Q2 2019 Earnings Call
Good morning, and welcome to the Washington Realty Trust second quarter earnings conference call and webcast.
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Oh, no I wasn't turn the conference over to Heather Gentry Investor Relations.
Please go ahead.
Thank you operator, welcome to Lexington Realty Trust second quarter, 2019 conference call and webcast.
The earnings release was distributed this morning, and both the release and quarterly supplemental are available on our website at www Dot Alex P. Dot com in the Investor section and will be furnished to the FCC on a form 8-K.
Certain statements made during this conference call regarding future events unexpected results may constitute forward looking statements within the meaning of the private Securities Litigation Reform Act 1995.
Lexington believes that these statements are based on reasonable assumptions, however, certain factors and risks, including those included in todays earnings press release and those described in reports that Lexington files with the FCC from time to time could cause Lexington, <unk> actual results to differ materially from those expressed or implied by such statements.
Except as required by law Lexington does not undertake a duty to update any forward looking statements.
In the earnings press release, and quarterly supplemental disclosure package Lexington has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure.
Any references in these documents to adjusted company FFO refer to adjusted company funds from operations available to all equity holders and unit holders on a fully diluted basis.
Operating performance measures of an individual investment are not intended to be viewed as presenting a numerical measure of lexingtons historical or future financial performance financial position or cash flows.
On today's call will Eglin, chairman and CEO that Volaris, CFO and executive Vice Presidents, Brendan Mullen ex Lora Johnson and James Dudley will provide commentary focused on second quarter results.
I will now turn the call over to will.
Thanks, Heather good morning, everyone. Our second quarter results were excellent with strong acquisition disposition and leasing activity.
This activity aligned well with our stated business objectives of acquiring high quality industrial assets disposing of noncore assets and proactively managing lease expirations.
Through our focused efforts, we continue to make consistent progress towards our goal of becoming an industrial real focused on single tenant net leased properties.
At quarter end, our industrial exposure represented 74% of our consolidated portfolio gross book value.
Given positive trends in our acquisition and disposition activity, we expect our industrial exposure to increase more rapidly over the balance of the year than it did in the second quarter.
We also saw nice improvement and overall occupancy during the quarter to almost 98% leased due to consistent leasing activity, new acquisitions and vacant asset sales.
Our balance sheet remains in great shape, with our capital needs being satisfied primarily through dispositions.
On the acquisition front robust activity during the quarter brought year to date acquisition volume to $260 million, both at average gap and cash cap rate of 5.8%.
We are excited by both the quantity and quality of prospects in our pipeline, although the market remains competitive.
We currently have accepted offers of north of $300 million of new industrial investments.
Our primary focus remains on acquiring high quality single tenant warehouse distribution assets and we may work directly with developers on new industrial construction projects from time to time.
Moving onto dispositions.
We are increasing the top end of our 2019 disposition plan guidance range to $750 million from our previously stated $500 million.
This increase is driven primarily by the potential sale of our preferred freezer facility, which is currently under contract for $244 million.
The sale price is extremely favorable compared to our cost of $152 million when we acquired the property in 2015.
Last quarter, we discussed the significant cap rate compression in the cold storage sector. The pending preferred freezer transaction is a good example of capitalizing on favorable sale opportunities that arise outside of our stated business plan objectives.
If executed this sale will provide us with substantial well priced capital to further diversify our industrial portfolio and reinvest into additional warehouse and distribution facilities.
Modestly higher cap rates.
We expect this transaction to close late in the third quarter or early in the fourth quarter of this year.
As a result of this potential sale together with our other dispositions, we expect overall pricing on 2019 dispositions to come in much better than expected and very favorable when compared to the 8.4% average cash cap rate for 2018.
Overall pricing, though is greatly dependent upon the timing of other sales, particularly the potential sale of our Dow chemical complex.
We're also mindful of our considerable 10, 31 exchange needs, which may cause us to push certain 2019 dispositions into early 2020, depending on acquisition volume through the end of the year.
Turning to earnings guidance, we announced this morning revised 2019 adjusted company FFO guidance, we increased both the low and high end by one penny to a revised range of 76 cents to 80 cents per diluted common share.
Factors supporting this increase include better than anticipated acquisition volume and refinancing savings from our recent term loan extension.
As we have discussed on previous calls our disposition strategy is creating short term FFO dilution and we expect AFFO growth to stay muted as we continue reducing our office exposure.
However, we anticipate that a AFFO will begin to trend upwards in 2020 as the high capital expenditures associated with our office portfolio decline with noncore asset sales.
We have made tremendous progress in executing on our portfolio strategy over the last few years and looking ahead. We are excited to continue creating a best in class single tenant net lease industrial <unk>.
With that I will turn the call over to Brendan to discuss investments.
Thanks will.
We had a productive second quarter in which we acquired six warehouse facilities for $202 million at average GAAP and cash cap rate of 5.8% and 5.9%.
Purchases included the BMW and Owens Corning industrial facilities, we discussed on last quarter's call.
As a refresher the BMW facility is a 408000 square foot class a distribution center that was completed this past January .
The property is located in an established industrial park within a high demand submarket of Greenville Spartanburg.
The company's only U.S. based assembly plant.
The properties lease for five years with annual rental increases of 2%.
The 510000 square foot Owens Corning facility is located in the inner southwest outlets Submarket near loop 12, and Interstate 20 with excellent access to a strong labor force.
The four and a half year lease term has 2% annual escalations.
In addition to these properties.
We purchased two two property industrial portfolios.
And well located submarkets within Memphis and Atlanta.
The two properties in the Memphis portfolio include a 928000 square foot warehouse facility. These two global food and agricultural company for five years as well as the 270000 square foot facility that is leased to global Express delivery company for four years and a logistics company for approximately five years.
The newly constructed properties are located in the same industrial park within a top Memphis Submarket.
And our within close proximity to major highways and to intermodal facilities.
We'd like at the properties were recently belt.
With modern cost a bulk stocks and are being fully utilized by their respective tenants.
Additionally, we believe there is a strong probability of renewal in the future for both properties.
The second portfolio transaction is comprised of two state of the art distribution facilities located approximately 20 miles from one another and high demand bulk distribution submarket of Atlanta.
The first property leased for five years to a foreign company interface Americas comprises 370000 square feet and was built to modern warehouse specifications.
Second property totaled 605000 square feet and was leased to Mars chocolate for about a year of remaining term.
Lease negotiations have begun with Mars for continued occupancy beyond our current lease term.
We have grown comfortable recently with shorter lease term for the specific deals we have acquired and view of the quality of the real estate location and future leasing outcomes that we have forecasted.
We've accepted offers an approximately $318 million of industrial properties and we anticipate the majority of these properties will close in the late third or fourth quarter of 2019.
The weighted average lease term of approximately 10 years for these properties is considerably longer than the four years of weighted average lease term for our purchases year to date. So these will blend nicely in our portfolio.
In addition to these properties. We are currently reviewing other investments in the marketplace, which includes the exploration the limited number of speculative development opportunities.
As we have discussed on previous calls pricing remains competitive and I would expect average cap rates for 2019 investment activity to come in somewhere between five and a quarter in 5.5% for warehouse distribution product.
I'll now turn the call over to Laura to discuss dispositions. Thanks, Brendan we continue to make good progress on non core asset sales and still expect the majority of this activity to close late in the third quarter or in the fourth quarter of this year.
This timing extends to the new assets included in the revised 2019 disposition plan that will discussed earlier.
Five noncore consolidated assets, which included a mix of office retail and vacant industrial buildings were sold in the second quarter for $41 million.
To date, we've disposed of 120 million of consolidated assets at average GAAP and cash cap rates of 5.3% and 4.7% respectively.
Consolidated assets that have been sold to date produced roughly $5.7 million of annualized NOI.
Within our office joint venture, we sold one property during the quarter and one subsequently for combined gross sale proceeds of $101 million from which we satisfied approximately 73 million of non recourse debt.
Our share of net proceeds totaled $5.4 million from the sale.
We currently have $370 million of sale assets, either under contract or with an accepted offer including the preferred freezer transaction.
The remaining assets that bring us to the high end of our 2019 disposition plan guidance range of $750 million are either in the market or being prepared for market.
We expect to pursue the sale of our Dow Chemical office complex in Lake Jackson, Texas. Later this year. This does until sale still represents a meaningful percentage of our 2019 disposition plan and could close in the fourth quarter provided the sale effort is successful and we can line up acquisitions to conclude 10 31 exchanges to defer gains.
Given the expected sale of the preferred freezer facility managing our substantial tax gains is critical as a result, this may push the potential Dow sale beyond year end.
We remain extremely active on the disposition front demand for assets in the marketplace remains strong and overall pricing has been better than we had anticipated in many cases.
At quarter end non core asset exposure represented approximately 26% of our overall gross book value.
A sizable difference compared to 58% at the end of 2016.
Post 2019, we will continue disposing of the remaining office portfolio on a one off basis.
That said as our office exposure becomes less meaningful to the overall portfolio, we would be open to disposing of assets and a more expeditious manner.
With that I will turn the call over to James who will provide an update on leasing.
Thanks, Laura we had another active quarter in which we secured new or extended leases totaling over 1 million square feet.
This activity brings our 2019 leasing volume to almost 3 million square feet.
Our overall lease portfolio increased almost 98% at quarter end compared to approximately 95% in the first quarter. This increase was primarily the result of vacant asset sales specifically, the Memphis industrial asset disposed of in the second quarter as well as new industrial investments coming online.
Additionally, our industrial occupancy increase meaningfully in the second quarter compared to the first quarter for the same reason.
Same store NOI was down around 2% and when stripping out vacancy it was down less than 1% continued negative same store NOI as largely a function of marketing office rental rates to market. Following lease extensions, we would expect that as we continue to reduce our office exposure our same store NOI growth profile will improve.
As of June Thirtyth 2019, 83% of the revenue in our industrial portfolio is generated from leases with rent escalations.
We executed three lease renewals during the quarter approximating 900000 square feet.
On the industrial side. This included a seven year extension with L'oreal and our industrial facility in Streetsboro, Ohio, whose lease was set to expire in October .
While there was a slight decline in rent, we paid no ti or leasing costs in connection with the extension and annual Escalations are 2.5%.
Additionally, we signed a 10 year extension with T.I. automotive and Livonea, Georgia.
We agree to lower rental rate in exchange for a longer lease term.
But the longer lease term.
We believe this asset will be more attractive to potential buyers and it is now a good candidate for sale given as noncore market location.
On the office side, we extended the lease with CA in Whippany, New Jersey for 10 years, which we believe will help create value upon the sale of the asset.
The unique leasing situation during the quarter resulted in a positive outcome for us we signed a new lease with classic Adriane and our Duncan South Carolina industrial facility for a three year term.
Plastic on enlist the prior tenant in the building, but their lease expired in September of last year, They decided that they needed. The building again and are now fully utilizing the 222000 square foot space at a higher rental rate than they had been paying in the past. We're currently in preliminary discussions with them regarding a longer lease term.
Our remaining 2019 office expirations have been addressed either through sale future sale or lease and we continue to market. Our one remaining 2019 industrial exploration for lease.
We are actively working on lease expirations for 2020 and beyond and have begun discussions or negotiations with many of our tenants.
Morgan Lewis, who currently occupies the majority of our 305000 square foot office building in Philadelphia Central business District has decided to build a new property, while they will be moving out of our space in the future. They have exercised their three year renewal option, which will extend their current lease to January of 2024.
The revised rental rate will be determined through an arbitration process pursuant to the lease if we are unable to negotiate a mutually agreeable rental rate with a tenant.
We are reviewing our potential options to maximize the value of the property in the context of our current portfolio strategy.
During the quarter, one of our smaller industrial tenants Hollander, who currently occupies our 208000 square foot facility and Thompson, Georgia filed for chapter 11.
They intend to stay in the building and pay rent through the end of the year, we have begun marketing the property for lease or sale. The overall impact to AFFO is de minimis.
With that I will now turn the call over to Beth who will discuss financial results.
Thanks, James and the second quarter net income attributable to common shareholders was $22 million or nine cents per diluted common share.
Adjusted Company FFO was $48 million or 20 cents per diluted common share for the quarter.
Our adjusted company FFO payout ratio was 51.3% at quarter end, allowing us to retain capital to execute our long term strategy.
We recorded second quarter gross revenues of $80 million compared to gross revenue of $106 million in the second quarter 2018.
This reduction is mostly the result of non core asset dispositions and lease expiration.
Property operating expenses of $110 million for the quarter declined slightly compared to both the first quarter of 2019 and the second quarter of 2018.
And as reimbursement were $6.7 million for the second quarter and represented approximately 68% of our property operating expenses.
As a reminder, tenant reimbursements are included within rental revenue on the statement of operations.
Further new leasing standard.
Yeah, Hey expenses were $7.3 million in the second quarter, a slight increase compared to the same time period in 2018.
Our estimated DNA forecast for the balance of the year is approximately $15 million.
Leasing and tenant improvements were approximately $6.1 million in the second quarter and we expect these costs to range between 10 million and $12 million for the remainder of the year.
This is always subject to change due to a variety of factors, including the timing of the completion of the improvement.
Moving onto the balance sheet, we continue to have an ample amount of both capacity and flexibility.
Cash, including restricted cash on the balance sheet was approximately 61 million at quarter end.
During the quarter and subsequently we borrowed approximately $75 million under our revolver, primarily to find new acquisition.
Robert at quarter end was 5.7 times net debt to adjusted EBITDA, representing an increase when compared to the first quarter.
As we have stated in the past leverage is likely to fluctuate depending on borrowings needed to fund acquisition, given the timing of asset sales.
We remain comfortable with leverage within a range of five to six times net debt to adjusted EBITDA.
Our consolidated debt outstanding at quarter end was approximately 1.5 billion with a weighted average interest rate of approximately 4.2% and a weighted average term of 6.7 years.
Unencumbered NOI represents more than 75% of our overall portfolio.
Subsequent to quarter end, we extended the maturity date on our 300 million dollar term loan to 20 to 25 cents 2021.
Additionally, we swapped the LIBOR portion of the interest rate to obtain an attractive current fixed rate of 2.73%.
With that I will turn the call back over to Wes.
Thanks, Beth I will now turn the call over to the operator, who will conduct a question and answer portion of the call.
Thank you we will now begin the question answer session.
To answer your question, we were press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
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At this time, we will pause momentarily to assemble our roster.
And today's first question comes from Sheila Mcgrath of Evercore ISI. Please go ahead.
I guess on the preferred freezer transaction I was wondering if you could.
Disclose the cap rate on that and do you already have a acquisitions lined up.
In a 10 31 exchange for that transaction.
Sure Sheila the cap rates about four and three quarters.
On that one and.
Between where we have under under contract and letter of intent right now we have enough acquisitions in the pipeline to complete the 10 31 exchange.
Okay, but you might still have to push the large Texas.
The Dow chemical out further is that right.
Yeah I mean, that's that's the question the preferred sale is obviously created a need to use a lot of.
Acquisitions in the pipeline for that 10 31 exchange.
So the question around Dow is just a gating item we want to make sure we have properties lined up for that exchange before we complete the sale.
Okay, Great and then on the acquisitions, they all seem to have a shorter term.
Remaining lease term then typical for Lexington is that something that we should expect going forward as you continue to increase the industrial exposure.
Not necessarily if.
Brendans comments, we're oriented toward the pipeline, where we have close to 11 years weighted average lease term on what's coming.
So we invest in the asset class across all durations that just happened to be that that during the first six months of the year there tend to be more opportunity on on the shorter end versus the longer but it's not a specific change in strategy.
Okay and one more on on Capex, you mentioned will in 2020 that you expect.
That that will decline meaningfully versus 2019 is there any way you could kind of put that into perspective in numbers.
Is it cut in half and 20 2020, or just some sort of magnitude.
Hi, Sheila it's back.
Yes, we are definitely going to have that come down after this year as we sell off most of our office portfolio, which does command the high Capex. So we're modeling looking somewhere and two about the $10 million to $15 million range for for next year.
Right.
Okay perfect. Thank you.
And our next question today comes from Craig Mailman of Keybanc capital markets. Please go ahead.
Hey, good morning.
Maybe just kind of bigger picture you guys are are redeploying more into industrial and it's.
Not necessarily the coastal markets. The other industrial guys are are jumping into just curious.
You know tenant mix that you guys are really going after and these type of markets and also just curious.
You know retail and department store I think are about.
4% of the portfolio could you talk all about the health there and also just whether you guys feel like you are at all exposed to any of the agriculture issues going on with the trade War right now given your market exposure.
[noise].
Sure. This is front end time.
In terms of our our tenant mix.
I think if you look at our recent transactions we have.
A pretty diverse range of tenancy.
Because we just see the logistics demand drivers going across being very strong across industries.
In terms of Ics.
Retail exposure concerns at the moment.
I would say that we don't have any specific concerns.
From the retail.
Sector.
And in terms of markets Craig.
We invest in both primary and secondary markets generally where cap rates are 100 to 150 basis points higher than what you might see in the coastal markets.
We do have an income oriented strategy were essentially underwriting for.
More certainty of iron ore from the rent streams that we're investing in versus underwriting.
For rent growth of more than two or 3%, we think the markets that we invest in while competitive or little bit less efficient than than some of the.
Markets that are are.
Desired by.
Other industrial Reits or private investors.
Thanks for that.
And then just on the classic omnium.
What kind of Mark to market you guys get on that kind of short term renewal and talk about.
Maybe sense of could you go into negotiations, but what time.
I have a mark to market you think you get on that longer term.
If there is a slight reduction would be.
Very minimal reduction I think the majority of it is going to be making the building into something thats very functional for them. So it would be more of a TR related adjustment versus a rent rental reagent rental adjustments skewing.
And then just on on 17 one.
Is it safe to assume that would be like an zero capex zero free rent renewal.
And just as you guys.
Look to minimize your office exposure, obviously, that's a well located building, but it needs to be pretty pricey.
Big re refresher redevelopment there.
Kind of now that you have the shorter term option in place I mean does that make sense.
To hold it till the end of that or you know do you sell the dream now.
Answer the first question is yes.
It's an on Capex renewal and the second is we're evaluating our options.
The notice was was.
Exercise very recently, so we are looking at all different options for the the size of the facility.
Okay, and then just last one.
You guys continue to sell assets and they're still slight dilution as you redeploy I know you haven't given 2020 guidance, but if you look at consensus year over year.
Looks pretty flattish I mean.
Could you comment at all about trajectory timing kind of just the math of how dilution should work.
Well, our expectation is that there will be more.
FFO dilution from the sale process.
But we think that the AFFO numbers start to grow next year, So you're right we haven't given.
Guidance, but you know there is dilution ahead.
In FFO from trading out of this portfolio.
Great. Thank you.
And our next question today comes from John Guinee of Stifel. Please go ahead.
Great Great nice job in order to get a sense for where.
You will stabilize should we should we think of you is running the business at a.
6.0, net debt to EBITDA is that.
Good stabilized number to get a sense for.
How acquisitions and dispositions offset each other.
I think we're very comfortable with leverage at that point in view of the portfolio that we're putting together.
It doesn't necessarily mean that will run our leverage that that high but it's certainly very comfortable leverage point for us to be.
Then he said I think you said your initial acquisition costs on the freezer deal was 152 million.
Okay do you have an expansion going on there before you sell it.
And how how much of the $181 million of assets held for sale is the freezer building.
We have an expansion that that essentially we're not funding at this point.
The transaction will be close before.
The expansion.
So.
In terms of the held for sale number.
It's about 75%.
Okay held for sale number John .
What else is in the held for sale number is miscellaneous all have asset.
Yeah, we have six or seven assets in total and the held for sale and if you look at the supplement in the property chart, you will see which assets they represent.
Okay, Great and then.
Maybe you talked about this already but you have an operating lease liability of about 41 million.
Does that pertain to ground lease situations on particular assets and how many assets are affected by.
Your operating lease liability.
Yes, that's exactly what it is it's our ground leases and we have about eight ground leases that it effects.
It also is.
We'll have our office lease.
We have our office lease here in New York and in Dallas that also are a part of that as well.
But its mainly black on leasing.
By the way your end one Penn one Penn I think end up.
Vornados building hasn't renovation going.
Great.
Okay active yes.
Are you going to are you are you are they say everybody is going to pay $30 more rentals lexicon, a bit pay $30 more rep well.
Okay, well, we have a lease that goes through 2025, and then we'll see what our options are.
Great. Thanks, a lot.
And our next month.
Next question today comes from Jon Petersen with Jefferies. Please go ahead.
Great. Thanks, So before we could get a little more details on the couple industrial renewals you did this quarter l'oreal anti automotive inc. kind of weighted average on a cash basis those rents rolled down by about 16%. So I guess where to go to kind of the unique circumstances that were seeing.
Rents rolled down on industrial properties.
Yes, Sir and L'oreal.
Oreo as a large property for the the Cleveland market as far as just bulk warehouse goes it's a front loader.
We got seven years of term, which was part of it and there were also no capital cost associated with it no commissions no T.I.s. So the rent is reflective of not paying those costs for the seven year term and anti auto.
It's more of a specialized manufacturing facility.
Where they manufactured gas tanks and in addition to that it's a little bit of a unique location on the border.
South Carolina, and Georgia So.
Those different factors, we thought that term was more important than maintaining the rent and I think as we said in the stated comments, we'll look to dispose of that asset now because it doesnt. It doesnt kind of meet the location criteria that we have being at a regular market.
Okay, and then you guys talked about the same store growth I think it was like negative close to 2% being weighed by some office move outs are you able to break out your same store portfolio by office and industrial and give us an idea on how the two different portfolios are growing.
We currently don't break out our same store by type currently but.
As we bring on more industrial park properties most of them are having escalations in the 2% to 3% range.
So once we get through our office renovation.
Redeployment into industrial we anticipate that our same store.
I will turn around and grow.
If if properties are in your held for sale bucket are they still on the same store pool.
Yes.
Okay.
And then maybe just more high level just curious there is a lots changed since the last earnings call in terms of how people are thinking about the economy would trade wars and then also what we've seen from the from interest rates. So how is that impacting your ability to sell office properties or or appetite out there for the office properties, you're trying to sell.
Hi, This is Laura.
We really haven't seen a dramatic impact we're out with the number of properties that are fully leased.
With term.
We've only seen appetite increase for those we are out with some multi tenant buildings now in Texas.
Unfortunately, where and growing markets there in one case in farmers branch, Texas and another in the energy corridor in Houston, which is really.
Improving from an occupancy standpoint, so we haven't seen the effects at this point, although we hope to benefit from the reduction in interest rates as we're selling longer term stuff.
Okay all right. Thank you.
And our next question comes from John Sorry.
Enberg Solomon. Please go ahead.
Good morning.
Hey, John .
I'm sorry, if I missed this in James's comments, but what was what progress is being made on lease or sale of the Indianapolis office property.
And then also maybe over the next year.
Robby.
Sure. This is Laura actually.
On the Indianapolis office property.
John Wileys moving out in October we do have an accepted offer on that so we're working toward a sale that property simultaneous with the lease expiration.
Okay and on the index that we're working on a long term extension with the sub tenant.
And Thats in progress and we expect to have executed in fairly short order okay.
And then how about the Michelin properties on the industrial side.
Yes.
We have noted previously that they're building and getting close to finalizing their 3.2 million square foot facility in career that they're going to consolidate both of these properties into.
There's a decent chance, we're going to get a short term extension from Michelin on both we have quite a few perspective, and one really hot and heavy perspective tenant for the Lawrence facility and then Moody, we have several prospects as well and we're just working through the leasing process there.
Okay.
And then maybe as you look out maybe longer term.
We ended the 2020 industrial expirations generally speaking what kind of movies can we expect in cash rents and on a potential renewal or re leasing I'm. Just curious if anything on that list stands out as being kind of well below or above market.
The only one that stands out in 2020 as being above market is the Tampa asset.
And that that has an office component to it currently which is got the rate of close to $6 and I think that we're going to end up somewhere in the fours on that because it's going to be converted to pure industrial.
Other than that I don't really see anything that should be marked down everything should be stable or potentially going in the other direction going up.
Okay.
Oh, that's it for me thank you very much.
Q.
And our next question today comes from the Cubo I of JP Morgan. Please go ahead.
Hi, Good morning, I was.
Do you still expect to be I think.
So that you want to be at about 90% or above if I remember correctly of industrial by year end 2020 is up to fill the goal.
Yeah, I think thats, a realistic goal and thinking in the context of serve 80% to 85% industrial this year than in the big.
A question there as well the Dow transaction close this year and next because that's a large transaction and its office but.
Directionally, we're moving toward a 100% industrial construct as fast as we can go well you know while maximizing value in each case in the office portfolio.
So as you fully traditional to the industrial portfolio basically within the next 12 to 18 months effectively were close to all go up the previous question now just 2020 exploration, but if you were to look at your entire industrial portfolio, where does that stand in the mark to market to the market basically your entire portfolio.
I think the entire portfolio.
Just to kind of throw out an estimate probably you know 80% of the portfolio is is newer quality, where we're expecting to stabilize rents or have rents grow and then we still have some of the older.
Industrial properties that have.
Remaining lease term on them that it's just going to kind of depend on how the negotiation goes with the tenants. There is some manufacturing in that number.
So that's kind of how I would estimate breaking it down.
No.
And on the topic of acquisitions and dispositions for the remainder of year. So I just want to get a little bit of specificity about numbers Youve mentioned before you said right now you're under contract for 370 million is up for sale to buy them.
We are under contract or have accepted offers on.
Property sales of about $370 million.
So between right now on your one you might sell through so I mean does that three seven so that through seven includes the preferred freezer age.
It does include the preferred freezer and while that's the number under contractor with an accepted offer we also hope to execute on additional sales of properties that are either in the market now are we plan to take to market in short.
And how much is adult chemical roughly in rough terms, if it were to be executed this year.
Well, we're we don't really want to prejudice any negotiation, we have in the marketing process will.
We will update you as that product process unfolds.
Got it and how much do you have in contract to buy right now.
We have accepted offers on 318 million.
Teaching.
Okay.
Okay. That's it thank you.
Thank you.
And our next question today comes from Sheila Mcgrath of Evercore ISI. Please go ahead.
I guess on the Whitney transaction I think that was a positive outcome for suburban office in New Jersey.
Could you give us a little more detail on what you know if that was the rent roll down Capex and what your plan for that asset is is it currently being marketed for sale.
Yes, so the rent went from or is going to go from 20 655 at the end of the current term down to 20 350 Triple net.
There were $30 WTI there were expended.
And that is definitely going to be on the list. It's got it has a debt balance on it which has a prepayment penalty. So we're evaluating whether or not it makes sense to move forward now or wait until the maturity of the debt.
Okay, Great and then on the Arrow electronics disposition out of your joint venture.
Was that a good outcome for the JV on pricing and should we continue to expect.
Regular sales out of that joint venture.
I think it was a good outcome for the joint venture.
It was it was right in line with where we expected that asset to trade on a one off basis.
And I think we will make select dispositions out of the joint venture as we and our partner together decide that opportunity success. So in addition to the Aero sale. We just saw another asset after the end of the quarter.
And there are.
A couple of others.
Potentially in the pipeline.
Okay. Thank you.
And our next question is a follow up from John Guinee Stifel. Please go ahead.
Okay great.
The Overland Park, Kansas debt and the Charleston data into fall total around.
39 million is there any asset income associated with either of those assets and how should we think.
About the.
The debt on your balance sheet.
John and Larry the Overland Park asset will probably stay on our balance sheet for the remainder of the year. We are hopeful that the Charleston will.
Maybe by the end of the third quarter.
Be off our balance sheet.
But are both of those assets it vacant and a drag on NOI right now.
Yeah. The Orland Park is is vacant the Charleston asset is mostly vacant. So currently the overland Park asset Oh, we do have some operating expense responsibilities for for that asset and the Charleston asset we have a server in place for that asset so that those should be decreasing on the operating expenses.
Great. Thank you.
Thanks.
This concludes our question and answer session I'd like to turn the conference back over to the management team for any final remarks.
Thanks to all of you for joining us this morning.
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Thanks, again and have a great day.
Thank you Sir Thank you for attending today's presentation. You may now disconnect your lines and have a wonderful day.