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Federal Realty Investment Trust (NYSE:FRT)Q4 2018 Earnings Conference CallFeb. 14, 2019, 10:00 a.m. ET
Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:
Operator
Good day, ladies and gentlemen and welcome to the Fourth Quarter 2018 Federal Realty Investment Trust Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.
I would now like to introduce your host for today's conference Ms. Leah Brady. Ma'am you may begin.
Leah Brady -- Investor Relations Manager
Thank you. Good morning. Thank you for joining us today for Federal Realty's Fourth Quarter 2018 Earnings Conference Call. Joining me on the call are Don Wood, Dan G, Jeff Berkes, Wendy Seher, Dawn Becker and Melissa Solis. They will be available to take your questions at the conclusion of our prepared remarks.
A reminder that certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results.
Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements, and we can give no assurance that these expectations can be attained. The earnings release and supplemental reporting package that we issued yesterday, our annual report filed on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and results of operations. These documents are available on our website.
Lastly, we'll be hosting an Investor Day on May 9th, at Assembly Row in Boston. You should have received the save the date. If not, please let me know; keep your eyes out for an invitation with additional details and a registration link in the next few weeks. We look forward to seeing you all there.
Given the number of participants on the call, we kindly ask that you limit your questions to one or two per person during the Q&A portion of our call. If you have any additional questions, please feel free to jump back in queue.
And with that, I will turn the call over to Don Wood to begin our discussion of our fourth quarter results. Don?
Donald C. Wood -- President and Chief Executive Officer
Thanks, Leah. And good morning everyone. We finished out 2018 particularly strong with reported FFO per share in the fourth quarter of $1.57 better than we had expected, resulting in a full year 2018 result of $6.23 a share, 6.8% better than last year for the quarter, 5.4% better for the year. We just have to point out right upfront.
This is the ninth year in a row that we have reported FFO increases over the prior year, the only shopping centers REIT to do so, and the 15th year of the past 16 that we've done so. We also expect to grow in 2019. Please let that sink in, in light of today's environment.(ph)Allow went right this quarter and subsequently through today that both benefited the fourth quarter operating results and more importantly cash flow in the future.
Everything from record leasing activity in the quarter to stabilized residential occupancy in our big development, the powerful office pre-leasing at both Assembly Row and CocoWalk. All that, that is contributing to a business plan that more and more seems right for today's demanding and changing consumer. So let me get to some specifics; revenues grew 5.1% quarter-over-quarter and 6.8% year-over-year, earnings growth at comparable properties was 2% for the quarter, 3.1% for the year. The comparable portfolio remains 95% leased and 94% occupied and operating expenses including G&A but not including real estate taxes grew at less than 1% for the quarter and less than 3% for the year.
That's a pretty complete formula for largely organic growth. In terms of leasing, we did 107 comparable deals for 574,000 square feet at an average rent of $32.16 a foot, 15% above the $27.96 that the previous tenant was paying in the last year of their lease. We've never done deals for that much square footage in a quarter before. A record by nearly 10%. For the year, we did 374 comparable deals and 402 total deals for almost 2 million square feet. Again, an all-time annual record for us at 12% more rent.
So despite dislocation in the retail real estate business, there is plenty of strong retail leasing going on in the dominant quality properties that we own. A few more words on leasing, because I don't want to portray it is all rosy. The big difference we see in today's results compared with a few years back is the increased volatility, when you look at a large sample size of leases. Big rent bumps at redeveloped and modernized retail destination are strong or even stronger than they've ever been.
But there is also a number of roll downs on anchor or junior anchor boxes, where there are legitimately acceptable alternatives in the market. Now, while that basic supply and demand dynamic have certainly have been around forever, it feels more pronounced today. So that the spread between good deals and not so good deals seems to me to be wider. We'll talk about for quite some time now the importance of a well diversified income stream to sustainable growing cash flow and I couldn't be more proud of the progress we've made in this regard.
Our core shopping center portfolio is second to none and we're looking at harder than ever for densification opportunities in terms of broader real estate uses, retail resi and office. Following the successes we've had or having at places like The Point in El Segundo, Tower Shops in Davie, Florida, Congressional Plaza in Rockville, and many more, you know the list.
We broke ground this quarter on our initial development phase at (inaudible) with shopping center, which includes 87 luxury apartments and expanded planning for the development of the balance of the east end of the site. In the next few months, we're hopeful we'll get investment committee approval to move forward with the redevelopment of the entire western portion of Graham Park Plaza, our longtime owned 19 acres shopping center that sits inside the beltway on Route 50 in Fairfax County, Virginia. That plan includes the addition of about 200 apartments and place making incorporated into a reinvigorated retail shopping destination. And we're getting closer in Darien, Connecticut with negotiation and feasibility of residential over retail mixed use community right at the train station in this New York City suburb.
But for a building permit, we now have all local and state entitlements to develop 75,000 square feet of new retail space and 122 rental apartments. Diversify and intensify, wherever feasible. The big development news over the past few months involved Assembly Row, Pike & Rose & CocoWalk. After achieving stabilization in 2018 of the big residential component of our second phase of Assembly Row at higher rents and at a quicker pace than we had expected, we were anxious to capitalize on that success with the start of our next phase.
In addition, the maturation of Assembly as a first-class office location, solidified by Partners HealthCare and the active T-Stop emboldened us to add more office product there too. So we're under way, we're driving piles, two high-rise buildings, one directly at the foot of the T-Stop with 500 rental apartments above ground floor retail and the second, a 300,000 square foot Class A office building, half of which is pre-leased to German shoe and apparel maker Puma for their North American headquarters.
I hope you saw that separate announcement on Puma several weeks back. Together, a $475 million Phase 3 expansion at one of the country's most successful mixed-use development that we're conservatively underwriting at a combined 6% yield with full land and infrastructure allocation, and near 7% on an incremental cash basis. With the commitment of West Elm to take the final 12,000 square feet, adjacent to pinstripes at Pike & Rose, our retail space has all been leased at least once. As West Elm and the remaining tenants open throughout 2019 and the residential units remained 95% occupied, the first two phases of Pike & Rose will be fully stabilized.
Construction on the 212,000 square foot spec office building and the 600 parking, less space parking garage in Phase 3 is now fully under construction for tenant occupancy in 2021. At CocoWalk in Miami, we made very strong progress on both construction and leasing on this 256,000 square foot, mixed-use redevelopment over the past several months with the signing of the 43,000 square foot office lease executed with Regus for their spaces concept at the project, along with an additional 21,000 square feet of new deals, both restaurants and retailers, which when combined with existing tenants, gets us to well more than 50% pre-leased on this important redevelopment.
The office demand here, in particular, is validating our thesis of consumers wanting to be in a monetized environments close to home. This property is going to be very special when it is completed. No significant developments at Sunset Place over the last few months as we continue to work toward entitlements that would allow greater density, tenants will continue to leave the property as it fits in existing condition. And so Sunset will be a significant year-over-year earnings drag in 2019. West Coast construction continues on schedule and on budget as we prepare to deliver 700 Santana Row to Splunk later this year.
Next steps, should be the first of two 350,000 square foot office buildings at Santana West. The 12 acre site that we control across Winchester Boulevard from Santana Row. We expect the investment committee consideration of that project in a couple of months, with construction start later this year if we can get comfortable with the numbers. Stay tuned. Also, Jordan Downs, 113,000 square foot grocery anchored development in Los Angeles with joint venture partner Primestor is well under construction with its full anchor program on their lease. 30,000 square feet of signed leases in the fourth quarter alone with Nike and Blink Fitness, joining grocer Smart & Final and value retailer Ross to round out the offerings, resulting in more than 75% of the GLA, leased at this point. Attention now turns to small shop space.
And finally, a quick shout out to Wendy Seher, Jan Sweetnam and the other 11 Federal Realty executives that were promoted last week, coming out of our Board meeting, including investment -- investor favored James Milam. There was a separate press release that lays out the details. There's very little about running this Company that is more satisfying to me then being able to develop and grow human capital from within. It's not always possible but we strive to be able to do so. To me, it's indicative of the depth of our team and pays off in spades, in terms of the continuity of our business plan and our ability to not miss a beat. And yes, as Dan G will note, G&A will go up a bunch next year. And that's about it for my prepared remarks for the quarter and for the full year of 2018, was a really good one.
Let me now turn it over to Dan for some additional color and then open the lines up to your questions.
Dan Guglielmone -- Executive Vice President, Chief Financial Officer and Treasurer
Thank you Don and Leah. Hello, everyone. We are really pleased with our results for fourth quarter and the full year 2018, with FFO per share growth of 6.8% and 5.4%, respectively versus 4Q and full year 2017. We beat consensus for both the quarter and for the year by a penny. The numbers in the fourth quarter were driven primarily due to lower net real estate taxes, offset by greater net impact from failing tenants that was forecast heading into the fourth quarter as well as higher demo and higher G&A. Our comparable POI metric came in at 2% for the fourth quarter as a result of these drivers. The average comparable POI growth per quarter for the year was 3.2%, a solid result in light of the challenging environment.
With respect to our former same store metrics, the quarterly average for the same-store with redev was 3.1% and same-store without redev at 2.7%. We are officially retiring these metrics having provided them over the course of 2018 during our transition to a more relevant comparable POI figure. With respect to asset sale and other activity during 2018, we raised over $200 million of proceeds in the aggregate as we closed on over 85% of the market rate condos at Assembly Row and Pike & Rose, raising roughly $130 million in proceeds, sold Chelsea Commons residential and Atlantic Plaza Shopping Center in our Boston region at a blended mid 5s cap rate, raising $42 million and closed on our 50-50 JV at the Row Hotel at Assembly, bringing in $38 million of gross proceeds.
On the acquisition side, our discipline was once again evident in 2018 as we aggressively scoured the market for opportunities but continue to find better risk-adjusted capital allocation alternatives in our own portfolio from a redevelopment and development perspective. However, we do have a pipeline of attractive acquisition targets and are optimistic, we can bring a couple of them over the finish line in 2019.
Now onto the balance sheet, 2018 was a year, where we positioned our capital structure exceptionally well to handle the next wave of value creating development and redevelopment activity for the Company. We finished the year with roughly $50 million of excess cash and nothing outstanding on our credit facility. We reduced our overall net debt level by over $100 million. We generated upwards of $90 million of recurring free cash flow after dividends and maintenance capital in 2018.
As a result, our net debt to EBITDA at year end is 5.3 times, down from 5.9 times at year end 2017. Our fixed charge coverage ratio stands at 4.3 times currently versus 3.9 at 4Q 2017. Our weighted average debt maturity remains at the top of the sector at 10 plus years and the weighted average interest rate on our debt stands at 3.88% with over 90% of it fixed. As we push forward with the next wave of development and redevelopment at federal over the coming years, development, which has been significantly de-risked through solid pre-leasing, Splunk with 100% of the office leased and 97% of the total building at Santana Row, delivery is set at the end of the year.
Puma with 55% of the office space leased and multiple tenants competing for the balance of the office space at Block 5b in Assembly Row delivery is slated for late 2021. And Regus' the IWG spaces concept having pre-leased 50% of the new office space at CocoWalk delivery is scheduled for late 2020. Our A-rated balance sheet equipped with the diversity of low cost funding sources leaves us extremely well positioned to execute our multi-faceted business plan and drive sector-leading growth through 2019 and into 2020, '21 and beyond.
Now, I will turn to 2019 FFO guidance. We are formally providing a range of $6.30 to $6.46 per share. This guidance takes into account the impact of the new lease accounting standard, which we estimate at(ph)$0.07 to $0.09 were among other items we will be expensing internal leasing and legal costs that were previously capitalized. Please note that on an apples-to-apples basis, adjusting for the new accounting standard, our FFO growth forecast for 2019 would be roughly 2.5% to 5%.
Behind this growth, are the underpinnings of a very solid 2019. Occupancy and rental rate gains in our comparable property portfolio will be meaningful. Proactive releasing activity in 2018 will drive growth in 2019 as major tenants like Anthropologie in Bethesda, 49er Fit and TJ Maxx at Westgate in San Jose, Bob's furniture at both Los Angeles and Escondido in Southern California, Target at Sam's Park & Shop in D.C. among others all contribute more fully over the year and continued stabilization our signature mixed-use projects Assembly Row, Pike & Rose and Santana Row will all drive meaningful growth to the bottom line in 2019.
These items together would drive FFO per share growth into the 6% to 8% range, if not for some discrete, but somewhat disproportionate headwinds. The leasing impacts at our non-comparable properties CocoWalk, Graham Park and Sunset Place will weigh on this year's results. Proactive redevelopment and remerchandising activity at some of our dominant regional assets in order to further consolidate their market leading positions, we'll also have an impact, assets, which include Plaza El Segundo in Los Angeles. Huntington Shopping Center on Long Island and Congressional hearing Metro D.C.
In addition, our recent initiative to establish the next generation of leaders of Federal will meaningfully increase our G&A in 2019 beyond the lease accounting changes. As a result, our guidance underscores a very constructive 2019 for Federal.
Now to the detailed assumptions behind our guidance; comparable POI growth of about 2% and total POI growth of 4%. The credit reserve, which includes bad debt expense on expected vacancy and rent relief of roughly 100 basis points. Non-comparable redevelopments, i.e. CocoWalk, Graham Park and Sunset will create about $0.06 of drag relative to 2018, as we work through the continued de-leasing impact of these assets.
With respect to G&A, we forecast roughly $10 million to $11 million per quarter. This reflects $0.07 to $0.09 impact from the new lease accounting standard taking effect this year and about $0.05 to $0.06 in higher G&A primarily relating to the promotions and the window additions, we mentioned. On the capital side, we project spending on development and redevelopment of $350 million to $400 million. As is our custom, this guidance assumes no acquisitions or dispositions and finally, we are projecting another $70 million to $90 million of free cash flow generation after dividends and maintenance capital.
As I close out my comments on guidance, I would like to highlight that federal diversified business model continues to consistently churn out sector-leading FFO growth by a wide margin. When you assess the projected apples-to-apples FFO growth for 2019, let me have you pause and think about the following statistics.
Federal consistently produces outsized bottom line FFO growth relative to our peers, not as adjusted but SEC endorsed NAREIT-defined FFO growth. Over three year, five year, 10 year and 15 year horizons, Federal's FFO growth has outperformed its Bloomberg shopping center peer average by a margin of roughly 8%, 6%, 8% and 7%, respectively. That's per annum and that's compounded.
With that, we look forward to seeing many of you in Florida in few weeks and please be on the look out for the invitation store Investor Day, which will be held on Thursday, May 9th at Assembly Row in Boston. Operator, you can open up the line for questions.
Questions and Answers:
Operator
Thank you. (Operator Instructions) Our first question comes from the line of Jeff Donnelly of Wells Fargo. Your line is now open.
Jeffrey Donnelly -- Wells Fargo -- Analyst
Good morning, guys. And Dan thanks for the color around guidance. Question is, the guidance ranges that you provided seems slightly more conservative than earlier commentary you gave in late '18, is that small delta the result of the specific change in your outlook you can talk about or is that really just kind of a non-specific, I guess as they desire to be cautious looking out at '19?
Dan Guglielmone -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah. I think it's a little bit of both. I think that when we put things out there we had placeholder with regards to the G&A and the incremental G&A outside of lease accounting and so that ended up being a little bit higher, and I think just as we work through, we -- there was preliminary guide post guidance back in November. And as we work through a budgeting process, which hadn't really yet started until mid-November and through the end of the year and wasn't finalized until January, I think look at 60 basis points, $0.04 revision on a, $6.40 basis. So it's, tweaking around the edges, it could give you -- it has a little bit more conservatism, yet.
Jeffrey Donnelly -- Wells Fargo -- Analyst
And maybe just a second part on the guidance, can you talk about what your assumptions are around cash spreads on renewals for '19 just because in 2017 they were up 9%, in 2018, they were are up four, I guess I'm wondering if there's a trend there if you guys kind of think you sort of, bottom here or maybe that's not so much a trend other than just a mix of lease maturities that you faced?
Donald C. Wood -- President and Chief Executive Officer
Can you repeat the question.
Dan Guglielmone -- Executive Vice President, Chief Financial Officer and Treasurer
I got you, Jeff. You know it is, I don't --I don't have much to add to that, it is a mix, it depends on what deals are coming up, how it kind of rolls, how it plays through. There is no doubt, there are pressure on rents and you know I tried to make that point in the prepared remarks, there at least we think more volatility you know, great deals are great not so great deals are not so great and that mix between top and bottom is more.
When it comes down to renewals, I mean if I look and just looked even at the fourth quarter, I can give you a couple of pretty interesting specific areas. As you know, CDS deal had a great property that we have in Northern Virginia. That's a big time renewal increase. At the same time, we sit there with in Ulta deal at Congressional Plaza, where they had somewhere else to go and we wound up agreeing to reduce rent that something that wouldn't have happened a few years back. So it really is a bit more volatile.
I don't know what more to tell you in terms of the notion of how those renewals will play out, but I can tell you that overall you should certainly expect to see continued growing rents from us. I just can't give you the mix as precisely as maybe you'd like it
Jeffrey Donnelly -- Wells Fargo -- Analyst
And maybe if I can just add one, sorry
Dan Guglielmone -- Executive Vice President, Chief Financial Officer and Treasurer
I think you'll see more volatility. I think you saw that this year. With regards to some of the -- the rollover, and you know, the range of 6%, one quarter 22%. Yeah. But you'll see more of that. I think going forward
Jeffrey Donnelly -- Wells Fargo -- Analyst
Just one last question maybe for you, Don. I'm just curious how you guys think about office leasing decisions. At Assembly you obviously cut the tail with Puma retail brand instead of looking outside of retailing. I'm just curious because for your retail properties, you guys have always talked about putting thought behind not just economics, but how the tenant contributed to the overall merchandising and other factors. For office. Is it strictly economics as it credit risk, is it, what it does in the daytime population. How do you guys kind of think about that?
Donald C. Wood -- President and Chief Executive Officer
Yeah, that's a great question, Jeff. It really is, there is on the weighting of merchandising versus economics, certainly on the retail side, a you now we put a lot of, there's a higher weight on the merchandising side. On the office side, it is less, it is more economics, but not completely. So at the end of the day, again when we do, when we're doing office we're only doing office at our places where we've created that environment on the street. So to the extent, the Company has a workforce that aligns better with the merchandising that we've done in the retail side on the street that is, that is clearly beneficial or they get a check up in that type of -- that type of environment. Credit is certainly the most important thing as we look at it on the office side but that merchandising component is clearly a component in -- we put there.
Jeffrey Donnelly -- Wells Fargo -- Analyst
Thanks, guys.
Operator
Thank you. Our next question comes from the line of Christy McElroy of Citi. Your line is open.
Katy McConnell -- Citi -- Analyst
Good morning. This is Katy McConnell on for Christy. So maybe you can talk generally a little bit more about the yield you are able to achieve on larger mixed-use development projects and how you're underwriting future phases as well and how you think about it in the context of ultimate value creation and what these assets can be worked upon stabilization?
Dan Guglielmone -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah, Katy. I love the deal. I'd love to take one. Look there is no question. I don't think I'm saying anything that everybody doesn't know that construction costs are clearly high and probably will go higher as we go forward and you need premium rents to do that. I can tell you the best thing that we have done in the last decade was to not stop or mixed-use development program throughout the last recession. That put us, as you know in the place of having the places themselves the street level places created during that period of 2013, '14, '15 and so the incremental mixed-use development stuff that we do at those places Pike & Rose, Assembly Row, Santana Row are risk mitigated in large measure. I very much believe that that mixed-use properties are -- at least the good ones are completely integrated in terms of those uses and have to be -- have to be viewed as integrated in terms of their cap rates, what they would be sold for, what those income streams are valued at.
And so when we have -- when we have the tenants to to jump on take it family, the next big piece for residential and office at a combined six on a -- on a fully loaded basis and closer to a seven, on a cash-on-cash basis, there is no doubt in my mind, we're creating significant value, and that's in a market where construction costs are about as high as any place that we've seen them given what's happening in and around us with the casino and other things that are, that are taking that construction workforce and employing them.
So if you just step back then and say, all right. Do you view these mixed-use properties that we're doing as sub five capital assets in total. Absolutely, we do, we absolutely look at those things as being one plus one plus one equals four in terms of office and resi and retail and accordingly to the extent, we can put our capital work 6% or better. Certainly at assets like that we think we're getting a sufficient premium to our cost of capital plus, as has been demonstrated Santana and in the Bethesda, as these things are open and yeah, they take a long time to get open. Yeah, they take a long time to mature, but they are the gifts that keeps on giving. So the growth rate of those assets we've experienced to be higher than other stuff. So the IRRs are effectively higher then other stuff. So I hope that answers. I hope that puts in context for you.
Katy McConnell -- Citi -- Analyst
That's great. Thanks for the color.
Operator
Thank you. Our next question comes from the line of Steve Sakwa of Evercore ISI. Your line is now open.
Steve Sakwa -- Evercore ISI -- Analyst
Thanks. Two questions, I guess, Don, the follow-up on that, you know as you think about places like Santana Row in the next phase and office. I mean, are you sort of raising the bar at all or are you getting a bit more cautious as we're getting later in the cycle, particularly on the office side as it relates to pre-leasing or sort of the weather room you want on rents, I realize that the apartment side is a little bit easier to sort of whether it downturn, but sort of how do you think about the office component this late in the cycle?
Donald C. Wood -- President and Chief Executive Officer
Yeah. It's a very fair question, Steve. And look, we absolutely look at this market by market, property by property as we make those decisions. And I'll give you a great example. When we look across the street at Santana Row and you look at those 13 --13 acres, we had a tenant that we could have signed for the entire 350,000 square feet of space to effectively pre-release that one of those buildings. We decided not to do it. We decided not to do it because it's been -- because of the credit of the tenant, because of the viability of the business plan. Even though the rents were strong.
So you know, it's important. I think that you. know that is we're allocating capital and we're allocating the -- or underwriting, if you will, the quality of the tenants that we're getting that while they are completely -- while they're very much de-risked because of the environment we created but not totally de-risked and so we look really close at the credit, we look really close at the diversity of the tenant base. We look very close as to the prospects of their impact on the rest of the shopping center as Jeff Donnelly asked early on.
In conjunction -- in total, we feel real strongly about Silicon Valley in terms of those, those opportunities over the next two to three or four years, you know, beyond that we'll have to see. It is not as vibrant at all in Montgomery County, Maryland and that's why we're doing one building, relatively small size, we know we want office as part of the overall mix of the, the mixed-use project. Those will probably be smaller tenants and more diversified in terms of the business. So the market there -- the marketplace will dictate it to some extent, but we have no problem saying no to a tenant that doesn't meet the underwriting standards that are necessary to make the whole thing work.
Steve Sakwa -- Evercore ISI -- Analyst
Okay. And then I guess one for Dan G, just on the guidance, I guess I understand you've got a lot of balance sheet flexibility, but is it fair to assume that you've got some equity raised in the model to -- to fund the(ph)350 to 400 on the development spend in 2019?
Dan Guglielmone -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah. Not -- not a lot. I think that we've positioned the balance sheet with call it $80 to $90 million of free cash flow after dividends and maintenance capital, we've positioned the balance sheet to be able to raise leverage neutral incremental debt of $125 million to $150 million. We have some dispositions in the market down. We'll see how well look to kind of bring those over the finish line, but also we've got capacity on our line of credit and we'll be opportunistic with regards to use of our ATM program to the extent that it's opportunistic.
Donald C. Wood -- President and Chief Executive Officer
Yeah. The other thing that I would add to that, Steve, is -- truly, look at our history, and in terms of -- in terms of how we judiciously issue equity. It's, it's, you know, we all love doing big deals and you don't love it, nobody loves it and so everything balanced. And the ATM program has been a good program in terms of matching up with development spend pretty nicely. We're at about a position as I think you know, where we don't have to do that though. And so, when you sit back and you look at all the alternatives, I think Dan said, we have some properties in the market. I think we got $125 or so million dollars worth of of dispositions that are in the market now that that hopefully get done. We expect them to get done, so that plays out. So it is all about having more arrows in the quiver and being able to pick and choose them opportunistically, carefully and in no way in a big, in any one, any one of those arrows being over too big a deal.
Steve Sakwa -- Evercore ISI -- Analyst
Okay. Thanks. That's it from me.
Operator
Thank you. Our next question comes from the line of Alexander Goldfarb of Sandler O'Neill. Your line is now open.
Alexander Goldfarb -- Sandler O'Neill -- Analyst
Hey, good morning. Just two questions, here. First, Don, just going to to the office side, you guys have obviously now done some pretty big deals with Puma and your partners South and Splunk. Are you guys thinking that maybe as you look at your pipeline going forward that maybe you want to have more office or do you feel that you guys are still leading with retail and offices, is I want to say an also rent, but office is that second component. Just trying to understand, because obviously, you've had some pretty big wins here.
Donald C. Wood -- President and Chief Executive Officer
It's a very good question, Alex. And please understand, we are a retail Company that -- if you just, the way you build out a large mixed-use project and we have three between Santana, Assembly and Pike & Rose, in particular, you have to create a place first. It's -- create that place, and we lead as we have in all three with residential over that because there is no question having a population that lives there, associated with the environment you've created is a real positive.
Now as those things mature and if you're lucky enough as we have been, to have big pieces of land, where there are incremental ways to create value, the logical next place to go is with daytime population. The thing that we're seeing in the marketplace to me that is just really frankly, amazing, is -- it's will come, almost not optional for a progressive company to have -- who hires younger people or the workforce that it needs to not be in a place with all of the amenities and so we're sitting with this advantage, if you will, of this, this many, many year headstart, if you will, creating place. And so now, you will see office that daytime population that builds in and makes such a ground out the communities and makes themselves strong.
I mean, I don't know whether Puma would be there without the partners' deal. And remember, Partners HealthCare, we're on the building. We didn't take the risk. We ground leased it. So we are a conservative company in terms of the way we view value creation at these -- at better assets, we could probably grow faster. If we did, absolutely everything ourselves and and move forward in that way. We're careful about it and we only do it ourselves in places, where we've really already established and know what -- what the environment is.
So think about our office as an integrated part of a decade or two decade long, you know, place making environment community, if you will, that that has to have all components of lifestyle including the office environment.
Alexander Goldfarb -- Sandler O'Neill -- Analyst
Okay, that's helpful. And then second question is and maybe my -- with old age, maybe I'm forgetting things, but I thought previously you guys had spoken about just with the experience of the second phases of Pike & Rose and Assembly that the next wave of projects will be sort of smaller in scale, but the capital spend for Phase III at Assembly is significantly bigger than either of the other two on a individual asset basis.
So just sort of curious how you're thinking about it as far as the stabilization period, the impact it has to earnings. I know you guys are all about growing regardless. So just want to understand how this bigger capital spend factors into that and if you expect the longer stabilization period or because it's a lot of office, maybe that's not really as much of the factor because they move in sort of, quickly?
Donald C. Wood -- President and Chief Executive Officer
Yeah. Let's, say first of all, you had nothing to worry about with your age. You're remembering well. Everything seems totally perfect. You're doing just fine, pal. So let's get that out of the way. In terms of and so incremental adjustments and adds to existing properties are generally smaller than the original first phase that we do in the first two phases that we do. We saw an opportunity at Assembly and I really hope you'll join us on May 9th for our Investor Day up there. This marketplace that marketplace is on fire. What we were able to do with that building, the residential building, which was big 477 units that time it took to fill that up surprised even us.
It was short and very different than almost every other market, it's that good. So the ability to jump on that and there were some reasons both from construction cost perspectives, which continue to go up there as well as some things that we need to get done with the -- on the residential side, in terms of, you know units that are cheaper effectively to do. On balance, it made sense to do that, right now. And jumping on that, it's a big building. It's at the base of the tea--that residential building, we have, give very strong thoughts on how well that will do.
And then when Puma was without us putting a shovel in the ground effectively have that deal done there that convinced us to move forward there. So we decided to do to have the same time. It while residential buildings not pre-leased effectively, we view it is that way given the level of success that we've had over the last 18 months. So it's a bit of an anomaly, but it's only an anomaly based on the strength of the market and the success that we've had in the first two phases.
Alexander Goldfarb -- Sandler O'Neill -- Analyst
Thank you, Don.
Operator
Thank you. Our next question comes from the line of Ki Bin Kim of SunTrust. Your line is now open.
Ki Bin Kim -- SunTrust -- Analyst
Thanks, Don. Good morning, everyone. So if I think about some of the troubled tenants out there and I am generalizing here. Obviously, you've talked about it, but we think some landlords work with these tenants to restructure their leases to keep them viable and obviously cost rationalize and so forth. But it's more a little one-off, but my question is, if I were working at the real estate department at TJ Maxx or the gems that are expanding our power time, any of the kind of expanding very strong retailers. And I see other tenants, getting a 30% discount on the rent. I would think and come to you and say, you know what we're both draw? We're bringing the tenants, and we're bringing customers into your center. There's a lot more value for us to be there, why are we not getting a discount? Now when I had my own questions and I know it's different by property and quality and all that, but do you see this as a risk and is that increasing?
Donald C. Wood -- President and Chief Executive Officer
Okay. I mean, there is no doubt. By the way if you were hired at any retailers, real estate department and you did not try to take advantage of an over supply situation in the country, you probably wouldn't be that long. So there is no question that every retailer has adopted the position of getting the best deal. That's not different than it's ever been. There is no question that in a more oversupplied environment that they play that card higher. Play -- answer around your own question. When there are no other opportunities, you can play it all out, but you don't win; on places where there is more opportunities, you do when that goes back to my volatility point from earlier on, I see a bigger spread between good deals and not so good deals from from that perspective.
I think if you, I think, I don't think there is a company out there that can say that the retail real estate industry is not in a position of change, does not have a overall oversupplied phenomenon associated with it. So you have to look at two things. In your specific real estate, what leverage do you have to a deal and at what churns? And then secondly, outside of basic shopping center leasing, where else do you have to grow? What other ways do you have to grow. And if you can't answer those two questions then you got a growth problem. We don't have that issue and that's a big deal, so the last couple of questions have been about office. Think about this for a second, we have 0.5 million square feet of signed office deals that are going to create over $23 million of NOI over the next couple of years, just there are lots of just not -- that's a lot of pizza shops and TJ deals and dry cleaner that's a pretty good down payment on future growth. And that's because of a vision of the overall importance of place that has been a 20 one year or longer view for us. So what you say is of course, it's a risk. It's a risk to the entire industry, and then you have to look at what you have to negotiate against that and I think we've done pretty well.
Ki Bin Kim -- SunTrust -- Analyst
All right. Thanks, sir.
Operator
Thank you. Our next question comes from the line of Jeff Spector of Bank of America. Your line is now open.
Justin Devery -- Bank of America Merrill Lynch -- Analyst
Hi, guys. This is Justin on for Jeff, this morning. First is congrats on a good quarter and solid year. One for Dan. We saw portfolio occupancy ticked down a little bit in the fourth quarter both sequentially, year-over-year. Can you just drill into what happened in the quarter? And then second, just from a guidance perspective, where you sit today. How should we expect occupancy to trend over the next four quarters?
Dan Guglielmone -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah, sure. Sure. I mean, look -- occupancy as we reported it, December 31st occupancy of 2017 versus December 31st, 2018, overall occupancy was pretty stable over the course of the entire year from an economic perspective and so while you saw some point in time to point in time diminution, I think that was part of it. I think in the fourth quarter, we were hit, with a little bit of some bankruptcies on a smaller level that let us down a little bit over the course of the quarter, but you know that's -- that's a bit of the color that I could -- we could kind point to. I would say that with regards to some of our small shop. I mean we, I think which trended down a little bit as well. A lot of that is driven by the de-leasing activity we've got going on at Sunset and Coco. Without those, those two properties, our small shop would be about, about 150 basis points to 160 basis points higher. So I think it's a little bit specific to kind of some of the redevelopment that we are doing within our portfolio with regards to some of those trends. But I would expect over the course of 2019 occupancy and lease rates will be fairly stable.
Justin Devery -- Bank of America Merrill Lynch -- Analyst
Okay. Great, thanks. And then Don, sorry if I missed this, but any updates on the prime store JV. I'm curious if these assets are meeting your internal expectation so far and if there's anything you've learned there from this venture that you might be able to integrate into the overall core portfolio?
Donald C. Wood -- President and Chief Executive Officer
Very, very good question and hand the short answer is yeah. I mean it's been, it's been a really good experience all the way through. Jeff's on the phone, Jeff, can you take Primestor on this?
Jeff Berkes -- Executive Vice President-Western Region President
Yeah, yeah. Yeah, the, we've been up and up and running for about 18 months now with -- with the Primestor folks and we're meeting our projections on what the, what the property produced in the way of NOI and leasing velocity within the portfolio. And if you look at some of the -- we are at a small bankruptcy out here -- G stage,we are able to back fill those spaces very quickly at better rounds. So operationally, I think everything is going well with the JV. In Jordan Downs as Don mentioned, as our first new investment with them since formation. Everything there is on track. We're 75% leased with our boxes in place and focused on leasing our small shop space, right now.
So that's on track as expected. So I think everything is going well. In terms of are we learning anything that we can apply to our greater portfolio. I don't know, Don, you might want to chime in on that. I'd say probably not, but again we haven't been in the JV that long and there's a lot of heavy lifting up front of course, when you -- when you form a relationship like that. So I would expect there'll be some nuggets as the years go on that we're able to extract but Don, what do you think?
Donald C. Wood -- President and Chief Executive Officer
Yeah, I think the word nugget is right. Remember, we did this deal with Arturo on Primestor, because they did think like us, because they have, I mean, if you go to a number of their properties as early as the one that comes to mind most and you'll see a lot of importance on place, a lot of importance on the mix of tenants and that's kind of what got us together in the first place. So we are aligned in the way we see things, helping nuggets that come out going forward that will go both ways. I'm sure, but not at this point.
Justin Devery -- Bank of America Merrill Lynch -- Analyst
Okay. Great. Thanks
Operator
Thank you. Our next question comes from the line of Vince Tibone of Green Street Advisors. Your line is now open.
Vince Tibone -- Green Street Advisors -- Analyst
Hey, good morning. I'd like to drill down a little further on the comparable property NOI growth guidance. I'm just trying to bridge the gap on how to get to the 2%. You mentioned occupancies expect to be roughly flat this year and what we announced where spreads and contractual rent bumps are. It seems like that would imply something greater than 2%, just hoping you could provide a little clarity there?
Donald C. Wood -- President and Chief Executive Officer
Sure. I think that kind of our core portfolio overall we'll see kind of decent growth in -- I'll call It along with some of the kind of the proactive releasing activity that we had in 2018 kind of, really reaping the benefits into 2019. You know, kind of getting us north of 3%. So you're right, from that perspective, but there are specific things in the portfolio that will weigh on -- on some of those numbers. One, some of the late year bankruptcies that we impacted the fourth quarter, we'll see that carry out through 2019.
So that'll be about a 50 basis point to 60 basis point drag in our forecast for the year in terms of some of those kind of below the radar impact from bankruptcy. And then also, I mentioned the redevelopments at Plaza El Segundo, Huntington, Congressional where we're doing kind of some remerchandising that will create some -- some drag as we turn tenants over and at those large assets, they can have big impacts that will create about 80 basis points to 90 basis points just on those three or four assets of drag. So that kind of brings us down to that about 2% number and so it's those two things.
Dan Guglielmone -- Executive Vice President, Chief Financial Officer and Treasurer
But they're value creative.
Donald C. Wood -- President and Chief Executive Officer
And the key point there is that long term at Plaza El Segundo, what we're doing at Huntington, Congressional great pieces of real estate, where we're doing in kind of that diminishing in kind of cash flow over 2019. As we do that long term, we are creating value and you will see higher rents and higher property operating income over the long-term there and value creating projects. So again, similar to our proactive releasing activity. This is more of the same, but just on a larger scale.
Vince Tibone -- Green Street Advisors -- Analyst
Thank you. That's really helpful color. One quick follow-up there. So just -- is the redevelopment contribution is going to be negative then, just looking. So it looks like you only have a few smaller projects that's stabilized in '18 that would contribute to comparable property NOI and a few rolling in '19 as well. So, given the 80 basis point drag is the overall contribution to next year's growth negative from redev.
Donald C. Wood -- President and Chief Executive Officer
We look at kind of redev and development kind of in the same thing. I think that you'll see some balance there. I think you'll see some small contributions from redev perspective in terms of what's on page 16 of our 8-K. I think you'll see continued contributions from Phase 2 roll up of Assembly from 2018 to 2019, as well as the (multiple speakers) So I think you will see yes, based upon that redevelopment, yeah. Now there will be drag from redevelopment during that on -- on our comparable number, yeah.
Vince Tibone -- Green Street Advisors -- Analyst
Great. Thank you. That's all I have.
Operator
Thank you. Our next question comes from the line of Nick Yulico of Scotiabank. Your line is still open.
Nicholas Yulico -- Scotiabank -- Analyst
Thanks. Dan, just hoping to get a -- maybe a few of the items, how we should think about for the AFFO adjustments there like a recurring CapEx number, how that might trend this year versus last year?
Dan Guglielmone -- Executive Vice President, Chief Financial Officer and Treasurer
I think we expect when we look at kind of the going from FFO to AFFO. It'll be pretty consistent. I think with 2018 numbers after our free cash flow, which is really AFFO less dividends, should be pretty consistent. We're still projecting as I mentioned free cash flow after dividends and maintenance capital to be pretty consistent and get a sense of that, call it $80 million plus-minus range in terms of what we expect our AFFO payout ratio to be pretty consistent with what we have in 2018.
Nicholas Yulico -- Scotiabank -- Analyst
Okay, helpful. And then Don, I just want to return to Santana Row in the future office development opportunity there. I mean, all the stats on the market out there are showing strength, new supply, competitive new supply continues to get leased and there's less of it available. So I guess, I'm just wondering, you know, do you have like does the Company have an internal time frame on sort of, go or no-go on the office there since -- and then whether we should think about the separate where you have this 320,000 office versus the million square feet across the street, whether there is like separate decision making on that or you could just launch everything at once if the market is, do you think the market is strong enough?
Donald C. Wood -- President and Chief Executive Officer
Yeah, let me, it's a great question. I mean cycles. Right. So as we sit, we look at Santana, we very much would like to make decision in the first half of 2019 as to whether we're going forward with the first 350,000 square foot building across the street from Santana, that Santana West. That's the next thing up. We haven't even delivered Splunk yet and it won't be delivered to the end of the year and hopefully this year, might even go on to next year, we'll see how that plays out. But other than Splunk, we've got it will be the go-no go on the 350, you'll see that decision soon this year because the market is as strong as it is. It definitely ways into our considerations. We know the queries we've been getting about office on that site. We know that they are strong. We know we've kind of proven it with Splunk 1, Splunk 2, AvalonBay chose it, bring their offices there with us our first office building has been a completely 100% leased with great roll-ups there. So we know, we've got an office environment that we've created there that will be successful. So to the extent that market softens as it surely will at some point over the next five or six years, we don't want to be in that position then so there is definitely a desire to get it done and get it going at least part of it in 2019.
Nicholas Yulico -- Scotiabank -- Analyst
Thanks, Don.
Operator
Thank you. Our next question comes from line of Derek Johnston of Deutsche Bank. Your line is now open.
Derek Johnston -- Deutsche Bank -- Analyst
Hi, good morning. Thank you. Are you seeing an uptick in interest or signing leases or additional leases with online native retailers and are any examples and are you seeing proof of concept regarding long-term viability there?
Donald C. Wood -- President and Chief Executive Officer
That's a great question. In terms of long-term viability too early to say, right. I can tell you that that we've had some real good meetings and are doing some pretty good deals with digitally native brands coming over whether we're talking about Casper, or Parachute Home, or Allbirds or any of those guys. Now, all that is good and it's demand and increasing demand in the type of properties that we have. That's clearly a positive. Whether those brands are will be great brands for 10 or 20 or 30 years, time will tell.
We'll have to see. It's why the diversity of the income stream is the most important thing in that decision making process. But clearly, many all would be too strong. Many of those digitally native brands who just three and four and five years ago, said I'll never have a brick and mortar place I have gone -- have reverse course that way. And yeah, and with the type of properties we own, we are natural recipient of that demand.
Derek Johnston -- Deutsche Bank -- Analyst
Okay, great. And just switching gears a bit, I know there are no dispose providers and guidance, but you guys are out there in the market. Any idea of how many assets are currently being marketed in the demand profile you're seeing in the private markets and how they're performing and basically our cap rates coming in at your expectations or what's the delta?
Dan Guglielmone -- Executive Vice President, Chief Financial Officer and Treasurer
Yeah. We're in the market with as Don mentioned two assets, we expect kind of a hope to get into that $125 million range in terms of proceeds and it's an ongoing process. I think we're. Yeah, I think that right now with regards to those processes, sales processes coming in at our expectations, we'll see whether or not we get them done, but yeah, now I think for our assets, we're seeing relative stability of demand for them and and no surprises, so far.
Derek Johnston -- Deutsche Bank -- Analyst
Thank you, guys.
Operator
Thank you. And next question comes from the line of Collin Mings of Raymond James. Your line is now open.
Collin Mings -- Raymond James -- Analyst
Thanks. Good morning, everybody. Just in the prepared remarks, the tone seem to be pretty upbeat about maybe getting some acquisition opportunities to the finish line this year. Anything else you can offer us or expand on those comments, and all this point. And maybe just generically, should we think about that those opportunities that you're pursuing, may be having a redevelopment component based on some of your prior activity, is that a fair way at least I think about that.
Donald C. Wood -- President and Chief Executive Officer
It is gone. Let me jump on that of a bit, because it's so funny when Dan and I were talking about what to do for preferred -- on prepared remarks, he wanted to talk about acquisitions because we do have some things that that are -- that are closed. The bottom line is, when we do acquisitions, we want to make sure that there is an opportunity to create value. We've never been a volume shop as far as I'm concerned, we never will be a volume shop and it's harder to buy today and assume that rents are going up, it's not 2006 anymore.
So that kind of, leads us to say what we do primarily will have some sort of a redevelopment component to it -- it's what we do best, doesn't mean, we're not looking for under market rents, of course, we're looking for, under market rents but it's harder to find that. So you'll see some acquisition activity from us this year, it will probably be relatively minor, but, you know, and mostly because our best use of capital is in the places that we've already created and we have incremental things to do at them, that is the on a risk adjusted basis.
Clearly, the best thing for us to be doing, which is why you see that development pipeline so full. So, but one of the things we never want to be a one-one trick pony. And so you know on that, on the acquisition side, you'll see the occasional acquisition it will most likely be part of some strategic plan to either add an adjacency or do something to it to be able to create redevelopment value.
Collin Mings -- Raymond James -- Analyst
All right. Really appreciate the color there, Don. And just going back to Derek's question on disposition activity. Can you guys just touch on the Atlantic positive sale in 4Q?
Donald C. Wood -- President and Chief Executive Officer
Sure, sure. We closed on a $27 million grocery anchored center and pricing was kind of in the mid 6s kind of taking that with a blended basis of our Chelsea Commons residential. We were in the mid-5s on a blended basis on those two kind of what we view as non-core at the end of the day. Just going to -- and that's the color on that. I mean I think that --.
The demos are too light there for us. And it came as part of a package, I don't know 10 years ago, maybe even more now that includes a number of assets, and that was one of the lighter -- that was one of the lighter demos. It was a good area -- it is a good area North Redding, but it is -- but they were light. And so when we looked at what we'd be able to do there in the future. We said nothing and have the ability to check shelter, which is -- which is what we did and that's why I got sold.
Collin Mings -- Raymond James -- Analyst
All right. Really appreciate. I'll turn it over. Thanks.
Operator
Thank you. And I'm showing no further questions at this time. I would now like to turn the call over to Ms. Leah Brady for closing remarks.
Leah Brady -- Investor Relations Manager
Thank you for joining us today. We look forward to seeing many of you over the next few weeks. Again, follow-up, if you did not receive the Investor Day save the date. Thank you.
Operator
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.
Duration: 62 minutes
Call participants:
Leah Brady -- Investor Relations Manager
Donald C. Wood -- President and Chief Executive Officer
Dan Guglielmone -- Executive Vice President, Chief Financial Officer and Treasurer
Jeffrey Donnelly -- Wells Fargo -- Analyst
Katy McConnell -- Citi -- Analyst
Steve Sakwa -- Evercore ISI -- Analyst
Alexander Goldfarb -- Sandler O'Neill -- Analyst
Ki Bin Kim -- SunTrust -- Analyst
Justin Devery -- Bank of America Merrill Lynch -- Analyst
Jeff Berkes -- Executive Vice President-Western Region President
Vince Tibone -- Green Street Advisors -- Analyst
Nicholas Yulico -- Scotiabank -- Analyst
Derek Johnston -- Deutsche Bank -- Analyst
Collin Mings -- Raymond James -- Analyst
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