Q3 2021 Netstreit Corp Earnings Call
Greetings welcome to net C Corp, third quarter, 2020 one earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please.
This conference is being recorded I will now turn the conference over to Amy and Investor Relations. Thank you you may begin.
We thank you for joining us for net strange third quarter 2021 earnings conference call. In addition to the press release distributed yesterday after market close we posted a supplemental package and an updated investor presentation, which can be found in the Investor Relations section of the company's website at Www Dot net Street dotcom.
On today's call management's remarks, and answers to your questions may contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995 forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today for more information about these risk factors. We encourage you to review.
Our Form 10-K for the year ended December 31st 2020, and other SEC filings. All forward looking statements are made as of the date hereof and that Street assumes no obligation to update any forward looking statements in the future.
In addition, certain financial information presented on this call includes non-GAAP financial measures. Please refer to our earnings release and supplemental package for definitions and GAAP reconciliations and an explanation of why we believe such non-GAAP financial measures are useful to investors. Today's conference call is hosted by net streets Chief Executive Officer.
Sure Mark Manheimer, and Chief Financial Officer, Andy Blocher, They will make some prepared remarks, and then we will open the call for your questions, but before I turn the call over to Mark I wanted to take a moment to make an ESG announcements as many of you are aware there has been more push for companies to provide disclosures related to environmental social.
<unk> and governance in recent years, we are putting together a webpage to showcase our company's commitment to environmental stewardship.
Our responsibility as well as good governance, we expect to put out a press release announcing the launch of our E. S. You webpage in the coming weeks and we welcome you all to visit our website.
Now I'll turn the call over to Mark to discuss our third quarter activity Mark.
Good morning, everyone and welcome to <unk> third quarter 2021 earnings conference call.
I will begin with a review of our investment activity and portfolio metrics for the quarter.
Andy will then provide further detail on our results and balance sheet.
For the third quarter, we were consistent with our publicly stated strategic growth plans.
We believe that growing our portfolio with high quality tenants, while further diversifying our tenant base and geographical and industry mix is critical to generating the best risk adjusted returns for our shareholders.
As of quarter end necessary has one of the highest credit quality portfolios in the net lease space.
And we will endeavor to continue to create a best in class portfolio as we grow into next year that'd be up.
In the third quarter, we completed gross acquisition volume of $90 million and an additional $4 million of development spending.
The $90 million of acquisitions for this quarter, whereas at an initial cash capitalization rate of six 2% inclusive of all closing costs and had a weighted average remaining lease term of 12 four years.
Nearly 90% of our third quarter acquisition, where with investment grade rated tenant or tenants with investment grade profiles.
Well similar to the past few quarters, our financial results for the quarter were impacted by the timing of acquisitions, many of which closed near quarter end as we grow our portfolio, we expect the quarter to quarter timing of acquisitions to have a diminished impact on our quarterly financial results.
But we will not but we will not sacrifice the quality of assets that we add to our portfolio, where our due diligence and underwriting criteria, which remain paramount.
Also in the quarter, we provided approximately $4 million of development funding, which included two new development projects with total costs expected to be $5 $4 million.
With a total of five development projects in the pipeline, we anticipate that we will begin to collect rent from four of these projects.
By the end of the first half of 2022.
Finally in the quarter, we sold four assets for $19 million at a weighted average cash capitalization rate of six 3%.
With these dispositions we've decreased our casual dining exposure to less than 1% decreased exposure to bank branches and we no longer have exposure to RV sales.
The continued <unk> of our portfolio will remain an integral part of the necessary strategy, but this quarter, we executed a few more dispositions than what is typical reflecting attractive opportunities to coal assets that didnt meet our long term investment objectives at attractive pricing.
As a result of our acquisition and disposition activity during the third quarter, our exposure to Walgreens was seven 5% of our total portfolio ABR up from two 5% in the previous quarter, northern tool and equipment, which made up one 4% of our portfolio ABR entered our top 20 tenant list.
711 remains our top tenants our ABR exposure to 711 was eight 2% down from nine 3%. We will continue to see the 711 exposure decrease over time as we continue to grow our portfolio.
Moving onto our quarter end portfolio metrics. Our portfolio contains 290 properties comprised of $5 5 million square feet in 40 states with a diversified tenant roster of 60 tenants in 22 industries.
Total ABR, our primary earnings driver increased to $59 $8 million with a weighted average lease term of 10 years at quarter end were 100% occupied with no lease expirations until 2023, and a less than 1% of ABR expiring before 2025.
Just on a b R. Our tendency is 75% investment grade with an additional 14, 5% classified as investment grade profile.
Subsequent to quarter end through October 28, the company completed over $90 million of acquisitions, including closing cost and no additional dispositions, bringing our year to date net acquisition volume to $354 million.
As a result, we are raising our 2021 net acquisitions guidance to at least $400 million, we continue to source attractive opportunities that meet our target criteria.
We are reviewing a wide range of opportunities, including investments in stabilized properties blend and extend opportunities sale leaseback transactions and development projects.
While quarterly acquisitions volumes may vary quarter to quarter, we will stay true to our strategic focus on high quality tenants with great access to capital and attractive real estate fundamentals, while we continued to enhance the overall diversification of our portfolio. We continue to believe that this is the best way to produce sector, leading earnings growth with very limited tenant credit risk in the coming years.
I'll now turn the call over to Andy to discuss the balance sheet and our capital markets activities Andy.
Thanks, Mark and once again, thank you all for your time with US This morning.
Let me begin with our results for the third quarter 2021.
Yesterday in our press release, we reported net income of seven cents.
Core <unk> of 22, and <unk> 24 per diluted share for the third quarter.
As Mark noted our third quarter results were affected by the timing of acquisition closings in the quarter as well as the full weighted average share impact of the equity offering completed in the second quarter.
Moving onto our balance sheet.
As of September 30th we had $28 million in cash and total debt outstanding of $192 million of which $175 million is from our fully hedged term loan with the remainder from our revolving line of credit.
We have no debt maturities until the maturity of our revolver in December 2023, which is subject to a one year extension option, which would match the December 2024, and maturity of our $175 million term loan.
Our net debt to annualized adjusted EBITDA ratio was three five times at quarter end below our four and a half to five and a half time long term targets.
Finally, with respect to the balance sheet in early September we filed our universal shelf registration with the SEC, giving us broader and more efficient access to multiple capital sources. In addition, we put a $250 million ATM program in place.
Based largely on the timing of gaining access to the ATM. We did not issue any shares under that program in the third quarter, but subject to market conditions expect the ATM to be a valuable tool to fund a portion of our acquisition volumes going forward.
With respect to dividends earlier this week the board declared a <unk> 20 regular quarterly cash dividend to be payable on December 15th to shareholders of record as of December one, reflecting an annualized dividend rate of 80 cents per share.
Finally, with regards to guidance, we are adjusting our full year 2020, one <unk> guidance to a range of 93 to <unk> 95 per share primarily due to higher dispositions completed in the third quarter and the timing of acquisitions as discussed.
We're increasing our 2021 net acquisitions to at least $400 million, reflecting strong access to deals that meet our investment criteria.
It's important to note that the increase in 2021 acquisition guidance. This late in the year is expected to have a very limited impact on 2021 financial results, but should support a solid foundation for earnings growth in 2022 and beyond.
We continue to expect cap rates consistent with our most recent activity.
We now expect cash G&A to be at the top end of the previously provided range of $11 million to $12 million.
As previously disclosed we're pulling forward some incremental internal control expense as a result of our upcoming large accelerated filer status and to ensure compliance from Fox perspective.
As always our cash G&A includes recurring transaction costs, which are listed in our financial statements as a separate line item.
Noncash compensation expense is expected to be at the midpoint of the previously provided range of $3 million to $4 million we.
We expect our cash interest expense, including unused line of credit facility fees to be at the lower end of the previously provided range of three to three and a half a million dollars and an additional 600000 of noncash deferred financing fee amortization.
We expect to incur taxes near the top end of the previously provided range of 200 to $300000.
And lastly, we expect fully diluted weighted average shares outstanding to be in the range of 38 to 39 million shares for the year.
Also for planning purposes, as we look to 2022, we signed a lease for our new office space with an expected move in date sometime during the first quarter of 2022, which will result in an increase in 2020 to G&A.
To wrap up we're very pleased with our strong third quarter activity, we're well positioned with sufficient capital and a consistent pipeline of attractive opportunities for growth.
As always we want to acknowledge our entire team for their hard work and contributions to our excellent results. So far this year.
This concludes our prepared remarks, we'll now open the line for questions operator.
Thank you if he would like to ask a question. Please press star one on your telephone keypad.
For me to tell me indicate your line is in the queue. You May press star two if he would like to remove your line from the Q and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. Our first question is from Nate Crossett with Bamberg capital markets. Please proceed.
Hey, guys. Good morning, it's Eric on for Nate.
Appreciate the color on the pipeline.
And kind of expanding on that in terms of.
The total deals and the total deal size if are there any portfolios in there and then as part of the volume in the quarter or any large deals during the during the quarter.
Yeah sure. So during the third quarter, we did do one larger transaction.
With the Walgreens transaction.
Involved helping the seller defease their debt on that portfolio as well as well as getting a lease extension with Walgreens extending all of those properties out to 15 years.
But I think the rest of the assets that we acquired in the portfolio, we're more granular and look similar to what we've been buying in the past.
Perfect. Thank you and then I know you increased your guidance in terms of acquisitions going into the end of the year, but can you kind of talk about what's the size of the pipeline right now and then kind of how should we think about acquisitions headed into 2022.
Yeah sure. So yeah, I mean, we did increase guidance.
We were able to close $91 million of acquisitions this quarter prior of prior to this call. So obviously, a little bit better on timing than we've done in the past two quarters. So that's certainly encouraging but I think the guidance pushed up to at least $400 million should give you a pretty good indication of what we have a pretty high level of confidence.
Closing.
For the rest of the year.
And then as we look forward on acquisitions I do think that we will see us do a little bit more of a relationship and repeat business with with some tenants and sellers that we've worked with in the past.
A little bit more on the blend and extend side as well as the development side, which is where we think we can pick up a little bit more alpha or beta that we're taking.
Okay, Perfect and then maybe could you just touch on competition and pricing are you seeing any changes in the last couple of months.
Any increase in competition and I know that pricing kind of came down a little bit, but it should that be the norm going forward or how should we think about that.
Yeah sure I mean, I think there has been a lot of capital that's really come in.
Across all asset classes, so I wouldn't say that we're completely immune to that.
But I don't think Theres really been won.
Really tangible competitive that's come in and really change things too.
Too much worse I think the cap rate that we closed on this quarter, a little bit lower than we've done in the past, but I think that's got a little bit more to do.
With the quality of the assets in a little bit more lease term looking.
Looking back to this time last year third quarter of last year, we were at a six five cap. So now we're at a six 2% cap rate, we've got a little bit more term and maybe a little bit higher quality assets that we closed on this quarter looking at what we're seeing so far.
For the fourth quarter, I would expect that cap rate to inch back up a little bit.
Okay, Perfect and then last one for me could you.
Give us some color on how the G&A will look for in the end of 2021, and maybe into 2022, I know you've kind of already built out most of the infrastructure you moved offices. So can you kind of give us your thoughts on how that may ramp going forward.
Yeah, all right. Thanks.
Yes for the end of 2021, and we do have some seasonal expenses that were dealing with in a couple of expenses that are onetime in nature.
We think on a on a pure run rate basis off of.
Off of third quarter, and consistent with the guidance that we provided.
G&A.
Including taxes right.
Probably going to go up probably six to 700000 largely attributable to three items.
One is the year end audit, we're not able to kind of straight lined the audit fees. So.
The audit is closing out the year and they've got.
<unk> dive with respect to year end those fees actually hit in the fourth quarter two as we've been talking about as Sox compliance right, we're going to be a large accelerated filer starting with 2022.
We're in really really great shape, there, but getting the right folks in to help US you know.
With the documentation and testing of all of our controls as a part of that as well and then third to a much smaller extent is hiring on the margin we talked about the 100000 per $100 million of G&A that's really.
Our personnel.
Type of thing and we've got a couple of acquisition folks that we're searching for right now we've got a.
Supervisor that we're recruiting for right now based on the timing it should have a de minimis impact.
When you start thinking about 2022, we are not in our off under our new office. We are building out our new office in that will be an increased expense and we will go through the details of that when we provide.
The details of our guidance in February for 2022.
Alright, thanks, guys take care.
Thanks.
Our next question is from <unk>, Kim with truly Securities. Please proceed.
Thanks, just to follow up on that last question.
You've mentioned G&A should be 600 to 700000 higher in <unk>, how much of that is onetime versus recurring.
Yeah well.
I mean I would say.
It depends on what you referred to is one time right. When you think about the audit fees. It's that's more of a seasonal nature right.
Probably on the Sox compliance you're probably looking at.
100 $200000.
Just to kind of gear everything up and then hiring on the margin.
Maybe call it a $100000 on the high end so.
We are like we said, we just signed a lease for new office space that will be moving into next year.
<unk>.
That's really all about we're in a very what I would consider a suburban location currently.
And with the bulk of our hiring occurring during COVID-19, if all of our employees wanting to come to the office on the same day, we would not have enough space for them. So we are moving to the uptown market.
That that's the type of space that our employees deserve I think it's going to be very helpful for attracting and retaining our our employees and it's going to be space that we will be able to accommodate our growth for the next 10 years right. Obviously the issue. There is our cash rents will be small as we kind of grow into that space, but all of that stuff is straight lined over time. So.
That's kind of it with respect to the G&A and key then with respect to read your note thought it was very detailed.
When you kind of look at the pieces and the roll forward.
I think that that was the biggest piece that may have been missing was the G&A. The other part is kind of the funding of the.
Physicians rate the interest expense in order to get that NOI online.
And while we did not utilize the ATM in the third quarter.
<unk> increases in share count as a result of utilizing the ATM.
Thank you for answering my second question [laughter] got it so yeah. A quick question on your balance sheet going forward, how should we think about it.
How should we think about your debt funding strategy.
Yeah, Great question, so as we kind of roll through.
We kind of think of our assets generally and if we're going to maintain our $4 five to five five times net debt to adjusted EBITDA.
We're really talking about funding our assets.
Just round numbers two thirds equity one third debt.
Yeah.
So over time, we think that we're going to be able to get to a size where.
We're going to be able to go and go to the rating agencies and get a rating you know that's probably $2 billion right, So where you're probably looking at least a couple of years away from now.
We could potentially look to either accordion, our existing credit facility, but what's more likely to happen as we start thinking about 2022 is likely.
Our ability to go to the private placement market.
And if we do that obviously smart for the company because we're doing a better job of matching the duration of our liabilities with the duration of our assets, but that comes at a cost so.
To the extent that we did that I would think that would probably be a second half 2022.
Type of deal, but you know you are talking about marginal borrowing rate currently on the line of credit of a point and a half to probably something that looks like the mid <unk>.
Call it the mid threes currently so.
Sure.
While a smart decision there was a cost that comes along with that.
Okay. Thank you.
Our next question is from Todd Thomas with Keybanc capital markets. Please proceed.
Hi, Thanks, Good morning, Mark you you mentioned.
You know for acquisitions going forward.
Maybe more existing relationships in some blend and extends can you just expand on that a little bit and talk about the strategy to source deals.
Yeah sure. So I mean I think.
60% to 70% of our transactions in the most recent quarter.
We're blending expense I think I've always kind of said the more of those we can do the better. The second time, you extend the lease with a tenant kind of security short term lease.
Get it under under LOI and they get it extended with the tenant the second and third time, you do that it gets a lot easier.
And we're doing that with more and more more and more tenants now. So I think that is going to be a bigger chunk of what we do over time and then the second big piece of that is really going to be more on the on the development side.
Which will involve of course, having a development agreement with a developer and Thats kind of take some time to hash out the first building those relationships and then second.
Working on a deal and then when you're already kind of have your form in place it's much easier to expand on those relationships with developers. So we do expect that to become a bigger chunk of what we do in the future and then we have had some success with.
Some sellers that have that we've bought some properties from in the past and they are just going to come back to us without marketing marketing the assets.
And just moving a little bit more quickly on some of those sales. So encouraged about what we think thats going to look like in 2022.
And seeing a little bit more evidence of that already here in the fourth quarter.
Okay and in terms of the development side, I guess, how big could that development bucket be could we see that ramp up more in 'twenty two whats the potential.
Size for for that to grow to in the near term.
Yes sure so.
I would expect it to grow a little bit actually thought it was going to take us a little bit more time to get that up and running as much as we're doing now, but I think with the team in place.
I think we're comfortable kind of doing $60 million to $75 million of development deals per year, and look I mean that kind of the way that we look at our acquisitions opportunity set is wherever the opportunity is.
If it makes sense to get more aggressive in <unk> and.
In one vertical then we're going to do that.
So we could potentially bring on more people if we felt like that was a.
Going to be a bigger source of what we're doing I wouldnt anticipate that certainly for 2022, but.
Yeah.
There is a limit to how many of those types of transactions that you can do with the current staff, but I think $60 million to $75 million is.
A kind of a good feeling for what we can do with the current team in place.
Okay.
And then and then Andy you know you you commented a little bit on sort of the debt strategies.
On your leverage ticked up a little bit it looks like you're just under five times on a net debt to.
Adjusted annualized EBITDA, if theyre closing for the act of the October acquisitions you.
You mentioned four five to five five times as the long term target what's the plan too.
You know I guess permanently finance acquisitions or rate raise cap.
Capital.
And Delever a little bit as you move forward here, what's your what are your thoughts on equity.
Yeah, I mean, obviously getting the universal shelf in place in September was.
A huge testament to our business.
So we were very pleased with that it just provides us with a lot more flexibility, including the ATM and other sources of capital.
Needless to say you know to the extent that we were doing large amounts of capital I think the market will become very much aware of that so I prefer not to comment on the specifics with the exception of <unk>.
Generally our view is over the long term kind of two thirds equity one third debt.
Okay alright, thank you.
Our next question is from Linda Tsai with Jefferies. Please proceed.
Hi, good morning.
So your comment that 2021 should support a solid foundation for 2022, do you think 25% to 26% earnings growth in 'twenty, two still seems reasonable.
The context of just.
Transaction timing delays continuing.
Yes, I mean, Linda so one I mean, I don't think that we're going to get into the discussions of specifics around <unk> <unk> per share growth for 2022 until we provide formal guidance I do think that.
The foundation that Mark and the team have put together on the operational side of the business.
<unk> is absolutely going to support sector leading growth.
In a low risk fashion, which is kind of where.
Where it is that we've been positioning the company.
For a period of time look I mean, I get it mark and I, and Randy and Amy and Tricia and everybody who read all the notes right I totally understand the frustration.
<unk> with timing and needless to say is as frustrated as you are we are as well.
I think that the idea really is less focus as we talked about last quarter on the intra quarter impact of those acquisitions and more focus on building up the most solid base of ABR that we can in order to support the growth that youre, referring to right. So.
In an ideal world, we wanted to have our cake and if needed to we want to get those deals and we want to get them on on.
On the balance sheet as quickly as we can.
In a number of cases in market, even provide a pretty good example that we have.
Been dealing with but in a number of cases, where the only everything that we can but these transactions have two parties and we cannot control the sellers.
Yeah, I mean, I think at the end of the day.
Yeah, Andy is exactly right I mean, we're going to focus first on the quality of assets that we're adding to the portfolio, we're really proud of what.
What we've been able to add second we want to try to get the best possible pricing that we can.
Which oftentimes it means that we're going to have to work through some complexities that others really prefer not to deal with and we mentioned the Walgreens transaction, where we're helping a seller with defeasance and getting leases extended with Walgreens is not party though.
And sale agreement with the seller. So you have multiple parties that you are dealing with there.
We did have a chunkier transaction that we expected to close in August.
This quarter ended up closing in October, but it was really the seller was having trouble getting the changes made to the <unk> that we needed to get comfortable with to in order to to move forward with a with a clean transaction and.
And so that particular deal cost us a penny a share in the third quarter. So when.
When were small these one.
<unk> can kind of kind of have a larger impact.
On one individual quarter, but we're really building this platform for the long term.
We're certainly we understand the.
What happens quarter to quarter.
But really the focus is much more on the long term portfolio that we're building.
Thanks for that additional color and then on your lease expiration schedule you have nothing due until 2023 and it's only four leases and then you've only got one in 2024 is it possible that you could continue to push out all of these through blend and extends.
I think each one of those leases is kind of a case by case basis. If we feel like we've got a very high level of confidence that either the tenant is going to renew when the when the exploration comes due or in the event that they don't renew that we can replace the rent.
We have a little bit less incentive to try to get that extended early.
But yes, I mean, I think we really just have such a little.
Due here in the next couple of years.
Probably won't be a big focus, but if we get approached by the Senate wanting to do something early.
We're always happy to have those conversations.
Okay.
Our next question is from Katie Mcconnell with Citi. Please proceed.
Great. Thank you so.
So you mentioned that the lower acquisition cap rate largely driven by the quality of assets, you're buying but can you just expand on that a bit more in terms of what you're targeting.
Are you seeing cap rate compression for the sector.
Yes, sure so and I think we had a little bit more lease term and in this quarter than what we've had.
Over the past several quarters, we really kind of been bouncing around in the mid to high six cap rate range over the past several quarters.
This one we just had a little bit more term.
A little bit more credit quality.
And then previous quarters I think it was really just had a lot more to do with the mix that would that we're acquiring.
And looking at what we've closed so far in the fourth quarter and what we think we're going to close in the fourth quarter I would expect our cap rates to move up closer to what they have been in the past.
Okay, Great and then on the disposition side would you say the third quarter represented the bulk of the dispositions or are you assuming additional asset sales within the net acquisition guidance.
Yeah. Good question so.
Dispositions.
We're always looking at potentially looking at selling assets if if if.
Theres, a strategic or opportunistic reason.
In the third quarter, we reduced our casual dining exposure I think we said on previous calls that we wanted to get that exposure below 1% by the end of the year. So we've accomplished that now down to just inside night thinking about 9% of our ABR.
Reduced exposure to banks, that's another area that we've really had highlighted as an area that we would like to reduce exposure over time.
Sold off at 711, which is our number one tenant to a little bit more diversification and then we had one camping world asset that we that we sold.
During the quarter that was really.
I think we think of that as a fairly cyclical.
Business with Covid, that's really been an area, where they've been one of the winners with Covid a lot of people have really kind of turned to RV by buying our views and running RV. So they've done really well during COVID-19 and we kind of view that as a good opportunity to sell a big box assets at a at a pretty aggressive cap rates. So we acquired that asset and kind of the <unk>.
Seven cap rate range for you.
Years ago, and then we are able to sell it at a 675 and Katie it's important to note that as one of the reasons why we provide our acquisition our acquisition guidance in the form of net acquisitions right such that to the extent that we dispose of assets, it's on us to go and replace them.
Well I think thank you.
Thanks, Greg.
And our final question is from Lindsay Duncan with Bank of America. Please proceed.
Hi, good morning, Thank you Andre.
On for Josh down our line.
Wanted to expand on that around get possession.
Okay.
To get more color around the fourth quarter.
Eric.
Im, particularly because they close at a higher cap rate.
What it really that big blocks asset in camping that drove the higher cap rate I'm, just curious to hear more comments around that.
Yes, sure and I believe they blended to a six 3% cap rate so.
Generally that's inside of where we are acquiring assets and certainly will be inside of the cap rate.
That we will be acquiring assets for for the year.
But.
Yes so.
Yes, so I mean, I kind of viewed it as maybe a pretty aggressive cap rate.
Compared to what we are acquiring assets accretively.
Recycling capital and then considering what we sold versus what we're buying we think we're adding better quality to the portfolio versus versus what we're selling.
Yes, I do think that I would expect dispositions to be considerably lower in the future.
Okay. Thank you.
And then my second question is.
Just around the challenging labor as you guys are expanding how are ya grappling with that.
Are you facing pressure.
Industry.
Tenants versus others, and what kind of outlook might get paas.
With regard to like impacted G&A beyond 2021.
So you might take the Geneva.
It's interesting.
Yes, Brian Yes from a tenant perspective, yes, I mean, it is something that we're paying attention to.
There are areas that we really expected to see a little bit more whether it be in restaurants, but we've actually seen some margin expansion.
With the restaurant properties that we own.
And I do think it could have an impact on the development projects that were.
We're looking at.
Moving forward with our development agreements with the deals that we have that are live right now we don't pay for any of the cost overruns. So if there.
Those expenses go up those are borne by by the developer, but I do think that could have an impact on future development deals and whether the rents associated with those could end up being a little bit higher.
Which might make us.
It kind of pause a little bit on some of those transactions.
Got it that's helpful. Thank you.
We have reached end of our question and answer session I would like to turn the conference back over to Mark Manheimer for closing comments.
Well, thank you everyone for joining today.
We look forward to discussing our progress for those of you joining NAREIT in a couple of weeks. Thanks again.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
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Uh huh.
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Okay.