Thank you for standing by, and welcome to the First Industrial 3Q Results Call. Please be advised that today's conference is being I would now like to hand the conference over to your speaker today, Art Harmon, Vice President of Investor Relations. Please go ahead.
Thanks, Jesse. Hello, everyone. Welcome to our call. I apologize for any delays to for folks trying to get on. So hopefully, you're getting in here and we're starting with the call now.
So before we discuss our Q3 2019 results and guidance, let me remind everyone that our call may include forward looking statements as defined by federal securities laws. These statements are based on management's expectations, plans and estimates of our prospects. Today's statements may be time sensitive and accurate only as of today's date, Thursday, October 24, 2019. We assume no obligation to update our statements or the other information we provide. Actual results may differ materially from our forward looking statements and factors which could cause this are described in our 10 ks and other SEC filings.
You can find a reconciliation of non GAAP financial measures discussed in today's call in our supplemental report and our earnings release. The supplemental report, earnings release and our SEC filings are available at firstindustrial.com under the Investors tab. Our call will begin with remarks by Peter Baccile, our President and Chief Executive Officer and Scott Musil, our Chief Financial Officer, after which we will open it up for your questions. Also on the call today are Jojo Yap, our Chief Investment Officer Peter Schultz, Executive Vice President Chris Schneider, Senior Vice President of Operations and Bob Walter, Senior Vice President of Capital Markets and Asset Management. Now, let me turn the call over to Peter.
Thank you, Art, and welcome everyone to our Q3 call. Let me start by saying thank you to the entire FR team for all of your efforts towards another strong quarter. The National Industrial market continues to favor the landlord. Given low vacancy and broad based demand, we continue to see strong rent growth and high levels of occupancy. We're pushing rents on new and renewal leasing as demonstrated in our results, which I will touch upon shortly.
From a supply standpoint, the overall market is more or less in equilibrium, with the exception of a few submarkets that are currently over primarily in larger format buildings. TBRE Econometric Advisors recently reported preliminary 3rd quarter net absorption of 45,000,000 square feet and new completions of 56,000,000. That brings the total for the 1st 3 quarters of the year to 124,000,000 square feet of net absorption and 155,000,000 square feet of completions. Our portfolio continues to produce strong results. Occupancy at quarter end was 97.7% and cash rental rate growth for 3rd quarter commencements was up 31.9%, eclipsing the record result we reported in the Q2.
For the full year 2019, we expect our increase in cash rental rates on new and renewal leasing be approximately 13% to 15%. As we have in years past, let me update you on our 2020 rollovers. As of today, we have signed approximately 32% of our 2020 rollovers at a cash rental rate increase of 6%. Our 2020 signings to date are from a broad geographic distribution and include just 3 small leases in the high rent growth market of Southern California. To provide you some context, in 2019, Southern California will represent about 23% of our rollover by net rent.
For 2020, we anticipate it to be plus or minus 20%. We're currently going through our 2020 budget process and we'll update you on our expectations for rental rate growth for 2020 on our Q4 call. Turning to our development program, the FR team continues to deliver profitable growth in the form of high quality buildings that fit their respective markets and serve the supply chain needs of our customers. In the 3rd quarter, we placed in service 4 developments totaling 1,900,000 square feet with a total investment of 129,000,000 dollars These were comprised of projects in Houston, Central Pennsylvania, Chicago and our build to suit Atlanta. Combined occupancy for these projects is 92% and the development margin is approximately 40%.
In the Q3, we continued to make progress on the lease up of our development portfolio. We signed a tenant for 100 percent of our 120,000 square foot First Park at Central Crossing III in Central New Jersey, which will now be generating be construction on a 100,000 square foot building in Philadelphia. Will be a rare option for tenants in this submarket looking for efficient modern space. Our estimated investment is 12 point $3,000,000 and our targeted cash yield is 6.1%. Thus far in the 4th quarter, we have commenced construction on First Redwood 2 Logistics Center, a 72,000 square foot facility near our buildings under construction cash yield of 5.2%.
Completion is set for the Q3 of 2020. In the Q4, we expect to break ground on 135,000 square foot building in Northwest Dallas at the second phase of our First Park 121 development. We're off to a good start as we've already pre leased 77% of the building. Estimated investment is $31,200,000 with a target 1st year cash yield of 6.7%. Summing up our development pipeline at September 30, we had a total of $337,000,000 of developments under construction or in lease up comprised of 4 point 2,000,000 square feet, which is 50% leased as of today.
With a projected cash yield of 6.5%, for similar leased assets. In the for similar leased assets. In the Q3, we also replenished our development pipeline by adding some well located sites in high barrier to entry markets. We acquired 3 sites in the Inland Empire, totaling 42 acres for a cost of $19,000,000 These sites can accommodate up to 774,000 square feet of new space upon entitlement. We also entered into a 50 year ground lease in South Florida for the future development of First Cypress Commerce Center, a 3 building park totaling 374,000 Square Feet.
We expect to break ground within the next few months. Our estimated total investment for the buildings is 35,600,000 dollars with a targeted cash yield of 7.1%. In the 4th quarter to date, we've acquired a 19.6 acre site in South Florida for $19,800,000 This is a covered land investment with 3 below market ground leases that are currently yielding 3.5%. The site is earmarked for future redevelopment of up to 294,000 square feet. While the property acquisition market remains ultra competitive, during the Q3, we closed on 4 buildings totaling 229,000 square feet at a cost of $30,400,000 These properties were in Orlando, San Diego and the Inland Empire.
The estimated stabilized yield on these acquisitions is 5.2%. Moving to dispositions. We were very active in the quarter. In Q3, we sold 1,600,000 square feet plus several land parcels for a total of $94,000,000 Note that for accounting purposes, we had to recognize the sale of a $54,500,000 property in Phoenix in which the tenant exercised its purchase option. The sale is expected to close in the Q3 of 2020.
Scott will walk you through more of the details during his remarks. Thus far in the Q4, we sold an additional 84,000 square feet in Minneapolis for $4,000,000 This brings our year to date sales total to $110,000,000 Given the broad appetite for industrial properties and our ongoing portfolio management efforts to continue to refine the portfolio, we are increasing full year sales guidance by $75,000,000 at the midpoint for a new guidance range of $200,000,000 to $250,000,000 Please note that this guidance range excludes the sales price of the building in Phoenix that I just discussed. These additional sales proceeds will be primarily invested in future speculative development opportunities in strong rental growth markets. As such, we would expect some temporary cash flow dilution in 2020 from these additional sales. With that,
let me turn it over to Scott to walk you through some additional details on the quarter and guidance. Thanks, Peter. In the Q3, diluted EPS was $0.62 versus $0.24 1 year ago. NAREIT funds from operations were $0.44 per fully diluted share compared to $0.41 per share in 3Q 2018. Excluding the approximately $0.01 per share gain from land sales, 3Q 2018 FFO was $0.40 As Peter noted, occupancy was 97 point 7%, up 40 basis points from the prior quarter.
We commenced approximately 3 point 3,000,000 square feet of leases in the 3rd quarter. 387,000 square feet were new, 1,100,000 were renewals and 1,800,000 square feet were for developments and acquisitions with lease up. Tenant retention by square footage was 82.3%. Same store NOI growth on a cash basis, excluding termination fees, was 2.9%. This was driven by rental rate bumps and an increase in rental rates on leasing, partially offset by a slight decrease in average occupancy and real estate tax true ups for markets paid in arrears, predominantly in Denver.
Lease termination fees totaled $246,000 and including termination fees, cash same store NOI growth was 3.1%. Cash rental rates were up 31.9 percent overall, a record quarter for the company. Our results were led by strong growth in Southern California and were also helped by a few larger renewals in markets like Minneapolis and Dallas. Breaking it down, renewals were up 37.2% and new leasing was up 14.6%. On a straight line basis, overall rental rates were up 50.4% with renewals increasing 57% and
new leasing up 28.6%.
As Peter mentioned in his remarks, we had to recognize for accounting purposes a sale related to a 618 1,000 square foot property in our PV 303 Park in Phoenix. The tenant exercised its purchase option in the Q3 for sales price of 54 $500,000 This building is leased by UPS and they made a substantial investment in the property. Due to the high probability that this transaction is expected to close in the Q3 of 2020, the new lease accounting standard requires us to recognize the gain from future sale in the current quarter. As such, we have also removed this property from our operating statistics
in
we closed at our private placement of $150,000,000 of senior unsecured notes. The notes have a 10 year maturity at an interest rate of 3.97%. Reflecting the related settlement of interest of mortgage loans at a weighted average interest rate of 7.3%.
Quickly moving on to a
few balance sheet metrics. At the end of 3Q, our net debt plus preferred stock to adjusted EBITDA is 4.8 times and at September 30th, the weighted average maturity of our unsecured notes, term loans and secured financings was 6 years with a weighted average interest rate of 3.9%. These figures exclude our credit facility. Moving on to our updated 2019 guidance for our press release last evening. Our NAREIT FFO guidance is now $1.71 to $1.75 per share with a mid point of $1.73 This is an increase of $0.01 per share from what we discussed in our 2nd quarter call, primarily driven by our 3rd quarter performance.
The key assumptions for guidance are as follows: in service occupancy for the year end Q4 of 96.7% to 97.7%. This implies a full year quarter end average in service occupancy of 97.25 percent to 97.5%. 4th quarter same store NOI growth on a cash basis before termination fees of 1.25% to 2.75%. This implies a quarterly average same store NOI growth for the full year points at the midpoint compared to our prior guidance due to our Q3 results. Our G and A guidance range remains unchanged at $27,500,000 to $28,500,000 and guidance includes the anticipated 2019 costs related to our completed and under construction developments at October 23rd and the planned 4th quarter start in Dallas.
In total, for the full year 2019, we expect to capitalize about $0.04 per share of interest related to Our guidance does not reflect the impact of any other future sales, acquisitions or new development starts, the impact of any future debt issuances, debt repurchases or repayments the impact of any future gains related to the final settlement of 2 insurance claims from damaged properties and guidance also excludes the potential issuance of equity. Let me turn it back over to Peter.
Thank you, Scott. We continue execute on our plan to maximize the value of each and every lease. Our team is pushing rental rates on new and renewal leasing, maintaining high levels of occupancy, refining our portfolio and leveraging our platform to make profitable investments. The industrial real estate leasing markets continue to show broad based demand, supported by the ongoing build out of supply chains, particularly those related to e commerce. With that, operator, would you please open it up for
question comes from Craig Mailman with KeyBanc Capital. Your line is open.
Hey, guys. Apologies if I missed this, but did you guys mention that there is anything that was skewing the rent spreads on renewals higher this quarter? Or was that sort of broad
based? Craig, this is Chris. Yes, if you look at the quarter, we had mentioned 3 of our markets, we had pretty good results, Southern California, Minneapolis and Dallas. If you look year to date, our cash rental rates are up by 15.3 percent and that is very broad based. It's about 10 of our markets have experienced double digit increases in 2019.
So yes, it is very broad based.
Okay. That's helpful. Then, Peter, you mentioned kind of the potential impact here on FFO from ramping sales towards the back end of the year. But just curious, is there kind of any impact positive or negative on same store or are these kind of lower growth properties that you guys are selling and it could boost it or vice versa?
Moment. So we have a great properties that are enjoying some very high leasing at the moment. So, we have a great opportunity to take advantage of a strong market and a strong bid for those assets. And that's why we're upping the guidance. In terms of their impact on same store, Scott, you have a thought on that?
My guess, Craig, it's going to be dependent upon which properties we sell in the 4th quarter. We do have a guidance range there. My guess is probably going to have a pretty minimal impact on same store, the 4th quarter sales.
Okay. But as we head into next year, I know you guys aren't giving guidance yet, but I know there was what the 80 basis points from the taxes that kind of get reversed next year. Could these also kind of be additive to that year over year acceleration you think or again just minimal?
I think it's going to be minimal, correct, the sales. But again, we have to look at what the portfolios that we're going to sell because we have a guidance range here. But my guess is going to be minimal on the minimal impact on 2020 same store.
Okay.
And then just one last one. You pointed out that the oversupply is kind of submarket specific here. Central PA kind of we have now to get kind of thrown into the mix as potentially being a little bit oversupplied. And just noticing one of your developments in the 70, 81 corridors kind of coming up on a year since completion and you don't really have any leasing on it. Can you talk about prospects there and whether this could actually be added to the pool kind
of empty, the stabilized pool? Sure, Craig. It's Peter Schultz. You're right. From a large building standpoint, Central and Eastern Pennsylvania continues to have a fair amount of supply, call it 900,000 square feet and up.
By our account, there are south of Carlisle along 81. We were pleased to have our larger building at 7,801 leased and that commenced in the Q3. We have some interest in the 250, nothing to report today. Disappointed that it's not already leased like some of our other assets. But we're we see a much less competitive environment in that size range than there is in the $900,000,000 and up.
Your next question comes from Caitlin Burrows with Goldman Sachs.
I guess just a quick follow-up on the similar topic. I don't think you mentioned this for the First Juliet Center in Illinois. That seems like another one that's coming up around its 1 year completion anniversary. So just wondering what your outlook to reaching 100% leases at that project?
Sure, sure. Hi, this is Jojo. So you know, that asset is has a total 355,000 square feet. That's 58% leased. So we leased 207,000 square foot, and we've mentioned that to most of you to a 3PL.
We have 149,000 square foot remaining. Again, just like Peter Schultz had mentioned, on the corridor, the large format buildings have more competition. And at this point, we're disappointed just like we are on the vacancy we just mentioned in PA. And we haven't leased it yet, but we're very focused to nothing new to announce right now leasing that remaining 149,000 square foot space.
And Caitlin, this is Scott. We're assuming that that lease up happens now in 2020 for guidance purposes.
Okay. Got it. And I guess maybe in terms of the development pipeline, I know you mentioned that the disposition proceeds will be used for continued spec development in strong supply demand markets. So when we look at the size of the development pipeline this quarter, it is down a little owing to some recent completions. So I guess how confident are you in the ability to replenish the pipeline as you go into 2020 and use those disposition proceeds
accretively? Well, if you look at the land that we currently hold, we can build about 12,000,000 square feet on that. That doesn't count roughly 4,000,000 square feet we can build in our JV land in Phoenix. Between that and the additional opportunities that our platform is finding across the country, we're pretty confident we can keep up the development program.
And I guess maybe just one other big picture related to like the ability to replenish the development pipeline and those 2 other projects granted there are only 2 that you have been somewhat more disappointed on. I guess when you think bigger picture outside of those two properties, are you still pretty confident that spec developing at this point in the cycle is the right thing to do and that there will be demand as long as you find the right spot?
Yes, demand continues to be really broad based. We really haven't seen a drop off. Again, in certain submarkets, there is some oversupply depending on the size of the building. But our focus, as you know, is to really try to deliver the right size property in the right submarket to meet some unmet demand and that hasn't changed. Our strategy hasn't changed nor has the demand for that product changed.
Okay. Thank you.
Your next question comes from John Guinee with Stifel. Your line is open.
Great. Thank you. I think you said, Peter, dispose of $200,000,000 to $250,000,000 of depreciable assets, most of that going into development. How what's your taxable income look like and what's your thoughts on your dividend given usually you cannot 1031 exchange a depreciated asset into development?
John, it's Scott. You can do 1031 and into land though. So we have we can do that. And we've been very successful in utilizing 1031 exchanges to offset gains on sales. But keep in mind, John, if we're not able to successfully do that, we still do have $46,000,000 of NOLs we can use to help us offset that.
As far as the dividend is concerned in 2020, it's been the company and the Board's philosophy that dividend growth is going to be based on growth of cash flow in the company, but we will evaluate it against what our taxable income is doing.
Great. Thank you.
Your next question comes from Rob Stevenson with Janney. Your line is open.
Hi, good afternoon guys. Peter, you identified I guess around $70,000,000 of Q4 development starts in your prepared remarks. There are roughly $160,000,000 of completion scheduled for the Q4. I appreciate there's probably a few starts in there that are smaller and or that you're not ready to talk about on the call today. But when you look at your expected starts over the next few quarters, any timing or entitlement issues that may cause the aggregate under construction pipeline to move materially up or down over the course of the next 4 to 6 quarters?
Are we likely to be consistently in that $250,000,000 to $300,000,000 level? It's just a bunch of projects that are smaller and don't meet those sort of $35,000,000 $40,000,000 threshold that you were talking about in the 2 starts that you have for the Q4?
I'll give you my thoughts and then turn it over to Jojo for his. We factor in the fact that it is taking a little bit longer to get entitlement, etcetera, into the way we manage our development pipeline. And so that's in there. So in terms of our pace and our ability to continue to grow, that's already factored into the math.
And then and the projects that
you mentioned, roughly about $80,000,000 between that 71,000 footer in Fontana and that ground lease in South Florida and the pre lease 77 pre lease in Dallas, all of those are fully entitled and approved.
Okay. And then on the subject of development, what's happening to construction costs and availability of labor in your market these days? It seems like that you guys have some good benchmarks and that you're about to start construction of 2nd or 3rd or even 4th phases in communities where you've just done it recently. How is that sort of trending? Any slowdown in construction and labor cost?
Or is it still going up at our measured pace?
Sure, sure. Good question. The range of total would be anywhere from 4% to 7%. And 4% would be basically the Midwest, some markets, just non coastal markets. The higher end 7% would be more on Southern California.
If you look if you break down the components, material cost increase have been growing more in the inflationary rate of 2% to 2.5%. So that's not the major driver. The major driver of the cost increase is really on labor and availability of labor. And so that results in a little bit higher labor costs and increasing subcontractor margins.
Okay. And then last one for me. Are you guys seeing any significant demand from clients to go to longer leases? I assume that the 7 year average lease term in the Q3 was driven by 1 or 2 outliers. Be curious if tenants that plan to be in the space for any length of period of time are starting to realize that longer leases might benefit them and maybe you guys are more willing to do longer leases the longer this cycle gets?
Sure, Rob. It's Peter Schultz. I would say, if you look at our stats, yes, the lease terms were up. And to us, that's communicating or conveying from our customers continued confidence in their business and growth and general business activity despite all of the noise that we all see in the headlines. So we're always focused on optimizing all of the lease metrics, including rate, term, TIs and rental increases, but we continue to view elongated lease terms as a positive sign for business.
Okay. Thanks guys.
The next question comes from Rich Anderson
So I'm going
to draft off the previous question a couple of questions ago on the speculative nature of your development effort. And you said nothing really has changed, right markets, right product, all that. But how are you what trigger points are you looking for to consider more in the way of build to suit activity into 2020 or whatever 2021? I mean is there what are some of the sort of observations that you're on the lookout for where you have to say, well, we need to be a little bit more careful about starting this or that project?
Yes. A couple of thoughts on that. First of all, as you know, we have this self imposed speculative leasing cap. Leasing cap. That means anything that we build that doesn't have a tenant or anything, if we do a forward that's 100% or 50% empty.
Anything that we do like that that has a quote leasing opportunity goes into that cap. So we're managing that risk that way. Other signs to look for in the market. So, when markets get tough, you see tenants changing buildings just because they can as opposed to because they want more space, call that musical chairs. We haven't seen any of that.
In bad markets, I can imagine in South Dallas for 1,000,000 footers, some of the landlords are probably taking lower rents than they'd like to get. We haven't seen that on a broad basis at all. So there are things that are indicative of perhaps a softening. And we haven't seen any of that. And those are really the measurements to look for.
Okay. Obviously, cost of capital has come way down this year, funding development primarily. When you look to 2020, if you do acquire, are you more inclined to go the value add route or core or is it just not a big consideration right now given your development heavy sort of mindset?
Well, I think when we look at acquisitions, first of all, we're not typically a player in broadly auctioned assets. Those are situations where we really don't believe we're going to be able to add value for our shareholders. Typically, we're making unsolicited offers in all of our offices on a regular basis. And from time to time, we annoy somebody enough so that they end up going ahead and selling the building. I kind of say that tongue in cheek, but it's actually happened.
So that's why you see our acquisition volume is fairly measured. Again, we're always trying to make sure that we can do profitable transactions. We've said this before, we're a profit
markets. Okay. And last question for me. Prologis talked a little bit about the duration to build concept and how it's been extended lately. Are you seeing that in your development effort or in the competition away from you?
And any comment color on that topic would be interesting. Thanks.
Yes, yes. We're definitely seeing that. If you're looking at the entitlement period, the entitlement has become tougher. So wherever parts of the country where there's significant entitlement process like SoCal, it has gotten longer. In terms of just time to build, yes, it has also gotten longer.
We're talking about maybe additional 3 months from your 6 to 9 months. Typically, it would be 9 to 12 months. And that's primarily because of, again, contractor availability. Some municipalities, when you have changes to their site plans because they're most of them are understaffed, they get back to you in a slow fashion slower fashion. And lastly, even utility companies are pushing back their installation dates of power and other utilities that affect the completion of the building.
Right. Are you able to beat that market
at all though? I mean, are you able to move faster than your competition or are you sort of in the same boat as everybody else?
My view is that everybody is the same boat, especially we are dealing with municipalities within a housing process or contractors are very distinct.
Your next question comes from Eric Frankel with Green Street Advisors.
Just wanted to drill into those 2020 early leases you signed. Can you just confirm what percent on square footage basis did that comprise Southern California? I think you said 3 leases. I just want to confirm what the actual square footage total
was? Yes. Eric, on a percent basis, it's less than 1% or 2%. So very small number.
Okay. That is quite small. Okay. I think both of my questions have been answered. I think only kind of minor ones are the ground lease development that you're undergoing in some of the South Florida.
Can you just talk about that feel a little bit sometimes ground leases can be a little bit of a complicated subject?
Sure. Eric, hi, it's Tojo. So these are premium sites that we wanted to acquire, 3 sites where we can build multi tenant buildings, and we wanted to buy the fee estate. The city does not want to sell the fee estate. The city, for $4, numerous of cases, will only do ground leases.
And they're pre boilerplate in terms of 50 year ground leases. So what we did is to compensate us for the different ownership structure, we then sold for and structured a deal and development that would yield a 7.1%. The way we got to that is that we think properties on excess gas would trade 4.25%, 4.75%. And then basically the spread we wanted a bigger spread than our standard 100 to 150. So we basically are underwriting like a 2 35 to 2 185 basis point spread.
That we intend to hold those properties long term. And at the same time, we have a cap, Eric. We put a cap on the ground lease rent that is at or below the recent inflation. That's very important to us because we think rent growth, contracts escalations, will significantly exceed the ground lease rent escalation plus the market rent growth as well. So that will give us a proportionally positive growth on our NOI once we complete those buildings.
Great. Thank you for that color. And does the ground type extension option? Are those extension options done at market value? Or is it just on a flat rate?
No. It doesn't have extension options, and that's why we structured the deal with that kind of a yield and that kind of a cap in lease ground lease increase.
The cash flow alone from that is going to provide a nice return on our investment and asset.
Sounds good. Okay. Thank you. And then just switching to this dispositions, it's very interesting, obviously pretty telling on investor enthusiasm that you're able to increase your dispositions guidance. Do you have a set plan to obviously, I know you don't get into guidance for 2020 and the disposition is not really part of that anyway.
Is it still increasing your dispositions generally? Is it just is it investor enthusiasm? Is it that
you just have a better use of proceeds?
What is there what's the main motivation?
It's a combination of a couple of things. One is that a lot of these assets are enjoying historically high occupancy. And when I say historically, I mean 98% to 100%. Secondly, they are in lower growth markets. And as you know, our objective is to dispose of assets and lower growth opportunities and put that money into better use.
And so we just have a confluence really of strong investor demand for these assets. The assets are fully leased and the cash flow is as much as we're going to get out of those assets and it's just the right time to sell those assets.
Sounds good. And is it fair to say that your CapEx burden is probably going to decline over time too just based on of the assets you're selling and what you're buying and developing?
It's absolutely the case that the net cash flow tend to be tenant and capital intensive assets. So the AFFO, if you will, out of those assets is a lot lower than the AFFO we can earn by redeploying that capital.
Okay. Thank you.
Your next question comes from with JPMorgan. Your line is open.
It's Mike here. Just to follow-up on the 2020 leasing question. Aside from the California mix issue, have you seen anything in the other leases that has given you any caution in terms of the rates you're able to get or demand?
Obviously, we'll give you more clarification when we go through a 2020 budgeting, but as of now, we have not. No. So again, it's very broad based and overall good news.
Okay. That was it. Thank you.
Your next question comes from Dave Rodgers with Baird. Your line is open.
Yes. Hey, guys. Maybe first start with Jojo. I wanted to ask, it sounds like all of these parcels that you've acquired or the ground lease that you entered into, you said they're all fully entitled. Are you doing the work for the entitlement and it's kind of under option?
Or you just do for market purchases post entitlement? And I guess how competitive is that profit? I imagine that'd be pretty competitive. So curious on your ability to continue to do that.
Sure, sure. Dave, actually, the $80,000,000 I referred to was the 1st Redwood 2, the ground lease and the 477,000 434,000 put in Dallas that are 77% leased. That's are all entitled. The 3 the 4 basically, the 3 land acquisitions we did in SoCal are not entitled, for example. So those require 18 to 24 months to entitle.
And so they're very nice sites. Those were obtained by off pipe deals or land assemblages. And so those are not entitled. And so we would expect those are more 2021 starts.
Got you. That's helpful. And then I think at the 12,000,000 square feet in the total pipeline that you can do, Peter, you mentioned, how
much of that's entitled versus not? Except for the land in Stockton, except for land Stockton and basically the sites that we talked about right now, both are entitled. Okay. It requires site plan approval, though, but the site plan approval is not a problem. All of it is still in industrial.
It requires 30 to 60 days approval
by the municipalities. Okay. That's helpful. Thanks, Jojo. And then, I don't know for Scott or Peter, with regard to tenant size and the leases that you've been rolling, maybe not in the quarter, but as you look back maybe on a rolling 4 quarter basis, you talk about the spreads that you've seen in the rent growth between the ticket size, maybe you're under 100,000 square feet to over and kind of the rent growth you've seen.
And I guess I would just allude back to your comments that the bigger boxes have been slower to lease. I assume they've been slower to drive rent growth as well. So kind of curious to see where the sizing break down is in terms of rent growth in your portfolio?
Chris, do you want
to take a shot? Yes.
If you look at overall kind of trailing 4 quarters, the rental rate increases are have
been a little bit higher for
the under 200,000 square foot spaces. So that's kind of generally the trend that we've seen.
Would the difference be I mean, is it a
couple of 100 basis points or not that wide?
Yes, it's a couple of 100 basis points. So not terribly, terribly wide.
Okay. Thank you.
Your last question comes from the line of Yi Ben Kim from SunTrust. Your line is open.
Hi, out there. So you guys hi, you have a great balance sheet, don't really need to raise equity. You're selling more assets. You have some on to come with the Phoenix asset next year. What are your kind of current thoughts on if you need to if you want to raise equity with some other activities like development or at this point you don't need to at all?
Hey Ki Bin, it's Scott. We're balance sheet right, we're in a great position right now. We're at 4.8 times debt to EBITDA. We've got plenty of liquidity. On our line of credit, we've got additional sales proceeds coming in.
We've got excess cash flow after CapEx and dividends. So we're set up pretty well. If you look back the last several years, why we raised equity, it's because our pipeline just grew too much compared to those sources I mentioned. So if there's ever an imbalance like that, that would be the reason we would issue equity if we like the stock price. But as of now, we look to be in pretty good shape.
Okay. And is there anything one time in nature that we should expect in 2020, whether it be a large lease that you don't have clarity on or things like that or expenses?
A large lease we don't have what on KeyBanc? Clarity.
I would say if you look from the rollover point of view, the largest rollover we had in 2020 is a 675,000 square foot lease, Central Pennsylvania. Peter is working with the tenant currently to renew that. Other than that, all the other expert expirations are pretty granular. As far as an expense point of view, I think you might be referring to the real estate tax issue we had in 2019 in Denver. We're not anticipating that in 2020, but we're running through our budgets right now.
Okay. And in terms of like what do you have left to leave, any notable geographic compensations?
No, no. Once we get this 675,000 square footer done, everything else is very granular key then.
Okay. And That's 200,000 square feet
or less. So it's not this is very granular from our portfolio point of view.
Okay. And just last question, any guidance you can provide on the cap rate for that Phoenix asset that you're selling through UPS?
So we don't provide really any cap rate information on a deal by deal basis. We'll provide you the consolidated cap rate when we sell that, when we provide our Q3 2020 statistics because that's going happen in the Q3 of next year. But I can tell you that if you learn the supplemental, we made a 19% margin on our investment there. And that was always part of the plan, and we really liked what happened because if you recall, 2.5 years ago, when we announced this deal, we said that this is going to be a catalyst to this intersection and the park and the land that we own. And heretofore, 2 years after, we've sold basically half land and got 100% more than 100% of our equity in our JV plus we were able to build and lease close to 1,300,000 square feet of Class A distribution space and leased to XPO Logistics and Ferrero.
So a
lot of good things have happened after that. And just from my education, typically when you have an option like that through a renter, Is it typically a market price type of transaction price tag or is it a little bit of a discount because they are a user?
Well, first of all, it's all negotiated and it's not typical for us to provide options. And in this case, we felt that they were they could be a big catalyst, UPS building their biggest Southwest hub. So that's why we entered into an option. And at this point, it was a fixed price option based on margin we wanted to make. Also bear in mind that, I don't know if you recall, but we struck this deal when the building was a shell with no EIs.
So this allowed us to easily develop the 643,000 square that eventually leads to XPO.
Yes, Ki Bin, when they this first came up and they told us they wanted to buy the building, we said no. And then as the discussions were on and they told us they want to invest $200,000,000 and make it their Southwest hub, action as Jojo already explained. So this has really turned out to be a very, very successful strategy and outcome for what we went into here.
That's all the time that we have for questions. I'll turn the call back to Peter Bazzilli for any closing remarks.
Thank you, operator, and thanks to everyone for participating on our call today. Please feel free to reach out to Scott, Art or me with any follow-up questions. We look forward to seeing some of you in Los Angeles for NAREIT in a few weeks. Have a great day.
This concludes today's conference call. You may now disconnect.