Q4 2022 First Industrial Realty Trust Inc Earnings Call
Speaker 2: So.
Speaker 3: J now.
Speaker 4: An.
Speaker 5: 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 touch tone 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
Speaker 6: Are Herman, Vice President of Investor Relations and Marketing? Please go ahead.
Speaker 7: Thank you, Dave. Hello everybody and welcome to our call. Before we discuss our fourth quarter and full year 2022 results and our initial guidance for 2023, let me remind everyone that our call may include forward-looking statements as defined by federal securities laws. These statements are based on management's expectations, plans,
Speaker 8: and estimates of our prospects. Today's statements may be time-sensitive and accurate only as of today's date, February 9, 2023. We assume no obligation to update our statements or the other information we provide.
Speaker 9: Actual results may differ materially from our forward-looking statements and factors which could cause this are described in our 10-K and other SEC filings. You can find a reconciliation of non-GAAP financial measures discussed on today's call in our supplemental report and our earnings release.
Speaker 10: The supplemental report earnings release and our SEC filings are available at firstindustrial.com under the investors tab.
Speaker 11: Our call will begin with the Marble Fight Peter Bacilli, our president and chief executive officer, and Scott Musil, our chief financial officer, after which we'll open it up for your question.
Speaker 12: Also on the call today are Jojo Yap, Chief Investment Officer, Peter Schultz, Executive Vice President, Chris Schneider, Senior Vice President of Operations, and Bob Walter, Senior Vice President of Capitol Markets and Asset Management. Now let me turn the call over to Peter.
Speaker 13: Thank you Art and thank you all for joining us today.
Speaker 14: The first industrial team delivered another excellent performance in 2022.
Speaker 15: We ended the year with in-service occupancy of 98.8% and achieved an annual cash rental rate increase of 26.7% on our 2022 Commencement. Both are first industrial records.
Speaker 16: The end result was an FR record setting annual increase in cash, same store NOI of 10.1% that Scott will discuss further in his remarks.
Speaker 17: Fundamentals in the industrial real estate market continue to support further market rent growth in our target markets and within our portfolio.
Speaker 18: According to CBRE EA, industrial vacancy was 3% at year-end.
Speaker 19: Fourth quarter completion of 113 million square feet exceeded net absorption of 91 million square feet. And for the full year net absorption was 412 million square feet versus completions of 379.
Speaker 20: Given this backdrop, we are off to a strong start signing leases that commence in 2023 at very healthy increases.
Speaker 21: As of last night, we are through 50% of this year's lease expirations and a cash rental rate increase of 33%
Speaker 22: which is already ahead of our 2022 pace.
Speaker 23: With four of the five largest remaining lease aspirations by Net Rent in the Inland Empire, our current outlook for cash rental rate changes for the full year 2023 is 40-50%.
Speaker 24: Moving to our new development activity.
Speaker 25: In Orlando, at our first loop project, we signed two leases totaling 126,000 square feet to bring that project to 49% lease.
Speaker 26: At first park Miami we also lease the remaining 66,000 square feet at buildings 9 and 11, bringing those two buildings totaling 333,000 square feet to 100% occupies.
Speaker 27: We continue to see good activity in both of these Florida markets.
Speaker 28: During the year we played through service 4.1 million square feet of developments representing a total investment of 448 million, all 100% least at a cash yield of 6.6%.
Speaker 29: We have one new start to announce, our first Stockton Logistics Center in the Central Valley of Northern California, the prime location for large format buildings.
Speaker 30: There we are building a 1 million square foot distribution center to serve the San Francisco and East Bay markets where the supply of large buildings is constrained.
Speaker 31: Our estimated investment is $126 million with a projected cash yield of 6.3%.
Speaker 32: including this start, our development in process totaled 3.6 million square feet.
with an investment of 556 million.
The projected cash yield for these investments is 7.3%.
which represents an expected overall development margin of 75%.
With respect to this position in the fourth quarter, we sold a 581,000 square foot facility in Minneapolis for 54 million at a stabilized cap rate of 5.3%.
As part of our continual portfolio management efforts,
Our sales guidance for 2023 is $50 to $150 million.
The guidance range is a bit wider than in the past, which reflects the continued practice of the recovery dynamic in the investment sales market.
Before turning it over to Scott...
Given our performance and outlook for growth, our Board of Directors has declared a dividend of $0.32 per share for the first quarter of 2023.
This represents an 8.5 percent increase from the prior rate and a payout ratio of approximately 70 percent based on our anticipated AFFO for 2023 has defined in our supplemental.
With that, I'll turn it over to Scott to provide additional details on our performance and our 2023 guidance.
Thanks Peter. Let me recap our results for the quarter.
NARIC funds from operations were a 60 cents per fully diluted share, compared to 52 cents per share in the fourth quarter of 2021.
For the full year, Navy Redepet OPER share was $2.28 versus $1.97 in 2021.
Our Fort Corps and full year 2022 results include income related to the final settlement of insurance claims for damaged properties.
Excluding the approximate 1 cent per share impact related to these claims, fourth quarter and full year 2022 FFO per share was $0.59 and $2.27 respectively.
As Peter noted, we finished the quarter with in-service occupancy of 98.8%, up 70 basis points compared to the year ago quarter.
Our cash, same-store ally growth for the quarter, excluding termination fees, and the income related to the final settlement of insurance claims that I previously discussed with 7.6%.
This was driven by higher average occupancy, increases in rental rates and rental rate bumps.
slightly offset by an increase in free rent.
As Peter mentioned, our 10.1% cash saves to a line growth for the full year calculated under the same methodology was a company record.
Summarizing our leasing activity during the fourth quarter, approximately 2.1 million square feet of leases commenced.
of these 700,000 renew, 1.2 million were renewals.
and $300,000 were for developments and acquisitions with LISA.
Tender retention by square footage was 81%.
Moving on to the Capitol site.
November 1st, we drew down all $300 million of the term loan that we closed in August .
We were successful in putting in place swaps to fix the all-in interest rate at 4.88% beginning in December .
So once again, our only variable rate debt is our line of credit.
Before I move on to our initial 2023 FFO guidance, I would like to comment on a topic that we've been asked about recently by the Investor in Analyst Communities.
The paracumpti of one of our tenants has been in the news recently.
As of the fourth quarter, a death up, a leading auto auction in related services provider accounted for 1.8% of our rental income.
Adenso was acquired by Carbano last year and Carbana has been facing some challenges in its retail segment.
For those newer to the FR story, we did a sale leaseback transaction with Adesa about 14 years ago for seven valuable locations critical to their operations.
These are released until 2028, after which they have two additional 10-year renewal options.
Let me also add that a death there is current on its red obligations.
It is helpful for you to know that we believe that our faces in this land and current rents are both well below market and that the majority of these sites could be developed at significantly high margins.
Moving on to our initial 2023 guidance for our earnings relief last evening.
Our guidance range for an A-Read FFO per share is $2.29 to $2.39 with a midpoint of $2.34.
Our 2023 FFO guidance is impacted by an additional two cents per share in real estate taxes in one of our markets that we will accrue in 2023 but will not be recoverable from our tenants until the taxes are paid in 2024.
Without the impact of this item, our epithelic point guidance would be $2.36 per share.
key assumptions for guidance are as follows.
Average quarter end in service occupancy of 97.75% to 98.75%.
Cash, same store and a wide growth before termination fees of 7.5% to 8.5%.
Please note our cash St. Store Guidance excludes $1.4 million of income from 2022 related to the final settlement of insurance claims for damage properties I discussed earlier.
Annual bad debt expense of $1 million, which assumes that a death-to-thase current on its rent obligation.
Guidance includes the anticipated 2023 costs related to our completed and under construction developments at December 31st.
For these projects, we expect to capitalize about 8% for share of interest.
Our GNA expense guidance range is $34 million to $35 million.
Other than previously discussed, our guidance does not reflect the impact of any other future sales, acquisitions, or new development starts.
the impact of any future debt issuances, debt repurchases or repayments.
and guidance also excludes the potential issuance of equity. Let me now turn it back over to Peter.
Thank you Scott.
And thank you again to the first industrial team for a job well done.
Our sector continues to exhibit the best fundamentals in memory.
However, we, like all of you, are keeping a watchful eye on the economic and geopolitical landscape and we are prepared for whatever challenges or opportunities the immediate future may bring.
As you heard us say, we operate, acquire, build and fund ourselves to outperform through the cycle.
Our portfolio, land holdings, and balance sheets.
are well positioned for cash flow and value generation across a range of operating environments.
Operator, would that please open it up for questions.
Now begin the question and the answer session. To ask a question you may press star, then one on your touch tone phone. If you are using a speaker phone, 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.
At this time, we will pause momentarily to assemble our roster. Our first question comes from
Key Benkin with truest securities. Please go ahead.
Thanks, I'm good morning. I guess I can first start off with the development pipeline. Can you provide some just high level commentary on what this total pipeline could look like in 23 in terms of starts and maybe reasons why the capitalized interest is coming down?
Keven Peter, with respect to the development pipeline for 23, clearly given that we are operating.
essentially at the cap it's going to be heavily dependent upon our new development lease
Just as a reminder, we do assume in our underwriting 12 months of downtime.
And yes, over the past few years we've done better than that.
We certainly hope it will continue on that pace. So I can't really give you, and you know, we don't guide on starts anyway, but we do expect to have additional starts this year.
We expect those starts would be certainly in high barrier markets on the east and west of the coast.
Scott, you want to talk about the capitalized interest? Yeah, he made it, Scott. I think Peter here right on the head, our guidance just seems 12 month lease up on our respective elements. We've been doing better than that. I think we've been six months or better. To the extent we can do better than that, and we have new starts, our capitalized interest number will go up. But again, I think it's just a function of how we guide.
and that we don't include any new development starts in our guidance. So that number could increase as the year goes on if we lease up the portfolio quicker than six months and we start new developments.
And on the first Stockton development, how are you thinking about
I guess the total project is it a single user you're going after, is it multi-tenant, what does the demand profile look like as of today?
Sure. Do you want to comment? Yes, thank you. There is significant demand for large users. That is the tightest submarket right now. It stopped at the IE to LA. It serves the Bay Area and the 80 East Bay Corridor.
So the demand right now is for large format buildings. And this is just the right of the interchange.
Thank you guys.
The next question comes from Rob Stevenson with Janie. Please go ahead.
Good morning guys. Scott, how much pressure are you seeing on the same store expense side? And what are you factoring into your 23 guidance?
Yeah, yeah, Rob, we're not really seeing much of pressure on there. You know, expenses I know in the fourth quarter in the same store are up a little bit, but that was really seasonal. That was a snorkelable and some utility costs. And in all those costs are recoverable, 100%. So, yeah.
But I'd say rather than 23, you're seeing increases in taxes, we touched upon one of our markets which was Denver at seeing increase of taxes. That's more of a timing difference. But keep in mind the vast, vast majority of our expenses are recoverable.
and when you're at a 98.5, 98.8% interest rate, even if expenses do rise, the leakage is pretty minimal at that occupancy rate.
Okay.
All right, and then you guys did about 60 million of acquisitions in the second half of the year, right around a three cap rate, including this fourth quarter one in the inland empire. Is there something incremental that you plan on doing there, or what's the rationale of spending, you know, a three cap rate on that type of money versus land or incremental development at this point?
Sure, let me address the acquisition of the 47,000 square foot building. That's a 5.5 acre parcel that's adjacent to roughly a 14 acre site that we own that has a building on it.
So our plan here is actually more land focused and building focus. We're going to basically join those two parcels and develop a over 400,000 square foot class-a building in IE.
That's the plan. So we're getting paid to carry the land as opposed to the other way you breath.
Do you need to knock down the 47,000 foot building or is this going to be an addition to the 47,000 building? No, we're going to basically knock down our plan is to knock down our existing building, plus this building and develop a 4 and a 1,000 square foot really class a high clearance nice building. So right now it is under entitlement.
And what type of time frame are you looking at there for potential start?
Again, you know what entitlement takes anywhere from 18 months to 24 months, but you know what we've been doing better than that. So I will let you know once we're ready to start that building.
OK, thanks guys.
Our next question comes from Nick Ulico with Scotiabank. Please go ahead.
Good morning. This is Greg with Nick. Peter, in the opening remarks, you touched on the continued price discovery dynamic in the investment sales market. Could you expand on that a bit more? What types of trends are you seeing cap rates? How far apart are they? Do you think these trends will continue until this moment initially came out?
sellers from where you want to buy and are you starting to see land prices fall at all?
give some thoughts on that and then we can I'll invite Peter and JoJo to comment certainly cap rates have moved
Again, as you know, last year we built in about a 100 basis point increase.
There aren't a lot of data points. There aren't a lot of transactions to really set can't go market by market until you cap rates. You don't really don't know what you're going to get until you go to the market. Clearly it's helpful when the buyers are motivated by 1031s or their users.
And as we've said in the past, a lot of the sales that we execute on do go to users.
But the availability of debt is also going to drive this and the cost of that debt. So that's why I've kind of comment the way I did and we gave a bit wider range. We're just not going to know until we get deep into these discussions. If we're going to like the pricing, this is good real estate. It's 100% at least. And so we're going to proceed.
proceed based on what the market feedback is. Peter, do you have anything to add? Sure. On land values, we've seen them come in depending upon the submarket location, 30, 40, 50 percent or so. Jojo? Yes, yeah. And it's just a construct of increasing the performer returns.
Of course, the variables, the land construction cost, and not our variable, so land takes to hit. So we adjusted our investment criteria to reflect that in terms of our increased return requirements.
Okay, and then in terms of supply chain considerations with construction and development, are you seeing alleviation there in terms of getting materials and build time? Any color would be appreciated. You're88.
Sure, so yes, we're seeing certain components improve. There's more certainty around delivery dates and the delivery dates have come in some. The notable exceptions to that would be switch gear, electrical components, rooftop units.
are still taking about a year or so. And that is certainly a critical element. On the costs, the trajectory of costs is coming down from where it's been. We're seeing costs come in on a couple of components. Others are still going up a little bit.
Okay, thank you.
Our next question comes from Todd Thomas with Keybank Capital Markets. Please go ahead.
Next question comes from Todd Thomas with KeyBank Capital Markets. Please go ahead.
Hi, thanks. Good morning. First question, I just wanted to see if you could talk a little bit about some of the moving pieces. I guess, you know, looking at same-store and I-growth and the FFO growth that, you know, contemplated with the guidance.
which is expected to be a little bit more muted around 2% at the mid-point or I guess 3% excluding the insurance claims but that compares to the 7.5 to 8.5% same-storinal eye growth forecast. You know, realize there's some moving pieces but just curious if you can help us bridge the...
the gap there and talk about you know what else might be having an impact on FFO. Sure Todd, sure Todd, it's Scott. I think we're coming up with a four percent increase. We compare the 236 taking out the impact of the taxes compared to the 227 and 22 before the insurance game but I get your point and
I would say there could be a couple of pieces there. I would say one is on the development lease upside. We talked about it earlier with Keyvins' question. We're assuming 12 months lease up on our spec development. Historically, we've been six months or less over the last three years.
If we were to lease up
The spec for filler that we have in place now, we can pick up about 8 cents per share. So that's a big piece of it right there. We hope we can do better, but our underwriting is 12 months and that's what we go with on guidance. I think the other thing Tati should look at is interest expense. We did incur.
more in debt in this last year to fund the investments or developments. So we're getting a full year impact of that this year. And then the last thing I think you need to look at is just the impact of rising interest rates. And I'll give an example on our line of credit. That's our only floating rate debt that we have outstanding.
The weighted average rate on that last year was about 2.9 percent and we're modeling high 5 percent in our model this year, so the interest rate is almost doubling in our line of credit borrowing. So I think those are the couple of things that would impact your question.
Okay, yeah, that's helpful. And then with regard to the development leasing, and the 2.1 million square feet that's completed, not at end service, how are leasing discussions progressing for those assets?
You know, what are you seeing for the potential to kind of hit that six month target today? How are those conversations? What did some of your leads say about connections between sides of sold?
I'll just make a comment there and then Peter and Jojo can discuss the various projects.
You look at those projects, they are just completing or have just completed. So we haven't really had much time pass in terms of leasing discussions.
Having said that, we are having very active discussions across a number of those projects. Peter, you can give a little color on it.
What's going on with that? Sure. So Todd, the projects in Pennsylvania, Denver, Nashville, and Florida that are in that population that you mentioned, active proposals and prospects for all or portion of all of those buildings.
And I would say we've actually seen an increase in new prospects just in the last couple of weeks. So it continues to be encouraging mayor. And in most of these cases, tenants continue to have very few choices. Of all the buildings in Seattle and Chicago.
They've been complete now for six weeks and we have active proposals and active interest from abroad range of users, 3PLs, consumer goods and within beverage.
Okay, great, that's helpful. Just one last one, I'm sorry if I missed this, but any update on Old Post Road that was previously expected to be leased in the first quarter. Is that buttoned up or is there any update that you can share and also talk about what's included in the guidance for that?
Sure, Todd, it's Peter Schultz. So the update is this. Our primary prospect for the full building is a third party logistics company who's servicing a long-term contract with the federal government.
That lease has been fully negotiated for a while. The contract was awarded to this group and protested by the runner-up not once, but on two separate occasions which has delayed that moving forward.
You know, given that this is with the federal government a little hard to handicap, quite when that gets done, although it certainly feels, given it's been through a couple rounds, it's probably more when, not if.
and we continue to engage with other prospects for the building. In terms of guidance, given some of the uncertainty around that process and where we are with other interests, it's forecast to lease in the third quarter of this year.
Okay, great. Thank you very much.
Thank you.
Again, if you have a question, please trust Star, then one. Our next question comes from Anthony Powell. With Bargley's, please go ahead.
Hi, good morning. I guess another question on the leasing environment. You mentioned that you're at an active discussion with tenants on the development pipeline. Has the kind of the tenor of the competition changed the past few weeks or since the last quarter? Are tenants just being a bit more cautious about taking space or do they continue to be be kind of opportunistic and aggressive at taking space?
and any changes in the types of tenants you're seeing coming through the shorter spaces.
Hi, it's Peter. The number of prospects for new spaces down a little bit, I would say we're looking at what I call a normalization of demand.
probably back to 2019 days. You recall that 17, 18, and 19 were the best of times back then. So we're coming off of, call it, some disruption in 2021 from...
from COVID and inflation, et cetera. And I think what's happening here is that those who are responsible in the C-suite are taking some time to absorb everything they're seeing, to figure out what exactly their needs are going to be. For sure, they have growth needs. They have to catch up.
Many of them did not invest in their supply chains in 20 and 21. So the demand is there. We're hearing also from the brokerage community that there's going to be significant demand. So we're bullish on what's going to happen. We think it's going to be a pretty active market.
But I would say in terms of sense of urgency, you're seeing more of a normalization. Peter, you have anything else? Sure, the other thing I would add to that is the smaller spaces continue to move a little faster. To Peter's comments about some of the users being more deliberate and circumspect in their decision making, that's where we're seeing it take a little bit longer.
If you have some more room on the, under the cap, if you get some of these, these development projects, please stop. What are the sources of financing outside of the positions? How are you, how are you looking at that inequity to fund potential new starts if you have the ability to do more?
Sure, this is Scott. We're in really good shape from a liquidity point of view. Let's just talk about what we have in process as far as development. It's about $225 million.
Now we'll be funded by excess cash flow after our dividend to $75 million. Peter talked about some sales we're going to do this year. Big point is $100 million. And then we have $600 million of liquidity on our line of credit. So we're set up pretty good. And let me say, if you give us credit for extension options in our line of credit and $300 million term, well, we don't.
likely that's just going to be funded on the line of credit or potentially could be new sales as well. So that's... And you know, the new starts just by the dynamic that we have now of needing now to lease up these newly completed assets. It's going to be largely back ended. So the big dollars that we will have to put out this year are not that significant.
Yeah, under a development, you're probably paying over a 12-14 month term. Probably not paying your first draw to two or three months after the start date. So, as Peter mentioned, if you put in place new starts at the back half of the year, you're probably not putting out a lot of additional cash flow.
Thank you. Our next question comes from Vikram Mahatra with Mizzuho. Please go ahead.
Morning, thanks so much for putting the questions. First one, you talked about the 40 to 50% rent spreads, you're anticipating, but can you just maybe walk us through your expectations of forecast for market rent growth across the portfolio, in particular maybe call out where you're seeing.
accelerating trends versus decelerating trends and market rent goal.
Are you joining on to the one-hour rentals? Yeah, thank you. You know, our health view right now is about 5%, 10%. That national, national, 5%, 10% across the nation. And the higher end towards the 10% would be the coastal markets. And then on the lower end of 5%, we just feel good is more of the Midwest market.
Okay, and then just on the on the bad debt that you've built in, you know, maybe two specific questions around that one, any impacts you're seeing from, you know, housing related tenants you may have, particularly in some of the sun belt markets like, you know, Phoenix.
appear to be having some operational issues. I'm not saying that means they're warehouse implications, we're just wondering if they're on a watch list.
Okay this is Scott. I would say no material tenants on the watch list other than our comments regarding Adesta that we spoke about earlier. Boohoo is, you know, they're timely on their payments as well. Peter will talk a little bit about the lease structure that we...
entered into them in 2022. Yeah, the Buhu lease has been in effect in September of last year. They're getting ready to start operating in the building after completing their work. We did structure a credit enhancement on that deal we have and we were comfortable with that. As Scott said.
a whole good at the moment. In terms of Phoenix, the economy is doing pretty well. If absorption levels have actually been record absorption, a couple of things happening Phoenix, they got the huge investment from TSMC. Not that it's going to affect the whole economy there, but it's going to be a positive.
Our next question comes from Dave Rogers with Baird. Please go ahead.
Good morning everybody. Maybe Jojo for you on the rent growth. I guess I wanted to talk about new supply as well. Obviously this is the year of new supply. We've been waiting for, maybe not waiting for depending on your perspective. But I think that you talked about 5-10% market rate growth. How does that trend throughout the year and when do you get hit with the most amount of competitive supply do you think? I guess I'm worried about...
in terms of under construction if you look at where we've developed, you know, a lot of multiple construction are accompanied to the sub-barricants we're not invested in. So for example, on the development under construction, 85% of our development under construction are either in Florida.
Northern California or Southern California, which I was deemed as one of the top five markets in the US. We expect for red growth because of its infill nature and kind of the lack of supply. So, you know, we feel good about the interests of our competitive positioning, our development.
And you know, we feel like I've said, you know, because the 3% vacancy, and we don't see the demand falling off, we still be slathered, you know, being a driver's seat in terms of rent pricing.
Appreciate that, Collar. Maybe just go to Peter next. I think you had a 550,000-square-foot-tenant move out into the year. Have you commented on kind of backfill for that, down time, etc.
Dave, I'm not sure which tenant you're talking about.
Nobody that in that size range moved out at the end of the year.
Okay, that's fair. The last question's got for you.
If you mentioned an answer earlier, 8 cents per share of development income, and it sounded like that that could be maybe upside to the guidance, or maybe that was what was embedded in guidance. Can you clarify that comment around the development? You're relatively going to get leasing and how that could progress throughout the year. Yeah, David, we assume 12 months lease up in the guidance and...
do better. And again, over the last several years we've been leasing up six months or less. Peter? I was just going to add Dave, of the project we've completed...
With our 12 month down time assumption, only three of those projects would generate some revenue this year and it wouldn't be until the fourth quarter. So there's not a lot there. So when you back that assumption from 12 to 6 months.
which perhaps some people do, we don't, then you introduce the opportunity to generate a lot more revenue this year from those completions and that's why you have the difference of eight cents.
That's helpful. Sorry if I misunderstood earlier. Appreciate it, guys.
Our next question comes from Mike Mueller with JP Morgan.
Yeah, hi, two quick ones. First on the projected 40 to 50% leasing spreads, can you just, you know, stripping out some of the outliers? Just what's the general band we should be thinking of in terms of coastal versus more of the Midwest markets, just how the spreads can range?
And then on the leasing for last year, what was the average escalator that you baked into the leases?
Chris, you want to take that? Yeah, so you have two questions on that. The 40 to 50 percent rental rate increase, certainly on the Southern California markets, that number is higher. If you look at our remaining 20, 20, 23 rollovers, about 40 percent.
is from Southern California, so we're certainly going to get higher rental rate increases there. As far as our escalators, right now currently an entire portfolio in place is about 2.9%. If you look at our 2023 Commencements signed to date, that number is about 3.6%. So that number is certainly trending upwards.
Can you hear me okay? Yeah, I'm good. Okay, great. My headset's been on and off. JoJo, can you repeat what you said about land values being down earlier in the call? I think I misheard you, but I just want to make sure I ask the question.
Sure, so Peter answered a part of the question and basically in terms of land values they come down year over year and the reason for it, you know, everyone including us increased our performer returns like Peter Vasiliev said, you know, it's about 100 base points change cap rates so we increased our returns 150.
to 45% decline. And the decline is more in the Midwest cities because land there represents a bigger component of the total investments and therefore if that's a variable it takes a bigger hit.
So how do you look at your own land bank of 1.6 billion on your balance sheet as of December ? And how does that compare and how has it changed relative to market in terms of its value?
We've looked at it and we've actually provided FMVs for those landsides. Basically, what you've seen is there's overall, very little change. But the depth of function of the great basis, we've acquired a lot of our products.
this, but clearly with debt cost being up a couple of under-bases, buying construction debt in particular being very difficult to come by. That strong bid by the merchant builder and that weekend are gone away.
So land values have come down.
for lack of that that opportunity there the land that we own you're referring to values it's in some of the best of markets in the country day county brown county lia high valley in an empire i can go on it's it's our holdings are are very very strongly located so
We're excited about the opportunity. And remember a lot of our, a big person, a land value just in the I.E. Where we've acquired a lot of those on assemblages and on entitled land. So we've created a lot of value for entitlement. And it's what you have is reflected.
Let me just clarify one item. I think you said the fair value of our land was 1.
6 billion upon that it's 840 million roughly that's page 25 of the Supplementally you can get that information
I guess I was just looking at the balance sheet. Back at the envelope, back at the hand look, sorry about that. On a death, you mentioned your rents in land or well below market. I was curious, you mentioned land being below market. Is that an asset that if you got it back, it would be something you would redevelop or completely tear it down and start.
in Seattle, in order to afford you in Tracy, and use them and the plant up.
We believe are given our view of FMV that would comprise about 86% of our current disease portfolio to a death zone.
Okay. Last question. Red dot that's something here. You know, there's minimal build out on those sites. You know, there's there's no infrastructure is really no associated square footage in our portfolio. So they're pretty, pretty raw ready to work. There's storing cars and running options on infrastructures and improvements they've made over time.
last question. You read about this at something here. There's minimal buildout on those sites. There's no infrastructure. There's really no associated square footage in our portfolio. So they're pretty raw already to work. They're storing cars and running options on infrastructures and improvements they've made over time. Okay. I'm understood. A-A
I understand better now. The last question is on old post. You mentioned you're expecting third quarter for it to be least. What's the sensitivity to earnings if that gets pushed back a couple of quarters? Is there any material impact on earnings as a result of that?
One month of rent is about, or anilize about $350,000.
month of rent is about, or analyze about $350,000.
That's all I got, thank you. This concludes our question and answer session. I would like to turn the conference back over to Peter Basile for any closing remarks.