Q4 2021 Armada Hoffler Properties Inc Earnings Call
Speaker 1: Welcome to Armada Hoffler's 4th Quarter 2021 Earnings Conference Call.
Welcome to Armada Hoffler as fourth quarter 2021 earnings conference call.
At this time, all participants are in listen only mode.
Speaker 1: At this time, all participants are in listen-only mode.
Speaker 1: After management's prepared remarks, you will be invited to participate in question and answer session.
After management's prepared remarks, you will be invited to participate in question and answer session.
At this time, if you have a question. Please press star one on your telephone.
Speaker 1: At this time if you have a question please press star 1 on your
As a reminder, this conference call is being recorded today.
Speaker 1: As a reminder, this conference call is being recorded today, Thursday, February 10, 2020.
Thursday February 10 2022.
I will now turn the conference call over to Michael O'hara Chief.
Speaker 1: I will now turn the conference call over to Michael O'Hara.
<unk> financial officer at Armada Hoffler. Please.
Speaker 1: Chief Financial Officer at Armada Hoffler.
Please go ahead.
Speaker 2: Good morning and thank you for joining Amato Hoffa's fourth quarter and full year 2021 earnings conference call and web...
Good morning, and thank you for joining Armada Hoffler is fourth quarter and full year 2021 earnings conference call and webcast.
Speaker 2: On the call this morning, in addition to myself, is Lou Hadad, CEO , and Sean Tibbetts, COO.
On the call. This morning. In addition to myself is Lou Haddad, CEO and Shawn Tibbets CLO.
Speaker 2: press release announcing our fourth quarter earnings along with our quarterly supplemental tax.
The press release announcing our fourth quarter earnings along with our quarterly supplemental package.
And our 2022 guidance presentation were distributed this morning.
Speaker 2: and our 2022 guidance presentation were distributed this morning.
Speaker 2: Replay of this call will be available shortly after the conclusion of the call through March 10, 2022. The numbers to access the replay are provided in the earnings press release.
A replay of this call will be available shortly after the conclusion of the call through March 10 2022.
The numbers to access the replay are provided in the earnings press release.
For those who listen to the rebroadcast of this presentation.
Speaker 2: remind you that the remarks made herein or as of today, February 10, 2022, will not be updated subsequent to this initial earnings call. During this call,
Remind you that the remarks made herein are as of today.
I guess 2022 will not be updated subsequent to this initial earnings call.
During this call we will make forward looking statements, including statements related to the future performance of our portfolio.
Speaker 2: including statements related to the future performance of our portfolio, our development pipeline.
<unk> pipeline impact of acquisitions and dispositions, our mezzanine program our construction business.
Speaker 2: the impact of acquisitions and dispositions, our mezzanine program, our construction business, our liquidity position, I put
Our liquidity position.
Portfolio performance.
Anything activities as well as comments on our guidance and outlook.
Speaker 2: financing activities as well as comments on our guidance and help.
Speaker 2: Listen in without caution that these statements are subject to certain risks and uncertainties.
Listeners are cautioned that these statements are subject to certain risks and uncertainties.
Speaker 2: many of which are difficult to predict and generally beyond our control, particularly in the light of the COVID-19 pandemic and any related echos.
Many of which are difficult to predict.
Generally beyond our control.
In the light of the COVID-19, pandemic and any related economic uncertainty.
These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review the forward looking statements disclosure in our press release that we distributed this morning, and the risk factors disclosed in documents, we filed with or furnished to the SEC.
Speaker 2: These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review the forward-looking statement disclosure in our press release that we distribute this morning, and the risk factors disclosed in documents we have filed with or furnished to the SEC.
We will also discuss certain non-GAAP financial measures, including but not limited to <unk> and normalized SSO.
Speaker 2: We'll also discuss certain non- GAAP financial measures, including but not limited to FFO and normal IDF.
<unk> of these non-GAAP measures as well as reconciliations to the most comparable GAAP measures.
Speaker 2: Definitions of these non-GAT measures, as well as reconciliations to the most comparable GAT measures, are included in the Corleas supplemental package, which is available on our website, on moda-hoffle.com.
Put it in the quarterly supplemental package, which is available on our website about a half of dot com.
Who will start the call today by discussing our 2022 guidance.
Speaker 2: Who's not to call today by discussing our 2022 guide?
Speaker 2: At this time, I'd like you to draw your attention to our 2022 guidance presentation that we published this morning. I'll now turn the call over to Luke. Thanks, Mike.
At this time I'd like you to draw your attention to our 2022 guidance presentation that we published this morning.
I'll now turn the call over to Luke.
Thanks, Mike.
Good morning, everyone and thank you for joining us today.
In addition to analysts and investors there are many of the Armada hoffler family on the call, including joint venture partners.
Speaker 3: In addition to analysts and investors, there are many of their Madahafir family on the call, including joint venture partners.
On behalf of our founder and Chairman Dan Hoffler.
Speaker 3: On behalf of our founder and chairman Dan Hoffler, board of directors and executive management, we sincerely thank you for-
Order directors and executive management with.
We sincerely thank you for being a part of our team.
So the last two years have been challenging to say the least your hard work dedication and expertise have.
Speaker 3: So the last two years have been challenging the SAVE Elise. Your hard work, dedication and expertise have seen us through our fifth recession.
I've seen us through our fifth recession.
As has been the case following the previous four.
Your efforts have poised us for significant growth and additional profitability.
Speaker 3: Your efforts have poised us for significant growth and additional profitability.
Similar to the five years preceding the pandemic I.
Speaker 3: Similar to the five years preceding the pandemic, I feel certain that investors will soon recognize the trajectory of our company and reap the rewards of our growth.
I feel certain that investors will soon recognized the trajectory of our company.
And reap the rewards of our growth.
I'm proud to be associated with each one of you.
The primary focus of my comments today will be on our 2022 guidance deck released this morning.
Speaker 3: The primary focus of my comments today will be on our 2022 guidance deck released this morning.
Speaker 3: Later in the call, Michael go over our fourth quarter and full year result.
Later in the call Mike will go over our fourth quarter and full year results.
As you can see from our earnings release any other announcements we've made in recent weeks.
Speaker 3: As you can see from our earnings release, any other announcements we've made in recent weeks. Our company has been...
Our company has been extremely active.
Over the last few months, we've acquired a 270 million dollar Trophy property signed.
Speaker 3: For the last few months, we have acquired a $270 million trophy property.
Signed several new leases and strengthen the balance sheet with non core dispositions and capital market activity.
Speaker 3: It's fine, several new leases and strengthen the balance sheet with non-core dispositions and capital market activities.
As we forecasted six months ago, all three of the asset classes in our stabilized portfolio are now over 95% leased.
Speaker 3: As we forecasted six months ago, all three of the asset classes in our stabilized portfolio are now over 95 percent.
Speaker 3: This activity, combined with near-term development delivery.
This activity combined with near term development deliveries.
Speaker 3: Make us extremely bullish about 2022 and beyond.
Make us extremely bullish about 2022 and beyond.
A quick word about 2021 .
Speaker 3: The fourth quarter was very strong with normalized FFO of 2710.
The fourth quarter was very strong with normalized <unk> of 27 cents.
Full year normalized <unk> of $1 seven represents a 7% increase from the midpoint of our original 2021 guidance.
Speaker 3: The full-year normalized FFO of $1.7 represents a 7% increase from the midpoint of our original 2021 guidance. Record NOI.
Record NOI from our multifamily properties combined with robust leasing in the office and retail sector.
Speaker 3: combined with robust leasing in the office and retail sector, as well as our out market acquisitions. All played a role in this outstanding achievement.
As well as our off market acquisitions, all played a role in this outstanding achievement.
As happy as we are about our recent performance.
The true excitement in our company centers around the current quality of our NOI in the future trajectory that we expect will fuel the substantial growth in the net asset value of the company.
Speaker 3: The true excitement in our company centers around the current quality of our NLI and the future trajectory that we expect will fuel the substantial growth in the net asset value of the company.
As you May recall, our goal for 2021, but to substantially increase N. A V through our leasing our initiatives improved quality of NOI and exciting development starts.
Speaker 3: As you may recall, our goal for 2021 was to substantially increase NAV through our Leasing Earth Initiatives, improved quality of NOI, and exciting development starts.
Speaker 3: The continuation of this theme will become self-evident as we walk through the components of our guide.
The continuation of this theme will become self evident as we walk through the components of our guidance.
Please see our guidance presentation that was released this morning.
Speaker 3: Please see our guidance presentation that was released this morning.
Page four.
Outlines the components of our earnings guidance.
Compared to 2021 results of $1 seven or 2022 normalized <unk> guidance mid point of $1 13 represents a solid 5.6% increase.
Speaker 3: Compared to 2021 results of $1.7, our 2022 normalized FFO guidance midpoint of $1.13 represents a solid 5.6% increase.
Now turning to page five.
2022 is a year in which we will continue to focus on increasing the quality of portfolio NOI accretive.
Speaker 3: 2022 is a year in which we will continue to focus on increasing the quality of portfolio NLI.
Speaker 3: Creative Acquisitions and Multifamily Development Deliver.
Accretive acquisitions and multifamily development deliveries.
In short, we anticipate that our activities over the course of 2022 will build a solid case for expansion of our multiple while we continue to ramp earnings and dividends over the next few years.
Speaker 3: In short, we anticipate that our activities over the course of 2022 will build a solid case for expansion of our multiple while we continue to ramp earnings and dividends over the next few years.
Speaker 3: As you can see by the data on the top of this page, we expect significant increase in 2022 NOI from 2021 level.
As you can see by the data on the top of this page we expect significant increase in 2022 NOI from 2021 levels.
This increase is driven by the acquisition of the Exelon building.
Speaker 3: This increase is driven by the acquisition of the X-Lon Building.
The lease up of Wills wharf, and the leasing activity at our retail properties, which are expected to yield a material increase in NOI.
Speaker 3: the lease up of Will's Wharf and the leasing activity at our retail properties, which are expected to yield a material in...
Even more important is the dramatic rise we anticipate in our future NOI once our current development projects stabilize.
Speaker 3: Even more important, it's the dramatic rise we anticipate in our future NOI, once our current development project stable.
Speaker 3: While all of our property segments are expected to exhibit healthy and
While all of our property segments are expected to exhibit healthy increases. The main driver is the 75% increase in multifamily NOI through development deliveries.
Speaker 3: The main driver is the 75% increase in multi-family NLI through development delivery.
The majority of the funds necessary for these projects has already been secured.
Speaker 3: The majority of the funds necessary for these projects has already been secured. The remainder will be satisfied in the least dilutive manner possible.
The remainder will be satisfied in the least dilutive manner possible.
As the company's largest active equity holder management remains committed to generate long term value for all shareholders.
Speaker 3: As the company's largest active equity holder, management remains committed to generate long-term value for all shareholders.
Our primary goal is to increase N a V and turn a substantial amount of this growth into <unk>.
Speaker 3: Our primary goal is to increase NAV and turn a substantial amount of this growth into FFO.
Turning to page six.
You'll see the same NOI total in bar chart form with the overlay of our anticipated fee income.
Speaker 3: You'll see the same NLI totals in bar chart form, with the overlay of our anticipated feet in...
Notable here is our projection of third party construction fee income will remain near the top of its historical range for the foreseeable future.
Speaker 3: Notable here is our projection that third party construction fee income will remain near the top of its historical range for the foreseeable future.
Speaker 3: Our contract backlog for this division will soon be at an all time high.
Our contract backlog for this division will soon be at an all time high.
Speaker 3: And as we have been stressing for several quarters, our lending program will continue to be deemphasized as we deploy more of our capital on hard-ass.
And.
As we have been stressing for several quarters, our lending program will continue to be de emphasize as we deploy more of our capital on hard assets.
Speaker 3: Thus, the fee side of the business will soon become a single digit percentage in a pool of rapidly growing and
Thus the fee side of the business will soon become a single digit percentage in a pool of rapidly growing income.
This was a conscious decision made in 2019 and one that sacrificing short term earnings but is on track to produce substantial increases in NAV.
Speaker 3: This was a conscious decision made in 2019 and one that sacrifices short-term earnings, but is on track to produce substantial increases in NAV.
Let's now take a look a closer look at the property segment composition of this NOI.
Speaker 3: Let's now take a closer look at the property segment composition of this NOI.
Starting with page seven.
The multifamily segment performance has been nothing short of spectacular.
Speaker 3: The multifamily segment performance has been nothing short of spectacular.
Every 2021 metric listed here registered the highest increases in year over year results that we've experienced in our history.
Speaker 3: Every 2021 metric listed here registered the highest increases in year-over-year results that we've experienced in our history.
Perhaps the most important statistics shown is the future of 55% growth in the number of units delivered through our development pipeline and the expected dramatic rise in NOI over the next few years.
Speaker 3: Perhaps the most important statistic shown is the future 55% growth in the number of units delivered through our development pipeline and the expected dramatic rise in NLI over the next few years.
We believe that the current and increasing value of our multifamily properties is underappreciated by the market.
Speaker 3: believe that the current and increasing value of our multifamily property.
Speaker 3: underappreciated by the market. And we hope that the true value of our multifamily portfolio will seem to be wrecked.
And we hope that the true value of our multifamily portfolio will soon be recognized.
Speaker 3: These are recently built best in class assets that we believe would receive sub four cap rates on the open market.
These are recently built best in class assets that we believe would receive sub for cap rates on the open market.
Page eight is a snapshot of our office segment.
Again, showing very impressive occupancy same store NOI and re leasing spreads.
Speaker 3: Again, showing very impressive occupancy, same store NOI, and releasing spread.
Speaker 3: As we have said for a number of years, top quality office buildings in mixed use environments helped perform the general market over the long term.
As we have said for a number of years top quality office buildings and mixed use environments outperform the general market over the long term.
Also noteworthy we have very little in the way of lease explorations over the next few years.
Speaker 3: Also, no worthy. We have very little in the way of least explorations over the next few years.
Inclusive of the Exelon acquisition, a quick look at our top 10 tenants will confirm that roughly one half of our office NOI is derived from investment grade tenants and trophy class buildings.
Speaker 3: Inclusive of the Exxelon acquisition, a quick look at our top 10 tenants will confirm that roughly one half of our office NOI is derived from investment grade tenants in trophy class buildings. Next page.
Next page details of our retail assets.
As we predicted.
Occupancy has fully recovered from the pandemic and same store NOI and re leasing spreads have been robust.
Speaker 3: Occupancy has fully recovered from the pandemic and same store NOI and releasing spreads have been robust
As we have only a small amount of retail in the pipeline. We are anticipating reliable growth in this segment, primarily through continued rent increases and acquisitions.
Speaker 3: As we have only a small amount of retail in the pipeline, we are anticipating reliable growth in this segment, primarily through continued rent increases and acquisitions.
Page 10 details of our development projects.
All projects are well underway with the exception of the Harrisonburg apartments, which we expect to commence construction. This spring.
Speaker 3: All projects are well underway with the exception of the Harrisonburg apartments, which we expect the commenced construction this spring.
Our Chief operating officer, Sean Tibbets is on the call. If you have specific questions regarding any particular development.
Speaker 3: Our Chief Operating Officer, Sean Pibitz, is on the call if you have specific questions regarding any particular develop.
I'll call your attention to the bar chart to the right of the page.
Speaker 3: I'll call your attention to the bar chart to the right of the page.
Speaker 3: You'll see that we are anticipating the value creation to be larger than our traditional target of 20.
You'll see that we are anticipating the value creation to be larger than our traditional target of 20%.
Speaker 3: This increase is primarily due to the compression in multifamily cap.
This increase is primarily due to the compression and multifamily cap rates.
Speaker 3: As I said earlier, the apartments make up the majority of the they are paying your equals or in that way todo the
As I said earlier apartments make up the majority of the pipeline.
We anticipate announcing at least two additional projects later this year.
Speaker 3: We anticipate announcing at least two additional projects later this year.
Page 11 shows our recent acquisition activity.
Over the past 14 months we.
Speaker 3: Over the past 14 months, we acquired six properties totaling over $500 million, adding a total of $35 million in NOF.
We acquired six properties totaling over $500 million, adding a total of $35 million in NOI.
The acquisitions include 500000 square feet of retail 450000 square feet of office and nearly 700 multifamily units.
Speaker 3: The acquisitions include 500,000 square feet of retail, 450,000 square feet of office, and nearly 700 multi-family.
We intend to continue with these types of opportunistic acquisitions in 2022 and beyond.
Speaker 3: We intend to continue with these types of opportunistic acquisitions in 2022 and beyond.
A total of over a half a billion dollars and recent acquisitions is impressive in and of itself.
Speaker 3: Of a total of over a half a billion dollars in recent acquisitions is impressive in and of itself.
Speaker 3: It's important to recognize that each of these purchases were off-market transactions.
It's important to recognize that each of these purchases were off market transactions.
Speaker 3: This approach requires patience and long-term relations.
This approach requires patience and long term relationships.
We believe that we could sell each of these almost immediately at a meaningful profit.
Speaker 3: We believe that we could sell each of these almost immediately and meaningful profits.
The full NOI impact of the assets listed here will be in place for virtually the entire year.
Speaker 3: The full NOI impact of the assets listed here will be in place for virtually the entire year.
Speaker 3: In addition, our 2022 guidance includes additional purchases of $100 million in the second half of 2022, as we prepare to receive the proceeds from our partner's sale of the Interlock Project in West Midtown, Atlanta, early next year.
In addition, our 2022 guidance includes additional purchases of $100 million in the second half of 2022 as we prepare to receive the proceeds from our partners sale of the interlock projects in West Midtown Atlanta early next year.
On page 12, you can see that our core markets spanning from Baltimore to Atlanta.
Speaker 3: On page 12 you can see that our core markets span from Baltimore to Atlanta.
The highest concentration in Maryland, and Virginia, the locations of our two master plan communities.
Speaker 3: with a high concentration in Maryland and Virginia, the locations of our two master plan communities.
Speaker 3: On pages 14 to 17, you can see the magnitude of Baltimore's harbor point in the town center of Virginia Beach.
On pages 14 to 17, you can see the magnitude of Baltimore's Harbor point and the town Center in Virginia Beach.
Speaker 3: Both of these master plan communities are multi-decade partnerships with the men with municipalities and represent best in class mixed-use developments that continue to thrive and expand through multiple faiths.
Both of these masterplan communities are multi decade partnerships with them is with municipalities and represent best in class mixed use developments that continue to drive and expand through multiple phases.
Additionally, we are seeing a tremendous number of opportunities in our other markets of the Carolinas and Georgia.
Speaker 3: Additionally, we are seeing a tremendous number of opportunities in our other markets of the Carolinas in Georgia and expect that we will continue to grow in those areas.
Expect that we will continue to grow in those areas as well.
Speaker 3: The remainder of the deck consists of a detailed description of the excellent purchase.
The remainder of the deck consists of a detailed description of the Exelon purchase.
Speaker 3: Michael speak to and individual pages on each of our development projects.
Which Mike will speak to an individual pages on each of our development projects.
Now I'll turn the call over to Mike.
Thanks, Lou in 2021 our stock rebounded from the lows of the pandemic, but the total return of 45%. In addition dividend was increased over 50% from $44 68 per share over the past 12 months.
Speaker 2: Thanks, Lou. In 2021, our stock remounted from the lows of the pandemic, the total return of 45%.
Speaker 2: In addition, the dividend was increased over 50% from 44 to 68 cents per share over the past 12.
For the fourth quarter, we reported <unk> 24 cents per share and normalized <unk> 27 per share.
Speaker 2: For the fourth quarter, we put FFO of 24 cents per share, and no light FFO of 27 cents per share. For the full year, FFO was a dollar five, and no light FFO was a dollar.
For the full year <unk> was $1 five and normalize that that though was is all of a center.
The St Johns Hopkins village and the two Charleston student housing properties under contract and being classified as held for sale. These properties are not included in any of the following performance metrics.
Speaker 2: The sale of the Johns Hopkins Village and the two Charleston student housing properties on the contract.
Speaker 2: and being classified as health for sale. These properties are not included in any of the following performance metrics.
Our stabilized operating portfolio occupancy for the fourth quarter was at 97% with office at 97 retail 96 and multifamily at 97.
Speaker 2: stabilized operating portfolio policy for the fourth quarter was at 97% was office at 97 retail 96 the multi-family
Same store NOI numbers continue to reflect the momentum of leasing and the strength of our properties, especially in multifamily.
Speaker 2: Thanks to our N.O.I. numbers continue to reflect the momentum of leasing in the strength of our properties.
Speaker 2: Overall, same-student wife of the quarter was positive 4.7% on a gap basis in 7.90%.
Overall same store NOI for the quarter was positive four 7% on a GAAP basis, and 7.9% on a cash basis.
Multifamily continues its amazing performance with same store.
Speaker 2: Multi-family continues its amazing performance. Same store, same store, part of the 17% on a gap in cash space.
Same store positive, 17% on a GAAP and cash basis.
Speaker 2: This is three quarters in a row of double digit increases of traditional multi-family same-store NLI.
This is three quarters in a row of double digit increases of traditional multifamily same store NOI.
For the year 2021 .
Speaker 2: Same story in Hawaii, across the entire portfolio, was positive 2.5% on GAP and 6.3% on cash with multi-family positive over 10%.
<unk> store NOI across the entire portfolio was positive 2.5%.
On GAAP and six 3% noncash with multifamily positives over 10%.
Leasing spreads on office and retail renewals for the quarter were positive eight 9% on a GAAP basis, and three 6% cash.
Speaker 2: Releasing spreads on office and retail renewals for the quarter were positive 8.9% on a gap basis and 3.6% cash. 2021, they're a positive 9% gap.
<unk> 2021 a positive 9% GAAP and four 9% on a cash basis.
Last month.
We closed on the acquisition of the 90% economic interest in the Exelon mixed use building.
Speaker 2: and closed on the acquisition of the 90% economic interest and the X-Law mixed use.
Our long term partner BD development continues to own the other 10%.
Speaker 2: A long-term partner, ED development, continues to own the other 10%.
The building consists of 444000 square feet of office 39000 square feet of retail 750 parking spaces.
Speaker 2: The building consists of 444,000 square feet of us.
Speaker 2: 39,000 square feet of retail, 750 parking spaces, and 103 multi-family...
Three multifamily units.
Speaker 2: 4500 energy company, X-Long constellation, Laces the office and 500 of the parkings.
Fortune 500 energy company Exelon constellation.
Constellation.
Z office and 500 of the parking spaces.
Page 13 of the guidance deck illustrates additional information on this transaction.
Speaker 2: Base 13 of the guidance deck illustrates additional information on this transaction.
Our expected first year return of seven 4% on a GAAP basis, and six 1% on cash basis, which makes this acquisition immediately accretive.
Speaker 2: I expected first year return a 7.4% on a gap basis and 6.1% on a cash basis, which makes this acquisition immediately accreted.
At closing, we refinanced the property with a five year $175 million loan with an interest rate of Disney plus $1 50.
Speaker 2: That closing, we refinanced the property with a five year 175 million dollar for the interest rate of 50 plus one, 50.
Speaker 2: With the acquisition activity highlighted on page 11, we have been active raising capital over the past few months.
With the acquisition activity highlighted on page 11, we have been.
Active raising capital over the past few months.
These sources of capital raising 86 million through a combination of the ATM and our first common capital raise.
Speaker 2: Resources of capital were raised in 86 million through a combination of the ATM and our first common capital raise, you know, for four years an average price of $14.76. In addition, we are exiting the student housing business.
Four years, an average price of $14.76.
In addition, we are exiting the student housing business.
We believe as a source of low cost capital.
We sold the gauge you student housing property in November and the two Charleston student housing properties under contract.
Speaker 2: We saw the day to student housing property in November and the two Charleston student housing properties are under control.
As expected sales price. These three properties is approximately $156 million.
Speaker 2: total expected sales price of these three properties is approximately 156.9. 40.1.
That's for 2022 debt maturities there are only two.
Most of our shopping center loans totaling $20 million.
We intend to pay off these loans and had the properties to the credit facility borrowing base.
Speaker 2: We intend to pay off these loans and add the properties that are credit facility borrowing.
Speaker 2: We also on-income with the Del Rey Beach Whole Food Center and then adding it to the bar window.
We also unencumbered to Delray Beach whole Foods Center, and then adding it to the borrowing base.
Now for an update on the mezzanine and preferred equity program.
Speaker 2: Now for an update on the mezzanine and preferred equity pro.
As we've discussed we in the process of reducing the overall size of the program.
Speaker 2: As we've discussed, we in the process of reducing the overall size of the problem.
Going forward, we expect to invest in smaller or a loan to own projects.
Speaker 2: Going forward, expect to invest in smaller or alone to own projects.
Speaker 2: This plan is well underway and with less capital committed to the program and lower projected interest income going forward, especially next year.
This plan is well underway and with less capital committed to the program.
Lower projected interest income going forward.
Especially next year after the interlock loan is paid off.
Our 2022 guidance for interest income includes an expected pay down approximately $14 million on the interlock loan this month.
Speaker 2: Our 2022 guidance for interesting come includes an expected paydown of approximately $14 million on the interlock loan this month.
With the property's performance and related increase in value. The current lender is modifying alone.
Speaker 2: the properties performance and related increase in value. The current lender is modifying.
They included a full year of interest income as we expect a loan to be paid off in early 2023.
Speaker 2: We included a full year of interest income as we expect alone to be paid off in early 2020.
Recently, we closed on our fourth tool to get past. This project. So a city park a $60 million project located.
Speaker 2: Recently we close on our fourth 12-year-old path this project Seoul City Park a $60 million project located in
And Charlotte North Carolina.
Speaker 2: Preferred equity alone is $20 million, which we expect to start funding early next.
Preferred equity alone is $20 million, which we expect to start funding early next month.
Our 2022 full year normalized S S, though earnings per share guidance.
Speaker 2: For 2022 full year normalized FFO earnings per share guidance, is the dollar 11 to $1.50.
As the dollar 11 to $1 15 per share.
Please see page four of the guidance presentation for details on our 2022 ranges and assumptions.
Speaker 2: Please see page for the guidance presentation for details on our 2022 ranges and assumptions. Now I'll turn the call back for loop.
Now I'll turn the call back to Lou.
Speaker 3: Thanks Mike. I know this is a lot of information to digest in a short period of time. I hope you will take the time to review it at a more leisurely pace.
Thanks, Mike.
I know this is a lot of information to digest in a short period of time.
I Hope you will take the time to review it at a more leisurely pace.
Please reach out to us if you have any questions.
Speaker 3: I believe you will come to realize the tremendous value we are generating at our motto hop
I believe you will come to realize the tremendous value we are generating intermodal hoffler.
One final note.
Speaker 3: One final note, we expect that our board will be discussing the level of upcoming dividends and further government enhancements at its late February meeting. Book for important announcements at that time. Operator?
We expect that our board will be discussing the level of upcoming dividends and further government enhancements and as late February meeting.
But for a important announcements at that time.
Operator.
Ready for the question and answer period.
Thank you.
Speaker 1: Ladies and gentlemen, if you have a question at this time, please press star one on your telephone.
Ladies and gentlemen, if you have a question at this time. Please press star one on your telephone.
Speaker 1: If your question has been answered and you wish to withdraw it, you may do so by pressing hash.
If your question has been answered and you wish to withdraw it you may do so by pressing hash.
If youre using a speakerphone today, please pickup your handset before entering your request.
Speaker 1: If you are using the speaker phone today, please pick up your handset before entering your request.
One moment, please wildly poll for questions.
Thank you.
Speaker 1: The first question comes from the line of Dave Rogers with BARD. Please go ahead.
The first question comes from the line of Dave Rodgers with Baird. Please go ahead.
Look in all the information today. It has a lot to digest, but wanted to maybe first start with the sources and uses you've got a lot of projects underway, you've got a lot more coming which I think is great for the story and clearly you guys can execute but $628 million in development you talked about <unk>.
Speaker 3: I'll look on all the information today. It is a lot to digest, but wanted it maybe...
Speaker 3: First start with the sources and use is you've got a lot of projects underway. You've got a lot more coming, which I think is great for the story and clearly you guys can execute. But 628 million in development, you talked about two more projects starting.
Two more projects, starting maybe give us a little more sense on kind of sources and uses as you kind of go through the year, you've got some asset sales teed up you've talked about acquisitions in the back half development starts in the back half so.
Speaker 3: Maybe give us a little more sense on sources and uses as you go through the year. You've got some assets that say you just teed up. You've talked about acquisitions and the back half development starts in the back half. So maybe just put the pieces together for us of what capital you've already secured and what's next in terms of maybe asset sales, etc.
Maybe just kind of put the pieces together for us of what capital you've already secured and what's next.
In terms of maybe asset sales et cetera.
Thanks, Dave Good morning.
Speaker 3: Thank you Dave, good morning. I'm going to let Mike answer that question specifically. We feel really good about our cash position and funding for remaining developments. Mike.
I'm going to let Mike answer that question, specifically, but we feel really good about our cash position and funding.
<unk> development.
Good morning, Dave.
Speaker 2: So the development projects that we already have out there announced is approximately $256 million to complete those projects, which includes the amount of capital that we need is approximately $60 million for the two JVs up in Baltimore.
So the development projects that we are that we already have out there and announced.
Approximately $256 million to complete those projects.
Which includes the amount of capital that we need is approximately $60 million for the two JV is up and in Baltimore.
We expect construction loans to fund the $180 million of that leaving cash requirements of $80 million and to fund that and certainly we have a liquidity position at year end it's.
Speaker 2: expect construction loans to fund 180 million of that, leaving cash requirements of 80 million to fund that. And certainly we have a liquidity position at year end that's more than adequate to take care of that.
More than adequate to take take care of that.
Speaker 2: Going forward, so in January , we closed on the Ex-Lond transaction. The net cash requirement for that after the refinance was $80 million, $90 million. In January , we raised $50 million.
Going forward. So in January we closed on the Epsilon transaction.
The net cash.
Cash requirement for that after the refinance was $80 million $90 million.
In January we raised $59 million through the ATM and the equity raise that we did in January .
Speaker 2: through the ATM and the equity raised that we did in January . And then all the sources of funds coming in this year is the interlock paid down to 14 million.
Other sources of funds coming in this year as the interlock pay down to $14 million.
And the expected proceeds are.
Speaker 2: and the expected proceeds of 39 million or so from the sale of the two Charleston student housing properties.
$39 million or so from the sale of the two Charleston stood.
Student housing properties. In addition, if the market conditions are right. We will continue to sell into the ATM as we've talked about we like the ATM for funding development, because we can raise the capital as we as we put it out.
Speaker 2: In addition, if the market conditions are right, we'll continue to sell into the ATM. As we've talked about, we like the ATM for funding development because we can raise the capital as we put it out.
That's helpful and I appreciate that Mike as you guys look to the second half of the year and the two development starts Lou that you discussed and I think upwards of $100 million of acquisitions at the high end of the guidance range.
Speaker 3: That's helpful and I appreciate that, Mike, as you guys look to the second half of the year and the two development starts, the lieu that you discussed and I think upwards of $100 million of acquisitions at the high end of the guidance range, how do you anticipate funding that? Do you have asses of pills that you would like to tee up and any thoughts around those in addition to what you've already discussed?
Do you anticipate funding that do you have asset sales that you would like to tee up and any thoughts around those.
In addition to what you've already discussed.
Yes, Dave we still have a couple of non what we deem as non core assets that we could we could pull the trigger on I'm not sure that'll be necessary as you know with development starts.
Speaker 3: Yes, Dave, we still have a couple of non, but we, Dean is non core assets that we could, we could pull the trigger on. I'm not sure that'll be necessary. As you know, with development starts, the cash needs are exceedingly small for an extended period of time. So we would be looking into, you know, well into 2023 before those.
The cash needs are are exceedingly small for an extended period of time. So we would be looking into you know well into 2023 before those.
Speaker 3: We have a really significant equity needs. And as we've alluded to, anticipating the payoff of the interlock loan with some $70 million or so coming back into the house ever early in the year.
Have any really significant equity needs and.
As we've alluded to were anticipating the payoff of the interlock loan.
With some $70 million or so coming back into the house early in the year.
Great. That's helpful. Thanks, and then just one follow up for me on the same store NOI for multifamily I think 10% for the year.
Speaker 3: Great, that's helpful. Thanks. And then just one follow up for me on the same-ster NOI for multi-family, I think, 10% for the year. Maybe unpack that a little bit for us if you could between rent growth, maybe what the rehab and redevelopments contributed, and then maybe some of the tailing stabilization of any developments that contributed to that. Just to try to get a sense for the run rate for multi-family growth in your markets going forward.
Can you, maybe unpack that a little bit for us.
If you could between kind of rent growth, maybe what the rehab and Redevelopments contributed and then maybe some of the tailings stabilization of any development that contributed to that just to try to get a sense for the run rate for multifamily growth in your markets going forward.
There's a lot there Dave [laughter].
Speaker 4: There's a lot there, Dave.
Yeah, there really arent any.
Speaker 4: There really aren't any material contributions from development deliveries through the first half of 2022. Gainesville Project is just starting to lease up, and Chronicle Mill won't start to lease up until late summer. In terms of the retrofits, that was one project here. The Cosmopolitan Parkments in...
Any material contributions from development deliveries.
Through.
The first half of 2022.
Our Gainesville project is just starting to lease up and Chronicle mill won't start lease up until into until late summer.
In terms of the retrofits.
And that was one project here at the Cosmopolitan apartments in.
Speaker 4: here in Virginia Beach and those.
Here in Virginia Beach.
And are those.
Speaker 2: They've on the on the cause mode just got the same store it is not in the full year same store number It's only in the the current quarter because when it came back online and it contributes about 300 grand of that 800,000 Increased revenue and the fourth quarter
Yeah, Dave on the AR on the Cosmo company on the same store is not in the full year same store number it's only in the current quarter because when it came back online.
It contributed about 300 grand of that 800000 of increased.
Increased revenue in the fourth quarter.
Dark our Uh huh.
Our anticipation David is that the knees.
Speaker 4: Our anticipation, David, is that these...
These double digit increases are going to start to moderate here through 2022.
Speaker 4: These double-digit increases are going to start to moderate here through 2022. And I mean, as we all know, it's been in this business for a long time. Thanks. You always return to the norm at some point. With the amount of product that's coming online, we believe that, you know, by the end of the year, you'll be back in two of much more traditional, two, three, four percent increases on trade out in rent. Thank you.
And.
As we all know that in this business for a long time thing you always return to the norm at some point.
With the amount of product that are coming online.
We believe that by the end of the year, you'll be back into a much more traditional 234% increases.
Trade out in rents.
Great. Thanks for the time, guys and all the color I appreciate it.
Thank you. The next question comes from the line of Rob Stevenson with Janney. Please go ahead.
Speaker 1: Thank you. The next question comes from the line of Rob Stevenson with Jenny. Please go ahead.
Hey, good morning, guys, Mike any known or likely move outs in the office retail portfolios over the next few years I think Louis said that your rollover isn't particularly big.
Speaker 3: hi good morning guys uh... mike any known or likely move out in the office retail portfolios over the next few years i think you would say that your role over isn't particularly big
Yeah. The only one that we're anticipating is in April of 'twenty three is the <unk> medical at the Thames Street Wharf Office building.
Speaker 2: Yeah, the only one that we're anticipating is in April of 23 is the J.J. Medical at the Tam Street War Office Building.
Speaker 2: We've already had been in contact with a couple of tenants that are expression interest in that space. On the retail side, all the renewals that happened while you saw we did quite a few renewals here in this past quarter. We're really not anticipating.
We've already had been in contact with a couple of tenants that are expression.
Interest in that space on the retail side all the renewals that happened why you saw we did.
You know quite a few renewals here in this past quarter.
We're really not anticipating.
Speaker 4: anything on the retail side, anything with any materiality in terms of least termination.
Anything on the on the retail side anything of any materiality in terms of.
Lease terminations.
Speaker 3: How big is the square footage and when does that office lease the fire?
How big is the square footage and when does that our office lease expire.
Yeah, It's about 46000 square feet and I believe its April of 'twenty three.
Speaker 4: Yeah, it's about 46,000 square feet. And I believe it's April of 23 day rub. Okay.
Rob Okay.
Yes.
And then Mike while I've got you you know how much loan to own opportunities are there you talked about focusing on that.
Speaker 3: and then my kwan have got you you know how much loaned on opportunities are there you talked about focusing on that made uh... there's a number of reads that do miss portfolio's or preferred however you want to classified and you know pretty much all of them found loaned on extremely scarce these days
A number of Reits to do Mezz portfolios or preferred however, you want to classify it and pretty much all of them. The found loaned one extremely scarce. These days I know that you have a few you know people that you work closely with but can you talk about what that opportunity set is.
Speaker 3: I know that you have a few people that you work closely with, but can you talk about what that opportunity set is?
Speaker 3: these days and you know what's happening to returns in that book.
These days and whats happening to returns in that book.
Speaker 5: as you know rates gyrate around here.
As you know rates gyrate around here.
Speaker 2: Yes, we've discussed this in a couple of opportunities there that the making it going at the end of the year.
Yes.
As discussed we've seen a couple of opportunities there that maybe you could go into at the end of the year.
One or two of those look like.
Speaker 2: One or two of those look like, you know, besides those, there's a couple more out there. And a couple of them look like they could be multi-family low-entombed, but you're right. The returns are thin and you have to do it in a manner so that you still have the right return when you're required.
Besides those there's a couple more out there in a couple of them look like they could be multifamily.
Loan to home, but you're right. The returns there are thin and you have to do it in a manner. So you still have the right return when you when you were quiet.
Speaker 2: But, you know, what happened, who knows that we just leaving the possibility out there that they could come together.
But will it happen who knows but we just leaving the possibility out there that they could take would come together.
Speaker 5: Okay. And then, Lou, any updates to the town center plan with those three parcels that you've been talking about for a while now?
Okay, and then Lew any updates to the town center plan with those three parcels that you've been talking about for a while now.
Yeah like I said in your slide deck, there are still two redevelopment. So then the surface parking.
Speaker 5: you're not that the two redevelopments and then the surface parking mean if you guys settled on anything yet is it still you know to be determined where's that stage wise
<unk> settled on anything yet or is it still.
To be determined.
Where is that stage was.
Yeah, we're still in preliminary stages there Rob.
Speaker 4: Yeah, we're still in preliminary stages there Rob. But what I've said is our expectation is that we'll be announcing a new project here at Town Center Virginia Beach in 2022. That project will most probably be a high rise. It'll have a multi-final.
What I've, what I've said is our expectation is that we'll be announcing a new projects here at town Center of Virginia Beach.
2022.
That project will most probably be a high rise.
It'll have a multifamily component.
And we're working through as I think you know, we're 97% occupied office wise, we have a few tenants here.
Speaker 4: and we're working through, as I think you know, we're 97% occupied, office-wise. We have a few tenants here that are looking to expand. So we need to zero in on a program of how much office space to put into what we believe we have mixed use tower. And is that likely to be a block two?
That are looking to expand so we need to zero in on a program of how much office space to put into what we believe we have mixed use tower.
And is that likely to be a block two.
Yes, yes, okay.
And then any other you you've talked in the past about some of the redevelopment opportunities.
Speaker 5: And then any other, you've talked to the past about some of the redevelopment opportunities, you know, with the movie theater and adding some apartments and then, you know, some other stuff. Is there anything else that you guys are looking at beyond town center at this point? Redevelopment-wise.
With the movie theater, and adding some apartments and then some other stuff is there anything else that you guys are looking at beyond.
Town Center at this point redevelopment wise.
Oh sauce.
Not of any real size.
Speaker 4: Not of any real size. Rob, we've got some refits we need to do and want to do in order to bump rinse, but not really anything of materiality. That town center opportunity is a big one. Our expectation is that regal is going to stay for the next few years. And then we get the bedbath parcel back.
We've got some resets, we need to do and want to do in order to to to bump rents, but not really anything of materiality that town center opportunity is a big one.
Our expectation is that Regal is going to stay.
For the next few years and and we get the bed Bath parcel back.
Speaker 4: in four years and so we'd be able to assemble a 10 acre parcel there for something really spectacular. So, never say never but the current thinking is we'll wait that period of time so that we can do something rather than try and do something independent on the three acre regal parcel combined the two and really have something to add. And then of course...
In four years, and so we'd be able to assemble a 10 acre parcel there for something really spectacular so.
Never say never but the current thinking is we will wait that period of time, so that we could do something.
Other than trying to do something independent on the three acre parcel.
Combined the two and really have something to add and then of course.
We're also working on the Harrisonburg apartments Hum.
Speaker 4: We're also working on the Harrisonburg apartments that are in the book on the developments to hide. Sean can give us a quick update on where that project is.
That's a that are that are in the book on the development side, Sean can give us a quick update on where that project stands sure. Thanks Lou Yeah. That's at 266 unit deal, 100% owned by US and you know kind of to answer. Your question. There. We are in the throes of Redeveloped that Regal site.
Speaker 3: Sure, thanks Lou, yeah, that said 266 unit deal.
Speaker 3: 100% owned by us and kind of to answer your question there. We are in the throes of redeveloping that regal site to include keeping the regal in play but also putting the multifamily community there. As a matter of fact, just on Tuesday night of this week, we received our entitlements from the city and passed the flying colors. So we're excited about that as we enter into the kind of planning and more of.
To include keeping the Regal in play, but also putting the multifamily.
Community there.
As a matter of fact, just on Tuesday night of this week, we received our entitlements from the city and passed with flying colors. So we're excited about that as we enter into the kind of planning and more.
More focused.
Speaker 3: more focused strategic phase of that design for that project. We're really excited about that one. Okay. Thanks guys.
Strategic phase of that design for that project. So we're really excited about that one.
Okay. Thanks, guys I appreciate it.
Thanks, Bob.
Thank you. The next question comes from the line of Peter Abramowitz with Jefferies. Please go ahead.
Speaker 1: Thank you. The next question comes from the line of Peter Abramowitz with Jeffries. Please go ahead.
Speaker 6: Hi, thank you. I just wanted to ask about the pipeline for potential acquisitions, kind of what's the composition of asset types and, I guess, geographic mix of kind of what you're looking at when you talk about that 100 million in the second half of the year.
Alright, thank you.
Wanted to ask about the pipeline for potential acquisitions kind of what's the.
What's the composition of asset types, and I guess geographic mix of kind of what you're looking at him when he talked about that $100 million in the second half of the year.
Yes, Thanks, Pete and good morning.
Speaker 4: Yeah, thanks, Peyton. Good morning. You can, we're creatures of habit. And so what we're talking, what we're targeting is what's in our wheelhouse. And that is mixed use facilities that we specialize in, if you will. And strong, sail, grocery, and
You can.
We are creatures of habit and so what we're talking what we're targeting is what's in our wheelhouse and that that is mixed use facilities.
That that we specialize in if you will and.
And strong sale.
Grocery anchored shopping centers.
So those have been good to us for 40 years, and we expect to continue expanding that that model.
Speaker 4: Those have been good to us for 40 years and we expect to continue expanding that model. As far as locations, again, we're looking for top quality of locations within our existing markets. And as I alluded to earlier, our preference is to transact off-market.
As far as as far as locations again, we're looking for top quality of locations within our existing markets.
And as I alluded to earlier.
Our preferences to transact off market.
Speaker 4: and preferably with somebody that we already know. And even more importantly, or perhaps more importantly, someone that's willing to invest in our company in the way of OP units.
And preferably with somebody that that we already know.
And even more importantly, perhaps more importantly, someone that is willing to invest in our company in the way of op units.
Sure that's helpful.
Speaker 6: And then I wanted to ask in terms of pricing, are you sending any sort of shift in behavior in the market for these deals just given kind of the outlook for interest rate? I know, you know, certainly copyrights don't move overnight, but what are you hearing from your counterparties or seeing in the market or you anticipating any kind of meaningful change in pricing this year?
And then I wanted to ask in terms of.
In terms of pricing are you sensing any sort of shift in behavior in the market for.
For these deals just given kind of the outlook for interest rates I know you know certainly cap rates don't move overnight, but what are you hearing from your Counterparties are seeing in the market are you anticipating.
Any kind of meaningful change.
In pricing this year.
Yeah.
Yeah right now.
Speaker 4: Yeah, right now, we'll see what happens as the Fed starts to tighten, but right now, cap rates continue to compress, particularly on multi-family properties, but even on high volume credit retail, cap rates have really come in very strong. Yeah.
And we will see what happens is as the fed starts to tighten, but I mean, right now cap rates continue to compress, particularly on on multifamily properties, but even even on on high volume credit retail.
GAAP rates have really come in.
Strong.
<unk>.
Pete as you know.
Speaker 4: Pete, as you know, you've been around this game for a long time. Hard assets stand the test of time. And so what I've seen over the last 40 years is that real estate does really well in a rising rate environment.
Been around this game for a long time.
Hard asset stand the test of time, and so what I've seen over the last 40 years is that real estate does really well in a rising rate environment.
Speaker 4: Obviously replacement costs are really going out very quickly and strongly. So I don't expect, and again, this is probably the fifth or sixth time we've seen a rising rate environment. And in-
Obviously replacement costs are really going out very quickly and strongly so.
I don't expect and again, we did.
This is probably the fifth or sixth time, we've seen a rising rate environment.
And in the past passed several times haven't seen any meaningful repricing.
Speaker 4: past several times, haven't seen any meaningful reprises.
Speaker 4: You get a lot more repricing with product types that go in and out of favor versus what's going on with interest rates.
You get a lot more repricing, where with what product types that go in and out of favor versus what's going on with interest rates.
Alright, that's it for me thank you.
Thanks Pete.
Thank you. The next question comes from the line of Jamie Feldman with Bank of America. Please go ahead.
Speaker 1: Thank you. The next question comes from the line of Jamie Selman with Bank of America. Please go ahead.
Great. Thank you and good morning, I just wanted to go to your follow up on your comment about student housing business and it sounds like you won't be growing there is there something about the Harrisonburg project, that's driving that or is that even considered student housing versus.
Speaker 4: Great. Thank you and good morning. I just wanted to go to your follow up and your comment about student housing business and Sounds like you won't be growing there. If there's something about the Harrisonburg Project that's driving that or is that even considered student housing versus At a more traditional apartment and so I kind of better understand where you're gonna draw the line here whether it's you know Campus markets or out of those
A more traditional apartments, just wondering kind of better understand where you're going to draw the line here, whether it's <unk>.
Campus markets or out of those markets completely.
Sure Jamie.
Speaker 4: Sure, Jamie, no, that, we have a ground zero location in terms of the heart of Harrisonburg. That would be traditional multi-family units. Our expectation would be that there would, we'll be some students.
We have a ground zero location in terms of the heart of Harrisonburg, those would be traditional multifamily units.
Our expectation would be that there will be some students.
Speaker 4: but not materially so. It's somewhat akin to our property that is close to Virginia Tech in Blacksburg. Again, traditional apartments rented in a traditional way. A lot of staff members, a lot of professors.
But not but not materially so.
Somewhat akin to our property that is.
That is close to Virginia Tech in Blacksburg.
Again traditional apartments rented in the traditional way.
A lot of staff members a lot of professors as well as some students occupy that but in harrisonburg. The overall vacancy rate is less than 3% and that submarket. So our expectation is that we're going to be at the top of the market with the newest product.
Speaker 4: as well as some students occupy that. But in Harrisonburg, the overall vacancy rate is less than 3% and that's the market. So our expectation is that we are gonna be at the top of the market with the newest product. And we're really...
We're really excited about that.
Okay.
Speaker 4: Okay, but I guess going forward, I mean, do you see yourself still developing in some of these, you know,
Going forward I mean, do you see yourself still developing in some of these.
College towns.
Speaker 4: Sure, I don't think you would see us do...
Sure.
Thank you would see us do.
Speaker 4: do at the strict traditional student housing property. We're gonna get best left to the specialist.
Due to strict traditional.
Student housing property.
We think that's best left to the specialist.
Speaker 4: But again, as you know, we do joint ventures with universities and has a diversified rate. We answer the call to what they want that to be.
But again as you know we do we do joint ventures with universities and as a diversified REIT.
We answer the call to what they want that to be.
Speaker 4: But it certainly isn't a focus of the company. We intended to exit that business. We are exiting the business, but never say never with future opportunities.
But it certainly isn't a focus of the company I mean, we intended to exit that business.
We are exiting the business.
But never say never with future opportunities.
Okay.
Speaker 4: And then we're not seeing a lot of office buying these days. I'm just curious, do you think this is going to be an opportunity for you to buy before others get in, where we see more large scale office acquisitions on your side?
And then I mean, we're not seeing a lot of of office buying these days I'm. Just curious do you think there's going to be an opportunity for you to buy before others get in will we see more large scale office acquisitions on your side.
It's a possibility Jamie.
Speaker 4: It's a possibility, Jamie. As you know, the market tends to paint everything with one brush. And so, offices out of favor. What we've seen in our markets, trophy class buildings, stand the test of time, and we'll continue stand the test of time. We see, we see.
As you know the market tends to paint everything with one brush.
And so offices out of favor.
What we've seen in our markets.
<unk> class a building.
Buildings.
The test of time, and we will continue to stand the test of time.
We see.
We see.
Well financed companies expanding their footprint.
Speaker 4: Well-financed companies expanding their footprint, not shrink.
Not shrinking.
Speaker 4: We're seeing that in conversations with the new CEO of X-Long Constellation. We're seeing it with T-Row Price. We're almost certain, but we are certain that that building that was originally programmed for 450,000 square feet will be bigger than that. Our expectation is by the end of the next quarter, end of this quarter, that program will settle down.
We're seeing that.
Conversations with the new CEO of Exelon constellation.
We're seeing it with T Rowe price, where we're almost certain while we are certain that that building that was originally program for 450000 square feet will be will be bigger.
And that our expectation is by the end of the next quarter end of this quarter that program will have settled down.
Speaker 4: So, yes, our intent is to take advantage of others painting everything with the same brush. And as you know, we're not going to shy away from mixed use, which also eliminates potential competitors.
So.
Yes, our intent is to take advantage of others painting everything with the same brush and and as you know, we're not going to shy away from mixed use.
Which also eliminates.
Potential competitors.
Okay.
So I mean whats your target type of office building here is it in your existing market footprint would you go outside of it.
Speaker 4: So, I mean, what's your target type of office building here? Is it in your existing market footprint? Would you go outside of it?
Speaker 4: If we're to go outside of our footprint, it would have to be a heck of an opportunity. And there's so much opportunity within our footprint that there's really not much of a need to leave home. But again, I think we...
For us to go outside of our footprint I would have to be a heck of an opportunity.
So much opportunity within our footprint.
So there's really not much of a need to to leap, we home, but again.
I think we.
I think you have to be at the top of the market with investment grade tenants.
Speaker 4: I think you have to be at the top of the market with investment grade tenants. And again, take advantage of the fact that those aren't receiving a lot of love from the market.
And again take advantage of the fact that those arent receiving a lot of love.
From the market.
Okay.
Speaker 4: Okay. And then you would come into you think your free business will be kind of near all time highs for the foreseeable future. What's in the pipeline that gives you conviction to say that is there is something changed in terms of just the appetite from customers?
And then you had you had commented that you think your fee business will be kind of near all time highs for the foreseeable feature what's in the pipeline that gives you conviction to say that is there something changed in terms of.
And just the appetite from customers.
Or just your willingness.
Speaker 4: or just you're willing to. Yeah, so they have to be the business again, we're going to make sure I'm going to make sure we're clear that the fee business on the whole, including the.
The active and the big again, we want to make sure I wanted to make sure we were clear that the fee business on the whole are including the big interest program. The loan program will shrink as a as an overall percentage and like I said, we will end up in the mid single digits in terms of our overall income and NOI.
Speaker 4: The interest program, the loan program, will shrink as an overall percentage. And like I said, we'll end up in the mid-single digits in terms of our overall income and N.O.I.
Speaker 4: But as far as the construction business itself, yeah, app backlog is headed to an all time high. A big part of that is what's going on involved more with T-Rail price and the adjacent building to it in the parking garage. But our third party clients are extremely active, particularly on the multi-family front.
But as far as the construction business itself.
Backlog is headed to an all time high a big part of that is what's going on in Baltimore with T Rowe price and the adjacent building to it in the parking garage, but our third party clients are extremely active particularly on the on the multifamily front.
Speaker 4: And so, we're seeing backlog into early 2025 at this point.
And so.
Seeing backlog into early 2025 at this point.
Okay. Thank you.
Okay.
Thank you. The next question comes from the line of Bill Gal with Raymond James. Please go ahead.
Speaker 1: Thank you. The next question comes on the line of Bill Cow with Raymond James. Please go ahead.
Speaker 3: take a good morning guys mike if if i could just circle back to to david roger's uh...
Hey, good morning, guys.
I can just circle back to Dave Rogers.
Your line of questioning.
Speaker 5: Maybe if you help us fill in the blanks here, year at six and a half times, core debt to core EBITDA, does that go up through the year or how much equity?
Maybe if you could help to help us fill in the blanks here Europe six five times.
Our core debt to core EBITDA.
Does that go up through the year or how much equity.
Speaker 7: Do you have in the model to maintain that 6.5?
Do you have in the model to maintain that six.
Yeah, Good morning Bill.
Speaker 2: Yeah, good morning, Bill. Yeah, we, you know, as we've been, you know.
Yeah, We you know as we've been.
<unk> kept our leverage for a number of years now is core to being six times something range and that's where we've been and that's where we'll continue to manage the <unk>.
Speaker 2: kept our leverage for a number of years now is we've accorded being six times something range and that's where we've been and that's where we'll continue to manage the company to. We'll kick up to the higher sixes and the next quarter so it may possibly as the new tenants get in
Company too.
Does it tick up to the higher sixes in the next quarter, So may possibly as new tenants getting in place instead.
Speaker 2: in places that paying rent. In total, deputies, I would want, you know, blow eight times and at the end of the fourth quarter, it was seven times. So we're not going to let it get out of that range. Or if it does, as we said in the past, it'll be for a short period of time.
Paying paying rent.
And total decades, having one below eight times and at the at the end of the fourth quarter. It was it was seven times. So we're not going to let it get out of that range or if it does as I said in the past it would be for a short period.
Of time.
Speaker 2: We have all enough APM to keep us in that range and that's things change in the depth like they always do. We don't expect to, you know, in the year from now to have the exact game plan that we're laying out today, we'll adapt. And if we need to sell non-core assets and accept it, we will do that.
Yes.
All enough ATM to keep us in that in that range and if things change and adapt like they always do we don't expect D and a year from now to have the exact game plan that we're laying out today will adapt and if we need to sell noncore assets and we will do that.
Speaker 7: All right, you don't want to share how much you've got in the model though of ATM issuance.
Okay.
You don't want to share how much you've got in the model, though of ATM issuance.
Yeah.
Because it's you know it's subject to change depending on the market condition Yep Yep Yep Okay.
Speaker 2: because it's subject to change depending on the market condition. Yep. Yep. Yep. Okay. Alright. Thanks.
Right. Thanks I appreciate it.
Thank you ladies and gentlemen.
Speaker 1: Thank you. Ladies and gentlemen, we have reached the end of question and answer session. And I would like to turn the call back to Luis Haddad, Chief Executive Officer for closing.
We have reached the end of question and answer session and I would like to turn the call back to Luis <unk>, Chief Executive Officer for closing remarks. Thank you.
And thanks to everyone for your time and attention this morning.
Speaker 4: It's thanks everyone for your time and attention this morning. As I said, hopefully you can take a little bit more time with our guidance deck. We're available for questions on that. And also, again, look for further announcements in the next couple of weeks. Thanks.
As I said, hopefully you can take a little bit more time with our guidance deck. We're available for questions on that and and also again look forward further announcements in the next couple of weeks.
Thanks, again and have a great day.
Yeah.
Speaker 1: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.