Q1 2023 STAG Industrial Inc. Earnings Call
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Steve Zeros. Please go ahead.
Thank you.
Welcome to Stag Industrials conference call covering the first quarter 2023 results. In addition to the press release distributed yesterday, we've posted an unaudited quarterly supplemental information presentation on the company's website at Www Dot stag industrial Dot com under the Investor Relations section on.
On todays call the Companys prepared remarks and answers to your questions will contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995.
Forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today.
Examples of forward looking statements include forecast of course.
Same store NOI, G&A acquisition, and disposition volumes retention rates and other guidance leasing prospects rent collections industry and economic trends and other matters.
We encourage all listeners to review the more detailed discussion related to these forward looking statements contained in the company's filings with the SEC and the definitions and reconciliations of non-GAAP measures contained in the supplemental information package available on the company's website.
As a reminder, forward looking statements represent managements estimates as of today.
Stag industrial assumes no obligation to update any forward looking statements.
On today's call you will hear from Bill Crooker, our Chief Executive Officer, and Matts Pinard, our Chief Financial Officer.
Also here with US today is Mike <unk>, our Chief investment Officer, and Steve Kimball EVP of real estate operations, who are available to answer questions specific to their areas of focus I will now turn the call over to bill.
Thank you Steve good.
Good morning, everybody and welcome to the first quarter earnings call for Stag industrial.
We are pleased to have you join us and look forward to telling you about the first quarter 2023 results.
Before we get started I want to welcome Steve Campbell to the call.
Steve joined Us about a month ago and brings with her many years of experience in the industrial sector.
These primary role will be to maintain our focus on same store operations and help us unlock further value in our portfolio.
He will also oversee growing our development platform over time.
Our first quarter results clearly reflect this snack between the strength of our portfolio and the persisting volatility seen in the capital markets.
The industrial market continues to benefit from strong demand driven by multiple secular tailwind.
E Commerce and supply chain reconfiguration have been consistent demand drivers with a diversified mix of industries buying for space across our portfolio.
We are experiencing healthy demand from food and beverage tenants the automobile sector and third party logistics providers.
The uncertainty in the economy is naturally having some impact on industrial fundamentals currently isolated to leasing a big box spaces.
Large tenants of rationalizing, our real estate footprint and commitment to large blocks of spaces.
This dynamic is not impacting our portfolio as our average lease size is approximately 150000 square feet.
We have discussed the benefits expected to accrue to industrial demand due to the projected near an onshoring of manufacturing operations from overseas at a high level.
Recently, we have been able to provide real life examples of this incremental demand driver.
We have seen very strong demand in our markets bordering Mexico, particularly El Paso, which is our ninth largest market consisting of two 5% of our portfolio ABR.
The near shoring in Mexico has provided significant incremental demand in the market, resulting in vacancy rates close to zero.
We have had three leases roll in El Paso in the past three months, resulting in almost no downtime and 59% cash re leasing spreads.
With respect to Onshoring projects announced include the $3 5 billion Honda Honda Electric vehicle plant in Columbus, Ohio, and the $2 5 billion solar panel manufacturing plant in Georgia.
Market Prognosticators have identified states like Georgia, Michigan, and the Carolinas as a likely dominant states for electrical vehicle.
In battery manufacturing.
What is important to note is that these instances of onshoring, our recurring and non coastal non gateway markets. They are lending in markets, where stag has traditionally had a footprint and we expect to benefit as this trend takes shape.
Our current 2023 leasing results have surpassed our initial expectation.
As of this week, we have leased 10 million square feet or 78% of the new and renewal leasing we expect to commence in 2023, achieving cash leasing spreads of 36%.
The progress and lease volume addresses in line with historical cadence at this time in previous years.
Based on this execution, we expect our cash re leasing spreads to be closer to 30% for the year.
The foundation of sustainable cash same store growth as the average contractual annual rent escalation embedded in the in the portfolio, which continues to increase.
Our average rental escalators in the portfolio of north of two 5%.
There is upward pressure on that number as the average annual rental escalator on our 2023 leasing activity achieved to date is three 4%.
Approximately 28% of those leases have rental escalators of 4% or higher.
On the debate on the development front, our 715000 square foot development in Greer, South Carolina is proceeding on schedule with expected delivery in early July .
We expect the two building project to outperform our original underwriting.
We have funded $54 million of the $68 million project and have seen strong leasing interest from tenants in the market to date.
Not surprisingly the acquisition market remains quiet with the market searching for price equilibrium.
Nevertheless, we have identified several interesting opportunities.
We closed on one building subsequent to quarter end and currently have another building under contract.
Both opportunities have remaining lease terms less than two years and on high velocity industrial markets with strong mark to market opportunities.
On the disposition side, we sold two buildings this quarter.
One building was a noncore asset and the second was a facility sold to the current tenant.
In the aggregate these trends I trade. These transactions resulted in proceeds of $37 million.
Selecting a 5.2 cash cap rate.
With that I will turn it over to Matt who will cover our remaining results and updates to guidance.
Thank you Bill and good morning, everyone core <unk> per share was <unk> 55 for the quarter, an increase of three 8% as compared to the first quarter of last year.
Cash available for distributions totaled $90 1 million.
An increase of nine 3% as compared to the prior period.
Leverage remains at the low end of our guided range with net debt to annualized run rate adjusted EBITDA equaled five times with $779 million liquidity at quarter end.
During the quarter, we commenced 41 leases totaling $4 8 million square feet, which generated record cash and straight line leasing spreads of 25, 3% and 35, 3% respectively.
Retention was 74% and we achieved record same store cash NOI growth of five 9% for the quarter.
The increase in the same store cash NOI is primarily attributable to the record high leasing spreads and the increase in average occupancy as compared to the prior year.
In terms of capital market activity, we fully repaid our $100 million private placement note app, which matured on January 5th there are minimal debt maturities for the next two years with only $53 $3 million maturing in 2024.
As a reminder, our debt is fixed rate through maturity with the exception of our revolving credit facility in terms of guidance. We have made the following updates we have increased our same store guidance to be between 475% and five 5% for the year an increase to the midpoint of 25 basis points. This increase was driven by accelerating leasing spreads and a modest reduction in expected.
Credit loss or <unk> <unk> per share guidance is increased to a range of $2 23 to $2 27 per share an increase of mid point of one penny we still expect net debt to run rate adjusted EBITDA to be between five times and five five times I will now turn it back over to Bill.
Thank you mats.
I am very pleased where the company sits today, we are extremely strong operational results and forecast for the remainder of 2023.
We're also benefiting from our conservative balance sheet with ample liquidity.
These factors will allow us to take advantage of opportunities that present themselves throughout the year.
I will now turn it back to the operator for questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Formation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Your first question comes from Craig Melman with Citi. Please go ahead.
Hey, good morning, guys.
Bill maybe just starting on the acquisition environment.
But a little bit slower here, but.
The pipeline kind of grew almost 25%.
Sequentially could you just give us a sense of.
What is driving that uptick is it you know.
Anything from sellers, becoming more realistic on pricing or.
Whatever situations and just kind of curious because it seems like a big jump sequentially and then also maybe just give us a sense of.
What the yield expectations have done have trended in that pipeline.
Yes, Thanks, Craig.
The pipeline jumped from Q4.
When looking at the pipeline in Q4 versus today.
Portfolio size in the pipeline is consistent we are seeing a little bit of an uptick of development deals within the pipeline.
But most of the increase is just due to our standard deals some value add deals some stabilized deals the.
The mix of the pipeline is.
Half of its unsolicited off opportunities on deals that we're approaching.
Owners to potentially sell the building and the other half is lightly marketed marketed or fully marketed in terms of the acquisition environment.
There is still a decent bid ask spread.
Between buyers and sellers, we are seeing that narrowing a bit we closed a deal subsequent to quarter end as we noted and as I noted the prepared remarks have another deal under contract the.
The yields are within our within our guidance range. So we still right now expect to operate within our cap rate range given the current market conditions, but overall feels like the acquisition market is improving slightly.
And then on the fully marketed deals do you have a sense of you know.
From the brokers kind of depth of the buyer pool that youre going up against maybe make up and then also just kind of curious of the deals that you've seen transacted sorted.
But taking price for asking price what that differential has been.
Yes, I mean, some deals they are asking a price and will be in the mix and.
Oftentimes, we're seeing those deals not close we are seeing more deals closed than we have in the past six months in terms of where the asking price is and where the deal ultimately closes it really depends on a deal by deal basis and the sellers. So when you have a more sophisticated <unk>.
Miller with.
With a good brokerage team I think they have a decent handle on where it can clear.
Often times, what we're seeing we saw at the end of last year and a little bit this year is.
Some sellers that have not transacted in the real estate market in years.
Expectations that are a little bit too high so it really depends on the deal.
And then just I know we've talked about this in the past but.
You guys operate in 30 states and so there's a wide mix of kind of primary secondary and tertiary markets are you seeing.
Any differentiation in what's happening on pricing between the primary markets you guys operate in versus those secondary and tertiary markets.
Yes, when we look at our markets and the definitions we've been using.
For the past year or so the CBRE tier one market switches.
Ah sized base definition, but also a capital flow definition. So when you think about that almost all of our portfolio close to 90% of our portfolio is in the CBRE tier one markets. We've done a really good job over the past five or so years to dispose of our non core assets in the tertiary markets. So overall really happy with.
Where our portfolio sits today in terms of pricing mix between.
The higher end tier one markets in the lower end tier one markets.
It really I think the bigger price disconnect relates to the weighted average lease terms. So the longer term leases are still pricing.
At 50 basis points ish, maybe a little bit more depending on bumps wider than your shorter term deals.
And then in terms of just the apples to apples market when looking at a higher tier one market versus a lower tier one market.
Are we seeing something in that 25 to 50 basis points, depending on what the mark to market opportunities.
And then just one last quick one.
With development, yet when you guys walked away from and basically gave up the deposit there could you just talk about what that yield had been expected to be versus where it was trading some of the color around that.
Yes, I can I can do that.
You got to start saving some questions for the rest of the folks here Greg but.
Last one.
Okay, Yes.
That deal we put that deal under contract in 2021, it was a forward take out.
And then as as the market moved and as our capital our cost of capital increased it was a deal that just didn't make sense for us anymore. Given the environment. It was a it was a deal that was in the very low fives.
And for US at that point, we did not feel like we're getting the appropriate return even with the loss of that incremental capital so very unique situation.
Something that we thought was in our best interest to walk away from.
Great. Thanks, guys.
Alright, Thanks, Greg.
Next question, Michael Carroll with RBC. Please go ahead.
Yes. Thanks, Bill can you talk a little bit about the cash lease spreads that you achieved in 2023 years, so far and what's the expectation for the remainder of the year I know last quarter, you were kind of targeting your 23 spreads to be between 25% to 30% I'm not sure. If you mentioned this in the prepared remarks, but did you update that just <unk>.
That youre already above 30%.
Satisfyingly about 70 plus percent of those leases.
Yes I.
I did so we're close to close to 80% of our expected leasing we've we've executed already to date and as you said the 36%.
Right now just given how much we've leased we've increased our expectation for the year to be closer to 30% for the year.
Okay.
And there is some uncertainty in the back half of the year, So which is.
We've been <unk>.
Tying to 80%, but yes.
20% left less of sign.
Is there any mix difference between that last 20% versus what you've already completed.
No not materially so which is why we've increased the guidance for the year closer to 30%.
Okay, Great and then as you look into 'twenty four I guess was there anything unique in the 'twenty three spreads in terms of geography, or I guess the term of the leases that were rolling that you would express is what youre going through in 'twenty four.
Yes, I mean this year the.
While we've signed to date is 10 million square feet. So it's a pretty big sample size, we're seeing really strong demand across our markets.
Supply that's coming online nationally is not impacting our markets as much as some some other markets. So we feel really good about the leasing spreads we've had this year and the dynamics in the market I mean, one thing thats been talked about a lot is the development starts and what the new supply is going to be in 'twenty four.
Right now development starts are pretty low so that should bode well for the supply demand dynamics.
In 24, but I try to stay away from 24 guidance in the first quarter 'twenty three call Mike.
That makes sense and then just last one I know you had a few large.
I guess lease lease spreads that you achieved in northern New Jersey.
Is that mix similar in 24 versus 23, that's not going to distort those numbers are the comparison of those numbers too much right.
Yes, I mean, when you think about some of the larger roles I mean, I mentioned some of the ones, we signed in El Paso at 59%.
That's not Northern Jersey, we signed our Amazon building in Northern Jersey, I think that was call it 80% ish.
But thats a 250000 square foot building. So when you think about 10 million square feet, you need a lot of that to really distort the number so it's a pretty it's a pretty good mix.
You exclude one or two or three leases is really doesn't change the number materially.
Okay perfect. Thanks.
Thanks, Mike.
Next question, Eric <unk> with BMO capital markets. Please go ahead.
Hey, guys good morning.
Kind of going back to the pipeline a little bit I, just want to talk about specifically on the development deals and the types of assets that youre seeing come to market or they were greenfield brownfield fully entitled and <unk>.
Where on the risk spectrum would you be willing to transact today.
Yeah, what's in the pipeline today is it's fully entitled deals, but it's entitled land sites that haven't started and as well as some that have gone a little bit further through the <unk>.
Process.
So it really is a mixed we're bidding too.
Cap rates or returns wherever we're getting excess returns over a stabilized transaction and we feel it's in markets, where we feel really comfortable with the leasing prospects. So when I talked about operating in the top 60, CBRE one market, it's probably in the top 30 CBRE one markets.
That's helpful and then over time, how should we think about the total amount of capital being allocated towards development.
Yes, I mean right now we're in the early stages, so I didn't really get through.
<unk> <unk> hundred 90 development, hopefully put some more under contract and as we do more of this stuff will enhance our disclosure and certainly enhance our guidance as to percentage of capital being deployed during the year for for developments.
That's helpful. Thank you and then last one for me extent general tenant demand.
Our tenants looking to renew ahead of exploration today and then.
So what are what are they giving up in the negotiation in order to execute on a quicker turn.
Yes.
Fundamentals continue to be really strong so tenants are leasing space ahead of lease exploration, but not materially longer more.
More in advance than they have in the past so it's a similar cadence to what it was last year.
So with that there's not we're not we're not giving we're not giving much up we're not giving much up so well.
<unk>, marking leases as close to market as we can for these lease explorations tenants really like the way we operate our buildings, we've got great relationships with their tenants, we work really hard at that so they want to stay in a stag building so.
Very similar cadence to last year in terms of how far and advanced air leasing their buildings.
Alright, thanks, guys.
Thank you next.
Next question <unk> with Bank of America. Please go ahead.
Good morning.
Colin I'm wondering what youre seeing in terms of rent growth in your markets in the first quarter and if this changes your view on the outlook for 2023.
Rent growth in the first quarter was depending on the market mid to high single digits.
We're still expecting that that was our initial forecast.
In February that we're still projecting that for for this year across the portfolio.
Last year I think we ended up high single digits really across the portfolio.
So a slight deceleration we're projecting.
But we'll see if that if that comes to fruition.
And it looks like in Philadelphia.
So 7%.
Then your second largest market hit 2% that's cool.
Can you speak to what's driving this decline.
Yes that was that was more of a definitional change so we instead of using costar markets, which.
<unk> has had a bigger circle, what we did was we really focused on the CBRE definitions of markets, which we think is more relevant for us.
When they look at markets the size of the market, but I think as as important as that is capital flow into market. So you could have a big market, but if you don't have institutional capital flow. It won't qualify the CBRE tier one market. So that was really it if you were to do apples to apples, our Philadelphia exposure.
Water over quarters the same.
Okay. So from a geographic perspective, this market still core to your strategy in no changes there.
Absolutely.
Okay. Thank you and final question.
Portfolio occupancy remained quite healthy that sequentially decline more than 100 basis points.
Is there any tenant driving this change or any comments around.
Changes in your tenant credit watch list.
I'll, let Matt talk about the tenant credit, but in terms of sequential occupancy.
Q1, 'twenty three we had about $5 5 million square feet expiring.
This quarter, we renewed 74% of that when you adjust it for immediate backfill it's about 80% so.
We had call.
Call it 20% of that $5 5 million.
Being effectively nonrenewed and the key in Q1 Q1 is usually our highest quarter for lease expirations. This one just had to be.
It happened to be a little bit higher if you look over the prior Q1 'twenty two there was.
Some pretty healthy average occupancy gains, which as Matt mentioned in his prepared remarks was a driver to the five 9% cash same store NOI growth in Q1, now that you want to talk about the tenant credit, yes, hey, good morning, Camille So in terms of tenant credit quite simply our watch list is very similar to what it was 90 days ago for the quarter we.
Did experience approximately $125000 of credit loss.
This is significantly less than what we were budgeting. So therefore, we have reduced our full year credit loss assumption from 50 basis points to 40 basis points.
The 40 basis points is an acknowledgment of the volatile macro backdrop, but similar to last quarter. None of this is specifically associated individual tenants. It's more of a broad based view of <unk>.
Potential credit loss will continue to monitor and update the market, but we're very pleased with our rental collections in the first quarter.
We generally have larger more sophisticated tenants almost 60% of our tenants have revenues north of a $1 billion over 80% of our tenants have revenues of $100 million. So while not a credit proxy, it's a pretty good indication of the size and sophistication of the tenancy.
Thank you for taking my question.
Thank you. Your next question Blaine Heck with Wells Fargo. Please go ahead.
Great. Thanks, Good morning, Bill I appreciate the commentary on Onshoring I guess can you just walk us through.
How the increase manufacturing activity impacts year portfolio directly I'm, assuming you guys arent necessarily housing the manufacturing activities within your building so what are the.
Some of the ancillary functions or tenants.
There may be relocating to those markets and driving demand in your warehouses in those situations.
Yes, I mean, the simple answer there blayne is Israeli suppliers to the manufacturing. So we were not housing the manufacturing warehousing the.
We expect to be housing more of the suppliers and three pls servicing those manufacturing sites. So as I noted we are seeing.
Real life examples in the El Paso market in the past three months, we signed three leases with the I think it was 59% cash roll ups.
I mentioned just a couple of examples of some onshoring there is theres a lot of other examples I know I think Rubens opening up a 5 billion dollar manufacturing plant east of Atlanta.
And Theres a bunch of other examples and Toyota is opening a $4 billion electrical battery plant outside of Greensboro. So.
A lot of the markets that we're operating in.
Is where these plants are going we have not.
Seen immediate impacts to our portfolio because these plants are not up and running yet but when they are we expect demand for our warehouses from <unk> and other suppliers to those manufacturing sites.
Great. That's helpful. You guys talked about this a little bit, but I think the development has been one area of the business. I think you guys are looking to do a little more can you just talk about how land pricing has trended recently and whether that would make you more willing to go out and start building a more substantial land bank for future development like some of your kind of REIT.
Re counterparts.
Yes, we are it's something that we're looking into Blaine right now.
More on the entitled land side of the equation.
But certainly over time and with with Steves help start to identify and maybe put some some raw land on the books.
Peak pricing, we are seeing land come down 20%, 30%.
We feel like given the market fundamentals.
Our outlook for the next few years and beyond <unk>.
Industrial is a very strong sector and we think this is an opportune time to.
Start to make our way into the development side of the.
Of the business.
Great very helpful. Last one for me you guys are right at the low end of your stated leverage target range of five times, what it is like acquisitions could ramp up as we progress throughout the year. Your pipeline increased pretty substantially can you just talk about potential funding sources do dispositions still make the most sense.
Or would you look at other sources like equity, even even where the stock is trading.
Hey, Blaine, it's Matt. Thanks for the question very similar to when we laid out our initial guidance last call. We're running our business plan. This year, assuming this macro backdrop with no incremental capital we haven't issued equity since January last year, we have no need for incremental debt, we're pretty successful in the capital recycling front, we actually were a net seller.
This quarter Leverages, a five times, we can run the midpoint of our guidance and stay within our band of five to five five so I guess short answer here is that we're prepared to operate this year without incremental capital.
Great. Thank you guys.
Good morning, Scott.
Once again, if you would like to ask a question. Please press star one on your telephone keypad.
Our next question comes from Mike Mueller with Jpmorgan. Please go ahead.
Yes, Hi, just sticking with development for a second I guess, if you do that's expanding that should we be thinking a little bit more of full traditional ground up or that in a mixture of stepping into projects that were recently developed butter.
Not yet leased and just take down the leasing risk I mean, how are you thinking about that.
All along the spectrum there Mike So we will we will step into projects that are.
Almost complete and take on the the leasing risk.
Wanted to get a better return than if that building was stabilized.
All the way to buying an entitled land side today.
And taking on the development risk in the leasing risk in the market risk so.
We're evaluating all of those opportunities we've executed on all of those opportunities to date are in the process of executing on I guess the last one so.
It will be a mix as we.
Get into this more.
And we do more of this will certainly enhance our disclosure and our guidance on it but right now we're evaluating a lot of these opportunities.
Yes.
How is the staffing I guess in house in terms of if you're thinking about expanding the actual ground up components like doing it all from scratch I mean, how staffed are you for that to do more than a handful of projects.
Yes, we are very well staffed today I mean, it all depends on how much I mean, our approach to this will be using general contractors. So we can flex up and down.
Without having all of those staff in house I think that's very similar to some of our peers and some of the private shops. So.
For US right now, where we're staffed appropriately and it all depends on how big this opportunity is.
Got it okay. Thank you.
Thanks, Mike.
Next question comes from Nick Zelman with Baird. Please go ahead.
Hey, guys. Just one quick question for me on the acquisition pipeline, you kind of said, 50% lightly marketed how does that compare relatively to historical pipeline.
Okay.
It's about the same it was from a from a lightly marketed when you start.
Factoring in fully marketed.
The pipelines move a little bit more to unsolicited transactions now than it was before and so with that you would expect our hit rate to be lower.
We're not sure and all of these cases that Theres, a theres a willing seller at a market price so.
It's moved more to the unsolicited than it has in the past.
Very helpful. Thanks.
Thank you.
Next question, Steve Sochua with Evercore ISI. Please go ahead.
Yes. Thanks, just one question I guess broadly I know cap rates going to vary by market and growth rates vary by market, but I guess, one way to normalize all of that is to maybe think about unlevered IRR is on the things that you are buying or selling so I guess question is where do you think unlevered IRR is our today for kind of your core markets.
And maybe how has that changed or how have you changed the unlevered IRR hurdles that youre willing to invest.
Yeah, it's probably high single digit Steve today.
We've <unk>.
Obviously, those numbers have gone up a bit with.
With our cost of capital when we evaluate a transaction it needs to be accretive. So is our cost of capital increases our unlevered IRR requirements increase as well.
So high single digits, meaning 789, 10, maybe not tablet.
We're in that range of high single digits would you say.
Well, it's probably in the seven five to nine range I would say.
It's oh, it's about the same it was from a from a lightly marketed when you start.
And I guess with the nines be sort of the smaller markets.
Factoring in fully marketed.
The <unk> has kind of the maybe the tier one CBRE markets you'd think about along that those kind of lines.
The pipelines move a little bit more to unsolicited transactions now than it was before.
Yes, it's a it's a mix it really depends on what we can get for a going in cap rate and then factoring in the growth rates that we're projecting.
So with that you would expect our hit rate to be lower because we're not sure and all of these cases that theres, a theres a willing seller at a market price so.
Some of the.
It's moved more to the unsolicited than it has in the past.
As I said most of the portfolio in the 90% portfolios and CBRE tier one markets, but.
Very helpful. Thanks.
Cap rates and returns vary across those markets. So.
Thank you.
Next question, Steve Farquhar with Evercore ISI. Please go ahead.
It just depends and it also depends on the.
The opportunity in who we're competing with on the opportunity. So a lot of times, where we're buying from.
Yes. Thanks, just one question I guess broadly I know cap rates going to vary by market and growth rates vary by market, but I guess, one way to normalize all of that is to maybe think about unlevered IRR is on the things that you are buying or selling.
Local private equity where the competition.
<unk> is only a couple of other bidders in this market. So we feel like we can extract some value on the acquisition by side and so sometimes those can even if they are in the bottom half of the CBRE tier one markets and sometimes yield.
A significantly higher result, and then some of the higher ups tier one markets.
Yeah, it's probably high single digits, Steve today.
We've argued.
Great. Thank you.
Obviously, those numbers have gone up a bit with with our cost of capital when we evaluate a transaction it needs to be accretive. So is our cost of capital increases our unlevered IRR.
Thank you.
Thank you I would like to turn the floor over to Bill Kroeker for closing remarks.
Okay.
Thank you everyone for joining us today really appreciate the questions very happy with where we are today as I mentioned and in the outlook for 2023.
Requirements increase as well.
So high single digits, meaning 789, 10, maybe not tablet.
And we look forward to seeing many of you at the upcoming conferences. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
Well, it's probably in the seven five to nine range I would say.
Yeah, I mean, it's a it's a mix it really depends on what we can get for a going in cap rate and then factoring in the growth rates that we're projecting.
As I said most of the portfolio in the 90% portfolios and CBRE tier one markets, but.
Local private equity where the competition is only a couple of other bidders in this market. So we feel like we can extract some value on the acquisition by side and so sometimes those can even if they are in the bottom half of the CBRE tier one markets and sometimes yield.
A significantly higher result, and then some of the higher ups tier one markets.
Great. Thank you.
Thank you.
Thank you I would like to turn the floor over to Bill Kroeker for closing remarks.
Okay.
Thank you everyone for joining us today really appreciate the questions very happy with where we are today as I mentioned and in the outlook for 2023.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.
[music].