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Retail Opportunity Investments Corp (NASDAQ:ROIC)
Q3 2019 Earnings Call
Oct 29, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Retail Opportunity Investments 2019 Third Quarter Conference Call. Participants are currently in a listen-only mode. Following the Company's prepared comments, the call will be opened up for questions.

Please note that certain matters discussed in this call today constitute forward-looking statements within the meaning of the federal securities law. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company can give no assurance that these expectations will be achieved. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from future results expressed or implied by such forward looking statements and expectations.

Information regarding such risk and factors is described in the Company's filings with the Securities and Exchange Commission including its most recent Annual Report on Form 10-K. Participants are encouraged to refer to the Company's filings with the SEC regarding such risks and factors as well as for more information regarding the Company's financial and operational results. The Company's filings can be found on its website.

Now I would like to introduce Stuart Tanz, the Company's Chief Executive Officer.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Thank you, and good morning everyone. Here with me today is Michael Haines, our Chief Financial Officer; and Rich Schoebel, our Chief Operating Officer. Before getting started, I would like to briefly address the California wildfires. While the situation is very serious, fortunately it has not impacted our portfolio or business, nor do we expect it to at this time. Needless to say, we continue to monitor the situation closely.

Now turning to our third quarter results. The Company posted another active and productive quarter, led again by another very strong quarter on the property operations front. We continue to maintain our portfolio at well over 97% leased, and again achieved solid same center NOI growth, along with very strong same space releasing spreads. In fact, our team achieved a 36% increase on new leases executed during the third quarter.

Given our strong performance year-to-date, we are on track to potentially have one of the best years on record for the company in terms of releasing spreads and overall leasing activity. Safe to say that demand across our portfolio continues to be strong, and we continue to have good success and making the most of it.

Along with continuing to deliver strong property operating results, we also continued to execute our strategy of disposing certain non-core properties, primarily focused on exiting the Sacramento market. During the third quarter, we sold another property for $30 million bringing our year-to-date total to $60.5 million. We also have another property under contract to sell for about $13 million, which we expect to close by year-end. Beyond that, with respect to the final two remaining properties in Sacramento, we just listed one of the properties and with respect to the last Sacramento property, we are in the process of releasing an anchor space at the center that once we have completed the leasing, we will bring that property to market as well.

We expect these last two Sacramento properties will together generate around $40 million in total sale proceeds once completed. Turning to our densification initiatives, we are pleased to report that we are making good progress on a number of fronts. At our Crossroads Shopping Center, we are currently finalizing our development agreement with the City of Bellevue on Phase II. The agreement will enable us to build 220 apartments along with 14,000 square feet of retail space, which is terrific from our perspective, as the amount of apartments and retail split -- space is greater than what we had originally thought the city would allow.

Additionally, we are finalizing the development agreement with the city. We are also close to finishing a detailed value engineering review of our plan design, which we think could reduce our initial cost projections by approximately 15%. Assuming everything continues to progress on the current track, we should be in a position to move forward in preparing working drawings starting in the first quarter. With respect to the two densification opportunities that we're currently pursuing at several of our shopping centers in the San Francisco Bay Area, both are progressing as well. At our Nevada Shopping Center, we continue to have productive meetings with the city regarding potentially building a 140 to 150 apartments along with 14,000 square feet to 16,000 square feet of retail space.

We are in the process of preparing design joins to be submitted to the city at our next scheduled meeting a few weeks from now. At our Pinole Shopping Center, the longtime city planner that we had worked with for many years recently retired. So we are now in the process of engaging the new planner who thankfully is also very supportive of our densification plans of adding multi-family to our site, potentially around 200 apartments. Additionally, recently a prominent international hotel group approached us with the support of the city about ground leasing a portion of our densification site. So, we are now in the process of exploring the idea of potentially incorporating the hotel along with multi-family as part of our densification plan, which we will be discussing in greater detail with the city next month.

Beyond these three densification projects, we are also in the beginning stages of pursuing two additional densification opportunities, both in the Pacific Northwest, one in the Seattle market and one in Portland. At our Seattle property, we started working with a local municipality together with an adjacent property on developing a comprehensive densification strategy for both properties. The city is highly interested in having a coordinated plan that could potentially include 1,000 apartments in total, along with more retail space.

Additionally, at one of our shopping centers in the Portland market, we recently approached the local municipality there about adding a multi-family component, which the city has embraced. In fact, they are now in the process of developing a new downtown core densification master plan with our property as the focal point. While these two densification opportunities are just in the early stages of discussion, we are very encouraged by the city and civic support thus far.

Lastly, in terms of acquisitions, we are pleased to report that we currently have three interesting off-market opportunities that we are pursuing, which together total around $85 million. One of the property is located in the Pacific Northwest, and the other two are located in Southern California. All three are grocery-anchored shopping centers that are well situated in excellent locations and all three have considerable amount of opportunities for our team to increase cash flow and enhance value going forward.

Additionally, at one of the properties, the seller is interested in taking ROIC units, potentially about $3 million or so, thus far valuation discussions have been encouraging. And we are currently in the process of conducting our due diligence with the goal of having all three properties under contract soon.

Now I'll turn the call over to Mike to take you through our financial results. Mike?

Michael B. Haines -- Chief Financial Officer

Thanks, Stuart. For the three months ended, September 30, 2019, the company had $72.4 million in total revenues, and $35 million in operating income. In terms of the first nine months, the company had $221.4 million in total revenues and $89.2 million in operating income. On a same center cash basis, net operating income for the third quarter increased by 3% to $48.7 million, an increase by 3.6% for the first nine months of 2019.

Turning to net income, for the third quarter of 2019, GAAP net income attributable to common shareholders was $17.9 million equating to $0.16 per diluted share. And for the first nine months, GAAP net income was $38.7 million or $0.34 per diluted share.

In terms of funds from operations for the third quarter of 2019, FFO totaled $33.4 million equating to $0.27 per diluted share, which brings our FFO for the first nine months to $0.82 per share. With respect to the company's balance sheet and capital raising activities, during the third quarter, we utilized the proceeds from the propertied sold that Stuart mentioned to reduce that. Additionally, over the past couple of months, we raised about $26 million of equity through our ATM program, being careful to utilize the program in a series of modest rates as market conditions permitted and that pricing that was within roughly 1% of the stock 52 week high. As with the property sale, we utilized the ATM proceeds to further reduce debt. As a result, during the third quarter, we lowered our net debt to EBITDA ratio down to 7.0.

Looking ahead, we would like to issue some additional equity market conditions permitting between now and year-end, with the goal of lowering our debt further, such that our net debt to EBITDA ratio was below 7.0 as we head in to 2020. Taking into account the asset sale, equity issuance and pay down of debt, at September 30, the company had a total market cap of approximately $3.7 billion with roughly $1.4 billion of debt outstanding, equating to a debt to total market cap ratio of 38%. With respect to the $1.4 billion of debt, 94% of that is effectively fixed rate.

In fact, the only floating rate that we currently have is our credit line, which had a balance of $92 million at September 30, representing just 6% of our total debt outstanding. Furthermore, we have no debt maturing for the next two years when our credit line comes up for renewal, and beyond that our maturities are well laddered.

Additionally, our interest coverage continues to be solid. Specifically, it was 3.2 times for the third quarter. Lastly, in terms of FFO guidance in light of the asset sales, equity issuance and debt pay down and the fact that we remain on the sidelines thus far this year in terms of new acquisitions, we've adjusted our FFO guidance range accordingly to now be at $1.10 to $1.12 per share for full year 2019. The low end of that range is since we do issuing more equity between now and year-end, while the high end of the range assumes we do not and also assumes that the pending disposition that Stuart mentioned doesn't close until the first quarter.

Now I'll turn the call over to Rich to discuss property operations. Rich?

Richard K. Schoebel -- Chief Operating Officer

Thanks, Mike. As Stuart highlighted, we are on track to post another very strong year on the leasing front, possibly one of the best years on record for the company. Year-to-date, we have already leased 1 million square feet of space, which speaks to the success of our hands-on proactive approach of seeking out opportunities to release space, well ahead of scheduled expirations.

Additionally, our strong leasing volume is especially noteworthy given that our portfolio has been essentially full for over five years now, as we continue to maintain our portfolio lease rate at well over 97% as Stuart touched on, including finishing the third quarter at a very strong 97.7% with our anchored space again at 100% lease and our shop space at 95% leased.

While the 97.7% is slightly below the record-high 97.9% lease rate that we posted last quarter, the slight drop is simply a function of timing between leases in connection with our efforts to capitalize on the strong demand for space. In today's leasing environment, demand in many cases continues to outpace supply, particularly for highly sought after locations where retailers are submitting letters of intent for any space that may come available. As we continue to work creatively at capturing this demand, our portfolio lease rate is going to fluctuate modestly from one quarter to the next, as we move tenants in and out.

Importantly, the demand is increasingly being driven by three emerging factors all within the in-line space segment. First, we are seeing a growing number of traditional bricks and mortar retailers seeking to expand their market presence on the West Coast with new format, right-sized stores tailored specifically to the surrounding communities demographic profile. Second, more and more e-commerce retailers are starting to introduce new physical store concepts to complement their online activity as well as grow their overall business and strengthened their competitive position, they too are seeking locations in well-located, grocery-anchored shopping centers.

And third, we continue to see increasing demand from traditional mall retailers branching out and seeking in-line space at grocery-anchored centers. Needless to say, these emerging factors all bode well for our business, especially as it relates to our ability to continue to diversify our tenant base and enhance the retailer mix at our shopping centers. These demand trends and focus on in-line space are clearly evident in our continued strong leasing results. Specifically, during the third quarter, we executed 96 leases in total, of which 91 were for in-line space.

In total, we leased 376,000 square feet of space, achieving a 35.7% cash increase on same-space new leases and an 8.7% increase on renewals. Year-to-date through the first nine months, we executed 288 leases, of which 275 were for in-line space. In total, we have leased 1 million square feet year-to-date, achieving a blended 32% increase in same-space new leases and an 11% blended increase in terms of our renewal activity. In summary, we continue to excel on the leasing front and are poised for a strong finish to 2019.

Now I'll turn the call back over to Stuart.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Thanks, Rich. As some of you may know, we just celebrated our 10th anniversary as a shopping center REIT. When we commenced operations a decade ago, our objective was to carefully build a portfolio comprised of grocery-anchored shopping centers that would serve as a strong foundation and provide the company with a balance of long-term stable cash flow and good growth opportunities for years to come.

Starting with zero properties back in October of 2009, over the years, we've built a portfolio that today stands at 88 shopping centers, totaling over 10 million square feet, with ROIC recognized as the largest grocery anchored shopping center REIT focused exclusively on the West Coast. We've built our portfolio not by chasing widely marketed deals but instead by carefully seeking out off-market opportunities, focusing on unique shopping centers situated in irreplaceable locations with identifiable opportunities for our team to enhance value over time, which is precisely what we have done as evident by our consistently strong portfolio results.

For example, for 31 consecutive quarters now dating back to 2012, when we began reporting property statistics, we have grown same-center NOI each and every quarter. Additionally, we've increased same-space releasing cash rents every single quarter as well, and we have maintained a portfolio lease rate at or above a very strong 97% for 21 consecutive quarters now. Our consistently strong performances indicative of our disciplined, focused strategy and unparalleled West Coast market knowledge and experience.

Needless to say, we are proud of our accomplishments over the past 10 years and we look forward to the future as we embark on our second decade of operation at ROIC.

Now we'll open up the call for your questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Collin Mings with Raymond James. Your line is now open.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Good morning, Collin.

Collin Mings -- Raymond James -- Analyst

Good morning, everyone. Hey, good morning, Stuart. Couple of questions from me. Just first, just Mike, going back to the guidance, can you just elaborate on the changes just given prior guidance that already incorporated some disposition and ATM activity?

Michael B. Haines -- Chief Financial Officer

Well it was kind of a function of a couple of things. The change in guidance is really being driven partly by -- our asset sales are a little bit slower than we had originally thought. We also issued equity little bit earlier than we thought we would, and those are the two primary drivers that caused the change.

Stuart A. Tanz -- President, Chief Executive Officer and Director

And that does include Collin, another $30 million of equity if the market is there for us in the fourth quarter.

Collin Mings -- Raymond James -- Analyst

Got it. Okay, helpful there. And I guess maybe just along those lines, Stuart. Just can you maybe just discuss the decision to utilize the ATM here. Again modestly below kind of consensus NAV estimates versus just bringing more assets to the market to reduce leverage?

Stuart A. Tanz -- President, Chief Executive Officer and Director

We felt it was important to tap the equity markets as Michael articulated, it's just half of our -- our high for the year, 52 week high. We felt it was important to really continue to finish the dispositions that we laid out, as well as to get some equity into the balance sheet to prepare us for 2020 as it relates to growing the company and growing our FFO.

Collin Mings -- Raymond James -- Analyst

Understood. And maybe just last one for me and I'll turn it over. Stuart just in context of the $85 million of off-market opportunities that you're pursuing that you highlighted in the prepared remarks, can you maybe just expand on that a little bit more, how did some of those opportunities come together? How quickly could some of these deals get across the finish line, especially just in context of again guidance for this year only suggesting $25 million at the upper end on the acquisition front.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Sure. A number of two out of the three deals are from very long-term relationships in the markets that we've had for the last couple of decades, in discussions with sellers they are finally warming up to actually selling us these off-market deals, and the third one is really coming through a relationship we've got up in Seattle, which is an OP transaction on a property that we've had our eye on for many years that the seller now is at a point where he is willing to look at transacting. So two in Southern California, one in the Pacific Northwest. We do expect to probably subject to due diligence close these transactions toward the end of the year and the first part of next year.

Collin Mings -- Raymond James -- Analyst

All right. I appreciate the color. I'll turn it over. Thanks, Stuart.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Thank you.

Operator

Thank you. And our next question comes from Christy McElroy with Citi. Your line is now open.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Good morning.

Christy McElroy -- Citi -- Analyst

Hey, good morning guys. Hey, just to follow up on Collin's question on the acquisition. So the $85 million you discussed, it sounds like it will be -- they'll close sort of toward the end of the year and into next year. But how are you thinking about the funding of those aside from the OP units you discussed. So you mentioned additional equity issuance, but it sounds like that's earmarked more for debt reduction. And I guess how are you thinking about the pricing of the OP units because historically you've -- you've been able to get a price that's a little bit higher than where your stock trades, so kind of two-parter there.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Sure, I'll have Mike address the first part of the question. But in terms of the OP units, the discussion right now is around a price of 19.50 or a bit higher.

Michael B. Haines -- Chief Financial Officer

As far as the funding sources, I mean it's going to be a combination of proceeds from asset sales and equity issuance, assuming the market conditions permit that. We're very sensitive of keeping our leverage in check, and in fact reducing our net debt to EBITDA ratio, which is a little focus of ours for a while now. So keeping that all that in mind, it is going be a combination of asset sales and equity issuance of ATM likely.

Christy McElroy -- Citi -- Analyst

Okay, great. And then Rich, just to follow up on your comments about occupancy. With the lease commencements, you have teed up, I would have expected builder occupancy to move a little bit higher quarter-over-quarter, instead of declining. Maybe you could give a little bit more detail on some of the offsets there in terms of space recaptured during the quarter. And it sounds like, you're still positive on the demand front. So where would you expect that builder occupancy rate ends the year?

Richard K. Schoebel -- Chief Operating Officer

We would expect it to be relatively consistent as it has been each quarter this year, meaning that we would expect about another 2 million of that 6.4 million will commence in the fourth quarter. I think it's all driven by the opportunistic releasing that we're doing in many cases well ahead of lease expirations where a tenant may be coming offline. I talked earlier then we would have anticipated, while we're waiting for the new rent to come in.

Christy McElroy -- Citi -- Analyst

Okay. So if you're expecting more lease commencement another 2 million, should we expect that should be incremental or is that -- is there other states coming offline that's sort of offsetting that, right? Because there is a disconnect, right? You have spaces commencing but there is also that offset in terms of space recaptured or fallout that you have that's kind of -- that results in that occupancy moving lower rather than higher.

Richard K. Schoebel -- Chief Operating Officer

Yeah no, I agree, I think it's really just a function of timing and being. It's a little bit hard to predict, we are constantly working with tenants that are in place and needing to be repositioned and the timing of the replacement leases, it's just very hard to predict. But there is always going to be some variability into it quarter-to-quarter.

Michael B. Haines -- Chief Financial Officer

In other words, we are still playing offense on the West Coast, Christy. We're still aggressively out there, which is obviously noted in the nice releasing spreads that we're getting but we're constantly at our -- working with our tenant base to really capture that mark to market as quick as we can, as it relates to the real estate that we own. But we're still playing offense in terms of the tenant base and that's why you are going to get some of this inconsistency going forward.

Christy McElroy -- Citi -- Analyst

Okay, thank you.

Operator

Thank you. Our next question comes from Michael Gorman with BTIG. Your line is now open.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Good morning, Michael.

Michael Gorman -- BTIG -- Analyst

Good morning. How are you?

Stuart A. Tanz -- President, Chief Executive Officer and Director

Good. How about yourself?

Michael Gorman -- BTIG -- Analyst

Good, thanks. Maybe if we could just stick with the equity for a minute. Can you guys maybe talk about, you've got the $85 million in potential deals some equity marked for some debt reduction. Can you just talk about as you think about the ATM versus the secondary market, obviously, the ATM is a lot more efficient. But what's kind of the capacity as you think about it on a quarterly basis in terms of what you can do under the ATM before you have to start thinking about looking at the secondary market based on your deal flow.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Well, I think you hit on the button when you said deal flow. I mean it all depends on how our deal flow is looking. If we were to accelerate our deal flow, as we move into 2020, then we would consider obviously our secondary versus using the ATM. But right now the ATM is certainly the most efficient way to raise equity for us.

Michael B. Haines -- Chief Financial Officer

I would agree with that. Yeah, after doing a like a one-off acquisition, it's not difficult to raise enough to fund that in any given quarter. If you have a larger portfolio transaction coming down the road, that mean obviously funds are accounted for a marketed deal.

Michael Gorman -- BTIG -- Analyst

Okay.

Stuart A. Tanz -- President, Chief Executive Officer and Director

And again we are sensitive Mike as to where that equity has been issued just so you know.

Michael Gorman -- BTIG -- Analyst

Yes sure. And Mike can you just remind us how much you have left under the current ATM?

Michael B. Haines -- Chief Financial Officer

The original plan was $250 million program. I think we've got at least $200 million still left on it.

Michael Gorman -- BTIG -- Analyst

Okay got it. And then maybe just one for Rich. Can you maybe talk about some of the leases that you pulled forward from this quarter. I think maybe about 200,000 came out of the 2020 exploration, are these early auctions where they negotiated renewals, and kind of what are your conversations with tenants that are looking to renew their leases early? What kind of conversations you're having there in terms of term or renewal spreads?

Richard K. Schoebel -- Chief Operating Officer

Sure. Some continue to be early exercise of options. You know in those cases, there's really not a lot of discussion. The tenants just exercising earlier than they are required to and then there's other circumstances where a tenant may come to us and be willing to give us the space back. But we keep them in place. So while we're out retenanting and then we pull the trigger once we have a replacement tenant in place, which brings that forward in terms of the timing.

Michael Gorman -- BTIG -- Analyst

Okay got it. Thanks guys.

Michael B. Haines -- Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from Barry Oxford with DA Davidson. Your line is now open.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Good morning, Barry.

Barry Oxford -- DA Davidson -- Analyst

Great, thanks guys. Wanted to talk about cap rates, but not on the $85 million because I know you don't want to kind of tip your hand in any way. But when you're out there in the marketplace, what is the range of cap rates that you're looking at given this kind of stronger retail environment we have?

Michael B. Haines -- Chief Financial Officer

So valuations for grocery, dominant grocery drug-anchored shopping centers on the West Coast have actually begun to go up, and cap rates have begun to creep downwards for two reasons. Number one, widely marketed deals that supply -- widening marketed deals that supplies widening marketed deals in the market have contracted. There's not a lot on the market. And number 2 is capital today, as it relates to deploying into the retail sector, what we're seeing out there is really the focus is nothing but grocery drug-anchored product or segment of the retail sector.

It's a combination of both of those that is continuing to drive cap rates down. In fact, we believe that we've seen some cap rate compression over the last 90 days to 120 days. And as we move into 2020, we don't, we believe that that valuations for what we own in the markets that we're in are going to continue to potentially head downwards, and that's why we're a bit more active right now in building the pipeline, but more importantly for us, it's really finding off-market transactions that will deliver a very strong NOI growth over a short period of time after buying these -- these assets.

Michael Gorman -- BTIG -- Analyst

Given cap rates might be compressing a little bit, why not push on your development more -- more so [Speech Overlap] acquisition deal pipeline.

Michael B. Haines -- Chief Financial Officer

Sure. We are working a bit on that aspect through densification. However, we are not in the development business for a number of reasons. And without spending a lot of time going through the answer, why we are not in the development business. The reality is through our experience, in terms of developing in these high barrier markets on the West Coast, the entitlement process takes a lot longer than most other markets. Costs are a lot higher. And from an income perspective in the development business, you typically need at least three years or four years to really stabilize your NOI.

It's a combination of all three of those that really keeps us on the sideline in terms of development, and what we also thought is we can find a dominant grocery-anchored center in our backyard. Our management platform or operating platform has the ability to really drive those yields to take away the risk of doing development. So it's all of that as to why we're not in the development business and more importantly through all the years of operating on the West Coast, the formula that we continue to work on at ROIC has really proved out to be a very successful formula in terms of building shareholder value.

Michael Gorman -- BTIG -- Analyst

Great, that's it for me, guys. Thanks for now.

Michael B. Haines -- Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from Jeremy Metz with BMO Capital Markets. Your line is now open.

Michael B. Haines -- Chief Financial Officer

Good morning, Jeremy.

Jeremy Metz -- BMO Capital Markets -- Analyst

Good morning, guys. Hey, Stuart in terms of the acquisitions, just going back to that, it seems like you've been right around the hoop here a number of times, and nothing has really ultimately come to fruition quite yet. I know you've been sensitive to your cost of capital and monitoring leverage, it again sounds like you're pretty close here, you mentioned the $85 million. I guess, how confident are you at this point that all that -- all $85 million gets across the goal line? And maybe what has held up some stuff in the past you know in the past 12 months to 18 months? Is it just sellers retrading, you're getting less comfortable as you've dug in more just trying to gauge this next bucket here and getting them to the goal line. Thanks.

Michael B. Haines -- Chief Financial Officer

Well, certainly we've been cognizant of the leverage side, really the net debt to EBITDA in terms of the balance sheet. We have obviously been very cognizant of our equity and the cost of that equity. But, more importantly it's really been and we've had some opportunities to do OP deals, but with our stock price the way it's been not performing recently, but certainly earlier in the year, we were reluctant to certainly move those transactions forward just given the discussions around the stock price itself.

You know the way acquisitions or our pipeline works is that sometimes we can sit for a number of months and work on a series of deals and then all of a sudden, it will come to fruition because of issues relative to the changes in either the retail sector or the overall income or tenant base of the assets, but more importantly, it was really being -- having some patience, keeping the eye on the balance sheet and then more importantly really getting to a point where we're comfortable enough to pull that trigger, and move a number of these deals that we've had our eye on forward. And that's where we're at right now. 2020, we're excited for 2020 at this point looking at ROIC, because the fundamentals are holding up so well. We're playing offense, continue to play offense and more importantly, we believe if we can hit the stride in terms of acquisitions, we will actually start growing our earnings versus having our earnings stay flat as they've done this year.

Jeremy Metz -- BMO Capital Markets -- Analyst

Yeah, that's fair. And you mentioned 2020, I mean that context is from the densification side. Obviously, you talked about Crossroads getting closed to starting -- early next year. Just, and then you detailed out the two others in San Francisco and the two in the Pacific Northwest, which sounds a little earlier phase. How realistic is it to get any of those started out in the ground next year or is it just too early to tell on that front?

Michael B. Haines -- Chief Financial Officer

Well, we do have a couple of pads that will come online and that will certainly help us in terms of NOI growth next year. But, in terms of densification, the Crossroads realistically will not come online until '21 because you've got to go through working drives, you've got to build the project, and you've got to stabilize it and that process alone is going to take at least a year to two years. So I wouldn't look at 2020 as it relates to densification, but I would look at '21-'22 is when you'll begin to see the real impact in terms of all the hard work that we've been doing all year as it relates to our densification.

Jeremy Metz -- BMO Capital Markets -- Analyst

Yeah. I'm sorry, I guess I was more focused on just not delivering next year, but start and getting one of those or both those San Francisco ones started out of the ground next year, does that seem...?

Stuart A. Tanz -- President, Chief Executive Officer and Director

Yeah, I mean the Crossroads, it looks like we'll come out of the ground hopefully next year, and the other two should follow shortly thereafter. So it's not right at the end of the year, it could be right at the beginning of 2021.

Jeremy Metz -- BMO Capital Markets -- Analyst

Got it. And then Mike, just one quick one back to some comments you made on the guidance. I guess just thinking through the slower asset sales should be a benefit, I get that the equity issuance was a little early and you have a little more in the fourth quarter. But it would feel like those maybe offset each other here a little bit. So is there anything else that we need to think about here that could be impacting the move in the guidance?

Michael B. Haines -- Chief Financial Officer

No, I would say, excuse me, it's primarily just the change in timing of the dispositions in the equity raises, yeah after ATM, that's the primary drivers.

Jeremy Metz -- BMO Capital Markets -- Analyst

Alright, thanks guys.

Michael B. Haines -- Chief Financial Officer

Thank you.

Operator

Thank you. And our next question comes from Wes Golladay with RBC Capital Markets. Your line is now open.

Wes Golladay -- RBC Capital Markets -- Director

Hey, good morning, guys.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Good morning, Wes.

Wes Golladay -- RBC Capital Markets -- Director

Hey, good morning, Stuart. Looking at your anchored expirations over the -- I guess through 2020, you have 10 of them coming due. Is there any large mark to markets and do you expect to recapture in that space?

Richard K. Schoebel -- Chief Operating Officer

Yeah, it's certainly something we -- it is, Rich. It is something we expect to recapture, and we're currently in the process of working on those. And in terms of the mark to market, a lot of that's going to depend on tenants that have options remaining where there could be, it could be flat. So there is very little control we have over those, but there are some that are coming up that are out of options and are significantly below market rents, where we expect to have some really good lifts.

Wes Golladay -- RBC Capital Markets -- Director

Okay. And then going back to the densification in Seattle, did I hear you correctly when you said the cost has been reduced by 15%? And if so can you elaborate on what happened there?

Richard K. Schoebel -- Chief Operating Officer

Sure. Again, we're in the early stages right now of what we call design engineering where you're really getting into the -- what I would call the details of what you're building. And in doing so, we have embarked with a partner, who is one of the largest construction companies in the country, and we are talking with them on a joint venture as well as overseeing the project from a construction standpoint. And currently, they've got close to $17 billion of construction currently under going on. And one of the things they do bring to the table, either as a partner or certainly, in doing the actual project is that they are basically having the ability to deliver a lot of that cost less than because of the amount of volume, they are doing at less than would normally would normally be under doing this one project. So that -- that's where a lot of the savings is coming from, and we're digging into those details very deeply right now, but the good news is that given how much construction they have ongoing, they believe with -- and they've done a lot of business and built a lot in Seattle that that will deliver a cost savings to us and that's what they're communicating to us at the present time. I don't know if you want to add anything to that.

Yeah, I mean I think the other part of that is that we look at this very conservatively, when we start down in this path. So what we're seeing is that our original underwriting, we try to be realistic about it and but now as we're getting closer to moving forward, we are fine tuning the pro forma and utilizing this -- everything we can to keep the cost as low as possible.

Wes Golladay -- RBC Capital Markets -- Director

Got it. Thanks guys.

Michael B. Haines -- Chief Financial Officer

Thank you.

Operator

Thank you. And our next question comes from Todd Thomas with KeyBanc Capital Markets. Your line is now open.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Good morning.

Michael B. Haines -- Chief Financial Officer

Hi Todd.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Hi, good morning. So just a couple of questions following up on the investments. Just curious, what's your appetite like for incremental investments beyond the $85 million that's in the pipeline today and then -- and then once the two other Sacramento assets are sold, are there additional assets being teed up for sale beyond those two? And does your investment activity, your acquisition efforts, does that cause you to think differently about dispositions going forward?

Stuart A. Tanz -- President, Chief Executive Officer and Director

Well, in terms of dispositions, I mean nothing specific at the present time, however, each year, we take a hard objective look at our entire portfolio as it relates to each properties sort of near and long-term growth potentials versus downside risk profiles, and we determine at that point whether we will sell those properties. So, and we're going through that right now, Todd, in terms of 2020. So as it sits right now, there is nothing yet teed up, but again we may tee up a bit more on the disposition side.

On the acquisition side, the focus there and the criteria there is really to be buying only grocery drug, if there is a third anchor that's got to be primarily one of your value tenants out there either a gym or Ross, TJ or outside of that, we're really staying away for -- to be buying anything more than having those three elements. And that's what's changed in terms of our criteria. So we're excited about 2020, and we'll continue to look at both sides of that equation, but from a -- again from a acquisition disposition side, you'll probably see on a net basis more on the acquisition than on the disposition side.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay. And then in terms of pricing, you commented that you're expecting to see potential cap rate compression here. Have you changed your underwriting or your return hurdles at all as you're looking at these assets today? Or is there little more value add or sort of growth embedded in the assets that you're underwriting today?

Stuart A. Tanz -- President, Chief Executive Officer and Director

It's growth. I mean that's the bottom line. The fact is that we're paying a 5 cap or 4.8 cap or a 5.3 cap, that's it's all about what they operating platform can do after we bought the asset and how, typically we like to see is about 100 basis point increase within an 18 month period of time of ownership. That's part of our underwriting criteria. Sometimes we meet that or and sometimes we don't. But in most cases, it's really finding high-quality assets that really offer the ability for long-term value creation and growth in NOI.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay and then just moving over to the same-store, Mike, maybe Rich can comment also. So the same-store NOI growth in the quarter was consisted of base rental income growth of 3.3%. You're running at 3.9% year-to-date for minimum rents, and that's being dragged down by net recoveries and other property income below the minimum rent line. Can you just talk about that? And what's happening a little bit there and the expectation heading into 4Q and also 2020?

Michael B. Haines -- Chief Financial Officer

Well, I don't think we -- we haven't really --

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Sorry, primarily around potential volatility in some of those other lines both below sort of the minimum rent line?

Michael B. Haines -- Chief Financial Officer

All those line items factor into the NOI, overall calculation for the pool, same-center cash, it's always a challenging number to precisely predict from one quarter to the next. The biggest driver is the timing of new tenants taking occupancy, which Rich had talked about, which is more often that we really don't know how it's going to play out. During the second quarter, it was better than we had thought. During the third quarter, it was conversely slower than we thought it would be based on budget. We're still tracking a solid 3% for this quarter, and we're still very comfortable at the range of 3% to 4% for the year, but it's really dependent on how the tenant base kind of moves around based on our proactive releasing initiatives.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay. Would you expect to see minimum rents accelerate into the fourth quarter. I think that was part of the forecast earlier in the year?

Michael B. Haines -- Chief Financial Officer

I would think so, yeah. I think there is a couple of large anchored tenants that are sources of cash paying rent in Q4, which should bring that number back up.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay, thank you.

Michael B. Haines -- Chief Financial Officer

Thank you.

Operator

Thank you. And our next question comes from Vince Tibone with Green Street Advisors. Your line is now open.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Good morning, Vince.

Vince Tibone -- Green Street Advisors -- Analyst

Hey, good morning. I have a few more on the densification side. I'm just curious how many of these projects would you be comfortable developing at one time? And do you have any risk or parameters in place, which is a threshold, on the total dollar amount of total active pipeline. Just trying to get a sense of how many of these, you could put to work at one time?

Stuart A. Tanz -- President, Chief Executive Officer and Director

Well there are -- I mean in terms of -- in terms of how many of these could be happening at one time. I mean you could at some point, as you look into the next you know '21. late '22 have two or three of these going at one time. However, we're not in the business of building multi-family. We're obviously going to partner up on everyone of them, where it's still -- that piece is still moving around, but in most cases, we will have a partner come in and oversee the project from start to finish, because it's just not our business. So you can expect more of a sort of a joint venture structure, obviously that's much less capital from our perspective. But that's sort of the program right now, as it relates to moving these three forward and potentially the other two now that are on the drawing board. From a capital perspective, Mike, if you want to comment on that.

Michael B. Haines -- Chief Financial Officer

I was just going to say any development is going to be incremental to our business, but it is also incidental sort of business because it's not our core competency. So any development -- developments that we undertake is not going to be a material number to our overall balance sheet. So that -- it's incremental but it's also incidental.

Vince Tibone -- Green Street Advisors -- Analyst

Okay, that makes sense. And I'm just curious when you consider selling entitled lands or any of these sites, just to lock in a value today versus developing over a few years, is that potentially on the table?

Stuart A. Tanz -- President, Chief Executive Officer and Director

Yes.

Vince Tibone -- Green Street Advisors -- Analyst

Okay, fair enough. That's all I have.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Thank you.

Operator

Thank you. And our next question comes from Craig Schmidt with Bank of America. Your line is now open.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Good morning, Craig.

Craig Schmidt

Thank you. On the three emerging factors impacting non-anchor space. I wonder what percent of non-anchor leases in 2020 may be impacted by those emerging factors?

Stuart A. Tanz -- President, Chief Executive Officer and Director

I think it's -- it's hard to predict, but that is where you know the tenant demand is coming from. So I think that you'll see a probably a large percentage that are you know coming from those categories.

Craig Schmidt

Okay. And then the one acre new lease, was that a grocery anchor or a general merchandise anchor?

Richard K. Schoebel -- Chief Operating Officer

It was a fitness.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Very strong fitness operator, Craig.

Craig Schmidt

Okay, thank you. Appreciate it.

Operator

Thank you. And I am showing no further questions in the queue at this time. I'd like to turn the call back to Stuart Tanz.

Stuart A. Tanz -- President, Chief Executive Officer and Director

Thank you. In closing, I would like to thank all of you for joining us today. If you have any additional questions, please contact Mike, Rich or me directly. Also, you can find additional information on the company's quarterly supplemental package, which is posted on our website. Lastly, for those of you attending NAREIT's Annual Conference in Los Angeles in a few weeks, we look forward to seeing you there. Thanks again, and have a great day, everyone.

Operator

[Operator Closing Remarks]

Duration: 45 minutes

Call participants:

Stuart A. Tanz -- President, Chief Executive Officer and Director

Michael B. Haines -- Chief Financial Officer

Richard K. Schoebel -- Chief Operating Officer

Collin Mings -- Raymond James -- Analyst

Christy McElroy -- Citi -- Analyst

Michael Gorman -- BTIG -- Analyst

Barry Oxford -- DA Davidson -- Analyst

Jeremy Metz -- BMO Capital Markets -- Analyst

Wes Golladay -- RBC Capital Markets -- Director

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Vince Tibone -- Green Street Advisors -- Analyst

Craig Schmidt

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