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Columbia Property Trust Inc (NYSE:CXP)
Q3 2019 Earnings Call
Oct 24, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the Columbia Property Trust Third Quarter 2019 Conference Call. [Operator Instructions]

I would now like to turn the call over to Matt Kroeber, Director of Investor Relations. Please go ahead, sir.

Matt Stover -- Director of Finance and Investor Relations

Thank you. Good afternoon, everyone, and welcome to our third quarter 2019 Columbia Property Trust Investor Conference Call. On the call with me today are Nelson Mills, President and Chief Executive Officer; Jim Fleming, Executive Vice President and Chief Financial Officer; and other members of our senior management team.

Our results were released this afternoon and our quarterly supplemental package, which can be found on the Investor Relations section of our website and on file with the SEC on Form 8-K. We filed our 10-Q with the SEC this afternoon, and an audio replay of this call will be available by this time tomorrow. Statements made on today's call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties. Number of factors could cause actual results to differ materially from those anticipated, including those discussed in the Risk Factors section of our 2018 Form 10-K.

Forward-looking statements are made based on our current expectations, assumptions and beliefs as well as information available to us at this time. Columbia undertakes no obligation to update any information discussed on this conference call.

During this call, we will also discuss certain non-GAAP financial measures. Reconciliations to comparable GAAP financial measures can be found in our supplemental financial data.

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

E. Nelson Mills -- President Chief Executive Officer & Director

Thanks, Matt. Welcome, everyone, and thank you for joining us. This afternoon, we reported the results from another strong quarter, reflecting the success of our strategy, the quality of our portfolio and the hard work of our entire team. We had created one of the best position portfolios in the entire office sector. We've featured attractive, modernized properties, located in some of the most desirable neighborhoods within high barrier to entry to Gateway markets.

We have also taking key strategic steps to enhance our ability to create value for our shareholders. Our properties continued to experience strong demand as evidenced by high occupancy and substantial increases in earthquakes. They are ideally located, with attracted, structural and functional qualities. Today's most forward-looking companies require these features to attract, retain and inspire a dynamic and energetic workforce. You can see evidence of this in the quality of our tenant roster and in the same-store results, we continue to generate quarter after quarter.

At Columbia, we maintain a very disciplined and proactive approach to capital allocation, investment flexion and leasing. We're always looking ahead for opportunities to further improve our portfolio and strengthen our operating platform, with a focus on growing cash flow and net asset value. And while we maintain a disciplined approach mood take decisive action to capture these opportunities.

This has been on full display over the last several years, and it's clearly visible in our operating and financial results, which Jim will walk you through shortly. But first, I'd like to discuss the key tenants of our strategy and highlight our most recent decisions to generate growth opportunities.

Our primary goal is value creation for our shareholders as measured by cash flow and NAV growth. And we had two key drivers: Disciplined investment in capital management; and operational excellence. Our investment strategy has been to thoughtfully recycle capital over time and to better growth opportunities. We have diligently disposed of more than $4 billion of noncore assets after repositioning them to maximize exit value along the way. That capital has been redeployed into various submarkets with strong demand tight supply and some of the most competitive markets in the country.

Choosing the right properties within those submarkets even more important in the chores we have made continue to pay of for our shareholders. As you know, our legacy Atlanta assets did not fit within the strategy. And after selling One & Three Brimley earlier this year, we have not completed our exit of the Atlanta market with the sale of Lindbergh Center. These sales have positioned us with 90% of our portfolio now located in New York, San Francisco and Washington, D.C.

The sales generated combined net proceeds of nearly $400 million that we can now deploy into the new growth opportunities. One such opportunity is our ground-up development, at 799 Broadway. This property is attracting strong and adjustable multiple high quality tenants, including a mix of well-established blue-chip names and exciting new growth opportunities. As a reminder, 799 Broadway is located adjacent to Square Park, an ideal live work play location next to one of New York's most active transportation hubs.

We're confident that this building's prime location and attractive and efficient design will commence substantial leasing at very attractive rates, well before construction is completed. In addition, we are also under contract on an exciting redevelopment project at 250 Church Street in Tribeca.

This property is located in the heart of one of Manhattan's most attractive neighborhoods, a high-end residential submarket that has very limited modern office supply. Our vision for 250 church is to create highly desirable boutique office space that, like 799 Broadway, will attract strong interest from top tenants and impressive rental rates.

Despite being 97% leased today, we continue to find opportunities, luckily and grow cash flows across the portfolio. Our highly talented and motivated team leased almost 200,000 square feet during the third quarter, making it our most productive leasing quarter this year.

Notable leases signed during the quarter include renewals of credit Suisse at 650 California, deluxe created services at 218 West 8 Peak Street in Chelsea and temper tech in Pasadena.

Jim will discuss in a moment, we also generated our highest releasing rate spreads of the year on both cash and a GAAP basis. While our portfolio reposition and transaction activity has drawn much of the tension over the last few years, we can't overemphasize our tremendous leasing success. Over the past three years, we have leased more than $2 million square feet in our core markets at an average 43% rollup in rents.

Finally, I want to highlight a key strategic step for Columbia. As announced last week, we're very excited to have entered into an agreement to acquire Normandy real estate management. The integration of this complementary platform will submit enhanced has Columbia's capabilities, relationships and pipeline of opportunities in New York, DC and Boston.

The $100 million acquisition, which is expected to close by year-end, will be largely funded with CXP shares, valued at $26.50 per share. Within the acquisition, Columbia will capture substantial revenue streams that should be modestly accretive to FFO with minimal impact on our corporate G&A.

Joined forces with Normandy is a natural fit, both operationally and culturally. Founded in 2002, Normandy is a leading real estate operator with respect evolvement and management team. And we are already working hand-in-hand with Normandy 2 developments, 799 Broadway and 250 Church Street. While bringing together these two talented and accomplished teams, we expect to establish a competitive force within our New York and DC markets. The acquisition brings us an expanded platform, a deeper execution strengths and greater access to capital. All of which enhance our long-term growth potential.

We were very pleased welcome the Normandy team to Columbia, including Finn Woodworth's, who will join our Board of Directors; and Jeff Groening, who will become our Chief Investment Officer; as well as Gavin Evan and Paul Teddy will also join our senior leadership team.

In summary, Columbia has just produced another quarter of impressive operational and financial results. We have embedded growth in our existing properties, a pipeline of new value add projects that further add to our growth prospects and we'll soon have the broadest and most capable platform in our history to drive value creation for our shareholders.

That all comebacks to the court drivers of our success. Strategic positioning we've accomplished through our unique investment strategy and, of course, the hard work of our talented team. We continue to seek even over opportunities to enhance shareholder value, including the potential repurchase of our own discounted shares. I would order to keep you perpetrated on our progress.

With that, I'll not turn the call over to Jim to provide additional details on our results and to share our updated outlook for the year.

James A. Fleming -- Executive Vice President and Chief Financial Officer

Thanks, Nelson. And we appreciate everyone joining the call today. 2019 continues to be a strong year for Columbia and for the third quarter, and it produced normalized FFO of $0.39 per share, our highest level of the year. And same-store NOI growth of 6.5% -- line to meet our full year expectation of of 8% to 10%

Despite low vacancy and limited rollover, our team was able to lease 198,000 square feet during the quarter, including a couple of key leases, at 218 West 18th Street in New York and at 650 California Street in San Francisco. Again, this quarter, we saw very high leasing spreads, 53% on a cash basis and 77% on a GAAP basis.

As you know, achieving higher rental rates on renewal and replacement leases is a key driver of future growth in both NOI and FFO. Our balance sheet remains strong and has benefited further from the sale of last month Lindbergh center. As of September 30, we had net debt to adjusted EBITDA at 9.5x, which is down from 6.1x in June and 6.6x in March. Our net debt to gross real estate assets also improved to 28%, down from 30% in June and 32% in March. And except for a small construction loan on 799 Broadway, we had no debt maturities until 2022, and we have more than $4 billion of unencumbered properties.

Our financial strength gives us substantial capital to deploy as we move ahead with our strategy. We will continue to seek attractive value add development and redevelopment projects in our key markets. In addition, now that the Normandy transaction has been announced publicly, we have the ability to repurchase our own shares, which we see as a compelling value. You can expect us to be more active in this regard, utilizing our newly purchased authorization that has put into effect in August, but always, acting opportunistically and balancing against all the investment options that end.

Turning to our updated outlook for 2019, we are once again raising the anticipated range for normalized FFO due to our continued financial performance and a later than originally anticipated sale of Lindbergh. Our original full year range was $1.35 to $1.40, which we raised after the first quarter, and again, after the second quarter. And today, we are raising the ranch again from $1.42 to a $1.46, up to $1.47 to $1.49. The rest of our guidance estimates remain unchanged, including year-end lease percentage of 96% to 98%, and same-store cash NOI growth of 8% to 10%.

In summary, 2019 continues to be a strong year for Columbia. And we're pleased with our third quarter results. We will provide guidance ranges for 2020 normalized FFO and other metrics on our next call. But we continue to believe we can, again, achieve same-store cash NOI growth in the high single digits, which will result in solid 2020 FFO despite our recent noncore dispositions.

We're also excited about our upcoming acquisition of Normandy. And as Nelson explained, we expect this transaction will be modestly accretive to our 2020 FFO per share. However, we believe that real value from this combination will come from the track record, relationships and capabilities of the larger platform.

And as we move forward in the next year, we will be focused on leveraging our platform to find value creation opportunities while maintaining a strong balance sheet and disciplined underwriting.

With that, Nelson and I would now be pleased to take your questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from line of John Kim with BMO Capital Markets.

John Kim -- BMO Capital Markets -- Analyst

Wondering, if you could provide an update on 149 Madison? I know it's probably a tough situation with WeWork, but what does the project stands today? And I think in the last call, you mentioned that occupancy may start as soon as this quarter, I'm wondering if that's still the case?

E. Nelson Mills -- President Chief Executive Officer & Director

Hi, John. Thanks for the question. So yes, just as a quick reminder, we have WeWork in three locations around the country, about 70,000 feet each in DC and California, both are you highly utilized occupancy situations. And we're monitoring all affect with all the news with WeWork. In case on one point witih Madison, this building is under construction, under buildout of -- by the lease has commenced, cash flow begins next summer in June. WeWork is in a process of building the space. There, they are working actively. There well along the process.

We originally believe and we're told that two subsidiaries WeWork would likely occupy the space. It's with all the changes that's not entirely clear, whether that will be the case.

We do think this space will be ready in a few months. We are called -- we're speaking with a senior -- with the new senior people that we work and we are told that they're very confident in their building to occupy that space, either with some of their companies or enterprise tenants. And may have plenty of demand stacked up. So that's what they're doing the work. That's what we're being told. We have no reason to believe that we will won't have full occupancy there, but we're keeping a close eye on it.

John Kim -- BMO Capital Markets -- Analyst

Is your preference to key the status quo just given your existing relationship with them or is there a Plan B and Plan C, if that's your actively reconsidering?

E. Nelson Mills -- President Chief Executive Officer & Director

Well, first of all, they have a legal right to the property. They are under 15 years lease, and as long as they're not in fault, it's their property to paying us a good rate. We struck it. We discussed in the past and we think we struck a good deal for our investors, with good credit enhancements and good terms. If they had the ability and the desire to continue to space, then they'll be a great tenant and a great outcome. If that changes, for any reason, we're very confident that that building is -- would be in high demand. And it's Midtown South property, which is what our focus is. It's why we are attracted to building it in the first place. current quadrant that an alternative use would be -- we'd workout just fine. But for the time being, that's where it is. Their current -- they are the current tenant, and we've got some good options either way, I think.

John Kim -- BMO Capital Markets -- Analyst

Okay. Just switching to Normandy. Can you discuss -- I know you talked about a little bit in your prepared remarks, but can you discuss how you plan to grow the business? What kind of assets under management you're looking to acquire? Would be more kind of in the private equity side as far as the fund you're looking to raise? And will there be sourcing transactions truly in the East Coast or can they be looking at other markets as well including the East Coast?

E. Nelson Mills -- President Chief Executive Officer & Director

Yes, well, Normandy focus has been New York, Boston and DC, the Northeast Corridors, and they have a quite a good repetition there. And they have a lot of good things going on there. It's just core of their business are two finds, finds three and funds four are currently active. We are acquiring the GP interest in those response. They have several years, each has several years, of -- to run. And so we'll step in as a manager and we'll look, obviously, collect fees from managing those funds. Those funds invest in various projects, which also have other direct investors at the project level.

And those investors pay fees as well, and those are longer lived income streams as well. In addition to that, there is various property management, third-party management, there are development fees, leasing fees. It's a very healthy, vibrant business that Normandy has developed in their -- we are strapping and we are coming together, really, if there. And a very successful story. And so we're very excited about that. All of those income streams made out last forever, most of them require durable. And we, together, we'll decide what we renew and continue.

But the real reason, as Jim mentioned, the real reason for the merger was just the talent, the reputation this company has, the complement to our team and our platform and the ability to go forward and create value together. Sources of capital, we'll include the project level equity and debt raise as opportunities arise. It remains to be -- we'll decide at some point whether we do another fund, that's resiliently a positivity, or we could go with direct project by project financing. And we certainly are going to be -- we're going to take could take and funds and play those out. And then from there, we'll have various options for raising new capital and doing projects together.

So yes, again, very excited about the opportunity, great fit. It was not -- Normandy was not looking to sell their company. We were partners together. This really started a discussion on how we could do more work together, how we could strategically align the two companies and a few months ago, we came to the conclusion that putting the companies together was the best answer for both of us. So that's how we got to this point. That is not necessarily a single. We're going to dive headlong into a bunch of new development projects. We did have an active pipeline, we're looking at opportunities. But you still got the same discipline or the management team that Columbia shareholders before, directing those efforts. So we'll continue to be thoughtful and disciplined about. And we now have more weapons, more tools, more broader relationships, access to capital. We just think it really elevates our game on many fronts. And that's the reason to do it.

John Kim -- BMO Capital Markets -- Analyst

So how does this impact your acquisition pipeline as it stands? Are you still looking to do more value add core plus type of acquisitions? Are you looking to do more redevelopment?

E. Nelson Mills -- President Chief Executive Officer & Director

Yes. We will certainly, as you know, we've actually launched two development projects. Relatively small, relatively out of our portfolio in the last year or two, both of those two with Normandy. We do have a couple projects we're looking at with Normandy that are potential value add projects. We also have some core and CorePlus assets, both in New York and San Francisco that we're looking at, and even DC where we keep an eye on the DC market. So no. Any point in time, probably 15% to 20% would be a cap on our at-risk -- the at-risk portion of our portfolio. The more we leased, the more successful we are, the more we can do more value ad. But we do not plan to significantly expand the percentage of our shareholder dollars there at risk on opportunistic investments.

Operator

Your next question comes from the line of Vikram Malhotra with Morgan Stanley.

Vikram Malhotra -- Morgan Stanley -- Analyst

Just another question on Normandy. Could you clarify the payment or the $100 million? Can you break that up into -- if there's an earn out component based on new metrics? And if not, just how is the payment structured between what's paid now versus maybe what's more deferred?

James A. Fleming -- Executive Vice President and Chief Financial Officer

Hey, Vikram. This is Jim. That's a very good question and it's something that we gave a lot of thoughts and was part of the way the deal was structured. So just to clear everybody on the same page, this is $100 million, $13.5 million of that is cash, it's paid at closing, and other $86.5 million is -- are these something, are essentially shares at $26.50. And we went into this and normally went in to this with the idea that there should be some tie in to where it wouldn't all invested upfront.

There are -- three original principles plus, one investor in Normandy, and roughly 2/3 of that rested right away and the other 1/3 is held back and invested in a 3-year period. And that's -- some of that is shared by the way with other key members of the team that are going to come to work for us. So some of that 1/3 is going to, some folks who have been employees of Normandy to really tie them in and align them with shareholders. And then, the rest goes to Normandy former principles. So there is a substantial amount at stake going forward that's tied to continuing to work for us and it was structured that way for us.

E. Nelson Mills -- President Chief Executive Officer & Director

And just to add -- just add to that, Vikram, answer, you Jim mentioned, there to end, a portion of first price is tied to retention of key employees. And then it's important in these key senior employees that are coming over will join our senior management team, they are being confident just like the rest of our senior team is. much of their composition is tied to shares, is tied to performance for other shareholders and the best over several years. So we think there's a lot of alignment and retention and all those features built in.

Vikram Malhotra -- Morgan Stanley -- Analyst

Got it. Okay. And then just a quick question on just the buybacks versus sort of acquisitions here. Can you update us on, how are you thinking about buybacks just given the way the stock is relative to your view of NAV?

James A. Fleming -- Executive Vice President and Chief Financial Officer

Sure, Vikram. We just -- so everyone is clear, we have not bought shares back in some time. The reason which we really couldn't discuss, the reason was that we had distraction pending we thought it might -- our letters, especially, about what would be a problem if we buy shares with this transaction now that's behind this and we have been an ounce.

And so we'll be free going forward to buy shares and you'll be did, bringing our authorization with the new $200 million in August. So we are free to go to do that, and we do -- we have bought shares at this price level and even a bit higher in the past. The reason is we think this price is compelling versus our NAV and really intrinsic value of the company. And so, yes, we do want to keep the business going forward and we do -- there's a strategic value in doing some value add where we can add value. But we think it's -- there is very clear value in the stock. And I think you should expect us to see some share repurchases. We're going to be opportunistic, so I'm not been laid out and wouldn't really be to lay that out clearly but we are now able to get in the market and we see a lot of value.

Vikram Malhotra -- Morgan Stanley -- Analyst

Thank you.

Operator

Your next question comes from the line of Sheila McGrath with Evercore.

Sheila McGrath -- Evercore -- Analyst

Yes. I was wondering if you could help us understand how you thought about the value of Normandy? How you arrived at the $100 million? And also, the $26.50 share price?

E. Nelson Mills -- President Chief Executive Officer & Director

Hi, Sheila. So it was a highly negotiated price, as you can imagine. I mentioned earlier, Normandy really wasn't looking to sell and exit. And we had our bankers, they have their bankers. We looked at cash flow streams, the various cash flow streams I mentioned earlier. Some are more durable than others, some would have a higher cap rate, multiple than others. And so we -- it was negotiated price, our board was very involved from the beginning with our advisors and bankers. But we looked at comparable multiples from other management companies.

And, again, we feel like it was a very fair deal, as obviously Normandy owners did. But something negotiated but we are arguably based on an evaluation of multiple streams. We -- multiple on cash flow streams. We obviously -- there is enterprise value the on that. It's a talented team. It's a great fit with us. There are a lot of intangible reasons to -- valuations, as you could add on to that. But we were very pleased with the quality of cash flow streams and the multiples we paid for those. So we undertake take that very seriously like an investment, and we were confident that we got the value for our shareholders. But it was heavily negotiated over several months process.

Sheila McGrath -- Evercore -- Analyst

Okay. Great. And then on the -- you said in your comments minimal impact to G&A. Do you mean that there is incremental G&A from this transaction, but the fee streams more than over -- more than offset that incremental G&A?

E. Nelson Mills -- President Chief Executive Officer & Director

That's right. I mean we did -- you're putting together two companies that have a lot of similarities in terms of platform, in structure and operations and so forth. So there were some redundancies in synergies there. We had about 100 people. They had a little bit more than 100 people. And putting two things together, again, over the several months of planning, there were several positions eliminated on both sides.

So we're very conscious of that and trying to get to an efficient structure and efficient platform so there weren't any real savings there putting two companies together. And then a lot of the incremental cost that we're bringing on, people are bringing on, are tied to directly to income streams, property management, development projects, fund management and -- so those were allocated to the projects and don't really affect corporate G&A. So we -- we'll give more details on this later in the year or only provide guidance for the latest, the latest. the incremental corporate G&A, which just going straight up, standard allocation, we think is going to be very modest -- increasingly very modest what we reported today.

Sheila McGrath -- Evercore -- Analyst

Okay. Great. I was wondering if you could give us an update on the interest level at 799 Broadway, I think that I will be completed next year. I am just wondering how that marketing effort is going?

E. Nelson Mills -- President Chief Executive Officer & Director

We don't expect the property to deliver late next year. And that's one of that side of that point quite well. A lot of interest on the tenant prospect side, we have an contained in having conversations around couple of hours already, substantial portion of the building. These are high-profile and you could -- good quality tenants. Still, nothing is -- we're not on the verge of thinking anything yet but we are very encouraged by the level activity and it's just working have a lot of choices there in terms of who we choose and we are very confident in meeting our expectations on the rate of terms. So I know it's a bit vague, but we're confident we'll have something to announce and not the to distant future.

Sheila McGrath -- Evercore -- Analyst

Okay. One quick one for Jim. Just on G&A in the quarter, I see you did separate, I'm assuming that $2 million or someone is related to of Normandy cost, but away from that, the G&A did decline sequentially by $1 million or more dollars. Could you help us understand that?

James A. Fleming -- Executive Vice President and Chief Financial Officer

Sure, Sheila. As the G&A for us and probably most companies something something the Director stock grants in the second quarter, of course, that would cause that one to be hired in the third quarter and then, you know, there are just various things getting into the weeds but any expectation gets forfeited in the third quarter. So it swings around a little bit. So it's not unusual to see it bump up a little bit quarter-to-quarter, but I would say this, I'd say we're on track to meet our range. We feel very good about that. In fact, we're pushing toward the lower end of the range, we believe. So we feel the G&A is under control.

Operator

[Operator Instructions] Your next question comes from the line of Mitch Germain from JMP Securities.

Mitch Germain -- JMP Securities -- Analyst

Nelson, did I hear you mentioned Boston again is a target market? Is that...

E. Nelson Mills -- President Chief Executive Officer & Director

Yes.

Mitch Germain -- JMP Securities -- Analyst

Is that -- so is that assumption that may be deal activity or you feel a little more constructive about growing there? Obviously, it's been pretty tough so far?

E. Nelson Mills -- President Chief Executive Officer & Director

Yes, thanks for the question, Mitch. I know we sounded schizophrenic about Boston sometimes. we're in and out. As you know -- as you mentioned, we own a property there, well far and property, great property there, 116 Huntington in Boston. We have kept a close eye on Boston. We have actually built the opportunity there over the years. We do not have a team there. And we have -- we focus more on Manhattan San Francisco. But we always liked Boston, we've always considered it a potential for market. It's a very tight competitive market, much like San Francisco today. So it's tough. It's competitive. But given our history and interest there, given Normandy's history track record, relationships there, it's a market we're gonna pay more attention to. So there's nothing imminent there. There's no -- there's nothing actively in the pipeline. But I think this is a market we're gonna get more serious about.

Mitch Germain -- JMP Securities -- Analyst

Okay. And then something about getting shares about, are you getting serious a little more bit about buying back stock? I mean we -- over the past couple of years, we've seen these levels before, but we've seen a bit of reluctance to acquire possibly because you had deals that you felt pretty constructive about as well. A, maybe, what is that -- deal pipeline; or B, why may be the change here and posture toward buyback?

James A. Fleming -- Executive Vice President and Chief Financial Officer

Sure, Mitch. We just haven't been in the market. And it's been -- haven't really been able to explain why but the reason has been it's pending transaction, it's kept us in the market. That's now announced and so we're free to go in to the market. And meanwhile, we've got a pretty good balance sheet.

We have sold our two Atlanta noncore properties during this timeframe and as you can see, our debt stands below 30% and it's -- and the stock is trading at a big discount to what we think it's worth. So there is value there. And I think it's our job to go address that now, strategically. We got to keep in mind other situations where we maybe able to create value with real estate and we're in a capital intensive business. But I think part of our job is to create value and capture value where we can.

E. Nelson Mills -- President Chief Executive Officer & Director

Yes, and just to reiterate, over the last two quarters, our lack of share buybacks was entirely related to this. We thought this was a material transaction, is material enough development that we had to stay out. It wasn't anyway reflective -- obviously, we understand the shares are trading substantially at low value, a great use of shareholder dollars. As Jim said, we do have to balance of other opportunities. We do have to scale and other factors or issues. But we'll see a different stance going forward.

Mitch Germain -- JMP Securities -- Analyst

Got you. Last one me. It seems like, I kind of interpreted Normandy as more of a acquired a higher type of transaction. And it sounds like you're suggesting you don't really have a specific plan about how to leverage the organization? It seems from a talent level, you like what you're getting but you may consider funds, you may consider separate account investments. I mean I think one of things in the investment community, it seems to dislike is uncertainty. So over the course of next couple of months as you finalize the transaction, should we expect a little more of the clearer plan of how you intend to work together going forward?

E. Nelson Mills -- President Chief Executive Officer & Director

Yes, absolutely. And to be clear, Mitch, raising capital, private capital, is absolutely in plan. We have this powerhouse organization. Normandy in addition to being great real estate performance side. There are also excellent fund managers investment managers, they grew repetition there. We want to use that, plus we have a fair amount of private capital under our management with Allianz and Blackstone.

So we will absolutely use that. The question is whether it will be a fund or a club or just private capital or project-by-project basis. Those are things that will provide more clarity around. One of the things we're doing, the reason is taking a couple months to close is we're actually talking to existing investors to Normandy platform. We're introducing ourselves to them, we're giving their consents for the transaction. And the process of doing that, we'll educate ourselves further on what those opportunities are to extend those relationships and to future investments. And we have our own relationships and there will be new relationships.

So we absolutely -- yes, it is a great cumulation of talent, and that is a major driver. But we do have a plan beyond that to renew and grow and further develop this business to increase. So, yes, absolutely, more to come on that. No later than our 2020 guidance, but possibly before as we deal close and we would pull that story together. We understand -- we totally understand your point about the uncertainty and this is something we're going to focus on in the next couple of months.

Operator

The next question comes from the line of Michael Lewis with SunTrust.

Michael Lewis -- SunTrust -- Analyst

Are you able to tell us what that $2.4 million of transaction cost? I like Sheila assume that was Normandy related, but maybe if you could give more detail. And then, can you share what additional cost might be or should we expect to find that out when the deal closes?

James A. Fleming -- Executive Vice President and Chief Financial Officer

Hey, Michael. Yes, it is Normandy and it's lawyers and bankruptcies and there will be more, and I don't think we have an exact number yet. But it'll be -- that say, it's a substantial piece of it though, that $2.4 million.

E. Nelson Mills -- President Chief Executive Officer & Director

But more to come on that, Michael, when we close the transaction and we announced more details about the transaction and the impact going forward, you know, as we've mentioned, it's a good result both on near-term and a longer-term. Near-term accretive, modestly, but and then the growth opportunities from there are something we're very excited about. And more details to come on that soon.

Michael Lewis -- SunTrust -- Analyst

Okay. Fair enough. And then, is there anything more you could say about the fee strains? Maybe you're not quantifying those, but maybe even a sense of how much of these fees are investment management versus property management versus leasing versus development? Just kind of a sense of what you're kind of taking on here at Day 1?

E. Nelson Mills -- President Chief Executive Officer & Director

Well, Mark, we're not -- I guess we're not prepared to provide details on those stratification. Although I will say there substantial long-term asset management fees, investment management fees from the funds, the two funds, fund three and fund four are core of the business.

Yes, other fees like leasing, development, construction management, property management are significant. And while those aren't as long term and not quite as durable on their face, they are quite renewable given the platform mother relationships, the future opportunities and so forth. So we understand that they are not as durable and long term as rents on properties, but we also did not play the multiples on the same property. So that was all taken into account. So yes, we will break that down not only in terms of what we're hearing Day 1, but what we expect back to Mitch's question earlier, what we expect back to Mitch's question earlier in a couple of months.

James A. Fleming -- Executive Vice President and Chief Financial Officer

And I think, Michael, I know everybody's curious. We're not switching to fee business. I mean we're going to have $100 million and this and we got $5 billion in real estate. So this is not really the bulk of business or bulk of our revenues by any stretch. You wouldn't expect us to do more there. So I think really what's most relevant is what does it do for us going forward? And we'll provide some more clarity on that, too, as we provide guidance for next year. We just haven't been in a position to do that precisely enough yet. But except to say, it's modestly accretive that there are significant personal cost but of course, it's accretive.

So the fee stream, we believe, will be substantially more than the personnel cost. And we think we really enhanced the platform. So are really -- and the last one is really more efficient to do it. So, again, it's not a big part about our investment portfolio by any stretch. It's -- and we do feel that the price that was paid for the fee streams fit within what our bankers were expecting based on other transactions that have been done in the market, both public and private. And we felt that it needed to be that way so that we felt, oh, by the acquisition but, of course, the motivation was to expand the platform and to get that talent in a relationships in a track record and that access to capital.

E. Nelson Mills -- President Chief Executive Officer & Director

And Michael, when we say it's accretive -- modestly accretive, that's on a per share basis. So we are issuing a few more shares in connection with the transaction. So it's producing the net-net income to cover that -- those shares and the overall net accretive, again, modestly, to all shares. So it's a good short-, near-term outcome. As we've said, the near term is not the primary reason for doing this transaction, but unlike just going out and hiring talent and assuming that and organically which would put cost but no revenues, this is best of both worlds that you get the real business here, a viable, renewable, extendable business with also the great talent.

So we think it's a very unique -- and on top of that, a cultural operational fit with the group we already know very well. So for all those reasons, these transactions -- these mergers are always difficult, as you know. But it's hard to imagine one that was much more logical and benefit in this one.

Michael Lewis -- SunTrust -- Analyst

Got it. And lastly, I just want to ask the New York cap question. It's been a long time now that investors have pushed back on these discounts NAV by saying the NAVs are real or they are not right or the cap rates aren't right. You have bought back shares in the past. So I assume you still see a really wide difference between the public and private market evaluation. But have you seen any movement in cap rates or kind of, how do you respond to that kind of pushback?

E. Nelson Mills -- President Chief Executive Officer & Director

You know, Michael, we're out there competing both in New York and elsewhere for those opportunities even think that we don't go purchase -- second or third round. We are actively very active. And there is still a lot of capital from all over the world, aggressively chasing quality real estate -- office real estate. And it is a bit of a bifurcated market right now. The new product -- nearly renovated product, renovated vintage product like we have is -- there is no evidence that pricing has cooled the notes at all. Some of the more standard commodity locations, commodity product is maybe not -- it in our trading quite well or it's not much interest. But overall, I'd say, cap rates in New York appear to be holding up well I'm and particularly for quality location and quality properties. That would be our view. And that's from buyers -- from a potential buyers point of view as well as the seller.

Operator

Your next question comes from line of Sheila McGrath with Evercore.

Sheila McGrath -- Evercore -- Analyst

Yes. Quick follow-up. Any known moveouts that we should be aware of? And were there any lease termination fees in the quarter?

James A. Fleming -- Executive Vice President and Chief Financial Officer

Sheila, there weren't any material lease termination fees. I have to go back and look to make sure there are absolutely 0., but there weren't any material ones. And no -- there are not any material moveouts that we're anticipating. Of course, we will lease -- we've got very limited roll going forward. There are a couple of key leases that Nelson and I both mentioned are almost the top two floors in their 18th Street building. The one we refer to Red Bull, and there is other tenant there may be something something to that space GAAP reduced as very substantial on. Our Credit Suisse on the top two floors at 650 California was also reviewed as substantial roll up. We did get two floors back at 650 California but, again, that will be a very big roll up as we get that space lease. And we wish we had more space to lease in that building. So we're pretty tight tight right now, and I don't -- we don't -- we're not concerned about that.

E. Nelson Mills -- President Chief Executive Officer & Director

Sheila, we do have a couple of situations where we have tenants in place, that tenant no longer needs as much space and is considering move or vacate. However, the tenant is -- has good credit. The tenant is good for the rents. There is plenty of leads left, but there's interest from other tenants at rollouts to come and take this space. So there is a great opportunities to have. And we may take advantage of those of could use that report of that in the next months that'll be good news. What will move the newer overall but it's a good story, just, again, we are reaffirming the attractiveness of this space. So when you are 97.5% lease, it's difficult to find a whole lot of upside and activity, but we do have some of that on the portfolio that we can take advantage of.

Sheila McGrath -- Evercore -- Analyst

Okay. And just on the leasing spread in the quarter, there weren't significant, I'm sorry if I missed this, but can you just tell us whether one specifically is driving that or property just give us a little detail on the spreads?

James A. Fleming -- Executive Vice President and Chief Financial Officer

Those 2, Sheila, that I've mentioned at 18th Street in New York and 650 California with the two big drivers. They were each around 30,000, 31,000 feet. So there was -- and then there was one other significant lease -- something, so we had three which was at Pasadena property. So those was -- between the three of those, those were over half of the leasing that was done in the quarter.

Operator

Your next question comes from the line of John Kim with BMO Capital Markets.

John Kim -- BMO Capital Markets -- Analyst

I have a follow-up. Just a follow-up on Normandy, just because it's been a recent transaction. So it's not any of the accretive deal and it's modestly earning accretive next year. But I was wondering, what is the -- your earning growth profile? Is this having this platform accelerate going forward?

E. Nelson Mills -- President Chief Executive Officer & Director

Yes. I think, absolutely, right? So just look at -- we are already doing, as you know, some development activity through partnerships with Normandy, and we're excited about that. Whether or not we've done this transaction with this side of the opportunity. But when you're partnering with a third-party, you're paying fees, you're paying promote. you're sharing profits. And so just from that point of view to have a capabilities in-house to do that, in addition to that, construction management fees, other fee strains, other ways to generate that capital. So I think, it does make that more profitable. It does make those opportunities more profitable for us. But in addition to that and more importantly, it gives us the opportunity to be more competitive to have a better chance at winning compelling opportunities.

They're building to attract investors alongside us. The likes of Invesco and casters and textures teachers and other current partners of Normandy's that build and attract some of those other investors along the sides will also be other fees they promote I think it brings all of that to the table. Now we're going to be continue to be disciplined with our investor capital. We're not gonna pour, like I said, we missed that 15% to 20% cap on at-risk investing for our investor dollars will be continuously disciplined on that. But I do think this does open the door and provides us the base from which to increase our profitability and our earnings by creation of opportunities. So yes.

John Kim -- BMO Capital Markets -- Analyst

Can you discuss what the different multiples you use to value the different fee streams worth?

James A. Fleming -- Executive Vice President and Chief Financial Officer

John, we're not -- we can't really -- we won't really get in to that at this point. What we will do as we provide guidance for next year, we'll provide some building blocks so you could understand how this fits with the company. I will say we did look at each different type of fee stream. We evaluated it with our bankers. In terms of durability, we diligent it to make sure that the numbers we really look at were really real, and we're holding up during the year. And we looked at multiples that had been paid on other transactions, both in the private and public real estate with public and private real estate targets with our bankers. And so we feel good about it. But that's all really we can say this point.

Operator

There are no further questions at this time. I will turn the call back to Nelson Mills for closing remarks.

E. Nelson Mills -- President Chief Executive Officer & Director

Thank you, everyone, for joining us today. We really do appreciate you participating and for the questions, great questions. And we really are grateful for your ongoing interest in Columbia Property Trust. As you can tell, we're excited about the future and value creation opportunity going forward. And we do look forward to updating you with more details on our recent transaction. And we'll soon be able to provide more workouts on the rest of this year in 2020. So thank you again for your time, and please reach out to us anytime with any questions. And we hope to see you soon. Have a great evening.

Operator

[Operator Closing Remarks]

Duration: 56 minutes

Call participants:

Matt Stover -- Director of Finance and Investor Relations

E. Nelson Mills -- President Chief Executive Officer & Director

James A. Fleming -- Executive Vice President and Chief Financial Officer

John Kim -- BMO Capital Markets -- Analyst

Vikram Malhotra -- Morgan Stanley -- Analyst

Sheila McGrath -- Evercore -- Analyst

Mitch Germain -- JMP Securities -- Analyst

Michael Lewis -- SunTrust -- Analyst

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