Q4 2020 WPT Industrial Real Estate Investment Trust Earnings Call
Good morning, ladies and gentlemen, and welcome to W. P. T industry right fourth quarter 2020 and conference call before we begin let me remind everyone that during this conference call management may make statements containing forward looking statements.
This forward looking information is based on a number of assumptions and is subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those described or implied.
We direct you to the company's earnings release, MD&A and other securities filings for additional information about these assumptions risks and uncertainties.
Note. This event is being recorded I would now like to turn the meeting over to Mr. Scott Friedrichsen, Chief Executive Officer. Please go ahead Mr. Fredrickson.
Thanks Anita.
And thank you for joining us on today's call with me today are medicine, real Arsenio Hall, and John <unk> our CFO.
Despite the many unforeseen hurdles experienced globally in 2020, depending on which provided a remarkable opportunity for WPZ to showcase the depth and experience of our team and the strength of our portfolio.
In the depths of the pandemic, we closed on a $730 million U S logistics portfolio, one of the largest U S industrial transactions during 'twenty.
This transaction increased the size of our portfolio by approximately 40% increased our exposure to key distribution markets significantly increased our scale and diversification and bolstered our tenant credit profile all while underscoring the ability of our teams is to source off market deals at attractive pricing.
Our private capital platform ramped up significantly with the addition of a new global institutional partner on.
Us to expand and accelerate our development pipeline, which at quarter end exceeded 6 million square feet.
We also added a Canadian listing providing our investors with additional optionality and flexibility and we're successfully added to several GSS index.
Before we close the year, we published our first ever chief.
Reported in 2021, we will continue to grow and integrate ESG into our daily operations, but the implementation of our three year strategic.
Strategic roadmap.
Throughout 2020 run collections exceeded 99% demonstrating the strength of Wpz's institutional quality industrial portfolio.
U S. Industrial fundamentals remained favorable with increased ecommerce penetration rising inventories and measured and supply.
The distribution on logistics sector remains fragmented with few experienced operators relative to other asset classes.
Looking back on our 2020 achievements and with strong sector fundamentals ahead I'm extremely optimistic about on what our team can accomplish in 2021.
I'll now turn things over to Matt to discuss our operational and investment results on activities.
Thanks, Scott and good morning, everyone.
As you probably noted from our press release it was a busy quarter. So our prepared remarks are a bit longer than usual. So we'll try to get three things as quickly as we can.
The REIT ended the year with occupancy of 98, 2% on a portfolio weighted average remaining lease term of four four years.
We collected over 99% of contractual rents for January February and March which remains consistent with our 2020 collection rates.
Turning to leasing activity <unk> had approximately 18000 square feet of new leases and 412000 square feet on lease renewals commenced on the fourth quarter lease.
Lease renewals commencing on the quarter and weighted average cash on straight line rent re leasing spreads of 5% and six 7% respectively.
We also signed approximately 52000 square feet of new leases and.
And 500000 square feet on lease renewals on the fourth quarter with weighted average cash on straight line rent re leasing spreads of one 4% and 13%.
The REIT renewed or re leased $3 5 million square feet commencing in the year at weighted average cash on straight line rent releasing spreads of nine 4% and 14, 7%.
We signed two 3 million square feet on lease renewals on a year with weighted average cash on straight line rent releasing spreads of eight 5% and $16 five per cent.
Subsequent to quarter end, we renewed or re leased approximately 155000 square feet at weighted average cash and straight line rent re leasing spreads of 14, 7% and 25, 8%.
At year end, we had approximately 2 million square feet or six five per cent of the portfolio's GLA is set to expire in 2021.
To date, we have reduced the remaining expirations from 2021 to $1 9 million square feet or 6% from the portfolio's GLA.
Turning to our development pipeline, we have 12 projects at various stages totaling approximately $6 3 million square feet in the Los Angeles, Phoenix, Chicago, Minneapolis, Houston Nashville.
So New York, and New Jersey markets.
During the quarter the <unk> team completed the following notable transactions we closed on two adjacent land parcels located in the Phoenix market through a private capital joint venture. The combined site can accommodate approximately $2 2 million square feet of development.
We also completed the off market acquisition of a $9 two four acre industrial parcel located in the inland Empire market in Southern California.
<unk> intends to develop on approximately 200000 square foot modern distribution building on the site, which is expected to remain on balance sheet during the development phase.
On the end of the year. We also completed the following transactions on.
On January 28, we acquired two distribution buildings located in Bayonne, New Jersey. These properties total approximately 349000 square feet and are 100% leased to public company tenants with a weighted average remaining lease term of approximately eight five years.
These properties were originally developed by the read through of private capital joint venture with the REIT owning an initial 10% interest through the exercise of the rights write a first opportunity to acquire additional JV interest in these projects. The REIT acquired the remaining 90 per cent equity interest on an off market basis for approximately $61 $4 million rep.
Presenting on going in capitalization rate of approximately 4%.
On February 25th we completed an off market acquisition of a 14.4 acre infill industrial parcel located in Carson, California, which is near the port of long beach for approximately $30 million.
The reason on the process of contributing this project into a private capital joint venture managed by the REIT with the REIT retaining a 51% ownership interest.
We anticipate developing approximately 250000 square feet of distributions based on this site.
With that I'll now turn things over to John to provide a discussion on our financial results.
Thank you, Matt and good morning, everyone.
Total investment properties revenue for the quarter and year increased 42, 3% from 46, 2% over last year, primarily due to the June 2020 acquisitions with additional contributions from increases in base rent.
Greed also earn management fees of approximately $1 8 million and $3 $1 million on the corner and for the year, respectively. As we saw gross promote fees of $1 3 million from the corner.
We are increasing our 2021 private capital P guidance to a range of $10 million to $14 million, including the promote fee earned in connection with the sale of a ban on property as Matt mentioned earlier and increased clarity on deployment timelines.
Same property NOI growth was up three 1% and two 1% from the corner on year, driven mainly by favorable re leasing spreads and contractual rent increases while impacted by a 0.6% to 1% reduction in same property occupancy.
G&A expenses for the quarter and year, excluding any fair value adjustments or promote expense was approximately $3 2 million and $12 5 million.
Yeah.
For the year was up about low for the quarter and year was up 56, 3% from $46 one per cent.
All per unit for the quarter and year was $25.04 to 89 five.
This represented an increase of 17, 6% or 9% compared to the same periods in 2019.
<unk> for the quarter and year was up 67, 1% from 51%.
<unk> was $21 two times per unit for the quarter and 75 cents per unit for 2020.
On the <unk> positively impacted by accretive acquisitions.
Increases in fee revenue for the quarter and increases in base rent on.
Offsetting these increases were lower management fees on the year attributable to a variation and promote income.
<unk> on occupancy and the increased weighted average number of units outstanding as a result of the equity offerings in 2019 and 2020.
At year end, our balance sheet and liquidity position remains strong with cash on hand on a $13 million remaining availability on the credit facility of approximately $159 million.
Leverage on our balance sheet net of cash on hand was 47%.
The weighted with a debt to adjusted EBITDA ratio of nine three times.
Our short term refinancing risk has essentially been eliminated through their prepayments on multiple mortgages throughout 2020, including a $6 $3 million mortgage prepaid in the fourth quarter.
We do not have any additional maturities from the balance of 2021 'twenty 'twenty, two we only have $124 $3 million mortgage maturing.
With regard to development activity ramping up through both our private capital platform and on balance sheet. We remain focused on capital recycling initiatives to further strengthen our balance sheet and create additional flexibility allocating capital to accretive investment opportunities the.
So we would expect to generate additional liquidity of approximately $82 million. Following the completion of the in process capital recycling transactions.
With that I'll now turn things back to Scott to wrap up thank.
Thanks, Chuck as I said at the top of the call. Despite the global uncertainty 2020 was a great year for the REIT and we're excited about what we can accomplish in 2021.
Thanks for your time and attention we'd now be pleased to answer any questions you may have.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on you touched on in town, if you're using a speakerphone. Please pick up your handset before pressing the key channel.
Withdraw from the question queue. Please press Star then two.
First question today comes from Marine Kalmar with TD Securities. Please go ahead.
Thanks, Good morning, everyone.
On the on the capital recycling that you guys have about 82 million.
Under our early progress I was just wondering what the timing was on that and maybe the cap rates and if you guys expect to do any more throughout the balance of the year.
Yeah.
Early to talk about cap rates on which assets, but it's going to be a combination of asset sales and joint venture contributions and our expectation is that's going to occur sooner in the air rather than later in the year I can say that by the <unk>.
We're on this call for our Q1 results, we'll have more specificity for either one.
Alright fair enough and then you guys seem to be a have a few different approaches to developments here you've got obviously, the the Ted 90 per cent the on balance sheet now with the Carson development at 50 149 per cent. How do you guys kind of think about the approach for each development and what sort of the preferred strategy.
Going forward.
Hey, Lauren.
I think we start with looking at the asset and that that tends to dictate our course of action and and I guess more particularly tends to dictate the interest of our capital partners on a particular project. So some of those variables start with size. So the smaller deals tend to be a little bit more frictional in terms of trying to chop up that investment across.
Number of different partners, who need some sort of critical mass to spend time on and then the other piece really relates to just the attributes of the project in terms of complexity timeline to being able to deliver a building if theres a longer entitlement timeline or we we need to sit and wait to be able to put the asset into production. Even if we have some current income.
That tends to just be viewed differently by different invest different third party investors. So that that high level is what starts the conversation is about what we may end up looking to invest more of our balance sheet in and we've mentioned this over the years and I think our intention is to continue to do this and we tried to be pretty clear about the disclosures to make it clear.
Projects have which type of capitalization, but our intention as we scale is to increase our exposure our balance sheet exposure to these types of investments and we think there's opportunities to do that and most of them involved really compelling projects that tend to be a little smaller tend to be a little more infill, but have a really interesting long term growth profile and that 10.
To be that that's what you see from our latest activity and I expect that to be the trend going forward.
Okay, and then maybe just last one from me we saw I think yesterday artist announced they're going to put up their port our industrial portfolio on I know they've got a lot of Minnesota and in some other markets. You guys are in or are looking to grow in a in any I have any interest in that or not so much.
The idea of them selling industrial and U S is not a new concept and so we've seen and looked at that before I think you know what the probably the new piece of information was would they separate out the industrial which a lot of people thought was the more compelling part of the puzzle and now they're saying, they're going to I suppose will dusted off on.
Take a look at it but but at this point, we haven't spent a lot of time on.
Fair enough, okay, great. Thanks, I'll turn it back.
The next question comes from human issue did that with Scotiabank. Please go ahead.
Thank you and good morning.
Oh private capital fee guidance, it was increased from $10 million to $14 million.
The difference versus the previous guidance is that all day on transaction or is there any other project as well.
No it's really a combination of all of the average.
Clarity at this point on the size of the Bay on transaction, but also clarity on a deployment timelines on the rest of the projects on our portfolio that we've got more clarity as to when those are going to hit and we were able to more confidently say that the numbers could be higher than we thought initially.
Okay.
Okay, and just how should we think about you know in terms of the first half and the second half. So it's a pretty chunky amounted to $14 million, yeah any guidance to somebody in perspective.
And so I mean the.
Our on balance it's gonna be a pretty from a pretty chunky number. So obviously, it's going to be weighted toward the first quarter of the year with.
The rest of the year really depending on the actual deployment timelines on some of the development projects.
Got it okay.
And then just focusing on the be on top of G. A I think it was acquired for four cap rate.
What was the development on that property.
But what sorry, what was the development why.
Oh, you did on their call, but I'm just trying to get a sense of what was the upside on that called the T or what was the size of the promote on that property.
Yeah, I mean, Michael will have full details around all of that when we released our Q1 results, but but I'd say this.
The nice thing about the New Jersey market is from the time, we started working on that project now that rents have grown significantly on that market and then as you know I'm on Schuh, we ended up with Amazon and one of the buildings and an extra and another in and bolt signed you know eight to 10 year leases and have three per cent bumps and so that that ended up I.
I think when you see the numbers on that Youll agree that it was a home run.
So perhaps moving.
So that was a good transaction flow to reach a totally to the debt.
And then you know after beyond on just looking at the T. Other projects, which are on the lease up I think that's inland Empire, Chicago and I think you did.
We'll also consider to acquire those properties once the once they are fully stabilized.
Yeah, Yeah, I think all of those all will will consider all of those I mean as we continue to emphasize we don't there's not a put there. So I think we'll look at them individually and a lot of the variables there depend on what the nature of the tenancy in lease term and other factors are on but that.
Adult we will certainly consider and and have a right of first opportunity to acquire all of those assets. So that they're about to I guess TBD.
Okay and I assume you know you mentioned about that 82 million dollar all day.
You know the liquidity coming in from capital recycling some of them debt proceeds will be funneled into acquiring some of these properties.
Yeah, and then the <unk>.
Initial view on the liquidity that is generated through those initiatives will be to pay down debt and then well be able to then drop back as we acquire additional properties yes.
Got it Okay and maybe just last question on the developments on a I'm looking at the Fontana, California land side, just to clarify it will be developed the hundreds of cents on the real balance sheet and not with the joint venture.
And is that an existing storage facility, which will be the they've loved into an industrial facility just to clarify that.
Yeah, that's a yes, and yes, and so yes, that's right.
Okay. Okay, that's great and maybe just last question is on the lease Expiries.
2021.
I think not much left now I think Matthew mentioned, it's one 9 million square feet.
Any any discussions in that regard any thoughts there.
Yeah, and it's really I mean, the numbers are a little misleading in the sense that would be based on the Fontana project that you just mentioned we picked up some leases, which are by design and pursuant to our development plan intending to roll in 2021, so that inflates. The number so really I guess, if I'm bridging from last quarter.
Or the end of the year, we were at six 5%.
You take away those Fontana leases, which are short term storage leases, we're really under five per cent and I and based on what we have in process, we feel like by the end of the court, but by the end of this quarter, we should be down to closer to two five per cent so about half of that.
That is outstanding currently we expect to be taken care of within the next few weeks.
With that that's kind of where we are status wise.
Got it and I guess, a 'twenty 'twenty is a 'twenty 'twenty two is too far out are.
Are you looking on starting to take a look at those are the ones as well, so pretty chunky or fabric of leases coming due next year.
It is early there there've been some very preliminary discussions.
In some exchanges with some of the larger leases there, but we're not trading paper and I would describe all of those discussions is very early phase.
Got it okay. Thank you go ahead.
You bet.
Thank you.
The next question comes from Mike Mark I guess, let's say Gerard. Please go ahead.
There.
Quick question on my end, just thinking about all the development.
I'd have to go back.
I don't really have it.
A large amount of your own balance sheet, whether it's the 10% interest or a 51% interest kind of active in EM and deployed our in force.
So at any one given point in time, so as this year progresses and things build up where do you see the stabilized amount of capital you're interest rising too in terms of capital that's in it and I realize that some of that be funded through construction was like lines on everything but I'm just a gross figure.
Yeah, Mike we were really focused on trying to grow that exposure as Matt said earlier and so we we don't have a firm number where it says hey, we want to be at.
5% or 10% I think we see better growth opportunities right now in development in some of those markets than we do in our buying stabilized in those markets and so that's how we will get into some of these high barrier markets like Southern California, where the deals you've talked about are located and so I don't think it's more on on an asset by asset.
Do we look at it and say Hey, this is a great opportunity to get into a market.
Practice once we build that too on what we can buy it at today and we will continue to make that evaluation and to the extent the markets.
Oh, well, we'll continue to evolve our thinking.
And I'd add on a little bit to that I would say number one we don't we don't think we're going to stabilize the development pipeline. This year, we still think we're in the ramp up based on although we've got a significant amount of activity going on coast to coast and 6 million feet. We've still got capacity on our team and in capacity on our balance sheet to fund our portion and so I.
Well I hope that we continue to add projects as we stabilize and swallow up projects that are completed and so I just I still very much consider this the ramp up phase of this business and I think the capability of our team to develop this exceeds what you see on the page in our deck today.
Okay, that's great.
Just given what you're seeing in terms of better opportunities on the development side, I mean, I get the return aspect, but how.
How does that make you feel about some of them. The other properties that you're on in your portfolio does it make you nervous about supply do you think maybe it's I'm, obviously your capital recycling.
Is it is it is it attractive still I guess a few part question is it are you guys price out of the market in terms of being able to acquire stabilized assets today and be just given the amount of development doesn't make it a little bit nervous in a little bit more I guess motivated to cull the portfolio on the other side.
Yeah, I'd say no we're not priced out on the market, but but obviously as you know we're pretty we're pretty militant about basis on the assets and so it is as the market continues to heat up and you put on market cap rate on a market rent a lot of times, you get well in excess of replacement cost and that's what makes us nervous because basis on chip forever.
But there's certainly opportunities like you know I mean last year was our biggest acquisition year in company history, right. We bought close to 10 million square feet and most of that if not all of that was off market, So where we see an edge or an opportunity or a disconnect or on an opportunity to buy at a favorable basis relative to replacement cost I think we can lean in there and I don't think we're price.
Out of those markets.
So and then the second part of your question is new supply I mean look 2020 was a record year in the industrial market in the U S per absorptions, we absorbed almost 270 million square feet last year, So all time record and and and we also set a record for your amount of leasing done in the U S. Industrial market, we said 650 million.
On square feet as an industry of new leasing and so the.
On the market is strong and I think most people think that continues at least in 'twenty, one and 'twenty, two and given the macro and we're only adding 250 million to 300 million square feet a year last year. It was 264 million feet so that.
Those those dynamics are in balance, but having said that are there are certain markets, where we wouldn't buy property because of the supply concerns yeah, there probably are but but that might relate to a specific size on a specific submarket not a red X on a market in general and so that's the same way we look at our diverse.
<unk> business week, we might not be building a million square foot on the market, but we might be building a $2 50 on an infill location and so it's it's a rifle shot more than interest a broad characterization I think.
Okay. That's fair and then last one from me before I turn it back.
Just on the day on transaction I think the gross acquisition costs would have been around $97 million for your 97 per square per your 90 per cent.
And then I guess, you had talked about a I'm assuming $36 million of debt.
So is that a is that at the 90 per cent interest. So I E. The you gross that up to be around like let's call. It 40 million from question. One and then question two presumably that assets under leveraged. So is the plan to take that out with a permanent secured product or would you just add that to your non carpool and increase your facility.
Capacity yeah. So on the first question is on 36 is that was the amount outstanding at the time, we acquired it that the whole loan amount. It was not adjusted for the 90 per cent.
And in terms of our financing on that longer term I think we we acquired it with the loan in place on debt. We had some term to it we will and we didnt need the liquidity immediately as we look at our various options will determine what we want to do with it but it's an option for both day on all of the cases that you looked at we can put permanent financing on it or we could add into our line.
Okay. That's great. Thanks, very much and congrats on a solid year.
Thank you.
The next question comes from Matt <unk> with National Bank. Please go ahead.
Mostly technical questions on my side with regards to the 10 to 14 million of income you're generating a day.
Can you break that out or give us some sense as to what would be promote versus sort of management fees are recurring fees.
Sure I would say probably at the are at the low end of the range is probably close to 75% from out at the high end is probably closer to about 50.
Okay.
And then I guess as we think of G&A in the context of that 10 to 14 million.
What would be a good figure for for a 2021 in terms of total G&A.
So I'd say for now excluding the promote expense and excluding sort of fair value adjustments on on stock based comp we'd be you know, we're probably roughly $3 5 million a quarter on average and the the promote expenses I think is what you were just starting with the non.
And it will continue to be I mean, what we've what we've always found is that it's probably a price will be approximately 60 per cent or excuse me 40 per cent of the of the promote and will show up we'll try and call that out separately. So everybody can see that.
Going forward, Okay. That's perfect and then on a straight line rent I think this this quarter with him, including straight line rent and free rent was a little bit more of a normal one although it looks like a fairly low number on a net basis, which aided a F. F. O. M is is this quarter a normal quarter or how should we think about.
In terms of future straight line rent versus free rent.
Yeah. This was a corporate partner to normal there was one lease termination fee that we received which helped push the number even more favorable than it had been so whereas in Q3, we had sort of an outsized free rent number this quarter. The free rent number was more normalized and that I think what I've said previously there's sort of two to 400000 is a good number.
In that range and then in addition, we picked up a little bit of extra benefit from this lease termination fee that we got.
And how how big was that just I may have missed it.
The net impact on anti Tau was about between $3 50 and 400000.
Okay.
With regards to lease renewal spreads I know these bounce around and it wasn't actually that much square footage that you guys did in the quarter itself and it looks like.
Leasing done subsequent to the quarter was in the 10 to 15 per cent range, but as we look forward, yeah does that sort of 10% to 15% increases on cash spreads.
Still seem like market or as it expanded from there.
I mean, it's certainly market in certain markets I mean, a lot of that is very asset and market dependent so I think it still blend to something that's probably closer to our annual experience in 'twenty 'twenty, where you're in a on a high single digits on an.
On an average cash basis and in the end of the teams on a straight line basis.
And some of that for US is just affected by opportunities where I mean, if you look at for example, our Q4 activity the numbers were a little skewed, but what's not really reflected in the spreads well. They did I guess it is in the in the straight line number as we had kind of a unique cohort of renewals there where every any lease in that Ah Chi.
It was in excess of 100000 square feet. They were on 10 year deals. So just a push for term, which in some cases means were a little softer on the spread side in favor of adding the value and increasing term so that doesn't in fact and then some of these.
Still a handful of fixed rate options, where essentially we don't have the opportunity to negotiate with a tenant or a reset to market on the plus side being obviously, we don't have the cost and capital infusion that might come from.
Market renewal, but debt.
And that really looks a bit like the lease just continues on where you're you've got more of an annualized step and you just keep going so but when you blend for those factors, which are more asset or four tenants specific I still think we going back to something that looks more like 2020, okay and on the 10 year leases, where you're putting in rent steps still trying to push that.
It is as high as you can get or are you getting north of three per cent in some cases blending to two and a half or well yeah. It's written on we're not getting.
Getting the hottest markets Youre seeing people push in excess of three I still think our experience lives more on the two and a half to three range three for tighter markets in newer product and maybe closer to the mid twos and other our other markets.
It makes sense and last one from me I don't know if it really didn't see any incremental shares issued during our Q4, but were you guys able to take advantage of or would you have wanted to take advantage of some of the share price move in terms of executing on your ATM and also as you look to do more development as the a T M kind of.
Good way of providing a small type of funding that you would need for some of the equity positions on these developments.
Absolutely. It's a good tool for that going forward I'd say that gets back to your first question, we still haven't used it yet we put a plan in motion.
For the year, where we were focused on capital recycling and using some of that recycle capital to fund our development efforts and so we didn't need to use the ATM or Oregon, the bought deal market, but if we do at some point in the future. It would be because we had a compelling use for those dollars.
Okay fair enough thanks, guys.
Yes.
The next question comes from Kelly Ann Chan with BMO. Please go ahead.
Hi, Good morning, guys and good morning, I'm going back to them on the supply and demand.
You talked to some markets, where there's a little bit more of an imbalance could you point to which markets you see a little bit of that in balance.
Yeah.
Again I think.
I guess, what my comment was meant to say is that there are many markets in the U S, where we wouldn't consider building period.
But there are certain submarkets and certain sizes, where you might be the fifth person building, a 750000 square foot building and say by the port in Houston or one of those markets and so you may focus like we did in Houston away from the Port where Theres a lot of supply or away from that north side, where there's a lot of supply and find a.
<unk> like Katy, Texas, where we're building where you've got less competition and so you know the the markets that have historically been pointing to that or at least recently.
There have been some of the Texas Submarkets on sizes some of the some.
Some of the Lehigh Valley for the Big bombers North of a million square feet and so theres certainly spots, where you wouldn't want to be the bip through the sixth or seventh person putting up a similar sized building, but we think in all the markets. If you look hard enough you can find opportunity.
Okay that makes sense and in terms of I guess the market now that you guys are focused on could you point to any specific.
Quick ones, where you're seeing from.
<unk> right now.
Well I mean, let's look let's just talk about some of the ones that we've got going on right now right I mean, the Phoenix market is benefiting because theres a lot of inflow from Phoenix from some of the southern California markets because you've got.
Better Labor story, you've got cheaper land, you got less regulatory environment and so Phoenix has got the lowest vacancy rate that it's had in 15 years and CBRE is projecting Phoenix to see the highest rental growth in the U S. Over the next five years are saying, it's going to grow 37% or close to 7% annually.
That's got a pretty good macro story towards Fontana, where we're doing that project in the inland Empire West that's one of the top industrial markets in the U S and and they they've got vacancy there of one 6% and they've seen you know.
Rents in Q4 alone went up six 7%. So that's a great story, there and in New Jersey, where we've got a couple of different projects going on you've got vacancy below 3% over the entire stage on rents have grown 20% over just the last three years and so.
And then of course Carson you know probably one of the best locations in the country right now on that South Bay market of L. A debt.
That that market is one 2% vacant, but the Carson submarket itself or the Carson municipality, and so less than a half a percent vacant and and and that whole market. There's only 700000 square feet under construction on its 200 plus million square foot market. So like I said, there's pockets of opportunity and now that we've got sourcing offices on Boe.
On the coast, we're really starting to lean in on some of those infill markets that long term are going to be red Hot.
Uh huh.
Hum that's great to hear and I guess, maybe switching gears on the other side on going back to the capital recycling and obviously, that's a couple of things and it works, but in terms of I guess are the overall target for 'twenty 'twenty. One can you kind of guide as to how much do you think you guys on.
And actually recycled through for the year.
So like we said, we think will generate liquidity of about 80 $82 million through some transactions that are already in process that really relates to probably a 100 and $200 million of assets being recycled and so that's really the net after we've paid down debt and taking care of other issues. What we think we generate in terms of on liquidity I think we're still come from.
It's consistent with what we've said towards the end of last year I think we're still comfortable that number on that $100 million to $200 million range.
Okay. That's helpful. Okay. That's it from me Thanks, guys I'll turn it back thank.
Thank you.
Next question comes from Brad Sturges with Raymond James. Please go ahead.
Hi, guys.
Just to go back to the 22 as far as where is that going on.
I wanted to clarify here, if you could give a little bit more color in terms of the more notable expires that you have rolling for 'twenty, two and when would they hit during the year.
Sure Yeah. The 'twenty two expirations are are spread fairly evenly throughout the year.
There are a couple that are bigger expirations of about 500, there's a couple of 500000 square foot spaces that are rolling in Q1. So that's really in terms of the discussions that I alluded to earlier those are really the two that are in the in the preliminary stage of discussions just given their size, we would expect to starting dose.
<unk> earlier than some of the small spaces. So that those are two those are two Houston projects that we picked up in connection with the pirate acquisition.
Got it and then in terms of where you are with discussions and in terms of what's left to do in 'twenty. One early 'twenty two it anything that stands out that might not be renewed at this stage.
No I didn't I don't think we I mean, I think the expected to vacate list is still relatively small at this point based on the visibility we have into those individual situations. So it's more about focusing on it.
The individual negotiations term you know, whether we whether there's a fixed rate option involved whether we can scrap that and push for something different or invest some capital. So those are the variables that are still moving around which is causing us to not have a have the ability to guide very specifically at this point, it's just too early.
Okay and maybe my last question just.
Inflation expectation starting to pick up any thoughts on how a replacement cost in general could trend and how that might translate into market rent growth given.
Given the demand you highlighted.
Yeah, I mean, we're certainly seeing construction.
<unk> pricing increases and specifically one of the things that people are talking about in our industry right now on our steel, which has gone up pretty dramatically and so you know not only is the word gotten out debt industrials hop do a lot of the landowners, which has driven the price of land up in the actual hard cost or the vertical construction component.
We are definitely seeing construction price increases the good news is as I'm sure you know I mean, the rents overall for the market last year grew 8% and so some of that is compensated by higher rents, but to the extent. These construction costs continue to increase I mean, youre going to have to be able to charge higher rents in order to make your spreads.
And that's I think you're right on.
Yeah, Okay, great. Thank you I'll turn it back.
You bet.
The next call. The next question comes from Tami Barron with RBC capital markets. Please go ahead.
Thanks, and good morning.
You've got good liquidity more capital coming in from I guess I'm on the capital recycling that's coming this quarter I'm, just curious how you're feeling about the balance sheet and leverage and if you. If you could maybe remind us where do you want to get leverage to and over what time frame.
So what we've generally talked about Tommy is that we'd like to run the business somewhere in the Forty's and right now we're as of year end, we were at 47% now with the acquisitions. We've recently take we've recently.
Brought on from a little higher than that right now and that's part of what is in plan on the capital recycling side to bring that back in line I think we're still comfortable being in the Forty's I think we obviously think it's better in the short term to try and find a way to move it down and that's part of the plan to recycle capital that so that we can access that cap holds up on into some of them.
The development initiatives and other things, we're doing longer term, we still would like to get to the point, where we're on investment grade bond issuer and so we're working toward that process. There is no definitive timeline on that at this point and so but it's something that we're trying to make progress on it you know quarter over quarter.
Got it just really one last one from me I mean, a lot of the focus is on the debate on the pipeline and maybe bringing more on balance sheet, but also you've got them.
On the JV pipeline with your partners. It seems to me that our acquisitions and just given how competitive it is out there is it fair to say that you know.
Going forward and more capital is going to be directed towards the development pipeline or do you think you can continue to acquire.
No assets outside of the JV pipeline.
I'd say I'd say, our expectation is we're going to do both I mean, clearly the focus on those students in the near term is on the development pipeline on getting that ramped up and really hitting on all cylinders, but to the extent there's product hitting our desk either on or off market. We're looking at underwriting all of that continually. It's just you got to look harder to find compelling opportunities on a frothy.
Markets than you do in a in a down market and so we're trying to maintain discipline on the acquiring side again as I said earlier it was our biggest year ever last year, and we got a lot of stuff in the pipeline and you know the U S market is a lot more liquid in and Theres a lot more available than there is on the Canadian market. So we benefit from a lot of deal flow.
So it just becomes a pricing exercise and and when we can find or on earth opportunity or makes sense of acquisitions, we'll do them in and when we can't.
We're blessed to have the development platform that we can lean on and create value for the unitholders.
Yeah.
That's great. Thanks, Scott and I will I'll turn it back.
Thanks, Bob.
This concludes our question and answer session I would now like to turn the conference back over to Scott Patterson for any closing remarks.
Great. Thanks, Anita once again, thanks for your time on your interest in W. P T industrial read and as I like to say if you have any questions feel free to call any of us at any time. Thank you.
This conference has now concluded. Thank you for attending today's presentation you may now.