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Retail Properties of America Inc (NYSE:RPAI)
Q2 2019 Earnings Call
Jul 31, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Retail Properties of America Second Quarter 2019 Earnings Conference Call. [Operator Instructions]. A brief question-and-answer session will follow the formal presentation.[Operator Instructions].

I would now like to turn the conference over to your host, Mike Gaiden. Thank you. You may begin.

Michael Gaiden -- Vice President of Investor Relations

Thank you, operator, and welcome to the Retail Properties of America second quarter 2019 earnings conference call. In addition to the press release distributed last evening, we have posted a quarterly supplemental package with additional details on our results in the INVEST section on our website at www.rpai.com.

On today's call, management's prepared remarks and answers to your questions may include statements that constitute forward-looking statements under federal securities laws. These statements are usually identified by the use of words such as anticipates, believes, expects and variations of such words or similar expressions. Actual results may differ materially from those described in any forward-looking statements, including in our guidance for 2019, and will be affected by a variety of risks and factors that are beyond our control, including without limitation, those set forth in our earnings release issued last night and the risk factors set forth in our most recent Form 10-K, 10-Q and other SEC filings. As a reminder, forward-looking statements represent management's estimates as of today, July 31, 2019, and we assume no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Additionally, on this conference call, we may refer to certain non-GAAP financial measures. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP numbers and definitions of these non-GAAP financial measures in our quarterly supplemental package and our earnings release, which are available in the INVEST section of our website at www.rpai.com.

On today's call, our speakers will be Steve Grimes, Chief Executive Officer; Officer; Julie Swinehart, Executive Vice President, Chief Financial Officer and Treasurer; and Shane Garrison, President and Chief Operating Officer. After their prepared remarks, we will open up the call to your questions.

With that, I will now turn the call over to Steve Grimes.

Steven Grimes -- President and Chief Executive Officer

Thanks, Mike. Good morning, everyone. Thank you for joining us today. This quarter, our team once again delivered better than expected results, reinforcing the momentum of RPAI 2.0 following the completion of our portfolio transformation roughly one year ago. Base rent expansion contributed to vast majority of our above plan 2.9% same-store NOI growth in the second quarter. Better than expected results in other categories also continued to contribute, as Julie will detail.

Overall, we are very pleased with our 2.9% same-store NOI growth through the first half of the year. With year-over-year increases in both retail occupancy to 92.4% and retail portfolio percent leased to 94.7% as well as a sequential increase in ABR per square foot to $19.27, we remain confident in the growth outlook for our business. Our ongoing systematic approach to upgrading our tenant credit quality and merchandising mix help us drive bad debt below expectations and multiply the impact of our top line momentum.

At the same time, the 20 basis point quarter-over-quarter increase in our lease to occupied spread to 230 basis points, the highest since 2012, underscores our near-term potential for revenue expansion. As Shane will outline, we are intensely focused on converting these signed leases into rent over the back half of the year. With this large amount of future anticipated rent starts, we also acknowledge that near term shifts in rent commencement dates compared to our current expectations could have an outsized impact on our second half same store NOI performance.

And this timing factor heavily influenced our decision to maintain our existing full year 2019 same-store NOI growth assumption of 175 to 275 basis points. Our progress along our mixed use development plans mirror our operating gains. We have already leased two thirds of our recently completed apartments at Plaza del Lago at rents above our original expectations. And our progress at One Loudoun Downtown, Carillon and Circle East continues on plan. We expect completion of these projects in the coming years to bring incremental cash flows from retail, multifamily and medical office tenants that complement the underlying same-store growth potential embedded in our density and super-zip oriented portfolio.

We also continue to take incrementally positive steps in the disposition and capital markets sides of the business. During the quarter, we monetized our loan asset in South Carolina, North Rivers Towne Center, continuing to reduce exposure to at risk tenants and to narrow our focus on our targeted MSAs. We also received funding on our previously announced $100 million 10-year private placement at the end of Q2 Q2, extending our weighted average years to maturity and increasing our revolver availability. Earlier this month, we also secured $270 million in term loans that lowered our already compelling average cost of debt and further extended our maturity profile. The related interest expense savings allowed us to raise the low end of our operating FFO range, which is now $1.04 to $1.07 per diluted share.

Our efforts at rent roll diversification and solidification along with broader trends toward stabilization in retail overall have enabled us to record below plan bad debt for the first half of the year. While pleased with this performance, we are maintaining our annual bad debt assumption of 50 basis points of revenue for the full year, adding an incremental layer of tenant fallout provisions to our second half view. To be clear, announced retail bankruptcies year-to-date have proven digestible and our tenant watchlist risks remain manageable.

The same strength in the jobs market and ongoing gains in wages continue to power consumer confidence. Last Friday's GDP report highlighted the accelerating consumer spending that has helped much of the retail sector find firm footing and the increasingly accommodative interest rate environment should further aid the finances of consumers. Combined with the accelerating pace of successful integration of bricks-and-clicks, we hold rising optimism about the outlook for our industry.

Turning to the broader topic of corporate responsibility, we launched our ESG microsite at rpai.com during Q2. I encourage you all to visit this part of our website to learn about the proactive approach we have long-held to addressing and embracing these key topics. We are proud of our social and governance initiatives and we are incrementally positive on the environmental initiatives, which will be further enhanced through our development efforts.

Finally, while confident in our above planned same-store results delivered in the first half of this year, we are focused on the delivery of our robust rent commencement schedule. We are also excited to continue to advance our mixed use development plans, which all sit in our top five markets and remain a key differentiator for us. With our balance sheet solidly positioned at 5.5 times net debt to EBITDA and our robust liquidity, which measured nearly $1 billion after our July term loan closing, we continue to have no need for external capital. Combined with our strong lease rate percentage, portfolio quality and platform, we sit in control of our annual and near-term goals.

With that, I will turn the call over to Julie. Julie?

Julie Swinehart -- Chief Financial Officer

Thank you, Steve. This morning, I will discuss our second quarter results, our capital markets activity and our outlook for the balance of 2019. In the second quarter, we generated operating FFO of $0.26 per diluted share, up $0.01 from the same period in 2018, $0.005 positive contributions from both NOI growth and a reduced share count drove this increase. Year-to-date, we delivered operating FFO of $0.54 per diluted diluted share, $0.03 above the first half of 2018. This year-to-date increase is also evenly split among expansion in NOI and reduction in share count. Same-store NOI for the quarter rose 2.9% over prior year results, outpacing our internal expectations. As we projected at the start of the year, our same-store growth continues to be driven by base rent expansion, which contributed 240 basis points to year-over-year same-store growth in Q2.

Contractual rent increases continued to anchor this base rent growth, while releasing spreads and occupancy also contributed. Additionally, higher other lease related income and lower bad debt benefited our year-over-year same-store growth. In terms of year-to-date same-store NOI growth, our 2.9% figure consists primarily of base rent growth, which added approximately 230 basis points as well as higher other lease related income and improvements in bad debt.

As we discussed during our first quarter earnings call, we had expected a deceleration in same-store growth during the second quarter, due to an anticipated decline in occupancy. And we did in fact realize a 60 basis point decline in occupancy sequentially to 92.4% in Q2 from 93 flat in Q1. However, slight wins in nearly all categories helped us best our internal modeling for Q2. Better than expected performance in operating and real estate tax expenses net of recoveries, which was largely driven by real estate tax refunds in the quarter proved to be the largest contributor of outperformance versus our projections.

Higher than anticipated base rent and other lease related income as well as lower than forecast bad debt also contributed to our well-rounded beat for Q2 same-store NOI growth. The same pattern of small broad based wins also helps drive upside in Q1 versus our internal estimates and contributes to our better-than-expected 2.9% year-to-date same-store NOI growth.

Regarding bad debt, in the second quarter, same store bad debt measured $46,000 or 6 basis points of same-store NOI, decreasing by $200,000 against the comparable quarter in 2018. Year-to-date bad debt of $485,000 or 30 basis points of same-store NOI declined $343,000 versus last year's first half results. Both the moderated cadence of retailer bankruptcies year-to-date and our efforts to reduce our at-risk tenant exposure have driven this year-over-year decline in bad debt.

We are pleased with our bad debt trends over the last few quarters. And thanks to steady declines in tenant concentration and a well-balanced merchandise mix, we remain poised to weather any further tenant distress we anticipate near term. However, for 2019, we also continue to assume bad debt of 50 basis points of revenue or 75 basis points of NOI, consistent with our full year assumption at the year's outset. Through Q2, we have only used 20% 20% of our full-year total allocation for bad debt and tenant fallout.

Turning to capital markets, during the second quarter, we received funding from the $100 million, 10-year private placement signed in early April, using all of the proceeds to repay amounts outstanding on our revolver and in turn driving the extension of the weighted average maturity of our debt to 4.7 years as of the end of the second quarter, up from 4.5 years in Q1.

We continued to exploit the ongoing contraction in the yield curve at the outset of Q3, closing on July 17 on the issuance of $120 million in five-year term debt priced at LIBOR plus 120 basis points and $150 million in seven-year term debt priced at LIBOR plus 150 basis points. We subsequently swapped this variable rate LIBOR exposure to fixed, locking in a total cost of 2.88% for the five-year term loan and 3.27% for the seven-year term loan, based on our current placement on the low end of our leverage grid. These swaps take effect on August 15, 2019.

We used $194 million of the gross proceeds to repay revolver borrowings and today our $850 million revolver is completely undrawn. Following this $270 million term loan fund raising, our pro forma weighted average maturity extended by almost a half-year to 5.1 years as of June 30 and our weighted average interest rate stood at 3.95%, an almost 10 basis point improvement.

Our debt capital raise efforts year-to-date have generated $370 million in aggregate proceeds, $120 million more than the midpoint of our original assumption. We expect to redeploy the excess amount raised to repaying higher interest rate mortgages early, which will improve our secured leverage ratio weighted average years to maturity and weighted average interest rate.

With interest rates moving as they did, our outsized unsecured debt capital raise activity proved accretive to our earnings expectations. Our increased operating FFO guidance of $1.04 to $1.07 per diluted share stems in large part from our assumptions around interest expense. At the end of Q2, our net debt to adjusted EBITDAre measured 5.5 times rising one-tenth of a turn from the first quarter in line with our expectations.

We continue to expect leverage to migrate higher over the balance of the year from leasing capex accompanying our busy back half of the year schedule for rent starts and ongoing development investment, which Shane will detail. We also expect to remain within our targeted 5.5 to 6 times leverage goal, solidifying our investment grade positioning. Further with no amounts drawn under our revolver facility today and no debt maturities in either 2019 or 2020, our liquidity profile remains robust.

Turning to our same-store outlook, we continue to assume full year 2019 same-store NOI growth of of 1.75% to 2.75%. We are facing our toughest comparable quarter now in that we posted 3.8% same-store NOI growth in Q3 2018, which also was our strongest quarter last year in terms of same-store NOI dollars.

Also, while our 2019 bankruptcy exposure has been limited so far, the impact of the bankruptcies announced year-to-date will become more significant to our results starting in Q3, although our bad debt assumption more than covers bankruptcies that have been announced thus far. So while our year-to-date same store NOI performance positions us well to achieve our full year same-store NOI growth goal, the need to execute on the commencement of the $9.4 million in ABR, including $9.2 million in same store ABR embedded in our lease to occupied spread of 230 basis points plays a critical role in our back half outlook.

Most of that rent is expected to start in 2019, weighted more heavily to the fourth quarter, much of it anchor driven. Each month of this signed, but not commenced base rent equates to approximately 25 basis points of annual same-store NOI and that's before factoring in recoveries. This context both adds visibility to our expected second half growth and underscores the timing variability inherent in our forecast through year-end. When combined with the impact from carryover of our full-year 50 basis points of revenue bad debt assumption to the back half of the year, after adjusting for lower than expected bad debt in the first half, these factors drive our rationale for keeping the existing book ends of our same-store assumption range in place.

With that, I will turn the call over to Shane.

Shane Garrison -- President and Chief Operating Officer

Thank you, Julie. Our focus on execution, coupled with our adjacencies and high quality portfolio continued to drive value as shown in the better than expected 240 basis point rent contribution to year-over-year same-store NOI growth that Julie outlined. And most importantly, we remain acutely focused on delivering the rent starts embedded in our 230 basis point lease to occupied spread as the majority of these commencement dates sit in 2019.

With portfolio ABR of $19.27 per square foot and a markedly smaller denominator than prior years, leasing activity and NOI can be volatile quarter-to-quarter. The 60 basis point decline in retail occupancy from the first quarter to 92.4% dovetailed with our internal expectations and previous commentary and reflects the anticipated move out of a large anchor box as well as vacancies from Payless and Gymboree.

Our portfolio leased rate declined a smaller 40 basis points sequentially to 94.7% and reflects our platform focus and market relevancy, which continue to drive leasing success as our retail partners continue to value those locations that provide for profitability profitability, distribution and brand awareness. Year-over-year, our 40 basis point increase in retail occupancy reflects the focus on not just leasing, but merchandising for the future, taking into account merchandising mix and long-term asset relevancy in addition to stability of future cash flows. Proof in point, while we have increased our year-over-year lease rate by 120 basis points, we have also reduced our top 20 tenant exposure by 200 basis points in the same 12-month period.

Our increasing tenant diversity combined with signs of stabilization in the retail sector more broadly has contributed to our bad debt outperformance year-to-date. While we remain focused on driving an effective merchandising assortment throughout our portfolio with relevant balanced tenancy, we also remain focused on contractual rent growth. In Q2, comparable new leases signed in the quarter averaged annual contractual rent increases of more than 230 basis points and all leases signed in Q2 averaged annual rent bumps of approximately 160 basis points.

Turning to our spreads for the quarter, the merits of our high quality portfolio also show through in the 8.2% blended spread for leases signed during Q2, our highest blended comp since fourth quarter 2017. Looking at the breakout, spreads on comparable new leases accelerated to 13.2% in Q2 from 10% in the first quarter and comparable renewal spreads increased to 6.9%, the strongest since the first quarter of 2017.

In regard to transactions, we continue to take an opportunistic approach to the disposition market and in Q2, we sold North Rivers Towne Center in North Charleston, South Carolina for $18.9 million. This power center sale marks our exit from another non-core market and the state of South Carolina, incrementally advancing our focus on local scale with relevance.

Lastly, looking to the future of RPAI and our development -- and redevelopment efforts, we achieved a number of milestones at our mixed use developments in the quarter. On the redevelopment front, we completed the multifamily renovation at Plaza del Lago and to-date, have leased 12 of the 18 multifamily units at rents above and timing ahead of our underwriting model. While modest in scope, the successful execution of this project above our plan adds to our confidence and experience in the mixed-use and multifamily redevelopment and ownership segment as we look to larger and more complex projects in our site expansion pipeline.

Turning to our ground up mixed use activity mixed-use activities, at Circle East, we remain heavily engaged in LOI activity with several lead tenants that will set the bar for merchandising at this corridor changing project. Overall, progress continues as expected and we will continue with further updates over the next few quarters, as we near the first quarter 2020 projected commencement of move-ins at the AvalonBay owned multi-family portion of this project.

At One Loudoun Downtown, in June, we broke ground at Vyne, our multifamily joint venture development. We expect this nexus for pads G and H with 378 one and two-bedroom units and approximately 70,000 square feet of commercial space to open in late spring '21. This mixed-use expansion will bring more residential product to capitalize on the extremely successful and vibrant merchandising at Loudoun.

Finally, at Carillon, we have already pre-leased 37% of the retail portion of Phase 1 before moving [Indecipherable] and we began demolition on approximately 290,000 square feet of vacancy GLA in early July and continue to expect construction activities and spend to escalate, as we advance through the remainder of the year. Additionally, the adjacent University of Maryland Medical System Hospital continues on schedule with our expectations for the project and opening in spring of 2021.

Like Steve and Julie, while I am pleased with our solid same-store growth performance year-to-date, our rent commencement roadmap for the second half sits front and center with our team. We are looking to carry over our year-to-date operating momentum in the back half and we will continue to focus on delivering the $9.2 million of annualized ABR needed to drive our back half same-store growth embedded in our year-to-date signed leases.

With that, I will turn the call back over to Steve.

Steven Grimes -- President and Chief Executive Officer

Thank you, Shane and Julie for your updates. Looking forward to the second half of the year, we are laser focused on turning on our anticipated rent starts along with staying ahead of any potential bad debt fallout.

And with that, I'd like to turn the call over to the operator for questions.

Questions and Answers:

Operator

Great. Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question here is from Christy McElroy from Citi. Please go ahead.

Katy McConnell -- Citigroup -- Analyst

Good morning. This is Katy McConnell on for Christy. I was wondering if you could just update us on your expectation for more tenant fallout in the balance of the year and then maybe also provide some commentary just directionally on your growth growth expectations for 2020, especially if the timing of actual closures ends up being more back-end weighted in 2019.

Julie Swinehart -- Chief Financial Officer

Thanks for the question, Katy. Good morning. So in terms of the trajectory, I guess I'll point out that the significant bad debt outperformance that we had in the first half of the year, combined with our position today, which is that we're going to maintain that full year allocation or assumption for bad debt and tenant fallout that would be stemming from bankruptcy, that just naturally moves additional expense to the back half of the year and some of that you'll see as bad debt, some of it for any bankrupt tenants you would just see as lost NOI. So it won't show up in the bad debt line item. But -- and that significantly changes the shape of same-store NOI by quarter as compared to how we originally expected the year to look. As I noted in my prepared remarks, Q3 is certainly going to be a tough comp. So I would expect at this point that our growth for the year in terms of same-store NOI growth will likely trough in Q3, before reaccelerating then in Q4.

Just to touch on bad debt, as I mentioned in the prepared remarks, we have only utilized about 20% of our full year allocation in the first half of the year. We have certainly had a few tenants announce bankruptcies, although they've proven digestible, so folks like Payless, Gymboree, some of that you'll see in the back half of the year. So I'd say another, call it, 40% of that original allocation has been, I'll assume, is sort of allocated to those tenants in the back half of the year, but that leaves us with 40% of our full year allocation remaining for unknown bad debt at this point in the second half of the year. And if second half looks anything like first half, there is certainly opportunity for out performance there, I'd say to the tune of, call it, 15 to 20 basis points on a full-year same-store NOI basis.

Steven Grimes -- President and Chief Executive Officer

Katy, this is Steve. And I think the back half of your question was on 2020 trajectory. So while we don't really give guidance on 2020, we do have some things of note, one of which has to do with our lease to occupied spread right now, as that's about $9 million. To the extent that we bring most of that online toward the tail end of this year, that should be a tailwind for next year.

So in addition to that, if we look at tenant fallout expectations for 2020 versus where we thought we might be at the beginning of the year, it's a little bit more muted than what we had thought. And we've taken a conservative approach in our underwriting to 2020 in terms of what we're expecting to renew. So I would just say that for 2020, well, we're not giving guidance, we're actually feeling pretty confident about more tailwinds than headwinds at this point.

Katy McConnell -- Citigroup -- Analyst

Great, thanks for the color.

Operator

The next question here is from Todd Thomas from KeyBanc. Please go ahead.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Hi, thanks, good morning. First question, I just wanted to dig in a little bit on the same-store NOI growth forecast. So your comments about there being potential delays or uncertainty uncertainty around the commencement of leases, is there evidence of that actually happening in the portfolio, because it sounded like in the first two quarters of the year, there were a bunch of small wins, so I was just curious if you could sort of shed some light on those comments a little bit.

Shane Garrison -- President and Chief Operating Officer

Hi, Todd. Good morning. This is Shane. I think it's just the appropriate caution. To your point, we have been very successful at turning on rent in some cases early this year. So no concerns as far as what is taking place. I think it's just around what -- it has yet to take place. Again, a large part of that heavy lifting is done in that we actually have signed north of $9 million in rent. Now, we have to execute. So we have about 50 deliveries yet, we'll actually deliver a good chunk on August 1 as well with some rent abatement, but eight anchors are in there, which take place in Q4, so it isn't that we expect any delays, it's just that it is a lot of variables. The good news is, we have a very focused portfolio, which has allowed us to stay in front of any potential permitting issues and also any material delays. So very important to turn on and deliver about 80% of that 9 plus million this year, which again should help in 2020, don't expect any delays but just putting that number out there for context.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay. And is there any notable rent loss that's expected moving from 2Q to 3Q?

Julie Swinehart -- Chief Financial Officer

No, nothing is coming to mind. I mean, I think we expect occupancy to, on a net basis, grow more so in the fourth quarter, as Shane mentioned, about 80% or so -- 75% to 80% of the rent that is signed, but not yet commenced should come on in the current year. More so, call it, late Q3 into Q4 is how it's looking. But I don't -- I'm not expecting anything on the near-term horizon in terms of fall out.

Shane Garrison -- President and Chief Operating Officer

I think the one thing to focus on, Todd, as Julie's commentary earlier, which is we basically have 80% of our bad debt reserve to use over the final two quarters. So one, we don't expect any more fallout and two, we have a very healthy debt reserve to utilize as well.

Steven Grimes -- President and Chief Executive Officer

And then, Todd, I would answer that or add on to that that also keep in mind that what the biggest contributor to our same-store has been base rent related and we don't expect any sort of material demise in that in Q3 or Q4, so it really is going back to what Julie mentioned in her original comments about the tougher comp in Q3, which I think is what puts the stress on Q3, but we rebound in Q4.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Got it. And I guess, so along those lines though, if I look back to the 3Q '18 supplement and look at the same store, it's the same number of properties in the same-store pool, 102 properties, is there any properties, is there any change to the pool anticipated, because if I look at where base rents are at the end of this quarter relative to 3Q '18, your are trending higher by 3.8% on the base rent line. So I don't know if there's anything else that may impact that or if it was, Julie, something lease accounting related that's changing year-over-year in terms of the same store financials.

Julie Swinehart -- Chief Financial Officer

No, I mean, we always update, nothing lease accounting related just to respond to that portion. We did have properties enter the same-store pool in 2019 just through the natural course of -- based on when we acquired them. So Main Street Promenade, New Hyde Park, Plaza del Lago, the retail portion there. Those all entered same store in 2019. So you would see those now in the Q3 '18 comp when we go to print next quarter and then obviously the couple of assets we sold in the year would come out, but the shape, even with the adjusted pool or the updated pool is the same where Q3 is the highest. Q3 '18, a piece of the out performance stemmed from recoveries and part of that was real estate tax refunds. We also had a handful of [Indecipherable] that ended up being trued up. But the previous year, that aggregated to a bit in our favor. So nothing lease accounting related, nothing in terms of same-store pool mix that's really driving that at all.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay, got it. And then just lastly, Shane, the $9.2 million of base rent and the anchor commencements that are in the pipeline here, can you just talk about the composition of that. I'm just curious how much of that, if you can remind us, is related to Toys "R" Us backfills or is that still kind of in the works and how much of the Toys "R" Us backfills are outside of that pipeline, and still to come.

Shane Garrison -- President and Chief Operating Officer

Sure. So just speaking to Toys specifically, three of those are in that delivery schedule. And then that leaves us with two remaining. One is in lease right now and one is an LOI. We've had -- we've run north of 80% comps on the Toys boxes to date. So it has been a bit longer than we contemplated for a couple of box where the comps have been right there. And again, from just an overall, the $9 million plus number, we expect about 80% of that to deliver this year.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay, great. Thank you.

Operator

Our next question here is from Shivani Sood from Deutsche Bank. Please go ahead.

Shivani Sood -- Deutsche Bank -- Analyst

Hi, good morning. Shane, you noted in the opening remarks that there was really good progress on the development and redevelopment front this quarter. So, I guess as you guys look out from here, what do you see as really the larger hurdles with getting some or more of these longer -- these near term projects, Circle East, Plaza del Lago, up and running or do you think most of the risks have been mitigated at this point.

Shane Garrison -- President and Chief Operating Officer

Yeah, I'm having a hard time hearing you, but I think it was specific to development, redevelopment and the cadence thereof. So, del Lago, we are done, we have 65%, almost 70% of the apartments leased at this point. That has been a great platform to -- for the team to really experience a redevelopment of a building that was built in 1928 and all the issues that pop up, in addition to the tenanting of that and managing the move-ins and things like that, setting up rent rolls, processes. So a great small learning experience.

And then as we step into the big three, we will call it from here in this case, Towson, Loudoun and Carillon, they are all in different iterations.

So Towson, we still expect delivery from AvalonBay of the Shell at the end of the year, again that's 80,000 square feet in total on both sides. We are well into leasing at this point, we have a few, call it, signature tenants that I think will really set the site plan for future leasing and tone around merchandising and hopefully we can talk about that on the next call. From a cost standpoint at Towson, the only variables from here are really going to be tenant related. So to the extent we have any movement in costs, it will be TI or tenant build out related, so not a lot of cost risk here as well. We just need to execute on the leasing side.

On Loudoun, just obviously just broke ground in June, we ordered some precast well under way there, the community and everyone here is very excited about that project, it's been very fine from a design standpoint and collaboration with Kettler, so off and running there. The center itself continues to drive inordinate residential value around us, Loudoun County again because of the data center footprint and the tech employment, our offices are 100% leased there, we are actually looking at a couple of other pads we may pull forward to the extent it makes sense from a risk pre-leasing and funding standpoint, but overall, we couldn't be happier with early demand there.

And then Carillon is obviously our biggest project, both JVs are done as announced. Trammell Crow, in this case on the medical office side and four on the apartment side, we demoed -- began demo a few weeks ago, we have about 300,000 feet down now and we're prepping the pad. We expect to start the foundations for the multifamily in December. On the retail side, we expect and I'm sorry, and the MLB to start together in March on the foundation. So all of this is really being driven by the hospital finishing and delivering in '21. I like our timing as it relates to lease up, especially on the multifamily side and MLB side. So I think to your point, on the risk side, all things considered

Unidentified Speaker

considered, we continue to step into bigger projects but with partners that do this in these food groups every day, which was always the plan. And right now, our focus is these three projects. I think anything below the line when you look at the supplemental, in this case a Naperville or Crown or any other pads we talk about are a bit more fungible or malleable at this point. We are laser focused on executing on these large projects, while maintaining our liquidity and debt to EBITDA profile as we think about cyclical risks and executing.

Shivani Sood -- Deutsche Bank -- Analyst

Great, thank you for that color. In terms of the near-term, the three that you mentioned, the related NOI contribution, can you just give us an update as we get into 2020 and 2021, at the Investor Day, it was just over $20 million I believe, by 2022. So just any -- if there is any update in terms of the more near term cadence?

Julie Swinehart -- Chief Financial Officer

Yes, Shivani. This is Julie. Not a lot of change really from the Investor Day presentation that lays that out quite nicely. Our earnings in 2020 will start to benefit from the leasing that's being worked on at Circle East and then with that project stabilizing Q4 of 2020, I think 2021, you will really see the full-year impact from Circle East and then with the next two, it's a little longer, again all consistent with the data and the dates and the returns that are spelled out in the supplemental, so you start to see some benefit from One Loudoun and Carillon in 2022 and then 2023 looks like kind of full-year impact from those projects. So largely consistent with Investor Day and on track from what I see.

Shivani Sood -- Deutsche Bank -- Analyst

Great, thanks so much.

Operator

[Operator Instructions] Next question here is from Hong Zhang from JP Morgan. Please go ahead.

Hong Zhang -- JP Morgan -- Analyst

Yeah, hi. I guess as it relates to Carillon, you disclosed that the retail portion was 37% pre-leased, is your plan to pre-lease that up as much as possible or are you holding a portion back for the -- to lease after the medical center comes online?

Steven Grimes -- President and Chief Executive Officer

Yeah, you know what, that's a great question. So the entertainment anchor is signed, we think that was very important from just a site plan and anchor perspective. We will see. I think early returns look like the MLB is -- the demand is significant as you would imagine, given the adjacencies of the hospital. I think that multifamily, the early look is that demand is also significant, given this is a teaching hospital and a transit oriented site, so I think some hold back would makes sense. The good news is, we have options from here, so we will maintain a positive stance as we see demand.

Hong Zhang -- JP Morgan -- Analyst

Got it. Thank you.

Operator

This concludes the question-and-answer session. I'd like to turn the floor back over to Mr. Grimes for any closing comments.

Steven Grimes -- President and Chief Executive Officer

Great. Well, thank you all for joining us today. We know it's a busy time. We also know that August is a pretty hopefully quiet month with some vacations planned. So we will probably see many of you on the road as we kind of reconvene the road process with conferences and whatnot in September. So thanks again for your time today. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

Michael Gaiden -- Vice President of Investor Relations

Steven Grimes -- President and Chief Executive Officer

Julie Swinehart -- Chief Financial Officer

Shane Garrison -- President and Chief Operating Officer

Unidentified Speaker

Katy McConnell -- Citigroup -- Analyst

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Shivani Sood -- Deutsche Bank -- Analyst

Hong Zhang -- JP Morgan -- Analyst

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