Columbia Property Trust, Inc.
Q4 2017 Earnings Call Transcript

Published: 16 Feb 2018

[Operator:]

Good afternoon. And welcome to the Columbia Property Trust Fourth Quarter 2017 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Matt Stover, Director of Finance and Investor Relations. Please go ahead.

[Matt Stover:]

Thank you. And good afternoon, everyone. Welcome to the fourth quarter 2017 Columbia Property Trust Investor Conference Call. On the call with me today are Nelson Mills, President and Chief Executive Officer; Jim Fleming, Executive Vice President and Chief Financial Officer and other members of our senior management team. Our results were released this afternoon and our quarterly supplemental package which can be found on the Investor Relations section of our website and filed with SEC on Form 8-K. We've also filed our 10-K with the SEC this afternoon. Statements made on this call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated, including those discussed in the Risk Factor section of our 2016 Form 10-K. Forward-looking statements are made based on current expectations, assumptions and beliefs, as well as information available to us at this time. Columbia undertakes no obligation to update any information discussed on this conference call. During this call, we will discuss certain non-GAAP financial measures. Reconciliations to comparable GAAP financial measures can be found in our supplemental financial data. With that, I'll now turn the call over to Nelson Mills.

[Nelson Mills:]

Thanks Matt. And thank you everyone for joining us today. We've now essentially completed our very successful portfolio of transformation which sets us up for significant same store NOI and FFO growth in the quarters ahead. Columbia Property Trust is now effectively a pure- play CBD Office REIT focused on a select few of the strongest, coastal gateway markets in the country. Let's take a look at the strength of our portfolio and why we believe it will drive out performance among office REITs as we move forward. Our high quality portfolio is more than 96% leased with very little rollover the next few years .We have 45% of assets in New York; 22% in San Francisco and 13% in Washington DC. That 80% of our portfolio in these three highly liquid, high barriers to entry markets, combined these factors with our investment grade ready balance sheet, Columbia Property Trust enjoys a solid base from which to grow. What's equally exciting is the significant upside in earnings and cash flow that we will start to see immediately this year. We have well positioned smaller floor plate building that has been recently renovated, located in markets such as Midtown South. We continue to attract dynamic tenants looking for differentiated space. Our properties are especially desirable to TAMI, financial services and other high growth tenants, producing a compelling opportunity for investors as well. Our growth story includes three primary catalysts. First, our robust leasing activity in recent quarters creates dramatic near-term upside with economic occupancy on the rise, as rent abatement quickly burn off. In fact, 13% of our lease space is not even producing a rent yet, but the gap between leased and economic occupancy is going to close quickly. The second layer of growth is more modest but still important. With 3,700 square feet of vacancy in very attractive submarkets and 261,000 square feet schedule to roll over the next couple of years, much of which is some of the strongest CBDs in the country, we believe our team can push our occupancy further, while also pushing rents. We signed more than 700,000 square feet of new leases last year. And with the solid pipeline of tenant demand, we have confidence that we'll further build on this leasing success. Third, even with all the leasing we've already accomplished, we still believe that rents across our portfolio are well under market. Our view is that in place net rents across portfolio are about 10% less than current market renovates on average. These under market rents combined with the potential for growth in market rents over time should allow us to increase our earnings and cash flow significantly over the next several years. Let's discuss some of our recently leasing activity, which demonstrates the appeal of well located, unique assets in our key CBD submarkets. Last year, we added BDG Media and Gemini Trust to our tenant roster at 315, Park Avenue South. That's located in the heart of Manhattan Midtown South district. In early 2018, we signed a 34,000 square foot lease with Pittsburg Data, a financial software company for two full floors in this building. 315, Park Avenue South is now 84% leased with the remaining floors under discussion with prospective tenants. Our success at this property and others demonstrates our ability to attract and meet the needs of broad spectrum of desirable tenants. Turning to capital allocation. During 2017, we exit Houston and Cleveland and reinvested those proceeds into new properties in New York City and in share repurchases. We were also very pleased to form to a new joint venture with Allianz. This key relationship along with our venture with our value partner Blackstone, served the cost effectively expands our presence and reaching our markets. As we reported on our last quarterly call, we collaborated with Allianz acquire 1800 M Street in Washington DC in October. This stabilized asset as to our significant scale in that market. Combined with our ADM street property which is all well leased, this acquisition nicely balances our growth opportunities in Market Square. We expect to further leverage our joint venture relationships as we identify compelling opportunities. Also during the fourth quarter, we added three more properties to our Manhattan portfolio beginning with two well leased office buildings in the Chelsea neighborhood, one of the most dynamic office markets in New York City. Known to some of you as the Twitter and Red Bull buildings are 17 and 18 Street properties are perfect examples of the smaller floor plate buildings with fully renovated interiors and amenities, necessary to attract TAMI and other desirable tenants. We have thoughtfully assembled the portfolio of such properties that we believe will compete favorably with traditional large four place of Midtown. As evidence of this look no further than our 97% leased rate across our New York City properties. The fact that we achieved this amid the perception of softening supply demand fundamentals in New York City overall, further underscores the appeal of our investment and operational approach. The third property we acquired in Manhattan is a unique redevelopment opportunity at 139, Madison Avenue. We are in the final plan stages for this 127,000 square foot property with boutique floor plates that will fit nicely with our existing Midtown South portfolio, once construction is complete in 2019. We look forward to seeing many of you at our New York City property tour on February 27, when we will visit three of our exciting Midtown South properties. We've also had meaningfully success in leasing our San Francisco properties. 650 California is now 96% leased from 65% occupancy just six quarters ago. Leases signed during this period would have average roll up in net rents of nearly 200%. And at 221 Main, we have been able to more than double the average net rental rates while leasing 68% of the space in that building since our acquisition. The property stands at 92% leased today, yet there are 94,000 square feet of leases yet to roll over the next few years, which should allow us to push the revenues even more at this derivative building as San Francisco leasing fundamentals continued to be very attractive. We've now leased market square in Washington DC to 80% despite continuing headwinds in the market. We have patiently held out for top rent and terms and continue to achieve them. That said, we continue to see strong leasing activity and plan to meet the market to raise most of this vacancy in 2018. With Market Square, ADM Street and 1800 M Street, we now have significant scale in DC and a nice balance between values add opportunity and stabilized cash flows in this market. Following a series of very successful transactions in 2017, we will continue to be disciplined in our capital allocation. By selectively pursuing new investments that add value growth potential and scale in our existing markets, either with partners or on our own. Recognizing the strong growth ahead and bright future for Columbia Property Trust, we also remain an opportunistic buyer of our shares, which we consider a compelling investment. In summary, our attractive high quality portfolio positions us well to capture growth opportunities in our select markets. Having emerged from a very successful portfolio of transition. We are reintroducing same store NOI guidance for 2018. Along with our FFO guidance that Jim will walk you through next; these metrics reflect an office REIT position to deliver dramatic growth in 2018 and beyond. With that, I'll hand the call over to Jim.

[Jim Fleming:]

Thank you, Nelson. And thanks everyone for joining us today. We had a good fourth quarter as expected and we are very excited about the outlook for Columbia and the guidance we are sharing with you this evening. The combination of several years of strong leasing; the reinvestment of proceeds from past dispositions into new investments and prudent use of leverage has changed the Columbia narrative from one of transition to one of execution and growth that should exceed our peers for sometime to come. We've reached an inflection point and expect to see robust growth in net operating income, FFO and cash flows this year and next year. At the same time as Nelson mentioned, we have significant stability at 96% leased with very little rollover exposure for two years and a solid balance sheet. Let me expand on the opportunities ahead. The significant amount of leasing activity we completed in 2017 sets us up for strong cash flow growth this year, with more than a 13 percentage points spread between our lease percentage and economic occupancy. Put another way we have closed to $64 million of rents from signed leases yet to commence. Our recent investor presentation provides a breakout of contractual cash win commitments throughout 2018 which give some perspective on the NOI progression throughout the year. Another contributor to this year's growth is our recent acquisitions. During 2017, we were patient in redeploying capital to make sure we found the most attractive opportunities. The acquisitions we made late in the year will contribute meaningfully to this year's results representing annualized lease revenue of $49 million. At 96% leased, we have less leasing work ahead but still opportunity to fill our vacant spaces, which include some of the best spaces in our portfolio. Between current vacancy and 2018 explorations, we have roughly 400,000 square feet to lease with almost 80% of it in New York, San Francisco and Washington DC. Yet another growth opportunity is our redevelopment of the recently acquired 127,000 square feet 149 Madison Avenue. As Nelson mentioned, this property will be under redevelopment this year but we will provide a growth opportunity in 2019 and 2020. With these tailwinds in mind, let's turn to our outlook for 2018. We are introducing normalized FFO guidance of the $1.41 to $1.46, which is an increase of roughly 24% to 28% over 2017. And although we are not giving guidance on AFFO due to the difficulty in predicting the exact timing of leasing capital, we do expect AFFO will increase dramatically this year as well. Finally, now that we've made through a heavy period of asset of recycling, we are also reintroducing same store NOI guidance. And our outlook calls for growth of 10% to 12% in 2018. Turning to our balance sheet. We remained very flexible, which further enhances our positioning going forward. During the quarter, our strong balance sheet allowed us to acquire four buildings including one with our joint venture partner Allianz. Also drawing strength from our balance sheet over the course of 2017, we repurchased approximately $58 million of common stock. We ended the year with over $4 billion of unencumbered properties and only two mortgages. At year end, our net debt stood at 37% of gross assets. And we had a weighted average maturity of 6.9 years on our fixed rate debt and 1.7 years on our floating rate debt. On February 1, we reduced our leverage down to 33% through a sale of 22.5% interest in University Circle and 333 Market Street to our joint venture partner Allianz for $235 million. As we explained before, we and Allianz had agreed that this sale would occur no later than July. But both parties elected to close early since it would not generate excess cash on our balance sheet. This transaction brings their ownership in these assets to 45% and helps reload our balance sheet. We now expect our overall debt to EBITDA ratio for 2018 will be in the low 6x range which is in line with our leverage goals. And over time, our increasing cash flow should create more room on our balance sheet. With that operator, please open the call for questions.

[Operator:]

[Operator Instructions] The first question comes from Sheila McGrath with Evercore. Please go ahead.

[Sheila McGrath:]

Hi, yes, good evening. I guess this question is on the cash NOI; you had an exhibit before that kind of walks us through the bridge to stabilization. I was wondering, Jim, if you could walk us from fourth quarter and where that stabilized cash NOI goes to with just contractual rent or leases? Sorry.

[Jim Fleming:]

Yes. Sheila, thank you. Sheila I guess two answers there. One is if you trying to track it quarter by quarter, I think the best information we have out there at this point is from our recent investor presentation. It shows $57 million of contractual cash wins that are not yet being paid, and we got up to $64 million now on the revenue side. So there are some additional things that happened since then. We will update that here shortly. We have an Investor and Property Tour, a week from Tuesday, in New York. And before that we will publish a new schedule. 1800 M Street in Washington DC and there are just bits and pieces elsewhere. So really that schedule of this in the investor presentation. The reason investor presentation gets you pretty close to that answer. And the answer is we are still on track ultimately got to that end result that you see from the bridge. Again we will update that but we don't think that it is moved very much.

[Sheila McGrath:]

Okay, great. And then the local and newspaper in Manhattan highlighted that you are marketing the 41st Street asset. I was just wondering if you could give us an update on that just with the volatility in the market and if that sale is kind of in your net debt to EBITDA guidance. The sale of that asset, is that kind of how you get there?

[Nelson Mills:]

Yes, Sheila. So, first of all, we have begun to market that asset and we got very pleased with the breadth of interest we are getting. We got lot of potential buyers and early indications are favorable on pricing as well. If you may recall this is 30 year lease with some nice revenue bumps over the years. And obviously with the good credit tenant, so it's attracting a lot of interest there. Not a lot of risk in the asset. Obviously, interest rates movement could impact pricing but where things stands today we are optimistic on getting a very compelling price. And that is factored into the balance sheet. We don't expect a great deal of transaction in 2018 assuming we closed this sale, most of the capital we would anticipate putting back on the balance sheet. We do have some capacity - remaining capacity in our Allianz joint venture. So we could buy few hundred million dollars of assets, that's always subject to change, it's always subject to board decision. But, yes, that is contemplated to sell that asset most or at least half of that would be kept on the balance sheet - of guidance.

[Jim Fleming:]

And Sheila, this is Jim. One more point on that in terms of our guidance. I think people have focused for long time when it's going to start in May from NYU and we have been in a free rent period. And obviously that - it is a big number from a cash standpoint. But we've done a lot of other leasing around the portfolio. And so when we talk about 10% to 12% same store NOI growth, we are also assuming the sale of that asset in that number so that we wouldn't get credit for that rent I guess paid back in one year. If we decide not to sell the NYU property then the number would even be higher. So we did take that into account.

[Sheila McGrath:]

Well, what would be the number be if you didn't sell it?

[Jim Fleming:]

High teens we think.

[Sheila McGrath:]

Okay. I'll get back in line up.

[Nelson Mills:]

But we do plan to sell it, Sheila. Just to clarify.

[Sheila McGrath:]

Actually, Nelson, when from modeling purposes is that a midyear thing or what should we assume?

[Nelson Mills:]

I think that's fair. That would be our expectation in terms of the marketing process that we could like to get it closed by mid-year.

[Operator:]

The next question comes from Vikram Malhotra with Morgan Stanley. Please go ahead.

[Vikram Malhotra:]

Thanks for taking question. I think there was one asset, correct me if I am wrong, in Atlanta where you are looking to find a new tenant there. Can you just give us an update sort of where you are in the process?

[Nelson Mills:]

Sure. I think you are referring to 3 Glenlake, yes, that's right. So New Rubber May has been the sole tenant there by about 350,000 feet for several years. They were original tenant; it was built to suit for them years ago. There is just over two years remaining on that lease but they have indicated they are leaving. And they have subleased part of that space for short term. We have secured a tenant for 160,000 plus feet of that space or almost half that extends eight years beyond the remaining two years term. So 10 year lease from now. So that's a good start on the re-leasing of the property. There are also a couple of other tenants including one that's a current subtenant that could be renewed. So we are very optimistic we will have this space leased as a new lease expires.

[Vikram Malhotra:]

Sorry maybe I got confused with this. I was referring to the AT&T building.

[Nelson Mills:]

Okay. Well, you can get two updates then. So, Vikram, AT&T recently announced in paper just couple of weeks ago that they are pulling back and stepping away from Atlanta. And while it's not 100% clear whether they will vacate entire building. It's possible, maybe even likely that lease is 950,000 feet, and it expires at the very end of 2020, so we have almost three years remaining. And so very much like the new situation where we had several years of runway. We have the same situation here. We are very confident if that is the case, we are very confident and been able to re-lease that space. So well located property, good property, plenty of run way to re-lease. We should know in the next few months what AT&T's full intentions are. But we are in good shape either way.

[Vikram Malhotra:]

And just on the building like your assessment of just where rents are versus market.

[Nelson Mills:]

They are right at market. And this is something we've been tracking for a while and we are confident that we can match the same rents.

[Vikram Malhotra:]

Okay, great. And then just one other question if I may. You did great job leasing up certain parts of your portfolio, the goal you had set out at the start of last year. And you've crossed sort of your - I think it was 92%, correct if I am wrong, I think that was sort of one of your parameters in your incentive comp that you kind of wanted to get, or you had to get the number up there. Looking forward to this year is there any such specific goals as part of your incentive comp something you need to achieve?

[Nelson Mills:]

So that was a key goal along with the lot of other goals. But the big goal for most of our senior management team of course is total shareholder performance which optimizing value and cash flows and all the rents, but certainly leasing is a big part of that. And for our real estate team, it was a very big percentage of their incentive for last year. That continued this year, even though the overall lease percentage is high, 96% probably soon going to 97% based on some things during the works, we have some as we just mentioned, there are several explorations in the next two to three years. It relates to the overall portfolio, it's not very big percentage but there are a few hundred thousand feet that we want to jump on early. And we tied that into our compensation incentive for sure.

[Operator:]

The next question comes from John Kim with BMO Capital Markets. Please go ahead.

[John Kim:]

Good afternoon. Big quarter in terms of leasing, as well as velocity, kind of miniscule quarter in terms of cash leasing spread. And I think that's mostly due to renewal. Can you just describe what those due to?

[Jim Fleming:]

Yes, John, you are right. And it's going to be - it is going to vary from quarter-to-quarter. So you are right, it's going to depend what we accomplish in quarter. A lot of times in terms of - yes, we have leases of properties that we brought. They would really value at properties like the ones in San Francisco, some of ones in New York where we're rolling up rents. It's going to be a dramatic number. And if you look back historically over last two or three years, nearly large leasing spreads but then again we're also working on renewing leases from time to time. Nelson mentioned AT&T. We think that one is at about market, it's really not a target market for us but Atlanta is a pretty good market. And so our goal there would not be huge roll up, it will be to, to renew at about the same rate. One other thing that was a big number in this past quarter was to blend and extent we did Westinghouse, and that actually was a bit, a little bit of a roll down. So that affected the calculation but that was a very good thing we think from a value standpoint because we extended their lease out to 15 years that was approved by the bankruptcy court. And that looks like it's; it's headed toward good resolution.

[John Kim:]

And then have updated us on your plans benefit?

[Jim Fleming:]

That, that is I think most people know is in bankruptcy Westinghouse is in bankruptcy. They encountered some pretty significant problems over the construction business they were doing for nuclear power plants. They due to bankruptcy, they are going to accept that business. And they will continue on providing fuel and servicing to nuclear power plants. They have announced that there is a buyer for the business, its Brookfield Property Partners. And their purchase price is $4.6 billion, which obviously indicates that there are significant fast cash flows in the business. And as we've said, they've extended that lease out to 15 years to provide home for the business, that is their headquarters. And so they do have to get approval in the bankruptcy court for the plan of reorganization that's in process now. Once that happens, there are some other approvals they have to get to, took for the sale of Brookfield, but we think it's headed in very positive direction. And we're you know, following with interest and the idea would be sending things ahead in the right direction that we would be able to sell that asset at some point.

[John Kim:]

So you are waiting for the bankruptcy approval before you move forward with?

[Jim Fleming:]

Bankruptcy and other regulatory approvals, they need to accept bankruptcy I think.

[Nelson Mills:]

That's right John. And there's no rush, we got 15 years on the lease now. I think letting that settle out in letting the noise get out of the system I think will help us with the sale process but, I would say at earliest later this year but likely the next.

[Jim Fleming:]

Yes. And John that they are currently on their rent, the obligation to pay rent is now administrative claims since the leasing has - we are in good - right now at least in the near term.

[John Kim:]

Okay turning to your guidance, the FFO guidance kind of makes sense. The net income guidance little bit surprising to us just given it's up 86% year-over-year last year you've had a huge gain on will totaling $176 million, it sounds like 222 East 41st in your numbers this year but do you have other dispositions in this, and you are signing for 2018?

[Jim Fleming:]

Yes and then you know, we don't tend to think of this in terms of the operating business it really doesn't affect FFO, but we did sell the 22.5% interest in the two San Francisco assets to our partner Allianz, and there were pretty significant gains in those assets as well.

[John Kim:]

But other than those three there are no other dispositions in your guidance?

[Jim Fleming:]

No.

[Nelson Mills:]

That's correct.

[John Kim:]

Okay. And then my last question is, so it looks like you've had some changes in senior management, moving over to more of a functional head roll rather than regional head. And Adam is now gone from the company. Can you just provide some more color in this?

[Nelson Mills:]

Yes, so, Adam worked with us for couple of years, served us well, great member of the team but we have, we have parted ways. And we are interviewing candidates, exploring various options. So we have, we have a lot of interest. And hopefully, we'll fill one or two positions in New York in the near term. We now have 2.6 million feet in New York, it's well leased. 97% or so leased in the city, but it's a very a sizeable and dynamic New York portfolio. And so we're getting a lot of strong interest from some good candidates. So the exact position and role and levels of the personnel to be determined but we're in good shape there.

[Operator:]

We have a follow-up question from Sheila McGrath with Evercore. Please go ahead.

[Sheila McGrath:]

I guess Nelson could you give us an update on Park Avenue South leasing, I forgot how many floors were left and just the progress on lease up of that building?

[Nelson Mills:]

Sure, there are - we are 84% leased, that's three floors remaining. As you know, we've had some, some really good success both in terms of leasing pace and rate and overall terms. We're very pleased with the results there. At least two of those three floors are, we're in discussions with some pretty strong prospects including existing tenants. And we're hopeful to get the building fully leased in the next few months, so yeah very optimistic about that.

[Sheila McGrath:]

Okay. And then another question 41st Street. Of course, I know you don't know the price that you're going to sell it at, but I was wondering if you could remind us of the history there you were faced with, even looking at empty building value. And then you did end up committing a lot of CapEx to the NYU. If you look back on the options and how much CapEx you put in, was this the right path? And did you have had this compared to what the empty building value -

[Nelson Mills:]

Sheila, thank you for that question. And I promise we did not ask you to plan that but I love that question. So if you recall the previous strategy of the predecessor company was a long-term single tenant leases. Certainly that building fit that, fit that model, fit that mode, it was a single-tenant to Jones Day. About four years ago or so, Jones Day announced, they'd be moving downtown for a variety of reasons. And we had an over three year run way of knowing the building would be vacant. We hired a great leasing team. We were headed down the path of a multi-tenant strategy; we were getting some significant interest. And then we identified NYU Medical, NYU Langone is a prospective tenant. Over a few months negotiations we are able to strike a 30 year lease with nice rent bumps over the term. Yes, when the absolute dollars in terms of TI and free rent we're pretty big numbers but for a 30 year lease we're very proud of what we negotiated there, $140 of TI. And about 20 months of free I think it was but again for a 30 year lease for that credit quality tenant it was, we're very pleased about the deal. In terms of headline rent, $38 net rent low to mid-70s gross equivalent, very pleased with the overall result there but if you're right if you take a snapshot in time, at the time we, it was going empty. The value it's created since that point forward, we're very excited about. Now it's a fully stabilized asset, good cash flow but there's not a lot we can do there to create a lot more value to that property, so we thought it's the right time to sell it.

[Sheila McGrath:]

And then just Jim in the guidance other than bad asset, are you considering or having the guidance, any other dispositions?

[Jim Fleming:]

Sheila we don't - we're not contemplating any other dispositions right now. But I'd say we're in a really good place in terms of guidance. I think we certainly as we mentioned could sell this NYU asset and invest some but not all the capital and probably take some - and could take some time to reinvest that capital, that's what our current guidance contemplates. We're not really considering any other dispositions but there is room for some other dispositions if it's the right thing to do this year. And we'll do whatever is right thing to do. I will say we're very focused on hitting the numbers in this guidance range. And we know that there are lots of investors out there that have waited long time for us to turn the corner, we have turned the corner. We've got a stable portfolio, and we're going to be mindful of that as we go through 2018.

[Sheila McGrath:]

Okay great and then on Market Square if you could just give us an update on any leasing activity there or prospect?

[Nelson Mills:]

So our strategy on Market Square has been to, we had good activity; we had a lot of great leasing over the last few years. That building is one of the top two or three buildings in the city for government affairs type tenants. And we attract more than our fair share of those. They tend to be small though. They do pay a nice rate, good terms, good credit but they tend to be at 5 to 15,000 foot tenant. So for 700,000 properties you have to really continue to work those. But we've had great success in doing so. We are holding up there in the same sort of rates and terms with new construction for those types of tenants. That said, we do have just over - about 20% vacancies today. And that's reflects our patience along with Blackstone, our partners, our patience in holding out for this terms. Demand is pretty good in DC today for Class A office, trophy office but supply is still - there is still lot of supply out there too. And so we are absorbing supply but it's just going to take a little while longer to do that. So we've been patient at holding out a term. That said, we and our partner have committed to meeting the market and raising substantial portion of that vacancy this year. So we would expect by the end of the year to knock that at least in half or better would be our goal.

[Sheila McGrath:]

Okay. And last question. I guess this one for Jim. Net debt to EBITDA just because of the acquisition activity in fourth quarter spot in time was elevated but you've already closed the joint venture. Where that is getting you pro forma that close? And then what are the means to lose that lower towards the 6x by year end?

[Jim Fleming:]

Yes, Sheila. So you are right. If you look at the debt at the end of the year and if you look at the EBITDA for the fourth quarter annualized, you'll get 8.2 or 8.3 but that's really not a fair calculation because we didn't get the full income from the acquisitions in the fourth quarter, and as we talked about we've got $64 million of revenues, it's not actually showing up. And so as we go into this year we did close the sale of the other 22.5% interest to Allianz. We have used that money to de-lever. Our view - our model is showing us with the debt-to-EBITDA number for the entire full year of 2018 in the low 6.2 to 6.3 and that's without any further dispositions, without any further de-levering. So if we reduce sale to this 222 East 41st and hold on some of the cash, put it back on balance sheet, we could wind up below 6. So the balance sheet is in good shape. And also by the way we expect the nominal leverage to be somewhere close to 30%. It's about 33% now and it could move down little bit over the year. So we feel that we reloaded the balance sheet, got some dry powder and we feel good about where we are. By the way we have talked to the rating agencies and they were --they certainly understand the temporary blip in the debt- to- EBITDA.

[Operator:]

There is a follow up question from John Kim with BMO Capital Markets. Please go ahead.

[John Kim:]

I have follow up to that. So if and when you do get the leverage below 6x debt to EBITDA, let's say six months from here, and the situation is the same as it is today, meaning your stock prices are 21 bucks and cap rates haven't move in Manhattan. Where do you share buyback fit as far as options and -

[Jim Fleming:]

John, that's a great question. As you know, we've been opportunistic and it has been based on a couple of things. One is whether we think the stock price is at a compelling level. And two, whether we think we have the liquidity and the leverage profile to feel good about it. We have not been buying lately because of the - we have a bridge loan that we put in place when we acquired the assets in the fourth quarter. We had not yet closed with Allianz. Our balance sheet is in much better shape now. So it's something we will be opportunistic about and we are going to continue to follow, it's not strategic but it's the value is clearly there. And we think that the stock price is very much - very compelling right now and so it's a part of our strategy going forward.

[Operator:]

This concludes our question-and-answer session. I'd like to turn the conference back over to Nelson Mills for any closing remarks.

[Nelson Mills:]

Well, thank you all for your time and attention this afternoon. We look forward to seeing many of you at our Investor Property Tour in New York on February 27. Please join us for that. If you haven't made plans to already we'll tour three of our properties and we will provide just a brief update on our New York holdings and our views on the New York market at that time. So we would love to have you. Otherwise, we are always available for questions. And we look forward to connecting with you again soon. Thank you.

[Operator:]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.