Q1 2020 Earnings Call

At this time, all participants are listen only mode. A question and answer session will follow the formal presentation.

Pretty much require operator assistance during the conference.

Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded I would now like to turn the conference over to your host Mr. David Corak.

I suppose in corporate Finance. Please go ahead David.

Good morning, everyone and welcome to the Jernigan capital first quarter 2020, <unk> earnings Conference call. My name is David Corak Senior Vice President Corporate Finance Jay's Conference calls being recorded Friday may eight 2020 at this time all participants are in listen only mode. The floor will be open for your questions. Following management's prepared remarks.

Before we begin please remember that management's prepared remarks and answers to your questions may contain forward looking statements as defined in the private Securities Litigation Reform Act of 90, 95, and other federal security laws actual results could differ materially from those stated or implied by our forward looking statements do the risks and uncertainties associated with the company business. These forward looking statements are qualified by the cautionary stance.

It is contained in the Companys latest filings with the FCC, which we encourage you to reveal a reconciliation of GAAP to non-GAAP financial measures provided on this call is included in our earnings press release, you can find our press release, that's easier ports, an audio webcast replay of this conference call on our website at Www Dot journey in capital Dot Com.

Marketing responses on this call May also reflect our estimates today regarding the impact of the cobot 19 pandemic on our business and operations, which are uncertain I cannot be predicted with any degree of confidence. These include the duration severity and impact could be outbreak the actions taken to contain the cobot 19 pandemic mitigate its impact as requested or mandated by government authorities or otherwise voluntarily take.

And by individuals or business.

Direct or indirect economic effect would be illness, and containment measures amongst others as well as the potential negative impacts on our business. In addition to myself on the call today, we have John Good Chairman and CEO, Jonathan Perry, President and Chief Investment Officer, I'm, Kelly lateral senior Vice President and CFO I'll now turn the floor over to Mr. good job.

Thanks, David and good morning, everyone.

As a preliminary matter I'd like to say that we all hope that you are all safe and well.

Our prayers continue to go out to all the frontline workers to health care governmental business leaders.

Most of whom are having to be difficult life altering decisions, often all off and on a moment's notice with very little supporting information and we are prayers, especially go out to those who've lost loved ones and and jobs on account of a this pandemic.

Hi, 2020 years gone away, none of us expected and we have many good things to report it Jay Cat, but everything we report comps in the context up a lot of pain that people are suffering and our art empathy and sympathies go out.

First quarter was one of many significant accomplishments for Jack cap.

We accomplished a major goal with the internalization of J cap advisors, our external advisor on February 20, following that transaction insiders, including our founder collectible younger approximately 2.8 million shares and units of J cap stocks or operating partnership.

And approximately 11, which is approximately 11.2% of our combined outstanding shares in units.

We believe this level of ownership to be among the highest in real world and together with the structure of the internalization transaction. We believe we've created a very strong alignment of interests that provides incentives for us to enhance shareholder value and together with a substantially reduce.

These G.N. a run rate has positioned the company for future success.

We improved the balance sheet by using our ATM program to Opportunistically issue approximately $15.4 million of common stock at a compelling price in the first few days a year and we followed that up I upsizing, our credit facility in late March to 375 million.

Collars, we improved the pricing and covenants and the facility and finally within the last few days, we've locked a maximum interest rate of 3.1% all $200 million of our facility through its maturity with all of those measures we've been shirt adequate liquidity for the company had and attract.

The price for the foreseeable future.

Furthermore, we completed the most acquisitive quarter in the company's history, a we acquired developers interests at nine self storage properties during the first quarter or all of these facilities. We had finance start earlier in the development cycle and this is a continuation of our strong price.

Jack record of executing on our original business plan to even out right. The vast majority of the properties. We financed a sense. The ended the quarter Weve acquired the developers interest into more facilities that we previously finance, giving us a lab in total acquisitions for the year today.

Meanwhile, our portfolio stated yard predominantly urban core gen be storage facilities can has continued to mature nicely and as I've. This weekend 61 of the 71 self storage developments, we finance are completed and open for business at an average occupancy of 55.

With that.

Lastly, our wholly owned properties for the quarter exceeded revenue and anti why expectations, resulting in operating income before fair value marks that significantly exceeded our expectations.

Like everyone else in the world each person in the J cap family, it's been profoundly affected in some way by the novel Corona virus, that's created the pandemic known as Cobot 19.

This pandemic was something none of us planned for could have reasonably predicted and it is changed the world as we all know wet weather, we like it or not we all must now changed the way we look at our businesses in life in general.

I'm very pleased with the reaction to the pipe pandemic by that Jay cap team, they've been Champs and pros and our reaction is has included a combination of both defensive maneuvers and the pursuit of opportunities in other words, we've been playing a lot of defense, but weve.

Also been playing some off that.

On the defensive bright.

We kept our entire team healthy throughout the pandemic today by by encouraging teammates to work from home before most businesses did so I think we I gave that directive owner about March the 16th and then on March 20, Yeah, we officially.

Closed our corporate office and it had everyone work from home to promote social distancing and keep everyone well technologically we were already equipped to do this in the transition was seamless and has worked amazingly well.

We diligently reviewed all of our corporate GSK, and we've reduced or deferred nonessential expenditures, including all travel, but we've retained all of our employees and everybody's been retained at current pay levels.

We increased an extended the term of our credit facility with reduced spreads and relaxed covenants and then we fixed the rate on 200 million. It at a maximum of 3.1% for nearly three years as I've already mentioned.

We increased the frequency and thoroughness of dialog with our third party managers, so that we could carefully monitoring interactively understand operations and overall performance effectively in real time.

We quickly got our arms around the potential long term affected the pandemic on our development property investments. Yeah does does investments that are open and operating but we don't wholly yen. We we re underwrite those investments based on the most current information that we had and we made rational a job.

So much to the fair values of such investment and then finally, we re underwrite all the projects for that we had in the queue for which construction had not yet but god. We determined that five of those projects, we're no longer economically feasible and we agreed with our developer partners to forego those projects.

On the offensive Friday, we intend to continue to be opportunistic notwithstanding the market disruption and uncertainty.

This off assets could and has entailed a accelerating the by out of some of our developer partners.

Stepping up the efforts to form a joint venture to acquire properties.

We believe will be in what we believe will be a robust acquisition cycle, that's around the corner and finally by leveraging Jay caps best of class portfolio to partner with other industry players in ways that enhance shareholder value.

While we believe we're doing all the right things to address the dramatic effect of the pandemic on our lives in our business.

We in our managers have lost some level of ability to control operating results going forward, because those fundamentals, particularly a lot of our demand drivers have been common dared by the virus and by the governmental and economic response to the virus, we all expect that the economic downturn, which.

In the short time since it began has at times worked looked worse than any with which most of us. It dealt in our lifetimes will somewhat negatively impact operating results over the balance of this year and perhaps beyond the extent of which is the is difficult to predict when so many people remain in there.

Homes, many businesses remain closed in unemployment continues declines.

While the hay, while the pandemic is unfortunate enough. The fact that the economic fall out as hit during a period of elevated supply in some markets has sharpened the blow.

As reflected in our fair value marks this quarter, we built in assumptions for longer lease up periods and lower short term rental rates due to the pandemic occurring during a period of elevated supply and also potentially interrupting the 2020 rental season, our fair value Mark shouldn't no risk.

Back be viewed as a loss of confidence in our portfolio or in the longer term performance of self storage properties. We enter 2020 with a best in class portfolio of recently delivered gen be self storage assets in some of the best markets in the country, we remain confident in our underlying business.

This strategy and in the management capabilities and brands of our third party managers with that I'll turn things over to Jonathan to review property operating results in transactional activity.

Jonathan.

Thanks, John and Hello, everyone I'll start by reviewing the first quarters proper property operating results and then give some color on what we are seeing in the second quarter to date.

Let me start by saying that all of our stores have remained open throughout this pandemic and are actively fulfilling the needs of both new and existing customers.

In the first quarter, our wholly owned portfolio continued to lease up well.

[noise], resulting in an hour exceeding the top end of our guidance range on revenue and also on net operating income.

The beat on net operating income was about 30%.

Moving on velocity was strong as we picked up 388 basis points of physical occupancy on properties in our own portfolio at quarter end. Excluding one property that was placed in service in the middle of the quarter. This was driven partially by earlier than expected College, maybe then but overall demand was healthy before the pandemic pants.

Hit.

Rate increases to existing customers continued to be strong in the first quarter, averaging 12.8%. However, all existing customer rate increases were paused beginning mid March 2020.

Moving into the second quarter, we're happy to report that we picked up 160 basis points of occupancy during the month of April with move ins running about 60% of budget and move outs about 70% of plan.

While it's still early rental activity appears to have trough. The second week of April and we've seen a steady increase in rental activity since that time.

That trend has continued into may as we gained another 80 basis points of occupancy and about it weeks' time.

For the first week of May both rentals and Vacates are running 75% of planned for the owned assets.

Each of our properties is managed Bob one of the public recently followed their respective lead on collection procedures for April our collections were slightly better than those reported by the other operators.

As you have heard from others auctions have not been held in most locations for about two months. The collection process has began in earnest.

States have begun to reopen so we would expect any lingering a or issues to be cleaned up over the course of the next 30 to 45 days.

During that same time period, we would also expect to reinstitute rate increases to existing tenants.

While it's still early given an unexpected return, giving and expected return to a more normalized operating environment, coupled with the daily increase and mobility in the states in which were located we're cautiously optimistic that we can still capture a significant portion of the 2020 rental season.

That I can turn it over to Kelly.

Thank you, Jonathan and a happy afternoon, everyone.

Last night, we reported a $2.53 loss per share for the first quarter.

This loss includes 46 cents related to the change in fair value of our development investment and a dollar an 84 cents related to internalization expenses goodwill impairment and the final payment of music fees CJ cap advisors.

We also reported an adjusted loss per share 42 cents, which includes the 46 cents related to the change in fair value of investments as well.

EPS and adjusted EPS were below our guided ranges entirely due to fair value for the first time in our history. This quarter, we recognized a decline in the fair value of investment primarily resulting from the impact to the code that 19 pandemic.

As a reminder, our fair value investments are comprised just are comprised of two components that component and real estate component.

The combination of these two components reflect the overall now market value of our investment.

Well interest rate ticked down during the quarter that component was negatively impacted by a dramatic increase in credit spreads, which were up approximately 200 basis points.

The real estate component is inherently forward looking in nature by virtue of that capturing the present value for our profits interest in our investment.

Which is derived from the value of the businesses conducted at each storage facility underlined the development property investment.

In valuing these profits interest we re underwrite olivier underlying facilities each quarter reassessing stabilization date rental rates, Lisa paid new competition and exit cap rates among numerous other variables.

To the extent those variables news, so too will our fair value marks.

But it kind of real estate company component is attributed to our expectations for elongated economic stabilization timelines of the majority underlying properties in our portfolio as was the ongoing impact of the supply.

In general we pushed out the stabilization dates six to 12 months on our investment, which we believed to be irrational range given the high level of uncertainty as to the severity and duration of the current panic.

Exclusive of fair value, though our results came in above our expectation for the quarter property into line are wholly owned assets as well as interest income were above the high end of our guided ranges.

DNA and interest expense were at or below the midpoint of our guided ranges.

Looking forward with the general uncertainty and lack of visibility with respect to the impact to the could they pandemic and economic recovery.

Well withdrawing our EPS and adjusted EPS guidance ranges for the full year.

We will reevaluate our guidance at such time as visibility improves and we can break predict what's better search and year result.

Turning to liquidity and capital sources and uses.

At 331, we had remaining funding commitments of 119 million on our development property investments.

However, as John mentioned, we have elected to forget five development projects that have not yet commence construction.

And 42 million of this hundred 19 million is related to those five investments.

This was 77 million remaining commitments to be funded over the course of the next few years as illustrated on page 18 of our supplement.

Also as John noted, we intend to be active on the acquisition front as well.

Too early to predicts the number of developer miles on the prices, what we would pay in such buyout.

And so we upsized and extended the maturity of our secured revolving credit facility from 235 million up to 375 million and extended the term out to March 2023, the new facility as lower credit spreads and relax financial covenants as compared to the previous facility and we intend to use the facility to.

And our development draws and acquisitions this year.

Our leverage levels remain very reasonable.

Additionally, we expect to have some capital recycling opportunities.

Well, we have brokers on all of our development projects and a desire to on a substantial majority of the facilities we finance.

We also have the optionality to allow the sale of facility underlying one of our development investments.

Well it to the refinance or repayment as alone when it makes sense.

And 2020, we could have capital recycling opportunities upwards of 40 million composed of potential refinancing repayments in or asset sales.

With our outsize credit facility. The ATM sales, we did cells, we did prior to the pandemic cash on hand, and potential capital cycling recycling opportunities. We believe we're well positioned to fund our existing development commitments Opportunistically acquired developers interests and operator core business as planned.

Our contractual investment commitments and our development pipeline are now fully covered at conservative leverage levels for the foreseeable future and we've created dry powder to continue to execute develop provides opportunistically.

Turn it back over to John Real quick.

Thanks, Kelly and before we begin today I'd like to highlight a few silverline names that we see in the current environment both related to the sector.

Generally into Jay cap specifically.

A silver lining number one change.

This pandemic is certainly causing change in everyone's lives and with change come self storage usage.

Silver lining number two.

End of the development cycle.

Development and already overbuilt markets is likely to either be deferred for the long term or abandoned all together for a host of reasons caused related to our accelerated by the cobot 19 pandemic.

Silver lining number three the power of the platforms.

Im smart extra space Lifestorage and public storage, our third party managers have the best marketing know how revenue management platforms and brand awareness in all of the self storage industry and all of this has been on substantial display during the peak.

Past eight weeks, it's all substantially enhanced from the great financial crisis and in 2008 in 2009 and it is paying great benefits right now.

While the severity of this that has and will put these platforms to the task, we expect that they'll outperformed the last downturn.

Silver lining number for J capital was built for US scenario like this we pre funded the business with common and preferred equity and we built optionality into our investments structure.

We believe that both our capital structure and our Optionality have positioned us not only to survive the pandemic and the resulting dramatic economic downturn, but also to thrive as things recover and silver lining number five external growth.

Unlike many other public reach our external growth story is not going away as we have a captive pipeline of deals as we've talked about in our prepared remarks up to this point.

We also have as much experience now with Gen. The lease up properties as anyone in the sector and we believe were the perfect partner to source of value way to underwrite and close acquisition transactions of new properties as they inevitably will hit the market when things reopened.

We strongly believe will be successful in forming such a partnership.

With that it's time for me to turn it over to Jerry for Q in a.

Thank you at this time will be conducting a question and answer session.

I'd like to ask your question. Please press star one on your telephone keypad, a confirmation toll indicate that your line is in the question Q.

Start to if you'd like to remove your question from the Q.

Participants using speaker equipment that may be necessary to pick up your handset before pressing the star exceeds one moment, please follow pull for questions.

First question is from Todd Thomas Keybanc capital markets. Please go ahead Sir.

Hi, Thanks, Good morning, John So you talked about being opportunistic and playing offense and reference the joint venture partnership more than one switch which is interesting.

I guess, how far along are you in the process to establish a vehicle that might help.

Support those efforts and with this involved.

Will this be an acquisition venture.

For equity investments or would it be more of a debt fund something to help expand your your lending and bridge loan program.

At this point.

Yeah, Hey, Todd Thanks for the question, it's a great question.

We started talking about this and probably the second quarter of 2018, when Jonathan joined the company. We felt like we were picking up one of the great mines in the space and someone who had as much experience and as much know how in terms of.

Opportunistically acquiring properties as as anyone we could have possibly added to the team. So these conversations have gone on really for the better part of two years I think that over the last.

Over the last couple of months and particularly as we've started to move to.

End of the rental season and toward those summer months, you know, we always felt like this was going to be the rental season that when you match the curve.

Development.

With lease ups and and took into account. The fact that an estimate of about 75% of those who have developed during this cycle have been merchant builders. This was going to be the summer when things were going to start and I think it's only natural in that you.

I had the development cycle.

Scheduled to come to an end I think Cove at night team has has accelerated the end of the development cycle and I and I also believe that kind of at night team with the inevitable impacted it will have on this rental season has put developers these merchant builders into a posture.

Where they're probably much more interested in liquidity now than they might have been and more likely than not pricing differences have have narrowed so with that in mind I think we have stepped up our conversations weve.

Had more inbound calls and it it's too early for me to comment on how far down the road, we are but we are having meaningful conversations along those lines right now.

Okay.

Helpful. And then yes, you know you talked about.

The more elongated stabilization timeframe.

Six to 12 months on average that impacted.

Some of the fair value marks in the quarter can can you speak to how pro forma rents have changed maybe for assets and lease up or or projects under construction today.

So tied with projects under construction.

Most of those have been underwritten yeah, we reported that we.

Effectively agreed with developers determine a five projects that were.

That were approved a couple of years ago in some cases and that's all set set out I believe on page 15 of our supplement.

Uh huh.

Those were the older projects that might have been underwritten with with older rent levels I think most everything that's under construction now.

Is it is probably fairly per at from a rent standpoint save any change that's occurred from the from the pandemic, but I don't think any of US can say right now that the pandemic is going to have a permanent impact.

On the level of rat. So I think it's way too early for us to start to reap re project stabilized threats on properties that aren't going to stabilize for four years.

Okay got it and then just.

Two quick questions I guess on.

On the dividend.

First as you look at the model today, you previously talked about.

The expectation to have the dividend covered in Raleigh, 22, and I know theres, a lot of moving parts and a fair amount of uncertainty.

With the those five assets the five projects that you stepped away from and.

You know an elongated stabilization timeframe on others, perhaps and a bunch of other moving pieces, but you know any any thoughts or insights as to how you might be trending as it pertains to the dividend coverage in early 2002, and then the second part is I know you just recently rightsize the dividend, but I'm just curious if there any additional considerations.

I'm here just given the current environment.

Sure and thanks for the question Todd, It's something we yeah really ought to talk about continuously as as everyone knows we have gone basically a four and a half almost five years now with a dividend that has always been predicated on a on us.

Financial model that was tied really to the overall building shareholder value.

I would like to emphasize just as a preliminary matter that in terms of looking at whether that we're on track to cover that dividend or not we gave guidance from first quarter and we blew out the guidance. So you had that was that that's a positive sign the pandemic.

Certainly change things and the way that I look at it is we were comfortable when we right size the dividend that even considering elevated new supply we had a pathway to cover that dividend in the first half of 2022 as we re underwritten.

And our facilities and as we have moved back stabilization dates.

Perhaps that's going to.

Impact cash flows to the point that the dividend coverage could be moved back as well, but the on the on the flip side of that.

You have a situation where our original projections were made.

Understanding and knowing that most people believed new supply was going to remain perhaps at an elevated level for longer than those of us in the industry would have liked and I believe this pandemic is effectively lopped off the top hole there and so.

To the extent you have a relief of some of that pressure, which we believe will invariably happen.

Perhaps that to us to some degree maybe completely.

Mitigates any elongation of of the stabilization periods that we.

Projected when we did our fair value marks this quarter. So at this point, we're still hopeful that we're going to hit that original timeline. If we don't hit that original timeline, we don't believe that the delay would be you know.

In excess of what that delay in the stabilization period has been and once we get into that first half of 2022.

There will be cash flow that will be very close to dividend coverage may not be quite there, but everybody is always understood that this was a pathway to eventual coverage.

Like to say that maybe a little debris has been thrown into the path and I think will clear that debris fairly quickly and and be back on our way.

Okay, Great. That's helpful. Thank you.

No question from Tim Hayes, The F. Park. Please go ahead Sir.

Hey, good afternoon, everyone hope, you're all doing well and thanks for taking my questions.

My first line.

I know you with your guidance.

And wont will respect that but given the constructive side, you're seeing from developed developers and the increased amount of inbound calls an increase kind of conversations you're having do you still think you're on track to on more than 50% of your portfolio on balance sheet by year end.

You know.

Tim when we put our guidance out yeah as Kelly said in her prepared remarks, the guidance that we have but that we have withdrawn is our SNR adjusted EPS guidance.

You know where.

We're in the first week of May right now in our guidance was 15 to 25 facilities for the EUR 15 to 20 facilities for the year and on May seven where we're at 11, so I still feel pretty good that we're on target in that regard.

Our Jonathan you may.

Like to comment on that as well.

I don't really have too much to add to that John I agree with that the conversations that.

That we're having right now our I'd call them somewhat.

Somewhat elevated or accelerated we expected to have.

A significant number of conversations with our partners.

After the rental season in the latter half of this year I think if you think about our guidance. It was it was it was more back end loaded.

With acquisitions, and I think that you could see those.

Come into the wholly owned to a little bit sooner. So when you think about the range that was put out there I believe that I'd be comfortable.

Targeting the higher into that range.

Mhm.

Okay. That's that's helpful. Thanks, guys.

And then you know just sticking.

On the topic of kind of strategic.

Alternatives or strategic investments here.

We saw obviously Smartstop recently took a significant stake in the company and recently went back to that can you just touch on maybe what conversations have been Mike with them and what changes are actions.

Any that they want to see or or are kind of.

You know even been driving so far and and maybe just in the broader context and.

How how many M&A.

In two.

As part of strategic alternatives that you could be pursuing.

Yes, Thanks, Tim and that's a great question, let me start by saying that.

Smartstop made its initial filing in late March and they filed a 13G, which is a passive position and a number of shares that they reported in that filing was this was the same I believe is the number of shares that they reported in the 13 d. that they filed on.

28, yes, I would say that.

That.

Characterizing someone who filed a 13 d. as having gone activist is maybe a little bit maybe a little bit strong of a suggestion you active an activist will generally follow 13 day and immediately start taking definitive types of action to you.

Next some kind of change and that has not as not really happened to this point in time.

You know smart, we know Smartstop people Smartstop is as significant participant in our industry. Yeah. There I think maybe the 10th largest self storage company out there and we've had.

Conversations with them passively at industry conferences, and things like that like we have with with.

Everybody else, we all talk about our businesses and from the standpoint of what that means for Jay cap. We've we've always said anytime a shareholder has asked us how we view M&A. We've always said we are.

As shareholder focused as any company you're ever going to fine. Yes. If you look at the 6.3% I'll level of ownership that Smartstop has.

Our insiders have double that and so theres nobody more focused on shareholder value than we are so if something comes along that we believe will produce a better value for our shareholders than we believe we can do on a standalone basis, we will always.

Go to our board discussed that and figure out the right thing today.

Thanks, John that's that's a add some double commentary I appreciate it.

And I guess, one more for me.

Maybe just touch on the markets, maybe which ones are performing better than you would expect in this situation. If there is any level of expectations year, and which ones are our most impacted by what's going on in Miami in New York in Atlanta, clearly top three in your portfolio and New York.

Having a hard time, but you know Atlanta opening up a little bit earlier than than other impacted MSC. As many of you can just can get a little bit of context around the performance in 70 specific markets.

Yes, Tim I think I'll give a I'll give a high level comment and then maybe let Jonathan get into a little more of the details.

You know we've been.

I'd wake up every morning over the last over the last seven weeks and the first thing I'd do those are poll the daily Flash report showing that the rental activity in each one of our.

Each one of our markets and you know it is it's really hard at this stage two to say there has been any particular trend among the portfolio. You know some days you will have a store that will just completely surprise you.

We had some days in the in the real hard of the crisis, where you look at our store on 150 history.

In Manhattan, and you had a bunch of rentals that that store Wen yen, New York appeared to be completely shut down.

I think that at a macro level, it's going to in many respects just follow the reopening of state yeah. The state of Georgia as everyone knows is more or less completely re open right now a florida is if not completely reopened certainly.

On the verge I think if you look across the whole portfolio somewhere around 80% of our total portfolio is now located in a state where you've had.

State of emergency that were previously in effect Resend, Ed and auctions can resume and you have other some you have some normalcy returning to business and individual life in those states and so I think that.

Just going to follow the pace at which states in cities and sub markets, you're not only legally reopened but people feel comfortable getting out and and starting to engage in life again, John If I want you add your commentary to that.

Yes, I would just say that you're right, it's hard to really pay even a market with the with a broad brush we've seen.

We have a handful not many but we have a handful.

Of stores that.

Maybe more exposed or make cater more to universities and others.

Our property in Pittsburgh comes to mind, we have an asset and in Knoxville, and a couple of our assets in Miami in Jacksonville have.

Have really performed well and you can attribute some of that to catching the university rentals or the student rentals earlier in the season, but but even and we're actually seeing a little bit of.

Second spike so to speak in some of those markets I know our property in Austin last.

Over the course of the last two weeks has performed really well so it's a little bit too soon to to see trends I think on a market basis, because you have some ups and downs at properties, even within mm say, but but you're right.

As John alluded to 90% of our own portfolio is in states or look at in the states that are open.

So we feel we feel good there we're seeing movement in Georgia, and Florida in particular, the northeast is going to take a little while longer we have we have an asset in Pennsylvania, or the Philadelphia suburbs as well as our assets in New Jersey, and New York and.

Other than the initial rush before everything shut down to ticket items in storage.

You Havent seen a whole lot of activity up there. So it's really it's really by region and then once you start digging into particular MSC is it's going to be honest store by store basis.

Got it okay I appreciate the color guys. Thanks again for taking my questions.

Thanks, Tim.

Now the question from John Peterson from Jefferies. Please go ahead Sir.

Great. Thank you.

Just curious if you've seen any properties transact in the market that would give you any idea of how property values might have changed and maybe more specifically to Jay cap I guess your model with the fair value marks are you still assuming mid five stabilized NOI cap rates.

And then maybe even finer point on it what was it stabilized cap rate on the property that you were assuming on the properties you guys did buy out this quarter.

Yes, Jonathan why don't you take that one.

Yeah, So just as far as the market goes.

You know that deals that were under contract.

And in the queue and and financing was lined up for the most part I believe those deals have been closing.

I don't I don't know of really any any deals that have come out since the pandemic hit.

That have that have transacted thats not to say that they won't but it's.

Buyers are taking a little bit more of up of a measured approach just waiting for the dust to settle a little bit.

But when you think about that they're there continues to be.

And the abundance of capital on the sidelines continuing to look to get into the space and I think it's just going to continue to build up.

In a muted transaction environment.

As far as cap rates go you know my sense and.

The.

The groups the people that I talked to that have a good beat on it and I trust their opinion.

We're all of the opinion that we don't really see cap rates expanding.

It's really just more into intense focus on the NOI and so.

You know maybe deals are underwritten a different way, but you're still solving for the same.

Same yield whether or not it's a stabilized yield or.

Or and higher or so I don't think the consensus out there is that there is we don't expect to see much of an expansion if any in and yields or cap rates on the deals that we ball.

I don't know that we've we've necessarily disclosed yields in the past, but I would say that these are these are in line with previous acquisitions they were both.

Teed up in into Q under evaluation.

Pre coated.

We felt comfortable with where.

How they performed through the pandemic and feel good about that investment.

I guess in the past we have suggested that.

On acquisitions, we're looking at stabilized.

Returns and low to mid Sevens, and I would say that the.

These that that range.

Okay. That's helpful and I'm, sorry, if I missed this but did you say what percent of your development projects or your developers projects have been stopped by local regulations. Just curious how much is still going on and how much is kind of.

Both down right now.

Yes, John it's really just that it's really just the New York in New Jersey area and so what does that Jonathan maybe five projects that six projects. So we have that we have six projects in New York, New Jersey that currently construction has a is halted and talking to talk into one of our developer.

There is up there this morning.

The expectation on the on the delay as is.

60 days minimal I think you're probably looking that up there 90, maybe 120 days delay on some of these projects.

Yes, John a little color on that though if you if you go through the list of projects.

For those projects are very early stage in fact in some cases I haven't they really havent broken ground yet so.

From the standpoint of of increasing costs, because you have a lot of Kerry.

That's probably not a huge issue here and then secondly, the fact that there is a delay when you start looking ahead to delivery.

When they used to lever.

Supply picture, maybe a little better when they do deliver so to some degree the delay could be in small respects blessing in disguise.

Got it Okay. That's helpful and then.

I'm curious about delayed development, maybe you kind of answered my question, but you have you said get five projects that were cancelled.

I'm curious for the ones I think the once you've just mentioned where they haven't even necessarily broken ground, yet I guess, how many more projects are out there that.

Maybe you could be added to the list of of being canceled.

Well I think that's a hard question to answer and I would say right now that everything that we haven't agreed with developers to cancel I would say you're likely to go forward. If you look at the ones that were cancelled then again I'll refer you to page 15 in the supplemental.

Maybe the most important column on that pages, the far left column, which is the what we called the closing date and that was the date that weve that we closed the construction loan and land was taken down and many of those go back to kind of key Q4 2007.

Team in some cases earlier in Q4 that than others and in all of our investment documents, we have contractual start date and contractual delivery date and in the case of those five.

Way past the contractual start day I don't think any one of them was going to hit the contractual delivery date, and Bob missing I'm not talking about missing by few days they were going to they were going to best bag and in all of those cases as we went and we looked at the projects and as we re underwrote the.

Projects the projects just didn't work anymore.

So thats one batch I think the batch that we just talked about where we'd had to add the delays.

I don't think you have the same dynamics now you know if we get two years down the road and we have a project that we closed on in the third or fourth quarter, a 2019, and it's still hasn't broken ground. Then we may be having a different discussion, but right now that batch looks like it will start.

And go forward as planned and I can't think of any of those that that right now I can point to in say, there's a high likelihood that is going to be cancelled and Jonathan feel free to chime in there. If you if you have another view.

No I agree with that when you think about the ones that are under construction quite a few of those are expected to be delivered I guess two of those are.

Maybe three or expected to be delivered this year. So they are.

They and two instances that I know.

They are going through their final inspections and they delay may just because.

As of delays and.

Hey municipality official getting out there and performing inspection. So there is a different stages than the ones that were dropped.

For the most part.

Got it alright, thats very helpful. Thank you.

As a reminder, if you wish to ask a question.

Star one on your telephone keypad that star one.

Ladies and gentlemen, there are no further questions Weve reached the ended the question answer session.

I'd like to turn the conference back over to John Good for closing remarks.

Thanks, Jerry and thanks, everyone for attending the call and thanks for the very thoughtful questions from those of you ask questions and we look forward to talking to you guys again.

In late July.

Take care and be say.

This concludes todays conference you may disconnect your lines at this time. Thank you for your participation.

Yes.