Feb 21, 2013
Executives
Art Harmon – Senior Director, IR Bruce Duncan – President and CEO Scott Musil – CFO Bob Walter – SVP, Capital Markets and Asset Management Jojo Yap – Chief Investment Officer Chris Schneider – SVP, Operations and Chief Information Officer Peter Schultz – EVP Eastern Division
Analysts
Craig Mailman – KeyBanc Capital Markets John Guinee – Stifel Nicolaus Dave Rodgers – Robert W. Baird John Stewart – Green Street Advisors Michael Muller – JP Morgan Michael Salinsky – RBC Capital Markets Milton Dresner – Milton Dresner Investments Stewart (Henley) – Shareholder Sam Shami – First Industrial
Operator
Operator
We are continuing to execute on our strategy to drive shareholder value through leasing. With our sites set squarely on our 92% occupancy goal for year-end 2013, as well as through our efforts to grow and enhance our portfolio.
As you saw in our press release, on the strength of our fourth quarter performance, as well as our outlook for 2013, we recommenced our common dividend. I will discuss the dividend in more detail shortly, but first, let me review our operating results.
In the fourth quarter, we gained 140 basis points of occupancy, with all the gain coming from leasing, and no impact from sales, to finish the year at 89.9%. Contributions came from many markets, and across a range of tenants.
For the year, we grew occupancy 200 basis points, with approximately 50 basis points due to the impact of sales. These year-over-year occupancy gains were reflexed in our same-store growth of 7% in the fourth quarter, excluding termination fees.
Including termination fees, same-store was up by more than 12%, as we successfully recovered back rent from a prior tenant. In the third quarter, recall that we launched three new developments, comprised of 1.5 million square feet, with a total expected investment of $108 million.
Including the $7.7 million lease, 156,000 square foot expansion in Minneapolis, that we brought online in the fourth quarter, our total starts for the year were $115 million. We are pleased to report that we successfully leased First Chino Logistics Center, our 300,000 square foot development in Southern California, prior to completion.
We signed a long-term lease with a specialty food retailer and supplier, who will take occupancy by the middle of the second quarter. Approximately one year ahead of Pro Forma, and at terms that were also ahead of Pro Forma.
Remember that last year we were successful in leasing First Inland Logistics Center, our 692,000 square foot distribution center in the Inland Empire. So this new lease further confirms the level of demand in Southern California, and the quality of the buildings we are adding to our portfolio.
Updating you on our other developments, our 489,000 square foot First Bandini Logistics Center in LA County, and our 708,000 square foot First Logistic Center at I83 in Central Pennsylvania, are progressing according to plan. With respect to dispositions of non-strategic assets, fourth quarter sales were $5.2 million, bringing our total for the year to 85.6 million, comprised of 4.2 million square feet and a land parcel.
The weighted average in place cap rate for 2012 sales was 9%, excluding land, and 8.2% if you include the land parcel. Sales for the year exceeded our written down book value by 29%.
We met our sales target for the year, both quantitatively in terms of value, and qualitatively, as we were true to our mission of selling properties that do not fit with our long-term portfolio objectives. For 2013, we are again targeting 75 to $100 million of sales, as we continue to execute on our asset management strategy.
As in 2012, we expect disposition activity to be weighted towards the second half of the year. On the capital side, we continue to strengthen our balance sheet during the year.
Our year-end debt to EBITDA ratio was 6.8 times, and 7.9 times if you include our prefers. During the fourth quarter, we redeemed $50 million of our 7.25% Series J preferred stock.
This was a good execution for our shareholders, as it lowered our capital cost, and efficiently redeployed some our excess sales proceeds. Scott will get into the details of our guidance, but I would like to talk about what we see for 2013, from a big picture standpoint.
In the leasing market, our team did a great job of capturing demand, particularly in December. We continue to see decent leasing activity thus far in 2013, but as always, we need to convert activity into signed leases.
Markets remain competitive, but with the steady absorption the industry has seen, landlords are in better position than they have been, which is reflected in fewer concessions and better pricing. Rents continue to recover with several markets, including the Inland Empire, Los Angeles, Houston, Miami, and Indianapolis, showing solid rent growth.
For 2013, we expect renewals to be flat deposits. For new leasing, we will still see row downs this year on average, as we continue to work through leases, signed at the market peak.
Regarding investments, we are working hard to identify new opportunities, to use the strength of our platform and contribute to our portfolio goals. As we have previously noted, we would feel comfortable with around $200 million of speculative development in process at any one time.
We are also actively seeking acquisitions, both lease and value add opportunities that meet our quality, market and return criteria. Returning to the dividend from our press release, the board declared a common dividend of $0.850 per-share for the first quarter.
At this level, we are establishing a base from which we hope to grow the dividend, while retaining capital for cash needs, including principal amortization payments on mortgage debt, as well as new investments. Considering these factors, the board decided that establishing the initial payout ratio of 50 to 60% was appropriate.
So before I had it over to Scott, we are excited about prospects for growth in 2013 and beyond. We have built in internal growth opportunities, as we look to meet our 92% occupancy goal by year-end.
We are executing on our developments, and our team is energized to find some new opportunities for profitable growth. With that, let me turn it over to Scott.
Scott?
Scott Musil
Thanks, Bruce. First let me walk you through our results for the quarter.
Funds from operations were $0.18 per-share, compared to $0.23 per-share in 4Q 2011. Comparing 4Q 2012 to 4Q 2011, before onetime items such as losses from the early retirement of debt, the loss from the partial redemption of our Series J preferred stock, and impairment of un-depreciated real estate, funds from operations were $0.23 per-share, versus $0.23 per-share in the year ago quarter.
EPS for the quarter was a loss of $0.09 versus a loss of $0.05 in the year ago quarter. For the year, FFO per-share was $0.88 versus $0.89 for 2011.
Excluding onetime items, such as NAREIT-compliant gains, losses from the early retirement of debt, the loss from the partial redemption of preferred stock, the charge from the IRS settlement, impairment of un-depreciated real estate and restructuring cost, FFO per-share was $1.02 versus $0.88 in 2011. Moving on to the portfolio, as Bruce discussed, our occupancy for our in-service portfolio was 89.9%, up 140 basis points from 88.5% last quarter, and 200 basis points from 87.9% at year-end 2011.
In the fourth quarter, we commenced approximately 5.4 million square feet of leases. Of these, 2.3 billion square feet were new, 1.9 million were renewals, and 1.2 million were short-term.
Tenant retention by square footage was 77% for the quarter, and our average for the year was 69%. For 2013, we expect retention to be a little higher on average, helped by improving supply demand fundamentals.
For the quarter, same-store NOI on a cash basis, excluding termination fees, was positive 7%. 5.6% of this gain was driven by occupancy growth, the impact of rent bumps, lease rollovers, and less free rent.
The balance of the increase was primarily due to lower real estate taxes, resulting from tax appeals, as well as lower bad debt expense. Same-store NOI growth including termination fees was a positive 12.4% reflecting the successful collection of back rent from a tenant that vacated its space several quarters ago.
Overall, lease termination fees were 2.9 million for the quarter, which is substantially higher than what is typical for us. For the quarter, rental rates were down 6.8% cash-on-cash, and on a GAAP basis, they were up 2%.
We expect rents on new leasing in 2013 on average to continue to be negative with some volatility in that number, given the relatively small population size in a given quarter. For renewal leasing, as Bruce said, we expect rents to be flat to slightly positive.
Leasing cost were $2.67 per square foot for the quarter, higher than the third quarter as a result of more new leasing. For 2012, we averaged $2.35 per square foot.
Our G&A for the fourth quarter was $8.7 million, above our typical run-rate due to the accelerated vesting of incentive compensation related to Bruce’s new contract. For 2013, G&A will return to more typical levels, which I will walk through later when I discuss guidance.
Moving on to our capital market activities and capital position. In the fourth quarter we redeemed 2 million depositary shares of our 7.25% Series J cumulative redeemable preferred stock for $50 million.
We repurchased $13.7 million of our 7.6% notes due in 2028, and $1 million of the 7.75% notes due in 2032, and a weighted average yield of maturity of 6.3%. We also paid off $14 million of mortgage debt with the weighted average interest rate of 7.6%.
Thus far in the first quarter of 2013, we repurchased another $4 million of our 7.6% notes, due 2028, at a weighted average yield of maturity of 6.2%. As noted in our press release, we have $72 million of secured debt, with a weighted average interest rate of approximately 7% that we plan to pay off prior to maturity.
We did not use our ATM during the quarter, and have a $107 million of capacity remaining. A few additional balance sheet items.
As Bruce noted, our debt to EBITDA as of the fourth quarter, adjusted for onetime items was 6.8 times and 7.9 times, including preferred. Our weighted average maturity of our unsecured notes and secured financings is 5.7 years, with the weighted average interest rate of 6.3%.
These figures exclude our credit facility. Our credit line balance today is $123 million, and our cash position today is approximately $50 million.
Moving on to our 2013 guidance. Our FFO guidance range is $1 to $1.10 per-share.
Excluding the estimated $0.02 loss per-share from the previously discussed early payoff of the $72 million of mortgage debt, and the 2028 notes we bought in the first quarter, FFO is expected to be in the range of $1.02 to $1.12 per-share. The key assumptions are as follows, average in service occupancy, end of quarter of 90.5% to 92%, average quarterly same-store NOI on a cash basis of positive 1% to 3%.
G&A of 21.5 million to $22.5 million, full-year [inaudible] FFO is expected to be approximately $.50 million. Note that this is a lower run-rate than the prior year as we sold another asset from our venture during the fourth quarter.
Guidance includes the incremental cost to complete the three developments launched in 2012. Note that we plan to capitalize $0.02 per-share of interest related to these developments.
Guidance also reflects the impact of the lease up of First Chino in the second quarter of 2013 that Bruce highlighted. Guidance does not reflect any potential lease up of our First Bandini Logistics Center, or First Logistics Center and I80, three developments that are in process.
Recall that these are slated to be completed in the third quarter of 2014, and the fourth quarter of 2014 respectively – ’13 respectively, and the Pro Forma assumed one year for lease up post-completion. Please note that our guidance does not reflect the impact of any future debt issuances, the impact of any future debt repurchases or repayments, other than those discussed above.
Any additional property sales or investments, other than the developments discussed earlier, any future NAREIT-compliant gains or impairment charges, nor the potential issuances of equity. With that, let me turn it back over to Bruce.
Bruce Duncan
Thanks, Scott. Before we open it up to questions, let me just say that 2012 was a good year with a strong finish.
And our team is focused on building upon our accomplishments. Our lease at our First Chino Logistics Center development is a great step in that direction.
We can drive incremental cash flow through leasing, by meeting our 92% year-end occupancy goal that we set at Investor Day in November 2011. Because of our progress towards that goal, and our outlook, we brought back the common dividend.
At our guidance mid-point, we can deliver approximately 5% FFO growth, excluding one-time items. We are methodically selling our non-strategic assets, and using our platform to find new growth opportunities through development and acquisitions.
And as I have said to our team, we look for 2013 to be more of the same, with an emphasis on more. By doing so, we can continue to enhance value for our shareholders.
We will now be happy to take your questions. As a courtesy to our other callers, we ask that you limit your questions to one, plus a follow-up, in order to give other participants a chance to get their questions answered.
You are of course welcomed to get back into the queue. So now operator, may we please open it up for questions.
Operator
(Operator instructions). Your first question comes from the line of Craig Mailman with KeyBanc Capital.
Your line is now open.
Craig Mailman – KeyBanc Capital Markets
Good afternoon, guys. Scott, I just want to clarify, so the occupancy assumption and guidance assumes no impact from potential sales?
Scott Musil
That’s correct.
Craig Mailman – KeyBanc Capital Markets
Okay, and then I’m just trying to reconcile kind of the 1 to 3% same-store with you’re going to have a couple hundred basis points of occupancy lift. I know you said that, you know, renewals are going to be positive or flat to positive but you’re going to have a little bit of drag from new leasing.
I’m just trying to get a sense of how conservative you guys are being with the same store outlook versus maybe what you guys are actually underwriting on a blended basis for rent spreads?
Bruce Duncan
Craig, why don’t we do this. Why don’t we have Chris talk about 2012 and what our experience was and the breakdown.
Chris Schneider
Sure. Some things we had going on in 2012, we had a very low historical number for our bad debt in 2012.
So 2013, you know, we’re assuming more return to our historical number so that’s – bad debt is going up in the assumptions. Also, we had some significant income from some restoration fees and also some real estate tax refunds, which you know, right now we don’t expect to have at the same consumer levels in 2013.
So when you factor in those positive impacts from 2012, the overall number 2013 is going on about 300 basis points so then you get closer to our guidance, our midpoint of 2%.
Craig Mailman – KeyBanc Capital Markets
What’s kind of baked in there through for a blended rents spread?
Chris Schneider
Overall, the rent spread is slightly negative so we’re about, you know, dropping about 3% on the blended rent spread for new and renewal deals.
Craig Mailman – KeyBanc Capital Markets
Great. Thank you.
Chris Schneider
Again, that’s on a cash-on-cash basis.
Operator
Your next question comes from the line of John Guinee with Stifel Nicolaus. Your line is now open.
John Guinee – Stifel Nicolaus
Okay, nice job guys. I can’t remember how many questions you gave me so I’ll ask one with a few pauses.
First, of the 76 million of debt – of early repay, how much cash out the door above and beyond the repayment of the debt will you expect to incur? Second, the average dividend in the industrial, your peer group of Duke, Liberty, DCT, East Group is about 4% which would equate to around 60 or $0.65 a share, so why didn’t you kind of try to be within that peer group?
And then the third question is what do you think roughly or economic occupancy was for the fourth quarter of ’12?
Scott Musil
Okay, John, this is Scott Musil. I’ll take the first question.
On the $72 million of repayments that we’ve got baked into our guidance, we expect to incur about $2 million of a loss from retirement of debt, that’s the $0.02 per share that we reference in our remarks.
Bruce Duncan
And John, on the dividend question, again, we wanted to start out using a conservative payout ratio of 50 to 60% and to us we want to be able to retain some cash to be able to grow the business in terms of take care of some amortization as well as new investments so it gives us room to grow the dividend over time and as we grow cash flow, we hope to continue to grow the dividend.
John Guinee – Stifel Nicolaus
And your economic occupancy for 4Q ’12, any idea what that was?
Scott Musil
Yeah, John, I think what you’re asking is kind of the average occupancy if you’re looking at the average month-in occupancy it was 88.7% versus where we finished the quarter at 89.9%.
John Guinee – Stifel Nicolaus
So 88 or 89% of tenant in place paying rent?
Scott Musil
Correct, yes.
John Guinee – Stifel Nicolaus
Okay, thank you. Great.
Operator
Your next question comes from the line of Dave Rodgers with Robert W. Baird.
Your line is open.
Dave Rodgers – Robert W. Baird
Hey, Bruce. I know the asset sale program has really been opportunistic and it sounds like it will continue to be that way.
How close are you to the end of what I would call the cleanup phase in ready to enter the capital recycling phase in a more maybe aggressive way? And any thoughts about how much is left in that program?
Bruce Duncan
Yes, if you look at , at sort of in our minds our non-strategic pool, we have about $180 million of assets that we want to dispose of so I would anticipate that would be done over the next couple of years.
Dave Rodgers – Robert W. Baird
Okay, and I guess as a follow up to that, are you seeing any better pricing on what you’re going to market with now? Is that part of the market improving at all or you’re not really seeing that?
Bruce Duncan
I would say, you know, we have to report on that as we go through the year but in general, there’s more dollars looking at property, so we’re encouraged by that, but again, it’s a one-off type of thing so we’ll report into each quarter on how we’re doing in terms of going after our targets.
Operator
Your next question comes from the line of John Stewart with Green Street Advisors. Your line is now open.
John Stewart – Green Street Advisors
Thank you. Look, I think what you guys have done on the balance sheet front make a lot of sense and continues to do so.
But my question is, you know, I’m a little curious that there’s no equity issuance baked into the guidance and Bruce, I’d love to get your thoughts on why it might not make sense to de-lever by issuing some equity?
Bruce Duncan
John, we never put guidance – we never put guidance that we’re going to issue equity, but what we saw over time is that [inaudible] we do it as an arrow in our quiver. If you look at what we’ve been able to do in terms of bringing debt to EBITDA down to 6.8 times and debt [inaudible], we’re making good progress on that.
We want to continue to de-lever over time. The best way we can do that is leasing up the portfolio but again, we have issued equity in the past and but we were judicious and mindful dilution.
Dave Rodgers – Robert W. Baird
Okay. Bruce, I’m curious in terms of the – really the next act, both I guess specifically for First Industrial and then too, if you could comment on your plans beyond the end of your employment agreement in the next year.
Bruce Duncan
I serve at the pleasure of the Board and you know, from my standpoint, we’ve had a – we’re in a good position here at First Industrial. We’re able to be an offensive in terms of our new developments.
We’re very excited about those. You know, we’re having good success with that.
We’ve got to continue to have good success. We’re going to continue to develop in our key target markets.
We want to continue to grow this business. We do think there’s an opportunity to continue to de-lever because we have some high cost debt and we’ve been successful over the last two years of being able to take that out at fairly good attractive pricing.
So again, it’s more the same, but I think in terms of the – where we’re going, the world’s getting better, we’ve got a good platform and we’re utilizing that platform. So I think it’s a pretty good time.
Dave Rodgers – Robert W. Baird
How much longer do you expect to be doing this?
Bruce Duncan
You know what, I would say I signed up for two additional years as an option to three more years after that, so we’ll just see how it goes and see how the Board feels about my performance.
Dave Rodgers – Robert W. Baird
I like your chances. Thank you.
Operator
Your next question comes from the line of Michael Muller with JP Morgan. You line is now open.
Michael Muller – JP Morgan
Yeah, hi. Two quick ones.
First of all, Scott, on the debt – the mortgage maturities that you’re going to prepay, what’s the timing of those in 2013?
Scott Musil
They’re spread out each quarter, like there’s some in the first, second, third and fourth quarter. There’s a little bit more in the fourth quarter than the previous three.
Michael Muller – JP Morgan
Got it. Okay.
And I just want to confirm, clarify something. When you were talking about the same store goal, or the goal of 92% occupancy by year end, you did say that that was more of a same store type metric so we should be comparing that to the 89.9 at year end so we’re thinking 89.9 going to 90 to give us the target, excluding any disposition or acquisition impact?
Scott Musil
Yes.
Michael Muller – JP Morgan
Okay. Thanks.
Operator
(Operator Instructions). Your next question comes from the line of Michael Salinsky with RBC Capital Markets.
Your line is now open.
Michael Salinsky – RBC Capital Markets
Thank you. This is a follow up to Dave’s question.
The 180 million of non-core you talked about, how much are you actively marketing at this point? And then, you know, kind of as a second question, trying to fit with the one question rule, as you think about your land bank, how much of that – should we look for any land sales this year and how – if you’re marketing it to market today, how much appreciation do you think you’ve seen on that?
Bob Walter
This is Bob. Mike, on the marketing question, you know, we’re constantly looking at various assets and putting them in the market, taking them out of the market.
I would also remind you that a lot of our sales are very user focused and those tend to be not really marketed exercises per se. So I would say it’s hard to say at any given time how much is technically in the market or not.
Bruce Duncan
The best thing we can do is when we close, we’ll let you know how we did with that. The second question was…
Michael Salinsky – RBC Capital Markets
The land bank at this point.
Bruce Duncan
The land market, I would not anticipate big sales of the land. We like our land position, you know there could be some one-off sales of not serious dollars, the dollar amount, but other – the $50 million we have, you know, we like what we have.
We think it’s good value. We don’t really look at it and sort of say how much could we mark it up for because we’re anticipating utilizing that in terms of new developments.
Michael Salinsky – RBC Capital Markets
Thank you.
Operator
Your next question comes from the line of Milton Dresner with Milton Dresner Investments. Your line is now open.
Milton Dresner – Milton Dresner Investments
Yes, Milton Dresner. When do you think you’re going to start issuing dividends on the up-reach shares?
Scott Musil
Milton, this is Scott Musil. It will be at the same timing that we’re going to do it on the common shares.
So for the first quarter, the payment date is going to be April 15th.
Milton Dresner – Milton Dresner Investments
Thank you.
Operator
Your next question comes from the line of Stewart (Henley), a shareholder. Your line is now open.
Stewart (Henley) – Shareholder
Thank you. This question would probably be for Scott if you’re able to answer it.
Could you provide an estimate of the 2013 tax care characteristics on the dividend assuming it remained at this level for the year and based on your guidance?
Scott Musil
Stewart, we don’t give a specific amount of guidance on our taxable income but I’ll give you some general parameters when we look at our taxable income compared to our common dividends and our preferred dividends there’s a fair amount of cushion between the two.
Stewart (Henley) – Shareholder
Thank you.
Operator
Your next question comes from the line of Dave Rodgers with Robert W. Baird.
Your line is now open.
Dave Rodgers – Robert W. Baird
Hey guys. I just wanted to follow up on the smaller spaces in the portfolio.
I think we’ve asked it before, but just to get an update on the trend, how is activity in the smaller spaces, say under 50,000 square feet? Are you beginning to see more traction there or are we seeing the volume still at the high end of the spectrum?
And I guess as a follow up to that, your spread that you talked about, are you seeing a big divergence in the spreads or lease rates for those spaces relative to the larger spaces?
Bruce Duncan
Dave, let me ask Peter Schultz to comment on that.
Peter Schultz
Sure, Dave. We’re seeing pretty good activity in the smaller spaces, both new deals as well as expansions from existing spaces.
So we continue to be happy with that. And certainly, as there’s a pickup in the recovery in the housing market, that may offer additional demand in those spaces.
Dave Rodgers – Robert W. Baird
Okay, thank you.
Operator
(Operator Instructions). Your next question comes from the line of John Stewart, Green Street Advisors.
Your line is now open.
John Stewart – Green Street Advisors
Thank you. I was hoping you could give us just a quick update or status report on where we stand on the top ten vacancies that you outlined for us at the investor day?
Bruce Duncan
Sure. Bob?
Bob Walter
Yeah, John, the – at the end of the fourth quarter, that’s at about 130 basis points and as you’ll recall at the investor day it was 325 basis points.
John Stewart – Green Street Advisors
Any specific transactions or progress to report?
Bob Walter
You know, I think as Peter said, and I would echo his comments, we’re seeing, you know, good activity across all these – all of our top ten vacancies and continue to market them very actively.
John Stewart – Green Street Advisors
Okay. And then just on the agreement with the IRS, I just noted that it’s still – the language characterizes it as preliminary.
I just wanted to get a status report there.
Scott Musil
Sure, John, this is Scott Musil. Just to refresh everyone’s memory, we made a written agreement with the Regional Office of the IRS on our audit settlement in the third quarter of last year.
The last hurdle was for the Joint Committee of Taxation located in Washington D. C.
to review our case. We’ve been informed by the IRS that our file has been sent to the Joint Committee.
What our IRS agent has told us, the one that’s reviewing us said that within the next couple of months that review should be taken care of. So hopefully we will know some news in the next couple of months about the finally of that matter.
John Stewart – Green Street Advisors
All right, thank you.
Operator
Your next question comes from the line of John Guinee with Stifel Nicolaus. Your line is now open.
John Guinee – Stifel Nicolaus
Hi. Just a curiosity question I think for probably Scott.
If I look at page 3, you’ve got construction in process of about 26 million and then if you look at page 35, which is your NAV page, you’ve got construction in process plus associated land of 72 million. Is the difference between the 72 and 26 all the land?
Scott Musil
That’s correct. That’s the fair share of the difference.
So if you look at the title on page 35, it’s CIP and Associated Land so that includes the land for those developments. The CIP line item on page 3, which is the balance sheet is all the costs other than the land.
So that’s correct.
John Guinee – Stifel Nicolaus
Got you. Okay.
Thank you.
Operator
Your next question comes from the line of Craig Mailman with KeyBanc Capital. Your line is now open.
Craig Mailman – KeyBanc Capital Markets
Bruce, could you maybe just give a little bit of color around the lease in Chino? I know you said it came in above pro forma on rents, just maybe give us a sense of length of the lease and kind of expected yield?
Bruce Duncan
Craig, let me have Jojo take care of that because he did all the hard work and got it done.
Jojo Yap
It’s a specialty foods resale supply company, primary service area would be the West. In terms of yields and rents, last quarter we mentioned to you that we were going to project a 7.1% yield.
I’m happy to report that we would exceed that yield on a Gap basis because we’ve outperformed the rent expectations. Now, I would not be able to give you the actual rate but I will mention to you that on average these sizes of buildings in Chino, California would rent in the 450 net range.
And that would be roughly, for California, you would think about that on a monthly basis as roughly $0.38 a square foot net.
Craig Mailman – KeyBanc Capital Markets
What does that translate into on a cash basis and how long is the lease, the initial term?
Jojo Yap
The lease is long-term and in terms of cash basis terms of yield, is that your question?
Craig Mailman – KeyBanc Capital Markets
Yes.
Jojo Yap
Yes, cash basis to yield, it would be exceeding the 7.1% pro forma yield on a GAAP basis cash that we mentioned to you last quarter.
Craig Mailman – KeyBanc Capital Markets
Okay. And then just for Bruce, I know you’re comfortable maybe ramping the development pipeline to 200 million.
You guys are at 108 now. Where – what projects could you see taking off in the near term and do you think you need to go out and buy any pieces of land or are you kind of good with what you have right now?
Bruce Duncan
First off, we’re less than 108 because the 108 included Chino and now that that’s leased you can take another 20 million off that. So we’re at about 88 if you will.
So we’ve got about $120 million [inaudible] new development. In terms of land, we do, again, we’re working on entitlements in a couple sites in Pennsylvania, we’re close to getting those finalized.
I don’t know if we’ll go spec on those. One we wouldn’t go spec on, it would be a build-to-suit.
We’re having – we’ve got conversations going on with some other places that we have. Again, whether it’s our land or whether we’ll buy like we did with Chino and [Inaudible] , we went out and bought the land and started a development.
So we’ll look at that as well. Again, we’re going to focus on our target markets and we’re excited about the product that we’re being able to deliver, the quality, the locations and being able to lease them up.
You know, again, we’ll continue to execute and get these projects built on time, on budget and get them leased up. So far we’re having success and I continue to expect we will have success.
We’ve got to prove it every day.
Craig Mailman – KeyBanc Capital Markets
Great. Thanks, guys.
Operator
(Operator Instructions). Your next question comes from the line of Sam Shami with First Industrial.
Your line if now open.
Sam Shami – First Industrial
Yeah, hi. I have two questions.
One is on the sales of your property, do you find that you’re selling to users that are occupying the buildings or to the out market because we find that everybody that we’ve been selling to in our market here has been buying to users of people that occupy the building and have their own lines of credit for financing.
Jojo Yap
We – this is Jojo. We sell properties to users and investors and just to give you a sense, in 2012 overall 2/3rds sold to users and going forward, you know, we’re about, like Bruce had mentioned, we’re about maximizing value when we look at our strategic properties to sell.
What we’re trying to do is that we’re trying to make sure that we get the best value. So if we feel that it’s a user type buyer that will give us the maximized value, that’s where – that’s what we’re targeting.
And if we continue to lease the space there too, we would target investors because as we all know, investors pay the maximum value for lease product.
Operator
There are no further questions at this time. I’ll turn the call back over to Mr.
Duncan.
Bruce Duncan
Great. Well, we appreciate your interest.
If you have any questions, please follow up with Scott, Art or myself and we look forward to seeing some of you down at Fun in the Sun down at the Citibank Conference in a couple of weeks. Thank you.