Ladies and gentlemen, please stand by. Good day, welcome to The Macerich Company fourth quarter 2019 earnings conference call. Today's conference is being recorded. Now at this time, I would like to turn the conference over to Jean Wood, Vice President of Investor Relations. Please go ahead.
Good morning, and thank you for joining us on our fourth quarter 2019 earnings call. During the course of this call, we will be making certain statements that may be deemed forward-looking within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of risks, uncertainties and other factors. We refer you to today's press release and our SEC filings for a detailed discussion of forward-looking statements. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the earnings release and supplemental filed on Form 8-K with the SEC, which are posted in the investor section of the company's website at macerich.com. Joining us today are Tom O'Hern, Chief Executive Officer, Scott Kingsmore, Executive Vice President and Chief Financial Officer, and Doug Healey, Executive Vice President, Leasing.
With that, I would like to turn the call over to Tom.
Thank you, Jean, and thank all of you for joining us today. It was a solid quarter with good operating metrics. Sales per foot were up 10% to $801 per foot. That's our 12th consecutive quarter of sales growth. Occupancy was 94%, up 20 basis points from September 30th, but down from 95.4% at the end of 2018. This was primarily due to the 2019 bankruptcies. Average rents were up 3.3%. We continue to experience strong leasing volumes across a wide variety of categories, with 2019 leasing activity up nearly 20% compared to the prior year. The leasing in 2019 included a significant amount of leasing to mixed use and non-traditional retail uses that are or will be bringing heightened consumer traffic to our high-quality town centers. This includes four hotel deals, including Caesars Republic at Scottsdale Fashion Square, five co-working deals, most of them with Industrious.
We agreed to three Life Time Fitness deals, plus one Equinox. Five years ago, these uses did not exist in malls. We expect this trend to accelerate as we move into 2020 and 2021. We completed an extensive 2019 financing plan, which generated over $550 million of excess loan proceeds and liquidity for the company. We continued to pursue non-core asset dispositions. We're under contract to sell a 50% share of the residential tower at Tysons Corner. In addition, we are under contract on another disposition of a non-core mall, and are in negotiations on another. For the year, we expect proceeds from non-core asset sales of approximately $300 million, and that has been factored into our 2020 guidance. Conversely, we have discontinued our efforts to joint venture any of our top-tier assets.
FFO per share was $0.98, matching consensus, and same center NOI growth for the year was 65 basis points, which was within our initial guidance range. This was accomplished in the face of significant retailer headwinds that occurred in 2019, the effects of which we see continuing into 2020. We expect to see same center NOI growth this year of a half a percent to 1%, with that accelerating in 2021. On the redevelopment front, our pipeline continues to progress well. In September, Macerich and PREIT opened Fashion District Philadelphia. The property features a unique mix of full price and flagship retail, outlet retail, restaurants, entertainment, and co-working uses. Tenants such as Century 21, Burlington, Nike, AMC Theatres, Round One, and City Winery are now open and operating. Performance has been strong, and since mid-September opening, the property has had over 3 million visitors.
Future tenants with signed leases include, among others, Industrious, Sephora, Kate Spade, and Ardene. In spring of 2021, a two-level flagship Primark will open on Market Street. We are pleased by the opening in the first holiday season, and we look forward to continued tenant openings at this unique downtown destination. Financial contributions from the asset are expected to continue to escalate in 2021 and beyond. We have executed leases and/or spaces open for 84% of the space, with another 10% committed. Significant progress continues on the repurposing of our recaptured Sears locations. Construction is underway at four of these properties. New tenants will open starting in the third quarter of 2020. Entitlement efforts continue on the two larger mixed-use projects, Los Cerritos Center and Washington Square, two of our top 10 assets. Both projects will include significant non-retail and mixed-use components.
We expect to be partnering with mixed-use experts on these two projects and other densification redevelopments. We anticipate groundbreaking on Washington Square in mid-2020 in preparation for a late 2021 grand opening. The uses at Washington Square are expected to include entertainment, food and beverage, creative office, hotel, all surrounding a plaza that will be the gathering and focal point leading into the new mall entry. We're pleased with the tenant demand and pre-leasing. We will announce tenant names as we execute deals over the coming quarters. As mentioned, our intent is to bring mixed-use components such as multi-family and hotel to both Washington Square and Los Cerritos, with some combination of ground leases and partnerships with multi-family and hotel developers with a minimal capital outlay on our part. Our redevelopment estimates for these Sears projects are $130 million-$160 million over the next several years.
We expect attractive yields of 8%-9% on the retail redevelopments, and 9%-10% for the mixed use. The variety of uses that will be featured at all these former Sears locations is extremely compelling and will significantly boost productivity and consumer traffic. At Scottsdale Fashion Square, all components of this multifaceted redevelopment are firing on all cylinders. What once was a low traffic wing leading up to a low-performing Barneys department store is now anchored by a flagship Apple, a fully occupied Industrious, and includes a new roster of exciting brands made possible by the addition of Apple and Industrious. Several hundred yards down the property, the luxury wing is rich with luxury brands, including Breitling, Burberry, Cartier, Gucci, Jimmy Choo, Louis Vuitton, Prada, Saint Laurent, Ferragamo, and Tiffany. Most recently, Nobu, Scottsdale, and Toca Madera are the latest additions to the restaurant expansion.
With the pending additions of Equinox and Caesars Republic in 2021, this latest wave of investment in this asset will be complete. Sales are nearing $1,500 per sq ft, and with the continued opening of the high traffic and high sales uses in the expansion, the leasing demand at Scottsdale Fashion Square remains extremely strong. Our portfolio features a tremendous collection of assets situated in markets with outstanding demographics. The leasing environment is good and improving with a broad and diverse set of new users. The strategic vision for our town centers is abundantly clear. They will anchor our communities and will be a focal point where our consumers repeatedly visit to shop, to dine, to be entertained, and in a growing number of instances, to work and live. In some cases, the investments may be minor, in others, they may be more significant.
As Doug will mention shortly, we are very enthused by the long list of significant projects that will start generating significant NOI for us in 2021. Now I'll turn it over to Scott to discuss the results for the quarter and summarize our very significant 2019 financing activity.
Thank you, Tom. The fourth quarter reflected good financial results, matching both company and street expectations. Here are some highlights for the quarter and for the year. FFO for the fourth quarter was $0.98 per share. In 2019, FFO was $3.54 per share, both matching consensus per First Call. The $0.98 in the fourth quarter represented an $0.11 decline from FFO of $1.09 per share in the fourth quarter of 2018, given primarily the following factors. One, higher leasing expenses of approximately $5 million, driven by the new leasing accounting standard. Two, lower lease termination income of $2.6 million. Three, higher interest expense of $2.1 million. Four, a favorable tax appeal during the fourth quarter of 2018, totaling roughly $3.5 million at one of our New York assets. This ultimately created an unfavorable comp in the fourth quarter of 2019.
Lastly, lost anchor rents from Sears, called a bankruptcy, of $1.5 million in the fourth quarter. Same-center net operating income was flat during the quarter and finished up 0.65% for 2019, which fell within our 0.5%-1.0% same-center NOI guidance for 2019. As we have mentioned on prior calls, we anticipated growth in the second half of 2019 to be lower than the first half of 2019 as a result of the bankruptcies, including Forever 21, and that was in fact the case. During 2019, the impact of both 2018 and 2019 non-anchor bankruptcies had an approximately 2% dilutive impact on 2019 same-center NOI growth. EBITDA margin showed significant improvement in 2019. The EBITDA margin increased by 90 basis points from 62.7% in 2018 to 63.6% in 2019. This morning, onto guidance.
We did provide detailed 2020 earnings guidance, and we direct you to the company's Form 8-K supplemental financial information for more details of those guidance assumptions. 2020 funds from operations is estimated in the range of $3.40-$3.50 per share, and same center NOI growth is estimated to be in the range of 0.5%-1%. While many guidance assumptions are provided within our supplemental filing, I would like to provide some further details. Similar to last year at this time, we thought it would be useful to highlight a few major components to help reconcile from actual 2019 FFO of $3.54 per share to the midpoint of our FFO guidance for 2020, which is $3.45 per share. One, we anticipate approximately $0.06 of decline in 2020 versus 2019 from the combination of reduced straight-line rent and SFAS 141 income.
These non-cash line items can be choppy, especially when we are required to write off tenant balances as a result of early pre-lease expiration store closures, as was the case in 2019. Two. We have included within our guidance $0.03 of expected dilution from disposition activity, including from Tysons Vita and other non-core dispositions that we are currently focused on. Three. As a reminder, there is continued rent loss from Sears that rolls into the first half of 2020, contributing to approximately $0.03 of dilution. Recall, this does not impact same-center results. Four. At Fashion District Philadelphia, we anticipate 2020 year-end occupancy of roughly 80%, and year-end 2019 occupancy was approximately 65%.
Given this occupancy ramp and the fact that capitalized interest on the project is substantially lower in 2020 now that the project is open, this property is only modestly FFO accreted to Macerich in 2020, but will significantly contribute to the company's FFO in 2021 and beyond. A few other notes regarding guidance. We have embedded approximately $0.06 or 100 basis points of general reserves for rent loss into 2020 same-center NOI guidance. We will monitor and adjust this figure as the year progresses. In terms of FFO by quarter, we estimate 23% in Q1, 25% in Q2, 24% in Q3, and the balance of 28% in the final quarter. While we are certainly not giving forward-looking guidance into 2021 and future years, we remain very optimistic about the financial tailwinds from numerous small and larger scale redevelopment investments in 2021 and beyond.
Again, please refer to our 8-K that was filed this morning for further information. On to financing activity for the year. To recap the 2019 activity, we were extremely active last year in the debt capital markets. In total, we closed nine deals totaling over $2 billion, or $1.4 billion at the company's ownership share. This yielded over $560 million of liquidity and available capital to the company. The average interest rate across these loans was 4.0%, and the average term was 9.3 years. These nine financed assets included Fashion Outlet Chicago, Shops at Atlas Park, SanTan Village, Chandler Fashion Center, Fashion District at Philadelphia, Tysons Tower, West Acres Mall, Kings Plaza, and lastly, One Westside. During the fourth quarter, we closed two major deals. On December 3rd, we closed a $540 million refinance of Kings Plaza. This 10-year CMBS loan bears interest at an all-in fixed rate of 3.62%.
The proceeds were used to refinance an existing $427 million loan and to repay a portion of the company's line of credit. Given the existing debt was amortizing and the new loan is interest only, the new mortgage will provide over $10 million of annual cash flow savings. On December 18th, our joint venture in One Westside closed a $415 million non-recourse construction financing on the soon to be new Google creative office campus in West L.A. The loan carries a rate of LIBOR plus 1.7%, which reduces to LIBOR + 1.5% once Google opens. The facility will cover the JV's remaining share of development costs. Looking into 2020, we do anticipate financing Danbury Fair Mall, Green Acres Mall, and another unencumbered A mall asset. We believe those assets will be very well received within the financing market and should generate in excess of $400 million.
Now I will turn it over to Doug to discuss the leasing and operating environment.
Thanks, Scott. In the fourth quarter, sales remained strong and leasing momentum continued. Portfolio sales ended the fourth quarter at $801 per square foot, which represented a 10.3% increase from $726 per square foot at the end of 2018. Economic sales per square foot, which are weighted based on NOI, were $916 per square foot, and that's up 7.9% from $849 per square foot a year ago. 2019 year-end occupancy was 94%, and that's up 20 basis points from last quarter and down 1.4% from year-end 2018. This is primarily due to 450,000 sq f t or 2% of our GLA being rejected and closed through bankruptcies in 2019. Temporary occupancy was 6.3%, and that's unchanged from December 31st, 2018. Trailing 12-month leasing spreads were 4.7%, and that's down from 11.1% from year-end 2018.
In addition to affecting occupancy, the 450,000 sq f t or 2% of our GLA that was rejected and closed through bankruptcy also put downward pressure on 2019 leasing spreads. At this point in the business cycle, and as Tom stated, we believe the opportunities to drive occupancy and increase cash flow are more prevalent through leasing velocity and vacancy backfill. Average rent for the portfolio was $61.06, and that's up 3.3% from $59.09 one year ago. Leasing volumes remained extremely strong throughout 2019. During the fourth quarter, 233 leases were signed for nearly 1 million square feet, bringing the 2019 totals to 938 leases signed for just over 3.5 million square feet. Now, this represents 18% more leases and 19% more square feet than what was accomplished in 2018.
This excludes Fashion District Philadelphia, which we'll discuss in a moment. We continue to leverage the strength of our powerful portfolio by executing on several key packages of deals. They include four deals with Amazon for both their Books and Amazon four-star concepts at FlatIron, Cerritos, Scottsdale, and 29th Street. That totals 18,000 sq ft. Additionally, we made deals with Ardène, a Canadian fast fashion retailer, Freehold, Deptford, and Fashion District Philadelphia, totaling 28,000 sq ft. We made three deals with BoxLunch at South Plains, Valley River, and Vintage Faire, then nine deals with Lovisa, a fast fashion jeweler out of New Zealand. This brings our total business with Lovisa to 11 stores, when you include the stores already open in Los Cerritos and Fashion Outlets of Chicago. The large format space continues to be very active.
We signed leases with Dick's Sporting Goods at Vintage Faire Mall for 45,000 sq ft, and Crunch Fitness at Deptford Mall for 28,000 sq f t, both of those in vacant Sears boxes. We also signed leases for Ross Dress for Less at Pacific View for 21,000 sq ft, and adidas at Fashion Outlets of Niagara Falls for 10,000 sq ft. It's obvious that the large format category is becoming more important and more influential than ever, and we believe it's currently one of the most efficient ways to drive occupancy and increase cash flow.
By way of example, if you take the large format leases that are signed or at lease in the Sears boxes at Deptford, Vintage, and Chandler, as well as the soon to be vacant Forever 21 boxes at Danbury and Arrowhead, you layer in Life Time Fitness at Broadway Plaza and The Oaks, and Equinox and Caesars Hotel at Scottsdale Fashion Square, by the end of 2020 and into 2021, we're looking at bringing online an additional $10 million at share of incremental annual revenue. We're still in the very early days within this large format sector. In the food and beverage category, we signed leases with Bamboo Sushi at Biltmore Fashion Park, Bubba's 33 at South Plains, and Shake Shack at Danbury Fair. This brings our total number of deals with Shake Shack to 11, making Macerich one of Shake Shack's largest landlords.
We signed multiple leases with digitally native and emerging brands in Q4, including Morphe at Arrowhead, Toca Madera at Carillon Commons, Purple at Santa Monica Place, Warby Parker at 29th Street, and gorjana at the Village of Corte Madera and Broadway Plaza. In further of Tom's comments on Fashion District Philadelphia regarding its grand opening, it was another very strong quarter for FDP in terms of leasing. We signed eight leases for almost 90,000 square ft, including key deals with Primark and 47,000 sq ft, Sephora and 7,500 sq f t, Kate Spade and 3,500 sq f t, PSW and 15,000 sq f t, and Ardene and 12,000 sq f t. While we're happy with what we transacted on in 2019, we know it's important, especially in this volatile retail environment, to get out in front of our business by addressing our 2020 lease expirations now.
To that end, I'm pleased to report that between signed leases and leases out for signature, in terms of square footage, we're 63% completed with our 2020 business. When you include active LOIs, we're almost 90% completed with our 2020 business. In the fourth quarter, we opened 105 new tenants totaling 339 sq ft. This is in addition to the 65 new tenants totaling 205,000 sq ft that we opened in the prior quarter. Retailers of note include a 23,000 sq ft H&M and a 10,000 sq ft Salon Republic at The Oaks, Toca Madera and Zinqué, two first Arizona restaurants at Scottsdale Fashion Square, Roots and L'Occitane at Tysons Corner Center, Five Below and 10,000 sq ft at Freehold Raceway Mall. We opened five abercrombie kids stores totaling 15,000 sq ft.
Lastly, we opened Ulta and Ross Dress for Less in about 35,000 sq ft at Superstition Springs, which finalized the backfill of a vacant Sports Authority box. Digital and emerging brands continue to migrate towards bricks and mortar. In the fourth quarter, we opened six more locations, including Amazon 4-star at Village of Corte Madera, UNTUCKit at Freehold Raceway, Purple at Santa Monica Place, and Havaianas, Stance, and Tommy John at Scottsdale Fashion Square. Also in the fourth quarter, we opened another eight locations with YM, the Canadian fast fashion retailer out of Canada, who bought the rights to Charlotte Russe. These eight locations total 50,000 sq ft. The final two deals in the YM package will open Q1 2020, bringing the total to 17.
After the liquidation of Charlotte Russe, which occurred in Q2 2019, leaving us with 25 vacant locations totaling 160,000 sq ft, between YM and a couple of other retailers, 21 of the 25 locations that Charlotte Russe vacated have already been backfilled. In conclusion, the leasing environment remains strong. As I've been saying for the last several quarters, we believe the time is right to take advantage of the current disruption in the retail environment by uncovering and securing new, exciting, and cutting edge uses across the multifaceted categories within our properties. Yes, we'll continue to rely on our legacy retail partners, especially those who have used the last several years to reinvent themselves. It does not and it cannot stop there.
As we know, times have changed, our shoppers changed, and shopping patterns have changed. In 2019, we made it our mission to uncover the latest and greatest brands and uses to help adapt to these changes. I'm extremely pleased with our progress. In 2019, we signed 94 deals totaling 150,000 sq ft of all new to Macerich tenants that we've never done business with in the past. In the end, 2019 was both a challenging year and a rewarding year. Most of all, I believe it was a year in which we changed our thinking and set the groundwork for whatever the future may bring. For 2020, our goal is simple: to continue to morph our properties into best-in-class town centers through transformational and creative leasing.
Town centers that will be something for everybody and places where folks will want to gather and can, in fact, actually work, shop, and play. As we do just that, I believe Macerich will continue to have one of the strongest and most sought-after portfolios in our industry. Now I'll turn it over to the operator to open up the call for Q&A.
Ladies and gentlemen, if you wish to ask a question, you can press star one on your telephone keypad. If you're using a speakerphone, please unmute your phone to allow the signal through to our equipment. We ask that you limit yourself to one question and one follow-up question. You are welcome to press star one again to ask any further questions. We'll pause for a moment to allow everyone an opportunity to signal. We will hear first from Craig Schmidt with Bank of America.
Thank you. I wondered if you could give us an expected incremental NOI increase coming from Scottsdale Fashion Square and Fashion District Philadelphia for 2020.
Yeah, sure, Craig. Good morning. This is Scott. Start with SBP. Incremental NOI, if I were to look at our pro forma, you could probably triangulate to 4.5%, 5% or so. Again, bear in mind that capitalized interest offsets, right? As I mentioned in my opening remarks, it's only modestly accretive in 2020, but we anticipate significant accretion in 2021, 2022, and beyond. Scottsdale Fashion, for the most part, is sitting in our same center. The expansion space that includes restaurants and fitness is not in our same center. That is accretive. I currently don't have a number. It's certainly above our portfolio average, given all the leasing activity. I don't have a figure for you offhand, though, Craig.
Okay. Thank you. That's helpful. Then I just wondered, what is the potential impact if Proposition 13 would pass for Macerich?
Craig, Prop 13 has been challenged many times in California over the last 30 years or so. Apparently, they've got enough signatures, it's going to be on the ballot, we know it's not polling well. For a variety of reasons, we think it's a long shot that that initiative to turn over Prop 13 or convert it to split tax rolls probably will not be successful. In our case, we structured our leases, almost all of them, as fixed CAM, but we have continued to bill property taxes on a triple net basis. We don't think it's going to have much impact. We realize that's going to put some incremental pressure on occupancy cost as a percentage of sales.
If it were to pass, which again, we think is a long shot, we don't think it would have any immediate impact on FFO or same center NOI.
Okay. Thank you.
Now we'll take a question from Alexander Goldfarb with Piper Sandler.
Good morning out there. First question is, Scott, just going over the same store pool. I didn't hear you guys talk about Forever 21, just confirming that it's still your prior guidance of $0.08 impact. When you guys go through your same store guidance this year of 0.5 to 1, how much is already reflected, not in that number, but how much of the portfolio is already having drag from closings last year? Meaning, are you starting the year off with 50 basis points of 2019 closings? Does 100 basis points of bad debt, sorry, that's what I meant. Does 100 basis points of bad debt, does that already include what you know has closed to date, meaning like Forever 21, and therefore there's 100 extra? Is the 100 already include stuff that's already closed this year?
Good morning, Alex. I'll take all those. I'm not sure I can remember all five, but I'll try and do my best here. 2020 same center guidance embeds within it as a result of the 2019 bankruptcies, approximately 200-225 basis points reduction of same center NOI. That includes the general 1% budgeting reserve that I mentioned in my opening remarks. Same center also includes the impact of Forever 21. I'll just refer back to the comments that we made in the third quarter call as to what the impact there is. We said roughly $0.08 was the impact on an annualized basis, and that roughly $0.02 of that would be felt in 2019 and the balance in 2020.
All of that will hit same center. In terms of what is and is not in our same center pool, Fashion District of Philadelphia hits our same center pool in the final quarter of the year, Q4. Our Sears boxes are not in our same center pool. Again, that does have some bearing on the first half because we did receive some rent in the first half of 2019 that we're certainly not receiving this year. The expansion area for Scottsdale is not in our same center pool. Lastly, One Westside is pretty inconsequential given the fact that was closed pretty much most of 2019, but that is also out of our same center pool. Hopefully that answers all your questions.
Yeah. Scott, on the 100 basis points of credit reserve for this year, is any of that already being used or is this all incremental? Meaning whatever you may have gotten notices for so far this year, is that in part of that 100 or that's incremental to the 100?
It's incremental, Alex.
Okay. The second question is, asset sales. Last time you talked about possible, I think about $80 million of, I think it was like apartment sale in the fourth quarter, then maybe some additional sales aggregating about $280 million. Didn't hear anything like that, but certainly noticed in your dividend composition from last year, you guys earned $135, you had gains of $65, but you still maintained the full $3 dividend. As we think about everything for this year, are we still thinking about asset sales and for that, you're still planning on keeping the dividend? Or are the asset sales no longer part of the calculus as you think about your 2020?
Well, Alex, as we look at 2020, the focus has shifted to selling non-core assets. In those, we typically don't have the same elevated tax gain or capital gain as we would if we sold one of our top 10 assets or top 20 assets. To some extent, there were tax considerations in 2019 that don't exist in 2020.
Okay. You're still going to maintain the same dividend payment despite that it's a pretty good source of capital and the market's sort of pricing. They're not pricing you on the current dividend. They're pricing on something less than that.
Okay, let me see if I've got this one right. If you're asking about the dividend, that's a board action. It's not my decision, so I can't speak for the board here. I will tell you that last week the board did approve, and we declared a dividend of $0.75 per share, which was consistent with prior.
Okay.
Again, that's a board decision, and the board addresses it quarterly before they declare the dividend. They're aware that there's room of about $1 a share, in terms of the non-taxable part of the dividend that could be used if they deem it so appropriate. To date, the board has not been interested in making that change, but it's their decision.
Okay. Thank you, Tom.
We'll now hear from Christy McElroy with Citi.
Thanks. Just to follow up on Alex's question on the asset sales. $300 million, that includes the $82 million for the 50% interest in VITA, which it hasn't closed yet. Just in regard to the other $200+ million , you mentioned the non-core mall under contract and then another non-core asset in negotiation. Do those three assets comprise the entire $300 million, or is there an expectation for others? Is the non-core asset under negotiation a mall or a non-retail asset? Just maybe some color on that. Thanks.
Those three will get fairly close to 300, and there may be one or two other small assets that are non-core for us that may be dispositions this year. Other than the apartment tower at Tysons Corner, the other assets are non-core malls.
Can you give a sense for cap rates on those non-core malls?
No, if I could, I'm not so sure that they would be very relevant because a lot of those assets don't have a lot of EBITDA, but they do in fact have some pretty good real estate value and the potential to do other things like multifamily.
Just in regard to your capitalized interest guidance of $25 million in 2020, I would have thought more of that would have started to be expensed as you delivered Scottsdale and you continue to stabilize Fashion District. How should we be thinking about the moving parts of that number as more of the interest related to those two projects are expensed, but is there anything else that's sort of being added to CIP or added to the pipeline beyond what you've listed in the development schedule that would impact that number?
Good morning, Christy. Certainly bear in mind that our projects, all of our Sears boxes are going to be factored in there. We have got a couple large format uses that we feel very good about the opportunities on. A couple Forever 21 boxes, those will be in the numbers. One Westside is obviously, we are throwing hammers, that is going to be factored in there. Bear in mind, Scottsdale was a multi-phase project, a lot of that was already placed into service throughout 2019. Certainly the wing that now features Apple and Industrious was fully in place for all of 2019, you do not have much of a decline there year-over-year. Fashion District, frankly, is the biggest year-over-year decline.
Again, there's continued reinvestment back into the portfolio in our high-quality Sears boxes, One Westside, like I said, a couple of the larger format Forever 21 stores that we are at lease on right now, and we feel very good about.
Those Forever 21 boxes will go into CIP, but they remain in the same-store pool?
Yeah, two different concepts. We typically carve out of same-center our major redevelopments, but when it comes to repurposing boxes and spending development capital to the tune of that order of magnitude, GAAP allows that to be considered construction in process and allows you to recognize capitalized interest. They're really two different concepts, Christy.
Thanks.
You bet.
James Sullivan with BTIG has the next question.
Yeah, thank you. Scott, thanks for providing that reconciliation in terms of the items that gets you from the same-store guide to a per share number. Midpoint of the per share guide at $3.45. I just wanted to clarify, because you listed the Sears box, as you said, that was not included in same-center. Then you itemized, I think 1%, $0.06 a share for kind of a loss reserve. When you report the same store, however, you typically will reflect any credit loss in the same store. Is that right or no?
Yeah, that's correct. Really the 1%, Jim, is just budgeted rents that we're carrying a reserve against for potential fallout. We'll continue to assess that throughout the year. That's a bit different than the notion of bad debt, where we're writing off uncollectible receivables. Inherent within our guidance is a bad debt expense estimate of $7 million, and we provided that on page 10 of our supp. In addition to that $7 million of uncollectible billed rents, we have an additional 1% of general reserves against potential fallout that we'll monitor as we progress.
That $7 million number you gave, yeah, that was indicated, I know, on the guidance page. I guess the issue is between the same store number and those items. I know lease term is excluded and one or two of those other items, but I would've thought that the reserve would've been the same. It would already be the 0.5%-1%, in other words, would be the same as maybe what you start the year with in each case. No? How you get to $0.06.
I'm not sure
would not be incremental.
Well, the $0.06. Maybe we're not speaking the same language here. The $0.06 is embedded within our thinking for the 0.5%-1% same center NOI guidance. I think Alex's question was, is any of the Forever 21, for instance, or other known bankruptcies inherent within that $0.06 or 100 basis points of general reserves? The answer is no. It's all incremental on top of what we know today.
No, okay. No, I understand that.
Is that clear?
Okay. Maybe we can follow up on this offline, but I'm just trying to connect the dots from obviously the 2019 result, adding some $0.03 to $0.06 of positive contribution from the same store guide, and then making the adjustments that then take the number back down to $3.45. We can follow up online on that, or offline on that.
Yeah, sure.
I also want to talk about-
Sounds good.
the refi proceeds. I know between the consolidated assets, between 4Q maturities and 1Q maturity, you've got about almost $600 million of maturities. You had talked, I think, in your prepared comments about financing on Danbury and Green Acres and another mall, and I think you mentioned something like $400 million in proceeds. I guess the question is Fashion Outlets at Niagara. What are you anticipating there at this point, to the extent you're comfortable talking about it? Number two, on Danbury Fair and Green Acres, are you anticipating excess proceeds to the maturity or no?
Yes, we are. Danbury Fair is a 10-year maturity. Given continued investment and progress and value creation at that asset over the course of a 10-year period, there's certainly the opportunity to extract extra value out of that one, and we do anticipate excess proceeds. Green Acres is very much the same way, even though we've only owned the asset for about seven years. Recall we did build a very substantial power center adjacent to the project. Frankly, the performance of Green Acres Mall is well beyond our expectations, and I do think there's the opportunity to extract excess proceeds. The third asset I mentioned, not by name, but I did describe it as unencumbered, and so I do feel very good that asset, which performs extremely well, will result in some excess proceeds. I think the last question you asked was Fashion Outlets in Niagara.
We're still evaluating that one. It's very possible at this time we may unencumber that one, but we'll be reporting back on that one over the course of the year.
Okay, very good. Thank you.
Now we'll take a question from Todd Thomas with KeyBanc Capital Markets.
Hi, thanks. Just first, a follow-up on the same-store forecast. Scott, I think you commented that Fashion Outlets of Philadelphia comes into the pool in the fourth quarter. Things like that could have an impact on the full-year forecast. Just given the ramp you're expecting to experience in occupancy, and I presume rental income, what's the impact that Philly has on the full-year same-store growth forecast?
Sure, Todd. Good morning. Well, given the fact it's only one quarter, it's not going to be a massive impact. What I can say, though, is as we look into 2021, Philadelphia will certainly be a major contributor, as will a lot of these larger boxes that are going to be coming online. One of the consequences of getting this real estate back, leasing it up, prepping the space for tenant delivery, and ultimately building out the store, is it takes about 18 to 24 months for that income to come to fruition and actually to get those tenants open and operating. We're looking at towards the end of this year and the beginning of 2021 having a significant inventory of that space coming online, which is the figure that Doug mentioned earlier. We do feel good about the contributions in 2021.
Circle back specifically to your question, though, the 2020 contribution from Philadelphia in the fourth quarter. There certainly is one, but it's not very significant in light of it's a single asset for one quarter.
Okay, got it. Doug, apologies if I missed this, but I think temp and short-term leasing contributed about 640 basis points of occupancy last quarter. Can you share where that was at year-end, and can you comment on how you expect that to trend throughout the year?
Yeah, Todd, this is Tom. I think the number at year-end was 6.3%, so pretty consistent with the third quarter, and I think that was flat with last year. There's a pretty strong initiative here to convert temporary space to permanent space because there's a significant pickup in rent between a temp tenant and a perm tenant. That's going to be a big push this year.
Okay. Can you quantify that a little bit? Do you have a sense for where rents are for that bucket? How much of a lift do you see on average when converting short-term leases to permanent?
It's usually a 50% pickup in rent when you convert. The goal with this year would be to knock that down by 75 or 100 basis points to take it closer to 5% from the 6.3% it's at today. We've got a team of people that specifically focuses on converting temps to perm.
Okay, got it. Just one last question also on leasing. You discussed some of the leasing activity in 2019, the progress that you've made on the 2020 expirations. Can you just comment specifically on the leasing spreads in the quarter and in the consolidated portfolio? They sort of came in sharply this quarter. I was just curious if you can discuss what that's attributable to.
Yeah, it's Doug. It all really depends on the property and the market. In our top-tier centers, as we look to execute on the 2020 business, we're executing at positive decent spreads. However, on some of our lower-tier centers, it may be more of an occupancy play. Obviously, when we're working to drive occupancy, it does come at the expense of rate, which affects spreads, but I wouldn't say that's the case in the majority of our properties.
Okay. Thank you.
Now we'll move to a question from Steve Sakwa with Evercore ISI.
Thanks. I guess first, there was an article yesterday about Intelsat filing for bankruptcy, I know that's a large office tenant you've got in Tysons. Any just sort of commentary you can provide around that tenant, its space needs, and how you think that might play out?
Well, they were one of our original tenants, Steve. Around the time they went public, right about the time we opened Tysons Tower five or six years ago. They've been an anchor tenant there with, I think, three or four floors. That being said, that market is pretty strong today. We're actually considering doing more office there. We don't think it would be too difficult if it came to that. We don't believe it will, but if it did come to the situation where they did file and we had to make some decisions, there's a much stronger office market today than there was when we originally did that deal. We in all likelihood would get a rent pickup as a result of taking that rent to market if it comes our way.
There's nothing baked into the 0.5%-1% for any kind of dislocation or disruption from that, is that correct?
That's correct.
Okay. Secondly, can you just broad picture give us, maybe I missed it, kind of the funding needs that you have for developments, redevelopments in 2020, 2021, and 2022?
Yeah, on average, Steve, we're going to be $250 million-$300 million. That's about what we were this year. Scott went through the refinancing liquidity that we generated, and that was roughly $550 million. There was liquidity well in excess of our capital needs generated this year. On top of what may come out of the financing pipeline, we're also deep in either contract or negotiations to sell some non-core assets, which will generate some additional liquidity, and we very well could continue that game plan as we move forward into 2021 and beyond. It's long been a goal of ours to sell our non-core assets if we can do it cost effectively and without a big earnings impact. That's an avenue we're going to continue to pursue in terms of generating liquidity to cover our very accretive redevelopments.
Just maybe one for Scott, just in terms of how you think about assets going in, going out of the same store pool. I guess Fashion District Philadelphia is obviously still ramping and really doesn't even stabilize till, it sounds like, it's in the 80% range and gets into the 90s, even a year from now. It sounds like that's going into the pool in the fourth quarter of 2020, although it's not really stabilized yet. Is it just a strict definition of 13 months and the asset goes in, or is there something a little bit more specific as to how you think about that or the new wing in Scottsdale when that gets added?
Yeah, you're pretty much spot on. You get four full quarters, then it gets into the same center pool. The fourth quarter of this year happens to be the anniversary for Fashion District. Let me just expand a little bit on the occupancy because the stats can be a bit deceiving. We do anticipate occupancy, as I mentioned, roughly 80% by year-end 2020. Bear in mind that there are three major spaces at that property that happen to be unique that are carrying into 2021. Primark, we expect to be a spring 2021 delivery. It's roughly 50,000 sq ft, two levels on market. It's going to be a great flagship anchor for us. In addition, there's two destination spaces on the east side of the project, and collectively with Primark, that's nearing 15% of the space.
It's a bit deceiving when I say 80%, but the core of the mall is certainly going to be more occupied than that. There just happen to be three distinct spaces that are going to trickle into 2021 that are going to drive some significant financial results in 2021 and beyond.
Okay. Thank you.
Now we'll hear from Linda Tsai with Jefferies.
Hi. Could you tell us how much Intelsat was paying in terms of rent, since that isn't included in your credit loss, if I heard that correctly?
Linda, we don't provide specifics on how much each tenant pays. It would be very detrimental to the lease negotiations in a lot of cases. We don't provide those specifics.
Okay. Since you've sold the multifamily sites, would you consider selling the office at some point?
Certainly. When we built those, it was our stated intention that we didn't necessarily plan to build them and hold them forever, but that as long as we own them and could control the development and how they were oriented towards the 2 million square foot powerhouse mall, we were going to do that. That's been done. The transit station's been built there. Both assets are doing quite well. That has actually turned that location, that entrance to the mall, into the number one location. We do have an open mind going forward, and that could possibly be a candidate to be sold along with our other non-core dispositions.
Can you discuss what drove your decision not to JV one or two of your top 20 assets and what it would take for you to revisit that concept?
I'm sure this is no surprise to you, but today, retail real estate, particularly mall real estate, is out of favor with institutional investors. Even the very high-quality assets, including the two or three that we exposed to the market, there's just not strong demand right now. We like those assets. We're glad to hang on to 100% of them. They are core assets for us, and we'll generate liquidity through selling non-core assets, as I mentioned.
Thanks. Just one last one. What's driving the lower occupancy cost ratio at your unconsolidated centers? It looks like you ended the year at 10.8%, and then last year was 11.5%, and in 2017, it was 12.7%. Is there kind of a targeted ratio you'd like to achieve, and just what's driving that?
Well, you've got a lot of factors. Sales have been up. Some cases you've got some bankrupt tenants that had a high occupancy cost as a percentage of sales that are coming out of the equation. That's pulling that number down, and I suspect that's the biggest reason for the drop versus the prior year.
Thanks.
Next question comes from Michael Mueller with JP Morgan.
Yeah, hi. You talked about the temp-to-perm leasing goals, but where do you see the overall 94% occupancy level going by year-end 2020?
Hey, it's Doug. I think between our temp to perm efforts and our focus in 2020 in leasing the vacant space that we've gotten back to us, I think we could see our occupancy increase by 100 basis points from 94% to 95%.
Got it. Okay. That was it. Thank you.
Now we'll take a question from Jeremy Metz with BMO Capital Markets.
Hey, guys. Sorry if I missed this, I just want to go back to the asset sales, the $300 million. It was a net number. I assume that those include some debt that's going to go away, making the gross proceeds higher. Maybe you can just quantify the gross expectations there. Just to be clear, it sounds like those will be outright sales as opposed to any sort of JVs. Is that right?
In all likelihood, they will be outright sales. There's a couple possibilities where I may stay in for a small JV interest. All those assets that we're considering in this group of non-core dispositions are unencumbered.
All right. Helpful. Just in terms of the percentage rent, you had pretty good uplift in 2019. I guess just two parts on that. First is, part of that lift you saw just being driven by converting some tenants to percentage rent, and that's helping kind of push it higher. Just I guess second is just how we should think about that here for 2020. Obviously, I think there's a desire to convert that to base rent, but maybe that's not in the cards. Any color there? Thanks.
Yes. Sure, Jeremy. I don't think conversion to percentage sales deals is what's driving that. It is a positive sales environment. Positive sales doesn't necessarily translate to each and every tenant. We do have some tenants that have surpassed their break point that I can't mention properties or tenants specifically, but that's what kind of drove the result uniquely. Percentage rent as a whole really has not been impactful to our entire rent structure. I don't think that's going to be a significant driver. It's certainly nothing we point to say that's something we can do to drive 1% same-center growth by any means. It's not a function of converting to gross deals.
Thanks, Dave.
Now we'll take a question from Haendel St. Juste from Mizuho.
Hey, good morning out there. I guess thanks for the color on the planned refinancing activity for this year, the $400 million of incremental liquidity you outlined. That is new debt after all, and your debt EBITDA sits here around 9x. I guess my question is, as you consider the 2020 outlook today, the development NOI coming online, and the refinancing activity plan this year, I guess I'm curious when we could start to see that debt-to-EBITDA figure improved. Where do you think that'll be by year-end and perhaps year-end 2021?
Yeah. There's obviously two sides of that equation. The debt that's being incurred with the refis, but also the additional EBITDA that's coming online from assets like Fashion District Philadelphia, Scottsdale Fashion Square, as well as the Sears projects. I think we're really going to see that start to decline as we accelerate same-center NOI going forward into 2020. We certainly expect that to be a stronger year for same-center growth than this year when we're still absorbing some of the bankrupt space. We think that's going to come down gradually, naturally, and I think there's actually a chart in our investor deck, which I don't have memorized, but if you take a look at that, I think you'll see what our expectation is for debt-to-EBITDA going forward.
I do recall that chart, but if I recall correctly, I think that chart did not include a Forever 21 bankruptcy or some form of the challenges they're facing now. I guess I was curious if there was an updated perspective. I do appreciate those thoughts. What is the unencumbered NOI today or as of fourth quarter for the portfolio?
Unencumbered NOI, I'd tag it roughly 15%-20%.
Okay. Lastly, Corte Madera. Looking at your top 20 malls, looks like sales per square foot are up across the board with the exception of Corte Madera, your number two mall. Sales per square foot there look to be down 10% year-over-year and 15% from last quarter. Can you discuss what's going on there and what that's attributable to? Is that a temporary blip, or is there something more meaningful we should be aware of? Thanks.
Yeah. Corte Madera, we had a couple tenants that are moving around, just as part of some redevelopment activity. I think that's really what's driving that. We had some high-octane tenants that are experiencing some temporary downtime as they relocate that happened to shift out of the sales pool and they'll be back into the sales pool. I think that's a temporary disruption in the figure.
Is that something that you think is a 2021 event perhaps to see the sales migrate back to where they were, or is it going to take a bit more time?
Yeah, I would think so. I would think so, Haendel. Yeah.
Okay. Thank you.
That's all the time we have for questions. I'll turn the call back to Tom for closing remarks.
Thank you, Jake. Well, thank you everyone for joining us today. We look forward to seeing you and speaking with many of you over the coming months.
With that, ladies and gentlemen, this does conclude your conference for today. We do thank you for your participation. You may now disconnect.