Q4 2020 Piedmont Office Realty Trust Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the Piedmont Office Realty Trust fourth quarter 2020 earnings call. At this time, all participants have been placed in a listen only mode and the floor will be opened for your questions and comments following the presentation.
It is now my pleasure to turn the floor over to your host Eddie Gilbert Sir the floor is yours.
Thank you operator, good morning, everyone. Thank you for joining us today for Piedmont fourth quarter 2020 earnings Conference call last night, we filed an 8-K that includes our earnings release and our unaudited supplemental information for the fourth quarter that is available on our website at Piedmont REIT Dot com under the Investor Relations section.
During this call you'll hear from senior executives at Piedmont, and they will refer to certain non-GAAP financial measures such as <unk> core <unk> <unk> and same store NOI.
The definitions and reconciliations of these non-GAAP measures are contained in the earnings release and in the supplemental financial information.
Also on today's call the company's prepared remarks and answers to your questions will contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995. These forward looking statements address matters, which are subject to risks and uncertainties and therefore actual results may differ from those we anticipate and discuss today the risks and.
These forward looking statements are discussed in detail in our press release as well as in our SEC filings. We encourage everyone to review the more detailed discussion related to risks associated with forward looking statements in our SEC filings.
Simple as a forward looking statements include those related to Piedmont future revenues, and operating income dividends and financial guidance future leasing and investment activity and the impacts of the COVID-19 pandemic on the company's financial and operational results you should not place any undue reliance on any of these forward looking statements and these.
Statements speak only as of the day they are made.
At this time, our president and Chief Executive Officer, Brent Smith will provide some opening comments and discuss our fourth quarter and annual results and accomplishments.
Brent.
Good morning, everyone and thank you for joining us to review, our fourth quarter and annual results along with our outlook for the coming year.
On the call with me are George Wells, our executive Vice President of operations.
Yogurt, our executive Vice President of Finance, and Treasurer, and Bobby Bowers, Our Chief Financial Officer, as well as other members of the senior management team.
Let me start by saying that all of us at Piedmont sincerely hope all our tenants vendors and investors continue to be safe and healthy and while we remain optimistic about the accelerating vaccine deployment and the path forward is.
We began 2021 the pandemic continues disrupt American business.
Today, our portfolio utilization remains at approximately 25% to 40% on average, but can vary greatly depending on city and tenant profile.
Notwithstanding the disruption to the office sector in 2020 Piedmont continued its track record of delivering solid <unk> growth for eight out of the last nine years.
Generating 10 since more of core <unk> per share or approximately a 6% increase over the prior year for 2020 and.
And we expect to continue this positive growth trajectory into 2021.
Bobby will discuss in our guidance later.
Despite the challenges of the pandemic my colleagues have kept the entire portfolio open and operational 24 hours a day seven days a week 365 days a year.
All remaining laser focused on the health and wellbeing of our tenants assist.
Assisting in their efforts to return to the workplace safely.
Furthermore, we have taken this period of reduced building population to improve the tenant experience and enhance onsite amenities.
Focusing on outdoor space and wellness factors and all of our buildings.
For example, our $2 2 million square feet Gallery, Atlanta project has achieved well health and safety rating by the well building Institute one of the few projects of this scale in the country and the first day on the Atlanta market with this designation.
With additional buildings in the process to also achieve future ratings by the well building Institute.
And we're excited ESG programs are already helping to generate incremental leasing.
From an operational perspective shelter in place orders during the second quarter of 2020 brought new tenant leasing activity to a virtual standstill.
But despite this challenging environment, we executed over one 1 million square feet of leasing for the year.
The majority of which was renewals for existing tenants.
These leases had a weighted average lease term between four and five years and achieved a cash roll up of three 5% on second generation leases.
And our weighted average lease term overall for the entire portfolio is now over six years.
Of the total leasing for the year approximately 190000 square feet were completed during the fourth quarter with our most notable leasing taking place in Atlanta, Washington, D C Minneapolis and Dallas.
For a list of our fourth quarter leasing highlights. Please see our earnings release or our supplemental financial information, which were both filed last night.
During the latter half of 2020, we continue to be encouraged by the improved leasing activity and the increasing size of the leasing pipeline.
Providing real time color on our leasing activity.
Generally we're witnessing similar dynamics across all of our seven markets with a smaller sized tenants those less than 10000 square feet continuing to make leasing decisions with little change in space design.
On the other end of the spectrum. We're also seeing tenants with large space requirements, who are serving their business model and require generally more than 50000 square feet continue to execute leases to take advantage of favorable rates and concessions in.
In fact, we're seeing a number of these larger requirements in Boston, Dallas, Atlanta, and Orlando, and we're beginning to see tenants planning space with lowered entities and greater focus on collaboration and team space.
I would also add that we've noticed the tenants are greater focus on the ESG platforms their landlord more than ever before something that is differentiating piedmont from less sophisticated operators in our markets.
Finally, I would note that the segment of the market, which seems the most timid and making longer term lease decisions are small and medium enterprises needing roughly 10% to 25000 square feet of office space. These tenants continue to exhibit a pattern of shorter duration renewals typically ranging from one to three years.
As I noted earlier, we continue to see meaningful large tenant activity, particularly in our sunbelt markets, along with Boston driven by an uptick in corporate relocations and expanding technology companies.
In fact in 2021 year to date, we've executed more than 500000 square feet of leasing.
And so with this real time dialogue with tenants and the improved pipeline activity. The buoys, our confidence that office space usage will continue to improve and return to a more normalized state over the course of 2021.
Furthermore, we believe Piedmont is positioned to meet tenant needs in a post COVID-19 marketplace with a focus on lower cost higher quality of life markets, such as Dallas, Atlanta, Minneapolis, and Orlando In addition to our suburban markets in Boston and Northern Virginia.
Preference for environments that create vibrant the many rich workplaces, along with robust tenant engagement and a best in class ESG platform.
We believe the most successful operators in the post Covid market will provide office users with a more balanced service offering encompassing wellness sustainability and engage the broader communities in which these businesses operate.
Turning to Piedmont lease explorations in 2021, excluding the city of New York lease, which is currently in holdover, we have only about five 8% of our annualized lease revenue expiring during the year and with virtually no expirations at our properties in New York, and Washington, D C, which rely on mass transit for building.
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I would also note that with the disposition of the New Jersey portfolio, we have only one asset in New York City, which was 94% leased at year end.
Furthermore, I am pleased to report that we continue to make progress on our lease renewal with the city of New York at 60 Broad Street, despite taking longer than anticipated. We are working with the department of citywide administrative services to culminate the approval process and expect to have more to share on our next earnings call regarding the regarding the shorter term renewal that would take the New York City.
Out of holdover and cover the timeframe for a re stack of their space under a longer term lease.
Digging into the strength and resilience of our tenancy base over half of our tenants are investment grade quality and we collected 99% of our billed receivables during the fourth quarter of 2020 and for the year.
Looking back at the height of the pandemic, we did have a number of tenants that experienced operational difficulties.
<unk> tended to be more smaller retail hospitality and co working operators that represented a limited amount of our total annual revenues.
As the result of the pandemic, we have entered into approximately 70 tenant work out agreements that typically defer three or four months of rent.
A total of approximately $7 million was primarily deferred under lease workouts.
Or a little over 1% of our total annual revenues.
By year end repayments of $1 3 million of that had already been made and the remaining rent deferrals are expected to be repaid in 2021.
As we've noted on previous calls our credit concerns primarily focus on our six tenants in the co working sector, which represented a little over 2% of our annualized lease revenue in 2020.
And less than 2% in 2021.
With one tenant we work representing roughly half the exposure at three separate locations.
During December we reached an agreement with we work to terminate their Orlando lease effective at the end of the first quarter of 2021.
I'll remind everyone that our we work leases where typical lease arrangements with standard credit enhancement terms.
Due to contractual requirements the Orlando location began paying rent on their lease in August of 2020.
Although I will note that we have not made any tenant improvements there due to issues between the tenant and local zoning officials.
We work as prepaid their rent through the end of the first quarter and also paid a lease termination fee of $2 6 million.
And in addition to a green the determination fee.
All rents for the other two we work locations in our portfolio, which are open and operating had been prepaid for over a year into 2022.
In connection with the other five small co working tenants. We will continue to monitor this segment carefully however, our exposure in 2021 to co working at this point has dropped to a very minimal level and we believe we have adequate reserves to cover potential future losses.
Turning to transactional activity 2020 was a successful year, we exited two non core markets, Philadelphia and Northern New Jersey at an average exit cap rate of around 7% and recycled proceeds into two sunbelt markets and accretive roughly 9% stabilized cap rate.
As we announced in conjunction with last quarter's call. We completed a portfolio sale consisting of our last three properties remaining in northern New Jersey and as part of this transaction. We did provide secured seller financing at a weighted average interest rate of 7%.
During the fourth quarter. We also acquired 222, South Orange Avenue for $20 million, a property, which is connected to our 200, South Orange Avenue in downtown Orlando and share several building systems as well as the key entry points with that asset.
The acquisition provides our existing office tower with direct frontage on Orange Avenue, the de facto mainstreet and Orlando Central business District, and we have already begun a redevelopment of the property and expect to be completed in about 12 to 16 months.
Upon completion, our downtown Orlando portfolio will represent a preeminent destination for the market and will reflect our environmentally sustainable priorities.
As I have noted we are seeing a more intense focus on our landlords ESG platform by our tenant base and in that vein I encourage all our listeners to review our most recent annual ESG report that is available on our website.
You will see our board level emphasis on measurable improvements to address climate change risks and other environmental concerns along with proactive steps to promote social justice diversity and community involvement, including the formation of the Piedmont scholars program at two historical Black colleges and universities.
Finally, I would like to point out that during the fourth quarter, we repurchased approximately two 2 million shares of common stock at an average price of $14 per share or approximately $36 million we.
We will continue to utilize the share buyback program in conjunction with acquisitions and development redevelopment to Accretively recycle disposed disposition capital.
As of quarter end board approved capacity remaining for additional discretionary repurchases was approximately $170 million.
At this point I will turn it over to Bobby to walk you through the financial highlights for the quarter and provide our initial guidance for 2021.
Bobby.
Thank you per M. While I'll discuss some of our financial highlights for the quarter and the year.
Average you to please review the earnings release and supplemental financial information, which were filed last night for more complete details.
For the fourth quarter of 2020.
Ported <unk> 46 per diluted share of core <unk>.
Which is comparable to the fourth quarter of 2019.
Annual core <unk> for 2020 was $1 89 versus $1 79 per diluted share for 2019, reflecting the 10 cents inquiries that Brent mentioned earlier.
<unk> was approximately $36 million for the fourth quarter.
Well in excess of our current quarterly dividend level.
On a year over year basis same store net operating income ended where we expected which was slightly down on a cash basis and relatively flat on an accrual basis.
The decrease in cash basis same store NOI was primarily attributable to the deferral of rental payments discussed previously as a result of rent relief agreements entered into during the year.
I will note the pace of such agreements slowed dramatically in the fourth quarter with only five small agreements being put in place during the quarter.
Our same store NOI on non accrual basis in 2020 was impacted by a few items, including our establishment of a $4 6 million dollar General reserve for potential Collectability issues.
The write off of a few tenants straight line rent accruals the.
The impact of less than originally forecasted new tenant leasing.
And a reduction in transient parking revenue.
All of which are closely tied to the impacts of the pandemic.
While individual quarters vary greatly in terms of the number of leases and the size of those leases completed $1 1 million square feet of leasing was executed during 2020, Inc.
Cash rents for these increased on average approximately three 5% and GAAP based rents increased over 10%.
Turning now to the balance sheet.
Our average net debt to core EBITDA ratio as of the end of the fourth quarter of 2020 was five eight times and our debt to gross asset ratio was approximately 34, 4%.
We currently have the vast majority of our 500 million got a line of credit available to us.
Debt maturities in 2021 include a very small mortgage that matures during the third quarter.
$300 million term loan that matures during the fourth quarter.
At this time I'd like to turn our focus to 2021.
And introduce our guidance for the year.
We currently estimate core <unk> for 2020 once a day in the range of $1 86 to $1 96 assets.
Per diluted share.
Certainly the pandemic will still present challenges in 2021.
But we believe our strong credit worthy tenant base.
Our attractive amenity rich locations that are easily accessible by car and not dependent upon mass transit.
Combined with low lease explorations projected for 2021.
Our limited exposure to transient parking income and.
And our limited exposure to retail and co working tenants as well as our prudent balance sheet, which includes a $4 6 million dollar general reserve for lease related receivables.
All will contribute to stability.
<unk> and greater predictability of that last year and our app.
<unk> operating performance.
Our guidance does not include any speculative acquisitions or disposition activity.
We will update this guidance upon such activity. However, our 2021 asset recycling if any in total is expected to continue to be accretive.
Our recycling transactions have been over the last several years.
Based upon these estimates same store NOI growth is expected to be between three and 5% on both a cash basis and accrual basis.
We also believe there'll be a slow gradual ramping up of business in leasing activity over the year with a return to more typical state of operations in the latter portion of 2021.
While our occupancy over the last few years has been impacted by the dispositions, primarily a large fully or near fully leased assets.
We expect our current portfolio is overall occupancy to improve 1% to 2% by year end.
We anticipate updating and narrowing this guidance around mid year as we learn more as vaccines become more fully distributed as <unk>.
More schools have reopened in his herd immunity is more widely expected.
It's also important to note as you prepare your financial models that our quarterly earnings can vary by a penny or two.
From the timing of seasonal expense items, and the volatility of certain accruals such as potential stock based compensation will.
We will be happy to work with you on your individual modelling questions at the appropriate time.
However, right now I'd like to ask our operator to provide our listeners with instructions on how we can submit their questions.
We will attempt to answer all of your questions now or we'll make appropriate later public disclosure if necessary.
Operator.
Certainly.
Ladies and gentlemen, the floor is now opened for questions. If you have any questions or comments. Please press star one on your phone now we ask that we're posing your question you. Please pickup your handset, it's Lucy on speaker phone to provide optimum sound quality. Please hold them on moly poll for questions.
Your first question is coming from Dave Rodgers.
Your line is live.
Hey, guys. This is Nick on for Dave.
Wanted to circle back to that over 500000 square feet of leasing to start the year can we get a.
A little additional color on maybe the mix between renewals and new leasing and then also like where the geographic regions are to that.
Yes.
Sure Nick Thanks, again for joining us this morning.
We are part of that.
Desire to put that into our materials was really to help give real time I think as we continue to talk to investors. They want to understand what's going on on the ground and so we did want to provide a little bit more color. As you think about the combination of the split between new and renewal leases I'd say that that level is in line with kind of price.
Near quarter splits if you will and I'd say, it's it's in various parts of the portfolio not necessarily concentrated in any single market, but we've seen the activity on just the number of leases signed pretty consistent across both Boston.
Alice Atlanta as well.
And so we will continue to we think see that pipeline growth through the year, but we were pleased and wanted to share that we've already made a pretty significant.
<unk> relative to what the leasing momentum was in 2020.
Yeah that was that was some surprising good news to start the year I guess going back to what you mentioned on line utilization I guess, we kind of have an idea of what markets are performing better on their return to the office, but I guess, maybe I'm like the industries or the tenant side that you're noticing that are being in the office more than like other tenants.
We continue to see small tenants really come back a little bit more in force than most of the other tenants.
Save large national corporates, probably be the most attended and coming back to the office. If you think about markets, though and kind of tenant size. So call. It less than 25000 square foot type tenants and we are seeing obviously has been widely reported just general economic activity is more robust in the sunbelt and no surprise.
Where we do see the higher levels of utilization that's not to say, we don't have for instance, government related or critical business operations elsewhere in the portfolio, where we're seeing almost 100% utilization, but I think that's the generalities that you're probably more interested in we're seeing it really translate also to our leasing pipeline activity being more active in that.
Those markets as well.
Okay, and then last one from me like moving to the portfolio I know like prior calls you mentioned the possibility of maybe monetizing some of your assets in stronger markets, such as Cambridge I.
My guess is that still the case and then turning to non core portfolio you trimmed the decent portion of that with 19 O. One market in the New Jersey portfolio in <unk> I guess what are your plans as we look ahead into 2021.
Yeah, Nick it's a.
Choppy acquisitions dispositions capital markets in general and so.
So you're going to continue to see us do what we've done in the past which is <unk>.
Monetize mature assets under our ownership and in today's market, that's generally lending itself to longer leased credit type tenancy.
And so we have a number of those that fit that profile in the portfolio and that we think we could sell in this market you mentioned, Cambridge, among others that could fit that profile.
And we're continuing to evaluate the potential disposition of those assets and I think you're likely to see us probably recycle is somewhere in the neighborhood of of $200 million to $400 million. This year and we're going to consistently continue to focus on recycling that capital into our healthiest markets.
We continue to see these larger kind of corporate and other activity from a leasing velocity standpoint pick.
Pick up.
So that's probably to focus mostly in sunbelt in Boston at the moment and we are continuing to evaluate development, but I think at the moment right now that's that's a little bit further down the list in terms of capital allocation, but we do feel enthusiastic about seeing some of these corporates come into the sunbelt markets, we're talking to economic development.
Groups that represent the states and cities and they are seeing an up tick in that activity in Dallas, Atlanta and Orlando.
And so that's probably another reason to focus a little bit more on those we're also continuing to lean into redevelopment, we will be doing a project or twenty-five mall road building up in Boston, completing the 200, South Orange Avenue campus now with the acquisition of two to two South Arne Avenue really creating a preeminent product there in downtown Orlando.
Condo and then of course, we're continuing to build out the phases of redevelopment at the Galleria in Atlanta, and hope to have share more to share with the market on that this summer.
Of course, our Big Boy right now at 60 broad and Thats really related to the leasing obviously with the stages completed and the New York City. That's underway. So we will continue to evaluate those from a capital allocation standpoint, as well as our buyback program appropriately within that same historical framework that we have in the past.
Great. Thanks.
Your next question is coming from Anthony payload.
Your line is live.
Thanks, Hi, everybody.
I guess first question is on the half a million square feet of leasing here in the first month or two of the year.
What is that due to the expiration schedule I guess because it's.
But I think in the supplemental and 900000 square feet. This year. So you know how much of that kind of knocks out this year versus future years.
I would say very little of that actually reduces the 'twenty one expiries.
As we've talked about and you've heard me mentioned, Tony we continue to have meaningful dialogue with these larger corporations and technology companies, who know their businesses really well or moving wholesale divisions or groups or expanding et cetera, and so.
We've been sharing that dialogue and we've continued to see that translate now into some leasing activity.
And we think thats going to be a positive that we'll want to share more detail with the market at the end of the first quarter.
But overall that 'twenty 2021, expiry still stands at about five 8%.
It was an early a series of early renewals and some new leasing thats really comprising net 500000 square feet.
Okay got it and then.
So a way to characterize just from what you've been able to execute so far and where your market discussions are kind of where the all in net effective rents are landing compared to pre COVID-19 levels.
Uh huh.
It can vary by market and right now I'd say, we're seeing again the most activity in the Sun belt. So that's where the majority of our data points come from as well as Boston, but.
Generalizing I'd say net effective because concessions have moved up call. It 10%, 15% while rates have held steady. So we've seen net effective right now depending on the market declining aware from 5% to 10%.
Depending on the dynamics.
But I think we view if you've got a larger into a credit worthy tenants looking for space.
We're going to fight for them and right now in this marketplace I think that's pretty reasonable to say those net effect as had been deemed but we are pleased that ourselves and other landlords are holding rent.
Spike the sublease space that is coming on in some of our markets. I think you have to Peel back the onion, a little bit and examine that a lot of that is not of the same quality and or duration that we provide a tenancy within the portfolio. So we still feel very good about where we're positioned in the market and we are we're able to accomplish.
I would say overall, we still feel like the mark to market in the whole portfolio of the leases still around that 5% to 10% level depending on market.
Building obviously.
On the 5% to 10% on the positive side for the whole portfolio.
Net.
Okay.
And then maybe from for Bobby.
$2 6 million dollar termination fee from we work is that something we'll see.
From the first quarter or is that in.
And the guidance like where does that show up.
Yes, Tony this is Bobby it is in our guidance.
Each year for the last several years, where we've recorded between $2 million to $3 million per year.
Termination fee income in.
In 2019, it was $2 $8 million believe it or not in 2020 is $2 8 million and in 2021.
Exactly the same thing right now we're forecasting $2 8 million. So it's not an unusual item, but we do we are able to identify them now and tell you. What it is it will come through as you've just asked primarily in the first quarter.
Okay, and then just remind us on that space. You mentioned work ended up getting done was we.
Sure.
<unk> teed up to put that bill or was that part of Piedmont.
Package that now you won't be spending those dollars I guess.
That's correct, we were had a T I obligation and those dollars will not be spent.
Okay and then just.
Last one if I might free Bobby just any brackets around G&A.
For 'twenty 'twenty one.
In terms of size, Tony what Youre wondering.
I know its tough with the comp accrual in the stock and stuff, but just kind of what's loaded into the guide.
In total maybe 28 million somewhere in that in total $7 million per quarter or something like that.
Okay.
Great Thats all I got thank you.
As a reminder, ladies and gentlemen, if you have any questions or comments. Please press star one on your phone now.
Your next question is coming from Michael Lewis.
Your line is line.
Yeah, great. Thank you.
So I'm going to lead off asking about the half a million square feet at least from year to date as well I think it caught everybody's on assets.
You did about 230000 a quarter.
The three quarters during the pandemic.
And Tony I already talked about the low lease expirations this year.
What's the 500000 is there one or two big chunks in there that drives the bulk of that or is this kind of a broader level.
Level of activity.
I'm just curious what kind of tenants are looking for space right now.
Yeah, Michael This is Brent thanks for joining us today.
I think it does include one of our top 20 tenants.
So there is a sizable win in there, but again I want to provide you with a context of what we're seeing broadly across the portfolio. So it includes you know I would say one of those top 20, and then a lot of other leases throughout that both of the larger size 50000 square foot plus and we have a few of those we're still chasing.
But a number of there's also smaller 10000 square foot deals, but what we're seeing as you heard me in my prepared remarks really limited.
Traction with 10 to 25000 square footer, so when we get into the detail at the end of the first quarter and we can't disclose who that top 20 tenant is at this point in time, but when we can share that in the other detail I think youll see that its very much what I describe as what we're seeing in real time.
Okay.
I wanted to ask you know I was looking through the list of properties that you've got kind of a handful here that are 50% leased or below two pierce place total 160.
60, 31 connection drive Las Colinas Corporate center too.
Are those mostly just frictional vacancy or their redevelopment opportunities in that group.
Kind of.
These risks or opportunities.
We certainly see many of them as more opportunities than I would say risks the Las Colinas Corporate center I'd start with that one great asset write off by DFW, where we've seen a lot of the activity from those larger corporates kicking tires in the Dallas market.
And it's our recently.
<unk> Redeveloped, so we read on the lobby amenity package tenant lounge fitness facilities.
Great structured pricing around that asset free structured parking. So it has again ease of access and.
And we had a large tenant vacate there at the end of last year, which gave us the chance to reposition it and we're already done with all of that work and so again that fits within that encouraging pipeline in Dallas since he is an opportunity or high street assets in D. C. We've.
I feel like they are well positioned in the market one has done extremely well the other one we continue to frankly struggled with but the good news is we have very little exploration aflac, none in D. C and we do have traction in that market with a number of tenants because that is it more of a value priced asset there around the Big City Center complex in development, where rents are closer to 70 to 80.
And we're more in the <unk> Zip code so.
And we feel like that's a compelling offering and we are seeing traction with that and now as that market starts to reopen but admittedly has been slower to reopen than our sun belt projects.
I think the other locations that you mentioned.
Two pierce place to be the one where I would say, it's probably in your mind risk, but we view it as a likely disposition candidate there are a number of large potential users that were quoting right now and depending on whether they land are not land will really ultimately decide the disposition price, but you're likely to see that asset.
So within the next 12 to 18 months because it is part of that non core market.
Set that we have which really includes the Chicago building and then the two buildings next door to each other in Houston.
That's the one I would may be deemed more as a risk than the others. The other than we certainly view as opportunities.
Great and then last one from me just.
Maybe you said this before but what's the what's the term on the New Jersey seller financing once that kept payback.
And I think you said it was 7%.
Yes, it's a bifurcated note senior Mezz piece at both technically have a term of three years, although I will say we've worked with this buyer before and maybe a little bit of background on the whole transaction would be helpful. So it's always been a strategic goal of ours to get out of the New Jersey market and it was a matter.
There are really finding.
The right opportunity and really have someone appreciate which was at Bridgewater crossing is one of the premier assets in Northern New Jersey, If everything we described in our portfolio that's compelling walkable mixed use around it lots of food and beverage and retail without ever having to get into a car. So really a unique office setting for northern New Jersey, but.
But we felt like we had some leasing momentum and given the high quality nature of the assets.
We werent, we felt like it was a good time to maybe see if some of the parties that expressed interest in the asset would be willing to step up and purchase it because we had not been willing to part with it prior to that.
They had a few that bid on the asset and particularly one group stood out from the others three parties that we really whittle down to all of them, we had prior relationships with and the Ultimate group that one we have done deals with in the past and utilized a similar structure. So.
That's a longer winded answer, but I wanted to give you some background. So that final structure for the debt again as a mezz at roughly 13, 6% as well as the senior at 6% to 7% I anticipate generally they this buyer pays off the mortgages that we've used for financing within a year I certainly would expect that on the mezz.
And frankly, I think it's likely on the senior given the leasing velocity at the assets that we had in tow when we sold the building to them and we think that is core.
Going to come to fruition and give them an opportunity to refinance us out of the assets.
I know that was a long winded answer, but hopefully that's helpful.
That's helpful. I was going to say I think those loans now with companies such as yourself.
So I apologize for asking a question that was answered in there, but the color is certainly helpful.
That's it from me thanks, guys.
There are no further questions from the lines I would now like to turn the floor back to Brent Smith for closing remarks.
I appreciate it I want to thank again, everyone for joining us today.
Despite a challenging 2020 I want to take this opportunity to to one last time think the other employees at Piedmont for the job that they've done and really in an uncertain environment.
Protect each other our vendors and our tenants, but we're excited about what we were able to accomplish from growth in 2020, and where it's headed into 2000 2021, we've got low near term lease expirations manageable debt maturities and frankly, our portfolio vacancy, which it's been pointed out is in the more attractive markets of Atlanta.
Land to Dallas, and Orlando, where we're seeing that activity in the pipeline rebuild fastest we think that combined with our best in class ESG platform and paired with a high quality and monetized environment is going to position Piedmont to do well this year and we look forward to continuing this dialogue is is hopefully the economy opens back up.
And the vaccine rolls out.
Thank you everyone and we look forward to talking to you in the second quarter.
Thank you ladies and gentlemen, this does conclude today's conference you may disconnect at this time and have a wonderful day. Thank you for your participation.