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spk04: Welcome to Armada Hoffler's first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared the remarks, you'll be invited to participate in a question and answer session. At that time, if you have a question, please press star 1 on your telephone. As a reminder, this conference call is being recorded today, Tuesday, May 4th, 2021. I will now turn the conference over to Michael O'Hara, Chief Financial Officer at Armada Hoffler. Please go ahead, sir.
spk05: Good morning and thank you for joining. I'm Otto Hoffler's first quarter 2021 earnings conference call and webcast. On the call this morning, in addition to myself, is Lou Haddad, CEO. The press release announcing our first quarter earnings along with our quarterly supplemental package were distributed this morning. Replay of this call will be available shortly after the conclusion of the call to June 4th, 2021. The numbers to access the replay are provided in the earnings press release. For those who listened to the rebroadcast of this presentation, I remind you that the remarks made herein or as of today, May 4th, 2021, will not be updated subsequent to this initial earnings call. During this call, we will make four looking statements, including statements related to the future performance of our portfolio, our development pipeline, impact of acquisitions and dispositions, our mezzanine program, our construction business, of liquidity position, our portfolio performance, and financing activities, as well as comments on our guidance and outlook. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control, particularly in 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, and we advise listeners to review the forward-looking statement disclosure and our press release that was distributed this morning and the risk factors disclosed in documents we have filed with or furnished to the SDC. We'll also discuss certain non-GAAP measures, including but not limited to FFO and normalized FFO, definitions of these non-GAAP measures, as well as reconciliations to the most comparable GAAP measures are included in the quarterly supplemental package, which is available on our website, amadahoffman.com. I'll now turn the call over to Luke.
spk06: Thanks, Mike, and thanks, all of you, for joining us today. This morning, we posted first quarter results with $0.26 of normalized FFO per share, which was in line with our expectations. More importantly, as you see in our earnings release, leasing continued at an accelerated pace with overall portfolio occupancy nearly back to the mid-90s percentages, which is our historical norm. We anticipate new tenants taking possession by year-end, with lease revenue returning to pre-pandemic levels early next year. Simultaneously, the rent collection percentages have returned to near-2019 levels, and bad debt write-offs continue to level off. While we are very pleased with these results, they barely begin to tell the story of the momentum building within our company. As we relayed to you with our guidance presentation last quarter, 2021 is a year where our focus is to substantially increase NAV through our leasing initiatives, improved quality of NOI, and exciting development starts. In short, we anticipate that our activities over the course of 2021 will build a solid case for expansion of our earnings multiple and ultimately lead to significantly higher earnings and dividends over the next few years. As the company's largest active equity holder, management remains committed to generating long-term value for all shareholders. Later in the call, Mike will walk you through some of the specifics from the first quarter. I'll use my time today to briefly detail some of the recent developments that we believe will ultimately accelerate the accomplishment of our longer-term objectives. On numerous occasions, we have discussed that our mezzanine lending program will be gradually reduced to approximately $80 million in size. We had anticipated that the two major projects in this program would have loans outstanding until the end of 2022, thereby reducing our ability to meaningfully resize the program until that time. We still project that the interlock commercial loan will be outstanding for that duration. Due to favorable market conditions and the rapid pace of unit absorption, our partners at Terwilliger Pappas have decided to market the SOLUS interlock asset. We now anticipate that loan to be paid off in the third quarter. The projected return of $33 million of capital, inclusive of nearly $10 million of earned interest, will enhance our flexibility to take advantage of other opportunities that are appearing on a regular basis. Since the fall of 2019, we have made clear the goal of rebalancing the percentage of our NOI that is derived from retail assets. Ultimately, the portion of NOI from retail will decrease due to the predominantly multifamily and office makeup of our development pipeline. We have also made it clear that we expect to focus the retail sector of our business on high-quality grocery and discount anchored centers, both through development and acquisition. During the first quarter, we closed on the acquisition of a Whole Foods Anchorage Center in Delway Beach, Florida. Additionally, we've identified a few off-market acquisition opportunities in the retail area. As you might expect, these potential acquisitions would fit nicely with the return of capital from the SOLUS interlock payoff. Last quarter, I reported that we already had over 90,000 square feet of new leases on vacant space and an additional 46,000 square feet in final negotiations. There is no substitute for well-located real estate, regardless of the property type. As a case in point, I'm pleased to report we have executed nearly 60,000 square feet of new leases, including the Bed Bath and Beyond vacancy at North Point, which is now leased to Burlington. As a reminder, we had agreed to terminate two of our Bed Bath leases, in order to recapture the space at those centers. We can now report that both of these spaces were almost immediately released with minimal investment and a nearly 7% aggregate increase into NOI. In addition, we have another 50,000 square feet of retail space that is at lease. Given the velocity of activity around our assets, our expectation continues to be that we will be extensively back to our retail sector historical norm of approximately 95% lease within the next 12 months. Substantial progress is also being made at Will's Wharf, our office building at Harbor Point in Baltimore that was delivered at the onset of the pandemic. Tenant activity has resumed and we are now in final lease negotiations with two credit tenants totaling 40,000 square feet that will shortly bring total occupancy to 60%. As you might expect, the announcement of T. Rowe Price bringing 1,700 employees to Harbor Point, and the Governor's decision to locate several state facilities in the Central Business District, thus bringing an additional 3,300 employees in close proximity to our collection of assets at Harbor Point, will serve to further enhance the value of all of our properties at this location. The development pipeline is largely unchanged from last quarter's call. All commencement and completion dates remain intact. As you may recall, the four projects underway total nearly $250 million and are heavily weighted to the multifamily sector. Given the robust market for these types of assets in the southeast, we expect to eclipse our historical 20% spread between cost and value on these facilities. Those totals do not include our recently announced joint venture with BD Development for the 450,000 square foot build-to-suit for T. Rowe Price's World Headquarters, and its complementary mixed-use development. These two world-class, state-of-the-art facilities are adjacent to our other three assets at Harbor Point on the Baltimore waterfront. Our team is fully engaged, and we anticipate groundbreaking on the complex prior to year-end. Moving on to construction, that group continues to perform at the extremely high level we've come to expect over these many years. This facet of our business is also generating the same sort of momentum that we are seeing company-wide. The team is successfully wrapping up several large third-party projects in the next few months and expect to break ground on two more engagements for a long-standing client later this quarter. This past year has seen our company intensely tested in several ways. While the struggles brought on by the pandemic were certainly not unique to us, the perspective we've gained in navigating what is our fifth major recession, It's allowed us to use the strategies that have seen us survive and ultimately thrive through multiple cycles over the decades. Conserving cash, working with tenants, reducing operational expenses, taking care of our people. All these approaches set the stage for the most important part of the equation, taking advantage of new opportunities and ultimately outperforming our peers in the subsequent recovery. We fully anticipate demonstrating that outcome over the next few quarters. As you saw in the press release yesterday, Ford has continued to increase the dividend given the momentum that we see building in the company. We believe robust leasing, off-market acquisition opportunities, development progress, new construction contracts, and additional free capital will justify this and subsequent increases. Now, I'll turn it over to Mike for an update on the quarter.
spk05: Thanks, Lou. Good morning. Hope all is well with you and your families. This quarter refreshed our supplemental package. We think you'll like the changes and find it easier to navigate. The first quarter reported FFO, normalized FFO of 26 cents per share. Rent collections continue to be strong at 99% portfolio-wide, including retail collections of 98%. Bad debt write-offs for $270,000, which is approximately the same as last quarter. With bad debt write-off stabilizing and rent collections near 100%, it appears that our tenants and our company are successfully handling the impacts of the COVID-19 pandemic. We have collected 92% of existing deferrals due and expect to collect all remaining deferrals outstanding. See page 28 of the supplemental package for more information on our rent deferrals. Our stabilized operating portfolio occupancy for the first quarter was 94%, with office at 97%, retail at 94%, and multifamily including student housing at 92%. Our conventional multifamily was 96% occupied, with student housing at 85%. The student housing property, John Hopkins Village, is the outlier at 74%. Its COVID-related decline in occupancy, along with the expiration of our five-year real estate tax abatement, who are the main contributors to the negative 9.5% same-store NOI. We expect this property to be back to 100% lease this fall with the university back to in-person classes. As we discussed, we are seeing leasing activity pick up across all our property types. In total, we have leased over 150,000 square feet since last October. This does not include resigning 100,000 square feet of real cinema leases. We're making good progress in getting tenants in place, but as all tenants are paying rent, our NOI and EBITDA will be lower, which is having a temporary negative impact on our leverage metrics. Releasing spreads were positive overall for the quarter at 6.1% GAAP and 0.6% cash. If you look at the performance metrics of our portfolio, including occupancy, rent collections, releasing spreads, and how quickly the vacated space released reflects the high quality of our real estate. As Lou discussed, we are focused on growing NAV. Page 8 of the supplemental package has the component data for calculating our NAV. When evaluating our NAV, please see the section on the bottom left of this page with additional information to consider when valuing the company. These include management's estimate of the land value from the development rights from the restructured Harrisonburg Regal Lease in a vacant space as of March 31st. The 70,000 square feet of vacancies are all at lease along with estimated rent amounts not including CAM. We believe these have real value and should be considered when evaluating our NAB. During 2020, we took multiple steps to increase our liquidity position and strengthen the balance sheet. Our common stock trading at discount levels during most of 2020 utilized other sources to raise capital. In total, since the pandemic started, we sold 10 unencumbered retail assets for a total of $106 million, including the disposition of an unencumbered Kroger Anchor Center during the first quarter for gross proceeds of $5.5 million. These asset dispositions, combined with $100 million raised through preferred stock issuance last year, we have raised over $206 million in cash. And to reiterate, we believe preferred stock should account for no more than 15% of our capital stack. We do not anticipate issuing any more preferred stocks in the foreseeable future. In addition, this year, we've currently issued through the ATM program, raising $14.6 million at an average price of approximately $13. These combined capital raising activities put us in a position to fund our development projects, including the T. Rowe Price Headquarters. With most of the projects beginning later this year in early 2022, as is the case of the T. Rowe Price Project, capital requirements for 2021 are marked. In addition, we own the land for all the projects in the development pipeline. As is typical of ground-up development, the capital requirements ramp up over an extended period of time. With the modest capital requirements this year, we believe using the ATM program is the most efficient method to raise capital to the extent necessary, assuming favorable market conditions. Alternatively, we could sell additional non-core assets to fund future developments. We are excited to be part of the development team for the new T. Rowe Price Headquarters building and associated mixed-use projects. The ownership in these projects is expected to be 50%, but both of these projects structured as non-consolidated joint ventures and therefore off balance sheet. The current estimate of our equity requirement combined for these two projects is $60 million. The capital requirement and corresponding investment in joint venture are likely to be the only impacts on our balance sheet. Last month, we closed on the refinancing of the last 2021 debt maturity We have now started addressing our 2022 maturities. Our 2021 per share earnings guidance is unchanged with normalized FFO of 98 cents to $1.02 per share. Please see page four of the supplemental package for the details of our 2021 guidance, ranges, and assumptions. I'm now turning the call back to Luke.
spk06: Thanks, Mike. Before taking your questions, I would like to take a moment to draw your attention to our ongoing sustainability initiatives. Last month, we published our 2020 sustainability report, which can be found on our website. We are excited to share the enhancements that have been taking place over the last year. Operator, we would now like to start our question and answer session.
spk04: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions. Thank you. Our first question comes from Dave Rogers with Baird. Please proceed with your question.
spk01: Lou, Mike, good morning, and thanks for the added disclosures this quarter. Lou, you talked quite a bit about the tone, or you talked a lot about leasing, and I guess I'm curious about the tone and the focus of the leasing activity that you are seeing. We hear in office that it's all about high-quality buildings and everybody upgrading, and you're pretty full in office. So I guess when I look at the impairment of the CAPT and the buy-load departure there, Is there any kind of trading going on in the multifamily and or the retail business that you're seeing that would kind of give us a better sense of kind of where that leasing direction is headed?
spk06: We're seeing that really portfolio-wide, and based on the amount of activity that we're seeing at Wills Wharf, I think it's going to continue for quite a spell. On the retail and multifamily front, cap rates continue to compress, and so you're seeing an awful lot of leasing take place in a short period of time. People are rushing to fill vacancies, again, in the higher quality centers. I foresee this continuing through the summer, maybe through year end, but we are rapidly running out of space. So, I think I confirm your thesis on what's happening out there. I'm not sure that that is true in the gateway markets. And I'm not sure it's true in deep quality assets. But in terms of the best located real estate and the highest quality buildings are seeing no lack of activity.
spk05: You know, Dave, just one thing on the office leasing, you know, just on our releasing spreads, you know, you know, it showed negative cash for this quarter. But, you know, that was one tenant that renewed for two years. It's 4,000 square feet. So I think it's a good indicator on what's happening.
spk01: Great, that's helpful. I did miss some of the early part of your answer. I don't know if it was mute or just my phone. So if I asked something repetitive, I apologize. Mike, I guess I'll ask about the initial repayment at Interlock. I thought at some point you were going to get an initial payment back from your partners there. Maybe that did happen. It looked like the balance just continued to build. So was there any difference or change in the way that your MES loan at the Interlock has been treated or your plans for that?
spk05: Yeah, so there's two different loans here. One is the multifamily piece with Twilio Pathis that Lou talked about that we're expecting that to be marketed and sold and have that loan paid off early. On the other, the commercial mixed use piece, there are some part of that are some townhome parcels that we're trying to contract, and we're expecting those to start closing and have some of those parcels paid off here starting later this month or early next month. We did loan some more money on that project. There's been some changes in the senior loan, which we're working with our partner on that as well as the lender.
spk01: Okay, that's helpful. Thanks. Last for me is on the student housing. You did talk about Johns Hopkins and the other projects. I guess I'm curious on the leasing pace for next year. I imagine there's quite a bit of question as to whether or not the schools will open and how quickly. But what are you seeing in the lease pace for your student housing assets as you think about kind of the fall lease up?
spk06: Dave, it's a little slower than it's typical, and I think there's some hesitancy based on the obvious. Hopkins has announced that they're doing full in-person classes come fall, as is the effect of the College of Charleston. So we expect things to be normalized come next school year, starting in August. Thank you.
spk04: Thank you. Our next question comes from Rob Stevenson with Janney. Please contribute your question.
spk03: Good morning, guys. Just to follow up on Dave's question, Lou, are you having to provide any type of different out in the lease if the college goes remote given, you know, that this is the first time that any of this stuff has really been experienced?
spk06: We're not. All the leases are 12-month leases that we're doing on those three assets.
spk03: Okay. So, if these colleges go remote, then, you know, the student can stay or whatever, but there's no ability for them to stop paying rent until it goes back to being in person or anything like that?
spk06: Correct.
spk03: Okay.
spk06: And I think that's why I think you're seeing, again, nationwide, you're seeing absorption at a slower rate. But like I said, based on virtually every college talking about full in-person classes. Our expectation is that the fall semester is going to look a lot like 2019.
spk05: Yeah, what we're hearing is the students are ready to sign leases, but the parents are not because they got burned last year. So, there's been a slowdown in getting the parents to sign leases.
spk03: No, I mean, it's perfectly understandable. I mean, I just didn't know whether or not the market had changed to basically have some sort of remote out. you know, or pause or whatever on these leases in order to accelerate that leasing, especially if you didn't think that it was a likely event that colleges would go remote again. um on the meth portfolio how should we be thinking about that how aggressive are you guys you know you added next and um but how aggressive are you guys in backfilling that because when i look you know the guidance was basically flat for versus last quarter in terms of the uh the expected uh income in 2021 on that you know are you expecting when interlock and part of the mixed use gets paid back, that there's going to be another one in addition to Nexton that's added into that pipeline? How should we be thinking about that?
spk06: Yeah, our expectation is that one to two projects will be added sometime in 2022 to continue the program at the rate that we've set. We've set a target of roughly $80 million to being our threshold for it. And, of course, that's only a guideline. We're not going to turn our noses up to good business, and we're certainly not going to do substandard business just to hit a target. But that is our expectation. Our partners are very active, and as you might imagine, the multifamily is very active. We don't anticipate any issue with refilling that pipeline.
spk03: And then, I mean, in terms of that, I mean, how are you guys thinking about just straight out, you know, 11%, 12%, 15% loans versus the loan to own? When we look forward, are you guys really only interested in loan to own, or are you more than happy to take, you know, 12% or 13% transactions where you have no real ability to get to the assets?
spk06: It's a great question, Robin. It's really both. What we want to do is participate with well-heeled partners in great real estate. And to the extent that our ability is limited to only be able to get that interest income because of the exit cap rate that our partners can achieve, then so be it. As we've said for all these many years, we underwrite each of these as if we're going to own them, and we certainly would love to own them. But as you know, sometimes that exit cap rate is just so far below our cost of capital, it just doesn't make good sense.
spk05: There's a couple other things. Rob, when you look at the returns, some of these loans are simple interest, some are compounding, and most of them also have a minimum interest. amount of interest that needs to be paid somewhere between two and a half and three years. So even on an early exit, we're looking at getting the full amount.
spk06: You're also, remember, we're also, as a rule, the rule of thumb is if you want our money, you're also using our construction company. And so there's typically a construction fee involved as well.
spk03: All right. Speaking of that, what are you guys seeing in terms of the materiality of construction costs increases on future projects? I mean, have you guys, you know, have you guys bid out TRO and the other stuff in your pipeline now? And what is that versus what it would have been, you know, a year or two ago?
spk06: Yeah, I think we wouldn't be the first to tell you that prices are going crazy right now. With what's in our pipeline, the two projects that are in the ground now, Gainesville and Chronicle Mill, everything's been fully bought out. Materials are either onsite or en route. And that's been since last fall and early winter. So nothing really, no real effect there. With regard to the two that we haven't started yet, we really don't need materials until early next year. So, the hope and expectation is that things will normalize a bit. With respect to T. Rowe Price, no, that is, that project is in design now. Where we're seeing the biggest increases, as you might expect, is in residential type construction, the multifamily side wood frame. I think everybody knows wood has tripled if not quadrupled in price from a year ago. Again, hope and expectation is that will normalize before we need any wood. Fortunately, on the T-Row Price Project, and most of what we do is high-rise concrete construction, which is less effective, however, We're seeing material increases everywhere. And this is where it's helpful to have your own construction company because we stay really close to the market. We have multiple lines of subcontractors to utilize as well as a network that's more regional than local to bring in what we need for properties.
spk03: And how about on the labor side? How much inflation are you seeing there? Are you seeing good availability as well?
spk06: We're not having a lot of trouble on that side yet. Again, I imagine if you're in home building, it's getting really difficult. But for large-scale projects, we're not seeing the issue there. It's really on the material side. Now, again, things are getting tighter all the time. But our expectation is that with the premier projects we're doing, which will be the largest contracts in their regions, we feel certain that we'll be able to track what we need to expedite construction.
spk03: Okay. And then last one for me. You talked about being in negotiations on some leases at Wills Wharf. What does the pipeline behind that look like to get that asset sort of fully filled at this point?
spk06: Sure. Like I said, our expectation is we'll be at 60% here shortly, which leaves around 100,000 square feet or 90 to 100,000 square feet to lease. Really good activity surrounding the asset. Maryland has been a little bit behind Virginia and the Carolinas in terms of reopening, but now it is reopening and we're getting a lot more tours, a lot more activity. I tell you, we are extremely excited about what's going on at the Baltimore waterfront. You heard me mention earlier the state is bringing some 3,300 employees into the CBD, which is certainly going to help downtown Baltimore and tangentially help the harbor by not having problems next door. And with T. Rowe Price essentially committing to – a long-term lease with 1700 employees, the activity is just really picked up. And so our expectation is that behind that 40,000 square feet is a like amount that we hope to sign prior to the end of the year, if not sooner.
spk03: And is the Hilton open? And if so, how's the utilization there?
spk06: The Hilton's open. As a matter of fact, I had brunch there this past Sunday. restaurant was full. I think, I mean, again, they're slowly building back. It's not dissimilar from what we're seeing at the other hotels that tangentially are in our property. So for instance, the Westin here, they're still on the wrong side of 50% occupancy. But that is building and should continue to build. The PPP really helped the hotel industry, so we're not seeing the kind of duress that you normally would see with those kind of occupancy numbers. So, again, expectations are later on this summer, if not fall, that they'll be normalized.
spk03: Okay. Thanks, guys. Appreciate it.
spk06: Thank you, Ron.
spk04: Thank you. Our next question comes from Jamie Feldman from Bank of America, Maryland. Please proceed with your question.
spk02: Thank you. I guess starting with T. Rowe and following up on the construction materials question, I mean, do you have any protections in that? Like how does it work if prices do go up materially?
spk06: Jamie, all I can tell you is that we are fully protected. against price increases. I just have to leave it at that. I don't want to give the details of the lease, but it's incumbent upon all of us to keep prices to a minimum, as it's helpful for everybody, but we're not at any risk there.
spk02: Okay. I guess just generally, you know, with the increases, do you see changing any of your price structuring, like cost plus or anything like that, as opposed to Fixed pricing or anything you think will change here if we do see this kind of sustained rise?
spk06: Again, our construction company works collaboratively with owners. We really don't bid for projects. We work with owners and architects to come up with the best designs to expedite construction. And so it's more of a team approach. Now, ultimately, if things continue to go where they're going, then we're going to see delays in projects. I mentioned that our construction company is going to break ground later this quarter on a couple of projects for a long-term client. You know, those projects were supposed to start earlier this year, and they haven't started mainly because, People are wrestling with costs. And again, our guys are working with the owner and the architects in order to try and get the best value for the dollar. The thing that is happening on the other side, Jamie, that you're probably well aware of, is that cap rates are compressing. So you're still able to maintain a spread. But at some point, the expectation would be that rents aren't going to keep up with those costs. And that's That's what our system is all about, right? Once that demand goes away on the rent side, then you'll see enough projects die. And when they die, hopefully prices come back in line.
spk02: Okay. Those are helpful thoughts. You had mentioned the Regal Cinema leases, or one of them at least, being backfilled. And I appreciate the added disclosure this quarter. Can you just walk us through? Because it looks like you've got them expiring from 21 to 24. I know there's only one listed on the through 23 table, but can you talk us through all those leases and where they stand and what vacancies you may still have coming?
spk06: Sure. So, with the two Regal cinemas, the one in Harrisonburg, as we've reported earlier, in bringing Regal back in, we negotiated our ability to do a mixed-use development on the property. which we are moving forward with and, again, hope to break ground first quarter of next year. Regal there is fully, they're going to open in the middle of May, and that lease is at their full pre-pandemic rent level. The Regal here at Town Center is different. We're kind of in a wait and see mode. They are, they're going to open that one in the middle of May as well. We've only made a deal for minimal rent from now through the end of the year. And at the end of that period, we and Regal are going to decide if they can go back to full rent and or if we decide it would be better for us to go ahead and take the building back and do the multifamily project that we had previously talked about. So, we're somewhat in the catbird seat there. We're kind of good with either outcome. but we're gonna see how well the movie theater business does. It's a different situation here at town center. There are half a dozen theaters nearby versus in Harrisonburg, from what we understand, it's the only movie theater within 100 mile radius. So we suspect that one's gonna stay a movie theater forever.
spk02: Okay, that's helpful. And then you guys had mentioned the mark to the office. leasing spreads weren't really a good example of where things really stand. Can you talk about your mark-to-market on both office and retail? I know the portfolio is a little all over the place, but just any thoughts there?
spk06: So, it's somewhat difficult, Jamie, on the vacancies, particularly the COVID-related vacancies. Where we are spending considerable tenant improvements is with higher credit tenants, we are getting higher rents than what we were getting prior to the pandemic. Where someone is willing to come in essentially as is, we're giving a discount on the rent. So it's really all over the board. It's kind of almost everything in between. I think the best thing we can say about those vacancies is that, Our expectation is that NOI on those properties will be slightly above where it was in 2019 once everybody's paying rent, which we expect to be early next year. So, again, our portfolio, remember our whole business model, guys, our portfolio grows at 1.5% to 2% a year if you look at it on a decade-by-decade basis. Our primary source of growth is through that development pipeline.
spk02: Okay. So you said you expect NOI higher than 2019. Does that include the development?
spk06: No. I'm talking about just on the stable portfolio.
spk02: Stable portfolio. And you're saying office and retail combined?
spk06: Yeah. Yeah.
spk02: Okay.
spk06: And then hopefully a bit higher than that on the multifamily. No, if you saw our guidance presentation, our expectation is when the development pipeline stabilizes, you're going to see a bit of a hockey stick formation.
spk02: Right. Okay.
spk06: But that is a 23-24 story.
spk02: Okay. And I just want to clarify, you made a comment that the ATM is the most efficient way to raise capital going forward. Are you saying as of now, like you're happy tapping the ATM for future needs?
spk06: Let's go a little bit deeper than that. We have fairly minimal capital needs. And so therefore, it is by far the most efficient way to get that. I wouldn't say we're happy. We weren't happy when the stock was trading at $19. So we sure as heck aren't happy when it's trading at 13 or 14. But for the minimal amount of equity that we need, and the ability it gives us to dollar cost average in as small as the requirements are, it is by far the most efficient way. Mike, do you want to add to that?
spk05: No, and if it doesn't, you know, if the stock doesn't continue to increase, we'll do what we did last year, and as I was saying, we'll go look at selling more assets. And the other thing we always look at with the ATM or raising is what's our What's our cost of capital and is the money being put to work that is still accretive, especially in development projects? And we're seeing the answer is yes.
spk02: Okay. Thank you. And then my last question is just on WeWork. Any thoughts on any changes in there, your plans for them in your portfolio, or will they grow, will they shrink, or just stay where they are?
spk06: I'm pretty sure they'll just stay where they are. Jamie, they're doing fine. As you know, they consolidated into our high-rise in Durham, and so it is the rework in that market. And our expectation is that they'll be fine there for 15 years. Our partners at the interlock in Atlanta have them on one floor, which I think is being built out now. Our expectation is that they're going to be just fine. We don't have I think I've said this before. Pre-pandemic, everybody was touting that co-working space was going to be 10% to 15% of the overall market, Class A office market. And then, of course, the pandemic hit, and it was going to be zero. My guess is things will go back to the center line within a year or two, and co-working will be an active ingredient. Now, whether or not that particular name does well is, you know, anybody's guess, but I think that kind of arrangement is going to be here to stay for a small but significant part of the office market.
spk02: Okay, great. I appreciate your thoughts.
spk06: Thank you.
spk04: Thank you. Our next question comes from Dave Rogers with Baird. Please proceed with your question.
spk01: Thanks for the follow-up, guys. Lou, just kind of tying in your comments for the demand around high-quality projects and pipeline beyond what we're seeing, right? So you got $240 million in process, $138 million complete in leasing, 10 triumphs still sitting out there as an opportunity. So I guess, are you still looking to backfill that pipeline? Are there more adds to that, do you think, here in the next six to nine months in terms of the own development pipeline?
spk06: Dave, we're okay with adding more. We're being extremely selective at this point. You know, that $240 million does not include the $400 million or so that we're working on with the Thero Price and its companion development. So, we're going to be awfully busy. We're seeing more opportunities than we could ever execute on. So, we're going to continue to try and fill more holes, but we're going to be extremely selective. Our hope and expectation would be, you know, over the next 12 months to add a project or two to that development pipeline. But we're really looking for, you know, the home run opportunities at this point.
spk01: All right. Thanks for that, Lou. And then, Mike, maybe just a follow-up on the deferral. You have the write-off category. end as you're kind of negotiating leases? Maybe just some added color on that abatement number.
spk05: Yeah, so we added approximately $400,000 to the deferral agreements this past quarter, and some of those had abatements in them. And on the write-offs, you know, obviously the ones that have been in place, we're working with the tenants to try and keep them going and writing off some of those deferred rents.
spk01: Okay. Thank you.
spk06: Thanks, Dave.
spk04: There are no further questions at this time. I would like to turn the floor back over to Louis Haddad for any closing comments.
spk06: Thanks very much for your attention this morning. Look forward to updating you over the next couple of months and reporting on next quarter. Have a great day.
spk04: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great day.
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