使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主
Operator
Good day and welcome to this Cousins Properties Inc. fourth-quarter 2006 conference call.
Today's call is being recorded.
At this time, for opening remarks and introductions, I would like to turn the conference over to your Chairman and Chief Executive Officer, Mr. Tom Bell.
Please go ahead, sir.
Tom Bell - Chairman and CEO
Good morning, everyone.
I'm Tom Bell, Chairman and CEO of Cousins Properties and with me today are Dan DuPree, our Vice Chairman;
Jim Fleming, our Chief Financial Officer; and Craig Jones, our Chief Investment Officer.
I would like to welcome you to our fourth-quarter conference call and at this time, I will call on Jim Fleming to review the financial results for the quarter.
Jim?
Jim Fleming - EVP and CFO
Thank you, Tom, and thanks, everyone, for your interest in Cousins Properties.
Certain matters we'll be discussing today are forward-looking statements within the meaning of federal Securities laws.
Actual results may differ materially from these statements.
Please refer to our filings of the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2005 for a discussion of the factors that may cause such material differences.
Also, certain items we may refer to today are considered non-GAAP financial measures within the meaning of Reg G as promulgated by the SEC.
For these items, the comparable GAAP measures and related reconciliations may be found through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our Web site at www.CousinsProperties.com.
This quarter, we reported FFO of $0.50 per share compared with $0.26 per share last quarter.
This increase is primarily attributable to the sale of seven of the 12 North Point outparcels we had under contract at the time of our last call.
The sale of these seven parcels generated gains of $11.9 million or $0.22 per share.
The other five parcels remain under contract and are scheduled to close in March.
Subject to final accounting, we expect the sale of these five outparcels to add $8.3 million or $0.16 per share to our first-quarter 2007 FFO.
As we said last quarter, these outparcels are being sold at an overall cap rate on current income of 6%.
Because these are sales of undepreciated property, the gains will be included in FFO.
The other significant transaction in the quarter was the sale of The Avenue of the Peninsula, which generated proceeds of $95.7 million and a book gain of $20 million.
Based on 2007 projected NOI of $5.7 million, this price represented a cap rate of just under 6%.
With the proceeds from The Avenue of the Peninsula and the other sales transactions during the year, we paid a special dividend of $3.40 per share in December, bringing the total paid in special dividends over the last four years to $12.62 per share.
It gives us a great deal of satisfaction to pay these special dividends because they provide a means for us to deliver real tangible returns to our shareholders from the value we have created by executing our development strategy.
During this period, we have also maintained our regular dividend, and we paid a total of $5.92 in regular dividends during the past four years.
From our 2006 sales and our Avenue Fund venture with Prudential, the Company also retained a significant amount of proceeds in 2006.
We used some of these proceeds to fund active development projects and acquisitions such as 191 Peachtree.
And we used the balance of the proceeds to reduce debt on a temporary basis.
Our lower debt levels this quarter caused us to capitalize 100% of the interest we incurred into our development projects, and we recorded no net interest expense in the fourth quarter.
We expect our debt to increase as we continue to fund our active development pipeline and we expect to record net interest expense again beginning in the first quarter of 2007.
We've made a change this quarter to our reporting of fee income and general and administrative expenses in order to be more in line with other third-party management companies and to be in conformity with the strict interpretation of GAAP.
Beginning this quarter, we have included in fee income amounts that third-party property owners reimburse us for the cost of our on-site employees.
And we have included the cost of these employees in our G&A expenses.
Historically, we had netted these reimbursements against the corresponding salaries and benefits.
This change had no effect on our net income or FFO, but because of the change, our fourth-quarter fee income and G&A expenses each increased by $5 million.
All prior periods in our income statement and in our supplemental package have been adjusted to reflect this change.
We've also made a change in our supplemental package to better reflect the direct overhead associated with our third-party management business by providing a breakout of direct G&A expenses associated with this business.
This change should allow you to better understand our third-party management business as well as our core G&A expenses.
This quarter, our residential neighborhoods sold a total of 454 lots, bringing the total for the year to 1576.
This compares to 577 lots sold in the fourth quarter of 2005 and 1941 lots for that year.
We've mentioned in the last two calls that despite the strong demographics in our markets, a number of home builders have delayed their purchases of lots.
We anticipate that our lot sales will continue to occur at a slower pace over the next several quarters and that our 2007 lot sales will be comparable to our sales in 2006.
Our same property results were up slightly from last quarter in our office properties, as the continuing lease-up in our office buildings outweighed the expiration of the IBM lease at 3100 Windy Hill Road.
You may notice on our portfolio listing the occupancy of the 3100 building went to zero during the quarter as IBM's 188,000 square foot lease on this building expired in November.
And as we anticipated, it was not renewed.
This building was designed as a training facility and we are now working to re-lease the space.
In our retail properties, same property results were up substantially, partly as a result of the expansion of The Avenue West Cobb.
As we've said many times before, our set of same-store comparable properties is relatively small and we encourage you not to put too much emphasis on these same property numbers.
You can gain a much better understanding of how our properties are performing by reviewing the property by property NOI information we publish in our supplemental package.
I'd now like to discuss the components of FFO in more detail by describing the changes between the third and fourth quarters of 2006.
You can follow my discussion beginning on Page 9 of our supplemental package.
I will begin with the office division, where rental property revenues less rental property operating expenses increased $395,000 between quarters.
The increase is the result of increases in occupancy at 1 Georgia Center and 191 Peachtree and a reduction in real estate tax at Inforum.
These increases were partially offset by the IBM lease expiration at 3100 Windy Hill Road.
For the retail division, overall FFO generated from rental operations increased $688,000 during the quarter.
This increase is attributable to the continued lease-up of our three recently completed development projects -- The Avenue Webb Gin, San Jose Market Center, and The Avenue Carriage Crossing.
FFO from track sales increased $3.5 million as a result of the sale of 13 acres at our North Point project, the sale of 22 acres at our Seven Hills project and the sale of 97 acres from our Paulding County project.
Lot sales increased this quarter by $1 million as a result of an increase in lots sold from 279 to 454.
Other investment property sales represent the gain on the sale of the seven ground leased outparcels at North Point.
Multi-family profits increased $336,000 primarily as a result of a cost true-up adjustment recorded in the third quarter.
Development fees increased 464,000, primarily as a result of fees recognized on our [Bethwater] and Seven Hills residential projects.
Management fees increased $1.3 million, primarily as a result of fees recorded on our new management contracts with the recently sold Frost Bank Tower and Bank of America Plaza.
Leasing fees increased $3 million as a result of commissions received on new leases at Concourse, Palisades West, Lincoln Center and Heritage Plaza.
Total G&A expenses increased $5.6 million as a result of the following -- $2 million from stock-based compensation net of capitalization, $1.1 million related to a true-up of bonus expense for year-end bonuses, and $1.1 million related to the reimbursed salaries of personnel managing Frost Bank Tower and Bank of America Plaza.
Other expenses increased $987,000 mainly as a result of an abandoned development project and a fee paid to structure a transaction that will reduce our property taxes on Terminus over a ten-year period.
Income tax expense was a $108,000 net benefit in the fourth quarter as a result of year-end tax rate and account true-ups.
Joint venture FFO decreased $4.3 million as a result of the sale of Bank of America Plaza and as a result of the decrease in our ownership percentage in the properties we contributed to CP Venture Five, which is one of the entities created by the Avenue Fund.
At the end the year, our Company's debt to market capitalization was a very conservative 16%.
And including preferred stock, our leverage was 24%.
Today's $377 million total debt is slightly higher than our $350 million total debt level at the end of 2004 after our substantial asset sales that year.
And in both cases, the low debt levels resulted from significant asset sales.
As I mentioned last quarter, today's low leverage would not be ideal for a property holding company, but it gives us the needed borrowing capacity to fund our future development costs.
We expect our leverage will increase to a more normal level over the next two to three years as we continue to fund the remainder of our $809 million active development pipeline as well as the shadow pipeline projects we plan to begin over the next several years.
With that, I will close my remarks and turn it back over to Tom.
Tom Bell - Chairman and CEO
Thank you, Jim.
In many ways, 2006 was one of our Company's better years.
We sold four assets with great value creation, successfully executed our Avenue Fund venture with Prudential and paid our third special dividend in the past four years.
We also started over $475 million of new projects across all four of our divisions.
The only negative in the year was our residential lot business, which declined approximately 24% due to market conditions.
I would like to take a few minutes this morning to look forward into 2007.
I'll talk a bit about our markets, give you an update on some of our current projects, and then discuss our strategy going forward.
While we continue to see improvements in all our office markets, there are still very few markets that support replacement cost rents.
Buckhead in Atlanta is an exception and now has the lowest vacancy of all of the Atlanta submarkets at about 13% for Class A office.
Our leasing progress at Terminus reflects the strength of the Buckhead submarket.
Overall, the metro Atlanta market is improving with about 18% vacancy down from 19% at the end of the last quarter.
The suburban markets of Austin, Texas are also very solid with average Class A vacancy under 10%; and the Dallas market is also improving.
We will continue to be cautious and opportunistic with regard to our office development opportunities.
The retail sector continues to be strong.
With land prices and construction costs going up, we're still seeing opportunities for retail development, and we hope to begin a couple new projects this year.
As we've all heard, the holiday season was mixed for many of the national retailers, but despite the warm weather at the end of the year, the industry average same-store sales increased by about 3.9% and gift card sales set new records.
Generally, the high-end retailers are doing quite well and the consumer continues to provide demand for new locations.
Demand for bulk warehouses and distribution space has also been increasing with 12 million square feet absorbed in the Dallas-Fort Worth market in 2006 and 13 million feet absorbed in metro Atlanta.
We'll continue to monitor supply of this largely speculative product, but we're seeing a lot of good demand right now.
Finally, the residential markets remain a concern in the near-term.
As we've said, the recent decline in lot sales will affect our FFO to a greater degree than our NAV or total shareholder return, but we are being very cautious today about new products and about levels of developed lot inventory.
We're seeing some healthy signs in the residential business, but it's unlikely the market will return to a state of equilibrium for either single family homes or condominiums until sometime next year.
I mentioned demographic trends in our last call, and we watched them closely.
The U.S.
Census Bureau projected in 2000 that 58% of the U.S. population growth from 2000 to 2030 or 47 million people, would occur in our six focused states, California, Texas, Georgia, Tennessee, North Carolina, and Florida.
Of course, we always need to be mindful of local market conditions and cyclical trends like the current residential slowdown.
But over time, we believe long-term demographic trends will provide a healthy (technical difficulty) for our development efforts in these Sunbelt markets.
To date, these markets seem to be outperforming the 2000 Census projections.
Let me bring you up to date on some of our development projects starting with the retail division.
In our last conference call, we discussed the new Market Center project of approximately 600,000 feet in suburban Kansas City.
We are continuing to obtain anchor commitments and to lease both mid box and small shop space.
And currently the center is 55% committed and the entitlement work is progressing quite well.
We expect to close on the land for this project during the second quarter of this year.
In October, we'll open The Avenue Murfreesboro in suburban Nashville.
This center is a hybrid of lifestyle and power center components.
Phase 1 and 2 are currently 53% leased and 70% committed and signed deals include Belk, Barnes & Noble, Petco, Best Buy, Dick's Sporting Goods, Linens 'N Things, Chico's, Ann Taylor Loft, Talbots, White House, Black Market, among others.
We also have strong early interest from outparcel users with five of the nine outparcels already committed.
The Avenue Webb Gin, our product in Gwinnett County, a suburb of Atlanta, continues to perform well.
The south side is now about 90% committed and the north side, which didn't open until this past October, is 74% committed.
In October, we also opened the 46,000 square foot phase 2 of The Avenue West Cobb, which is part of our Avenue Fund with Prudential.
All but one of the spaces in this expansion area are now leased and occupied.
We very recently closed on the acquisition of 109 acres of land in Forsyth County, the rapidly growing northern suburb of Atlanta, where we plan to begin construction soon on our newest Avenue project.
Phase 1 of The Avenue Forsyth will include 463,000 square feet of retail space and 11 outparcels.
We are currently 43% committed on this phase.
In the fourth quarter, our office and multi-family division focused on execution of development and leasing.
We integrated 191 Peachtree into our marketing and leasing program and we made substantial construction and leasing progress in our mixed-use Terminus development.
And we executed a lease to kick off a major new office development in Austin, Texas.
During 2006, our leasing team was involved in two of the largest leases in the Atlanta market.
These leases included 274,000 square foot leased for the American Cancer Society in our Inforum building downtown and the 411,000 square foot lease for CompuCredit at Concourse.
These leases improved both of those respective buildings to 98% leased.
At 191 Peachtree, our purchase price of $127 per square foot is allowing us to offer very favorable lease economics on this beautiful Class A building, and it's attracting strong interest from potential tenets.
Since we acquired the building in September, we have executed leases for over 125,000 square feet, including 62,000 square feet for Cousins' corporate headquarters, which we will occupy in April.
We are also in serious discussions with several major tenets representing over 650,000 square feet and we expect to be able to announce some specific leases in the first half of this year.
Recent developments in downtown are very encouraging.
During the quarter, we acquired 201 Peachtree Street, a small retail building adjacent to 191 Peachtree, for potential redevelopment of the Peachtree frontage.
Work is progressing on tenet improvements for the American Cancer Society's 274,000 square foot lease in our Inforum building, which will add over 650 new jobs downtown.
And Georgia State University has recently mandated that its freshman and sophomores live on campus and new downtown dormitories are nearing completion that will provide over 2000 beds.
Major capital expansions are also planned for several of the convention hotels downtown and a new boutique hotel is under construction in the renovated Winecoff building across Peachtree from the 191 building.
We also made solid progress at Terminus in the fourth quarter.
The Terminus 100 office tower will accept its first tenet in April and we now have signed leases for over 70% of the office tower and retail space, plus letters of intent and other serious prospects would bring our leasing to approximately 90%.
We have begun quietly marketing 10 Terminus Place, 142 unit condo tower located adjacent to Terminus 100, with full-scale marketing to start in September for occupancy in mid '08.
Also, based on leasing momentum at Terminus 100, we have commenced, design and development drawings for Terminus 200, a 510,000 square foot office building to complement Terminus 100.
Despite our sale of Frost Bank Tower at Austin Texas, we intend to remain a leading competitor in that improving office market.
And during the quarter, we entered into a joint venture with Dimensional Fund Advisors and Temple Inland to develop two office buildings containing 360,000 square feet on a 22-acre parcel in the southwest suburban sub market of Austin.
Dimensional has entered into a 15-year, 210,000 square foot lease for one of the buildings, bringing the project to 58% preleased.
At our 50 Biscayne project in Miami, construction remains on schedule, and topping out of the structure should occur on February 23rd.
And we anticipate that closings will commence at the beginning of the third quarter.
Despite weakness in the Miami condominium market, our preferred location and early buyout of construction costs have resulted in solid value for our buyers.
Other than the IBM lease expiration at 3100 Windy Hill Road, which Jim has already mentioned, we experienced leasing improvements across the office portfolio.
I mentioned the American Cancer Society lease brought Inforum to 98% leased.
Also, in Birmingham, we have improved leasing percentage at 600 University Park to 98%, backfilling a major vacancy there and at Lakeshore Park Plaza, we are in the final stages of negotiating four leases that would improve leasing to 91%.
During the fourth quarter, our industrial division expanded the Snapper lease at the King Mill Distribution Park by 130,000 square feet, bringing that lease to 417,000 square feet and completing the leasing of the original portion of the first building.
Also in the fourth quarter, we completed phase 2 of this building, adding 379,000 square feet of additional space.
Our land division had a good quarter considering the current status of the residential markets.
We completed the joint venture agreement with Callaway Gardens Resorts southwest of Atlanta for the development of approximately 567 residential lots and this new project will build on the success of our original Callaway Garden's project, called Longleaf, where we have sold 117 of the 138 lots available.
As most of you know, capital recycling is a key component of our strategy and we've had a lot of dispositions in recent years.
Since 2003, we sold and contributed to joint ventures over 30 buildings, totaling $2.1 billion in value, of which $894 million was captured in 2006.
This has allowed us to distribute $632 million or $12.62 per share in special dividends to our shareholders.
The rest, approximately $1.5 billion, we've retained in our Company and either invested in new products or used to temporarily reduce debt.
As Jim pointed out, our low leverage today will allow us to continue to fund our development pipeline over the next several years without issuing additional equity.
And this will add to our FFO and NAV as development projects become operational.
Our capital recycling program has enabled us to fund our robust development pipeline, including such projects as 191 Peachtree, Terminus, and our latest Avenue projects without additional equity.
We believe our shareholders will benefit substantially over time from this strategy.
We've captured attractive market values from stabilized properties, returning some of the capital to our shareholders, reducing the size of our equity base and reinvesting the balance of new projects with attractive development returns.
Going forward, we will continue to be opportunistic, and you may see us sell additional properties from time to time based on specific market conditions or for strategic reasons.
But overall, we are now more focused on doing an outstanding job in executing our development pipeline, identifying new development opportunities, and building up our base of stabilized assets.
You'll likely see us finance some stabilized projects with attractively priced fixed-rate debt.
We believe judicious amounts of increased leverage will increase the returns we receive on our development projects, and we intend to take advantage of this as we grow our portfolio.
With that, I will close my remarks and open the floor to questions.
Do you have any questions, please?
Operator
(OPERATOR INSTRUCTIONS).
David Toti, Lehman Brothers.
David Toti - Analyst
A couple of questions.
First, what is your strategy with regard to re-leasing the IBM training center?
I know it's a fairly unusual building.
Have you sort of thought about that in terms of your approach?
Tom Bell - Chairman and CEO
Yes, we just began the leasing process because, as you probably remember from past calls, we weren't really in a position to begin working on the re-leasing of this building until IBM vacated.
But we're really looking at two types of potential occupants.
One is someone who used the training center basically as it is presently constructed.
The other is users who would want to use it as an administrative center or a call center or another office -- sort of back office use.
And we've seen some activity I think on both fronts.
Dan, anything to add to that?
Dan DuPree - Vice Chairman
No, it's a specialized building and it's going to be more targeted marketing than broad-based marketing.
David Toti - Analyst
Okay.
And in terms of tenant concessions, I know you don't like to disclose details for competitive reasons, but could you give us a few examples of recent deals that in terms of the rental rates concessions attached without getting into specific names?
Tom Bell - Chairman and CEO
Well, it sort of depends on the building and the submarket.
In Buckhead, we're getting very good rents.
I guess they're probably the highest rents in the market, would you say, Dan?
Dan DuPree - Vice Chairman
With the exception of one specific building in midtown, I think.
Yes.
But the other thing about concessions and rents, for the first time in multiple locations, we're starting to see a little bit of roll-up in rents not in every market, not in every situation.
We had one particular building in Birmingham, Lakeshore Plaza, that we actually had acquired anticipating roll-up in rent because we had one major tenant leased that was paying a really low rate.
And we are receiving the higher rates there, and I think we've taken that building up to where it's in excess of 90% committed, where a year ago we were looking at substantial vacancy because of that tenant rolling over.
But also in North Point, we are beginning to see upward movement in the rates in that market as well, a buck or two.
So I would tell you just as a generalization, that we are seeing -- that we are being less aggressive or needing to be less aggressive in concessions and rate across the office portfolio.
David Toti - Analyst
Great.
And then lastly, predevelopment costs jumped up a little bit in the quarter.
Is that a run rate that we can look at going forward, about $1.5 million, or is that operationally high?
Dan DuPree - Vice Chairman
I don't think that's -- I wouldn't use that as a run rate, David.
That's -- we had one project -- retail project -- that we decided not to pursue in the fourth quarter.
That happens from time to time.
You will see it and you have seen it in the past from time to time, but I think that is higher than what you would see in a normal --
David Toti - Analyst
Oh, so that was the debt deal cost in that number?
Dan DuPree - Vice Chairman
Yes.
Operator
Christopher Haley, Wachovia Securities.
Christopher Haley - Analyst
Have a question -- a couple of questions.
On Terminus in the office side, what do you think your operating expenses might run at and how much of a benefit was this real estate tax change that you mentioned in your prepared remarks?
Tom Bell - Chairman and CEO
Well generally the operating costs depends on the asset.
With regard to the -- and I think you can expect operating costs from pass-throughs to be between $8 and $10 depending on the asset and the market.
With regard to the taxes or the tax benefits that we're getting, once again, it sort of depends on the asset.
You correct me, Craig, if this is not right.
But I think in the 191 building, you will see the full value of the tax advantage passed on to the tenet and in the Terminus building, with regard to those leases that we've already affected, we will probably have some revenue sharing on those between the tenet and the Company.
Craig Jones - Chief Investment Officer
I think this year on Terminus alone, -- going back to the previous question about the ran rate on predevelopment expenses -- again, I think that predevelopment expenses included the cost of getting the tax abatement on Terminus, which was a onetime thing.
That cost will more than -- I think our savings this year alone on Terminus will be about $600,000.
So we more than pay for the cost, just the savings to us, plus we put ourselves in a competitive advantage so that we're going to be reducing our expenses on that building this year.
Well, actually, starting -- really more significant starting in 2008, and it will be more than $1 a foot on our operating expenses.
Now, it's a decreasing advantage each year, but on the first year, it's going to impact more than $1 a foot.
Christopher Haley - Analyst
Craig, without adjusting for that benefit or potential revenue sharing at Terminus on the office, what would you say overall operating expenses and taxes per foot might run for the office portion?
Tom Bell - Chairman and CEO
Of Terminus?
Christopher Haley - Analyst
Yes.
Craig Jones - Chief Investment Officer
Yes, I think --
Tom Bell - Chairman and CEO
About $10.
Christopher Haley - Analyst
Okay.
Could you give us a sense as to what you -- obviously don't give specific numbers, but could you give us a sense as to how things are trending on margins for your lot track business into the early part of 2007?
And if you were to prognosticate, whether it be hot or cold versus how things look in the last couple years?
Tom Bell - Chairman and CEO
Yes, once again, it depends on the market.
Margins in Houston and Dallas by and large are holding up pretty well.
Maybe some slight diminution, say 7% to 10%.
Margins in Tampa are down significantly, more like 30%, but interestingly, they had gone up from our pro forma -- originally pro forma rents, I mean sales prices, they have gone up almost 100%.
So we're still selling, even though they are down, we're still selling at rates that are slightly above what we have pro formaed.
As to prognostication, I'm not a very good prognosticator, but as we said in our remarks, we've seen our Texas markets.
Our Georgia markets have never really fallen off.
We've seen our Texas market sort of stabilize.
And our guys feel like we'll have a decent year in Texas.
And Tampa, we were surprised to see some sales in the fourth quarter in Tampa that we didn't expect, but we still expect the Tampa market to recover more slowly.
I would guess year-over-year and it's just a guess, year-over-year, I would expect our lot sales to be roughly flat to down a little bit.
And as we said in our remarks, we're not out there producing a bunch of additional lots and won't until we see the markets begin to recover.
Christopher Haley - Analyst
Okay.
And you referring more so to revenue, Tom, than you were to operating margin?
Tom Bell - Chairman and CEO
Yes, right.
Well, a percent of operating margins.
Christopher Haley - Analyst
Okay.
Jim, last question, have you provided or at least had an early estimate as to the tax equivalency or tax flow to your distributions in 2006?
Jim Fleming - EVP and CFO
Yes, Chris, it's on our Web site.
It's around 18% if you assume a 35% federal income tax rate on average for all our dividends in 2006.
Christopher Haley - Analyst
Okay, great.
Thank you very much.
Congratulations on a good year.
Operator
Dan Sullivan, Wachovia Securities.
Dan Sullivan - Analyst
They have us backed up, Wachovia after Wachovia.
I had two quick questions.
First, just a comment, Jim, I like that zero interest.
That's pretty cool for fixed income investors.
Jim Fleming - EVP and CFO
Well, enjoy it while it lasts!
Dan Sullivan - Analyst
The first question I had is relative to your 50 Biscayne project, I know that everything is sold, but I just wanted to know what are the terms of the contracts?
How much money is down in terms of the things -- I guess the 95% or so that sold to third parties?
And is there any issue there that some of those people could walk away from deposits?
Tom Bell - Chairman and CEO
Well, they have 20% down, about $44 million, and $46 million in deposits.
Eight or nine units have resold.
Is that right, Craig?
Craig Jones - Chief Investment Officer
We had six contracts that fell out, and we've resold three of those.
And we -- again, the percentage that we can keep on any given unit is -- we've got 20% down, but we could keep 15% if they defaulted.
Tom Bell - Chairman and CEO
15% of the total sales price.
Jim Fleming - EVP and CFO
The three that we resold were at an average of $80 a foot more than the original sales price.
Tom Bell - Chairman and CEO
So, you know, we're watching it carefully.
We're watching that market carefully, but the general belief between ourselves and our partners is that we are favorably priced to the market, probably $100 a foot under comparable products because we were in early enough and locked in our construction costs early enough that we didn't get the run-up that some of the other providers had gotten.
So we're pretty optimistic about closings.
Dan Sullivan - Analyst
I got you.
And then net net, it looks like you are about a third out of the deal with your deposits with your $46 million, so you can certainly withstand some (multiple speakers)
Tom Bell - Chairman and CEO
Right.
Exactly.
Dan Sullivan - Analyst
Next question, you mentioned a boutique hotel going in across from 191 Peachtree.
Is that in the old -- the Macy's/Davidson building or is that next to that?
Tom Bell - Chairman and CEO
Winecoff next door.
Dan Sullivan - Analyst
Got you, okay.
And what is the scope of that project?
Tom Bell - Chairman and CEO
It's a small hotel.
I think it's going to be 113 or 118 -- 113 rooms?
Dan DuPree - Vice Chairman
It will have an upscale restaurant too.
Tom Bell - Chairman and CEO
Yes, a high-end restaurant.
Dan Sullivan - Analyst
I got you.
And I think the Ritz-Carlton just turned over, didn't it?
Didn't that just get sold?
Tom Bell - Chairman and CEO
Sold to Highland.
Very nice pricing.
And -- I think both the Hyatt and the Marriott are in the process of spending $100 million each.
Craig Jones - Chief Investment Officer
And the Hilton.
Tom Bell - Chairman and CEO
And the Hilton on capital improvements.
So we added it up one time for a speech we made at the end of the year.
I think we've got about $2 billion of in-process investment right now or development going on in the downtown area.
Dan Sullivan - Analyst
Got you.
Guys, thank you very much.
Operator
(OPERATOR INSTRUCTIONS).
At this time, we have no further questions.
I would like to turn it back over to management for any closing remarks.
Tom Bell - Chairman and CEO
Well, thank you, all for being with us today.
We're off and running into 2007.
As you know, and as we always say, if you have any additional questions or need any additional information, don't hesitate to call Jim, Pat, Dan, Craig, or myself.
We're always glad to talk to our investors and partners.
Thanks for being with us today.
Goodbye.
Operator
Once again, ladies and gentlemen, this will conclude today's conference.
We thank you for your participation.
You may now disconnect.