Q2 2021 First Industrial Realty Trust Inc Earnings Call
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I would now like to hand, the conference elevating our host Mr Art Harmon, Vice President and head of Investor Relations. Thank you. Please go ahead Sir.
Thank you Katrina, Hello, everybody and welcome to our call.
Before we discuss our second quarter 2020 results as well as updated guidance, let me remind everyone that our call may include forward looking statements as defined by Federal Securities laws. These statements are based on management's expectations plans and estimates of our prospects today's statements may be time sensitive and accurate only as of today's date Thursday July 22020.
We assume no obligation to update our statements or the other information we provide.
Actual results may differ materially from our forward looking statements and factors, which could cause. This are described in our 10-K and other SEC filings you can find a reconciliation of non-GAAP financial measures discussed in today's call and our supplemental report and our earnings release supplemental report earnings release, and our SEC filings are available at <unk>.
First and industrial Dot com under the investors tab.
Our call will begin with remarks by Peter <unk>, Our President and Chief Executive Officer, and Scott Musil, Our Chief Financial Officer, After which we will open it up for your questions also on the call today are Jojo Yap, our Chief investment Officer, Peter Schultz Executive Vice President, Chris Schneider, Senior Vice President of operations and Bob Walter Senior.
Vice President of capital markets and asset management now, let me turn the call over to Peter.
Thanks Art and thank you all for joining us.
Our team delivered another great quarter highlighted by strong operating results robust development leasing and more investment for growth.
Our efforts were supported by the overall economy and the industrial real estate sector continued to gain momentum throughout the second quarter.
Due to strong second quarter performance and the overall strength of the sector. We are increasing our <unk> guidance, which Scott will walk you through shortly.
Per CBRE Flash report net absorption was a healthy 85 million square feet and the second quarter, while completions came in at a 3 year quarterly low of 52 million square feet.
Completions were impacted by reduced construction activity in 2020 as well as the continuing limited availability of readily developable land and highly sought after locations.
Through the first half of this year net absorption was 150 million square feet.
Outpacing new supply of $106 million.
And the second quarter, we were successful and driving occupancy while continuing to increase rental rates on new and renewal leasing.
In service occupancy at quarter end was 96, 6% and increase of 90 basis points from the end of last quarter.
This increase in occupancy was accompanied by 15, 7% increase and cash rental rates on new and renewal leasing.
The strength and breadth of tenant demand also carried over to our development investments evidenced by $1.2 million square feet of development leases signed and the second quarter and third quarter to date.
We are pleased to announce that our 250000 square foot building at first logistics Center at 70, 881, and Central Pennsylvania is now 100% leased to a leading consumer products company.
This takes care of the largest vacancy among our completed developments.
Also in Pennsylvania, we successfully leased the 100000 square foot first independent logistics center to the United States Postal service.
And Houston, and our first Grand Parkway, and Commerce Center, we signed 2 leases totaling 117000 square feet, bringing the 2 building 372000 square foot project, there to 55% leased.
And Dallas, we just leased 97000 square feet at first park 121 to a logistics provider, bringing the 2 building 345000 square foot phase of that park to 64% leased.
This is in addition to the 125000 square foot pre lease at the last phase of the park that we started and the second quarter as discussed on our last call.
We also achieved significant new leasing at our developments and process.
And South, Florida, we pre leased 100% of the 259000 square foot building 2 at first park, Miami to our logistics and transportation company.
This building is scheduled for completion and the fourth quarter and the leases expected to commence and mid first quarter of 2022.
This same tenant also pre leased 50% of our next start and that park, which I will discuss shortly.
We also leased 100% of the soon to be completed 141000 square foot first 95 distribution center and Pompano.
The lease will commence by October 1.
Given the strong demand and the ability of our team to replenish our pipeline with profitable development opportunities and we're excited to share several new development starts.
And Nashville, we were successful and winning a 692000 square foot build to suit with a leading specialty e-commerce retailer.
Completion is slated for the third quarter of 2022.
Our projected investment of $59 million and.
And with a projected cash yield of 6.4%.
And taking advantage of the tenant demand, we are seeing and south Florida at first Park Miami, We will start at 219000 square footer known as building 1 and.
And as I, just noted we inked the lease for 50% of the space and in advance of going vertical.
Total estimated investment is $39 million with and targeted cash yield of 5.3%.
We are also well positioned for future growth at that park and in addition to what's already underway I remind you that we can develop another 405000 square feet on land, we own today and we.
And another 59 acres developable to 1.3 million square feet for and total buildout of up to $2.5 million square feet.
Also in Florida, and the Orlando market, we are starting first loop logistics Park.
First loop is a 4 building project totaling 344000 square feet with an estimated investment of $45 million and a cash yield of 5.6%.
In Seattle, we launched first steel a 129000 square footer.
Estimated total investment is $24 million within targeted cash yield of 4.7%.
And the second quarter, we acquired a strategic site and the I 70, 881 corner of Central Pennsylvania for $83 million.
Known as first logistics center and $2.83, we have begun construction on the $1.1 million square foot building.
The site can also accommodate a 700000 square foot building, which is permit ready.
This location is proximate to major parcel hubs for UBS first.
Ex and the U S postal service, where tenants are strong east coast consumption zone.
Our total projected investment for the first building is $125 million with completion targeted for the third quarter of 2022, and an estimated cash yield of 5.1%.
In summary, these newly announced development starts totaled 2.5 million square feet with an estimated investment of approximately 291 million and net cash yield of 5.4%.
Including these planned new development starts.
Our development and process totaled $5.7 million square feet with a total investment of $608 million.
And a cash yield of 5.8% our expected overall development margin on these projects is approximately 50%.
We are excited about this robust pipeline and what it means for future cash flow growth.
To further bolster our development pipeline, we acquired the remaining 138 acres and our PV 303 joint venture for $21.5 million.
This price reflects a $10.2 million reduction from our share of the gain and our earned per mode from the joint venture.
This purchase closes out a very successful JV, which generated a largely unlevered, 54% IRR for the partners and gives us another prime land holding to serve tenants need and this high demand logistics corridor.
In addition, just last week, we closed on a 95 acre site in the inland Empire East Submarket of banning for $27 million that can accommodate up to a $1.4 million square footer.
Vacancy and the inland Empire East is just around 2% and there are limited sites that can meet customer requirements and this size range.
In total our balance sheet land today can support more than 12, and a half million square feet of new investments and our share of the camelback joint venture is around $3.8 million square feet.
So we are very well positioned for future growth.
Second quarter building acquisitions were comprised of and 81000 square foot distribution facility in Orlando and a 33000 square foot regional warehouse in Denver.
Total investment was $18.4 million and the combined stabilized cash yield is 5.6%.
Moving on to sales during the quarter, we sold 3 properties and 1 unit for $26.2 million and and in place cap rate of approximately 5.4%.
We also sold 1 land parcel for $11 million.
In total we have sold $104 million year to date and have reached the low end of our sales guidance range of $100 million to $150 million.
Before I turn it over to Scott, who will discuss more details on the quarter and our line of credit and term loan executions. Let me Express my heartfelt. Thanks to the entire first industrial team for their hard work and many contributions to our very successful second quarter.
With that let me turn it over to Scott.
Thank you Peter let me recap our results for the quarter.
NAREIT funds from operations were <unk> 48 per fully diluted share compared to <unk> 40 per share and to Q2 thousand 20 and.
And our same store NOI growth for the quarter on a cash basis, excluding termination fees was 2.1% helped by an increase in rental rates on new and renewal leasing and.
Rental rate bumps embedded in our leases and lower bad debt expense slightly offset by a decrease in occupancy and increase and real estate taxes.
Summarizing our leasing activity during the quarter, we commenced approximately 3.5 million square feet of leases.
$1.1 billion were new 2 million were renewals and 400000 were for developments and acquisitions with lease up.
Tenant retention by square footage was 71, 1%.
Cash rental rates for the quarter were up 15, 7% overall with renewals up 12, 1% and new leasing up 22, 7%.
And on a straight line basis overall rental rates were up 29, 5% with renewals, increasing 27% and new leasing up 34, 4%.
Moving on to the capital side and as Peter mentioned, we closed on 2 financing transactions this month for which the pricing demonstrates the strength of our balance sheet first.
First we amended our line of credit which was scheduled to expire this October.
Our new deal is for $750 million and matures in 4 years with 2.6 month extension options.
The interest rate is LIBOR, plus 77, 5 basis points, a pricing reduction of 32.5 basis points from our previous facilities credit spread.
We also financed our $200 million term loan that was due to mature earlier this month.
New term loan matures in July 2026, and has an interest rate of LIBOR, plus 85 basis points.
This is a 65 basis point reduction and the credit spread compared to our previous term loan.
With our interest rate swaps and place the new fixed interest rate on the term loan is 184%.
Given the strength of our credit metrics, our line of credit and term loan and provide for pricing at the Triple B plus b double a 1 level, which is 1 notch better than our current credit ratings of Triple B flat <unk> to.
This favorable pricing will be maintained as long as and our consolidated leverage ratio as defined and the applicable agreements remains less than 32, 5%.
We would like to thank our banking partners for their many years strong support first industrial.
Reflective of these 2 executions the weighted average maturity of our unsecured notes and term loans and secured financings was 6.5 years with a weighted average interest rate of 3.4%.
At June 30, our net debt plus preferred stock to adjusted EBITDA is 4.9 times.
And the second quarter, we paid off $58 million of mortgage loans, and an interest rate of 485%, which leaves us with no other maturities for the remainder of the year.
Moving on to our updated 2021 guidance per our earnings release last evening.
Our guidance range for NAREIT <unk> is now $1.89 to $1.97 per share with the midpoint of $1.93.
Which is a <unk> <unk> per share increase at the midpoint, reflecting our second quarter performance and an increase and capitalized interest due to our announced development starts.
Key assumptions for guidance are as follows.
Quarter and average in service occupancy of 96% to 97% and increase of 25 basis points at the midpoint.
Please note that our occupancy guidance now assumes that the lease up of the 644000 square foot former pier 1 space will occur next year.
Due to additional leasing and our portfolio, we were able to essentially backfill more than enough space as an offset and raise our occupancy guidance.
Same store NOI growth on a cash basis before termination fees of $3, 75% to 475% and increase of 25 basis points at the midpoint due to our second quarter performance.
Please note that our same store guidance excludes the impact of approximately $1 billion from the gain from an insurance settlement.
Our G&A expense guidance remains unchanged at $33 million to $34 million.
And guidance includes the anticipated 2021 costs related to our completed and under construction developments at June 30, plus.
Plus the expected third quarter groundbreaking first park Miami building 1.
First loop logistics Park, and first steel and total for the full year of 2021, we expect to capitalize about <unk> <unk> per share of interest.
Other than previously discussed our guidance does not reflect the impact of any future sales acquisitions or new development starts. After this call and the impact of any future debt issuances debt repurchases or repayments. After this call and guidance also excludes the potential issuance.
A equity let me turn it back over to Peter.
Thanks, Scott and thanks again to the Fr team for another great quarter as we continue to achieve success.
All fronts and.
Importantly, our pipeline of future projects is the strongest it's been since the great recession.
Which positions us well to continue to drive long term growth and value for shareholders and serve the space requirements of our tenants.
With that operator would you. Please open it up for questions. We ask that you. Please limit your questions to 1 plus a follow up and then you are welcome to get back in the queue.
Thank you Sir.
As a reminder to ask a question you will need to press star 1 on your telephone Covid jogger.
Question press, the pound or hash key.
Yes.
Our first question is from Craig Mailman from Keybanc capital markets. Your line is open.
Hey, good morning, guys.
Could you just discuss a little bit of.
And the prospect activity at the Pier 1 space and.
Maybe what is it about the building or the Submarket that.
And is kind of along getting the backfill process there.
Sure Craig Good morning, it's Peter Schultz activity and the Submarket continues to be good.
And the pipeline for new supply is very limited and tenants have relatively few choices.
The lease signings to date have been and a couple of buildings that were bigger than us.
Smaller than us.
Our building is positioned for immediate occupancy, which is really important and the environment, where we're seeing along gagan and permitting.
Permitting process and delays on materials.
So we're ready to go we've seen a couple of shorter term deals and thats not really our preference and some of the longer term deals are a little slower moving.
So we remain optimistic about our success, there and the mark to market and as Scott said in his remarks, given the strength of leasing.
And the portfolio otherwise.
That more than offset that and.
And we still have that as upside for the rest of the year. So we will keep you posted on our progress, yes, Craig with even with pushing out that lease up to 2022, we still plan to end the year around 97% occupancy so all things being equal the lease up of tier 1 is about 1 percentage point of occupancy.
That would push us to about 98%, which is rarefied air and.
The industrial sector.
I guess Peter are you guys close with them and then or is it and like your prospect pipeline is.
Good morning.
Craig I would just reiterate there is good activity and the market. We are evaluating a number of things as I said, our preference would not be to do shorter term deals and some of the longer term deals or just slower moving.
And we would preferred we would prefer Greg from forward to be a single tenant building as well and so the size requirements and the market just need to match up or just need to find the right match.
And Alex.
And then.
As we think about your same store guidance you guys are running around a little over 2% for the first half of the year is it just going to be a big spike and <unk> as you kind of lap appear 1 move outs and thats going against you and Jim.
The mid point.
Yes, exactly so if you do the math based upon our annual midpoint guidance of $4.2 5% that implies about a 6% same store growth rate in the back half of the year and Craig you're right. The 2 main drivers 1 is occupancy so we're going to do better and occupancy on the back half of the year, which will add up.
About 2.3 percentage points to the same store, we're also going to do a little bit better and the back end of the year with increasing rental rates on new and renewal leasing and thats about 8.6% increase compared to the first half of the year and that takes care of the majority.
Debated and get us to the 6% plus or minus that and think we'll achieve the backend of 2021.
Great. Thank you.
Our next question is from <unk> Kim from Choi Your line is open.
Thanks, and good morning, guys.
Good morning, Stephen good.
Morning.
So you guys have made some pretty interesting investments and the Phoenix market. You. Obviously, you bought PV 303 of the remaining portion and a man.
100% ownership and you have the camelback line as well can.
Can you just talk about the supply demand dynamics and.
And that market, especially given that there seems to be about 23 million square feet being delivered.
And that market and only 25% pre leased I'm not sure how good the broker reports are but I just wanted to get your take on it.
Sure and keeping an eye this is jojo.
Phoenix I would say.
And at a record first half.
In terms of net absorption and it clearly from the and completions by and almost double.
First half of the year year to date absorbed net absorption is about 12, almost 12 million square feet, which is 1 of the highest I've seen it and the last 15 years. So again very big demand Lydall III Pls lot of E Commerce, and a lot of Omnichannel manufacturers have come in and as well.
Yeah.
And.
A lot of demand for data centers historically, if you look at what we have.
And building that we've developed we've leased.
And actually either before completion or right after completion and minimal downtime as you know we have a 547000 square feet on balance sheet development.
And expandable to about 985, and we're actually fielding proposals as we speak on that so while we've got and proposals and we're looking at our options.
And just in terms of keeping the land that we bought.
If you look at that basis that base is sub 4.
And that's about 360 per square foot I can tell you to date and that's about 45% to 50% below market. So right off the bat. We believe we are in the money and.
And we think in the future that will yield.
Given the basis of where the rents are today that should be over 6 easy in terms of yields. So we're very very bullish and we're getting good about our current investment and by the way our portfolio their existing portfolio is about 98% leased today and goes to a 100% pretty shortly.
Okay, Thanks for that and.
And for you Scott and I know, sometimes you guys gave some color on lease spreads for deals that are signed but not commenced yet.
So when you look at the pipeline of deals that you have.
Currently and what kind of spreads higher should we continue to expect.
So the will of.
The stance that we're seeing is as of today, we've got 84 per cent of the leases that are expiring this year signed keybanc.
Even so that coupled with the new leasing that we've done for 2021 we're.
And we're looking at a cash incur.
Increase in rental rates of about 45%. So its very healthy. When you include the renewals, which we pretty much made it through the year and the new leasing that we've done.
Okay. Thank you.
Our next question is from Rob Stevenson from Janney. Your line is open.
Hi, Good morning, guys can you talk a little bit about the central PAA land purchase and the $1.1 million square foot property, you're building there and the line.
And costs alone is nearly 2 times, what you paid on a per acre basis for the inland Empire parcel not used to seeing central PAA trade and get that big of a premium to the California land and then where should rents be here versus the $5 per square foot on your existing central PVA portfolio.
Rob Good morning, it's Peter Schultz, So a couple of things and Pennsylvania as we've said on prior calls bigger continues to be better demand has been most active and consistent.
And the 700 million square foot range and plus so that demand profile has been really strong.
When you look at the supply there has certainly been a fair number of million square footer or is that has been constructed they're essentially all leased.
And there is only 1 other building today and Thats under construction and addition to ours.
And central Pennsylvania, So very limited choices.
For tenants.
Strong demand the site as Peter mentioned and the <unk>.
Remarks, this is very close in.
Harrisburg through the.
Parcel hubs and the intermodal and importantly, a much better labor story than some of the sites say, along the southern and 81 quarter or up and northeast. So we really feel great about that.
And that combination of factors and the location in terms of the price.
That's about $46 on an <unk> basis, so under the building.
Which is.
Our site that is fully entitled permitted ready to go so we started construction the day.
After.
So jojo can talk about the California site.
And that is going through the entitlement process.
But we think the opportunity here to create value is quite good with cap rates and <unk>.
That market $3, 75, and going lower.
Day, Joe Joe you want to talk about yet.
And then that far east market I wouldn't want it and we'll take that as market because thats a way below market. We got that deal by assembling 6 parcels to 2 different sellers. It took us a year off market and right across the street there are already a sale that's about 60%.
Above our basis, so that didnt hit the market.
And thanks to the team.
And that's our.
La inland Empire team for getting that deal done, but thats definitely not market. If you look at it that's under 7 Bucks a foot.
And land prices, there, where we have this site shooting to be closer to mid teens, So I would add 1.
You shouldnt use that price as market because that never hit and the market.
Okay, and then second question.
The pipeline now is about $500 million, you've got 80 ish million rough numbers completed and to be completed and the third quarter and a similar amount of announced starts you guys have been doing a lot of significant.
Significant pre leasing on the pipeline do you sit here at the $500 million ish level is that where youre comfortable today do you, let that drift up as demand pulls you in that direction does it fall back to more sort of $3.5400 ish.
You look forward, how should we be thinking about the pipeline.
Yes, Hi, Peter look.
We can build about $12.5 million feet on land that we own.
That equates to about 1 and that doesn't include the $291 million and we talked about today. So that's net of that.
That's about a $1.3 billion.
That's $1.3 billion worth of investments.
We also control land, where we can build and now that we can invest another 320.
And our share of the JV Camelback JV is about another $340 million of investment. So if you add all that up again net of the 291, we talked about today, that's pushing $2 billion of investment.
You can see that our volumes are up today I think going forward you can expect our our development volumes to be higher than.
And then they have been historically don't forget our company is much larger now today than it than it was even 2 or 3 years ago. So the numbers that you're quoting are probably closer to the go forward than the historical levels.
Okay. Thanks, guys I appreciate it.
Our next question is from Caitlin Burrows from Goldman Sachs. Your line is open.
Hi, Good morning, maybe just a follow up on that last 1 I guess, given the land bank that you've had.
And opportunity that you have what keeps you from moving forward.
More quickly.
Please take time to assemble or is there anything else that is.
Keeping you from moving more quickly.
Well every single project has a story and a time line and its really just working through that we havent turned the entitlement process takes a long time.
We do face as everyone else does potential delays with commodity inputs. As you know there are shortages on steel and other commodity inputs, so that that influences the timing.
No we have a speculative development and leasing cap and we have to manage that we want to make sure that we continue to lease these new developments and a timely way building is great, but if you don't leave the buildings that's not good.
And so far as you've seen we're way ahead of schedule or ahead of pro forma on the lease up of many of these projects, where they are being leased at or near completion and in some cases before we even go vertical so that the market is very very strong where we own these great sites and we're going to continue to roll them out.
As they are ready to go.
Got it Okay, and then maybe you could just talk a little bit on what types of tenants you're seeing the most interest from and how deep that is and if there's any visibility to how long you think that deep demand can continue for that and supporting those leasing spreads that you were talking about earlier.
Peter and Jojo you want to add some color on that sure hey, tailwind so demand is very good.
Across markets and space sizes, and most active industries would include transportation and logistics companies E Commerce.
Food and beverage consumer products.
And some apparel from homebuilding.
Home improvement and.
And it continues to be very very good tenants need space.
And we've continued to see a lot of activity across the portfolio and Jojo.
Nothing really major to add but existing tenants and not necessarily know that or distribute configured reconfigured to supply chain because their online business is continuing to increase so there just.
Need to add more space.
<unk> Peter again, we're not seeing any slowdown to your question.
Demand at all.
Got it okay, great. Thank you.
Once again and final 1 would like to ask a question. Please press star 1 on your telephone.
Our next question and from Michael Carroll from RBC capital markets. Your line is open.
Yes. Thanks can you guys provide some color on I guess current market rents and how has that changed I guess over the past 3 to 6 months and.
And maybe highlight what type of rents that you were able to achieve on the $1.2 million.
Development leasing this quarter versus underwriting if you can provide details on that would be great.
You guys want to talk about market share sure.
For the first half of the year, Mike and rich market rents accelerated as 1 of the highest paces over and over 3 to 5 year period, I would say the range would be 5% to 15.
And it's hard to pick a number because it's different from market by market, but towards the higher range would be west coast, and and and immediately behind that would be east coastal markets and then everything in between in terms of rent growth. So it's been very very robust. The thing is is that what's happened in the market.
For the first half of the year is that supply did not meet the demand and Thats why there is a squeeze and.
And Mike its Peter in terms of underwriting and general.
All of the projects have leased earlier at higher rents at lower cost.
And we've talked about we've had a couple of it took a little bit longer but in general.
And our underwriting across the board.
Great and then can you update us on maybe the development margins that you've achieved they get from the developments that were stabilized and the I guess at the end of 2020 and then maybe I guess I don't know if you would provide these numbers yet but on the developments that are and process right. Now that are 100% leased I guess, how are those trending our Roe.
Those that right now.
Sure So like Peter said.
<unk> said that.
Out of the $605 million of development under construction at the end of the quarter plus the newly announced developments are margin, there's roughly 50%.
And so.
If you look at the recently announced they are closer to the low forties.
Still significantly above our targeted.
Margins.
So in terms of trending and I would say that overall first half of first half of this year compared to first half of last year, the margins have compressed a bit and here's the reason why number 1 land costs land prices have gone up and construction costs.
And have gone up but the.
The impact of that was much overweight basically over compensated by rental rate increases.
Across markets and.
And cap rate compression. So you have some.
Margin compression and little bit, but thats, primarily over weighted by the round of rate increases and cap rate compression does that answer your question.
It does perfect. Thanks.
And our next question is from.
Dave Rogers from Baird. Your line is open.
Yes. Good morning, everybody just wanted to ask about size ranges and in terms of where rent growth of that if you mentioned it I missed it and I apologize I can go back but.
Can you talk about maybe some broad size ranges and how rent performance has been or trended even since the beginning of the year.
Yes. This is Chris as far as from a size perspective, it's been pretty broad based across all size ranges and we're seeing healthy increases.
Double digit plus increase across all our sites.
Yes.
And the slight differences and the last quarter I don't know if you asked this question or somebody else.
I think last quarter, we would've said.
Rents are growing a little bit faster and the smaller spaces.
That's pretty much leveled out now and the larger spaces are growing pretty quickly as well.
No it's pretty much back and parity. Okay that helps and then is that changed what you are seeing in terms of maybe cap rate compression either between sizes or what we've seen I guess year to date from a market by market perspective, I think theres been some greater compression, either and BS and center and the country assets. It sounds like maybe would that also be starting.
And hit some parity do you think or are you still seeing some differences and performance on cap rate.
In terms of.
Hi, Tony and the terms and cap rate compression is across the board.
Investors from for all sides and real estate increase.
A large portfolio buyers and the 1 offs. They are very very few years theres. So much capital across a broad spectrum of sizes and the capital and also across either acquisition lease redevelopment or development opportunities Theres basically competition on every part and size and our market today and industrial.
And.
I would say cap rates have probably come in based on depending on the market primary versus secondary and 25 to 50 basis points above last year.
Okay. Thanks for that color.
Peter facility I think you mentioned in the comment of development being larger going forward sizing up with the company.
Maybe we'd argue on this number but 1 thing you haven't really sized up as the disposition program I think relative to the size of the company as you accelerate your development this year and it sounds like into next year and continue to have success. I mean should we start to think about and increased level of asset sales repositioning even more aggressively than you have been and fund.
And <unk> development that way or do we think about it more from us.
And equity perspective I.
I think the timing of sales and the volume of sales.
And a lot of different inputs..1 is certainly the position of the particular assets that we're focused on whether they are fully leased.
We're looking at obviously maximize value on those assets. The volumes I think going forward are going to be closer to that 100 to 150 range than maybe a few years ago, and we were selling 225% to 40.
But that can change sometimes we get some unsolicited offers that we can't refuse on assets that maybe we didn't have at the top of our list to dispose us.
And which case will take that opportunity to.
Dispose of those assets. So yes, we're not going to probably move up the disposition volume like we are and the development pipeline is really the answer to your question.
Thanks, I appreciate that.
Scott 1 for you on bad debt can you tell us what that was in the quarter and the impact I think you said it did have a positive impact on same store and Thats been the case I guess for many years now, but can you give us an update on that.
Yes.
David was effectively zero for the second quarter, which means for the first 6 months of this year and zero bad debt expense. So credit metrics are doing fabulously and that added about 17 basis points to our same store, which is 1 of the reasons why we increased our guidance.
So very good showing very low bad debt.
Alright, Thank you for that last 1 and I'm just going to go back to pier 1.
A long term hold asset for you guys. If you get it leased up I guess going back to Craig's very first question is I mean does it have the parking the truck courts. The height. The column spacing that you want and are building long term.
So we really like that it's Peter Schultz, Dave, we really like that and sub market.
We've talked about and protocols high barriers.
Supply constrained and.
We look at all of our assets.
As we say asset management and ongoing basis. So we'll continue to evaluate that but we like.
That submarket and the assets are very functional.
This 1 and the 1 next to it which is a little bit smaller.
Certainly meet the market and.
And compete favorably.
Okay. Thanks, everyone.
And our next question is from Steve <unk> from Green Street. Your line is open.
Hi, good morning.
And follow up on kind of your disposition commentary I'm just curious given the strength of the transient transaction market why not be a little bit more active on property sales and not because you don't necessarily need the funds, but more to expedite the portfolio goals without going more coastal I'm and less black that you laid out the last investor.
And your day.
Yes.
We certainly think about that a lot and good question.
The nature of the buyers for what we're selling are typically focused on 1 off deals maybe they'd buy a couple at a time.
And the way that we can maximize the present value of those of those assets is to sell them. The way we have and it doesn't mean that we don't consider from time to time trying to pull some together.
And taking a look at the market that way. So we evaluate all the all the potential options and so far the way we've been doing and has really been the best way to maximize value.
So I mean is it possible increase volumes and this is kind of the way youre doing it or you think kind of this.
1 to $1.50 range is really the.
And just maybe from a human capital perspective, all youre able to dispose of it 1 at a time.
No I mean, we have the resources internally to handle a bigger and portfolio sell and you've you've seen and.
And the last 5 years, we've sold 2 $200.230 million and a crack so that's.
And that's not an issue or just again trying to maximize value.
<unk> and <unk>.
And pace it out to do so.
Got it that's helpful color, that's all I have thank you.
And the other thing I'd say is that as we have done that and been patient with those sales the pricing has gotten better and better and better over time and the leasing status and those assets has gotten better over time.
Next question.
<unk>.
Again, if anyone would like to ask a question please price.
Star 1 on your telephone.
Our next question is from Mike Mueller from.
JP Morgan your line is open.
Yes, hi.
On the acquisition side. It seems like you occasionally do something large, but youre not got a lot of 20% to 60000 square foot buildings.
But on the development side and to see a lot of 100 to 500000 square feet and I'm curious what's driving that disconnect is it just youre seeing better economics, and acquisitions and smaller buildings because fewer bidders.
Joe you want to take that yes, yes, Mike.
A couple of reasons 1 is exactly your.
And when Youre going a little bit smaller size, you are competing to hopefully will less capitalized.
And less well capitalized.
Competition.
Might be dealing with less sophisticated sellers and.
So more fertile ground to do unsolicited or off market deals larger and large large large.
Sellers typically are well represented and probably through the the most.
Sufficient process and therefore, there is no value almost no value to be generated from those kind of acquisitions. So yes. So and then also if you notice we are.
And we're always trying to increase our infill portfolio so that portfolio is.
Is a very good strategy and legal infill typically the sizes are going to get smaller and if you look at a number of our acquisition, we do a lot of bolt ons whether it.
And we mean by that for example, this Denver portfolios and northeast.
<unk> property to our bigger developments, so it's easy for us.
2.
Get a small profitable deal there and the same thing with our recent acquisition and our Orlando.
So thats close to.
The properties that we already have.
Got it.
And that makes sense.
It's all I had thanks.
And I am showing no further questions at this time I will now turn the call back over and Mr. Peter <unk> for closing remarks.
Thank you very much and thanks to everyone for participating on our call today.
Always please feel free to reach out to me Scott art with any follow up questions.
And we look forward to connecting with many of you and the near future.
Well.
Thank you presenters, ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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