COPT Defense Properties (CDP) 2018 Q4 法說會逐字稿

Welcome to the Corporate Office Properties Trust fourth quarter and year-end earnings conference call. As a reminder, today's call is being recorded.

At this time, I would turn the call over to Stephanie Krewson-Kelly, Corporate Office Properties Trust, Vice President of Investor Relations. Ms. Krewson-Kelly, please go ahead.

Thank you, Heather. Good afternoon, and welcome to COPT's conference call to discuss fourth quarter and year-end 2018 results as well as our guidance for 2019. With me today are Steve Budorick, President and CEO; Paul Adkins, Executive Vice President and COO; and Anthony Mifsud, EVP and CFO. In addition to the supplemental package and press release related to our results, we issued a press -- a separate press release detailing our 2019 guidance. And we posted slides on the Investors section of our website to accompany management's remarks.

On our website and in the press release results, you will find reconciliations of GAAP and non-GAAP financial measures management discusses. At the conclusion of management's remarks, we will open the call for questions. Statements made during this call may be forward-looking within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties and other factors. Please refer to yesterday's press release and our SEC filings for a detailed discussion of forward-looking statements.

With that, I'll turn the call over to Steve.

Thank you, and good afternoon. We had very successful 2018. The results we achieved during the year solidified the foundation to support multiple years of growth and FFO. Leasing success in both the operating and development portfolios will contribute to FFO growth in 2019, accumulating into a fourth quarter run rate of 3% to 4% annualized growth over 2018 full year results.

The healthy defense spending environment that has existed for the past few years, combined with continuing strong bipartisan support to fund National Defense initiatives, supported last year's record-setting leasing results. In total, we leased 4.2 million square feet, 94% of which was at Defense/IT locations, capitalizing on the demand created by the defense spending environment. Leasing highlights include: we successfully negotiated the largest volume of lease expirations since 2011. And we renewed 2.5 million square feet, the most in our history, which resulted in a strong 78% retention rate. The 600,000 square feet of vacancy leasing we achieved during the year was 38% higher than 2017 levels; and development leasing of 1.1 million square feet ranked as the second-best year in our 20-year history.

Last year, we outlined 5 ways that demand recovery related to higher defense spending would manifest in our markets and benefit our company. At that time, we expected to realize progress in 3 of the 5 categories during 2018 and ended up achieving success in 4 of the 5 categories. The first category was incremental leasing by defense contractors rising from new contract awards. During 2018, we achieved 529,000 square feet of vacancy leasing at Defense/IT locations, demonstrating expansion of demand following defense budget increases.

The second category was realizing deferred leasing with U.S. government users awaiting funding. During the year, the government leased 220,000 square feet of new space from pent-up demand with additional requirements carried over into 2019.

The third category would occur when demand exceeded available inventory. We projected this would occur in 2018 and 2019 only at Redstone Gateway where demand is outpacing supply. We started 2 spec buildings midyear that are 61% leased, and we are finalizing leases that will stabilize both developments.

The fourth type of demand recovery would come from major preleases or build-to-suits with defense contractors, which we anticipate could occur as soon as 2019. In June, we executed a highly confidential defense contractor build-to-suit driven by a new government award well ahead of the initial timing of expectations. Additionally, in December, we commenced an office development in Huntsville concurrent with the pre-lease negotiations for a defense contractor that has a tight delivery schedule. We're also in advanced stages of lease negotiations with a second defense contractor to prelease the rest of the building.

The fifth category of demand recovery was long-term expansion at secure government campuses, which we expected would materialize in the next few years. We are confident that we will capture at least one opportunity this year and several in the following years.

We see continued opportunities in each of these 5 demand categories as leasing momentum continues to be strong into 2019. In mid-January, we completed the 34,000 square-foot long-term lease with the U.S. government for the second floor of 310 NBP. The same government user now leased us approximately 30% of the building, and we're working with the customer to advance additional expansion rates. Among the 10 projects we have under construction or redevelopment, 5 are 100% leased, and the 4 scheduled for shell completion in 2019 should achieve stabilization before year-end.

In terms of development leasing, our 2019 objective is to lease 900,000 square feet equal to last year's initial goal.

To date, we've completed 7 of the 11 data center shell leases we agreed to develop in November of 2017. We placed 3 in operations during 2018 and we'll place the 4 we have under construction into service during the first half of this year. Among the remaining 4 build-to-suits, we expect to announce the next 2 leases in coming weeks and the final 2 leases during the summer, completing the 11-facility program.

Additionally, as we finalized our land acquisitions, we purchased and entitled more development capacity than originally contemplated. And we have the capacity and the demand to develop another 4 shells, totaling 800,000 square feet of future build-to-suits.

So in summary, an orderly defense spending environment continues to support strong demand in our Defense/IT markets and should translate into another strong year of leasing in 2019, both in the operating portfolio and for new development projects. Because of our leasing achievement last year and the clear timing on development deliveries this year, 2019 is the year that FFO growth materializes. Over the coming quarters, we expect results to accumulate into a fourth quarter FFO per share run rate with growth of 3% to 4% that positions us to enter 2020 with solid momentum.

With that, I'll turn the call over to Paul.

Thank you. As Steve noted, 2018 turned out to be a record year for leasing. This strong leasing achievement supported 200 basis points of occupancy gain in our core portfolio over the last 3 quarters. Three of our subsegments experiencing particularly strong demand are the Fort Meade B/W Corridor, our 3 Navy Support locations and Redstone Gateway in Huntsville, Alabama. In our Fort Meade B/W Corridor subsegment, we leased a total of 2 million square feet during 2018 and currently have 650,000 square feet of available space. Against which, we are in various stages of negotiations for a 535,000 square feet. Within this subsegment, at the National Business Park, our 3.8 million square foot park serving the U.S. government with secure campuses and defense contractors who support the missions at Fort Meade, during 2018, we completed 955,000 square feet of leasing at the NBP, including 56,000 square feet of vacancy leasing and 899,000 square feet of renewals. Currently, the NBP contains 430,000 square feet of unleased space, against which we are working on 360,000 square feet of prospects.

Our Navy Support subsegment is 93% leased and has 88,000 square feet of availability. We have active prospects for 95,000 square feet or 108% of the current vacancy. In Huntsville, Alabama, demand is very strong, and we have no vacancy in our operating properties. Accordingly, we are engaged in predevelopment activities for 3 additional buildings.

Development demand and development leasing continue to be key elements of our external growth. In 2018, we placed into service 7 properties totaling 688,000 square feet that were 90% leased plus the defense contractor build-to-suit that was 100% leased. These newly operational properties are highly leased, and nearly all of their $16 million to $17 million of cash NOI that is in our 2019 guidance is contractual. Furthermore, based on expected operational dates and demand we are tracking, during 2019, we should place another 900,000 square feet into service that we expect will be 100% leased, supporting solid low risk FFO growth in 2020 and thereafter.

Among our 10 active construction and redevelopment projects, 5 buildings totaling 800,000 square feet and representing a total investment of $125 million are 100% leased. There is 210,000 square feet of unleased space and 4 projects we expect to complete during 2019, against which we are tracking the following demand. At Redstone Gateway, our 2 spec developments, 4000 and 4100 Market Street, are currently 61% leased. And we are in the late stages of negotiating 2 leases that will stabilize both buildings in the coming months. In December in Huntsville, we started 8800 Redstone Gateway, concurrently with negotiating a large prelease with the defense contractor. Since commencing construction, we are now in negotiations with a second defense contractor to prelease the balance of the building. Lastly, at 6950 Columbia Gateway, a 106,000 square-foot building in redevelopment, we completed a 10,000 square-foot lease there earlier this week and are in late-stage negotiations with a 40,000 square-foot user that would raise our preleasing to 47%. Similar to other redevelopments we have completed in Columbia Gateway, we are updating architectural features and amenitizing this property to target a growing base of technology and cybersecurity companies choosing to locate in this area.

Our shadow development pipeline of build-to-suit in large preleasing opportunities remained strong. A year ago, it contained up to 3 million square feet of deals, 2/3 of which were data center shells. We executed 1.1 million square feet of leases this year -- this past year, last year. And our shadow development pipeline still contains 2.1 million to 2.5 million square feet of potential transactions, 40% to 45% of which are data center shells.

The healthy defense spending environment continues to support methodical and deliver procurement decisions among government users and defense contractors. And we look forward to updating you on our future leasing successes.

With that, I'll hand the call over to Anthony.

Thanks, Paul. For 2019, we are initiating full year FFO per share guidance for the fairly tight range of $2.02 to $2.06. This range includes a $0.01 negative impact due to the new lease accounting standard. In terms of leasing, we assume we'll renew between 70% and 75% of expiring leases. Our same property year-end occupancy guidance of 92% to 94% is relatively flat for the year as we retenant the 700,000 square feet that did not renew last year and as leases commence on the 600,000 square feet of vacancy leasing executed in 2018. Despite the change over in tenancy, we expect same property cash NOI will grow 1.5% to 3%.

In terms of cash rents on renewals, we forecast rental REIT conditions to be stable versus last year so our guidance on cash rents is flat to minus 2%. Remember that over the term of our average lease, we benefit from 2% to 3% annual rent escalations. Over a typical 5-year lease, a 2.5% annual escalation yields approximately 11% appreciation in the in-place rent stream. In effect, we achieved our rent growth annually in the form of rent escalations, which have been modestly outpacing market rent growth as opposed to one large mark-to-market at the end of a lease.

Our 2019 guidance includes NOI from the 2 floors at 310 NBP that the U.S. government leases. The remaining 4 floors total 137,000 square feet and would add $0.01 of FFO per quarter but are not included in our outlook at this time. When we achieve further leasing at 310 NBP, we will update our guidance.

Our 2019 guidance assumes we invest $250 million to $300 million in development during the year. This includes spend on existing projects as well as development starts contemplated in our plan.

In terms of funding this growth, first, we expect to draw the remaining $46 million from our forward equity facility during the first quarter. Second, we intend to raise between $125 million and $150 million from sales of properties or venture interests to fund the remaining equity requirements, the impact of which is reflected in our guidance range. Our 2019 plan should result in our year-end debt to adjusted EBITDA ratio remaining steady year-over-year at 6x. We also are establishing first quarter guidance in the range of $0.49 to $0.50, essentially flat with fourth quarter results. Our first quarter guidance anticipates the typical impact from seasonal utility and snow removal cost.

With that, I'll turn the call back to Steve.

Thank you. So to recap, we had a very successful 2018, accumulating record or near record achievements on all leasing metrics. The defense budget environment has translated into healthy market conditions throughout our defense locations. Our new development demand is widespread, representing opportunities in 5 geographic areas. Our 2019 plan is very simple and very low risk. Leverage demand strength to lease vacancy in our operating portfolio, complete the developments we leased in 2018, achieve new development leases we are cultivating now, internally fund our development spend and maintain balance sheet strength and flexibility. Our record leasing in 2018, driven substantially by defense contractor demand, will contribute to 2019 results and further contribute to 2020 FFO growth. As we advance through the year, our quarterly FFO per share will build the run rate in the fourth quarter that approximates 3% to 4% growth over 2018 full year results. We have high confidence that we can deliver strong level of achievement in 2019 and that our development leasing achievement will similarly provide catalysts for growth in 2020 and beyond.

I will wrap up with a final reminder. The vast majority of our Defense/IT segment demand is driven directly or indirectly by U.S. government actions, and their pace of progress is measured, thoughtful and deliberate. Accordingly, our pace of progress will not materially change from a timing standpoint. But the volume of opportunities has increased, and we expect it to remain strong over coming years.

With that, operator, please open up the call for questions.

(Operator Instructions) Your first question comes from Jason Green with Evercore.

Can you guys talk about the decision to introduce, call it, $135 million of dispositions and how you guys think about dilution versus some other sources of funds?

Well, we're committed to maintaining the balance sheet strength that we've worked very hard to create over the last 5 years. In the current pricing environment, we don't believe it's prudent to attempt to raise equity externally. We have multiple alternatives to harvest some development profit within our portfolio and recycle that into our strong and value-creating development opportunities.

Got it. And then I guess, switching to another part of guidance. You're calling for tenant retention in the 70% to 75% range where historically, it's been more of 75% or 75% plus. Is there a reason the tenant retention should drop in the coming year? Or is there a level of conservatism baked in? And if there is, if retention were to come in around 80%, I guess, what's the upside to earnings?

Well, we said last year we're at the same guidance, and we think it's a deliverable safe guidance. In terms of upside to earnings, that's really hard to predict. It depends on what, where, when and the rental impacts.

Your next question comes from Jamie Feldman with Bank of America Merrill Lynch.

So Steve, to focus on this 3% to 4% growth rate by year-end '19, can you just talk about what would get you -- what are the potential hiccups that would derail you from hitting that number? And then what's the opportunity to actually beat that number?

So there's very little speculative revenue in our plan to put that number at risk. So we have high confidence we can achieve it. In terms of exceeding it, it would require additional revenue creation beyond our plan. And the likelihood of that making a material impact is pretty low because of the long lead cycles and build out times in our business. So we think it's a pretty good number that you can count on.

Okay. And then it seems like you do have some pretty good visibility on a pretty long runway here. So if I read it right, you're talking about if you were to annualize the fourth quarter of '19 overall of '18, it gets you to 3% to 4%. So what was your 2020 growth rate look like at this point if you have any visibility on that on both the same-store and even an earnings growth basis?

Well, we're confident there'll be growth. We're reluctant to put out any number now.

Okay. I mean, do you see acceleration in both of those metrics?

Well, I'll refer you back to my final comments. Everything in our business is ultimately driven by U.S. government decisions, and they're measured and deliberate and thoughtful. So that message is intended for you to interpret that our progress is going to continue at about the same pace it is now.

Okay. All right, that's helpful. And then it seems like things are taking off in the portfolio. What's your ability to push rents? And how should we think about market rent growth?

To be honest with you, we don't see market rent growth in 2019 and potentially thereafter -- potentially, could occur in 2020. Right now, we're focused on driving up occupancy. All of our markets have increased demand, but there is competition. We have advantaged locations, but we're not in position to really drive rents yet.

And is this across all the submarkets, you're thinking the same thing?

Yes.

There's one of our subsegments, the Navy Support subsegment, where in a couple of those locations, we feel that due to demand, we can slightly push up rents during '19 and '20 going forward.

Okay. And then on Page 13 of your presentation, you talked about, for the 5 leases expiring in '19, one of them is going to be taken out of service, 155,000 square feet. Can you just remind us what that project is and what your plans are?

Sure. That is a legacy asset that the company's owned for a very long period of time. It's located in downtown Annapolis, Maryland. It was a managed services provider property. We held that in the SRP because we recognized at that point in time, the land is really more valuable than a building would be if we sold it. As that property -- the lease on the property has been 100% leased for 15 years. As that expires, we've already achieved a land lease agreement that creates significant value. So we'll demolish it, turn it over to our land lease tenant and it will be a good candidate for recycling.

Okay. And what's the earnings impact of that? I guess, not much other than the land lease.

Currently, the project's generating about $2.5 million worth of annual cash NOI. The land lease is going to be a bit lower than that on an annualized run rate and there will be a little bit of downtime between -- probably a little more than a year downtime between the exploration of the existing lease and the commencement of the new ground lease.

When did the lease expire?

Right now, it will -- expires at the end of this year.

End, so that's in 2020?

That's correct.

Your next question comes from Manny Korchman with Citi.

Steve, just thinking about the government shutdown, has that impacted the psychology or the confidence of any of the tenancy, specifically contractors but also the U.S. government looking to extend?

No, not at all. First of all, let me just address a point you didn't ask. From a rent collection standpoint, shutdowns never affect our business. The government's obligated to pay the rent. This particular shutdown did not include the DoD. Several budget line items were passed in September. It was the unpassed line item categories that got shut down. So we saw no impact.

And no one tried to make conversations with the contractors other than thinking about the business in the same way?

Well, actually, demand is accelerating over previous quarters and both with the government and defense contractors. So no impact.

Great. Anthony, maybe this one is for you. You came out with a really tight FFO guidance range for the year, but your sort of fundamental ranges are as wide as they've been from both a same-store occupancy, et cetera, perspective. What's driving the wider range in sort of the fundamental operations of the business but allowing you to pinpoint where FFO is going to go?

Well, with respect to occupancy, we've got a pretty good line of sight based on the activity that we accomplished in 2018 and what we've got in the -- in our prospect list for 2019. So I think the range there is just to focus folks on the midpoint of both of those but from a cash NOI standpoint as well as occupancy there.

And was there anything specific that changed between October and today that your same-store range ticked up a little bit?

It's just the benefit of the incremental leasing that was done in the fourth quarter that will -- those leases will start, will commence in 2019 at various points along the way. So the volume was a bit more healthy than we had anticipated in the third quarter.

Great. And if I can ask one last one. Steve, you talked about the additional shells within the data center development program. Would those -- or are you targeting those for the same customer? A different one? And then is the pricing or the yield on those projects any different than sort of the initial either few or 11, however you want to think about it?

So in all likelihood, it will be the same customer. We've had discussions with the customer. Our expectations on yields is stable with what we've been delivering.

Your next question comes from Craig Mailman with KeyBanc Capital Markets.

Anthony, on the dispositions, did I catch it right? Are those going to be basically shells that get joint ventured?

No, you didn't catch that. The thought -- we're currently working on a variety of alternatives, both in terms of properties as well as structures. And at this point, we're not going to sort of say what component of the portfolio we'll be harvesting that value from. All we can tell you is that we've got interest from several capital sources and feed investments and that interest is very high. And we're confident in our ability to generate the capital that we need to continue to invest in the development pipeline while maintaining our balance sheet strength.

Okay, that's fair. But can you give us a sense of what's embedded in guidance from a timing and yield perspective on the sales?

No, not at this point. We'll update you when we execute those transactions.

Maybe first half, back half weighted? Just a sense of how we should think about it because that would obviously impact kind of quarterly guidance. Or do you just want us to think about you guys are going to be 3% to 4% higher than the $0.50 kind of run rate in 4Q '18 so we should just think about you get to sort of $0.52 by the end of the year? Is that just a better way to think about it?

That is. The vast majority of the impact of the funding and the sales are embedded in that run rate.

Okay. And then just as we think about it, because you guys are basically selling here 2020 growth as what to look for. If we just think about the components you laid out so far in the call, think about $0.52 kind of run rate here in the fourth quarter, so that gets you to $2.07, $2.08 depending on where you are in that $0.03 to $0.04 range. Then you have $0.04 from 310 NBP that should start to flow through since nothing is embedded in '19 and then take away kind of $0.02 related to the downtown Annapolis. So should we think about sort of $2.09, $2.10 as sort of a baseline and then some upside from kind of same-store and other deliveries of developments?

Yes, that's about right.

So if we think about in consensus right now, it's about $2.16? That seems like a realistic kind of place for this rate to be thinking about? Without giving guidance, of course.

I don't want to comment on a consensus. We'll do that as we move through the year.

Okay, that's fair. And then just one last one. Your second largest tenant is close to 9% of rents right now. You have another 4 kind of projects that are going to flow through. Depending on what you guys ultimately sell could -- or on a stabilized basis, dictate where that comes in. But how comfortable are you guys having that kind of concentration? The government is one thing because it's different tenants within the government. But from a tenant concentration, where do you want to limit kind of an individual credit?

Well, we've had discussions with our board. We're very comfortable taking that concentration up to about 15%.

But with the projects that we have in the pipeline as well as the ones that we contemplated and the growth in the underlying portfolio that -- beyond the data center shells, that number doesn't get much above 10% with the activity that we've got in the pipeline.

Your next question comes from Blaine Heck with Wells Fargo.

Steve, I think this is the second time you guys have tweaked the language in the presentation on Page 20. Now it's saying leasing can take as far as 18 months from authorization and appropriation. I think, a few quarters ago, it was 6 to 9 months. I guess, what do you think is lengthening the decision process this time around? And is this a systemic change? Or is there something in particular affecting the time line of the cycle?

Well, we extend it -- we hit that on the last call. We haven't extended it any further. And frankly, we consider it kind of a good thing, not a bad thing. We had some contracts that were awarded in 2017 that we landed at the end of 2018. And frankly, the initial -- they were finalized in '17. The initial awards were '16. It's merely meant to suggest that the process with contractors can be delayed because of contestation or the complexity of the contract. And that the -- in fact, the demand from budget year lasts longer than our initial timing had suggested.

Okay, that's really helpful. And just one quick one for Anthony. Can you just give us some color on the impairment on nonoperating properties you guys took during the quarter? Sorry if I missed that, but was that on something held for sale? Or what was the situation there?

We had -- we had started some redevelopment activities on a project here, a property here in Columbia Gateway. And that project was fully leased in the fourth quarter and didn't require the investment or the redevelopment capital. So the costs that we had incurred for the redevelopment plans, we wrote off. And yes, that space was leased 100% to a defense contractor to support a contract award from a tenant at Fort Meade.

Your next question comes from Tom Catherwood with BTIG.

A quick question on Redstone Gateway. It's good to see the demand pick up there. Obviously, it looks like in the presentation that you're in predevelopment on a number of buildings there as well. Is this demand new companies coming into the market? Is it relocation? Is it expansion of existing tenants in your properties? How should we think about that from a demand side?

I don't need to be a smart guy, but it's yes. In some cases, it's people relocating into Huntsville. In other cases, it's expansion for sites -- or contract-specific needs. Generally, that's probably the highest number. And then some is kind of relocation and planning for long-term investment to capture location and efficiency advantages. But it really represents the full spectrum.

Got it. And then Steve, I can't remember. Does the Gateway have a similar structure to NBP where there's a portion that's behind a gate that can be used for security? Or is everything outside the gate?

No, it does have -- roughly 30% of the development capacity is behind the fence.

Is any of that kind of -- and that you're seeing behind the fence? Or is it still all kind of in the core of the park right now?

We do have some demand behind the fence and we're working with a couple of users for possible solutions there.

Got it, got it. And then for Paul. Obviously, on Page 8 of the presentation notes the challenges with some of the D.C. trophy market assets. How will you see demand coming in and tenant interest in 2100 L Street?

Thanks. Yes, at 2100 L, we are on time and on budget for delivery of the shell in the first quarter of 2020. And it is a competitive market, but I'm pleased that we have 180,000 square feet of prospects right now against the 90,000 square feet of remaining office space. And within that 180,000, we are on the short list and in active negotiations, advanced proposals with 55,000 square feet. So it's -- very wary of the competitive environment. But again, our timing of delivery does line up well relative to the broader market.

(Operator Instructions) Your next question comes from Dave Rodgers with Baird.

Paul, I just wanted to ask about 310 NBP. I think, your comments, you said demand from government and contractors seems to be accelerating regardless of the shutdown. Again, remind us what we're waiting for then on 310. And it sounds like you did make some progress in the quarter but nothing else left in the year. Is there any particular kind of waterfall we're waiting for on that particular asset?

Yes. Well, we signed the lease for the second floor about 3 weeks ago. And really, all I want to say is that we're still working with the same user and continuing our discussions about additional space in the building.

Okay. Steve, going back to one of the comments you made about data shells, the thinking in response to another question, you had said you expect it to be the same user, but, I guess, no agreement in place, I guess, I would take from that commentary. And have you had discussions with other users if you're going to go forward with these developments and perhaps not have a user in tow or the same user in tow. Can you provide a little more clarity on that comment?

Well, we have no contractual obligation nor do they. But we have a relationship of trust and confidence, and we fully expect it to be them. But we're not contractually obligated.

Okay. And then last question just on the disposal. If the stock goes back up to $30 a share, do you still anticipate executing on the dispositions this year?

It's a hard question to answer. But I think we're -- as the year progresses, we're going to get pretty committed to our internal raise. So we'll probably end up fulfilling that.

Your next question comes from Chris Lucas with Capital One Securities.

Just a couple of quick questions, follow-ups. On Redstone, Steve, I guess, there was an announcement by the FBI that they were moving a little over 1,000 people down to Redstone over the next couple of years, I guess. Do you see a tail from that? Or is your business more tailored to more of the stricter defense contractor business down there?

We have no contractors negotiating that would represent a tail today. Ultimately, I do. I think they're going to have to make their big move first, because the elements that we see moving down there are very technology research oriented. It kind of fits right in their wheelhouse with strong demand we get from the DoD activities on the base as well as the space exploration activities.

Okay, great. And then just so I'm clear on the data shells. So you've got 7 that you've got leases on and earned a construction and/or have completed. There's 4 left of the original that you don't have leases on. Is that correct? Do you have the land acquired for that? For the 4?

We do. I think, you pointed out in your research that we closed on one parcel.

How many -- so specifically, how many pieces or how many shells can you get on that parcel?

So that -- as part of the delay initially, we anticipated getting a smaller parcel that would hold 2. We ended up being more efficient to buy a larger parcel that will ultimately hold 3. But we anticipate getting leases -- 2 leases for that property in the coming weeks. The remaining parcel is firmly under contract. We have a scheduled closing date, and we will revert to those leases in the summer months.

Okay. So the issues that you talked about is delays on the third quarter call is related to sort of the data shall deliveries. Have those been resolved at this point?

They have. They have. We kind of intimated that in our confidence of deliveries. Yes, we're in good shape.

And then the other 4 possible shells that you're talking about, those are on the existing lands you own or have under contract? What is that?

Well, those 4, I just mentioned 1. So the land parcel that we bought, we upsized. And similarly, other land parcels that we acquired, we are able to kind of scoop up more. And they have some built-in land inventory.

Okay. So just so I'm clear, I just want to clearly understand. It's a total of 11 then that you're talking about. There's not 11 plus and then the 4? It's 11?

So the 11 program, we're anticipating for 4 to complete the 11 data shell build-to-suit program that we had suggested. A happy outcome is we have additional land capacity that can hold another 4 in the future.

Okay. Okay. Okay, that's helpful. And then the last question was you had -- your stock was beaten up pretty bad end of fourth quarter and the beginning of January. Not unlike a number of other REITs, but yours was particularly hit bad. And there was no buyback on the stock. I guess, I was just curious as to do you have a buyback in place? And if not, why? And if so, why didn't you execute during that time frame?

So we don't currently have one in place. We've engaged in robust discussion with our board. It's possible in the future we would have one in place. We did not move for one because we just felt the best use of the capital and resources we had, and continue to have, is to continue to create value through the low-risk development that we've already signed and is pending.

This concludes our question-and-answer session. I will now turn the call back to Mr. Budorick for closing remarks.

Thank you all for joining our call today. We are in our offices this afternoon, so please coordinate through Stephanie if you'd like a follow-up call. Thank you.

Thanks.

Thank you for your participation today in the Corporate Office Properties Trust fourth quarter and year-end earnings conference call. This concludes the presentation, and you may now disconnect. Good day.