Q1 2021 Lexington Realty Trust Earnings Call
Good morning, and welcome to the lessee.
From Realty Trust first quarter 2021 earnings conference call on.
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I would now like the turn the conference over to Heather Gentry Investor Relations. Please go ahead.
Yeah.
Thank you operator, welcome to the Lexington Realty Trust first quarter 2021 conference call and webcast. The earnings release was distributed this morning, and both of the release and quarterly supplemental are available on our website in the investors section and will be furnished to the SEC on the form 8-K.
Certain statements made during this conference call regarding future events and expected results may constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Lexington believes that these statements are based on reasonable assumptions, however, certain factors and risks, including those included in today's earnings press release and those described the reports the Lexington files with the SEC from time to time could cause Lexington, the actual results to differ materially from those.
Expressed or implied by such statements.
Except as required by law Lexington does not undertake a duty to update any forward looking statements.
In the earnings press release, and quarterly supplemental disclosure package Lexington has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure.
Any reference in these documents to adjusted company F. F. L refers to the adjusted company funds from operations available to all equity holders and unit holders on a fully diluted basis off.
Operating performance measures of an individual investment are not intended to be viewed as presenting a numerical measure of Lexington historical or future financial performance financial position or of cashless.
On today's call will Eglin, chairman and CEO, Beth Boulerice, CFO and Brendan Mullinix C. I L will provide a recent business update and commentary on first quarter results.
Executive Vice President of Lara Johnson, and James Dudley will be available during the Q&A portion of our call I will now turn the call over to Wil.
Thanks, Heather and good morning, everyone. We had a great first quarter overall and continued to make substantial progress on executing our business plan.
Adjusted Company <unk> was 22 cents per diluted common share in the quarter, which included $10 $9 million of lease termination income primarily associated with the legacy industrial assets in Durham, New Hampshire.
During the quarter, we purchased three industrial assets for approximately $51 million and completed the fully leased development project in the Columbus market.
Overall these investments produced average estimated stabilized GAAP and cash cap rates of six 1% and for.
Five 9% respectively.
Market rents across our portfolio continue to grow.
Occupancy is healthy and our industrial exposure represented over 91% of gross real estate assets at quarter end, excluding held for sale of assets.
We continue to see the value of our industrial property has steadily increased during the quarter and we believe the value of our office portfolio is also improved image signs of the pandemic easing.
The.
There are several factors continuing to drive up the overall value of our holdings capitalization rates continued to be under pressure replacement cost is increasing rapidly.
And tenant demand is driving rents higher on.
The industrial portfolio is benefiting from all of these trends with first quarter industrial base and cash base rent renewal increases of.
2000, 14.6% and five 4%, respectively, representing the most visible sign.
Yeah.
The factors driving valuations higher are also supporting the highly competitive investment landscape.
We continue to focus our time on finding the best risk adjusted opportunities in our target markets in the Sun belt and lower Midwest.
The industrial purchases in the quarter included two facilities in Indianapolis and one in Central Florida.
Additionally, we have approximately $206 million of assets either under contract for with an accepted offer.
Which we expect to close later this quarter.
After a slow start that is typical of the first quarter current deal flow is robust with more than $1 billion of investments under review.
We are mindful of pricing as there continues to be a lot of capital chasing opportunities in a competitive market.
On the development front, we are finishing the construction of our Atlanta project and Fairbairn and we're committed to two other projects in our target markets of Indianapolis in Central Florida.
Development and the purchase of vacancy continue to be attractive ways for us to produce stabilized yields in excess of what is available in the purchase market for fully leased buildings.
Turning to the leasing we leased one 5 million square feet during the quarter and at quarter end, our stabilized portfolio was 97, 8% leased.
The asset management team has done a terrific job in securing both lease extensions and new leases with increasing rents.
In addition to the three lease renewals in our single tenant industrial portfolio.
We raised occupancy at our multi tenant industrial facility in Antioch, Tennessee to nearly 100 per cent and.
And simultaneously increase base rental rates by approximately 16%.
For the two new tenants within the facility.
Subsequent to quarter end, we executed a five year extension at our 423000 square foot industrial facility in Lumberton North Carolina.
The increase base and cash base rent by 23 per cent and eight 6% respectively.
Our balance sheet continues to be in great shape with net debt to adjusted EBITDA of four six times at quarter end.
Our cash balance at quarter end was $170 million, including restricted cash we.
We had $94 $5 million sold forward in our a T M.
Liquidity was enhanced during the quarter by $58 million of sales at GAAP and cash cap rates of $6 three per cent and six 5% respectively.
Will be augmented by retained cash flow throughout the balance of the year.
Subsequent to the quarter, we sold our industrial facility in the Laurens, South Carolina for $40 million per.
Currently we have assets under contract or with an accepted offer for an aggregate gross price of approximately $135 million.
Our remaining noncore sale portfolio consists of 17 properties, which generated the first quarter NOI of $8 $2 million we.
We believe the current value of this portfolio is approximately $290 million.
Finally, we continue to make progress with our ESG efforts and have disclosed long term environmental targets.
In addition, we distributed a tenant survey to collect data gain feedback and identify opportunities to partner with our tenants.
We became a supporter of the task force on climate related financial disclosures and our participant member of of grabs the.
We are working on reporting to the grasp real estate assessment for the first time this year.
With that I'll turn the call over to Brendan to discuss recent investments in our development pipeline.
Thanks, well.
The two Indianapolis assets, we acquired during the quarter are virtually identical buildings, each approximately 150000 square Plaza.
Class a facilities built in 2019.
Well located in northwest Indianapolis within one mile of by 65 the pro.
These are 100% leased each with two tenants and have a weighted average lease term of just under five years with rental escalations of 2.5 per cent.
Indianapolis Central location excellent infrastructure and its large high quality labor pool make it very attractive to bulk users, particularly e-commerce distributors.
Indianapolis is one of the top five cargo of airports in the country with the second largest Fedex hub in the world and it ranks as one of the top 10 U S bulk distribution markets.
The Central Florida acquisition like line is an example, where we can add value through leasing up some vacancy in the facility.
The property is a brand new 222000 square foot class a warehouse distribution center and it's primarily leased on a long term basis with two five per cent escalations to credit tenant motion industries.
City of genuine parts company.
We are currently in negotiations with the potential tenant for a portion of the remaining square footage and have multiple prospects viewing the additional space.
As we work towards the stabilized cash yield forecast it to be approximately five 3%.
Lakeland is the core sub market on the I four corridor between Tampa and Orlando.
Two of Florida's largest and fastest growing msas in.
And the property is just a short distance away from the new Amazon Air hub facility in like that.
All of approximately 320000 square foot Rickenbach, our project in Columbia.
Two of subsidiary of Pepsico was completed in the first quarter.
The estimated GAAP and cash stabilized yield of seven 9% and seven 7% respectively.
As will mentioned, we continue to have an attractive pipeline of development projects underway.
And the Atlanta, our class eight 910000 square for development project is expected to be substantially completed this quarter.
The Atlanta posted record positive absorption in the first quarter of over 8 million square feet.
And the airport South of Atlanta, Submarket, where the property is located let the metro with over 5 million square feet of positive absorption.
We currently estimate our development cost to be approximately $54 million.
And our stabilized cash yield is estimated to be around 525 per se, which assumes a 100% occupancy and payment of our partner of smoke.
The property isn't of prime location, along the I 85, South Submarket of Atlanta.
And we've been seeing sales trade at substantial premiums to go on costs.
Today I'll touch on the two development projects that we have begun funding in central Florida and Indianapolis.
The Central Florida project, because the class a one 1 million square foot warehouse distribution center.
Located on the 90 acre site with frontage on I 75 and the.
Our recently purchased Amazon facility.
The estimated development cost is approximately $81 million.
Okay. All of it is very well situated for statewide Florida distribution requirements located just north of I 75, Florida Turnpike slate offering access to Tampa, Orlando, and the east and West Coast of Florida.
As well as more of towards Jacksonville on Georgia.
Our Indianapolis project in Mt comfort.
We began funding subsequent to the quarter is just 14 miles east of downtown Indianapolis.
The easy access to high standard.
Now for just one of Indianapolis fastest growing modern logistics Submarkets and offers a very favorable labor profile relative to other competing submarkets.
The $1 1 million square foot facility has an estimate of cost of roughly $60 million.
Like art van of development projects growth projects each of market the specs.
Including 40 foot clear Heights.
Fishing pipe plants truck for deaths building depth of column spacing.
And ample trailer on car parking to meet the demands of e-commerce and other bulk distributors.
The shell completions are anticipated late in the first and second quarters of 2022 for the Ocala and now comfort projects, respectively, both with stabilized cash yields in the mid five per cent range.
We will continue to provide regular updates on the progress of these projects.
With that I'll turn the call over to Beth to discuss financial results.
Thanks, Brendan we generated adjusted company at the <unk> of approximately $64 million or 22 cents per diluted common share in the quarter.
And adjusted company <unk> would have been approximately 19 cents per diluted common share excluding lease termination income of $10 $9 million.
As announced this morning, we increased the low end of our 2021 adjusted company <unk> guidance range by a penny to a revised range of 73 to 76 cents per diluted common share.
Revenue during the quarter were $93 million, representing an increase compared to the same time period from 2020, mostly due to new acquisition and the termination income I just mentioned.
Property operating expenses were roughly $11 million with approximately 88% attributable to tenant reimbursement.
First quarter, G&A was $8 $4 million and we expect our 2021 on G&A range to be $31 million to $33 million.
Overall same store NOI increased two six per cent and would have been approximately one 7% excluding single tenant vacancy with our same store leased portfolio at 97 five per cent.
More specifically industrial same store NOI increased one five per cent and would have been two 8% excluding single tenant vacancy.
At quarter end, approximately 88% of our industrial portfolio leases had escalation with an average rate of two three per cent.
On the capital markets front, we took the opportunity in the first quarter to increase our availability under our ATM program the $350 million.
Additionally, we entered into sports sales contract for an aggregate of $3 6 million common share which have not yet settled.
As of March 31st we had $8 6 million common share on settled under forward sales contract, which had an aggregate settlement price of $94 $5 million.
As Rob mentioned, our balance sheet is in terrific shape with low leverage and ample cash available at quarter end, we had nothing outstanding on our unsecured revolving credit facility and on.
Unencumbered NOI remains high at 91%.
In addition, our consolidated debt outstanding was approximately $1 4 billion with a weighted average interest rate of approximately $3 three per cent and a weighted average term of six seven years with that I'll turn the call back over the world.
Thanks, Beth I will now turn the call over to the operator, who will conduct the question and answer portion of the call.
Okay.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
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At this time, we will pause momentarily to assemble our roster.
And of our first question will come from Anthony pillar of J T.
P. Morgan. Please go ahead.
Okay, Thanks, and good morning.
My first question just a clarifying one of the.
The $10 $9 million of term income in the first quarter is that included in your 73% to 76% on.
Guidance for the year.
Yes, it is Tony.
Okay. Thanks, and then just the the Florida asset Brendan talked about where you're taking on some some lease up there just whats your appetite for those types of transactions and should we see doing more of those.
Okay.
Yeah, I mean, I think our expectation is that well, we will do a little bit more of that going forward.
And that's a function of the.
The few things, we're getting more concentrated positions in our markets.
That's creating the market knowledge and data to allow us to underwrite the class a warehouse investments.
Where we can lease them to a stabilized yield that sort of well in advance of where we could purchase fully leased buildings. So.
And I think we'll do a little bit more than that but it's you know it's not gonna have become the dominant focus.
Okay, and if you think about the Lexington, the weighted average lease length. It's about seven years seems to be somewhere in the middle of some of the net lease companies closer to 10 than the pure industrial operating rates, maybe all of closer to five.
Where do you think the sweet spot should be or do you think over time that gravitation of different direction up on down.
We like it where it where it is theres been in.
The warehouse distribution market, there's been a shortage of of longer lease opportunities recently.
You tend to see it in the sale leasebacks and sometimes the build to suit where the facilities of more specialized.
So you know, we we like seven years, but it it could get shorter.
Uh Huh just based on what we're seeing in the market.
Okay, and then just a last one for me just to tie up the disposition side, you mentioned of $135 million to be sold but then you mentioned the $8 2 million of non core NOI of worth about $290 million or the is the 135 in a matter of those <unk>.
I just wanted to tie that together.
The the 135 is in the 290.
Okay, and do you think that Qunar.
290, you'd be done this year or that's just sports what's left.
That that's what's left I think one of the reasons why we did not increase the higher end of our guidance as you know recognizing that we're hopeful that with the pandemic easing we may have opportunities to move more quickly on.
On the sale front.
But you know the time time will tell we'd like to move out of that portfolio is as soon as we can but it would be hard to move it moving at all before year end.
Okay, great. Thank you.
Yeah.
The next question comes from Sheila Mcgrath of Evercore ISI. Please go ahead.
I guess good morning, well I was wondering if you could give us your big picture thoughts on M&A in the sector and the valuation on Monmouth's just your thoughts on that.
Yeah sure Sheila there's been a two substantial M&A announcements in the last couple of weeks.
As you know the the first one realty income and for REIT was interesting to me because I'm at Realty income you have a very large well capitalized company with a good cost of capital.
You know maybe beginning to act like a consolidator on the path to being a much much larger entity. So I thought that was that was interesting and head of thought very positive implications for the net lease sector.
Overall, the thought of the transaction was very well thought out of the structure very very impressed.
With the management presentation.
And you've got the tip your hat, the Glen refinement and Paul Mcdowell for doing such a great job.
For Reed, so I thought that was a win win for both shareholders.
Each company.
And when you see that in an M&A transaction, it's good for the whole REIT sector too so.
You know that that I thought was a really positive.
The equity Commonwealth and Monmouth's I think has very positive implications for us too, but they are for once and the.
The case of equity Commonwealth, you've got a very well respected management team essentially reaching that conclusion.
The industrial is likely to be of really good asset class for a long time, and we share that view. So I think that's sort of an endorsement.
Of our strategy and Oh from what I can tell some people of question you know the the high price maybe but.
You know two to access the industrial market with any kind of scale you know the the sort of entry price is what it is I would be more focused on you know how equity Commonwealth is going to deploy its cash to scale of the platform. So.
Joe two very different transactions, but I think we feel very very good for us at the same time.
Okay, Great and then on if you could give us a little more detail on that lease termination fee.
On what kind of asset was that on and what are your prospects to backfill that.
I'm James do you want to jump in on that one.
Yeah sure. So we had we had one tenant that at lease expiration at the end of March and then we had a subtenant that was stepping into a direct lease that wasn't committed to the property. So we thought just kind of given the situation and talking with the the two tenants that while we had the incumbent tenant in place. It was the best time to maximize value.
Through a negotiating of surrender and also getting some lease income from the the second the second piece of the transaction. It's a mixed use property, it's got office and industrial and from a leasing perspective theres been some preliminary interest, but there has been quite of bit of of interest from a.
The sale perspective, so I think that that will probably ultimately be the outcome would be of sale to.
For someone who would redevelop the property, but again it was really just the.
The way, we thought about it it was our opportunity to maximize the value of the property through the transaction that we executed and then potentially exiting the property.
Okay, Great and one last quick modeling question. The development that came on line. This quarter on what was the timing inter quarter to help us model going forward.
Yes.
Okay.
Beth do you want of jumping on that one.
Okay.
Hey, Sheila it came on line in March.
From this year okay.
Okay. Thank you.
Sure.
Okay.
The next question comes from Craig Mailman of Keybanc capital markets. Please go ahead.
Hey, guys. So well I appreciate your thoughts on the M&A and kind of of the commentary about asset values kind of rising here.
Curious you know your cost of capital has also improved for.
The significantly here over the last year or so just how are you guys viewing kind of what you're willing to pay given your blended cost of capital and kind of the growth.
Prospects for industrial here.
Okay.
Well, what we've been doing Craig for the most part is trying to closely match I'm not exactly dollar for dollar, but if you look at disposition activity for first quarter and kind of our commentary about second quarter.
Yeah acquisitions may be 260 odd million.
The.
Dispositions, maybe 230 odd million, but we've sort of been using the purchase market.
And just taking the sale proceeds from liquidating the office portfolio in a handful of other things and redeploying them in the purchase market.
And then we've been selling.
Selling some stock forward in the a T M, which we would sort.
Sort of plan on drawing down to invest in our development opportunities, where the accretion math works best So that's sort of philosophically.
How we're approaching the business from you know from a capital standpoint.
And as the as I said, we've been really just been it's using disposition proceeds to make purchases so far.
No no I get the the mechanics of how you guys are doing I guess I'm, just kind of higher level you guys of $290 million left to go subject of 130 fives.
Teed up but once you get through that right your cost of capital will significantly improve because you'll be using equity and debt to fund future acquisitions, and so I'm just trying to think longer term you guys have done a nice job of sourcing some higher yielding developments, but.
Clearly as you want to build out the industrial portfolio of maybe one of the mix in <unk>.
Kind of some higher growth markets of today of a lower going in yield.
How you guys are thinking about your competitiveness at may be kind of a.
Less term more near term rollover to get some growth from the portfolio versus continuing to buy out maybe some higher yielding developments, which may not hit right away you know in terms of kind of more closely match funding of the dilution from <unk>.
The capital raises versus getting the NOI on line.
Kind of building out of the portfolio longer term.
Well I think were sort of uniquely positioned right. Because we're we're very active in the single tenant net lease marketplace, right, which has fully leased buildings with stable cash flows and growth and yet we also have the the skill set to produce.
More returns on that we are buying some vacancy of.
Partnering with the.
Developers. So you know I I agree with you that there's the potential for our cost of capital to get much better that may allow us to be a little bit more active in the purchase market, but I think it's it's the tiny bit premature to speculate on.
What the ideal mixes of you know how active we would be in purchases versus versus development.
And then maybe one just quick one for Beth what what do you think the timing is of pulling down the 94 and a half a million dollars of forward equity just for modeling purposes.
Sure.
So we have to pull it down between August and February. So it went on to be dependent on the development budget and as we need to to fund the development projects will be coming down during that time.
Great. Thank you.
Oh.
Yeah.
The next question comes from Elvis Rodriguez of Bank of America. Please go ahead.
Good morning, and thank you for taking the question maybe just a quick question on the termination income how much was included in guidance coming into the year and how much is included for the remainder of the year.
Hey, all of this yeah. It was we had known about it and it wasn't guidance.
On.
The other line when we gave guidance last time.
We weren't it wasn't on a solid thing, but we thought that it may happen. So it wasn't in there, but yeah going going forward. There is one of the there's a little bit of termination income that's going to be spread out over the year for another tenant.
But it's it's it's about Oh, it's not that much compared to the other one is it's about 600000 of quarter.
And that's the lost revenue from derm over the balance of the years balance it's about $1 8 million.
Exactly exactly.
Okay, that's very helpful.
And then and the will perhaps you can help US here. So you had mentioned you know potential.
As physicians of about.
The 300 million on investments of about five to 600 million I'm, assuming the investments also includes developments. So you really just debt net of like call. It 10 million on your acquisitions and dispositions excluding development should we see more of that occur for tourism and towards the end of the year or.
Once you you know how should we see the deployment of this capital.
In terms of the.
The development spending or on the acquisition side on the on.
The acquisition front should we see it coming from on the acquisition side.
Yeah, I mean, I think we have of visible pipeline through June 30.
And you know that that gives us the chance to be methodical and disciplined with respect to working up to wherever we get debt at year end.
You know I'm I'm hesitant to sort of predict a bigger year than what we've talked about before just because they think that the that sort of creates an internal dynamic where you know and encourage us to be a little bit more aggressive than maybe we should be.
So I think we'll take the market as it comes but we're clearly positioned to deploy a lot of capital. This this year in and the.
I'm heartened to see the amount of transaction activity on co on the deal sheet, you know compared to first quarter of wins you know typically it's very slow, but there's it's a very very large and very robust market at the moment.
Great and just one more for me you had a new tenant units are.
Added to your top 15 tenants this corner.
How comfortable do you feel with tenant concentration I mean, Amazon is now a little over 6%. So anything you can share of how you think about your portfolio and tenant concentration as you build out your industrial platform. Thanks.
Sure Yeah, we we've been trying to avoid them.
Sort of it.
The concentration above I'm sort of.
Above 5% on any in any one place on Amazon would would be the exception.
At the moment, but.
We like having a very balanced.
Credit exposure.
Yeah.
Great. Thank you.
Okay.
Okay.
The next question comes from Jon Peterson of Jefferies. Please go ahead.
Great. Thanks, well I Wonder if you can give your thoughts on the.
The idea of eliminating 10, 31 exchange I guess, specifically for the Alex P portfolio, what that might mean for the office properties that youre still trying to dispose of and then you know how you anticipate that might impact the the transaction markets and your growth plans going forward.
Well that would really be an earthquake for the real estate industry. So I I personally have not reached the conclusion of that that's likely but it's you know it's safe to say that we're we're racing to finish.
The the job as fast as we can.
And what we've been doing with our sale of proceeds where we have a low tax basis office buildings as we've been redeploying the capital into class a modern warehouse the distribution facilities that.
Ideally, we hope to never sell them, we just the enjoy the rent growth forever and ever and never have to worry about.
The redeploying the disposition proceeds in and having to manage it the tax position.
So that's where we're trying to get the portfolio to them.
Who knows how the tax legislation will work out.
But for years and years of the years selling long term net lease investments to you know to passive investors in the 10 31 exchange market has been.
But the great sort of source of of liquidity for sellers and often at prices that reflect the fact that you have of motivated buyer trying to further tax gains so that that would be as I said on earthquake for the industry.
The hard hard to see them.
And how that how that moves for it but you know you never know in this world Yeah. Okay, and then just I apologize if I missed this but the the joint venture that you guys have on your press release, the $1 1 million square feet in Indianapolis could you give us some details on the economics of that joint venture.
Sure Brendan you want to jump in there.
Yeah.
Yeah sure Hi, John.
Yeah that debt.
That transaction in Minneapolis.
Structured similar there are other.
Merchant builder.
Spec development joint ventures for.
For competitive reasons.
I don't like to get deep into the details about how those are structured but I'd.
It's a and on a high level at the <unk>.
80, 20 joint venture and then there is a there are promote structures to our merchant builder.
And are based on the on success.
Okay, Alright, that's helpful. All right. Thanks, guys.
The next question comes from Todd Stender of Wells Fargo. Please go ahead.
Hi, Good morning. Thank you just looking at your quarterly leasing summary of the Kraft Heinz lease kind of stuck out in the I know it was renewed last year, but then the.
It got extended again here in Q1 I just wanted to hear any details you have.
Sure so that one.
Yeah, So craft had a a five year of fair market option and they exercised it.
And the anticipation that there would be a discussion on the longer term lease so the exercised it and then we continue to negotiate with them. They wanted a small amount of T. I and we're willing to go 10 years. So really it was an exercise last year two to protect themselves.
So that they could get the five year extension, new they would have the space without competition ball, we negotiated the longer term.
Alright, that's helpful. Thanks, and then for will.
Just with construction costs continuing to rise driven mostly by the housing market.
How have the material costs are impacted your return expectations. As you guys think about breaking ground on on new development.
Yeah.
I think on maybe I'll ask Brendan to just offers US perspective on you know the the two new projects because you know so so far it hasn't it hasn't impacted us very much.
Okay.
Yeah sure I can touch on that.
So first of all on something that the rising construction costs are something we're very mindful of.
In particular the.
The steel pricing.
As is one factor that's.
Had a big impact on our sector.
So so far of the development projects that were discussed in my prepared remarks.
We have secured steel pricing and deliberate.
Which is important as many may be aware of there there are really two issues today surrounding steel one is the escalating pricing and and the other is protracted delivery schedule.
You know I think that the one thing about escalating construction costs and including sales pricing.
While it's.
Not a positive I think that it will contribute to a potentially contribute to a greater rental growth.
And I think you know in terms of the projects that were discussed having secured our steel.
That will allow us to deliver ahead of other competing supply and at a better base there's been other new starts.
So I think the.
Those factors are will actually help us from a competitive standpoint.
That's helpful. Thanks Brendan.
Yeah.
Yeah.
The next question comes from John <unk> of Ladenburg Thalmann. Please go ahead.
Good morning.
So on one of the other aspects of the Realty income Beirut merger was the potential spin out of their office properties into a separate company.
On that May also be looking to kind of scale up as it rolls out.
The potential transaction change how you look at monetizing the JV office portfolio or even some of your on balance sheet office assets.
No not necessarily.
Thank you sort of have to wait and see how of that that trades and you know whether whether it has.
Access the capital to put to work.
We're in terms of our office joint venture I think we're very pleased with its performance.
You know so far and we're not looking at any sort of large scale exit strategy of at the moment it would be great for the sector. If if there ended up being and that leaves office REIT that the trades well I think there's big opportunity big Big risk, obviously, too, but the big opportunity.
If they can turn that into.
The sort of a market leading platform.
And so I guess with the JV assets in particular is the plan still kind of if possible granular dispositions on your own.
Yeah Yeah.
Yeah, and you know we've made a handful of good sales so far.
And we've kind of weird.
We've shrunk our equity were producing a high return on equity for ourselves and our partner in.
The the partnerships like doing very well.
Okay.
And then in terms of the development side of of the investments.
Have you seen any kind of market change in in competition, particularly maybe some of the secondary non kind of quote unquote Gateway markets. You know has there been any kind of shift of competition into those markets maybe from from Gateway markets. If you will.
Brendan do you have an opinion on that I think from my from my perspective, we've been working with partners that we've done a lot of build to suit the work with in the past and you know we we haven't felt any like real competitive pressure from others trying to sort of horn in on those relationships.
Yeah, I would agree with that.
Yeah.
Our market's been competitive for some time so sure there's there's no way on trains but.
But I would agree with those comments there.
Okay, and then one last detail one and apologies if I missed this in the prepared remarks, but was there any update on the.
The leasing prospects for the all of it Olive branch property Olive branch Mississippi.
And we didn't touch on it in her in her comments, but I'll ask James to jump in and of course perspective.
Yeah. So we've got we have several prospects, they're mostly preliminary but there's about a 20 million square feet of.
The potential prospects in the market right now.
We're also working through or tenant exiting so there may be some holdover. The that's gonna take place as well from a from a clarity of our vacancy perspective, but nothing eminent but quite a bit of activity and we continue to feel that we're gonna have a successful outcome.
And as the successful outcome of rents probably below market given the demand.
That's the right we would expect to to better the rents that were in place with the the.
The incumbent tenant.
Okay.
That's it for me. Thank you all very much.
Once again, if you would like to ask a question. Please press Star then one.
This concludes our question and answer session I would like to turn the conference back over the will eglin for any closing remarks.
Thanks, again to everybody for joining us on the call. This morning.
Please visit our website or contact Heather gentry, if you would like to receive our quarterly materials.
In addition, as always you may contact me or any other member of our senior management team with any questions.
Yeah, Thanks, again and have a great day.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.