Q3 2021 PS Business Parks Inc Earnings Call
Good afternoon, and welcome to the P. S business parks third quarter 2021 earnings results conference call and webcast. At this time all participants have been placed in a listen only mode and the floor will be opened for your questions. Following the presentation.
If you would like to ask a question at that time. Please press star one on your telephone keypad. If at any point. Your question has been answered you may remove yourself from the queue by pressing the pound key.
If you should require operator assistance. Please press star zero. It is now my pleasure to turn the floor over to Jeff hedges Psb's Chief Financial Officer, Sir you may begin.
Good morning, everyone and thank you for joining us for the third quarter 2021, PS business Parks Investor Conference call. This is Jeff hedges Chief Financial Officer with me today is our president and Chief Executive Officer, Mac, Chandler, and our Chief Accounting Officer Trenton Groves.
Before we begin let me remind everyone that all statements other than statements of historical fact included in this conference call are forward looking statements.
These forward looking statements are subject to a number of risks and uncertainties many of which are beyond PS business parks control, which could cause actual results to differ materially from those set forth in or implied by such forward looking statements.
All forward looking statements speak only as of the date of this conference call.
PS business parks undertakes no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.
For additional information about risks and uncertainties that could adversely affect PS business parks forward looking statements. Please refer to the reports filed by the company with the Securities and Exchange Commission, including our annual report on Form 10-K, and subsequent reports on Form 10-Q and form 8-K.
We will also provide certain non-GAAP financial measures.
Reconciliation of these non-GAAP financial measures to GAAP is included in our press release and earnings supplement which can be found on our website at PS business parks Dot Com I will now.
Now I'll turn the call over to Mac.
Thank you, Jeff Good morning, and good afternoon to those in the East welcome to PS business Parks third quarter, 2021 investor call.
On today's call I will highlight our third quarter accomplishments provide a rundown of our recent investment activity and provide an update on our markets, Jeff will present additional detail on our financial results balance sheet and capital allocation.
To begin we are thrilled with the third quarter results highlighted by same park cash NOI, which increased by 10, 7% this quarter compared to the same period last year robust occupancy gains and rent growth were the primary driver of Ryan O y growth.
Quarter end occupancy of 95, 5% increased 270 basis points year over year, our industrial portfolio continues to flourish with an average occupancy of 96, 3% for the quarter and year to date same park cash NOI growth of 13, 3% compared to last year.
Moving to production, we leased 2 million square feet in Q3, a sequential increase of seven 5% cap.
Cash and net effective rents this quarter increased 5% and 15, 4% respectively.
Again, our industrial assets led the way with healthy cash and net effective rent growth of 9% and 22, 4% respectively.
Leasing transaction costs were $4.38 per square foot for the quarter the increase as compared to Q2 was mainly attributable to a handful of larger strategic space Reconfigurations supported by higher rental rates.
Now turning to our investment activity on September one we acquired Port America, 718000 square foot multi tenant industrial park adjacent to DFW in Dallas for $123 million. The Park is currently 97, 1% occupied and continues to meet our high expectations in all aspects.
Particularly of rent growth in renewals, we are forecasting a stabilized yield of approximately four 5%.
Subsequent to quarter end, we announced the disposition of less business Park in San Diego, California, We couldnt be happier with this transaction that realized $315 million of gross sale proceeds to put this in perspective, the sale price represents greater than 60 times, our 2021 estimated at a life for them.
Property.
Approximately $50 million of the net proceeds has been exchanged into Port America as previously communicated our special dividend will likely be paid by year end to the extent the remainder of the sale proceeds are not exchanged which Jeff will touch on a little later.
We previously announced that we are marketing for sale, our Royal Tech Flex Park in Las Colinas, Texas.
Process is advancing as expected and we've received very positive feedback from the market that you may have seen we moved this property to held for sale in our Q3 financials. We plan to provide an update early next year.
We are in the market for acquisitions that meet our standards, particularly multi 10 industrial parks to allow us to add value through our best in class leasing and operating platform.
Moving to our development projects Freeport, our 83000 corporate industrial development of Dallas is tracking well to building a 63% leased with another lease executed this week with kids, who do not have strong interest in the remainder of the building and are tracking to have a fully committed by year end or to 12 development in Seattle in Boca development.
Lower death are due to break ground in November <unk>.
Construction of Brentford at the mile of 411 unit multi tenant multifamily development in Tysons, Virginia is on schedule for aiming is proceeding as planned and dry wall starts next month, we plan to deliver the first units in summer 2022.
Now, let's turn to our markets.
In Seattle, we are pleased to announce that we have leased our 48000 square foot vacancy at 212 business Park to a regional technology company, our industrial assets in Seattle are performing well and average occupancy increased to 95, 6% for the third quarter.
110 basis point sequential expansion, we have strong demand for logistics fulfillment and building materials companies.
In Northern California, and momentum continues to build logistics and distribution are the leading demand drivers, but we also increased see increased demand for life science firms in the East Bay and construction related industries throughout the market.
Industrial rent growth in Northern California was nine 9% for the quarter.
With an average occupancy of 95, 9%.
We recently signed a letter of intent for our 140000 square foot vacancy in Hayward and lease negotiations are just beginning.
Yeah.
For Southern California, we see increased diversity and demand from logistics and smaller last mile users to small business services. We are delighted with the performance of our industrial assets, which maintained an average occupancy of 98% for the quarter third quarter cash rent growth was strong at 95% retention was 85%.
Our mid counties industrial portfolio remains exceptional with less than 2% vacancy.
The Texas industrial demand is strong.
It also had average occupancy for the third quarter dropped to 94, 2% primarily due to the expected move out of a 67000 square foot tenant in a flex building in north Austin, we are evaluating several options for re leasing the space. However, we do expect it to me right to remain down for a few quarters.
In Dallas, we ended the quarter at 92, 8% occupancy and we're bullish in the market as it continues to a beacon.
For employment growth and population migration.
In Washington Metro our industrial portfolio continues to perform well with Q3 occupancy coming in at 95, 6%, which is in line with the all time low market vacancy rates for Northern Virginia suburban, Maryland as reported by J L. L.
Our office portfolio was 87, 5% occupied and Theres positive momentum with transwestern reporting tours are up 35% from a year ago.
Our leasing production between Q2, 'twenty 'twenty and Q1, 2021 averaged 90000 square feet per quarter.
Since then production has increased to 175000 square feet per quarter.
We are still not back to pre tax pre pandemic levels, but we're pleased with the increased activity.
<unk>, we made in our make ready suites has positioned as well as in many cases, we can deliver space faster and cheaper than our competitors.
Finally, South Florida continues to lead all of our markets due to strong wholesale distribution e-commerce and logistics demand.
Occupancy in our Florida Division increased in Q3.
To 98, 2% from 96, 9% last quarter, our MCC Park on Miami, Miami continues to outperform the local market due to small tenant demand and expansions both of which are helping drive rental rates to all time highs.
I'll now turn the call over to Jeff.
Thank you Mac.
I'll begin with an overview of our financial results for the three and nine months ended September 32021.
Net income allocable to common stockholders for the three months ended September 30th was $52 2 million or $1 89 per diluted share while core <unk> was $60 3 million or $1 72 per share representing a six 8% increase from the same period in the prior year.
For the nine months ended September 30th net income per diluted share was $4 55.
And core <unk> was $5 16 per share a five 1% increase from the prior year.
During the quarter cash net operating income attributable to our same park portfolio was $70 7 million.
10, 7% from a year ago.
The increase in same park cash NOI was driven by cash rental income growth of eight 4%, which was primarily attributable to gains in occupancy and rental rate growth.
Same park weighted average occupancy for the quarter was 94, 8% up from 92, 6% in the prior year.
For the nine months ended September 30th same park cash NOI increased eight 6% again, driven by a seven 3% growth in cash rental income, resulting from increased occupancy and rental rate growth.
Funds available for distribution or Fad was $51 6 million for the three months ended September 30th, bringing <unk> year to date to $156 3 million, representing a 10% increase from the prior year.
In addition to the previously mentioned cash NOI growth continues.
<unk> continues to benefit from well managed recurring capital expenditures, which for our same park portfolio registered at 11% of NOI.
Turning now to the balance sheet.
We ended the quarter with $46 6 million of unrestricted cash and our credit facility remained undrawn.
As previously announced we recently called for redemption, All series W preferred shares and those shares will be redeemed on November 3rd at this time. There is no plan to issue a new series of preferred equity as we intend to fund the series W. Redemption with cash on hand, and a portion of the loss sale proceeds.
Speaking to the loss of disposition.
Approximately $51 million of the $311 million of net sale proceeds will qualify for a 10 31 exchange against support America acquisition, which also served as an exchange asset for the two parks in Northern Virginia, Munro Business Center and Park East business Park that we sold earlier in the year.
We will retain the ability to exchange some of the remaining lusk sale proceeds for a period of time, but.
But as previously disclosed if we do not find additional exchange opportunities, we will likely pay a special dividend by year end, we will provide.
An update with all relevant details of this potential special dividend on or around December one.
Lastly, ill point out that we paid a quarterly dividend of $1 five per share to common stockholders in the third quarter and our board recently declared an ordinary dividend on a dollar a five per share to be paid in the fourth quarter of 2021 on December 30 to stockholders of record on December 15th.
With that I'll now turn the call back to Mark.
Thanks, Jeff.
Earlier this month, we announced that a deal con will be joining us as our new EVP and Chief Financial Officer effective January 10th 2022.
<unk>, Jeff Trenton, and I have developed an orderly transition plan, which will mitigate any potential disruption and allow us to continue to accomplish our strategic goals to grow net cash flow and source accretive investment opportunities today.
Today, as Jeff's last investor call with PSP and while it's too soon to get to say goodbye I'd like to take a moment to acknowledge Jeff many contributions and to say thank you.
This concludes our prepared remarks and with that we'll open it up for questions.
At this time, if you would like to ask a question. Please press star and one on your telephone keypad. If at any point. Your question is answered you may remove yourself from the queue by pressing the pound key.
While you pose your question that you would pick up the handset to provide optimal sound quality.
And we will take our first question from Emmanuel Korchman with Citi.
Hey, good morning, guys.
Mac you know given the success of <unk> sale, how much more time are you spending looking for assets that have higher and better uses and maybe the second part of that same question is are there sort of limits do you think about whether it would be.
Things like a need for a special dividend or use of proceeds or is it just a matter of scattered in the portfolio for the best value.
Value creation opportunities.
Thanks, Patty and good morning.
Over the years we've identified.
Many such assets and war.
Partly.
<unk> brought on it supported the need for someone to focus directly on that and that was our head of development.
Who's based up in Seattle, who is going to primarily work work on.
Yeah.
Value through entitlement, and whether whether that entitled value something that we.
Used for ourselves through reinvestment or or we sell to someone else remains to be seen.
But we're spending a lot of time and I would.
Say more time than before.
And in part I would say.
The emergence of life science as you.
Incredibly strong sector is somewhat new and in the scheme of things.
And then their ability to pay what they can afford to pay is somewhat unprecedented. So we are looking for more opportunities that might fit there and many of the markets that.
Where we own assets or markets that.
Meet their needs to as well so I would say we've increased our time on.
On it it's it's obviously, we've we've enjoyed the success of that and its raised our attention too.
Other potential opportunities.
So all of the answers your question, but certainly more tightened we're spending more time on it.
Thanks.
If we just think about the types of tenants leasing from you have you seen any shift in tenant industries or types I know in the past you pleased to experiential users.
Yeah.
Go cards, and the like and some of your flex parks have you seen less of those more of those more ecommerce just a flavor of who's leasing in your parks right now.
Yes.
Definitely.
I'm not sure there's too many carriers to me and says what we'd call experiential it in our own portfolio.
Maybe a small handful.
That's certainly not a growing segment.
I'd say if anything the shift is more to traditional.
Logistics related companies, whether that'd be.
The tenants who are.
Similarly, our manufacturing goods to be sold through e-commerce or distributions.
I think we're I think our portfolio is certainly shifting that direction with industrial has always been that way, but shifting more all the time and flex is continuing to grow that way too as well.
As vacancy drives up in most markets.
So we've seen more of a pure industrial tenants look at our flex product asset as an interesting alternative and so there are some cases, where we may.
We may reduce the amount of office build out.
Because that's what the market's looking for and make it more of a pure play industrial.
Thanks very much.
We'll take the next question from Craig Mailman with Keybanc capital.
Hey, guys.
I just wanted to follow up on the potential acquisition pipeline just kind of curious.
The kind of the robustness of that and you know your willingness to maybe a stretch a little bit given the fact that you have essentially very low cost proceeds from losses that you can kind of redeploy here.
Yeah, Hi, Craig.
Part of that there is that there is a limiting factor with our 10 31, which is now starting to do with appetite is just a timing factor because were.
Or.
We really the shot clock that we have really expires really roughly December one. So so if we don't exchange by then.
Anything we don't exchange, we're in a special dividend mode. So.
There's a couple of assets that we are pursuing women that were under contract for.
One that were.
Pursuing that would meet that timing.
But but those yeah.
At this stage given how close we are to 12 one.
I would say less than.
Half of the.
Net sales proceeds.
Will be have the ability to be redeployed through a 10 31.
Alright, so the U S.
That's about.
Let's see.
Our acquisition purposes.
Less than a $100 million.
Okay.
So there's a couple of assets that we're pursuing that.
But we we do understand the attractiveness of the cost of capital and obviously, we want assets that meet our standards not just for yield but for the long term.
And the extent that we can close on a couple that we're pursuing.
We certainly intend to do so.
Okay. So that would that one that's under contract to be a little bit less of 100 million or would you need.
Other one after that to close to kind of get to the 50% Mark.
Really less that the aggregate of the two is as is under 100 really.
Okay, Hey, Craig This is Jeff just to remind you as I said about little over $50 million of the proceeds has already been applied against the Port America acquisition. So so that portion has been exchanged right. This would be an incremental 100 million that gets you to the half the 311.
That's right that's right that's right Yeah and also looking at.
You know, it's not quite in a new investment, but the redemption of the series W is in a sense an investment at a higher at a higher yield than what you'd find in the marketplace today.
Okay, so probability weight.
So cash applied for that is certainly an accretive use of funds.
Right I'm, just getting a probability weighted you probably 100% on $150 million special dividend in somewhere 50, 50 on another kind of $50 million on top of that.
Yeah.
Hi.
Greg I think you are directionally thinking about it the right way and as I said, we're going to provide more details on this on or around December one when we have more clarity on our opportunity to exchange the remainder of those proceeds.
Okay.
And then just quickly on import America I know you said four 5% stabilize yield as we're modeling that kind of what's a good gap yield to put that out initially.
Yes.
Hey, Hey, Greg It's Jeff again.
For the interim period of time, we'd say, probably three and three quarters to four.
Picking up closer to that four.
Next year.
Okay, I'm on a GAAP basis.
Yeah between now to be clear between now and when we reach stabilization and.
No.
Three three year about $2 two to three years.
Okay.
Hmm.
Then another one on the signed LOI at Hayward can you give us a sense of the potential mark to market there.
We're not quite ready.
To communicate too many details on that because we've just started we've just entered into that and we.
There's some confidentiality that we have between us and the tenant.
Who's a I will tell you the tenant is a to b.
Building materials tenant that uses a lot of technology in there.
In their application and manufacturer of building materials.
We just started that.
But as we get further and we're ready to proceed.
But it's.
We're very pleased with the transaction should it make and.
It's in line with our expectations of what we've been pursuing over the last couple of quarters.
Okay.
Could you remind me of your expectations.
[laughter] well I will tell you, it's not going to qualify as as as rent growth because it's been vacant for.
Presuming this lease that site it will have been vacant for more than a year.
Yes.
Uh huh.
So you guys are wiggling out of reporting it because it's not.
12 months.
Yes.
Generally it's a little premature I mean literally we just started turning turning to lease.
And obviously, we got very close once before.
So maybe we're a little cautious here.
We don't want to jeopardize this deal for making.
No. That's fair and then just one last quick one I I didn't hear it the Austin vacancy you said should be down how big is that and how much of an earnings drag would that be if it's going be down for the full.
Full year.
A few quarters at about 67000 square feet. This was planned some time ago.
US notice it was the state of Texas.
And that'll be that'll be down for a few quarters.
We have not cut back on Saturday basis.
Yeah.
Hi, Craig I don't have a precise figure to give you on that I would say you could probably look at what we've experienced from an NOI perspective in the Austin market and on a pro rated basis, that's a pretty good proxy for what.
While we would expect the drag to be.
Perfect.
Thanks, guys.
Yeah.
Thanks, Craig.
Well go next Anthony <unk> with J P. Morgan.
Yes. Thanks so.
You all talked about 95 for getting the 95% of occupancy like for a few quarters now and it seems like you're more or less there and you just talked about Hayward in Austin, So where should we think about.
The next stop is on your occupancy occupancy side as we kind of look ahead.
Yeah.
Yeah, Tony I mean, it's we like we like where we're at.
At this point.
We're we're.
We're pushing rent growth.
And.
We think we're really in a sweet spot being in that 95.
Maybe a hair over.
And we think pushing rent growth pushing embedded rent bumps puts us in the best position to grow NOI over the long term.
So certainly in certain markets you can see from what we reported were.
We're a healthy clip above 95% in certain market. So does it mean on it on a per market basis, you could exceed it but keep in mind. Our lease terms are generally shorter you know they are less than four years. So we have a little bit more natural role.
Which helps us mark to market quicker, we can get to spaces faster.
But we like we like this occupancy and can we clip up a little bit more.
Or more.
But we like the spot that we're in where we think we've got some really good leverage and we're applying that through rate growth.
Retention.
We don't have to.
We're renewing tenants where it makes sense.
But we're under no pressure to do that and we're having good success with us.
Okay, and then just in terms of thinking about inflation you have smaller tenants in the portfolio and perhaps more maybe gross leasing. So do you feel like you have any more exposure on the inflation side as we as we think about costs.
That you can't pass through.
I don't think any more than.
Disproportionately more than any other landlord out there I mean, our our parks if you think about how we operate them.
Is it it's pretty basic there.
There isn't a lot of fluff to it and I don't think inflation is really they're pretty utilitarian and that allows our expenses to be really.
Pretty modest so I don't I don't think were you know.
For the most part our portfolio is obviously industrial flex and our expenses are pretty reasonable. So so I don't think inflation is going to have a tremendous pushing us as it might in other sectors for example.
We haven't seen a big.
Big pushback from our tenants on that and we haven't experienced it.
A big change in tone from our tenants as it comes to renewing leases and signing new leases.
Really I think.
The overriding theme is.
Really just a lack of vacancy in the market and within our portfolio I think thats over writing any inflationary concerns which is there's just so little space out there and most of our tenants don't have the opportunity to go to other other parks in the market.
Got it and then just last question for me you talked about the couple of deals you might have to to use up some of the proceeds from from loss, but just thinking beyond that because you have a lot of balance sheet capacity beyond sort of the sales proceeds.
What is the deal flow look like Youre buy box like are you seeing a lot of product that fits into what you would want.
There is the deal.
So that's out there is really pretty good.
Pricing is a little bit better in Texas than say the coasts.
There is theirs.
Pretty meaningful difference in that.
There's a lot of product that we like.
That's out there and.
No.
We will likely we've signaled that.
Royal Tech.
It may very well sell next year, that's going to provide additional 10 31.
Change opportunities presuming that closes so we're.
We're in the market not just for between here in December but very much active pursuing deals that were closed next year as well. So we're seeing a lot what we like pricing has gotten more aggressive over the last quarter.
It's getting awfully expensive out there.
And I think the parks out a little bit larger like a part of America I think those are ones that we certainly like but I think we also compete a little bit better because their art.
As many.
Operators, who want to take out 100, plus tenant park like that and that really fits us well because were built that way, we're built to take that on.
Okay, but a larger portfolio opportunity by the way would suit us really well.
And we're pursuing those as well.
Alright sounds good thank you.
Sure thing.
Well go next to Blaine Heck with Wells Fargo.
Great. Thanks, good morning.
Can you talk about your development projects and program a little bit more it sounds like you guys are on track to execute well at your Freeport in Seattle projects I guess, just with demand for industrial product is robust as we've ever seen it are you more inclined to start spec industrial development and maybe can you give us any sense of how much capacity you're currently.
<unk> Holdings Might've Howard you on on that side.
I can't I can't point to a.
Our long term pipeline of surplus land, it's pretty fit there are.
There aren't.
There aren't a ton of these opportunities, but were certainly mining them.
But I think I certainly think our our expertise in this is is proven.
And.
Our ability from a capital standpoint, and an appetite to do this.
We would love to do more I think I think really the next the next evolution is trying to acquire adjacent land land that we already owned and bring that into.
Into our parks when we experience a freeport was was pretty interesting in that nobody nobody is really building.
Ground up.
Class a industrial for small tenancies or these are 10000 square foot bays and the tests have come to US and said boy Nobody has this product.
And a newly built building with that with all the modern amenities and and that's why our rents were well in excess of what we underwrote it was actually pretty difficult for us.
To underwrite that and we we well exceeded those our return on that.
It's roughly 10.
10% stabilized yield on that excluding land, we already own the land.
So to me I think the next evolution is.
Is pursuing adjacent land to existing parks and it might be land that doesn't necessarily have to be vacant, but land, where we could scrape and rebuild and.
We're going to start to pursue those more because it was really neat.
Meet.
To meet our expectations. It does provide a great accretive deal for us.
Yeah, Okay that makes sense.
Then just with respect to brentford at the mile. It sounds like everything's on schedule, there which is great.
Are you running into any cost pressures given the supply chain disruption, we've seen and the related increase in pricing for materials.
Yes, we're fortunate in the sense that when we when we.
Bought that job out we got ahead of some of this.
So we're 99% bought out.
So.
We're monitoring that very closely.
Just because we are bought out doesn't mean, we have all materials under roof, but.
It looks like we're going to be just fine.
But we're we're in fact.
You know pushing things, where normally we would want to be ordering things a month that we're ordering three months out and we're really trying to get out ahead of any potential disruptions, whether or not they're there today or not and I think we're confident we're going to be just fine but.
I think star.
Starting when we did and focusing a lot of time and effort on it has really helped us.
Okay. That's helpful. And then last one from me Mac I think it's pretty clear you guys are working on decreasing your exposure to office and increasing industrial and maybe even flex on the margin, but I wanted to ask whether there are any geographic targets a market targets that you have that might involve a sale out of the market or investment in any.
Specific market over the others.
Yeah.
We.
We like we like all of the markets that we're in I mean, what's what's interesting is we're preferred me almost equally well in all of our markets are industrial is performing.
Because 80% of our practice is on the coast.
But.
I don't see us.
No.
Having a heavy.
Bias towards leaning into one are leaning out of any of them, they're really it's really more opportunity driven.
But I do Echo your observation just out that we are continuing to to lighten up our office and reinvest in industrial I think that.
That theme makes sense for us and when it's opportunistic we will continue to do that.
And.
Certainly the pricing is a little bit better in Texas, Texas is sort of an interesting take compare to the coast.
A little better yield going into it and you might say well you know.
Markets in Texas for example, maybe more susceptible to new supply than the coast.
Conventional wisdom.
But I will say the.
The multi tenant product almost no matter, where you are just generally isn't being built.
And.
Even with vacant land at even with more lax entitlements, it's just not being built and so <unk>.
Supply really isn't increasing as opposed to bulk warehouse.
So we're not as concerned about that so we're.
<unk>.
We like all of our markets and.
Really one additional step that we havent really got you yet is alright, green lighting, new markets and so I think nothing to reveal reveal here today, but I would tell you our markets were very bullish at all of them right now they are all performing very well.
Great that's helpful. Thanks.
Thanks, Mike.
Yeah.
Well go next to Vince <unk> balance sheet.
Hi, Good morning, I wanted to follow up on the earlier question on the transactions market are you seeing the same level of investor competition for business parks as more traditional industrial properties, and then obviously business parks or more operationally intensive. So just wondering how the type of bitter investor.
The difference between the two segments.
Hi, Vince.
I'd say, it's probably overall, probably less there are less bidders going after it then.
Traditional bulk large warehouse, industrial, which which probably has more.
Uh huh.
<unk> <unk> capital.
Behind local sponsors.
I would say in the multi tenant it tends to be.
Some of our some of our REIT peers.
But also more local operators.
Who know there who know their local markets and they're used to operating it and they are expanding their footprint.
But.
Even with less players it doesn't really mean, there's less demand is just.
Whether you have 10 people who are going after after an asset or 'twenty five.
Even with tenure Theres still plenty of competition. There. So we're saying there's still real robust demand for for our private it's helping to drive the value of our existing multi tenant.
No I think.
That's really helpful. And then one follow up I mean, what do you think the current cap rate spread in.
Same market for our business park versus more.
Our bulk product and that in the same place.
Okay.
Well I, certainly think it's compressed versus a year ago.
And it probably continues to compress because I think I think there is.
Demand for our four product that has a shorter wallets, where you can mark to market quicker and that's what that's traditionally and.
But business parks provide so I think it's continuing to compress.
I mean, it's I think it's since call. It 50 basis points of cases, it's less.
At one point it was.
Over a year ago was over 100.
It certainly compressed.
Yeah.
I think I think 50, plus or minus is probably inside in cases, as a reasonable a reasonable spread.
Perfect. Thank you.
Sure.
Yes.
Once again, if you do have a question you May press star one on your phone at this time.
Yeah.
There are no further questions I will turn the floor back over to Mac Chandler.
Thank you everyone for your time and for your continued interest in PSP I Hope you enjoy the rest of your Friday and I hope everyone has a safe Halloween. Thank you again.
This does conclude today's conference. Please disconnect your lines at this time and have a wonderful day.
[music].
Yeah.
Yeah.
[music].
Yes.
[music].
Mhm.
Yes.
[music].