Columbia Property Trust Inc (CXP) Q4 2020 Earnings Call Transcript

Image source: The Motley Fool.

Columbia Property Trust Inc (CXP)
Q4 2020 Earnings Call
Feb 18, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the Columbia Property Trust Fourth Quarter 2020 Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]

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

Matt Stover -- Director of Investor Relations

Thank you, operator and thank you, everyone for joining us on our fourth quarter 2020 Columbia Property Trust investor conference call. On the call with me today are Nelson Mills, President and Chief Executive Officer; Jim Fleming, Executive Vice President and Chief Financial Officer; Jeff Gronning, Executive Vice President and Chief Investment Officer; and other members of our senior management team.

We released our results this afternoon in our quarterly supplemental package, which can be found in the Investor Relations section of our website and on file with the SEC on Form 8-K. We also filed our 10-K with the SEC this afternoon, and an audio replay of this call will be available by this time tomorrow. Statements made on today's call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties.

A number of factors could cause actual results to differ materially from those anticipated, including those discussed in the Risk Factors section of our Form 10-K, which includes specific risks pertaining to COVID-19. Forward-looking statements are made based on our current expectations, assumptions and beliefs, as well as information available to us at this time. Columbia undertakes no obligation to update any information discussed on this conference call.

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

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

Nelson Mills -- President, Chief Executive Officer and Director

Thank you, Matt and thank you, everyone for joining today's call. I'll begin with a quick look back at 2020 and discuss some of our more recent accomplishments. Then provide our thoughts on 2021 and beyond. Jeff will walk us through the growth opportunities throughout our portfolio, and Jim will share additional financial details around our fourth quarter results and our outlook for the New Year. 2020 was undeniably a transformative year that brought about many challenges, new perspectives and greater awareness for our society and our industry. The pandemic has challenged our fundamental practices and perception around how we live and work.

For Columbia, the past year underscored the stability of our portfolio and resiliency of our platform. And I'm proud of our team's performance. We took advantage of this disruptive year to further enhance the health and safety of our tenant, to improve communication and services across our portfolio, to adopt technology and improve operational practices and to further meld our integrated platform, much of which arose from our acquisition of Normandy last year. All the while, we maintain seamless operations and delivered solid financial performance throughout 2020.

In fact, despite the unforeseen challenges of the pandemic, we achieved 2020 normalized FFO of $1.52 per share, same-store cash NOI growth of 8.7% and a year end lease rate of 95.6%, all of which are at or above our pre-COVID full year guidance ranges issued last February. Our rent collections were also strong throughout the year at 98% of total rents and 99% of office rents, a testament to the quality of our tenant roster and the desirability of our properties. This level of stability in the face of unprecedented challenges across our industry is a reflection of the resilience of our strategy, the attractiveness of our properties and location, and our team's success in partnering with so many dynamic forward-thinking companies and call our properties home.

During the fourth quarter, we leased 34,000 square feet at positive rent spreads. Through mid-February of this year, we have leased another 59,000 square feet, including 47,000 square feet in the San Francisco market and double-digit positive cash leasing spread. We are expecting a bit of a pullback in our cash flow metrics for 2021. Jim will provide more detail in a few minutes, but this is partly a result of the asset sales we completed last year and partly due to our more conservative expectations about leasing pace during the current environment. However, even though leasing activity was dismally low in 2020, and we expect relatively light transaction levels for the next few months, we are seeing green shoots of activity.

Tours with prospective tenants are on the rise and existing tenants are beginning to focus on reentering their space, with many contemplating renewal, reconfiguration and/or expansion options. For leases negotiated and executed thus far, rental rates and other terms have held up relatively well, and we expect that to continue. As the challenges of this pandemic received, we believe we are very well positioned for strong leasing results and cash flow growth.

In a moment, Jeff will walk us through some of the leasing opportunities we're addressing today, along with others that will bring online over the next several quarters. We will soon deliver new state-of-the-art construction as well as renovated vintage product and highly desirable neighborhood. In addition, we have the opportunity to release attractive space in existing properties with substantial embedded rent roll up potential. These opportunities reflect our unique approach to value creation, which relies on assembling terrific properties and ideal location and producing cutting-edge workplace experiences for discerning tenant.

For example, in New York City, the portfolio we've assembled in Midtown South and West Chelsea is a perfect match for the tech and media firms that continue to drive and expand in those markets. Simply out, if you're looking for investment exposure to the expanding demand by tech and media in Manhattan, our portfolio and strategy deliver. We're also well situated in San Francisco, Washington, D.C. and Boston, with great locations, flexible floor plans that allow for social distancing and state-of-the-art systems such as special stores and mobile amenity access.

Last month, we announced the installation of new air purification system, including bipolar ionization across our portfolio. This important and timely effort reflects our long-standing commitment to providing our tenants with safe and healthy workspaces. And as part of a comprehensive program, we have implemented to prepare for the comfortable and safe return of employees to the office. Our success in creating workplaces that attract forward-thinking growth companies is reflected in our dynamic tenant roster, which includes companies such as Twitter, Snap, DocuSign, PitchBook, and Affirm, companies whose history of success is driven by their culture of collaboration and innovation.

Even during periods of weak leasing activity across the entire office sector, we're still seeing demand from growing tenants for differentiated space like ours. That said, as the world continues to react to the pandemic and it's after effects, we recognize that what companies need and want is evolving. Alongside the technology and practices, we have implemented to prepare our buildings for tenants return to their office spaces, we are also responding to shifting demand drivers with more flexibility innovation. This includes implementing new technology resources, targeted amenity offerings, enhanced workplace assistant and adaptive lease terms.

We believe the pandemic has accelerated many shifts in the landlord and tenant relationship that were already in progress. And we believe that our success, as always, lies in understanding and anticipating these drivers. We are committed to providing a workplace experience that meets the demands of today's top companies.

Before I hand the call to Jeff to tell us more about the growth opportunities that lie ahead, I want to highlight our important news from January that Connie Moore, a long time Columbia Director, has been elected Chair of our Board. Connie brings 40 years of tremendous industry experience, having served as CEO of BRE Properties, and several executive positions at Security Capital Group, and is the former Chair of NAREIT. The range we're passed to Connie from our former longtime chair, John Dixon, who remains an Independent Director for Columbia.

I want to thank John for his many years of service as our Board Chair, a position you held through a time of tremendous progress and transformation for Columbia Property Trust, dating back to before our public listing in 2013. We're very grateful for John's leadership and pleased that he'll remain a director. In related news, Carmen Bowser, now fills previous position as Chair of our Board's Investment Committee. We look forward to benefiting from the strength, perspective and experience both women bring to their respective leadership position on our Board.

In closing, we are well prepared to perform for our shareholders amid the ongoing challenges, and we're excited about the opportunities that lie ahead for 2021 and beyond. We're going to stick to what we do best, optimizing our portfolio of attractive, well-located properties, while demonstrating flexibility, creativity and service in meeting our tenants' evolving needs. This has been our proven approach for many years, but it is essential during unprecedented times such as these.

In the months and years ahead, office demand will undoubtedly rebuild a further flight to quality and a shift toward more flexible terms and office as a service. Columbia is uniquely positioned and committed to capturing this evolving demand while maintaining one of the most attractive portfolios and tenant rosters in the sector.

With that, I'll turn it over to Jeff to discuss our near-term growth opportunities.

Jeff Gronning -- Executive Vice President and Chief Investment Officer

Thank you, Nelson and thank you, everyone for joining the call today. As you know, for many years, our team has pursued an investment strategy, centered on developing and operating properties that have a strong appeal to the fastest growing tenants in our selected markets. We look for undervalued assets in prime neighborhoods that exhibit specific physical characteristics that we can redevelop or reposition into compelling workplace environments with modern systems, access to desirable amenities and where we can then deliver a highly tailored tenant service experience. We've demonstrated the success of this strategy by attracting some of the highest growth in most dynamic tenants in the world to our properties, including tenants such as Twitter, DocuSign, Amazon, Snap, PitchBook and Oracle, just name a few.

As we apply this strategy to future growth opportunities, we are doing so through our pipeline of active development and redevelopment projects totaling 1.9 million square feet spread across five assets. At share, this pipeline totals 640,000 square feet and will represent a 13% expansion to the current size of our in-service portfolio. Each of these properties is at a different stage of the development cycle with anticipated deliveries starting in the third quarter of 2021, and expanding over the next three to three and half years. We estimate this growth pipeline once delivered and stabilize has the potential to add between $40 million and $50 million of incremental NOI contribution based on today's market fundamentals.

In addition, and as I will touch on in a minute or two, we have some opportunities to drive additional growth beyond our 2021 earnings guidance by releasing certain blocks of space that will be coming back to us in 2021. However, before I touch on lease rollover, I would first like to provide a quick update on each of the projects we have coming online, near-term or in the planning stages. First, 799 Broadway is a trophy quality, creative office building in an ideal New York City, Midtown South location. The building is designed with the latest health and wellness features necessary to accommodate a new way of working in a post-COVID environment.

Construction is slated for completion in July, and tenant tour activity has picked up significantly in recent weeks. We currently have lease proposals out the tenant sneaking space ranging from 40,000 square feet to over 100,000 square feet. While we don't have any leases that are imminent, the level of activity we are experiencing is strong, and we remain confident that 799 is positioned to perform at the very top of the market as we look to lease-up the building in the months ahead.

Another growth driver for the company is 80 M Street in Washington, DC's Capital Riverfront District. We're taking an innovative, environmentally friendly mass timber approach with our three floor vertical expansion above what is currently a seven-story steel and concrete structure. We believe the new space we are adding is some of the most unique and attractive space available anywhere in the D.C. market at this time. The project timeline remains on schedule and on budget. We should be complete by mid 2022. And as you may recall, we've pre-leased 60% of the 105,000 square feet of new space.

Third, 149 Madison Avenue is a 122,000 square foot office property located at the corner of 32nd in Madison in the Nomad section of Midtown South. We are now positioning this building for lease-up, following last year's negotiated lease termination deal with WeWork. This newly renovated property offers high quality creative office space with the flexibility to accommodate a variety of tenant profiles and will be positioned to attract tenants at rents ranging in the $70s per square foot. We expect to have this space ready for occupancy in late 2021.

In addition to our active development pipeline, we also have two longer-term projects in the development queue. Terminal Warehouse and 101 Franklin both located in New York City. At Terminal Warehouse, we and our co-development partner have completed the building design and are finalizing the construction management bidding process, and we are documenting a new $1.2 billion construction loan to refinance the original acquisition financing. We expect to formally commence the redevelopment of this historic 1.2 million square foot property in July after wrapping up the remaining predevelopment path.

101 Franklin is slightly behind Terminal in the building design and predevelopment phase, as we intentionally slowed down the project in order to gauge the post-COVID market conditions and tailor our development program accordingly. Our team is looking forward to pushing 101 Franklin into a higher gear at the appropriate time and hopefully very soon. Together these five projects will represent a material expansion of and quality upgrade to Columbia's current in-service portfolio and will position us to deliver on the next leg of earnings growth and value creation for the company's shareholders.

Now moving to leasing. For the past several quarters, we've talked about below market roll-up opportunities in our expiring leases, including cash roll-ups of 8.9% in 2020 and 15.4% so far in 2021. We don't have much direct vacancy to address in the portfolio given our current 96% leased occupancy rate, however, we do have some specific blocks of space that will be coming back to us through lease expirations in 2021.

As of July 1, Amazon Web Services will be consolidating out of 90,000 square feet at University Circle in Palo Alto. AWS is paying us a blended rate of $79 per square foot net rent and we expect to release this space at a 10% plus roll-up to that amount. Also, as previously announced on July 1, we'll be taking back 174,000 square feet of space from Pershing at our 95 Columbus Avenue property in Jersey City, New Jersey. We're currently making important capital improvements to the building's lobby and other common areas as is required under the Pershing lease renewal and in order to maximize our potential to attract new tenants to this pocket space.

And third, also in July, we will take back 54,000 square feet of space currently occupied by the law firm Mintz Levin at our Market Square property in Washington D.C. In connection with Mintz lease rollover and an additional 120,000 square feet of current vacancy and other near-term lease roll, we are initiating a capital improvement plan to activate the lobby arrival experience, enhance the outdoor plaza and ground level retail areas and to address other common area upgrades that are needed to position the space for lease to new tenants.

So to conclude, I share Nelson's sentiment that our focused strategy and the hard work of our team helped produce strong results in 2020. The stage is now set for Columbia to push forward with a new chapter of growth where we'll seek to further capitalize on our portfolio of premier assets, continue to leverage the resources of our vertically integrated platform for value creation and by securing new external growth opportunities that will present themselves as we emerge from the effects of the pandemic. We're optimistic about the future and look forward to updating you on our progress to drive earnings growth and value creation in the quarters ahead.

I'll now hand the call over to Jim.

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

Thank you, Jeff and we appreciate everyone joining us today. Despite the unprecedented market turbulence in 2020, we produced solid results capped by our fourth quarter performance reported today. I'm proud of the work we've been doing at Columbia, which helped us meet or exceed our pre-pandemic guidance ranges. As all of you know, we are in a challenging business environment. Very few people are using their office space, which is creating problems for retail and service businesses in and around office buildings. Fortunately, less than 5% of our revenues come from these users. And overall, we've collected 98% of our 2020 rent, but we have had some smaller delinquencies.

As a result, we made the decision at the end of 2020 to place nine tenants on a cash accounting basis. This resulted in a reduction in FFO and GAAP NOI in the fourth quarter of about $0.06 per share, mostly from the write-off of straight line rents. You'll see this reflected in our FFO, our same-store NOI growth and even our leverage for the quarter as measured by our debt to EBITDA ratio. However, even with this adjustment, our full year 2020 performance was very strong. In fact, we generated fourth quarter normalized FFO of $0.32 just below the $0.34 of the year earlier.

For the full year 2020, this brought our normalized FFO to $1.52, exceeding the range we provided a year ago this month, and consistent with a higher range of $1.51 to $1.54 provided in October. We also were able to grow our fourth quarter same-store NOI based on cash rents by 0.7%. That brought our full year growth to 8.7%, consistent with the 8% to 10% range provided with our last earnings release and only slightly below our original 2020 guidance range. We're proud of this growth during one of the most difficult years for real estate markets in recent memory.

Our team leased 34,000 square feet during the fourth quarter, bringing our full year total to just over 260,000 square feet. As Nelson mentioned, already in the new year through February, we leased an additional 59,000 square feet, much of it in the San Francisco market. Our leasing during the fourth quarter came with an average new term of six years and releasing spreads of 5% on a cash basis and 21% on a GAAP basis, again, underscoring the below market nature of much of our available space.

We ended the year with a lease percentage of 95.6%, within the original 95% to 97% outlook range we initially provided for 2020. Our collections have remained robust with nearly 98% of total rents collected for the fourth quarter, including 99% of office rents. January and February are trending in the same direction. We've already collected 97% of total January rents and over 90% of total February rents, both of which are on pace with our collections in recent months.

As you heard from both Nelson and Jeff, our strong performance throughout 2020, both operationally and financially, is a direct result of our unique portfolio, our high quality tenant roster and the hard work of our team. Our balance sheet remains solid with strong liquidity that allows us to take the patient approach to value creation that Jeff outlined. We ended the year with more than $90 million in cash, plus access to $540 million of additional funds under our revolving credit facility.

For the fourth quarter, our leverage metrics were elevated temporarily, as we placed a number of retail tenants on a cash accounting basis. As a result, our net debt to adjusted EBITDA ratio stood at 8 times at year end, and our fixed charge coverage ratio was 3.4 times. However, our net debt to real estate asset ratio stood at 31.4%, and we continue to have more than $4 billion of unencumbered properties. Our only debt maturities prior to next year are modest loans at our share on 799 Broadway and Terminal Warehouse.

Turning to our outlook. As we discussed last year, we knew 2021 results would be lower year-over-year, partly due to the dispositions we completed in 2020, which gave up some near-term cash flow. As a reminder, we sold our Pittsburgh asset early in 2020, we sold our Pasadena Property at the end of the first quarter, and we sold a 45% interest in 221, Main Street in San Francisco to Allianz in the fourth quarter. Over time, we expect our development and redevelopment projects will generate cash flows to replace the cash flows from these dispositions, but we believe we will start to receive those revenues in 2022.

As Jeff mentioned, we will take back 174,000 square feet from Pershing in Jersey City at mid-year. And at the same time, we will take back 90,000 square feet from Amazon Web Services in Palo Alto. We believe, both of these spaces will lease at the same or better rates. But given COVID, we're anticipating that this will take a few months, which will temporarily reduce cash flow in 2021. In addition, in 2020, we received a termination payment from WeWork at 149 Madison, equal to 10 months rent. Once this building is leased for a full year, it should generate even more revenue, but we do not expect much revenue until 2022.

Given that backdrop, based on the information we have today and assuming current expectations around the pandemic remains stable, our new normalized FFO guidance range for 2021 is $1.23 to $1.30. We're also providing our expectations for same-store NOI growth on a cash basis of negative 3% to 5% and a year end occupancy range of 90% to 95%. We anticipate full year corporate G&A of $33 million to $35 million.

As we discussed earlier on today's call, we have multiple leasing and releasing opportunities that should begin to drive cash flows over the coming year, including 799 Broadway, 149 Madison, the Pershing space in Jersey City, University Circle in Palo Alto and the newly created space at ADM Street in D.C. Our entire team is excited to execute on these growth opportunities.

In conclusion, despite the severe challenges that 2020 brought to the global economy, Columbia Property Trust performed well, producing results that were largely consistent with or even better than our pre-pandemic outlook. This is a reflection of the unique portfolio we've assembled over the course of many years, our top-notch tenant roster, and the resiliency and determination of our entire team. Looking ahead, we're excited about the many growth opportunities, both near-term and long-term and we look forward to updating you on our progress.

With that, operator, if you could, please open the lines, we'd be happy to take questions.

Questions and Answers:

Operator

Yes, sir. [Operator Instructions] For our first question, we have Vikram Malhotra from Morgan Stanley. Vikram, your line is open.

Vikram Malhotra -- Morgan Stanley -- Analyst

Topic in the question -- hi, good evening. Could you -- you walked us through sort of some of the big leases, i.e., there are known move-outs now for this year. Maybe just if you could give us a little bit more detail on more holistic your expectations for lease up? Any sort of early prospects you have and the mark-to-market you referenced? And then just so we have a kind of a more holistic picture, given kind of the nature of the volume of the move-outs. Could you also just give us a sense of, if there are any known move-outs for the first half of '22?

Nelson Mills -- President, Chief Executive Officer and Director

Yeah. Sure. Vikram, I'll start and then Jeff and Jim can weigh in. Thanks for the question. So most of these move-outs that Jim referenced have been known. The one bit of disappointment and maybe surprised from last quarter is, Amazon Web Services, 90,000 feet in Palo Alto. As we'd indicated in the last couple of quarters, we were hopeful -- certainly not certain, but we were hopeful they might stick around for a year to short term. As it turns out, they are not and that space will become available midyear this year. That's the bad news. The good news is, it was well under market rents, and that property has always performed quite well, and we think the demand will be there.

So we're pretty confident getting that release at a bit of a roll-up eventually. Jeff touched on several of the other -- the Pershing space was known. And again, we think the bogey there in terms of the rents we need to achieve at that space in Jersey City is relatively low, but we're confident and be able to meet that as well. Those were the known move outs. Jeff touched on several projects that are coming online, 799 Broadway, which has a substantial amount of tours and activity and some pretty keen interest from smaller and larger users alike. So we're pretty optimistic that later this year, we'll have some significant leasing there. That's kind of the headline.

There are other spaces around as well, 149 Madison, 115,000 feet in Nomad here is the redevelopment we've taken back from WeWork. We expect to have activity on that later this year and then just various spots around the portfolio. Again, good high-quality space. Overall, we're still well leased. I think 8% of our portfolio is rolling during 2021. But it's all pretty good space. And in most cases, we anticipate roll up opportunities even in this post-COVID environment. As far as 2022, Jim, perhaps you have that. What are some of the total volume and the major components of the terminations in '22?

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

Absolutely. So Vikram, in 2021, as we -- as you know, we've identified a fair amount of space. It's over 300,000 square feet. We've talked about between Pershing, Amazon Web Services and the law firm and D.C., which are the large ones. We don't have anything else of note in 2021 that where we know they're going to move out or really that any other significant expirations. So over 300,000, really 2022 much lighter for the whole year and these are both in the first half. We have about a little over 50,000 square feet of known move-outs. And one is in Boston and one is at Market Square in D.C. each about 25,000 feet. In both cases we believe the rental rates we'll be able to achieve will be at or better than what the expiring rents are. So those -- those seem pretty, OK. Really no big items to note there.

Vikram Malhotra -- Morgan Stanley -- Analyst

Okay. Great. And then just on the development projects we have a little bit more visibility on one of them. But can you just remind us sort of where have asking rents or rents underwritten, where have they trended since sort of being underwritten just amid COVID and what are your expectation for further lease up?

Nelson Mills -- President, Chief Executive Officer and Director

Yeah. So Vikram, it's really difficult to say. As you know, there's been really low leasing transaction volume. But we've had enough discussions with tenants and prospective tenants and we've seen enough going in the marketplace. We're starting to get some indication. So new construction -- well-located new construction like 799, of course, all ships are going to drop a bit with the sinking tide.

But new property like that, well-located property like that we -- maybe a single-digit percentage drop. I mean, I'm not sure. We're pretty hopeful, we'll get close to our pre-COVID ask on that, on average throughout the building. So that's $130 plus range in gross rents for that type property, right? It's a unique property, well located state of the art and new etc. That's one end of the spectrum. On the other end of the spectrum, more commodity space. If you think about mid-block buildings, mid floors within a building and some of the acquirer submarkets those will suffer more significantly in this environment.

Fortunately, we don't have a lot of that. But those could be in the near term 20%, 30% drop in net effective rents. I mean, that wouldn't be surprising. Fortunately, we don't have a lot of that. So it's hard to say. We're encouraged by the green shoots we're seeing in activity, and particularly in the tech and media areas. And so we're pretty hopeful. Yes, there will be some decline. There will be a pullback. But we think for good quality properties, it's going to be reasonably within range of what we were shooting for.

Vikram Malhotra -- Morgan Stanley -- Analyst

Okay.

Nelson Mills -- President, Chief Executive Officer and Director

The pace of leasing is going to be a bit slower, right? It's just going to take a while longer to really get back in action. And that's a pretty big component of our guidance for 2021, just a bit slower pace.

Vikram Malhotra -- Morgan Stanley -- Analyst

Great. And then just Jim one last one for me. Could you clarify with the capex that you mentioned, some incremental capex, and arguably that's maybe more one-time. But just where do you see -- where will the fat payout trend toward year end, given sort of these move-outs and maybe some incremental capex?

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

Sure, Vikram. So as you know our -- as you can see our AFFO or FAD last year was $1.25 and we had a dividend of $0.84, which is a very healthy ratio. It will be -- we think the AFFO or FAD this year will be around the same level as our dividend, but that's a temporary phenomenon. Really, it's more a function of cash flow than it is of capex, because a lot of this capex is development. We will be spending development dollars, but that really doesn't factor into the AFFO calculation. So there are some. We've got some capital projects to finish up, but really by the biggest amounts of capital are going to be driven by development.

So it's really -- I'd say what really is to watch is the cash flow. We do think -- as we said, we do think cash flow is going to increase over time. We do have some really good space available to lease. We're just being conservative on how we're approaching that for guidance. It's possible we could lease it faster in 2021 and get some more revenue. I think it's likely that we will get significant revenue in 2022, starting with 149 Madison, the Pershing Space, Amazon Web Services, etc., followed later by some of these other projects. But I think the way we look at it, I think we're in good shape for now in terms of the dividend. I think the fab will grow over time. And I think we'll -- we feel that the dividend will be well-covered over time.

Vikram Malhotra -- Morgan Stanley -- Analyst

Great. Thanks so much.

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

Thank you, Vikram.

Nelson Mills -- President, Chief Executive Officer and Director

Thanks, Vikram.

Operator

Our next question, we do have Sheila McGrath from Evercore ISI. Sheila, your line is open.

Sheila McGrath -- Evercore ISI -- Analyst

Thank you.

Nelson Mills -- President, Chief Executive Officer and Director

Hi, Sheila.

Sheila McGrath -- Evercore ISI -- Analyst

Hi. I've had a question on Amazon Web Services. Can you remind us, are they exiting their entire space there and where they might be going?

Nelson Mills -- President, Chief Executive Officer and Director

They are, Sheila. So I think they gave some serious thought to staying -- extending that lease, at least for a year or two, but ultimately decided not to a combination of work-from-home in the near-term. And as you can imagine, they have other campus options in that region, right? So as we understand it, we don't have all the details, of course. But as we understand it, the combination of work-from-home and consolidating into some of their larger campuses is going to be their solution. So it was 90,000 feet and again, well under even a post-COVID market rate. And so, yeah, disappointing that we didn't keep them around for a while longer, but again, we think that will be -- that lease will tell take care of that space and relatively new term -- near-term.

Sheila McGrath -- Evercore ISI -- Analyst

Okay. And then following up, I think Jeff mentioned at 799 Normandy, there's a pickup in activity from last quarter. Just wondering are these new tenants to Manhattan or relocations within the city? And are the relocations driven by COVID at all seeking new safer?

Nelson Mills -- President, Chief Executive Officer and Director

Yeah. Jeff, you want to cover that?

Jeff Gronning -- Executive Vice President and Chief Investment Officer

Yeah. Sure. Hi, Sheila. The answer to your question is that it's all of the above. I can think of -- we've had multiple tours in the last few weeks, including this week. I can think of at least one tour that is a fintech tenant. That is actually not -- doesn't currently have a presence in the city. So that would be a new move into the New York City market. Other activity that we have is coming from within the city and a variety of different tenants.

Technology is a common theme, in terms of the activity that the activity that we're seeing. And well, I think what the tracking tenants is the neighborhood -- the village neighborhood, the uniqueness of the property, the quality of the space. And for sure, the features that address wellness in the post-COVID environment, the outdoor tariffs is the right there, the ventilation systems and all of that stuff. So, it's pretty, it's broad-based, it's tech centric and space tenants room within and without New York City.

Sheila McGrath -- Evercore ISI -- Analyst

Okay, guys. And one...

Nelson Mills -- President, Chief Executive Officer and Director

Just to add on that, Sheila. One of the things -- it's not true in all cases, but in most cases, for the, I think, the more serious prospects, our competition is almost exclusively Midtown South. That seems to be where they're focused. And in most cases, where the only new construction option and the most expensive option, so it's -- again, it's a testament -- like Jeff said, a testament to the desirability of the neighborhood. And then, I think, where we have the opportunity to differentiate is, obviously the new product. So again, it's...

Sheila McGrath -- Evercore ISI -- Analyst

Great.

Nelson Mills -- President, Chief Executive Officer and Director

We're optimistic about that.

Sheila McGrath -- Evercore ISI -- Analyst

Great. And one last question. Nelson, you mentioned the new air system that you installed. Is that across the whole portfolio? How much did that invest in cost? And do you think all landlords are doing it or would this make Columbia's building, a little more competitive than maybe some undercapitalized landlord?

Nelson Mills -- President, Chief Executive Officer and Director

No. I think most landlords are spending a substantial amount of effort in dollars on this. This is an essential, must have in this environment. I don't know exactly, how we compare. I'd like to think that, we're doing at least as much or more than most. But it's across the portfolio. It's filtration, latest, greatest filtration. It's by filter authorization. We've even gone the extra step of putting BPS systems on our elevators. Elevators, has been -- have been a concern for tenants reentering. And so, yeah, we're very pleased, proud of what we're doing there. The cost is -- yeah, I don't -- Jim, I don't know if you have the specifics, it's probably something under $1 foot or so. Across...

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

Yeah. I don't -- Sheila, it's not a huge number. We actually had some savings last year on operations for people, of course, not being at our buildings, supplies and other stuff. And so it really hasn't moved the needle much. Look at bigger cabs, as I recall, were $10,000 or $15,000 a piece, that the system is in the building depends on buildings. But I think we spent certainly over $1 million across the portfolio, but not million of dollars. I could get you the exact number. I just don't have it.

Sheila McGrath -- Evercore ISI -- Analyst

No. Thanks for that.

Nelson Mills -- President, Chief Executive Officer and Director

Yeah. I think, it's just under $1 foot or so. I'll tell you the feedback, we're getting from existing tenants is very important to them. I mean, perspective tenants, it's a given. It's a must have for attracting new tenants. Existing tenants, it's much appreciated. It's something they're very interested in. So its money well spent. No question about it.

Sheila McGrath -- Evercore ISI -- Analyst

Okay. Thank you.

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

Thank you, Sheila.

Nelson Mills -- President, Chief Executive Officer and Director

Thanks, Sheila.

Operator

For our next question, we have John Kim from BMO Capital Markets. John, your line is open.

John Kim -- BMO Capital Markets -- Analyst

Thanks and good evening.

Nelson Mills -- President, Chief Executive Officer and Director

Hey, John.

John Kim -- BMO Capital Markets -- Analyst

Yeah. Hi, everyone. Jeff, you mentioned the Terminal Warehouse redevelopment is moving forward as far as building design and construction bidding whereas 101 Franklin you've been intentionally delayed. I guess my question is why is the Terminal Warehouse progressing at this time? I realize you have a lower equity position. But just given the amount of potential spend I'm just wondering are you seeing potentially greater demand for this asset or is it because your partners want to move forward? Just some more commentary.

Jeff Gronning -- Executive Vice President and Chief Investment Officer

Yeah. Sure. Just so quick background this is a 1.2 million square foot asset. It's a $1.7 billion total capitalization at completion. It is a comprehensive redevelopment of an existing historic structure. One that -- it's a redevelopment not a ground-up development. So just one consideration is that our current basis is not just land, its land plus improvements that is more than halfway to kind of stabilize cost if you will. And so that combined with the uniqueness of the product.

And by unique, I mean, the quality of the product and the differentiation of the product that we intend to deliver to the market we think is particularly well suited to the post-COVID environment. This is a -- what we like to refer to as a ground scraper not a skyscraper. And so the variety of space that we'll be delivering and the ability for tenants to control their environment, control their ecosystem take advantage of the multiple elevator course that we have throughout the asset combined with the kind of the new build premium space some of the old brick and beam space that we'll retain in the building, we just think it offers a very compelling space offering for very high end and unique and high-growth tenants.

And I think we've seen in New York City in particular even during the pandemic, technology-oriented tenants whether Facebook at Farley or other big commitments Amazon that have been executed even during the pandemic is we think the type of demand that we expect to see at Terminal as we deliver that project. So we have the confidence and the conviction to move forward with it. We thankfully also have a blue-chip roster of co-investors in the transaction with us who have the fortitude and the wherewithal and the long-term view to see the project through. And so that's where we are and that's what we intend to do.

Nelson Mills -- President, Chief Executive Officer and Director

And John compared to 101 Franklin Terminal is a little bit more advanced than 101 Franklin formally known as 250 Church. We had just acquired the property and we're just beginning some of the early planning and design when we had the COVID shutdown. So it's a little further behind and we had a little better opportunity just to press pause for a few months. That said as Jeff said earlier, we do hope to get going on that in earnest. It's also a different tenant prospect there. We're probably looking at smaller family office, high net worth hedge fund type there at that building.

And as Jeff said, the Terminal Warehouse can serve a lot of different types of tenants. But the large -- it's also a great candidate for a large tech campus. So we felt like that momentum and that demand is out there, and we want to be ready for the next couple of years. We felt like we had a little more time on 101 Franklin to make sure we made the right decision on the scope of the project, but we'll get going on it soon also.

John Kim -- BMO Capital Markets -- Analyst

Okay. Can you quantify -- you guys mentioned a few times that you've had an increase in tours. I was wondering if you could quantify that in any way. And is the timing related to the vaccine? And also, can you just clarify, are these physical tours or virtual tours?

Nelson Mills -- President, Chief Executive Officer and Director

Jeff?

Jeff Gronning -- Executive Vice President and Chief Investment Officer

Yeah. Sure. Its physical tours. Certainly, much more so than it was prior to the New Year. I think that generally, across the market, we've seen -- there's been an uptick in activity. I guess there's beauty in small numbers, right, because there was very little activity for nine months in 2020. So any increase is going to look good on an absolute basis. But relatively speaking, we have seen a real uptick in activity with tenants beginning to kind of revisit space plans, plot their reentry to the office and look forward to kind of the back half, I think, of 2021 in terms of what their space needs are.

And kind of when you work backwards from having to make a decision in later 2021, you land where we are now on the calendar, and you need to -- if you're a tenant that has to do something this year, you've got to get going. And so I think that, that's what we're seeing across the market, I think other landlords are experiencing the same thing. And we hope that, that momentum continues and continues to build from here. So it's not -- as Nelson said in his remarks, we were seeing green shoots. We're not seeing a return to normal levels of activity and volume, but at least we're moving in a positive direction at this point. There certainly are virtual tours and plenty of people that still aren't in the office or coming into the city. But we're turning the corner on that. People are starting to shape up.

Nelson Mills -- President, Chief Executive Officer and Director

Yeah, I agree. And unique to 799, another thing, another driver there, the reason we're seeing strong activity and tours there, as Jeff said, it's a unique property. It's not going to be around forever, right? So if -- it's the opposite of commodity. So if you want that property, you can't wait around another year to make a decision, right? So I think that's -- I think of the opportunities driving accelerated interest as well.

John Kim -- BMO Capital Markets -- Analyst

On 799, it looks like the occupancy -- occupancy got pushed back a quarter to fourth quarter. I just wanted to clarify that. Is any occupancy included in your guidance for the year?

Nelson Mills -- President, Chief Executive Officer and Director

I don't think so. Jim, do we have any -- well, any GAAP earnings included? No?

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

No earnings. We're not sure, John. We might have some -- a little bit of -- might factor in the lease percentage a little bit. We've got a pretty wide range on that 90% to 95%, but we don't have any earnings assumed on that property, which brings up a good point. We're not -- I don't mean to suggest that the sky is the limit this year, but I do think there is some potential upside this year, if we can get some more leasing than we have in our plan.

Nelson Mills -- President, Chief Executive Officer and Director

As you know, to again GAAP earnings, we need to have the property completed and occupiable and the lease will have had to commence. So the chance of those two things happening, I think are relatively high. But for overall consensus, as Jim said, we haven't counted any earnings yet in the '21 guidance for that property.

John Kim -- BMO Capital Markets -- Analyst

Okay. I mean, now that you've come up with the guidance for this year that's below the street. And arguably, there's a lower focus on '21 earnings and '22 at this point. Are there any non-core asset sales that you're thinking about pursuing earlier rather than later? Whether it's 95 Columbus or 229, West 43rd or any other assets that you must like push forward?

Nelson Mills -- President, Chief Executive Officer and Director

No. So a lot of the driver and the difference between 2020 and 2021 related to property sales in 2020, as you know. So it's a great question. But we are not anticipating -- I mean, it could happen. I mean -- but we're not anticipating in our guidance or otherwise you're anticipating any property sales in non-core sales in this year.

John Kim -- BMO Capital Markets -- Analyst

Got it. Thank you.

Nelson Mills -- President, Chief Executive Officer and Director

Not on our plan and not on our interim guidance.

John Kim -- BMO Capital Markets -- Analyst

Thanks.

Nelson Mills -- President, Chief Executive Officer and Director

Thanks, John.

Operator

For our next question, we have Rick Skidmore from Goldman Sachs. Rick, your line is open.

Rick Skidmore -- Goldman Sachs -- Analyst

Thank you. Good afternoon. Hey, Nelson.

Nelson Mills -- President, Chief Executive Officer and Director

Hi, Rick.

Rick Skidmore -- Goldman Sachs -- Analyst

A question for Jim. On the straight-line writedown, of those nine tenants that you moved to cash-based accounting, is that the entirety of the tenants that you have -- that you might have concern about or that are not paying?

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

We think so, Rick. Great question. We think so. It really focused on the retail and service tenants. Those are the ones that have really been impacted. And some of those are paid. But we really did a pretty deep dive try to understand -- come up with our credit concerns, and those are the ones we came up with. It's possible there could be some others, but we don't expect that. We think we've dealt with it. And now we -- so those tenants will just recognize income as we receive their payments.

Rick Skidmore -- Goldman Sachs -- Analyst

And Jim, as you think about the guidance in 2021, does that assume that collections are relatively stable through the year or does that assume kind of a pickup in the back half with what most would say would be an economic recovery in the second half of '21?

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

Yeah. We're clearly -- we've had the very good fortune of collecting most of our rents. As you know, we've collected 98% of our rents, really on a very consistent basis throughout 2020, and that has continued in 2022 so far. And we -- for our modeling purposes, we've kind of run it through with high levels of collections. Now we have assumed some write-offs, just to be conservative. And we've got these tenants. We put on a cash basis. We haven't assumed much from them. And we haven't really assumed any significant lease termination payments. We had a number of significant ones of those last year. We might get some of those this year.

So there are some things that could happen really swing in both directions I suppose. But I think we've been overall conservative, as we've come up with these numbers for this year. And we do think that the occupancy will be lower a bit really because of the known move-outs. We don't think it's right at all. We think it's just the known move-outs and we think that's a temporary phenomenon.

So that's really how we built our budget and model and guidance for this year. We're not assuming -- as Nelson said, we've got 8% rollover and a number of those we know are leaving. And so we're sort of taking those into account. So we're not assuming that we're benefited by a robust recovery. Obviously, if it happens that's a good thing it will drive -- really drive revenues in 2022 or 2021.

Rick Skidmore -- Goldman Sachs -- Analyst

Yes. I guess my question was just on those nine retail tenants that you move to cash accounting. It sounds like you've assumed that they'll kind of stay steady state through the year as opposed to ramping up in the back half?

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

No, that's right. That's exactly right.

Rick Skidmore -- Goldman Sachs -- Analyst

Okay. And then just one follow-up just on the writedown of goodwill. I assume that that was for the Normandy acquisition. What was the driver of that writedown? Was there something that changed at Normandy aside from sort of obviously the pandemic? But I guess my assumption was that there was some revenue generated. But was there a meaningful change in the business that resulted in that significant of a writedown on that asset?

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

No. And for others who haven't picked up on this, if you look at our 10-K you'll see that we wrote off the goodwill that we've assigned to the Normandy platform when we -- earlier in the year when we had acquired and merged with Normandy. It was an acquisition of a business. So there was $63 million from an accounting standpoint of really acquisition cost and that had to be assigned to goodwill.

The way goodwill works it's an intangible asset. You have to test each year. You have to look at it every quarter. But at least once a year you have to do a valuation of whatever market segment that goodwill is -- falls under and look at the valuation. And really it is largely informed by the stock price. It's kind of an odd thing but when the stock price falls and stays down for a while which would be obviously good for us and others in 2020 you have to take a hard look at that. You do an analysis of the overall segment. It includes the Normandy platform, but really was not driven by the Normandy platform because that's a small piece.

But then if you decide that you need to take an impairment you do it for the goodwill. That's just the way the goodwill works. So it really doesn't have anything to do directly with Normandy. In fact, if you look at our supplementals for the last several quarters you'll see that the revenues from our management and fee business have been going up pretty steadily through the year. We expect them to hold up at similar levels in 2021. So we're actually pleased with it. It's actually done well relative to our underwriting. So it's really not Normandy. It's a function of our stock price more than anything else and the way the goodwill accounting works.

Nelson Mills -- President, Chief Executive Officer and Director

Yeah. And just to emphasize that Rick it -- obviously, the assets operate under the Normandy platform in the funds. I mean, obviously, they're impacted just like our portfolio is, in terms of leasing opportunities and valuations and that sort of thing. But, as Jim said, it's held up very well. Revenue stream, which a lot of the valuation was based on, held up very well. So, again, just to reiterate what Jim just said, it's not a reflection of our perception of the value of Normandy. But it's -- when the value of the company is reflected, the share price is squeezed, it had an impact on our views on goodwill. So that was all.

Rick Skidmore -- Goldman Sachs -- Analyst

Thank you.

Nelson Mills -- President, Chief Executive Officer and Director

Thank you.

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

Thanks, Rick.

Operator

For our next question, we have Michael Lewis from Truist. Your line is open.

Michael Lewis -- Truist -- Analyst

Thank you.

Nelson Mills -- President, Chief Executive Officer and Director

Hey, Michael.

Michael Lewis -- Truist -- Analyst

Hi. So you gave a lot of good leasing details. I just wanted to, at a high level, this lease percentage guidance for year-end. You ended this year at 95.6%. The guidance is 90% to 95%. Given what you already leased in 1Q, it looks like you've got a net about 8% rolling. I'm wondering about the high end and the low end of that range, especially the low end, hopefully, is conservative. You talked about some of the pieces there. How should we think about -- it seems like that range displays heightened uncertainty, which we have in this market, but I'm just wondering about, kind of, how you came to that and what gives you the low end and the high end as well?

Nelson Mills -- President, Chief Executive Officer and Director

Yeah. Generally -- Jim can talk about more detail. But generally, it's the beginning of the year and with a disruptive market and a lot of uncertainty about the pace of leasing. So I would say, it's very conservative from the standpoint, will we keep it well above 90%? We're very confident in that. How fast we can do that and whether we -- how quickly we can absorb that lease, those rolling leases is the question, right?

So I think 90% is a bit conservative. But if you did the math and you looked at expirations and it took you well until later in the year to get a lot of leasing done, you can fall down into that range. So if we do, we're not staying there. It's just a matter of trying to match up the leasing pace of new leases with the exploration pace. That's where it gets a little tricky. So I think, as the year goes on, we'll obviously tighten that up. We're very optimistic we'll be at the high end of that range, but it's a range. So we think this early in the year, given where the market is, it was appropriate thing to do.

Michael Lewis -- Truist -- Analyst

Okay. Thanks. I want to ask about the G&A in 4Q. It was a couple of million dollars lighter than you've been running at. The guidance for 2021, it shows running a couple of million dollars more a quarter than that. Was there anything one-time in 4Q 2020 or anything else to kind of draw attention to?

Nelson Mills -- President, Chief Executive Officer and Director

Well, we're going to continue to work on G&A. We'll continue to work on G&A. Again, it's a range. We know it's something that we owe to our investors to really manage the business as efficiently as possible. So we'll be focused on keeping that as low as possible. So it's a starting range. In terms of last year, our bonuses were substantially below target. Even though the team worked hard and performed very well, we certainly need to -- we need to fill the pain with our shareholders. So -- we our overall bonuses were able to target. That was a bit of a factor. And then other than that, we have worked pretty hard at looking at where we can trim cost. So again, I think the range is fair. We're going to work very hard to be at that number throughout the year.

Jim, anything to add to that?

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

No, that's exactly right, Nelson, on all fronts, really. And so the couple of million dollars you see there, Michael, it really is -- a lot of that is bonuses and I think that was appropriate. And we had in our guidance a full level of bonuses. And we've got that in our guidance for this year. Could -- I don't know if it's another tough year. It might not be at that level. But the important thing that Nelson also mentioned is that we are really taking a hard look at G&A. We're trying to reduce it as much as we can and we're going to continue to do that.

Michael Lewis -- Truist -- Analyst

Okay. And then just last one on the -- you answered the question about Normandy. I just -- so I had the same question right? And I just want to make sure there's nothing -- it had nothing to do with degradation in fee streams or fund asset impairments nothing like that. It was really just a high level company thing. And like you said to do with the stock price. Just to confirm.

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

Yeah, absolutely. That is correct Michael. And you might speak to others about goodwill impairment. It's a bit rare in real estate world because you really get a goodwill in your books when acquiring a business and not from acquiring real estate. But in the overall corporate world it does happen. And when stock price runs down the first thing you have to do is think about goodwill impairment. It's just kind of an odd thing in GAAP accounting. That's where the give is because it's an intangible asset. So it's a onetime thing that's gone. But again no reflection on the -- really the value or the operations or our view on the Normandy platform.

Michael Lewis -- Truist -- Analyst

Okay, great. Thank you.

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

Thanks, Michael.

Nelson Mills -- President, Chief Executive Officer and Director

Thanks, Michael.

Operator

There are no further questions at this time. Presenters, please continue.

Nelson Mills -- President, Chief Executive Officer and Director

Okay. Well thank you all very much for your time and attention today. It's always an honor. Pleasure to speak with you. Thank you for the great questions. We are available to any of you who would like to contact us and get more information. We're going to be working hard and staying focused and trying to beat these expectations that we've laid out for the year. So again thank you again and we look forward to talking to you soon.

Operator

[Operator Closing Remarks]

Duration: 67 minutes

Call participants:

Matt Stover -- Director of Investor Relations

Nelson Mills -- President, Chief Executive Officer and Director

Jeff Gronning -- Executive Vice President and Chief Investment Officer

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

Vikram Malhotra -- Morgan Stanley -- Analyst

Sheila McGrath -- Evercore ISI -- Analyst

John Kim -- BMO Capital Markets -- Analyst

Rick Skidmore -- Goldman Sachs -- Analyst

Michael Lewis -- Truist -- Analyst

More CXP analysis

All earnings call transcripts