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Piedmont Office Realty Trust (PDM -1.28%)
Q4 2020 Earnings Call
Feb 11, 2021, 11:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good morning, ladies and gentlemen, and welcome to the Piedmont Office Realty Trust fourth-quarter 2020 earnings call. [Operator instructions] It is now my pleasure to turn the floor over to your host, Eddie Guilbert. Sir, the floor is yours.

Eddie Guilbert -- Treasurer and Executive Vice President

Thank you, operator. Good morning, everyone. Thank you for joining us today for Piedmont's fourth-quarter 2020 earnings conference call. Last night, we filed an 8-K that includes our earnings release and our unaudited supplemental information for the fourth quarter that is available on our website at piedmontreit.com under the Investor Relations section.

During this call, you'll hear from senior executives at Piedmont, and they will refer to certain non-GAAP financial measures such as FFO, core FFO, AFFO, and same-store NOI. The definitions and reconciliations of these non-GAAP measures are contained in the earnings release and in the supplemental financial information. Also on today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements address matters which are subject to risks and uncertainties, and therefore, actual results may differ from those we anticipate and discuss today.

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The risks and uncertainties of these forward-looking statements are discussed in detail in our press release as well as in our SEC filings. We encourage everyone to review the more detailed discussion related to risks associated with forward-looking statements in our SEC filings. Examples of forward-looking statements include those related to Piedmont's future revenues and operating income, dividends and financial guidance, future leasing and investment activity, and the impacts of the COVID-19 pandemic on the company's financial and operational results. You should not place any undue reliance on any of these forward-looking statements, and these statements speak only as of the date they are made.

At this time, our president and chief executive officer, Brent Smith, will provide some opening comments and discuss our fourth quarter and annual results and accomplishments. Brent?

Brent Smith -- President and Chief Executive Officer

Good morning, everyone, and thank you for joining us to review our fourth quarter and annual results along with our outlook for the coming year. On the call with me are George Wells, our executive vice president of operations; Eddie Guilbert, our executive vice president of finance and treasurer; and Bobby Bowers, our chief financial officer; as well as other members of the senior management team. Let me start by saying that all of us at Piedmont sincerely hope all our tenants, vendors, and investors continue to be safe and healthy. And while we remain optimistic about the accelerating vaccine deployment and the path forward, as we begin 2021, the pandemic continues to disrupt American business.

Today, our portfolio utilization remains at approximately 25% to 40% on average but can vary greatly depending on city and tenant profile. Notwithstanding the disruption to the office sector in 2020, Piedmont continued its track record of delivering solid FFO growth for eight out of the last nine years, generating $0.10 more of core FFO per share or approximately a 6% increase over the prior year for 2020. And we expect to continue this positive growth trajectory into 2021, as Bobby will discuss in our guidance later. Despite the challenges of the pandemic, my colleagues have kept the entire portfolio open and operational 24 hours a day, seven days a week, 365 days a year, while remaining laser-focused on the health and wellbeing of our tenants, assisting in their efforts to return to the workplace safely.

Furthermore, we've taken this period of reduced building population to improve the tenant experience and enhance on-site amenities, focusing on outdoor space and wellness factors at all of our buildings. For example, our 2.2 million square feet Galleria Atlanta project has achieved WELL Health-Safety Rating by the WELL Building Institute, one of the few projects of this scale in the country and the first in the Atlanta market with this designation, with additional buildings in the process to also achieve future ratings by the WELL Building Institute. And we're excited that these ESG programs are already helping to generate incremental leasing. From an operational perspective, shelter-in-place orders during the second quarter of 2020 brought new tenant leasing activity to a virtual standstill.

But despite this challenging environment, we executed over 1.1 million square feet of leasing for the year, the majority of which was renewals for existing tenants. These leases had a weighted average lease term between four and five years and achieved a cash roll-up of 3.5% on second-generation leases. And our weighted average lease term overall for the entire portfolio is now over six years. Of the total leasing for the year, approximately 190,000 square feet were completed during the fourth quarter, with our most notable leasing taking place in Atlanta, Washington, D.C., Minneapolis, and Dallas.

For a list of our fourth quarter leasing highlights, please see our earnings release or our supplemental financial information, which were both filed last night. During the latter half of 2020, we continued to be encouraged by the improved leasing activity and the increasing size of leasing pipeline. Providing real-time color on our leasing activity, generally, we're witnessing similar dynamics across all our seven markets, with smaller sized tenants, those less than 10,000 square feet, continuing to make leasing decisions with little change in space design. On the other end of the spectrum, we're also seeing tenants with large space requirements, who are certain in their business model and require generally more than 50,000 square feet, continue to execute leases to take advantage of favorable rates and concessions.

In fact, we're seeing a number of these larger requirements in Boston, Dallas, Atlanta, and Orlando, and we're beginning to see tenants planning space with lower densities and a greater focus on collaboration and team space. I would also add that we've noticed that tenants are greater focused on the ESG platforms at a landlord more than ever before, something that is differentiating Piedmont from less sophisticated operators in our markets. Finally, I would note that the segment of the market, which seems to be the most timid in making longer-term lease decisions, are small and medium enterprises needing roughly 10,000 to 25,000 square feet of office space. These tenants continue to exhibit a pattern of shorter duration renewals, typically ranging from one to three years.

As I noted earlier, we continue to see meaningful large tenant activity, particularly in our Sunbelt markets, along with Boston, driven by an uptick in corporate relocations and expanding technology companies. In fact, in 2021, year to date, we've executed more than 500,000 square feet of leasing. And so with this real-time dialogue with tenants and the improved pipeline activity that buoys confidence that office space usage will continue to improve and return to a more normalized state over the course of 2021. Furthermore, we believe Piedmont is positioned to meet tenants' needs in the post-COVID marketplace, with a focus on lower-cost, higher quality of life markets such as Dallas, Atlanta, Minneapolis, and Orlando in addition to our suburban markets in Boston and Northern Virginia, a preference for environments that create vibrant amenity-rich workplaces, along with robust tenant engagement and a best-in-class ESG platform.

We believe the most successful operators in the post-COVID market will provide office users with a more balanced service offering, encompassing wellness, sustainability and engage the broader communities in which these businesses operate. Turning to Piedmont's lease expirations in 2021. Excluding the city of New York lease, which is currently a holdover, we have only about 5.8% of our annualized lease revenue expiring during the year and with virtually no expirations at our properties in New York and Washington, D.C., which rely on mass transit for building population. I would also note that with the disposition of the New Jersey portfolio, we have only one asset in New York City, which was 94% leased at year end.

Furthermore, I'm pleased to report that we continue to make progress in the lease renewal with the city of New York at 60 Broad Street. Despite it taking longer than anticipated, we are working with the Department of Citywide Administrative Services to culminate the approval process and expect to have more to share on our next earnings call regarding the shorter-term renewal that would take the New York City out of holdover and cover the timeframe for a restack of their space under a longer-term lease. Digging into the strength and resilience of our tenancy base. Over half of our tenants are investment-grade quality, and we collected 99% of our billed receivables during the fourth quarter of 2020 and for the year.

Looking back, at the height of the pandemic, we did have a number of tenants that experienced operational difficulties, but these tended to be smaller retail hospitality and coworking operators that represented a limited amount of our total annual revenues. As a result of the pandemic, we have entered into approximately 70 tenant workout agreements that typically defer three to four months of rent. A total of approximately $7 million was primarily deferred under lease workouts or a little over 1% of our total annual revenues. By year end, repayments of $1.3 million of that had already been made, and the remaining rent deferrals are expected to be repaid in 2021.

As we've noted on previous calls, our credit concerns primarily focus on our six tenants in the coworking sector, which represent a little over 2% of our annualized lease revenue in 2020 and less than 2% in 2021, with one tenant, WeWork, representing roughly half the exposure at three separate locations. During December, we reached an agreement with WeWork to terminate their Orlando lease effective at the end of the first quarter of 2021. I'll remind everyone that our WeWork leases were typical lease arrangements with standard credit enhancement terms. Due to contractual requirements, the Orlando location began paying rent on their lease in August of 2020, although I will note that we have not made any tenant improvements there due to issues between the tenant and local zoning officials.

WeWork has prepaid their rent through the end of the first quarter and also paid a lease termination fee of $2.6 million. And in addition to agreeing to the termination fee, all rents for the other two WeWork locations in our portfolio, which are open and operating, have been prepaid for over a year into 2022. In connection with the other five small coworking tenants, we will continue to monitor this segment carefully. However, our exposure in 2021 to coworking at this point has dropped to a very minimal level, and we believe we have adequate reserves to cover potential future losses.

Turning to transactional activity. 2020 was a successful year. We exited two noncore markets, Philadelphia and Northern New Jersey, at an average exit cap rate of around 7% and recycled proceeds into two Sunbelt markets at an accretive roughly 9% stabilized cap rate. As we announced in conjunction with last quarter's call, we completed a portfolio of sales consisting of our last three properties remaining in Northern New Jersey.

And as part of this transaction, we did provide secured seller financing at a weighted average interest rate of 7%. During the fourth quarter, we also acquired 222 South Orange Avenue for $20 million, a property which is connected to our 200 South Orange Avenue in downtown Orlando and shared several building systems as well as the key entry points with that asset. The acquisition provides our existing office tower with direct frontage on Orange Avenue, the de facto Main Street in Orlando's Central Business District. And we have already begun redevelopment of the property and expect to be completed in about 12 to 16 months.

Upon completion, our downtown Orlando portfolio will represent a preeminent destination for the market and will reflect our environmentally sustainable priorities. As I have noted, we are seeing a more intense focus on our landlord's ESG platform by our tenant base. And in that vein, I encourage all our listeners to review our most recent annual ESG report that is available on our website. You will see our Board-level emphasis on measurable improvements to address climate change risks and other environmental concerns, along with proactive steps to promote social justice, diversity, and community involvement, including the formation of the Piedmont Scholarship Program at two historical black colleges and universities.

Finally, I would like to point out that during the fourth quarter, we repurchased approximately 2.2 million shares of common stock at an average price of $14 per share or approximately $30.6 million. We will continue to utilize the share buyback program in conjunction with acquisitions and redevelopment to accretively recycle disposition capital. As of quarter end, board-approved capacity remaining for additional discretionary repurchases was approximately $170 million. At this point, I will turn it over to Bobby to walk you through the financial highlights of the quarter and provide our initial guidance for 2021.


Bobby Bowers -- Chief Financial Officer

Thank you, Brent. While I'll discuss some of our financial highlights for the quarter and the year, I encourage you to please review the earnings release and supplemental financial information, which were filed last night for more complete details. For the fourth quarter of 2020, we reported $0.46 per diluted share of core FFO, which is comparable to the fourth quarter of 2019. Annual core FFO for 2020 was $1.89 versus $1.79 per diluted share for 2019, reflecting the $0.10 increase that Brent mentioned earlier.

AFFO was approximately $36 million for the fourth quarter, well in excess of our current quarterly dividend level. On a year-over-year basis, same-store net operating income ended where we expected, which was slightly down on a cash basis and relatively flat on an accrual basis. The decrease in cash basis same-store NOI was primarily attributable to the deferral of rental payments discussed previously as a result of rent relief agreements entered into during the year. I will note, the pace of such agreement slowed dramatically in the fourth quarter, with only five small agreements being put in place during the quarter.

Our same-store NOI on an accrual basis in 2020 was impacted by a few items, including our establishment of a $4.6 million general reserve for potential collectibility issues, the write-off of a few tenants' straight-line rent accruals, the impact of less than originally forecasted new tenant leasing and a reduction in transient parking revenue, all of which are closely tied to the impacts of the pandemic. While individual quarters vary greatly in terms of the number of leases and the size of those leases completed, 1.1 million square feet of leasing was executed during 2020. And cash rents for these increased on average approximately 3.5%, and GAAP-based rents increased over 10%. Turning now to the balance sheet.

Our average net debt-to-core EBITDA ratio as of the end of the fourth quarter of 2020 was 5.8 times, and our debt-to-gross asset ratio was approximately 34.4%. We currently have the vast majority of our $500 million line of credit available to us. And debt maturities in 2021 include a very small mortgage that matures during the third quarter and a $300 million term loan that matures during the fourth quarter. At this time, I'd like to turn the focus to 2021 and introduce our guidance for the year.

We currently estimate core FFO for 2021 to be in the range of $1.86 to $1.96 per diluted share. Certainly, the pandemic will still present challenges in 2021, but we believe our strong creditworthy tenant base, our attractive amenity-rich locations that are easily accessible by car and not dependent upon mass transit, combined with low lease expirations projected for 2021, our limited exposure to transient parking income and our limited exposure to retail and coworking tenants as well as our prudent balance sheet, which includes a $4.6 million general reserve for lease-related receivables, all will contribute to stability, confidence and greater predictability than last year and our anticipated operating performance. Our guidance does not include any speculative acquisitions or disposition activity. We'll update this guidance upon such activity.

However, our 2021 asset recycling, if any, in total is expected to continue to be accretive as our recycling transactions have been over the last several years. Based upon these estimates, same-store NOI growth is expected to be between 3% and 5% on both a cash basis and accrual basis. We also believe there will be a slow gradual ramping up of business and leasing activity over the year with a return to more typical state of operations in the latter portion of 2021. While our occupancy over the last few years has been impacted by the dispositions, primarily of large fully or near fully leased assets, we expect our current portfolio's overall occupancy to improve 1% to 2% by year end.

We anticipate updating and narrowing this guidance around midyear as we learn more, as vaccines become more fully distributed, as more schools reopen, and has herd immunity is more widely expected. It's also important to note as you prepare your financial models that our quarterly earnings can vary by $0.01 or $0.02 based upon the timing of seasonal expense items and the volatility of certain accruals such as potential stock-based compensation. We'll be happy to work with you on your individual modeling questions at the appropriate time. However, right now, I'd like to ask our operator to provide our listeners with instructions on how we can submit their questions.

We'll attempt to answer all of your questions now, or we'll make appropriate later public disclosure, if necessary. Operator?

Questions & Answers:


Certainly. [Operator instructions] Your first question is coming from Dave Rodgers. Your line is live.

Nick Thillman -- Baird -- Analyst

Hey, guys. It's Nick on for Dave. I just wanna go -- circle back to that over 500,000 square feet of leasing to start the year. Can we get a little additional color on maybe the mix between renewals and new leasing and then also like where the geographic regions are to that?

Brent Smith -- President and Chief Executive Officer

Sure, Nick. Thanks again for joining us this morning. Part of that desire to put that into our materials was really to help give real-time -- I think as we continue to talk to investors, they want to understand what's going on, on the ground. And so we did want to provide a little bit more color.

As you think about the combination or the split between new and renewal leases, I'd say that that level is in line with the kind of prior quarter splits, if you will. And I'd say, it's in various parts of the portfolio, not necessarily concentrated in any single market. But we've seen the activity on just the number of leases signed pretty consistent across both Boston, Dallas, Atlanta as well. And so we'll continue to, we think, see that pipeline grow through the year.

But we were pleased and wanted to share that we've already made a pretty significant achievement relative to what the leasing momentum was in 2020.

Nick Thillman -- Baird -- Analyst

Yes. That was some surprising good news to start the year. I guess going back to what you mentioned on like utilization, I guess, we kind of have an idea of what markets are performing better on the return to the office. But I guess, maybe on like the industries or the tenant side that you're noticing that are being in the office more than like other tenants?

Brent Smith -- President and Chief Executive Officer

We continue to see small tenants really come back a little bit more in force than most of the other tenants and, say, large national corporates would probably be the most timid in coming back to the office. If you think about markets, though, in kind of tenant size, so call it, less than 25,000-square-foot type tenants, and we're seeing, obviously, it's been widely reported just general economic activity is more robust than the Sunbelt. And no surprise, that's where we do see the higher levels of utilization. That's not to say we don't have, for instance, government-related or critical business operations elsewhere in the portfolio, where we're seeing almost 100% utilization.

But I think that's the generalities that you're probably more interested in. We're seeing it really translate also to a leasing pipeline activity being more active in those markets as well.

Nick Thillman -- Baird -- Analyst

OK. And then the last one from me. Like moving to the portfolio, I know like prior calls, you mentioned the possibility of maybe monetizing some of your assets in stronger markets such as Cambridge. I guess, is that still the case? And then turning to noncore portfolio, you trimmed a decent portion of that with 1901 market and the New Jersey portfolio in 4Q.

I guess, what are your plans as we look ahead into 2021?

Brent Smith -- President and Chief Executive Officer

Yes, Nick. It's a choppy acquisitions, dispositions, capital markets in general. And so you're going to continue to see us do what we've done in the past, which is monetize mature assets under our ownership. And in today's market, that's generally lending itself to longer leased credit type tenancy.

And so we have a number of those that fit that profile in the portfolio and that we think we could sell in this market. You mentioned Cambridge, among others, that could fit that profile. And we're continuing to evaluate the potential disposition of those assets. And I think you're likely to see us probably recycle somewhere in the neighborhood of $200 million to $400 million this year.

And we're going to consistently continue to focus on recycling that capital into our healthiest markets and where we continue to see these larger kinds of corporates and other activity from a leasing velocity standpoint pick up. So that's probably to focus mostly in Sunbelt and Boston at the moment. And we are continuing to evaluate development, but I think at the moment right now, that's a little bit further down the list in terms of capital allocation. But we do feel enthusiastic about seeing some of these corporates come into the Sunbelt markets.

We're talking to economic development groups that represent the states and the cities, and they are seeing an uptick in that activity in Dallas, Atlanta, and Orlando. And so that's probably another reason to focus a little bit more on those. We're also continuing to lean into redevelopment. We'll be doing a project at our 25 Mall Road, building up in Boston, completing the 200 South Orange Avenue campus now with the acquisition of 222 South Orange Avenue, really creating a preeminent product there in downtown Orlando.

And then, of course, we're continuing to build out the phases of redevelopment at the Galleria in Atlanta and hope to have more to share with the market on that this summer. And of course, our big buoy right now is 60 Broad, and that's really related to the leasing, obviously, with the state that's completed and the New York City that's under way. So we'll continue to evaluate those from a capital allocation standpoint as well as our buyback program appropriately within that same historical framework that we have in the past.

Nick Thillman -- Baird -- Analyst

Great. Thanks.


Your next question is coming from Anthony Paolone. Your line is live.

Anthony Paolone -- J.P. Morgan -- Analyst

Thanks. Hi, everybody. I guess, first question is on the half a million square feet of leasing here in the first month or two of the year. What does that do to the expiration schedule, I guess? Because it's -- you only have, I think, in the supplemental 900,000 square feet this year.

So how much of that kind of knocks out this year versus future years?

Brent Smith -- President and Chief Executive Officer

I would say very little of that actually reduces the '21 expiries. As we've talked about and you've heard me mention, Tony, we continue to have meaningful dialogue with these larger corporations and technology companies who know their businesses really well and are moving wholesale divisions or groups or expanding, etc. And so we've been sharing that dialogue, and we've continued to see that translate now into some leasing activity. And we think that's going to be positive that we'll want to share more detail with the market at the end of the first quarter.

But overall, that 2021 expiry still stands at about 5.8%. It was a series of early renewals and some new leasing that's really comprising that 500,000 square feet.

Anthony Paolone -- J.P. Morgan -- Analyst

OK. Got it. And then is there a way to characterize, just from what you've been able to execute so far and where your market discussions are, kind of where the all-in net effective rents are landing compared to, say, pre-COVID levels?

Brent Smith -- President and Chief Executive Officer

It can vary by market. And right now, I'd say we're seeing, again, the most activity in the Sunbelt. So that's where the majority of our data points come from as well as Boston. But in generalizing, I'd say net effectives -- because concessions have moved up, call it, 10%, 15%, while rates have held steady.

So we've seen that effectives right now, depending on the market, decline anywhere from 5% to 10%, just depending on the dynamics. But I think we view it, if you've got a larger and/or credit-worthy tenant looking for space, we're going to fight for them. And right now in this marketplace, I think that's pretty reasonable to say those net effectives have been deemed. But we are pleased that ourselves and other landlords are holding rent, despite the sublease space that is coming on in some of our markets.

I think you have to peel back the onion a little bit and examine that a lot of that is not of the same quality and/or duration that we provide a tenancy within the portfolio. So we still feel very good about where we are positioned to the market, and we're able to accomplish deals. I would say, overall, we still feel like the mark-to-market in the whole portfolio of the lease is still around that 5% to 10% level, depending on market and building, obviously.

Anthony Paolone -- J.P. Morgan -- Analyst

On the 5% to 10% on the positive side for the whole portfolio?

Brent Smith -- President and Chief Executive Officer


Anthony Paolone -- J.P. Morgan -- Analyst

OK. And then maybe a couple for Bobby. The $2.6 million termination fee from WeWork, is that something we'll see, I guess, in the first quarter? Or is that in the guidance? Like where does that show up?

Bobby Bowers -- Chief Financial Officer

Yes, Tony. This is Bobby. It is in our guidance. Each year for the last several years, we've recorded between $2 million to $3 million per year of termination fee income.

In 2019, it was $2.8 million. Believe it or not, in 2020, it's $2.8 million. And in 2021, it's exactly the same thing. Right now, we're forecasting $2.8 million.

So it's not an unusual item, but we are able to identify it now and tell you what it is. It will come through, as you just asked, primarily in the first quarter.

Anthony Paolone -- J.P. Morgan -- Analyst

OK. And then just remind us on that space, you mentioned no work ended up getting done. Was WeWork teed up to foot that bill? Or was that part of Piedmont's TI package that now you won't be spending those dollars, I guess?

Bobby Bowers -- Chief Financial Officer

That's correct. We had a TI obligation, and those dollars will not be spent.

Anthony Paolone -- J.P. Morgan -- Analyst

OK. And then just last one, if I might, for you, Bobby. Just any brackets around G&A for 2021?

Bobby Bowers -- Chief Financial Officer

In terms of size, Tony, is what you're wondering?

Anthony Paolone -- J.P. Morgan -- Analyst

Yes. I know it's tough with the comp accrual and the stock and stuff, but just kind of what's loaded into the guide?

Bobby Bowers -- Chief Financial Officer

Yes. In total, maybe $28 million, somewhere in that in total. $7 million per quarter, something like that.

Anthony Paolone -- J.P. Morgan -- Analyst

OK. Great. That's all I got. Thank you.


[Operator instructions] Your next question is coming from Michael Lewis. Your line is live.

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

Yes. Great. Thank you. So I'm going to lead off asking about half a million square feet of leasing year to date as well.

I think you caught everybody's eye. I think you did about 230,000 a quarter, the three quarters during the pandemic, and Tony already talked about the low lease expirations this year. Was the 500,000, is there one or two big chunks in there that drive the bulk of that? Or is this kind of a broader level of activity? I'm just curious what kind of tenants are looking for space right now?

Brent Smith -- President and Chief Executive Officer

Yes, Michael. This is Brent. Thanks for joining us today. I think it does include one of our top 20 tenants.

So there is a sizable win in there. But again, I want to provide you with a context of what we're seeing broadly across the portfolio. So it includes, I would say, one of those top 20 and then a lot of other leases throughout that. Both of the larger size, 50,000 square foot plus, and we have a few of those we're still chasing, but a number of those also smaller 10,000-square-foot deals.

But what we're seeing is, you heard me in my prepared remarks, really limited traction with 10,000 to 25,000 square footers. So when we get into the detail at the end of the first quarter -- and we can't disclose who that top 20 tenant is at this point in time. But when we can share that and the other detail, I think you'll see that it's very much what I described is what we're seeing in real time.

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

OK. Thanks. I wanted to ask, I was looking through the list of properties, and you've got kind of a handful here that are 50% leased or below Two Pierce Place, 1201 Eye, 6031 Connection Drive, Las Colinas Corporate Center 2. Are those mostly just frictional vacancy? Or are there redevelopment opportunities in that group or kind of are these risks or opportunities?

Brent Smith -- President and Chief Executive Officer

We certainly see many of them as more opportunities than I would say risk. The Las Colinas Corporate Center, I'd start with that one. Great asset right off by DFW, where we've seen a lot of the activity from those larger corporates kicking tires in the Dallas market, and it's recently redeveloped. So we've redone the lobby, amenity package, tenant lounge, fitness facilities, great structured parking around that asset, free structured parking.

So it has, again, ease of access, and we had a large senate vacate there at the end of last year, which gave us the chance to reposition it. And we're already done with all of that work. And so again, that fits within that encouraging pipeline in Dallas and see as an opportunity. Our Eye Street assets in D.C., we feel like they're well-positioned in the market.

One has done extremely well. The other one we continue to frankly struggle with. But the good news is we have very little expirations, in fact, none in D.C. And we do have traction in that market with a number of tenants because that is more of a value-priced asset there around the big CityCenter, complex, and development where rents are closer to 70 to 80.

And we're more in the 50 ZIP code. And we feel like that's a compelling offering, and we are seeing traction with that now as that market starts to reopen. But admittedly, it has been slower to reopen than our Sunbelt project. I think the other locations that you mentioned, Two Pierce Place to be the one where I would say, it's probably, in your mind, risk.

But we view it as a likely disposition candidate. There are a number of large potential users that we're quoting right now. And depending on whether they land or not land, we'll really ultimately decide the disposition price. But you're likely to see that asset go within the next 12 to 18 months because it is part of that noncore market set that we have, which really includes the Chicago building and then the two buildings next to each other in Houston.

So that's the one I would maybe deem more as a risk than the others. The others we certainly view as opportunities.

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

Great. And then last one from me. Maybe you said this before, but what's the term on the New Jersey seller financing once that gets paid back? And I think you said, it was 7%?

Brent Smith -- President and Chief Executive Officer

Yes. It's a bifurcated note, senior, and a mezz piece. Both technically have a term of 3 years, although I will say, we've worked with this buyer before. And maybe a little bit of background on the whole transaction would be helpful.

So it's always been a strategic goal of ours to get out of the New Jersey market, and it was a matter of really finding the right opportunity and really have someone appreciate, which was that Bridgewater Crossing is one of the premier assets in Northern New Jersey. It's everything we describe in our portfolio that's compelling, walkable, mixed-use around it, lots of food and beverage and retail without ever having to get into a car. So really a unique office setting for Northern New Jersey. But we felt like we had some leasing momentum, and given the high-quality nature of the asset, we felt like it was a good time to maybe see if some of the parties that expressed interest in the asset would be willing to step up and purchase it, because we had not been willing to part with it prior to that.

They had a few that bid on the asset, and particularly, one group stood out from the others, three parties that we really whittled down to, all of whom we had prior relationships with. And the ultimate group that won we have done deals with in the past and utilized a similar structure. So that's a longer-winded answer, but I wanted to give you some background. So that final structure for the debt, again, is a mezz at roughly 13.6% as well as a senior at 6% and then the 7%.

I anticipate generally, they -- this buyer pays off the mortgages that we've used for financing within a year. I certainly would expect that on the mezz. And frankly, I think it's likely on the senior, given the leasing velocity of the asset that we had in tow when we sold the building to them. And we think that is going to come fruition and give them an opportunity to refinance us out of the asset.

I know that was a long-winded answer, but hopefully, that's helpful.

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

Oh, no. It's helpful. I was gonna say I see those loans now which is on Page 36 in your stuff. I apologize for asking the question that was answered in there, but the color is certainly helpful.

That's it for me. Thanks, guys.


There are no further questions from the lines. I would now like to turn the floor back to Brent Smith for closing remarks.

Brent Smith -- President and Chief Executive Officer

Appreciate it. I want to thank again, everyone, for joining us today. Despite a challenging 2020, I want to take this opportunity to, one last time, thank the other employees of Piedmont for the job that they've done and really in an uncertain environment to protect each other, our vendors, and our tenants. But we're excited about what we were able to accomplish from growth in 2020 and where it's heading into 2021.

We've got low near-term lease expirations, manageable debt maturities. And frankly, our portfolio vacancy, which has been pointed out, is in the more attractive markets of Atlanta, Dallas, and Orlando, where we're seeing that activity and the pipeline rebuild fastest. We think that combined with our best-in-class ESG platform and paired with a high-quality, amenitized environment is going to position Piedmont to do well this year. And we look forward to continuing this dialogue as hopefully the economy opens back up and the vaccine rolls out.

Thank you, everyone, and we look forward to talking to you in the second quarter.


[Operator signoff]

Duration: 40 minutes

Call participants:

Eddie Guilbert -- Treasurer and Executive Vice President

Brent Smith -- President and Chief Executive Officer

Bobby Bowers -- Chief Financial Officer

Nick Thillman -- Baird -- Analyst

Anthony Paolone -- J.P. Morgan -- Analyst

Michael Lewis -- SunTrust Robinson Humphrey -- Analyst

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