Q2 2022 Eastgroup Properties Inc Earnings Call
Good day and welcome to the East Group properties second quarter 2022 earnings conference call and webcast. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by.
Pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Marshall Loeb.
President and CEO . Please go ahead.
Good morning, and thanks for calling in for our second quarter 2022 conference call as always we appreciate your interest Brent Wood. Our CFO is also on the call. This morning since we'll make forward looking statements. We ask that you listen to the following disclaimer.
Please note that our conference call today will contain financial measures such as P and L a and SSO.
non-GAAP measures as defined in regulation G.
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On the Investor page of our website and to our periodic reports furnished or filed with the FCC for definitions and further information regarding our use of these non-GAAP financial measures and a reconciliation of them to our GAAP results.
Please also note that some statements. During this call are forward looking statements as defined in in with then the safe harbors under the Securities Act of 1933.
The Securities Exchange Act of 1934 in the private Securities Litigation Reform Act of 1990 path forward.
Forward looking statements in the earnings press release, along with our remarks are made as of today and reflect our current views about the company's plans intentions expectations strategies and prospects based on the information currently available to the company.
On assumptions. It is made we undertake no duty to update such statements or remarks, whether as a result of new information future or actual events or otherwise.
Such statements involve known and unknown risks uncertainties and other factors that may cause actual results to differ materially. Please see our SEC filings, including in our most recent annual report on Form 10-K for more detail about these risks.
Good morning, and thank you for your time I'll start thinking our team for another strong quarter. They continue performing at a high level and capitalizing on opportunities and a positive fluid environment.
Our second quarter results were strong and demonstrate the quality of our portfolio and the industrial market strength. Some of the results produced include funds from operations coming in above guidance up 17% for the quarter well ahead of our initial forecast.
This marks 37 consecutive quarters of higher <unk> per share as compared to prior year quarter truly a long term trend.
Our quarterly occupancy averaged 98, 1% up 130 basis points from second quarter 2021, and at quarter end were ahead of projections at 99, 1% leased and 98, 5% occupied for perspective each of these represent record levels for the company.
Similarly quarterly re leasing spreads were strong at 37% GAAP and over 22% cash year to date, releasing spreads are similar at 35% and 22% GAAP and cash respectively.
Finally cash same store NOI also reached a quarterly record at nine 5% and stands at 9% year to date.
In summary, I'm excited about our results year to date and the positioning this gives us for the balance of the year.
Today, we're responding to strengthen the market end user demand for industrial product by focusing on value creation via raising rents and new development.
I am grateful, we ended the quarter, 99% leased and to demonstrate the market strength, our last seven quarters have each been among the highest quarterly rights in the company's history.
Another trend, we're seeing is widespread rent growth.
Re leasing spreads have trended higher than in 'twenty, 'twenty, one and more importantly across a broader geography.
I'm happy to finish the quarter at $1 72 per share in F. F O and raise annual guidance 15 cents at the midpoint to $6 90 per share up 13, 3% from 'twenty to 'twenty one's record level.
Helping us achieve these results is thankfully, having the most diversified rent roll in our sector with our top 10 tenants only accounting for 8.8% of rents.
Yes.
As we've stated before our development starts are pulled on market demand within our parks.
Based on the strength, we're saying, we're raising forecast 2022 starts to $350 million.
Well closely monitor leasing results, along the way and expect to update our guidance throughout the year.
Given the shift in capital markets early second quarter, we're taking a measured approach on new building investments.
We are however, evaluating new development sites, given the level of demand and longer timeframe often required to foot sides engine production.
In the midst of this transition I am very pleased for our toilet Corporation acquisition.
The portfolio consist of 14 properties totaling one 7 million square feet with 85% of the NOI coming from the San Francisco Bay area, and 15% from Sacramento strategically the property's mirror our own portfolio very closely in terms of building size tenant sizes.
In infill locations secondarily, it raises our capital allocation to San Francisco up to 7% within California up to 21% and further reduces our concentration in Houston, which is down 150 basis points from last year.
Brent will now speak to several topics, including our updated projections well then our 2022 guidance.
Good morning, our second quarter results reflect the terrific execution of our team strong overall performance of our portfolio and the continued success of our time tested strategy.
<unk> per share for the second quarter exceeded our guidance range at $1 72 per share and compared to second quarter 2021 of $1 47 represented an increase of 17%.
The outperformance continues to be driven by our operating portfolio performed better than anticipated, particularly occupancy and rental rate growth.
From a capital perspective macro concerns of investors have caused the stock market to decline, including our share price and as a result, we did not issue any equity during the second quarter apart from the <unk> acquisition, we have been intentionally deleveraging the balance sheet over the past several years and are in a good position to pivot to debt proceeds.
For capital sourcing during the second quarter, we issued the private placement of $150 million of senior unsecured notes with a fixed interest rate of 3.0% to 3% and a 10 year term.
We also agreed to terms on a $125 million senior unsecured term loan that has two tranches one for $75 million with a five year term and another $50 million with two year term. The tranches have effective fixed interest rates of 4.0 per set and 4.09% respectively.
We expect to find and close the loan in late August .
Subsequent to quarter end, we agreed to terms on the private placement of two senior unsecured notes totaling $150 million.
One note for 75 million has an 11 year term and an interest rate of 4.90% and the other 75 million note has a 12 year term at an interest rate of 4.95%.
The notes are expected to be issued and sold in October as a reminder, the company does not have any variable rate debt. Besides the revolver facilities.
And our near term maturity schedule is light with only a 115 million scheduled to mature over the next two years.
Our balance sheet remains flexible and strong with healthy financial metrics, our debt to total market capitalization was 19.5%.
Unadjusted debt to EBITDA ratio was down to 4.95 times and our interest in fixed charge coverage ratio has risen to 9.1 times.
Looking forward <unk> guidance for the third quarter of 2022 is estimated to be in the range of $1 71 to $1 77 per share.
And $6.84 to $6.96 for the year, a 15 cent per share increase over our prior guidance.
The 2022 F F O per share midpoint represents a 13, 3% increase over 2021.
A few of the notable assumption changes that comprise our revised guidance include increasing our average month end occupancy 30 basis points to 97, 8%.
The increase in the cash same property midpoint from 7.4% to eight 5%.
Removing any additional common stock issuance and increasing debt issuance by $125 million.
In summary, we were pleased with our second quarter results and we will continue to rely on our financial strength the experience of our team and the quality and location of our portfolio to carry our momentum through the remainder of the year now Marshall will make final comments.
Thanks, Brent and closing I'm proud of the results our team created for the first half of the year and the position it leaves us and for the balance.
Portfolio operations remain historically strong as our results indicate.
That said capital markets and the overall environment became fluid during second quarter.
While never fun to live through a couple of thoughts that may prove helpful.
First our team has worked together through several downturns and forecast downturns before.
<unk> may shift, but its not uncharted waters.
Currently the industrial market has been so red hot the past few years some level of market concern we view longer term is healthy for a sustained positive environment.
Meanwhile, our buildings are as full as they've ever been and rents are rising throughout the portfolio will work to keep occupancy high continue pushing rents and listen to tenants and prospects to accommodate their demands in the market as we've always done in good and bad markets.
While the world may be anticipating a choppy environment I remain excited for eastgroup future.
There are several long term positive secular trends are occurring with Ann last mile shallow Bay distribution space and sunbelt markets that will play out over years, such as population shifts evolving logistics chains et cetera.
These trends along with the mix of our team our operating strategy and our markets keep me optimistic about the future.
We'll now open up the call for any questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Please limit yourself to one question and one follow up at this time, we will pause momentarily to assemble our roster.
Our first question comes from Conor Mitchell with Piper Sandler. Please go ahead with your question.
Hi, good morning, Thanks for taking my question.
So you guys have touched on it a little bit with the industrial sector being Red Hot band widespread branch, but there seems to be no sides of leasing slowdown or tenant pushback. So my question is do you believe that this is the industrial sector as a whole is abuse or maybe it's more east group's portfolio, that's behaving differently for the market.
Yeah.
Good morning, Conor I I'd like to thank all of you know maybe like most.
Question is the answer is yes, and variations I'd like to think last mile. We we've said for a few years, there's probably an earlier inning versus kind of big box as people work through supply chain logistics change E. Commerce. So hopefully we're at a little more immune than and then that said I don't know that the industrial is immune.
We're not feeling the downturn, we certainly don't see it in our numbers. We finished the quarter at a record high percent leased but if you're watching the news reading headlines are certainly enough clouds on the horizon that we're being more.
Being cautious with our capital in and with our planning, but I'd like to thank all weather it better than the average company and even the average industrial rate and the market is as we've said it was has been so hot we've even kitted a little of edits.
When you know the stock market's overheated as you're getting that.
And on Uber and Uber drivers, giving your stock tips. Its felt like the number of new industrial developers or new entrants in the market has really increased over the last handful of years, so a little bit of unease and Choppiness, we think longer term, it's probably healthy and and may present, some good opportunities in those downturns as competitive as things were.
It was hard to find opportunities, but with some on <unk> and maybe.
Financing, whether it's debt or equity a little bit harder to come by there may be some opportunities. That's one way you usually found our best acquisitions longer term is in a downturn as well.
Okay.
Yeah.
Great and then just kind of following up on that last part there. It does seem that there's little slowdown.
Change or the outlook for the acquisitions of development. So.
Can you please address how the impact of rising interest rates and the depressed stock price are impacting your future investment decisions.
I'll start and then I'll, let Brent Brent touch on but for now with.
You know probably early Trialing timing early second quarter as the stock market moved and we were you know like.
Everybody, probably expecting interest rates to rise throughout the year and still are we've really pulled back and I'd say, we have not actively bad more so called it's called it monitoring number of kind of core investment acquisitions and value add acquisitions that we were have been actively bidding on the prior few years.
Because of our access to capital is more limited and more so and we were still in a price discovery phase on pricing on an awful lot of assets. So we don't.
To acquire land, especially for a new pocket to get through the zoning entitlements.
The mass grading all of the things like that you could buy the time. That's done you could have entered and exited a recession. So we're still active on land, but really pulled back on the others and maybe Brian if you want to touch on the balance sheet side, a little bit yeah sure. Good morning, Conor and yeah, obviously with this the quick change through the quarter with with the.
The overall market sell off and of course, our stock being impacted by that and we didn't view it as attractive. So of course, you saw zero ATM issuance and then you saw in our assumption changes for the remainder of the year, where we basically have pivoted from a T M.
Issuance to a little more debt our balance sheet was very strong and remains very strong and flexible and.
When times are when you like your stock price at the very reason you put it in that position because what you don't like it you you want to have that other avenue to go to which we have and we have plenty of runway. There. So you know it's not say certainly we changed our assumption that way, but you know if the price were to rebound.
When it rebounds in the future then yeah, we could go the other way, we view that as being fungible, whether it's in the ATM issuance or debt, but you saw us lock up some debt terms and carries through the end of the year will continue to go back and forth and as Marshall said will be and we're being.
Little more student diligent with exactly how we spend the capital and prioritizing that far best value add which is our development pipeline, but so we'll continue to monitor but we like our balance sheet position, even with the debt. We've had a we're still in a very strong debt EBITDA position very strong fixed coverage ratio and other debt metrics. So.
We're in a good position, we'll just take the lane that's most available to us in this monitor it and be flexible.
And.
You know move with it as we need to.
Great. Thanks for the color.
Sure welcome.
The next question comes from Jeff Spector with Bank of America. Please go ahead with your question.
Great. Thank you first question.
Marshall just on visibility into 2023 are.
Clearly in a great position I know sometime this fall you'll start your budgeting process and sure there's clouds on the horizon, but I guess from where you sit versus let's say prior years like what's your confidence level on.
Or thoughts on visibility at least into 'twenty three at least into the first half of 'twenty three how are you feeling.
Sure Good morning, Jeff and good question as we as we kind of have you right later in the year here in a few months, we'll really dig into our budget.
In detail, but what I I like as we head into 2023 as I think about it in maybe two or three factors of last year. Our average renewal on a GAAP basis was a little over 30% and pending the timing in that we're offering we're usually out ahead of lease expirations.
We may not have captured a full year run rate on a number of the renewals. We did last year year to date through mid year, we're at 35% and so those those kind of rent increases.
The good news is that the agreement has been reached but in terms of really getting into our quarterly run rate an awful lot of those still aren't affecting us and this year, we've seen more widespread rent increases last year, we benefited from it but we had just the way our explorations laid out some larger spaces in California.
That helped raise that number this year, it's been more widespread Florida has been 40% Las Vegas, Austin any number of markets, so and with inflation, where it is we're not seeing and supply is tricky as it is to deliver goods, we feel still pretty confident absent a bag.
Economic hit on demand more so than supply and.
And then maybe the last leg of that you've seen us move.
Five buildings out of our development pipeline. This year those all rolled in fully leased so we will get a full year impact of those in 2023.
Within our pipeline today Theres. Another 14 buildings that will deliver by the end between now and the end of first quarter 12 of those are 100% leased and we've got activity on the other two so we feel pretty good. So that's a lot of new NOI, that's coming our way I mean, I wish the equity market would it.
We've said internally into our board right now it feels a little bit like a tale of two cities, we've probably had.
The best couple of three quarters, we've ever had as a company in terms of the metrics produced but the market looking at you know I guess the answer is the market's looking ahead, our stock prices moved down pretty pretty pretty low. So we're in a right now we are projecting a 13% increase this year in F. F O and that's off a record number last year.
And what I like is with the rent increases and the new developments I don't know what the increase will be next year, but and I'm an optimist. So I guess I should preface it with that I felt were.
We're pretty optimistic about next year, especially if it's a mild recession will be fine and keep moving and hopefully we can pick up an opportunity or two from some people that have weaker balance sheets and will be.
Back and running at full speed again, but we're.
Kind of slowing down a little bit and monitoring the horizon.
But internally thanks feel really good and we're not sensing it from our tenants or you know maybe it so we're not sensing it yet, but we've certainly not seen a slowdown or hesitation from tenants yet and that's what we've done and waiting for the last few months and the peak guys in the field just are not seeing that yet thankfully.
Very helpful. Thank you.
And then I guess, if you could tie those comments into.
The you increase your development start guidance.
Yes.
How do we tie some of the some of the concerns but you did increase the development start guidance.
Sure and really.
Certainly they tie together and and if it is.
That's helpful really ire developments, what I like about our model. It is it's like I've I've used the analogy stacking shirts in a retail store of where our parks are built out in phases and it would since Brent now on the call it would be Brent and I, calling us saying.
Jeff It phase two where 50% leased we've got another lease out I've got three proposals out I'm about to run out of inventory, we'd like to build that next building or two so really our starts rather than someone incorporate saying, let's go build a million square foot building in the inland Empire East strong the south.
Side of Dallas.
It is the teams in the field, saying I'm about out of inventory or I've got any number of cases in our parks to I've got existing tenants that need more space and if we don't deliver it to them on a timely basis someone else is so we're really responding to the market and I'd say it corporately, we've certainly gotten a lot of them.
More cautious, but as we look at our development pipeline, especially what's already finished and construction is over 70% leased and then the the balances moving you know it's in the mid Forty's with good activity in the buildings that are at zero or a number of those we are just started in removing dark dirt and havent finished foundations.
Yet so it's really a response to teams in the field, saying, Hey, we need more space and that's why we think we're doing this from memory, which is dangerous, but we started this year at $250 million in starts and one trend. We've seen is with the lack of <unk>.
New product demands there and the lack of new product and it takes us and everyone else longer to deliver that product we are building.
Buildings are leasing up earlier and earlier.
And under the construction, so usually we would deliver a building and then you'd start leasing it now we're seeing pretty good activity doing construction. So that's continuing to kind of.
Paul that and Anna moved from Phase two to phase three within our parks more quickly than the historically in Fort Myers for example, where we built a spec building. It was taken out we delivered the next one and we've not finished either of those at a tenant took that building and so now we're moving onto our third building, but as soon as we.
We've been able to really start construction knock on wood.
We've struggled there to keep up with the demand a little bit which is a great problem to have.
Thank you.
Sure.
Our next question comes from Connor Seversky with Baron Berg. Please go ahead with your question.
Hi, there good morning, Thanks for having me on the call just wanted to jump back into development capacity briefly.
Thinking in some of these particular markets, where you hold these parcels of land say Dallas, where you've got about 70, not you, but in aggregate 70 million square feet under construction.
Would you be looking to potentially sell out of some of that exposure in favor of maybe some of the more coastal markets with.
Future supply growth dynamics.
You know and I guess, that's a good question good morning Connor.
One thing in Dallas does have a larger number and I was thinking it was I've seen in the sixties.
The two thoughts typically I guess, we would say as a rule of thumb. If you take that $60 million 70 million in Dallas under a Dallas Fort worth under construction, probably 10% to 15% of that is a good rule of thumb, that's really shallow bay product I guess, the short answer would be no.
Really the construction isn't what would drive us to exit if we sold something in Dallas and so much of that construction isn't competitive with us the numbers I was kind of looking at Dallas just briefly.
It's two thirds of it per CBRE is calling big box and three fourths of it.
It's under construction is in the Submarkets of North Fort Worth East Dallas, South Dallas, and then the $2 87 corridor I know CBRE added some geography basically expanded the geography as they covered as the market continues to push further and further out and where a lot of our product is in north Dallas.
Next to the DFW airport that area, where 100% leased in Dallas, So we're feeling pretty good and seeing good rent increases in that market as well if we did sell something and you know in Dallas, which we're not opposed to that and where.
37% as our cash rent increase year to date in Dallas that it would be older product it wouldn't and that's typically not so much driven by new supply and we like the coastal markets, but you know.
It was interesting talking to brokers in Dallas for the first time.
Having lots of some of our brokers, they're saying, there's so little land left in Dallas that people are being pushed further south further north kidding.
Oklahoma is going to be part of the Dallas market you get so far out and the tenants are getting pushed out of Fort worth as well that there's really it's hard for me almost like in L. A and when people initially talked about L. A being an infill market and you get pushed so far east, which is certainly the reality of that that I think Dallas is starting to cross.
Stateline, where if you're in an infill location in Dallas.
We've repurposed so many of the older industrial buildings, so a long long winded way of saying, where we're pretty bullish on Dallas in that market. I mean, we will certainly keep the size of our allocation to that market kind of managing yet, but we're seeing some good development opportunities and the team's doing a great job there so weird.
We like Dallas, Austin any number of those texts.
Texas markets right now.
Got it appreciate the color there and as well as the comparison to L. A and say the inland Empire is the kind of overflow of Alpha just one more quick one.
On the dividend, we saw a pretty meaningful headache last year. The positive revisions to guidance may seem like we're trending towards another but could you offer some color here on the thought process, perhaps as it relates to increasing the debt load over the course of the year and how fueling a higher interest expense would impact your ability to raise the dividend.
Yeah. This is Brent Conor.
Yeah, well, obviously next quarters, our traditional period, where the board and we evaluate the dividend and make the adjustment and obviously I think we started the year at a midpoint guide of 663 and I think now we're up to 690. So the year has gone very very well and so I think it's very safe to assume that obviously, the dividend's going to.
No we really don't have much cushion there to begin with so the dividends, obviously going to increase to exactly the extent you know we'll continue to hone in on that to make sure we have adequate coverage, but yes. The interest expense increases is really on the margin obviously that the although the debt we've tied up as baked into our revised numbers, which still was.
15 since over the last guide so.
There's going to be a cost of capital, regardless, but we're still plenty clear of that with what we're doing especially on our development pipeline.
Obviously with the increased cost in capital eats into that margin a little bit, but it's still historically at a comfortable margin. So.
Yeah, well, we will visit but obviously all the indicators are that it will be increasing and up.
You know as far as the debt impact on that it's <unk>.
Baked in but we've got you know a.
Ah Commiserate increase in property net operating income coming in over the top of that so it's we're not taking on debt in a vacuum without doing anything with the proceeds we've got very good. We still you know as Mark said, we're still seeing very very good opportunities to place capital, obviously, if that changes, we'll pivot, but you know.
As of now.
We will continue to do that but more to come on that next quarter, but yeah, that's going to be something.
Something I think our shareholders as always you know our traditional policies to keep that dividend is minimal and we want to grow it and just by virtue of earnings growth like we're doing but.
We will try to keep that.
To a minimum just so we can retain as much capital as possible, but at some point you just get forced to.
Increased because of earnings growth, which is the situation you want to be in.
Got it thank you for the time.
Yes, Sir.
Our next question comes from Michael Carroll with RBC Capital markets. Please go ahead with your question.
Yes. Thanks, I wanted to see if you guys can talk a little bit more about construction costs and how much they've increased in your underlying markets.
Maybe the three buildings that you broke ground this quarter I mean, how much higher are the budgets on those projects versus the buildings that you built in those parks previously.
Oh good.
Good morning, Mike Good construction prices continue to increase.
And it's really evolving to I guess is the other interesting thing I was just we were looking at a project in Florida in the concrete prices are up pretty materially from the last building within the same park for a while steel prices were up overall it feels like maybe F 35, 40% number.
And moving and in it and it's at different times in our roofing materials earlier in the year talking to our construction people you would get a quote but they wouldn't be they won't hold quotes for very long and often on roofing material. It was when it got delivered so I know we spend a lot of time and those guys do bid things out and are managing it as best.
They can the other.
As an aside comments of helpful. And this is where the supply numbers I saw one of our peers commented, which is accurate that the supply numbers are large and a number of our markets just because when you break ground to deliver has gotten debate we used it could build a building in five or six months, that's probably eight or nine months now it was.
To order electrical panels, the number I heard was 11 months for delivery.
H rooftop HVAC units is taking longer and it kind of moves from item to item within the building and I think.
Frustrating as that is I almost have to remind myself for the several years two to 3 million square feet, we have under development that it takes longer and cost more and thankfully rents are rising so we've been able to maintain those yields but it's hard as it is for us to deliver buildings and as expensive as the.
They are that's got to be great news for the 54 million square feet that we already own because that's where you're helping us push rents within our portfolio and with that demand there, but I would think with the concerns that in time people will finish up price projects in construction pricing may come back down and delay.
Every times get a little bit better but.
Been predicting that for a while too and it hasn't come to fruition, but I'd say, 35% to 40% increases and it's been a mixed bag steel is available now that was really the first item that became the kind of got your number and then it may trend again and it sure sounds like China continues to have shutdowns for Covid and <unk>.
Aren't.
Items in places and the other one I'm waiting as we are and probably in hurricane season. Now is usually PVC pipe is something that if you have a lot of hurricane damage all of a sudden everybody needs PVC pipes and that pricing jumps up so we're managing it as best we can but that's that keeps a lid on supply in it.
Exaggerates the amount of product that's under construction in any market right now too because it it's not moving through the pipeline as quickly as it would have anyone's project say three years ago.
And that 40% number is that over like roughly the past 12 months and does that construction cost increase does that keep.
Does that make you second guess the type of buildings that you want to break ground honors rents just so strong and maybe off of that what about your competitors or they are unwilling to break ground. If construction costs have increased so dramatically.
It's probably not 12 months, but maybe maybe 24 I would say about 40% number I mean, it's a little bit rate, we used to compare pre and post COVID-19 numbers and even kind of went in but it's it's probably a little more elongated than 12 months I do think in the market. There is certainly some efficiencies of scale to building bigger box.
As to do that although I've heard where they've had different contractors and things anecdotally.
Get the amount of concrete they need and things like that I think it gets more complicated.
I've said given that.
It's easier to place more dollars in our type buildings than it used to be and what that cost increase and the land is some of that cost increase as well that we've seen such a run up which again, maybe this pause will be helpful on where some land pricing goes.
R.
Our yields are still hung in there and again I think cap rates are moving up albeit.
Slowly and probably at different rates, depending on the type of building I think for our type buildings.
Shallow bay multi tenant buildings the cap rates haven't moved up as much as they have on say longer term single tenant bigger box more bond like assets is what we're hearing as well so.
We've changed we have evolved a little bit with what we build in terms of the amount of glass on the buildings. The architectural features trailer storage, but really the type buildings.
We like our model in and want to respond to our tenants, but not change it based on construction pricing, maybe a better way to say it if we can make our yields work because what we're building is being absorbed in the market and I'd hate to change it I'd, rather trying to manage our cost structure then change our strategy.
Okay, great. Thank you.
Hello.
Okay.
Our next question comes from Craig Mailman with Citi. Please go ahead with your question.
Hey, guys.
Just circling back.
Development capital deployment in general.
Want to put words in your mouth, Marshall, but putting all the commentary together it seems like the potential for maybe slower start into next year is more a function of capital availability and pricing and wanting to maintain leverage metrics versus.
Is that kind of a fair characterization.
Good morning, Craig and Matt I don't know that I don't know that I would go maybe that extreme I think we're being a little more cautious with our capital and then that and then I guess within that there is a couple of projects that we were looking at maybe we'd build through you know typically will build 212 buildings on a park a couple of them.
Given construction pricing and timing we were looking at three or four and we are reconsidering that now, but I think this year I was worried this year our starts would be down from last year, because last year, we had the.
State distribution of the large freight and $90 million pre leased in San Diego.
But we will beat last year's numbers and I think things could slowdown certainly at some at some point if the equity market stays close I mean, we've got Brent and his team have us in a great position in terms of ability to access the debt markets for a little while before we feel like that's getting nervous at some point if you just don't have.
Access to capital that would we.
I guess, you consider a joint venture or some things like that that we haven't really gone down aren't looking at going down those roads yet since the demand is still there, but we feel pretty good about demand.
Until I turned the TV on or pick up a newspaper and I'd, rather we've said in good times and bad there's always something you can get spooked or get too bullish I like that our starts are really driven by a phone call or an email from the field. So we'll keep going and we'll find a source for that.
Capital always think good projects find capital and right now in the development pipeline is going pretty well so it could if it slows down next year it won't be because we call. It at corporate it's just going to behave phase III didn't lease up as quickly as we hoped it would or that different rental rate and so we're going to wait a while on phase four.
And we've done that in any number of cities Atlanta, Phoenix, Miami differently in different markets Houston at times, and it's probably been.
Pretty seamless and invisible to the street, but we're we've kind of waited for demand to catch up with the last phase within a park. So I like that we have that kind of self monitoring and really the only time, we've shut it down corporately that in recent memory has been early on in Covid and even in hindsight I said I didn't have the nerve to do it.
But I should have we should have kept developing through COVID-19, given how demand and things in hindsight, we would've been able to get some great construction pricing and we did tie ups and land, but we should have kept going then but typically it's been market by market or even park by park within a market.
That's helpful. So, let's say your regional guys are clamoring for more.
Yeah sure because everything please.
But how much debt capacity do you think you have if the equity market.
Still doesn't make sense to tap.
Yes, Craig it.
If it's prolonged obviously you can't go forever, just issuing debt, but keep in mind. The current environment. Our EBITDA is growing at a very rapid rate. So the metric at which your you know your debts, increasing but so far our EBITDA has not been static so you're not moving one with the other being static thankfully its inquiry.
So that's helped offset you know any significant increase in the metrics.
Nothing that we'll just evaluate the latest.
Round of of debt that we tied it we think will take us through the end of the year and as we get probably fourth quarter, we continually evaluate but we will look and see more into 'twenty, three and see what we need there, but you know as long as the EBITDA continues to grow again, we've dialed back as Marshall said, maybe more fringe.
Investing to wear hardcore development.
So it just it you know Greg will have to just be a flexible would you know if it gets prolonged obviously that becomes more problematic than something you have to keep an eye on but as it is now will be measured and.
Be smart with the capital, but we still have access to it and.
If that changes down the line then we'll obviously react to it we won't.
Go beyond where our comfort level is we've always been pretty conservative on the balance sheet, but between EBITDA growing and.
The good sources of capital and we've not given up hope that somewhere down the line.
Market conditions change and now obviously, if the stock price became more attractive down. The road then we could pivot to that as well, but we also have to say you have to be flexible and prepared and.
Feel like we are and so we'll just you know it's really hard to.
We're glad we've got the runway. So we don't have to make a knee jerk reaction, that's where you want to be so we'll just monitor it and be smart about it.
So if I had to if.
If you had to peg a number or kind of what's the nominal.
Our debt capacity, where does that get you to that.
Leverage.
I wouldn't put a number to it because it moves like I'm, saying is if our EBITDA is up next quarter than it did that gives you more capacity, but we have internally more talked about wanting to keep our.
Debt to EBITDA at sub six and so based on the debt. We just took on if you take the fourth quarter.
Our internal fourth quarter, EBITDA and annualize that.
That's still keeps us we're still in the low five range. So.
Rather than put a dollar to it we've really looked more along those lines are a metric and again more annualizing, our current quarter forward and evaluating it.
So we'll just see again that number is going to change a little bit as we go.
But that would be I would probably say just a general rule of thumb that we're keeping an eye on although we're not close to that at the moment.
Either buy it or amount of leverage.
Sorry.
But in terms of capacity.
From where you ended this quarter to that.
Hi.
<unk>.
Yeah, I mean, I guess, Craig if it helps I'm here from following me the other thoughts as we think about as Brent said thankfully with the rent increases and the new developments coming online that.
One side or the other has to be right in that as long as our rents are going up and we're delivering new buildings are EBITDA keeps growing so that debt capacity in absolute dollars.
We're creating new capacity for EDA, and eventually either wall Street or I guess.
It sounds like about main street, where we are in the field will be right, if things turn and we lose tenancy and rent stall then we would get.
Get faster to get to our debt capacity, but at that point.
There's not going to be the need to build new buildings, either so that'll be that will either ended or at some point.
We've taken the attitude.
Been there and any number of times of Hey, let's just keep making money and eventually someone will notice.
So we'll keep if we can keep doing that eventually the stock price will get to a point, where and I realized NAV is.
Pretty fluid number either in our internally and consensus on the street or the equity markets reopen.
And if the market's still solid than we have we got spoiled a little bit for so many years, having the debt and equity markets available to us.
Okay I appreciate it over my two question limit, but I just wanted to get your.
Thoughts on.
Yeah.
Asset managing the portfolio here right. There is still a bid for shorter term leases with some roll versus kind of core assets. So if you guys kind of go through the portfolio and see maybe some assets that have similar attributes where either.
And you know on a going.
Because the cap rates are attractive and even when you kind of stabilize and to see what you'd be even on the table.
If that spread is still kind of attractive relative to go to development.
Could that be something we see more of that cost rise in the stock prices.
Yeah, that's advantageous here.
I know you guys never do it.
Sure.
That's a thought.
You did see as we sold a little bit earlier in the year, we sold an asset in Houston and really where we are.
If helpful, where we've typically targeted it's pretty simple.
People that are in the field responsible we've said you know hey, if you came in in the morning, and you got a notice that someone went bankrupt one of your tenants went bankrupt, which building what you want to get that notice from leased.
And that that almost all of your dispositions left and then its putting together.
In our private corporate of batting order of what order do we go in and so we've seen a sell a number of tenant intensive service center buildings and we're about through that process. We've got another couple of buildings in Houston on the market and we'll keep working through those assets. So there's it's not much it's probably under 25 30 million.
Of the new Tulloch acquisition, there and Theres nothing wrong with the assets Theres, just a little bit of land in Hercules, California. Some smaller assets that are good assets, but won't fit us. So we've got a couple of those on the market as well, but you're right that that's also a source I'd love to trade some of those assets for <unk>.
Development land in one of our core markets.
And we've been doing that but you know.
That could add a little bit of emphasis right now the disposition market isn't great because I think everybody, including us is kind of waiting to see how it plays out but we will we've got a few things on the market and are.
Presently as we always do and we'll we'll kind of keep pushing through those but that's a good way as you say more capital allocation move.
Move out of some assets that arent, our future and be able to put it into land in and hopefully develop it to a higher yield than what our exit rate is.
Great. Thanks, guys.
Sure Youre welcome.
Our next question comes from Todd Thomas with Keybanc Capital markets. Please go ahead with your question.
Hi, Thanks, good morning.
Wanted to follow up on the development side, and I guess, your appetite for land, which which seems relatively unchanged.
And really you know regarding the yields for future projects just given your comments about the increase in construction costs, you discussed which of course is offset by the increase in rents youre, saying youre seeing yields.
Yield expectations for new projects improve.
To offset the greater near term uncertainty in what sounds like a modest increase in in market cap rates or exit cap rates I guess, how is that spread trending.
For development for future developments, when you sort of put it all together.
Yeah, No I think youre right.
I still think as we touched on I think construction prices will moderate just because more people will pull back on development with the land and it I guess.
It's all not equal, but some of the land we acquire.
It's measured and we'll have it tied up for as long as we can prior to closing and as long as the seller will work with US and then even then some of it we close and if it's a new park it could be a year or a little more before where and the dirt and really.
Start going vertical with construction and things like that getting the kind of the infrastructure in place. So that that gives us confidence on some land that let's go ahead and acquire it because by the time, we're ready to build on it and Thats always we've said that's the one item for development, we can order and it's incredibly I think land is incredibly.
Tight in a number of our most of our markets now that's one thing that's really changed over the last five years is just how hard it I've mentioned, Dallas earlier, Austin, Atlanta, and Tampa any number of our markets, where how much how hard it is to find land.
<unk> yields have hung in there thankfully cap rates, probably have come up but lash you know I'm using last year for example, which is.
Probably feels like 10 years ago, but I think our average development yield was at seven and probably call. It market cap rates three and a half. So we're obviously not a merchant developer, but that's about 100 or that is 100% profit margin. So we felt like there is room, even if cap rates come up a little bit in yields come down if we're making.
50%, 60% kind of value that's a lot of NAV creation for our shareholders.
And then a lot of just good solid long term assets incremental.
So we're still managing through that and then as if it helps as we underwrite on our developments.
We also compared to some of our peers, probably more private than public we underwrite to current market rents. So we don't forecast rents, which I know some of that by the time, we deliver the buildings are actually leasing them up often of late rents can be 10% to 20% higher but I've always felt like that's a <unk>.
Literally slope and we don't want to start projecting rents in the future. So enrolled on any number of cases to what we're actually delivering and leasing up has been a higher yield thankfully than where we were using today's construction prices because we will have that locked in and today's rents and in most cases, we can do a little better than that.
Always targeted 150 basis point premium for development over current market rents and we're still we've been exceeding that by a wide margin and really looking at return on cost kind of as a second metric. So development yields are still are it's the most attractive use of our capital and within our <unk>.
<unk> oftentimes, it's internal demand or it's somewhat across the street needing that space.
If you look back in hindsight.
I'm doing this from memory, which is dangerous I think it's of our last 22 buildings that have rolled into our portfolio 21 have rolled in at a 100%. So if I were.
I would push myself and say hey, we should have done more buildings on that if you get making those kind of returns.
So that Thats Yesterdays news, but as long as were building buildings and they're leasing up and we're getting those kind of profit margins and creations in value, we should kind of keep on that path until the market.
Slows down or tells us something different than it is today.
Okay. That's helpful and then.
And then can you talk a little bit about the change in asset pricing that youre seeing today I think you commented.
Is that youre seeing less movement in cap rates or pricing for your assets relative to.
Some of the box your assets with longer term leases can you just provide a little bit more color around that comment and and what youre seeing in the market currently today.
Yeah.
Couple of part answer I've read and heard kind of 10 to 25 basis points for a kind of more multi tenant shorter term duration, maybe three to five year leases and because of that increase in rents that people are saying it probably feels more on the higher end to us than than that more like two.
835, I'd call it.
And then I think if it's a longer duration more bond like asset what I.
Repeating a couple of broker comments more of the 75 and it makes that basis point increase and it makes sense, because you're theres not that opportunity to go back to market on those assets and and really the other thing I think there are fewer bidders I think you're in a price discovery phase where.
Everybody's waiting to see what happens.
Next and then as we think about our capital and maybe going back to Craig's comment earlier, we said, okay. We want to make sure. We can fund our development and then if there is some distress in the market I'd love to have that dry powder I'm not expecting much distress out there, but given the number of kind of newer.
Local regional developers and oftentimes they may build our type product more than say, a large institution because of the capital dollars, we'd like to be able to capitalize on that and maybe step into their land position or some things like that so we're being.
You know trying to slow down and kind of wait for those opportunities and even have been reaching back out to kind of stay in touch to some of the local regional developers that we've called on and some of which we've acquired assets from our value add assets. The last few years.
Okay alright, thank you.
Okay.
Our next question comes from Dave Rodgers with Baird. Please go ahead with your question.
Hey, guys. This is Nick on for Dave I guess with the industrial market still so tight.
Earlier tenants coming to the table to talk about renewals has that timeline changed at all since year end 'twenty one.
It's a little bit it probably has I mean, there was a couple of instances, which was interesting where we had and I get it tenants are busy running their business, where they waited I can think of one.
Certainly one in California, one in Arizona, where by the time that we had approached the tenants they put things on hold and when they pick back up and is one of the brokers subscribe its almost like the housing market, we were able to get rents that were $10, 15% higher.
Just because things were put on hold and we've seen not in mass, but some tenants reach back out and.
Do a little bit earlier renewals I think thats, probably smart on their on their part I would say over 90, 999% of our tenants, which is probably an underestimated come to us through a tenant rep brokers, so where we're generally ready to speak whenever they are because I always thought if we're not talking to them or somebody else.
Well, but there are probably a little bit earlier in the process and that probably will continue to pick up and where we can't force the conversation until they're ready to talk but then is when they are ready to talk.
We've always looked at it almost like dollar cost averaging and on investing in so we've got 4 million square feet in someone's doing a three to five year renewal.
At some point, we will hit a renewal on the bottom of the market and at some points on the top of the market. So we don't try to get too cute and over guests in the market in terms of interest rates rental rates things like that and it does seem like when things get bad they get bad a whole lot faster than they get good. So we don't want to get too cute.
Wait until the last minute on rents and things like that.
That's helpful. And then maybe with like rising cost have you heard any local economic issues related to higher utilities that might be pressuring tenants.
No I haven't I mean, I would believe it I do empathize with our tenants between.
And utility cost gas prices wages.
Hey, I'll, even point the finger at us rents things like that they're probably getting hit for them about every side I have not.
We don't have heavy manufacturing in our buildings, we may have some light manufacturing and E. Commerce I have not heard anyone specifically complain about their utility costs, but that probably is coming next.
Thanks, that's it for me.
Sure.
Our next question comes from Ronald Camden with Morgan Stanley . Please go ahead with your question.
Great just two quick ones. The first is just when you're talking to tenants.
Do you sort of the commentary you're hanging on their inventory.
They are today, obviously, there's been some notable announcements out of the retailers, but just curious what you're hearing on the ground.
The tenant inventories have the right inventory, they're trying to build more inventory just any commentary there would be helpful.
Sure I think.
Painting with a roller brush I think people are still by and large short of inventory just because of the supply chain issues and so what.
Again, optimistically I think they'd like to have more inventory.
And they'd like to even move inventory kind of order to a higher level because they did get so burn yeah. We've heard of kind of a just in case rather than just in time that people have been speaking of so I think there is still the inventory to sales ratio and whether it's people where they have excess inventory some of the retailers. It seems like they've got the it's not so.
Much more overall inventory is the wrong inventory at different times. So we you know and as we've seen a case or a larger tenant we're negotiating with now they may take a little bit more space than they would currently need today, but part of the conversation is they'd like to move.
This is a direct one and we still need to get this lease signed that they'd like to carry more inventory longer term. So I'll. Let you know how that one plays out but that was an interesting comment by them is that they may take and it's about 20% more square footage than they than they currently wanted and and we also have seen a lot of activity.
From <unk> this year it seems like they have picked up in the market and that tells me and that's probably just a different mix bag.
Our company's carrying more inventory and they're usually pretty quick to respond to the economy too. So given the amount of new tenant activity in kuna noggle actually made it onto our top 10 tenant list. This quarter any number of those three pls that tells me the economies moving pretty quick because we may be one of <unk>.
In our five spaces, they have near DFW Airport for example.
Great. That's helpful. And then just a quick one a few months ago. There was all the news that sort of Amazon feedback on the market.
I know, that's maybe less relevant.
For your spaces, and so forth but.
Just any update there have you have you seen anything there.
Just what are you seeing on the ground.
Yeah, Thanks, and we did see it fell and probably as you mentioned like an overreaction, certainly where were full and.
Wish we had still with that Amazon is still out there.
Each group specific we've got four spaces with them.
The majority of men in two bigger spaces that 95% of our Amazon lease rents expire in fourth quarter of 2033 or beyond.
There are none of our four spaces are they interested in giving back or terminating and in our conversations with them. The numbers I've heard anecdotally of late was that Theyre give back maybe I've read between 10 to 30 million square feet.
Was closer to the 10 million square foot number than the 30 million square foot number and that they still may take down.
Not in active negotiations I wish we were with them right now somewhere further than the next big block of space, but around 40 million square feet. This year. So I think it was <unk>.
They got out ahead of themselves in terms of logistics versus their true growth and they'll probably grow into a number of these spaces. They just they are paying rent, but they may not occupy them for a number of months until they grow into them was what we were hearing in the actual give back maybe closer to the lower end of that right.
And the higher end in and Thankfully you know look we.
There are two 2% of our rents and we've got a lot of it.
As I mentioned, a long term timeframe before we address it with them and I'm guessing other landlords like us the rents we have from Amazon are below market. Today. So if we did get a spacer to back it may be vacant as we re let it but 99% leased and below market rents.
That compared to the reaction that's not such a bad that's not that bad news.
Great helpful. Thank you.
Sure you're welcome.
Our next question comes from Vince <unk>.
<unk> with Green Street Advisors. Please go ahead with your question.
Hi, Good morning could you discuss the key building blocks of a revised same store guidance based on leasing spreads year to date revised occupancy and bad debt guidance I'm still having trouble getting all the way up to the new range is free rent timing and big benefit this year.
Uh huh.
That's been pretty consistent obviously, that's been more minimal than it has been in the past.
That may be something we could talk through offline I can tell you that the beats on our end or raises have been consistently in the the property net operating income category.
I saw some releases and information were on other analyst models to talk about G&A and interest being a part of our beat this time and frankly in our internal model that was very modest it was more truly on the operational side. So happy to talk to you offline and see about.
What areas might deviate significantly from kind of what we're seeing or thinking.
No that sounds great. It probably makes sense to do offline, but maybe just a quick follow up are you able to comment at all in terms of what maybe cash releasing spreads you've baked in for the back half are you expecting something similar to the first half forecasting on an acceleration and any color you can provide there.
Yes.
Basically in essence, where especially here in the last couple of quarters baking in similar to what you've what you've seen us now for several quarters lay down we've not seen any headwinds to that in the near term that causes us to think that would change in the short run. So that's what we have basically baked in your guys in the field probably.
<unk> tend to be a bit conservative relative to not necessarily from a budget standpoint, maximizing every percent engine every penny of rent into the assumption, but the actual results. We think we will fall in line with what you have with what you've been seeing and then 2023 as Marshall said earlier, we will dig into deeper.
As we progress in the year and that'll be.
Something we'll see if we project through throughout the year, but like I say right now as far as we can see out it still feels along those positive trends that we've been seeing for several quarters now.
Got it. Thank you that's helpful.
Thanks.
Okay.
Our next question comes from.
<unk> <unk> with Mizuho. Please go ahead with your question. Thank.
Can you quantify how much GPL demand has increased and are you seeing any slowdowns from ecommerce.
Good morning, gentlemen.
Three PL I don't have an exact number again I guess it was that last year the year before I do know as we move within our tenant list, we've seen a pretty material and food and beverage three PL just talking to our guys in the field. The homebuilding industry is one we got questions were outside that ones. We don't have a lot of it but a lot.
More concerned and in e-commerce, it's been a slowdown certainly Amazon has slowed down and that's a little bit trickier to I'll tie it into three pls of his people some of our retailers rework logistics change is it.
We're talking to Walmart now and it's like I'm not sure it's for brick and mortar mortar exactly.
Probably the answer is a little bit of both so much is.
E Commerce sales as well so they they blend over and certainly the smaller e-commerce, who could probably be it will be used going through at <unk>. So that's the other.
Tricky part I guess, we're seeing the good news, maybe if I'll take two steps back pretty broad.
Demand from us.
And any number of sectors and I'm glad are one of the things, we certainly spend time and talk about is our geographic mix within our portfolio, but then one of the things I don't think people focus on as much as our top 10 tenants are below 9%, which is about half the industry average so I like that to me.
The more geographically dispersed and the more tenant diverse dispersed our diversified weekend, they probably than the safer our rents are and as our former CFO used to say a lot. Our dividends are covered by rent. So theres no joint ventures or funds or all the other things and not that those don't.
Work for other people, but ours is a pretty simple model so I like our.
Diversifying our rents are in and what kind of respond to the demand of who's out there pending their credit and where the T. ISR is who's next in terms of leasing.
Thanks, and just one more question.
Any markets that are of concern to you right now from a supply perspective.
There's really not a good question and the numbers are certainly higher on supply than we've seen historically, so as absorption and I know, it's taking people longer to get products out of the pipeline than it normally did theres no specific market that really has us concerned.
Right now for our product type I mean, the numbers are pretty high end up major markets. As you would expect Atlanta is the dialysis.
I've read about Phoenix is another market people have mentioned, but we're 100% leased in Phoenix, where 100% leased in Dallas.
Bought a vacant building I'll brag on our team in Phoenix, but we acquired it in second quarter and got it fully leased in second quarter. So.
We're seeing supply, but it's typically on the edges of town and in big boxes.
By and large so there's no specific markets that really worry us and it really matters more by sub market and by Who's building archive product and but right now we're not saying we worried.
Significantly more about demand and a black swan event or a deep recession affecting demand and we do supply thankfully.
Got it thank you.
Sure you're welcome.
Again, if you have a question. Please press Star then one our next question comes from Jon Petersen with Jefferies. Please go ahead with your question.
Great. Thanks, guys.
On escalators, just curious of how those are trending and if theres any inflation component being considered either from your side or from the tenant side.
Good morning, John and answer instrument.
I would say historically, we would've said kind of 2.5% to 3% escalators and the.
Typically the bigger the tenant and the longer the lease makes sense. They would negotiate harder than you would drift to the lower.
Lower end of that range and maybe a year 18 months ago. Those started moving essence, why we like GAAP re leasing spreads as well because you capture that free rent in those annual bumps to 4% and it probably started in the bigger markets, but it's been pretty consistent becoming throughout the portfolio.
That it's become more of a 4% norm on rent escalators.
Not seen CPI.
I wouldn't shock me, given where CPI is but I've not heard of that from our team or from any of our tenant rep brokers and things like that so it's interesting to see if that.
I've read about the clear lease and some things like that that are out there.
We typically try where not the major player what we'd like to think were material in our markets, but it's not like we have so much space in Atlanta that we dictate market terms. So I've always thought we were trying to want to fit within the box or.
What the tenant rep brokers looking for and not be outside the box on too many different.
Level, so we've probably been widely saying, we're more of a market follower than a market leader in terms of just some of our lease terms, but we're happy to see the rent escalators rising and I'll.
Stay in touch if we start to see CPI I'll, let you know, but I'm not saying that because then other people then you've got to go back and make those calculations and things like that which is more.
I'll be a little more cumbersome, we used to have some leases 10 years ago that had those but then it becomes a project for the tenant and the landlord.
Gotcha.
And then I was hoping we could maybe continue the conversation on your cost of capital so.
You guys are clearly clearly indicated that the equity markets feel close to you, but and I realize the stock's down year to date, but I mean, you are up like 35% over the last couple of years. If I look at your F. F O yield on 2023 estimates its about four 5% and you guys issued debt recently at 4.9 person.
<unk> I know, that's not always like an apples to apples comparison, but.
With where interest rates have moved to and you know your multiples are kind of your <unk> yields still being at a discount to your development yields in the high sixes I guess, you know what does that spread need to be whether between development yields and like an F O yield or or even just the difference between like the multi.
On your stock and the cost of debt because that's the cost of debt rises I would assume your equity becomes more attractive. So I don't know if you can maybe help me better understand like what hurdles you're looking for for the equity markets to fill open to you.
Yeah, I wouldn't disagree with obviously anything youre, saying, there obviously the numbers work and as that goes up it certainly.
You know you run your pencil just like you did and you see the equity side could still be more cost effective part of that frankly gets into.
Just.
External perception that if if you viewed it issuing depend.
Depends what anybody's view of N. A V is but do you want to be I guess within reach of bad or within reason of that from and obviously you can get different viewpoints on that number which makes that a little more challenging. So I would say you know as much as spreads or you're obviously looking at spreads in which cost of capitals more affordable or makes our development more accretive.
You know probably what baked into that as much as anything is kind of keeping an eye on our N. A V, which is a bit of a moving target but.
We would agree with you we don't feel we've rebounded some from the bottom we don't feel that it's far off and certainly you know as I mentioned earlier internally we've removed.
ATM issuance and issued more than that in the guidance, but that's not to say that if you know if the pricing didn't get to level, where we were comfortable with it that we would do that and then we would just change your revised guidance next time, So I guess I would say I agree with you and I don't think we're that far off.
Again, just want to be within a range of what.
Investors shareholders and Lightwood expect for you to issue plus we've got a long successful track record of putting your capital to work in a very smart man or so.
Basically in essence agree what youre, saying and it's again, it's something we're looking at on a daily basis.
Alright, I appreciate that color. Thank you.
Sure.
This concludes our question and answer session I would now like to turn the conference back over to Marshall Loeb for any closing remarks.
Thanks, everyone for your time, we appreciate your interest in Eastgroup.
If there's any follow up questions were certainly available and hope to see many of you soon at the next upcoming conference take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.