines at this time and have a great day.
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