Q1 2021 Plymouth Industrial REIT Inc Earnings Call
Good morning, and welcome to the Plymouth Industrial REIT first quarter 2021 earnings call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be and opportunity to ask questions to ask a question. You May Press Star then one on you touched on phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Tripp Sullivan of SCR partners.
Please go ahead.
Thank you good morning, welcome to the Plymouth Industrial REIT Conference call to review the company's results for the first quarter of 2021.
On the call today will be Jeff Witherell, Chairman and Chief Executive Officer Pen White, President and Chief Investment Officer, Dan Wright, Executive Vice President and Chief Financial Officer.
And Jim Connolly Executive Vice President of asset management, and and Hayward General Counsel.
Our results were released this morning, and our earnings press release, which can be found on the Investor Relations section of our website, along with our form 10-Q and supplemental filed with the SEC.
A replay of this call will be available shortly after the conclusion of the call true may 14th 2021, the numbers to access. The replay are provided in the earnings press release for those who listen to the replay of this call. We remind you that the remarks made herein are as of today may seven 2021.
<unk> will not be updated subsequent to this call.
During this call certain comments and statements we make may be deemed forward looking statements within the meaning prescribed by the securities laws and.
Including statements related to the future performance of our portfolio, our pipeline of potential acquisitions, and other investments future dividends and financing activities all forward looking.
Looking statements represent plymouth's judgment as of the date of this conference call and are subject to risks and uncertainties that can cause actual results to differ materially from our current expectations and <unk>.
And so urged to carefully review various disclosures made by the company, including the risk and other information disclosed and the company's filings with the SEC.
We will also discuss certain non-GAAP measures, including but not limited to core S. F. O S. S O and adjusted EBITDA Ari definitions of these non-GAAP measures and reconciliations to the most comparable GAAP measures are included in our filings with the SEC and now I'll turn the call over to Jeff Witherell. Please go ahead.
Thanks Chip good morning, everyone and thank you for joining us today.
First quarter was a great start to 2021.
And as we're five weeks into the second quarter, we are seeing a continuation of those results with strong leasing rent collections acquisition pipeline and and improving balance sheet I would like to once again, thank the entire Plymouth team for their many contributions to these results.
Let's start with our portfolio stats at quarter end occupancy was at 96, 6%.
Cash releasing spreads of 12, 1%.
<unk>, 99% plus of our rent and.
Core <unk> and <unk> per share above our forecast.
Based on this performance and the adjustments we've made to our full year assumptions for an increased level of acquisition and capital markets activity.
Firmed, our full year 2021 core <unk> and <unk> per share guidance.
With this strength and operations and continued strong dividend coverage and the board also decided to increase our quarterly common stock dividend by 5% with a second quarter dividend. We're pleased to provide this additional return to our shareholders. After navigating through the pandemic year of 2020.
I spent some time last quarter, highlighting some of our new disclosures to help properly value our portfolio.
We've added data on replacement cost components of rent.
Rent collections primary and secondary market concentrations, a breakout of potential developable land and value creation as well as our joint venture and relevant features of our preferred stock.
And I think it's going to take a little more time for the investment community to fully absorb the strong case, we're making with our data and want to highlight the key studies, we've outlined on page five day, clearly showcase where we are currently creating value through leasing or redevelopment and I would note in particular, where we've materially improved the returns of these properties and managing through <unk>.
And tenant fees lease extensions lease restructurings with rent escalations and longer lease terms.
We've also undertaken redevelopment and some cases.
And at our one 1 million square foot Fisher Park building and Cincinnati, we reconfigure tenant layouts to increased marketable space by 40000 square feet and have recently commenced construction on an additional 58000 square feet that should generate a projected cash yield of 14% on our $1 $6 million.
And this redevelopment is essentially installing floors over the open trading pits, but we do have over 30 acres available for future development.
We have one ground up development now underway and Portland, Maine, and we anticipate the 70000 square foot industrial building will be completed and the fall at a cost of approximately $7 5 million.
We are already in discussions with a potential tenant to take the space.
And Atlanta, where we own over 1 million square feet. We had several properties with additional land. We are actively exploring the potential to break ground. Later this year on a new 250000 square foot building.
With our history as real estate operators, we have the experience with development civil engineering, and construction for redevelopment opportunities and ground up development as well.
The components of NAV on page 14 of our supplemental list, where we have our greatest concentration of the 152 acres of developable land and the $1 7 million square feet of potential development and GLA.
We will continue to explore where we can selectively meet current or future demand that we can't satisfy with existing space within our growing footprint.
Another way, we are looking to address future demand and tenant need is with opening a new regional office in Memphis, We currently own over 4 million square feet and this market, including the portfolio, we have through our joint venture with Madison, We've made a hire locally and will be establishing and fully staffing that office over the next several months having boots on.
And the ground through our offices and Columbus, and Jacksonville has given us and competitive advantage and we believe it will provide the same for us and metropolitan Memphis.
Our balance sheet priorities remain unchanged, we want to ensure that our dividend well covered debt our leverage profile continues to improve and now we have access to multiple sources of capital I.
I discussed the dividend earlier and with the new annualized rate will still be at a payout ratio of less than 50% on core <unk> and 58% on <unk> based on our full year mid point.
Even with our increased acquisition activity, we are still targeting and net debt to adjusted EBITDA ratio of less than seven times by year end 2021.
The reason we were able to achieve this as we have been disciplined on our ATM activity by focusing on the greater net proceeds and the ATM can provide and its positive impact on trading and liquidity to help US match fund this increase and acquisition activity. While this is our preferred method of financing we have additional capacity on our line.
And access to over $340 million remaining buyer power throughout Madison joint venture.
We are as bullish as we've ever been on our outlook for industrial fundamentals and the strength of our markets. Our focus on the first mile to the last mile has proven to be a winning strategy properties and our wheelhouse and our markets continue to appreciate and value.
Would be hard for them not to with market rents, increasing new supply remains constrained and our target markets and tenants looking for space to accommodate growth and access to large pools of skilled labor.
Continue to believe that now is the time to own these types of industrial properties, and we're buying them right with embedded growth and the ability to create value through aggressive leasing and asset management based on decades of experience as real estate operators.
With that I'll turn it over to Pat.
Okay.
Good morning.
Here are similar refrain from most of US this morning.
We expect it to be for the year, if not slightly ahead of our expectations.
On our fourth quarter call, we outlined our plans for completing slightly less than $150 million of wholly owned acquisitions for 2021.
And based on the level of activity, we've seen so far we've increased that target up to nearly $200 million by.
And by yearend.
We completed our first transaction from a quarter and mid February and Kansas City for $8 $6 million and any.
Actual yield of eight 8% price per square foot of $39, which equated to an approximate 58% discount to replacement cost.
With a shorter weighted average lease term we've taken some leasing risks on the two tenants renewing but we're confident and our underwriting we've provided some additional color on page four of our supplemental to highlight why we like Kansas City and <unk>.
Weighted on the largest navigable inland waterway as the largest rail center and the U S by tonnage and has a 30% more Interstate and miles per capita and any other study and the nation.
We have a foothold there we expect to expand our footprint and the future much like we did across the state and St. Louis.
Our largest acquisition and the quarter was 772000 square foot single tenant industrial building and Columbus that is occupied by OTW logistics.
We acquired this building for $29 million and.
Net initial yield of seven 5%.
$38 per square foot.
Waiting to a 46% discount to replacement cost.
<unk> is well established and this market has been a tenant and this property since 1995 as well as occupy and nearby properties.
Asset brings our footprint and Columbus to nearly 3 million square feet. We've highlighted this acquisition on page four on the supplemental as well.
And Chicago, we acquired 149000 square foot industrial building occupied by <unk>, one of the country's largest producers of consumer goods packaging and labels for $7 $9 million.
And there the initial yield was seven 3% and debt.
$53 per square foot, we're looking at about a 54% discount to replacement cost.
This asset is located on the north shore Submarket and brings our total assets and Chicago to 38 buildings totaling $6 1 million square feet.
The other two acquisitions, where and St Louis and Cleveland and so.
And Lewis we added our seventh building with 142000 square foot asset acquired for $7 8 million and on initial yield of seven 6% and and Cleveland, We added 100000 square foot building, which brings our scale there up to 17 buildings totaling $3 7 million square feet.
But this quarter's activity indicates more than anything is that our strategy of acquiring one off properties or small portfolios and our target markets and then methodically grow and our scale continues to pay off handsomely.
We are creating value point.
Point, you again to our supplemental on page five where we've noted several transactions, where we've materially improved our returns through adding value or reposition properties and benefiting from implied cap rate compression.
We have few periods and our markets that have the combination of size and scale access to capital and extensive real estate operating experience with these types of assets.
We continued to demonstrate how we are able to keep our pipeline full.
And we underwrite assets that qualify for the REIT and manage and operate and add value when and where it makes economic sense.
The portfolio, we've assembled piecemeal and the last four to five years and markets, such as Atlanta, Chicago, Jacksonville, and the three markets and Ohio, Indianapolis, and Memphis, and all of which we now own over 1 million square feet have now experienced a sizable uptick in valuations and <unk>.
Price not just consistent with the strategy, we've been intentionally pursuing since day one.
As a result, the value add enhancements, we've made combined with recent cap rate compression and the portfolio premiums. We're seeing every day are evidence of that significant valuation uptick.
We provided a lot of data points. This morning, but one anecdote might drive home this point.
And there is currently a 3 million square foot portfolio being marketed for sale across a large portion of our existing footprint. We've looked hard at this transaction. We believe it is ultimately going to trade for a sub six cap rate.
That's the portfolio and our markets with comparable buildings, similar tenants and same occupancy levels and <unk>.
Solid marker or data point and further validation of where our portfolio is similar to ours are trading these days.
Looking ahead to our plans for the balance of the year. We are now targeting just under $200 million and wholly owned acquisitions up from $147 million projected a quarter ago.
Our published guidance outlines the expected timing and we are anticipating the cap rates for these for.
And for these acquisitions would be and the mid <unk> to mid seven cap rate range, given strong rental growth rates and mark to market opportunities and selected markets.
Pipeline for smaller opportunities and our markets remains very robust and as the anecdote I shared a test. So it does the potential for larger transactions and we look forward to reporting our progress on our investment activity as the year progresses.
I'll now turn it over to Jim to walk through the leasing activity and portfolio operations.
Okay.
Good morning.
Through the end of April we had released 76% of our leases that was scheduled to expire during the year.
This is comprised of $4 6 million square feet was scheduled to expire in 2021, including adjustments for acquisitions and early terminations.
Of that amount $2 3 million square feet.
Been renewed one 2 million square feet was leased to new tenants and 95000 square feet was vacated.
Leaves 1 million square feet that will expire later this year and we expect to have leases on shortly.
Additionally, we leased 125000 square feet on space that had been vacant at the start of 2021.
During Q1, we saw rental rates increased 12, 1% on commencing leases over prior lease rates on a cash basis.
During the year, we expect that rate increase to continue to be significant.
The overall rate coming down and reflect some large and long term leases coming online that will drive the average for instance, the new 10 year 527000 square foot lease at 3500, and southwest Boulevard, and Columbus will increased seven 7% over the prior lease on a net cash basis.
During and those leases, we expect to have an average of 8% to 9% cash rental rate increase on leases commencing during the year.
Portfolio wide occupancy at the end of Q1 was 96, 6% up 20 basis points from the end of 2020.
Occupancy was forecasted to be 95, 5% to 97% during the year, which we expect to maintain.
And can see within our portfolio included 263000 square feet and it's being repositioned at four locations, excluding that square footage occupancy rate would've increased to 97, 7%.
And forget these locations that begin to show benefits.
Percent of 146000 square foot facility, and Chicago has been leased and equal and we have prospects for the balance of that building.
True for 26, we have collected 99, 6% if I went and built during Q1 and 98% of the rent for April.
One small rent deferral was issued during the quarter and it will be paid back during the balance of the year.
And it's been a busy year to date 77 leases executed related to 2021 explorations totaling $3 6 million square feet.
An additional 15 leases totaling 500000 square feet has been executed for leases expiring beyond this year.
Numbers reflect the high level of performance at the Plymouth asset and property management teams are delivering and show that we are well positioned to meet our leasing and management requirements long into the future.
At this point I'll turn it over to Dan to discuss our financial results.
Yeah.
Thank you Jim.
Echo Jeff's earlier and encouragement to thoroughly review our supplemental.
We've continued to expand on our disclosures there and I will reference several of those this morning.
Turning to our first quarter results, our core <unk> and <unk> results are 40, and 32 per weighted average common share on units respectively. We're ahead of the 38 core <unk> midpoint and then 29%.
<unk> mid point, we previously projected.
The outperformance and these metrics was primarily related to lower than anticipated interest expense and greater NOI contribution from the non same store property pool offset by a decrease and same store NOI due to the impacts of the winter storms.
<unk> was also impacted favorably by lower than expected recurring capital costs.
Going into this quarter, we had expected we would see a 1% increase and same store property NOI on a cash basis for Q1.
Unfortunately, the 11, 9% increase and same store operating expenses related to the extreme winter and winter winter this year compared to the mild weather the prior year resulted and the decline of one 8%.
Insistent with other reports and this sector, we've seen so far this quarter with similar market exposure the increase in operating expenses more than offset the benefit of our strong leasing results.
As we look at the balance sheet and we continue to make progress on more closely match funding our acquisition and capital markets activity as well as staying on track with our full year and leverage target.
Our net debt to EBITDA at quarter end was six seven times. This ratio is in line with our original expectations of staying below seven times net debt to adjusted EBITDA.
At year end 2021, with the start to the year a bit below that level slightly above it and the two middle quarters and settling in less than seven times for Q4.
The composition of our balance sheet continues to improve as well with nearly 37, 5% of our debt unsecured thanks to the utilization of our unsecured line of credit and 62, 5% of our debt with fixed interest rates.
At this time, we have ample liquidity with $9 $9 million of cash on hand, plus an additional $4 8 million and operating expense growth and <unk>.
$110 million of capacity on the line with another $200 million available under the accordion provision if needed.
As noted in our earnings release, we affirmed our previously issued full year 2021 guidance range for core <unk> of $1 70 to $1 74 and.
And <unk> of $1 $43 48, while adjusting slightly our net loss range as well as each of the underlying assumptions.
The main drivers for these changes are the increased acquisition volume expected higher share count from the ATM activity and the first quarter and to date and the second quarter.
And the adjustment to our same store NOI based on on those higher expenses related to weather and Q1.
I'll briefly touch on several of these assumptions.
Same store property NOI growth on a cash basis is now expected to be and a range of 2.5% to 3%.
And with same store occupancy remained unchanged at 95, 5% to 97% for the year. This 40 to 60 basis point adjustment is entirely related to the higher expenses incurred in Q1.
Acquisition timing will be a primary factor and the quarterly cadence once again as we expect the second quarter to look much like the first quarter with the contribution from Q1 acquisitions and anticipated Q2, and Q3 acquisitions being offset by higher share count from the Q1 and Q2 to date ATM activity.
We expect to see the second half of the year benefit from the <unk> sequential ramp up of transactions.
The higher weighted average share and unit count now assumes we'll be at $29 5 million on a weighted average basis for the year and so today, we have a total of $29 9 million common shares and units outstanding.
We have been able to support our investment activities for the past several quarters with moves we've made to increase the flexibility on our balance sheet and have the liquidity to take advantage of a growing number of opportunities available in existing markets and as well as additional markets that fit our target profile. We've also been able to minimize the short term impact from acting.
And by gradually lowering our cost and both debt and equity capital and provide a platform to continue creating value for the longer term.
Operator, we're now ready to take questions.
And we will now begin the question and answer session.
Ask a question you May press Star then one on you touched on the phone. If you are using a speakerphone. Please pick up your handset before pressing the keys.
And so withdraw your question. Please press Star then two.
Our first question today comes from Dave Rodgers with Baird.
Yes, good morning, everybody, Jeff and Pat maybe to start with you on the acquisition pipeline I think when you gave guidance last quarter you had pretty much indicated that you were only giving guidance to the extent that you have the capital to pursue that so maybe I would ask is that same question again and also can you talk maybe more about the broader acquisition pipeline and the depth of what Youre looking at.
Today, the ability to kind of grow that as the year progresses and a second on that was can you talk more about maybe b versus a cap rate compression the actual cap rate compression, you're seeing as you're out there and the markets today.
Yeah. Thanks, Dave This is Jeff.
Yeah, I mean, I think what you've seen is we had some.
Some decent activity on the ATM.
And the first quarter and and the second quarter, a little bit as well so we have been able to.
Bring some more acquisitions to the table, which we're working on.
And Thats, where the increase comes from.
We've got plenty of capital available and the joint venture we've got capital.
Our line is.
This pay down we get capacity there.
And just to add to that Dave.
And here.
You mentioned and our pipeline right now.
Our pipeline is just under about $700 million worth of deals that we're that we're analyzing.
And as you know, we've always maintained a fairly strong and robust pipeline that is not different at all.
We have seen.
And some some cap rate compression and even in the last 90 to 120 days.
I think you'll see that across the across the board. So we're still being very particular and prudent about which deals we pursue.
Okay. Thank you for that and then maybe Jeff or Dan on the same store change you were really clear about the weather impacts. So I appreciate that component of it I guess I wanted to ask a little bit further about I think you are 70% net leased so wondering if you get some of that back at this just hit and markets, where you tend to be growth or modified.
Growth and you didn't change the occupancy so it just seems like it's really coming back to this kind of one issue. So maybe any additional thoughts you can provide around kind of the ability to recollect some of that or how that just hit.
The income statement overall.
Dave I think.
Appreciate the question I think you've hit it right and right on.
On the on the head.
Some of the mix of our lease structure between Triple net and gross and we've got.
Recovery factored that there's potential for sure.
We took a hit of about $500000 in the first quarter relative to.
Snow removal and other other costs directly related to weather some of that we expect through definitely we will be able to recover well.
And final number and Recoverability won't be determined until year end as you balance out all of the various <unk> adjustments.
Okay I appreciate that that's helpful. Thanks, guys.
Thank you.
Our next question comes from Connor Seversky with bearing Berg.
Good morning, everybody. Thanks for having me on the call.
A quick question on Kansas City I'm, just wondering if you could provide some color on what you see in terms of supply growth there.
And just maybe a little bit more on the competitive dynamics and the and that market specifically.
Okay.
Yes, hi, cornerstone on here.
We see similar characteristics and Kansas City, as we do and all of our markets.
Supplies.
New supply is still relatively constrained.
And whether it's Kansas city or St Louis or other nearby nearby markets.
So supply demand balance still.
It still is.
There's still.
And place.
Across the board.
I think youre going to see about of all the all the new construction and coming out of the ground.
About half of it is.
Pre leased so.
I think that applies and Kansas city, as well as well as other markets.
We entered.
Nearby St. Louis just over a year ago that has proven to be a wonderful market for us we're still on.
And deals there were still expanding our footprint.
We're looking at additional deals and the Kansas City.
As I mentioned earlier and we like we like everything.
And that there is and Kansas City and in fact that it's.
On our largest and.
And waterway.
The largest rail center by by tonnage and we.
We just think it's going to be a great place.
To buy and operate assets for the flow of long term.
Great and I'll leave it there thank you.
Our next question comes from Alexander Goldfarb with Piper Sandler.
Hey, good morning.
First.
Jeff.
Portland, Maine, and certainly a great great city, good good seafood, but development.
Curious if you could talk a little bit more about the decision to develop there and then just broadly you guys have a successful track record on buying existing assets and.
And that's been a hallmark of the platform since the IPO, but.
But maybe just comment a little bit more on how you see developments fitting in there and.
What are your thoughts on it.
This is gonna be purely on spec basis, or do you envision being able to do.
Build to suits.
Okay.
Hi, Alex.
Yes, thanks for the question.
Something we do want to highlight so yes, I mean, I can get specific a little more specific on Portland, Maine. So we are and established industrial park in the actual city limits of Portland and.
It's a great city, it's fairly built out and very little land available very land constrained.
So we own 200000 square foot facility. There now are at least two.
Two good tenants one of the tenants are looking to expand.
So this is additional land that we've owned.
And we learned this.
Pat and I've learned this over the years, where we can make these acquisitions.
With additional land you don't really pay for that land maybe in today's market you start to you'll start to see that happen, but you know you go back 2345 years ago, the land and it didn't have had very little value to it. So we're able to put up a 70000 square foot building.
Development and new England as you know is very difficult I mean, we had to go to the Army Corps of engineers.
Which most parts of the country don't even know who those people are and.
We got that approved we broke ground about two weeks ago. We have it is on spec as we sit here today, but the.
The axiom of build it and Asia Com is you Couldnt couldnt scripted better deals and Portland and for us to do that.
So we have several people interested and the building and.
Although there's no guarantees I feel very comfortable but up by by the end of this year when we deliver that building we will have.
It'll be leased.
Is it equates to Atlanta, and Thats, another scenario, where we can build about 250000 square feet. We have been in discussion with one of our tenants to do a build to suit.
We're ramping that up pretty quick there is.
Additional demand in the marketplace according to our brokers.
No.
This is not so much a broad based development strategy as it simply additional land that we own.
Tenants are asking us for additional space and if there if they are located and the general proximity and Theres no additional space for them then they will move to new construction.
As to why.
We look at that.
We're projecting high single digit yields on our construction.
So I think that blends and very well with our mid to high single digit returns on acquisitions.
So I think that's why we do it does it is demand for it we own the land we have the expertise and we're building two good yields and some other markets.
The development yields are quite low.
Compared to where we were were seeing ours.
Our next question comes from Craig Mailman with Keybanc capital markets.
Hey, Jeff just a follow up did I Miss did you actually give a development yield of what you could get in and Portland, and maybe the 250000 square foot.
And their location and Youre looking to build.
It Didnt, Craig simply because you know.
And is not finished.
I mean these are.
And these contracts are or would be would be.
And basically.
Gross contract right. So.
We know what we're getting into.
And.
Cost overruns or are borne by the by the builder.
But it is not leased yet either but our.
And as I said high single digits is what our returns are penciling out to as far as yields.
Okay. So like a 100 to 200 basis points above where you guys are buying.
Exactly.
Okay.
And I guess, how much of this would you want to do a year if youre looking at.
$200 million of acquisitions, you guys have.
Additional land to develop and how much.
Would you guys one on your plate from that standpoint.
Do you guys have a development capacity and house are you doing everything.
Kind of a third party.
Well, there's a lot of questions and there Greg we are neat.
And I just wanted to make sure I get them answered for you.
We have development.
Experience in house, and we might my background as civil Engineering land surveying my early days and.
And then worked for a developer for a number of years. So we have development experience and Thats just me and if you go across the room pendants built plenty of things and then we've got a pretty deep bench here that you probably haven't seen but some of other people.
And three or four other people here that have a ton of experience and Jim comments at the table and.
He's been.
He spent 15 years at Nortel globally building out all of their properties. So we have the experience from that level, but we're not we're not higher and the concrete and steel and that we basically have.
General contractor, that's working with us on the design build and.
And have that done.
So we have the experience again as I've already said three times I apologize for that.
We feel very comfortable with it if you look at our board our board has a tremendous amount of experience and in construction and development as well so.
And there.
And how much we want to do with it.
It's opportunistic for US right, we're not out trying to assemble land and acreage.
And to become a day.
A big development.
Industrial player, but these opportunities to come and right at us.
You know it.
We don't see much risk and it quite.
And quite frankly, so I don't know if you have a dollar figure really it so we've got quite a bit and Cincinnati we've got.
35, plus acres there we could build on the demand and it's one of the hottest markets and the country for industrial so.
And if the right opportunity comes along.
And we're going to do it.
Alright.
That's helpful. And then just on the decision the board's decision for the dividend.
We thought it was a good idea that you guys cut it retain the capital was the dividend increase I know and and nominal basis, it's not tremendous amount of money, but was that driven by the need to do it because you guys are bumping up against taxable net income or was it a the board felt like it was a nice thing to do for sure.
Our holders.
And it was a combination.
No we didnt have to do it this quarter for the taxable, but we are bumping up against that.
And.
And.
I think it's a good policy and remember our again our board is made up of.
A lot of a lot of people that have a lot of REIT experience right.
A REIT experience and so I think we wanted to get back on track and.
Put that dividend raise and place and if we could do it each year as well as the cash flow keeps growing and the rents keeps going up 205, six and a year, we think it makes sense.
But I guess from a dividend policy you guys are a little bit capital constrained here or have been historically is the board and to continue to do kind of what's necessary or.
Are you guys going to forego that retention.
Maintaining all four and five 5% dividend yield and just trying to get a sense of.
The dividend policy here tied to taxable versus tied to getting on a dividend treadmill that.
And is more tied to the payout.
Sure.
I think as we evaluated.
While we're moving in the direction of the taxable income thresholds.
The conversations tend to be.
Directed predominantly towards the payout ratios and maintaining that on a on a positive debt balance.
And what we're seeing and the marketplace.
And then just one last one do you guys have really done a nice job of being able to source assets.
Good markets, where the public guys just kind of shied away from but could you just talk a little bit about.
And the growing competition from private players in your markets down debt cap rates on the coast are really difficult to to big pencil for a lot of guys given their cost of capital.
Yeah Gregg on here.
And we've always seen some competition.
And all of our markets.
From from.
And from from private.
Companies or partnerships or kind of more on what I would call the local or regional.
Buyers I think thats.
Kind of where we where we shine a bit.
A public REIT, well capitalized and have.
Good good cost of capital.
And we're oftentimes.
When we're when we're bidding.
For our property and there is from competition.
More often than not sellers like to deal with with someone like ourselves that can close quickly all cash with.
Very few if any.
<unk> is like a financing contingency, which a lot of it is private guys have to deal with so.
To your point I think there has that competition has ramped up moderately and the last.
Three to six months.
I think as I mentioned earlier and.
And if you read the same research reports that we all do we're seeing some some cap rate compression and our end markets a lot of a lot of buyers that were once and tier one of our primary markets are now kind of looking to the tier two of our secondary markets for for yield.
Is that constant.
Balance if you will that we're we always take a hard hard look at when.
And when we're when we're thinking about acquiring properties and our and our markets, but our our strategy is no different today than it was four or five years ago.
We're very very happy with our results and look forward to continuing to do more of the same.
Our next question comes from Gaurav Mehta with National Securities.
Yeah. Thanks, Good morning, and your prepared remarks, you talked on on our portfolios being marketed for sale and our comparable portfolio and comparable market and pumps.
Six months and campaign.
And you guys had musical ly and more color on that portfolio and then as a follow up.
And you do keep acquiring properties at a higher cap rate.
On a comparable and product type is sending it from six months from cap range.
Yes, sure I did mentioned that on one specific.
Portfolio, there are a number of portfolios that were.
Sure.
Aware of either.
And then in terms of bidding on them or we're just playing aware of this particular one is.
Quite sizable over $100 million and.
And our markets.
That will most likely trade below a six cap as I mentioned earlier again, there are others as well.
Just kind of goes to what we're seeing and the market.
And also relates to.
And the assets that we currently own and our own portfolio those that we have.
Wired over the last four or five years at much higher cap rates and now have seen.
A significant uptick and valuation.
As a result of cap rate compression and premiums on portfolios as you probably know.
So we look at small to mid sized portfolios as well as on one off deals what we call hitting singles and doubles, where yes youre more.
Perhaps to find deals that are.
A little bit higher cap rates from.
Kind of on the 707 five cap rate range.
And obviously, we don't just look at cap rates per se. There's obviously many other.
Moving parts that go into analyzing our transactions, but in general that's kind of where we are today.
And given today's market.
Okay. Thank you.
Okay.
This.
A question and answer session I would like to turn the call back over to Jeff whether al for any closing remarks.
Yes. Thank you everyone for joining us today as usual we are available for follow up questions.
So please get in touch and thank you.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.