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Corporate Office Properties Trust (NYSE:OFC)
Q4 2020 Earnings Call
Feb 5, 2021, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Corporate Office Properties Trust Fourth Quarter and Full Year 2020 Earnings Conference Call. [Operator Instructions]

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

Stephanie Krewson-Kelly -- Vice President of Investor Relations

Thank you. Carmen. Good afternoon, and welcome to COPT's conference call to discuss fourth quarter and full year 2020 results as well as our guidance for 2021. With me today are Steve Budorick, President and CEO; Todd Hartmann, Executive Vice President and COO; and Anthony Mifsud, EVP and CFO.

Reconciliations of GAAP and non-GAAP financial measures management discusses on this call are available on our website in the results press release, supplemental information package and results presentation posted on our website. As a reminder, forward-looking statements made during today's call are subject to risks and uncertainties, which are discussed at length in our SEC filings. Actual events and results can differ materially from those forward-looking statements, and the company does not undertake a duty to update them. Steve?

Stephen E. Budorick -- President & Chief Executive Officer

Good afternoon, and thank you for joining us. 2020 was challenging, but strong year for our company. We derive nearly 90% of our rents from locations that support the defense activities of the United States government and its contractors engaged in national security, defense information technology, cybersecurity activities among others. These missions are not correlated with the general economy. And the work executed in these buildings never shuts down. Our strategy of concentrating buildings around U.S. defense installations, executing priority missions is unique among REITS. Our performance during the economic uncertainty of 2020 and our outlook for this year demonstrate the strength of our unique investment strategy.

From a leasing perspective, our ability to execute development leasing last year was unimpeded. In contrast, our vacancy leasing Volumes were significantly reduced in the second and third quarters as a result of the strict shutdown restrictions. In terms of operations, our rent collections remained very high due to the exceptional credit of our tenants. In total, we collected 99.7% of gross rents between April and year end.

We made the combinations to retail and amenity tenants to help them bridge the financial gap caused by the shutdowns. In aggregate, these reserves and concessions represented 1% of our annualized rental revenue, including $1.8 million of reserves against straight-line rents. Beyond rent -- the combinations, our parking revenues were $2.6 million lower than our original plan. Although these amounts were largely offset by operating expense savings, our operations absorbed $4.6 million of pandemic-related impacts during the year. Notwithstanding these impacts, we met or exceeded expectations on multiple fronts.

Our initial guidance for FFO per share, as adjusted for comparability, had a midpoint of $2.08. When the shutdowns began, we lowered the midpoint by $0.01 to $2.07 to create capacity to absorb unanticipated events. By the time we held our third quarter call, we had absorbed the impacts from the COVID shutdowns and had good visibility on the remainder of the year. With that, we increased the midpoint of guidance to $2.09. As detailed in last night's reporting, our 2020 FFO per share of $2.12 beat the midpoint of our initial guidance by $0.04 and grew 4.4% over 2019 results.

During the year, we raised debt and equity capital on attractive terms. And as a result, we have zero debt maturities to address during 2021. And we ended the year with debt-to-EBITDA at a conservative 6.2 times. We completed a total of 3.6 million square feet of leasing last year. Development demand was strong throughout the year. And we met our pre-pandemic goal of leasing 1 million square feet. Our 81% retention rate matched our 20-year record. Notably, our average term on renewals was 4.2 years. And excluding the short-term borrowing renewals, our average term was 4.7 years.

Vacancy leasing volume was adversely affected by the pandemic shutdowns. While first quarter volume was strong and fourth quarter volume recovered, the shutdowns dramatically stressed vacancy leasing volumes in the second and third quarters. The 416,000 square feet we completed during the year was about 60% of our pre-pandemic plan. This reduction in leasing productivity impacts our 2020 same property outlook.

Most importantly, we placed 1.8 million square feet that were fully leased into service during the year, surpassing the prior company record by more than 600,000 square feet in fueling FFO per share growth. Our ability to place large volumes of highly leased developments into service is the key to our long-term growth. And in 2021, NOI from these developments will more than offset the effects of last year's delayed vacancy leasing.

National defense spending drives demand for IT -- defense IT locations and the defense spending environment remains healthy. Congress appropriated the fiscal year 2021 defense budget at the beginning of this calendar year, passing the National Defense Authorization Act with solid bipartisan and bicameral support. The base DoD budget increased another 1% over fiscal 2020 levels. And the consensus in the defense industry is that it will continue to grow by roughly 1% per year for the next several years.

In 2021, we expect demand for new development to remain solid. In our development leasing pipeline, we're tracking over 2 million square feet of demand across several of our defense IT locations. This demand include solutions for government customers and defense contractors, including hyperscale cloud computing. Based on the breadth and depth of demand, we set our development leasing guidance at 1 million square feet for 2021.

In all, we forecast recently completed and current development projects will contribute up to $23 million of NOI to 2021 results. This NOI will drive FFO per share between 2% and 5% higher than 2020's elevated results. Additionally, the midpoint of our 2021 FFO per share guidance is $0.01 higher now than the guide post we provided in October.

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

Todd Hartman -- Executive Vice President and Chief Operating Officer

Thank you, Steve. At the end of 2020, our core portfolio was 94.3% occupied and 95% leased, representing gains of 120 basis points and 40 basis points respectively. These year-over-year gains were led by strong increases at the National Business Park and in our NoVA defense IT and navy sub-segments. Additionally, our Huntsville operating portfolio nearly doubled during 2020 to 1.5 million fully occupied square feet.

During 2020, we achieved a very strong 81% renewal rate. Leasing capex on renewals remained among the lowest in the office sector, averaging only $2.03 per foot per year term. Cash rents rolled down an average of 2.1% with annual escalations averaging 2.4%, both in line with expectations. First year cash on expiring leases relative to first year cash of the renewed lease compounded at 2.5% annually, demonstrating the internal growth embedded in our lease structures.

We renewed six large office leases, totaling 775,000 square feet, including early renewals of four large office leases scheduled to expire in 2021. On Slide 13 of our presentation, the two large 2021 expirations totaling 250,000 square feet are government leases that will be renewed shortly.

As Slide 11 shows, our quarterly vacancy leasing achievements started out the year with a healthy 143,000 square feet in the first quarter and was suppressed for two quarters and recovered in the fourth quarter to 142,000 square feet. Although 2020 vacancy leasing volume totaled 416,000 square feet or roughly 75% of our five year average volume, it was still 40% below our original 2020 plan. The 1 million square feet of development leasing achieved during the year included five fully leased build-to-suit projects for defense contractors, totaling 680,000 square feet at four of our six defense IT sub-segments. One at the National Business Park, one at Redstone Gateway, one in San Antonio and two data center shell build-to-suits in Northern Virginia.

During the year, we also completed 238,000 square feet of development leasing with the U.S. government, including 210,000 square feet in 100 Secured Gateway in Huntsville, which is now fully leased and occupied. And an 18,000 square foot lease on new development in the Pax River portion of our navy group.

Regarding our leasing outlook for 2021, we entered the year with solid momentum for new developments and a recovering demand for operating properties. In our operating portfolio, we have solid prospects for current availability and our activity ratio is 75%. For example, in Columbia Gateway, we have six concentrations of vacancy, representing 240,000 square feet. We're working with 22 prospects totaling 230,000 square feet or 96% of the available space, although one of these prospects requires occupancy in 2021.

With 80,000 square feet of availability, 6721 Columbia Gateway represents our largest block of vacant space in the park. In the fourth quarter, we backfilled 20,000 square feet and are tracking 140,000 square feet of additional demand. In Northern Virginia, we had 290,000 square feet of vacancy and are pursuing 240,000 square feet of demand. Lastly, at the National Business Park and excluding 310 NBP, which is reserved for the U.S. government, we signed 140,000 square feet of vacancy leasing in 2020, bringing the park to 92% occupied and 96% leased. Also at the NBP, we have five blocks of vacancy, totaling 130,000 square feet, against which we are pursuing 90,000 square feet of demand, half of which is now under lease negotiation. Regarding 310 NBP, we continue to have confidence that government will lease the 135,000 square feet of availability during the year.

Demand for development continues to look strong. Even though we completed 0.5 million square feet of development leases in December, we are still pursuing over 2 million square feet of potential transactions in our development leasing pipeline, which supports our goal of executing another 1 million square feet this year. Roughly 75% of the demand is from U.S. government and defense contractors for new office facilities and 25% is for data center shells.

Turning to our active development projects. In the fourth quarter, we placed 582,000 square feet of fully leased space into service, bringing our total volume for the year to a record 1.8 million square feet and increasing the size of our operating portfolio by over 9%. These developments were fully leased and their NOI will contribute significantly to 2021 results.

Our 11 active developments total 1.5 million square feet and are 84% leased with availability concentrated in three projects. At 4600 River Road in College Park, Maryland and at 8000 Rideout Road in Redstone Gateway, we are tracking significantly more demand than available space and expect both projects to stabilize during the year. And at 2100 L Street, our Trophy building in Downtown DC has roughly 85,000 square feet of availability.

Like many major urban markets, the Downtown DC office market shutdown during the pandemic. Encouragingly, we are now working with 76,000 square feet of early stage prospects. During 2021, we expect to place 670,000 square feet into service that are now 81% leased. Based on the activity we are tracking, we expect further leasing gains during the year.

I'll conclude my remarks with an update on progress at DC-6. The U.S. government contract that had executed a 3.1 megawatt lease last spring, finalized their super computing deployment during the fourth quarter and is paying full rent on the premises, adding roughly $3 million of annualized NOI. That lease has a five year term, a five year renewal option and a 3.1 megawatt expansion option. Discussions with our 11.25 megawatt customer have progressed nicely since the holiday break, and we have narrowed the open negotiating points. The original lease continues in full force in effect on a perpetual term unless either party exercises the termination with six months notice or the lease is amended or replaced.

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

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

Thanks, Todd. Fourth quarter and full year FFO per share, as adjusted for comparability of $0.56 and $2.12, exceeded the high ends of our elevated guidance by $0.02. Fourth quarter results benefited from higher revenues at DC-6 and gains on the sale of an alternative investment. Property operations were solid. Lower free rent concessions and operating efficiencies net of The COVID impacts drove a 1.6% increase in same-property cash NOI for the year. And same-property occupancy ended the year at 92.1%.

During the fourth quarter, we formed a new joint venture with Blackstone. In two transactions, we raised $165 million of equity, ending the year with debt to adjusted EBITDA ratio of 6.2 times. We achieved strong pricing on both transactions, demonstrating the value we create through development. Our 2021 plan is summarized on Slides 25 and 26 of our presentation and continues to be straightforward and low risk in nature.

NOI from development placed into service is the main driver of this year's growth. We placed a record 1.8 million square feet into service last year, two-thirds of which occurred in the second half of this -- of the year. The incremental revenues plus those properties we expect to place into service this year should contribute to between $21 million and $23 million of cash NOI. At the midpoint, 99% of this NOI is contractual.

We plan to invest between $275 million and $300 million in development and have no acquisitions planned. We will continue to prudently fund our development investment and expect to sell additional joint venture interests in data center shells to maintain existing leverage levels. Based on our current portfolio of wholly owned data shells, plus the 200 development, we can monetize approximately $650 million of equity value from this sub-segment to fund future requirements.

Lastly, we forecast the same-property occupancy pool ended the year between 90% and 92% occupied, which is impacted by the deferred vacancy leasing in 2020 by approximately 2%. Based on these occupancy levels and assuming normal expense levels, we forecast same-property cash NOI will be flat to down 2% for the year. Same-property cash NOI is impacted by the reduction in 2020 vacancy leasing as well by approximately 1.5% to 3%.

Additionally, we have built in some capacity for a possible early renewal and contraction activity in some of our non-defense tenants, which impacts our outlook for both same-property statistics. Based on these assumptions, we are establishing a range of FFO per share of $2.16 to $2.22, midpoint of which is $0.01 higher than the midpoint implied by the growth guidepost we provided in October.

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

Stephen E. Budorick -- President & Chief Executive Officer

Thank you. Our strategy is built on three fundamental pillars. Invest in assets with durable demand characteristics that are for protection from broader economic cycles. Create value for shareholders by managing our portfolio to high occupancies and low recurring capital expenditures and developing new assets across well below their market value. And maintain a strong and durable balance sheet with flexibility to respond to disruptions in the capital markets and to seize opportunities quickly.

For the last five years, we have implemented this strategy with great discipline, allocating our capital investments as follows. Targeting markets and properties that support essential U.S. government defense missions such as signals in human intelligence, missile defense, space exploration, law enforcement, cyber activity and hyperscale cloud computing. Investing in advantaged land positions best located to serve the priority defense missions we target and executing low risk value creating new developments.

Our performance in 2020 and our high visibility into 2021, demonstrate the high level of durability in our cash flows. Investor appetite for our data shells has demonstrated the impressive value creation our developments provide to our shareholders. Our bond offering during 2020 illustrated that the debt market recognized and reward us for the resilience of our portfolio and franchise, achieving the most attractive debt structure in our history.

Over the past nine years, we've completed approximately 10 million square feet of development leasing, averaging 1.1 million square feet per year. During the past three years, we've executed 4.3 million square feet of development leasing and averaging over 1.4 million square feet per year. We completed our strategic asset reallocation plan in 2018. And since that time, our new developments in durable operating portfolio produced growth in our FFO per share as adjusted.

So in conclusion, COPT has entered an era of growth, driven by durable operating portfolio, a strong balance sheet and a reliable low risk development program that is producing incremental NOI annually. We look forward to seizing the impressive opportunity before us in 2021.

And with that, operator, please open up the call for questions.

Questions and Answers:

Operator

Thank you, Mr. Budorick. [Operator Instructions] Our first question is from Manny Korchman with Citi. Your question please.

Emmanuel Korchman -- Citigroup Global Markets -- Analyst

Hey, everyone. Anthony, just looking at your guidance for DC-6, can you tell us what timing and rent roll down assumptions are based into the NOI range that you provided there?

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

Sure. So the range assumes that we have the current rent a tenant is paying for the first quarter and that the renewal is executed at the beginning of the second quarter, at which point the rent roll downs -- rolls down between 10% and 15%.

Emmanuel Korchman -- Citigroup Global Markets -- Analyst

Great. And then maybe just looking too far forward, but I'll ask anyway. You've now presented your large maturities coming up in 2022 with retention ratios that are obviously lower than what you had last year, at least for the commercial users. How are those discussions with those corporate users going, if at all?

Stephen E. Budorick -- President & Chief Executive Officer

So with both of those customers we've had fairly advanced negotiations to extend and contract before the pandemic shutdowns occurred. And since that time, the active discussions have withhold. We expect them to heat up this year. And we're -- since we are negotiating contraction before the pandemic, we continued to expect them to contract, and they're both in Downtown Baltimore.

Emmanuel Korchman -- Citigroup Global Markets -- Analyst

And maybe one last quick one for me. Anthony, you mentioned some alternative investment sales have led to gains in 4Q. What else is on the books that we might expect to drive gains or losses in the future?

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

So we have a pretty limited amount of those investments left. It's about $3 million to $3.5 million remaining. So they're in a fund that the company invested in and they manage the liquidation of that fund. So the timing of that's very difficult to predict. So it sort of comes and goes as the fund is sold off.

Stephen E. Budorick -- President & Chief Executive Officer

The fund is a private equity fund that creates -- brings new defense technology to market with start-up companies. And we invest in it to create opportunities to be the landlord for those tenants that they successfully create.

Emmanuel Korchman -- Citigroup Global Markets -- Analyst

Thanks all.

Operator

Thank you. Our next question comes from Craig Mailman with KeyBanc Capital Markets. Your question please.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Hey, everyone. I'm just curious, it sounds like vacancy leasing could be picking up a little bit here. I'm just curious, what you guys think was the trigger for that? Is it just the ability to actually tour space or with the vaccine is there people kind of feeling a little bit better about making long-term decisions? And also just curious, anything you guys are seeing discernibly like different types of space usage or floor plan layouts as we get to the, hopefully in the back end of the pandemic?

Stephen E. Budorick -- President & Chief Executive Officer

So I'll take that in layers. Certainly during the second and third quarter, there was very little showing activity, which creates kind of a void in the natural deal flow and they have had a component to it. Activity picked up in the fourth quarter and remained strong now. I would estimate that 60% to 70% is defense contractors. And much of that activity is either in anticipation or contingent on contract awards, they continue to flow at a pretty healthy rate out of defense installations around our properties.

In terms of the space planning, we really have not seen a material change in the densities for the tenants that we've planned. It's a bit surprising. But even leases that we had executed in April -- March and April went on to fulfill their interior plan -- their interior build out as had been planned before the pandemic.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Okay. That's helpful. Any kind of -- how are the dynamics on rents kind of progressing here or is it totally -- is it face rent or is it TIs? Kind of what's the conversation going like as people come back and want to take space?

Stephen E. Budorick -- President & Chief Executive Officer

So both for Downtown DC, economics are stable in all of our markets, if not strengthening in some. In Alabama where we have a lot of activity right now, in essence, each new lease that we execute sets a new kind of high watermark for market rent. National Business Park, Columbia Gateway very stable. We'll find out soon what the impact is in Downtown DC. But I would expect concessions to go up and rates to remain stable.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Any of the pickup in Huntsville are those space for us I think that was the location that they pick for that. Is it just way too early for that to be a demand generator?

Stephen E. Budorick -- President & Chief Executive Officer

Yeah, it's way too early, Craig. It's very exciting, but early. Certainly the award has been announced. Other states are contesting the award. It will be challenged for some time. But there is activity evaluating space requirements down there, both short and long-term. And it could potentially create opportunity with the government and unquestionably will create opportunity with contractors.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

And then just one last one. 310 NBP, it sounds like you guys are feeling better about that. But with the administration change, is there going to be any changes at the top of that tenant organization that will require another review of this space, like you guys have kind of had there has been turnover over there that could delay it?

Stephen E. Budorick -- President & Chief Executive Officer

I don't expect that to be true. I think it's a matter at a much lower level than the new cabinet positions are going to be evaluating.

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Okay, great. Thank you.

Operator

Thank you. Our next question comes from Blaine Heck with Wells Fargo. Your question please.

Blaine Heck -- Wells Fargo Securities -- Analyst

Great, thanks. Good afternoon. I feel like we have to do a separate quarter, but just to get an update. Can you talk about the likelihood of you guys expanding your DC shell program to cater to some other tenants given that's cloud computing and all that goes with it has become increasingly competitive?

Stephen E. Budorick -- President & Chief Executive Officer

So we routinely have exploratory discussions with other tenants, potential tenants. Here too for their development model or their procurement model is in a great alignment with our strategy. And that the bulk of those people want to lease fully developed data centers where the landlord is bearing all the capital risk. A customer that we've got a great relationship with now, it's an ideal model for us because we're putting in a few hundred dollars a square foot and they're taking measurably more capital risk by taking our shell and developing it to Tier 3 data center. To the extent we had a customer who is interested in a similar program, we would welcome the opportunity.

Blaine Heck -- Wells Fargo Securities -- Analyst

All right. Thanks, Steve. That's helpful. And then just one for Anthony. Can you just give us a little bit more detail on your equity needs for this year, maybe a little bit on potential size and timing on an expected DC shell JV?

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

Sure. So the data center shell equity that we need is between $200 million and $225 million. We have groups of those assets that we have available to us to venture throughout the year as some of them have been placed in service for longer than two years, which is sort of our benchmark for tax purposes. So our plan is that that would most likely go out in call it even -- call it thirds beginning in the second quarter and transaction is closing in the second, third and fourth quarters.

Blaine Heck -- Wells Fargo Securities -- Analyst

Got it. All right. Thanks guys.

Operator

Thank you. Our next question comes from Steve Sakwa with Evercore ISI. Your question please.

Steve Sakwa -- Evercore ISI -- Analyst

Thanks. Most of my questions have been asked. But can you just remind us what the size of the land bank is to further the data center shell business? And are you actively looking for more land out in Northern Virginia?

Stephen E. Budorick -- President & Chief Executive Officer

So the land -- I don't have acreage available to me. Okay, I do now. We have three acres, Steve. And all of that land is adjacent to current or recently completed developments. We have a notional schedule of when they'll be developed. Right now, the long pole in the tent is getting power with the extreme level of development activity over the last two years. Both of the power suppliers are strained to get additional critical power to these sites. But from a company program, I'd say, we've got two to maybe two and a half years of run time before we need to buy more land.

Steve Sakwa -- Evercore ISI -- Analyst

Sorry. Just to convert that, that three acres would equate to what kind of developable square footage?

Stephen E. Budorick -- President & Chief Executive Officer

It's little -- almost 1.2 million square feet.

Steve Sakwa -- Evercore ISI -- Analyst

Got it. Okay. That's it for now. Thanks.

Stephen E. Budorick -- President & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Tom Catherwood with BTIG. Your question please.

Thomas Catherwood -- BTIG -- Analyst

Thank you, and good afternoon, everyone. Following up actually on Steve's question, one thing that did jump out, it looks like the data center shells you started in the fourth quarter are on the land that had been in the defense IT bucket, though there wasn't a decrease in the data center shell land. Are we reading that right? And is there kind of some more potential to repurpose land elsewhere in your portfolio for data center shells?

Stephen E. Budorick -- President & Chief Executive Officer

Well, you get a cookie time. That was very good analysis. Yeah, that was parcel land in Fairfax County that we have held for office development and some customer-specific needs allowed us to make that available to our data center shell tenant and we executed leases on that. I don't think there is much more of that in Northern Virginia.

Thomas Catherwood -- BTIG -- Analyst

Got it. Got it. And then, Steve, you alluded to the challenges with getting power at these data center shells. And the two that you started in the quarter seemed to have longer development timelines than other ones you've done. Is that because of the kind of constraints on getting the power in or are these developments a little different from what you've done before?

Stephen E. Budorick -- President & Chief Executive Officer

So yes and no. I pointed out, they are in a different county. They're in Fairfax County, which is notoriously bureaucratic. So we've got a very long development schedule to allow us sufficient time to get through a rezoning and then all the approvals we need to develop the asset. Additionally, we need time to get the critical power as well.

Thomas Catherwood -- BTIG -- Analyst

Got it. Understood. And then last one for me. [Speech Overlap]

Stephen E. Budorick -- President & Chief Executive Officer

To the extent we can accelerate the approvals and the access to power, we will deliver those early.

Thomas Catherwood -- BTIG -- Analyst

Got it. Thank you for that, Steve. And then one last one. Steve, you had mentioned the expectations for 1% defense department budget increases going forward. One of the things that kind of hit the news recently, but has been overwhelmed by other stories was the cyber hack on government and defense agencies. Given that that was a growing portion of your portfolio, are you seeing a reallocation of either dollars or attention to that space? And what is that -- I imagine that could be -- have some upside for Columbia Gateway and NBP, what are you guys seeing so far?

Stephen E. Budorick -- President & Chief Executive Officer

I think it's early, but we see impacts of those kinds of exogenous events when contracts flow out of the government agencies into tenants, and then we'll experience that demand. I would expect significant increases in funding to address the issue, but also that demand would materialize maybe another 12 months down the road.

Thomas Catherwood -- BTIG -- Analyst

Understood. Thanks everyone.

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

Thanks, Tom.

Operator

Our next question comes from Jamie Feldman with Bank of America. Your question please.

Jamie Feldman -- Bank of America Securities -- Analyst

Great. Thank you. So I guess, along with the -- along the same lines as the last question. You had mentioned 1% growth in the defense budget expected over the next few years, but if you were to look at the more relevant piece of the budget that ties to your business, like defense IT and cyber, what do you think the growth rate looks like for that segment over the next several years?

Stephen E. Budorick -- President & Chief Executive Officer

So it's little early. They passed the budget, but we don't have access to the documents. They may have published the Green Book, which allows us to mine that data for more program level changes. Certainly, I think cyber will probably grow north of 5% for the next several years, if not higher. And then other programs, I just can't speak to.

Jamie Feldman -- Bank of America Securities -- Analyst

You're saying 5% per year?

Stephen E. Budorick -- President & Chief Executive Officer

Yeah.

Jamie Feldman -- Bank of America Securities -- Analyst

Okay. And then you had mentioned for 2022 the two large leases in question are both Downtown Baltimore. I mean, does that -- and everything else seems like it's doing really well. I mean, does that make you rethink at all your Baltimore exposure, opportunity to maybe sell those assets and move on?

Stephen E. Budorick -- President & Chief Executive Officer

Well, we've always considered those assets that we would recycle at the right point in time. One of the reasons we hold on to them is we wanted to enter the era of growth. We talked about in our discussions. Certainly selling them before we get the renewals established would be silly. But I would certainly say that those one or two of those assets could be considered for sale in the next 24 months.

Jamie Feldman -- Bank of America Securities -- Analyst

Okay. But you don't want to market them until you've figured out these two leases?

Stephen E. Budorick -- President & Chief Executive Officer

Well, absolutely not. I mean, we'll sell them at the worst possible time.

Jamie Feldman -- Bank of America Securities -- Analyst

Okay. And then I know you guys -- you provide your guidance in terms of cash, cash NOI growth, same-store growth and leasing spreads. Can you give us a sense of what those look like on a GAAP basis?

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

So our leasing spreads on a GAAP basis are between, call it, 5% to 7% in terms of converting the cash roll downs into GAAP spreads given the increases that we have embedded in those assumed renewals.

Jamie Feldman -- Bank of America Securities -- Analyst

Positive 5% to 7%?

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

Yeah.

Jamie Feldman -- Bank of America Securities -- Analyst

Okay. And what about same-store NOI?

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

Same-store NOI is -- I'll have to get back to you on that, Jamie.

Jamie Feldman -- Bank of America Securities -- Analyst

Okay. Thank you. All right. I think I'm all set. Thank you.

Stephen E. Budorick -- President & Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Jay Kornreich with SMBC. Your line is open.

Jay Kornreich -- SMBC Nikko Securities America, Inc. -- Analyst

Hey, thanks guys. Just looking at your portfolio as it lends itself more heavily to the DC Metro area, which makes sense considering the business you're in. How do you guys think about stretching beyond that as you entered San Antonio and Huntsville? So what do you -- how do you see expansion in those markets and potentially other markets as well?

Stephen E. Budorick -- President & Chief Executive Officer

Well, we tried -- we have pursued missions that are knowledge base not troop or weapons production base. And we have scoured the country for good opportunities periodically for the last decade. I would recommend you give us a phone call where I could go in a more detail. But the locations that we serve are places where the missions have very high priority. So they will have high levels of consistent funding and are knowledge base, which suggest they need office property and not manufacturing or a residential. So we're pretty committed to the locations we have.

Jay Kornreich -- SMBC Nikko Securities America, Inc. -- Analyst

Okay. I appreciate the high level color, and that's it for me. Thank you.

Operator

Thank you. Our next question comes from Dave Rodgers with Baird. Your line is open.

Dave Rodgers -- Robert W. Baird & Co. -- Analyst

Yeah, good afternoon. You guys have addressed a lot, but two questions. One, maybe on 2100 L. Would you guys consider selling that before any kind of two year hold period or is that still going to be subject to that same thinking? I'm just trying to consider when that could potentially go for you if that's still the plan? And then the second question, I think Todd mentioned it, but maybe Todd and Steve, you guys could tackle this. The occupancy loss in '21, obviously it's lower backfilled that's showing up there. But when you see the lower retention this year, is there any schematic to that either a geographic component of the portfolio or program that negatively impacted the lower retention?

Stephen E. Budorick -- President & Chief Executive Officer

Well, let's take them one at a time.

Todd Hartman -- Executive Vice President and Chief Operating Officer

So I'll take the first, Dave. In order to create the flexibility to monetize 2100 L, there was a -- a structure has been created for that asset to be owned within a REIT within a REIT. So we have a structure that will allow us to sell, which is not a common kind of structure within -- in the district. So we have a structure that would allow us to be able to monetize that asset before the 24 month period is up.

Stephen E. Budorick -- President & Chief Executive Officer

And then with regard to the renewals, we've built into our assumption some pretty conservative numbers on commercial office tenant contractions during the year and capacity to absorb an early renewal with the contraction. If the opportunity is presented specifically regarding those two tenants in Downtown Baltimore.

Dave Rodgers -- Robert W. Baird & Co. -- Analyst

So those are the '22 expiration, but there is just room to absorb them this year is what you're saying?

Stephen E. Budorick -- President & Chief Executive Officer

Yeah. We've put some capacity for one or the other. And then when we look at commercial tenants renewing, we've handicapped some contraction tenant generally or specifically.

Dave Rodgers -- Robert W. Baird & Co. -- Analyst

Okay. That's helpful. Thanks everyone.

Operator

Thank you. And our next question is, please forgive me, Omotayo Okusanya with Mizuho. Your line is open.

Omotayo Okusanya -- Mizuho Securities USA Inc. -- Analyst

Yeah. That was actually pretty good. Good afternoon, everyone. So a quick question about same-store forecast for next year. The occupancy guidance of 90% to 92%, you were at 92% for 2020. What could kind of get you to the lower end of that range? And even if you were at the higher end, which is the same number you were at in 2020, you still kind of forecast about a flat same-store NOI growth. Can you just walk us through that a little bit.

Stephen E. Budorick -- President & Chief Executive Officer

So the lower end would be represented by less leasing that has been contemplated in our plan earlier over the year. And remind you, we've got a pretty manageable revenue at risk number. But to the extent we weren't able to hit that target, that will be reflected in fewer square feet at the end of the year and a lower achievement. The higher end is the converse of that. We generate more leasing than the midpoint of our plan. And then what was the...

Todd Hartman -- Executive Vice President and Chief Operating Officer

The corollary on the same office cash NOI growth is that the occupancy is a point in time at the end of the year and based on how those leases commence throughout the year and contribute to that cash number is why we end up with the flat at the high end.

Omotayo Okusanya -- Mizuho Securities USA Inc. -- Analyst

Okay. So the average is probably lower for the full year versus the actual year end number?

Todd Hartman -- Executive Vice President and Chief Operating Officer

Correct.

Omotayo Okusanya -- Mizuho Securities USA Inc. -- Analyst

Okay. That's it. Thank you.

Operator

Thank you. Our next question comes from Chris Lucas with Capital One Securities. Please go ahead.

Chris Lucas -- Capital One Securities -- Analyst

Hey guys, good afternoon. Just a couple of quick ones for me. 2100 L was placed into service in the fourth quarter. Did that contribute any GAAP revenue in the fourth quarter?

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

It was very small. It was like a week. So minimis.

Chris Lucas -- Capital One Securities -- Analyst

Okay. And then that doesn't change, I guess the expected cash rent start dates for that lease?

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

It does not.

Chris Lucas -- Capital One Securities -- Analyst

Okay. And then, Anthony, just as it relates to the alternative investment sale, that is included in your FFO adjusted for comparability?

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

It is. We had a small [Speech Overlap] yes.

Chris Lucas -- Capital One Securities -- Analyst

Okay. Okay, cool. Thanks. That's all I have. Thanks.

Operator

Thanks. And our next question is from Jamie Feldman with Bank of America. Your question please.

Jamie Feldman -- Bank of America Securities -- Analyst

Hi, thanks. Just a quick follow-up. I just want to understand your thought process on saying April 1 for the DC-6 renewal. How do you guys choose that date?

Stephen E. Budorick -- President & Chief Executive Officer

Fairly randomly. No, just based on the kind of progress that we've had since the holiday break, checking off the open issues with the tenant.

Jamie Feldman -- Bank of America Securities -- Analyst

Okay, all right. What still needs to get done? Are you able to discuss that?

Stephen E. Budorick -- President & Chief Executive Officer

I really don't want to go into any further detail on points. I think on the last call I conveyed that we have a bundle of -- we addressed all the issues that were opened with positions we'd be willing to accept and challenged them to narrow the gap, and we're making pretty good progress. But ultimately, it's got to be good for our shareholders or we won't agreed to it.

Jamie Feldman -- Bank of America Securities -- Analyst

Okay, all right. Thank you.

Operator

Thank you. And I'm not showing any further questions in the queue. I will now turn the call back to Mr. Budorick for his closing remarks.

Stephen E. Budorick -- President & Chief Executive Officer

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

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Stephanie Krewson-Kelly -- Vice President of Investor Relations

Stephen E. Budorick -- President & Chief Executive Officer

Todd Hartman -- Executive Vice President and Chief Operating Officer

Anthony Mifsud -- Executive Vice President and Chief Financial Officer

Emmanuel Korchman -- Citigroup Global Markets -- Analyst

Craig Mailman -- KeyBanc Capital Markets -- Analyst

Blaine Heck -- Wells Fargo Securities -- Analyst

Steve Sakwa -- Evercore ISI -- Analyst

Thomas Catherwood -- BTIG -- Analyst

Jamie Feldman -- Bank of America Securities -- Analyst

Jay Kornreich -- SMBC Nikko Securities America, Inc. -- Analyst

Dave Rodgers -- Robert W. Baird & Co. -- Analyst

Omotayo Okusanya -- Mizuho Securities USA Inc. -- Analyst

Chris Lucas -- Capital One Securities -- Analyst

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