Q3 2024 Rexford Industrial Realty Inc Earnings Call

Speaker Change: and Michael Frankel, the director of the film, and the director of the film.

Operator: Ladies and gentlemen, thank you for standing by.

Abby: My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rexford Industrial Realty Inc. 3rd quarter, 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Abby: Ladies and gentlemen, thank you for standing by. My name is Abby and I will be your conference operator today. At this time I would like to welcome everyone to the Rexford Industrial Realty Incorporated 3rd quarter, 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.

Abby: After the speaker's remarks, there will be a question-and-answer session.

Abby: If you would like to ask a question during that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time.

Abby: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you, and I would now like to turn the conference over to David Lanzer, General Counsel. You may begin.

David Lanzer: Thank you, and I would now like to turn the conference over to David Lanzer, General Counsel. You may begin.

Michael Frankel: We thank you for joining in Rexford Industrial's 3rd quarter 2024 earnings conference call. In the addition to the press release distributed yesterday after market closed, we posted a supplemental package and an investor presentation in the investor relations section on our website at Rexford Industrial dot com.

David Lanzer: We thank you for joining in Rexford, and that's those third-quarter 2024 earnings conference call. In the addition to the press release distributed yesterday after market close.

Speaker Change: We posted a supplemental package and an investor presentation and the investor relations section on our website at Rexfordindustrial.com

Michael Frankel: On today's call, management remarks and answers to your questions may contain forward-looking statements as defined by federal securities laws. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ. For more information about these risk factors, please review our 10-K and other SEC filings. Rexford Industrial assumes no obligation to update any forward-looking statements in the future.

David Lanzer: On today's call, Management's remarks and answers to your questions may contain forward-looking statements as defined by federal securities laws.

David Lanzer: Ford looking statements to draw some matters that are subject to risks.

David Lanzer: and uncertainties that may cause actual results to differ.

David Lanzer: For more information about these risk factors, please review our 10K and other SEC filings.

Speaker Change: Rexford Industrial assumes no obligation to update any forward-looking statements in the future. Additionally, certain financial information presented on this call represents non-GAAP financial measures. Our earnings release and supplemental package present gap reconciliation and an explanation of why such non-GAAP financial measures are useful to investors. Today's conference call is hosted by Rexford Industrial's Co-Chief Executive Officers, Michael Frankel and Howard Schwimmer, together with Chief Financial Officer, Laura Clark. They will make some prepared remarks, and then we will open the call for your questions. Now I turn the call over to Michael.

Michael Frankel: Additionally, certain financial information presented on this call represents non-GAAP financial measures. Our earnings release and supplemental package present GAAP reconciliation and an explanation of why such non-GAAP financial measures are useful to investors.

Michael Frankel: Today's conference call is hosted by Rexford Industrial's co-Chief Executive Officers, Michael Frankl and Howard Swimmer, together with Chief Financial Officer Laura Clark. They will make some prepared remarks, and then we will open the call for your questions.

Michael Frankel: Now I turn the call over to Michael. Thank you, David, and thank you everyone for joining Rexford Industrial's 3rd quarter earnings call. I'll begin with a few remarks, followed by Howard and Laura. To begin with, we'd like to thank our Rexford team for your outstanding work delivering another strong quarter. Our team generated a 5.4% increase in FFO for share compared to the prior year quarter, which brings our FFO for share growth to 9.3% for the first nine months of the year compared to the prior year period. With our consolidated stabilized portfolio occupancy of 97.6% at quarter, and our in-fill Southern California tenant base continues to demonstrate resiliency driven by the mission critical nature of our in-fill locations, fueled by regional consumption that remains stable and has continued to grow each year since 2021, driven by the nation's largest regional population and most diverse economy.

Michael Frankel: Thank you, David and thank you everyone for joining Rexford Industrial's third quarter earnings call. I'll begin with a few remarks followed by Howard and Laura. To begin with, we'd like to thank our Rexford team for your outstanding work, delivering another strong quarter. Our team generated a 5.4% increase in FFO per share compared to the prior year quarter, which brings our FFO per share growth to 9.3% for the first nine months of the year, compared to the prior year period. Thank you very much.

Michael Frankel: With our consolidated Stabilized portfolio occupancy of 97.6% at quarter-end, our Intel Southern California Tenet Base continues to demonstrate resiliency driven by the mission critical nature of our Intel locations fueled by regional consumption that remains stable and has continued to grow each year since 2021 driven by the nation's largest regional population and most diverse economy.

Michael Frankel: With regard to general market conditions, increase levels of global unrest, uncertainty related to the presidential election, and an uncertain economic outlook continue to lay on markets and business decision making. Although our infill Southern California industrial market continues to demonstrate superior long-term tenant demand fundamentals, current leasing activity reflects some tenants taking longer to make decisions. Williams. Looking forward, as the economic and political environments stabilize, we believe our infill seven California industrial markets' favorable supply-demand backdrop inherently positions our market for future rent growth. Most importantly, our Rexford portfolio remains well-positioned for favorable ethical for share and net asset value growth driven by the high quality of our properties and the substantial volume of value add property repositioning and functional enhancements driving the accretive internal growth embedded within our in place portfolio.

Michael Frankel: with regard to general market conditions, increased levels of global unrest uncertainty related to the presidential election and an uncertain economic outlook continue to weigh on markets and business decision-making.

Michael Frankel: Although our Intel 7 California Industrial Market continues to demonstrate superior long-term tenet demand for the metals, current leasing activity reflects some tenants taking longer to make decisions.

Michael Frankel: Looking forward, as the economic and political environment's favorites, we believe our infant, Southern California, industrial markets, favorable supply demand backdrop, inherently positions our market for future rent growth.

Michael Frankel: Most importantly, our Rexford portfolio remains well positioned for favorable efforts for share and net asset value growth.

Michael Frankel: driven by the high quality of our properties.

Michael Frankel: and the substantial volume of value at property repositioning and functional enhancements driving the accretive internal growth embedded within our in-place portfolio.

Michael Frankel: By wave indication, assuming zero market rent growth, we currently project about 34% cash and Y growth embedded within our portfolio, realizable over the next three years.

Michael Frankel: By way of indication, assuming zero market rent growth, we currently project about 34% cash and all I grow embedded within our portfolio, realizable over the next three years. And with this, I'm very pleased to turn the call over to Howard.

Howard Schwimmer: And with this, I'm very pleased to turn the call over to Howard. Thank you, Michael, and thank you all for joining us today. Rexford ended the third quarter with solid operating results, a testament to our value creation business model. The Rexford portfolio continued to be favorably positioned relative to the overall infill market. We executed 1.6 million square feet of leases, driving 394,000 square feet of positive net absorption, equal to positive 80 basis points, outperforming the overall market's negative 25 basis points of net absorption, according to CBRE. Leasing spreads in the quarter should continue to strengthen at 39% and 27% on a net effective and cash basis, respectively, in line with our prior quarter projections.

Howard Er: Thank you, Michael, and thank you all for joining us today.

Howard Er: Richard ended the third quarter with solving operating results, a testament to our value creation's business model.

Howard Er: The Rex Reportfolio continues to be favorably positioned relative to the overall infill market.

Howard Er: We executed 1.6 million square feet of leases, driving 394,000 square feet of positive net absorption, equal to positive 80 basis points. Outperforming the overall markets negative 25 basis points of net absorption, according to CBRA.

Howard Er: Leasing spreads in the quarter should continue strength at 39% and 27% on a net effective and cash basis respectively, in line with our prior quarter projections.

Howard Schwimmer: Additionally, annual embedded rent steps in our executed leases average 3.9%. Excluding the lease up of the 275,000 square foot depot repositioning project, rent steps average 4% in line with prior quarters year to date. With regard to market rents, we have seen taking rents for highly functional product comparable to the Rexford portfolio down approximately 2.5% sequentially and 7.5% year-over-year, reflecting continued normalization following the extreme market rent growth during the pandemic of over 80% in aggregate within our Rexford's investment activity. During the quarter, we completed $60 million of investments, and subsequent quarter end, we closed an additional $70 million investment through an off-market transaction.

Howard Er: Additionally, annual embedded rent steps in our executed leases average 3.9%. Excluding the lease up of the 275,000 square foot DuPont repositioning project, rent steps average 4% in line with prior quarters year to date.

Howard Er: with regard to market rents.

Howard Er: We have seen taking rents for highly functional product comparable to the Rexford portfolio down approximately 2.5% sequentially and 7.5% year-over-year, reflecting continued normalization, following the extreme market rent growth during the pandemic of over 80% in aggregate within our infill markets.

Howard Er: Turning to Rexford's investment activity, during the quarter, we completed $60 million of investments in subsequent quarter-end, we closed an additional $70 million investment through an off-market transaction.

Howard Schwimmer: In aggregate, these investments comprising 550,000 square feet are generating an initial yield of 5.8% and a projected, unlevered, stabilized yield of 5.9% on total cost. Looking forward, we currently have approximately $200 million of investments under contract or accepted offer, which are subject to customary closing conditions. Moving to our capital recycling program, during the quarter, we disposed of one property, bringing year-to-date disposition activity to $44 million, generating a 12.8% weighted average unlevered IRR. In addition, we are negotiating on over $90 million of dispositions, which will be subject to customary closing conditions. During the third quarter, we recommend and stabilize three repositioning and redevelopment projects totaling approximately 325,000 square feet, representing a total investment of $99 million.

Howard Er: In aggregate, these investments comprising 550,000 square feet are generating an initial yield of 5.8% in a projected, unleveraged stabilized yield of 5.9% on total cost.

Howard Er: Looking forward, we currently have approximately $200 million of investments under contract or accepted offer, which are subject to customer-reclosing conditions.

Howard Er: Moving to our Capital Recycling Program, during the quarter we disposed of one property bringing year-to-date disposition activity to $44 million, generating a 12.8% weighted average unlovered IRR. In addition, we are negotiating on over $90 million of this positions, which will be subject to custom-right closing conditions.

Howard Er: During the third quarter, we rent commenced and stabilized three repositioning and redevelopment projects, totalling approximately 325,000 square feet, representing a total investment of $99 million.

Howard Schwimmer: Awards. These projects achieved a weighted average unlevered stabilized yield on total investment of 7.6%. Year-to-date, we have stabilized seven projects across 450,000 square feet, which achieved an 8.4% weighted average unlevered stabilized yield on total investment of $165 million. In the quarter, we also leased our 275,000 square foot depot property in the Inland Empire West, which stabilized subsequent quarter end at a 5.5% yield. Importantly, I'd like to thank our Rexford team for your entrepreneurial efforts that continue to drive Rexford's success.

Howard Er: These projects achieved a weighted average on leverage stabilized yields on total investment of 7.6%.

Howard Er: You're today, we have stabilized seven projects across 450,000 square feet, which achieved an 8.4% weighted average and delivered stabilized yield on total investment of $165 million.

Howard Er: In the quarter, we also list our 275,000 square-foot de-pont property in the inland empire west, which stabilized subsequent to quarter and at a 5.5% yield.

Speaker Change: Importantly, I'd like to thank our Rexford team for your entrepreneurial efforts that continue to drive Rexford's success. And with that, I'm pleased to turn the call over to Laura.

Laura Clark: And with that, I'm pleased to turn the call over to Laura. Thank you, Howard. Third quarter results were in line with expectations. FFO per share was 59 cents, representing 5.4% growth over the prior year quarters. Same property in a wide growth on a net effective and cash basis was also in line with projections at 2.6% and 5.3%, respectively. Bringing year-to-date, same property in a wide growth of 4.7% on a net effective basis and 7.7% on a cash basis. Third quarter net effective same property in a wide growth was driven by a positive 750 basis point contribution from base rent growth, primarily offset by a few items, including 320 basis points related primarily to lower straight line rent associated with an elevated level early renewal last year.

Laura: Thank you, Howard, third quarter reveal for inline of that vacation.

Laura: FFO for share was 59 cents.

Laura: representing 5.4% growth over the prior year quarter. Same property NOI grows on a net effective and cash faces was also in line with projections at 2.6% and 5.3% respectively. Bringing year today same property NOI grows to 4.7% on a net effective basis and 7.7% on a cash

Laura: 3rd quarter, net effective state property in a library was driven by a positive 750 basis point contribution from base rank roads, primarily offset by a few items, including 320 basis points related primarily to lower straight line rent associated with an elevated level early reading a little last year.

Laura Clark: An 80 basis point impact from the timing and recovery associated with higher seasonal utility expenses and property taxes, and a 70 basis point impact related to bad debt. While bad debt in the quarter was a healthy 30 basis points of revenue, the third quarter of 2023 included the positive reversal of a prior reserve impacting the current quarter comp. In regard to the balance sheet, net debt to EBITDA is 4.7 times, near our long-term target leverage range of four to four and a half times. During the quarter and subsequent to quarter end, we settled 220 million dollars of outstanding forward equity related to our March equity offering and currently have $614 million of net forward proceeds remaining for settlement.

Laura: In 80 basis point impacts from the timing of recovery associated with higher seasonal utility expenses and property taxes.

Laura: and a 70-basic point impact related to bad debt. While bad debt in the quarter was a healthy 30-basic point in revenue, the third quarter of 2023 included the positive reversal of a prior reserve, impacting the current water comp.

Laura: In regard to the balance sheet, net sets the EBITDA at this 4.7-time. Near our long-term target leverage range of 4.5 times.

Laura: During the quarter and subsequent quarter-end, we settled $220 million of outstanding forward equity related to our March equity offering.

Laura: and currently have $614 million of net-forward proceeds remaining for settlement.

Laura Clark: In total, we have liquidity of approximately $1.7 billion, including 62 million in cash on hand and 995 million available under our revolving private facility. We have no near-term debt maturity until mid-2026, assuming extension options.

Laura: In total, we have liquidity of approximately $1.7 billion, including 62 million in cash on hand, and $995 million available under a revolving credit facility.

Laura: We have no near-term debt maturity until May 26 of St. Louis Extension options.

Laura Clark: Turning to guidance. 2024 FFO for sure guidance has been increased by one cent at the high and low end of the range to $2.33 to $2.35, representing 7% year-over-year earnings growth per share at the midpoint. Note that our guidance does not include future acquisitions, just positions or related funding that has not yet closed. 2024 same property NOI growth guidance is now 4.25 to 4.75 percent and 7 to 7.5 percent on a net effective and cash basis, respectively. Both within the range of our previous expectations, reduced 25 basis points at the midpoint.

Laura: Her needs a guide on.

Laura: 2024, FFO for sure guidance has been increased by one cent at the high and low end of the range to $2.33, $2.35 representing 7% year over year earnings growth per share at the mid-point. Note that our guidance does not include future acquisitions, decisions or related funding that has not yet closed.

Laura: 2020 for St. property in a library's guidance is now 4.25 to 4.75% and 7 to 7.5% on a net-effective and cash-based respectively.

Laura: Both within the range of our previous expectations reduced 25 basis points after midpoint.

Laura Clark: Drivers of our same property in a wide growth range include the following expectations. First, 2024 average occupancy of 96.5 to 96.75 compared to our prior range of 96.5 to 97%. We expect fourth quarter occupancy to be impacted by a few known moveouts included in our prior guidance, combined with the timing of lease commencement on vacant units that are now projected to commence in early 2025. Second, full-year leasing spreads are in line with the prior quarter's forecast at 55% on an effective basis and 40% on a cash basis. Third, concessions for the full year of approximately 1.75 months, up from one and a half months, largely driven by three leases with longer durations signed in the third quarter.

Laura: Drivers of our same property in a wide growth range include the following expectations.

Laura: First, 2024 average occupancy of 96.5 to 96.75% compared to our prior range of 96.5 to 97%.

Laura: We expect fourth quarter occupancy to be impacted by a few known moveouts, including in our prior guidance. Combined with the timing of lease commencement on vacant units that are now projected to commence in early 2025.

Laura: Second, full year leasing spreads in line with the prior quarter-sourced pasts at 55% on a net-effective basis and 40% on a cash basis.

Laura: Third, Confessions for the full year of approximately 1.75 months, up from one and a half months, largely driven by three leases with onverter relations signed in the third quarter.

Laura Clark: Finally, bad debt as a percentage of revenue and the 50 basis point area in line with year-to-date and historical averages.

Laura: Finally, bad debt as a percentage of revenue and the 50-bates-just point area, and line with year-to-date in historical averages.

Laura Clark: Our updated same property in a wide growth guidance also includes the projected moveouts of LL scoring, occupying 540,000 square feet at our Mission Boulevard property, who sold their business after recently filing for bankruptcy. We anticipate the tenant will vacate the building at the end of November; however, for our original redevelopment plan, we are currently in the entitlement process. While the vacate of this large space has an outsized impact on portfolio occupancy, the impact to NOI is relatively nominal due to the current estimated rental rate being approximately 250% below market. Other components of our increased FFO-per-share guidance range include a positive one-cent per share contribution from 131 million of acquisition activity, plus an incremental one-cent per share contribution related to higher than expected occupancy and our non-same property pool, which represents approximately 27% of our total portfolio.

Laura: Our updated same property and OI growth guidance also includes the projected move-out of LL scoring. I'll keep playing 540,000 square feet at our mission goal of our property to solve their business after recently filing for bankruptcy.

Laura: We anticipate the tenant will vacate the building at the end of November. However, for our original redevelopment plan, we are currently in the entitlement process.

Laura: While the vacate of this large state's housing out-closed impact on portfolio occupancy, the impact to N.O.I. is relatively nominal due to the current estimated rental rate being approximately 250% below market.

Laura: Other components of our increase FFO-pressure guidance range include a positive 1 cent first share contribution from 131 million of acquisition activity.

Laura: Boston incremental one cent per share contribution related to higher than expected occupancy and are not same property school, which represents approximately 27% of our total portfolio.

Laura Clark: The incremental NOI contribution from repositions and redevelopments is in line with our prior projections, and full-year GNA of 83 million is also unchanged. Looking forward over the next three years, we have an estimated 222 million dollars of internal cash in a wide growth embedded within the current portfolio, assuming no further acquisitions in today's market rent, and include 91 million of incremental NOI from repositions and redevelopment, 72 million from the portfolio cash-marked market of 19% as we roll in place rents to current market rates. 51 million from portfolio annual embedded rent steps averaging 3.7%, and 8 million from acquisitions closed in the quarter and subsequent to quarter ends.

Laura: The incremental NOI contribution from repositions and redevelopments is in line with our prior projections. And full year GNA of 83 million is also unchanged.

Laura: Looking forward, over the next three years, we have an estimated $222 million of internal cash in a libraries embedded within the current portfolio, assuming no further acquisitions in today's market rents and includes.

Laura: 91 million of incremental and awye from repositionings and redevelopment, 72 million from the portfolio cashmarked market of 19% as we roll in place rent to current market rates.

Laura: 51 million from portfolio annual that has rent steps averaging 3.7% and 8 million from acquisitions closed in the quarter and subsequently quarter ends.

Laura Clark: Together, this represents 34% growth in cash and NOI over the next three years. Note that in the third quarter, we captured approximately 350 basis lengths of market to market, realizing 13 million dollars of incremental annualized NOI.

Laura: Together, this represents 34% growth in cash in a while over the next three years. Note that in the third quarter, we capture approximately 350 basis lengths of mark-to-market, realizing $13 million of incremental annualized in a while.

Laura Clark: Finally, I would like to quickly touch on the three-year FFO for share outlook we spoke about at the beginning of the year, based on the dynamic market environment and current as well as the inherent challenges of forecasting the timing of market inflections. We will be focusing on our annual guidance going forward, which we will provide when we report fourth quarter earnings in early February.

Laura: Finally, I would like to quickly touch on this three-year FFO-pressure Outlook we spoke about at the beginning of the year. Based on the dynamic market environment and current conditions, as well as the inherent challenges with forecasting the timing of market inflection.

Laura: We will be focusing on our annual guidance going forward, which we will provide when we report fourth quarter earnings in early February.

Laura Clark: Before I turn the call over for your questions, I want to recognize and thank our Rexford team. We are inspired daily by your passion and pursuit of excellence. Thank you for all you do to drive the success of Rexford.

Laura: Before I turn the call over for your questions, I want to recognize and thank our record team.

Laura: We are inspired daily by your passion and pursuit of excellence. Thank you for all you do to drive the success of Rexford. Operator?

Abby: Operator? And thank you.

Abby: We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one a second time.

Speaker Change: And thank you, we will now begin the question and answer session. If you have tiled in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your questions, simply press star 1 a second time.

Abby: If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: If you are called upon to ask your question and are listening to be a speaker phone on your device, please pick up your hand set and ensure that your phone is not on mute when asking your question.

John Kim: And your first question comes from the line of John Kim with BMO Capital Markets. Your line is open.

Speaker Change: and your first question comes from the line of John Kim with BMO Capital Market. Your line is open.

Michael Frankel: Thank you and good morning. I want to ask about the flow decision making that a lot of your times are talking to you are having today. It seems like it's a common theme. What would you attribute this to in terms of our tenants pushing back on the higher rent levels versus uncertainty in the economy and the upcoming election? Or is it something else, like the cost of holding inventory, or automation, or another reason?

John Kim: Thank you and good morning.

John Kim: I want to ask about the flow decision making that a lot of your tenants are talking to you or having today. It seems like it's a common theme. What would you attribute this to in terms of our tenants pushing back on the higher rent levels versus uncertainty in the economy and the upcoming election or is it something else like the cost of holding inventory or automation or another another reason?

Michael Frankel: Hi, John's Michael. Thank you so much for joining us today. No, I think it's predominantly driven by factors that are not necessarily specific to the company, the tenant, or their industry or sector. Really more driven by some of the macro concerns and general decision making around the economy. And I think we're seeing really short-term impacts by elevated levels of economic uncertainty, really driven in part by geopolitical and unrest globally. Uncertainly around the election, interest rates still remain sort of an uncertainty as well. I think a lot of folks had hoped there would be more certainty around interest rates at this point in time.

Speaker Change: Hi, John's Michael. Thank you so much for joining us today. No, I think it's predominantly driven by factors that are not necessary specific to the company, the tenant or their industry or sector. Really more driven by some of the macro concerns.

Speaker Change: and General Decision making around the economy. And I think we're seeing really short-term impacts by elevated levels of economic uncertainty. Really driven in part by geopolitical and unrest globally.

Speaker Change: I'm certainly around the election, interest rates still remain sort of an uncertainty as well. I think a lot of folks could hope there'd be more certainty around interest rates at this point in time.

Michael Frankel: And we're really seeing tenants make decisions or slow their decision making; maybe it's kind of staying put. But we're also seeing, I think it's important to note this: underlying strength in the businesses of our typical tenants. Regional consumption remains stable, strong, and growing in Southern California. And frankly, our third Q leasing activity, I'm sure the team will get into this later, reflects performance that is essentially in line with our guidance instead of the beginning of the year. So again, we're not really seeing any big surprises in the tenant base in terms of decision making in that respect.

Speaker Change: and we're really seeing tenants make decisions, or slow their decision making, maybe it's kind of staying quit. But we're also seeing, I think it's important to note this, underlying strength in the businesses of our typical tenants.

Speaker Change: In a regional consumption remains stable, strong and growing in Southern California.

Speaker Change: and Frank Howard, our third chief leasing activity, I'm sure the team will get into this later, reflects.

Speaker Change: and I'm not really seeing any big surprises in the tenant base in terms of decision-making in that respect. So I think really predominantly driven by macro factors and in that sense, as those macro factors stabilize, we continue to see a favorable backdrop with regards to demand.

Michael Frankel: So I think really predominantly driven by macro factors. And in that sense, as those macro factors stabilize, we continue to see a favorable backdrop with regard to demand.

Unknown Executive: Okay, and then on your rents that you signed this quarter, it was at 1,788 on a gap basis. I think it's kind of bounced around up and down this year.

Speaker Change: Okay, and then on your rents that you signed this quarter, it was at 1788 on a gap basis. I think it's kind of bounced around up and down this year. How indicative of...

Unknown Executive: How indicative of the current rent, or the rents you signed a third quarter, how indicative of that is versus rents that you will be signing for the remainder of the year into 2025. It would suggest market rents declining more than the cent and half percent that you presented.

Speaker Change: The current rents, or the rents he signed a third quarter, how difficult of that is, is it versus rents that you will be signing for the remainder of the year and into 2025. It would suggest, you know, market rents declining more than a set of enough presents that you presented. And also we're trying to figure out what the two market is on 2025 explorations.

Laura Clark: And also, we're trying to figure out what the two-marked market is on 2025 expiration.

Laura Clark: The differential in rent is really more about the mix of leases, and I'll pass it to Laura with a little more detail on that in the rest of your question.

Speaker Change: The differential in rent is really more about the mix of leases and all past it to lower with a little more detail on that. Any rest your question?

Laura Clark: Hey John, thanks for your question. In terms of the, in terms of Michael said it's true, it is about the mix of leasing.

Speaker Change: Hey John, thank you for your question. In terms of the, it is, in terms of right Michael Schwimmer, it is, it is about the mix of laziness.

Laura Clark: When we look at, you know, our full year guidance for net effect is spread that is as an example of 55% on a net effective basis and 40% on the cash basis is unchanged from our expectations last quarter. That does imply a 40% net effect is spreads and 25% cash spreads into the third and fourth quarter. You can see that our third quarter spreads came in right in line with our expectations at 39% and 27%. So as we look into 20, as we look into the fourth quarter, you know, we are we are expecting to generate similar spreads that we did this quarter.

Speaker Change: When we look at our full-year guidance for net effect of spread that as an example of 55% on a net.

Speaker Change: on a net affected basis in 40% on the cash basis is unchanged from our expectations last quarter. That does imply a 40% net affected spreads in 25% cash spreads into the third and fourth quarter. You can see that our third quarter spreads came in right in line with our expectations at 39 and 27%. So as we look into the fourth quarter, we are expecting to generate.

Laura Clark: And really what's driving that is the smaller states is, you know, our market market, their market market more more near terms. So I think on average, the average size is 9,000 square feet and average term was 3.5 years.

Speaker Change: Similar spreads that we did this quarter and really what's driving that is the smaller stages, you know, our mark to mark it, their mark to mark it more near term, so I think on average, the average size is 9,000 square feet and average term was 3.5 years.

Laura Clark: And Laura, do you have the expiring rent on 2025 expiration? It's presumably lower than the 1510 in your supplement. Yeah, we can; we can follow up with you after the call.

Speaker Change: and Lawrence, do you have the expire in your rent and 2025 exploration? It's presumably lowered in the 1510 in your supplement.

Unknown Executive: Okay.

Unknown Executive: Great.

Speaker Change: Yeah, we can follow through you after the call.

Jeff Specter: Thank you. And your next question comes from the line of Jeff Specter with Bank of America.

Speaker Change: Okay, great, thank you.

Jeff Specter: Your line is open. Great.

Speaker Change: and your next question comes from the line of Jeff Spector with Bank of America. Your line is open.

Jeff Specter: Thank you. One follow-up from John's first question on the reason why, you know, tenants are making slower decisions.

Jeff Spector: Great, thank you. One follow-up from John's first question on the reason why, you know, tenants are making slower decisions.

Jeff Specter: You know, there is a key difference, Michael, from what you said, what we heard at our conference from some of your peers and our broker call. And maybe there is a key difference, whether it's your tenant size, your markets. I mean, we were hearing the main reason is a result of access; you know, space tenants took too much space. I don't think you mentioned that. So are you, are you making a clear difference here? Or is that just, is that another reason, and you, you accidentally left it off?

Jeff Spector: There is a key difference, Michael, from what you said, what we heard at our conference from some of your peers in our broker call, and maybe there is a key difference, whether it's your tenant size, your markets, I mean, we were hearing.

Speaker Change: The main reason is a result of excess space. Tenants took too much space. I don't think you mentioned that. Are you making a clear difference here? Is that another reason you accidentally left that off?

Michael Frankel: Hi, Jeff.

Michael Frankel: Thanks so much for joining us. You know, I think that we do see that as a driver; it's probably less of a driver than for the big box product. And so it's probably why you don't hear us emphasizing it as much. You know, we continue to see very high utility at our properties by our tenants. And we continue to hear of interest for more space. We're just seeing a delay in decision making. So I do think the dynamics are a bit different for our smaller tenant base within our infill markets as compared to the big box market.

Michael Frankel: Hi, Jeff. Thanks so much for joining us. You know, I think that we do see that as a driver. It's probably less of a driver than for the big box product and so it's probably why you don't hear us emphasizing it as much.

Michael Frankel: We continue to see very high utility at our properties by our tenants and we continue to hear of interest for more space we're just seeing a delay in decision making. So I do think the dynamics are a bit different for our smaller tenant base within our infill markets as compared to the big box market and that's probably why you hear it's not emphasizing in the way that you do for the big box market.

Michael Frankel: And that's probably why you hear us, you know, not emphasizing in the way that you do for the big box market.

Unknown Executive: Thank you.

Laura Clark: And then Michael, you also said the market market is 34%; that would assume market rent stays flat from here.

Speaker Change: Michael, you also said the market is 34%, that would assume market rent stays flat from here. I think you're not providing market rent forecast now, but I guess can you...

Laura Clark: I think you're, you know, you're not providing market rent forecast now, but I guess can you can you provide a little bit more color on that comment the 34% of you saying you do feel that at least market rents are stabilizing. I think the 34% is a reference to our embedded analogue growth. I'm not sure.

Speaker Change: Can you provide a little bit more color on that comment, the 34% are you saying you do feel that at least market rents are stabilizing?

Michael Frankel: I think the 34% is a reference to our embedded and all-agre of them. I'm not sure, can you clarify the question a little bit? Sorry, I thought at the beginning you said the mark to mark it is 34% it's on one of your slides. And that's, I assume that's based on today's market rent.

Laura Clark: Can you clarify the question a little bit? Sorry, I thought at the beginning you said the mark to market is 34%; it's on one of your slides. And that's, I assume, that's based on today's market rent. It's rising for your product.

Michael Frankel: and so I didn't know if you were implying like you think market rents are finally stabilizing for your product.

Laura Clark: Hey, Jeff, this is Laura. The 34% that you're referencing is the embedded analogue growth within our portfolio over the next three years. We we have about 222 million dollars in embedded analogue growth from repositions and redevelopments, mark to market, our embedded rent steps, as well as the acquisitions to close in the quarter.

Michael Frankel: Hey Jeff, this is Laura. The 34% that you're referencing is the embedded NOI grows as an our portfolio over the next three years.

Michael Frankel: We have about $222 million as embedded in a wide growth from repositioning the redevelopment smart-to-market, earn-bet-it-run steps, as well as the acquisitions to close in the quarter.

Unknown Executive: Okay, thank you. I appreciate that. And then I, my last, I just want to confirm on the current redevs and lease-up redevs. I see some of that is, you know, coming online in the coming quarters. Any expectations on, you know, the lease, you know, on Lisa's sign? Any comments you could make.

Jeff Spector: Okay, thank you. I appreciate that. And then I last, I just wanted to confirm on the current redeads and lease up redeads. I see some of that is coming online in the coming quarters. Any expectations on the lease on lease is signed. Any comments you could make?

Howard Schwimmer: Hi Jeff, it's Howard. Well, obviously we've already commented on the timeline for decision making being a little slower than we've seen in the past. You know, that that said we are seeing reasonable amounts of activity on space. And we've made adjustments in terms of some of the lease-up time frames in the redevelopment and repositioning. Just, you know, some things were pushed out, you know, on average, we pushed those out about two months, and half of it is related to construction delays, and half of it really being related to leasing. But, you know, overall, you know, there is activity out there, and really I'd echo a lot of comments Michael made in terms of some of the reasons why the decisions are slower.

Jeff Spector: by Jeff Itowers.

Speaker Change: Well, obviously we've already commented on the timeline for decision making being a little slower than we've seen in the past

Speaker Change: You know, that says we are seeing reasonable amounts of activity on space.

Speaker Change: and we've made adjustments.

Speaker Change: in terms of some of the lease-up timeframes in the redevelopment and repositionings. Some things are pushed out, you know, in on average we pushed those out about two months.

Speaker Change: and half of it is related to construction delays and half of it really being related to leasing.

Speaker Change: But overall, there is activity out there and really I echo a lot of the comments Michael made in terms of some of the reasons why the decisions are slower, but we're fairly optimistic in terms of turning some of that activity into some sign transactions into the latter part of the year and into early 2025.

Howard Schwimmer: But yeah, we're fairly, fairly optimistic in terms of turning some of that activity into some sign transactions into the latter part of the year and into in the early 2025.

Unknown Executive: Great. Thank you.

Craig Mailman: And your next question comes from the line of Craig Mailman with City. Your line is open.

Speaker Change: Great, thank you.

Speaker Change: And your next question comes from the line of Craig Melman with City, your line is open.

Craig Mailman: Hey, good morning. Just want to circle back to the redevelopment pipeline here. I know you guys are saying that you've been kind of stabilizing projects in the kind of high seven percent range. But then DuPont was sort of a five and a half stabilized art. How should we think about where yields or returns are coming on their redevelopments, you guys have underway are going to start soon relative that seven eight. I mean, there was a five and a half a one off, or is that more of where returns are going to trend given kind of higher construction costs and moderating rents and maybe elongated lease up timeframes.

Craig Melman: Hey, good morning. I just want to circle back to the redevelopment pipeline here. I know you guys are saying that you've been kind of stabilized in projects in the kind of high seven percent range, but then DuPont was sort of a five and a half stabilized. Art, how should we think about where yields or returns are coming on their redevelopments you guys have underway or going to start soon relative that seven eight. I mean, it was a five and a half a one off or is that more of where returns are going to trend given kind of higher construction costs and moderating rents and maybe elongated lease up timeframes.

Howard Schwimmer: Craig, it's powered. You know, you can certainly refer to the supplemental that has all the data property by property in terms of projected yields. But in terms of that specific property, you know, as you recall from some of our prior comments, you know, 275,000 feet in the inlet and prior west had been one of the softest segments of that of that market because of the oversupply of the product. And so rents, you know, even when you just look around all the markets, rents decline probably, I'm going to say, you know, the most for that kind of product because of the amount of vacancy that there is in it.

Howard Er: Hi Craig, it's Howard. You can certainly refer to the supplemental that has all the data property by property in terms of projected.

Howard Er: Yields, but in terms of that specific property, you know, as you recall from some of our prior comments, you know, 275,000 feet in the Inland Empire West.

Howard Er: had been one of the softest segments of that market because of an oversupply of the product. And so, rents, even when you just look around all the markets, rents decline probably, I'm gonna say, the most for that kind of product because of the amount of vacancy that there is in it. So that's really more of a one-off in terms of the stabilized yield you see there on that particular asset. [inaudible]

Howard Schwimmer: So that's really more of a one-off in terms of the stabilized yield you see there on that particular. Joseph. Right, yeah, no, I see the 6% unleveraged yield in the deck. I just, I was, I was asking this question because I know, you know, the three-year roll forward that you guys pulled this quarter was really predicated primarily on the redevelopment. I think it was 11 to 13% that you talked about. And I was just trying to get at the, you know, the reason for pulling that if, you know, you guys are continuing to start redevs and it feels like you feel pretty good about your return expectations.

Speaker Change: Wright. Yeah, I see the 6% on-levered yield in the deck. I was asked this question because I know the three-year role-follower that you guys pulled this quarter was really predicated primarily on the redevelopment. I think it was 11 to 13% that you are talked about.

Speaker Change: and I was just trying to get at the reason for pulling that if...

Speaker Change: You know, you guys are continuing to start redabs and it feels like you feel pretty good about your return expectations. Could you just talk a little bit more about the decision to pull that guys in here?

Unknown Executive: Could you just talk a little bit more about the decision to pull that guidance here.

Unknown Executive: So quickly after you gave it.

Howard Schwimmer: Yeah, Craig, I think it's purely a function of timing because we are really excited about the embedded growth in the portfolio, and we're very, very well positioned to generate substantial growth over the near and long term. When we're looking at the forecast, and when you look back to the initial outlook that we said at the beginning of the year, it was based on the market dynamics at that time. Since then, there has been continued economic uncertainty.

Speaker Change: Schauquakler Fee gave it.

Speaker Change: Yeah, Craig, I think it's purely a function of timing because we are really excited about being that aggressive in the portfolio.

Speaker Change: and we're very, very well positioned to generate substantial growth over the near and long term. When we're looking at the forecast and when you look back to the initial outlook that we said at the beginning of the year, it was based on the market dynamics at that time.

Howard Schwimmer: So we believe it's prudent to push aside the forecast at this time. We're really focused on our 2025 growth. When we have that better visibility and will provide that those expectations when we report for Q our name. And the focus for us is executing on that significant and better growth within the portfolio. Okay, that's fair.

Speaker Change: Since then, there has been continued economic uncertainty.

Speaker Change: So we believe it's prudent to push aside the forecast at this time. We're really focused on our 2020-25 growth. When we have that that our visibility, and we'll provide that those expectations when we report for QRN. And the focus for us is executing on that significant and that it grows within the portfolio.

Craig Mailman: Just clarification about yellow flooring. I know that you know it didn't last as long as you had hoped to get you through the planning stage or entitlement stage on that redevelopment. Do you anticipate doing a short-term lease there?

Speaker Change: Okay, that's fair, just clarification about L.O. flooring. I know that it didn't last as long as you had hoped to get you through the planning stage or entire one stage on that redevelopment. Do you anticipate doing a short-term lease there, or should we just assume that that's going to be down until you start to read it? That's 1601.

Craig Mailman: Should we just assume that that's going to be down until you guys start to read it at 601? Yeah, Craig, I mean, we will certainly put it on the market and see if we are able to get some short-term income in that space. It's not anticipated at this point in our guidance.

Speaker Change: Yeah, Craig. I mean, we will certainly put it on the market and see if we were able to get some short-term income in that space. It's not anticipated at this point in our guidance.

Michael Frankel: Okay. And then just maybe one last one. You know, you guys are still sitting on a good amount of cash deploy. And what we're hearing is, you know, stabilized yields are coming down on acquisitions, particularly in good gateway markets. How do you guys kind of with what's in the acquisition pipeline?

Speaker Change: And then just maybe one last one. You guys are still sitting on a good amount of cash to deploy. And what we're hearing is you know stabilized yields are coming down on acquisitions, particularly in good gateway markets. How do you guys kind of with what's in the acquisition pipeline? I know you guys don't always buy stabilized your bags of value add kind of how do you feel the return opportunities are relative to maybe the cost of capital you raised. The equity at earlier this year.

Michael Frankel: I know you guys don't always buy stabilized your bags of value add kind of how do you feel the return opportunities are relative to maybe the cost of capital you raised the equity at earlier this year. Hey, Craig, thanks again. It's Michael here. Thanks again so much for joining us today. And no, we're excited about any opportunities that you that we might have in our pipeline. The only reason that they are in our pipeline is because we believe they're going to deliver substantial accretion, you know, relative to our steady state cost capital. And which would mean a creative to, on average, you know, to the near term.

Michael Frankel: Hey, Craig. Thanks again. It's Michael here. Thanks again for so much for joining us today. And no, we're excited about any opportunities that we might have in our pipeline. The only reason that they are in our pipeline is because we believe they're going to deliver substantial accretion, you know, relative to our state-of-state cost capital. And which would mean a creative to on average, you know, to the near term.

Michael Frankel: In fact, so the company as well as long term, it doesn't mean from time to time, we might not buy a vacant asset, but we're going to expect that we're going to get paid for that without much a substantial higher stabilized yield. But in general, you're going to see us continue buying, on average, cash flowing assets with, in general, opportunities to create value that we believe are going to be accretive to the portfolio and to shareholders, both in the near and long term, on average.

Michael Frankel: impacts to the company as well as long-term. It doesn't mean from time to time, we might not buy a vacant asset, but we're going to expect that we're going to get paid for that with how much a substantial higher stabilized yield. But in general, you're going to see us continue buying on average cash-quiling assets with, in general, opportunities to create value that we believe are going to be accretive to the portfolio and to shareholders, both in the near and long term, on average. [inaudible]

Unknown Executive: Great, thank you.

Nicholas Yuliko: And your next question comes from the line of Nicholas Yuliko with Scotiabank.

Speaker Change: Very, thank you.

Nicholas Yuliko: Your line is open. Thanks, hi everyone.

Speaker Change: and your next question comes from the line of Nicholas Heliko with Scotia Bank. Your line is open.

Laura Clark: I just wanted to go back to the same store occupancy change in guidance. So, in terms of the tenant move that you talked about, can you just quantify how big of an impact that was on the same store occupancy guidance? Yeah, in terms of our same store occupancy guidance, we did reduce the midpoint by about 25 basis points. So, and we reduce to high and by about 25 basis points. In terms of the drivers, the two drivers, rent commencement timing on vacant units, we've pushed out projected commencement into early 25. That's, that's about half of the drivers, just given the overall leasing dynamics.

Nicholas Heliko: I think I saw everyone. I just wanted to go back to the same stir occupancy change in guidance. So in terms of the tenant move that, that you talked about, keep this quantify how big of an impact that was on the same stir occupancy guidance.

Speaker Change: Yeah, in terms of our same story, I could see guidance. We did reduce the midpoint by about 25 basis points.

Speaker Change: and we reduce the high-end by about 25 basis points. In terms of the drivers, the two drivers, Rhincomment and Timing on the vacant units, we've pushed out Projective Commencement in the early 25.

Laura Clark: We're tenants are delaying leasing decisions, and overall leasing negotiations are taking a little bit more time. We've pushed out that projected timing. I'll note that on really the 10 largest units that accounts for the majority of the change, we do have activity on about six of those units. So it's more of a function of expecting that commencement to be in one queue and not work you. And then LL Flooring is about 10 basis points.

Speaker Change: That's about half of the drivers just given the overall leasing dynamics. We're tenants are delaying leasing decisions and overall leasing negotiations are taking a little bit more time. We've pushed out that projected timing. I'll note that I'm really the 10 largest units that accounts for the majority of the change. We do have activity on about six of those units. So it's more of a function of expecting that commencement to be in one queue and not work you. And then LL flooring is about 10 minutes. [inaudible]

Laura Clark: Okay, yeah, thanks, Laura.

Unknown Executive: So yeah, just following up on that.

Laura Clark: So it sounds like the piece that being delayed to 2025, there's not anything specifically leased for that space. And there's a lease, and there's a lease in place; just not going to commence until next year. It's all sort of speculative leasing that is being delayed into occupancy for next year. Yeah, it's just based on our expectations in terms of commencement and the activity we have in place in the paper that we're trading today.

Speaker Change: Okay, yeah, thanks, Laura. So yeah, just following up on that. So it sounds like the piece that being delayed to 2025. There's not anything specifically least for that space, and there's a, you know, there's a, you know, there's, you know, least in place, just not going to commence till next year. It's all sort of speculative, uh, leasing that, uh, is being delayed into occupancy for next year.

Speaker Change: Yeah, it's just based on our expectations in terms of commencements and the activity we have in place in the paper that we're treating today.

Unknown Executive: Okay, thanks.

Nick Filmman: And your next question comes from the line of Nick Filmman with Baird. Your line is open.

Speaker Change: Okay, thanks.

Speaker Change: and your next question comes from the line of Nick Filman with beard. Your line is open.

Nick Filmman: Hey, good morning out there. Laura, I wanted to kind of touch on some of the leasing mix dynamics. You kind of laid out on the smaller tenants having shorter lease terms. So you've kind of already converted that mark to market on that term, but maybe just looking at your schedule like, do we kind of view that as since 2026 is kind of more larger leases that that would be greater spreads or like, how should we think about that dynamic?

Speaker Change: Hey, good morning out there. Laura, I wanted to kind of touch on some of the leasing mix dynamics you kind of laid out on the smaller tenants having shorter lease terms so you've kind of already converted that mark to market on that term, but maybe just looking at your schedule like do we kind of view that as since 2026 is kind of some more larger leases that that would be greater spreads or like how should we think about that dynamic?

Laura Clark: Yeah, I'm certainly not going to speak to spreads for next year or 2026 at this point in time. I look forward to providing more, you know, more guidance around our spread expectations and report for quarter earnings and put out 2025 guidance. Yeah, I think it's important to look at you. We have provided the portfolio net effective mark to market at 31% and our cash market today is strong 19% as well.

Speaker Change: Yeah, I'm certainly not going to speak to spreads for next year or 2020, except at this point in time, and what boards are providing more?

Speaker Change: Yeah, more guidance around our expert expectations and reports worth quarter earnings and put out 2020 to me five guidance. I think it's important to look at you. We have provided the portfolio, a net effect of March to market at 31% and our cash mark to market today is a strong 19% as well.

Laura Clark: And then going to be back to kind of the repositioning redevelopment sort of bucket like how much of that NOI flow through every kind of expecting like is this we could capture half of it loaded into 25 or is this more of a backup sort of way to forecast.

Laura Clark: Are you asking me specifically about the product that we've delivered, or the entirety of the pipeline echo? I'm kind of asking on particularly what's laid out for the 2027 role forward, what percentage of that? I know you guys kind of give stabilization dates, but those kind of flow through, I guess, to the sun with your internal modeling. Like, is it logical to see some of that upside in 25, or are we thinking this is still going to continue to be pushed more 26, 27? Yeah, I mean, we provide our stabilization timing for every property within the pipeline.

Speaker Change: Are you asking me specifically about the product that we've delivered or the entirety of the pipeline? I'm kind of asking on particularly like what's laid out for the 2027 roll forward, like what percentage of that? I know you guys kind of give stabilization dates but those kind of flow through I guess to some like your internal modeling, like is it logical to see some of that upside in 25 or are we thinking this is still going to continue to be pushed more 2627?

Speaker Change: Yeah, let's, we provide our stabilization timing for every property within the pipeline.

Laura Clark: So we're going to see some impacts into 25, 26, and 27. So just you're pretty confident on those stabilization dates or anything in market-time anecdotes have shifted in the last 90 days to make you sway one way or the other. Yeah, I mean, look, that's why we made the update that we did to some of the timing. And so that's in, you know, our view and what we're seeing in the market today, that's incorporated in our current projections around stabilization dates.

Speaker Change: So, just your pretty confident on those stabilization dates or anything in marketing and accepted in the last 90 days to make you sway one way or the other.

Speaker Change: Yeah, I mean, look, that's why we made the update that we did to some of the timing. And so, that's an, you know, our view and what we're seeing in the market today, that's incorporated in our current projections around stabilization dates.

Unknown Executive: That's it for me, thanks.

Mike Mueller: And your next question comes from the line of Mike Mueller with JP Morgan.

Speaker Change: That's it for me, thanks.

Mike Mueller: Your line is open. Yeah, hi.

Speaker Change: And your next question comes from the line of Mike Mueller with JP Morgan. Your line is open.

Michael Frankel: I guess what are the attributes of the 90 million of dispositions that you're finalizing, and to the extent that you find acquisitions?

Mike Mueller: Hi, I guess what are the attributes of the 90 million of dispositions that you're finalizing into the extent that you find acquisitions? How are you thinking today about, I guess, incremental dispositions versus pulling down the forward that you have in place?

Howard Schwimmer: How are you thinking today about, I guess, incremental dispositions versus pulling down the forward that you have in place? Well, I might get tired. I'll speak to the dispositions. We're not, because usually we are really more comfortable reporting as these happen, but we do, you know, this is, I think, of a larger amount of product that we are looking at and circling at the moment. So we're excited to be, you know, 44 million year-to-date in having the other 90 million plus that we're working on, but we, I think we'd be more comfortable giving you more information about that as we close the various transactions.

Speaker Change: Well, I might get to Howard, I'll speak to the dispositions, we're not, because usually we are really more comfortable reporting as these happen, but we do, you know, this is...

Speaker Change: I think while the larger amount of product that we are looking at and circling at the moment so we're excited to be, you know, 44 millions year to date and having the other 90 million plus that we're working on but I think we'd be more comfortable giving you a more information about that as we close the various transactions.

Laura Clark: Okay.

Laura Clark: Sorry, Laura. Yeah. I'll answer the second part of your question around how we're thinking about funding. I mean, we have a variety. You know, we've got a pipeline of uses in which to fund. We have a pipeline as acquisitions of about 200 million. We also have about 75 million of additional repositioning redevelopment to spend through the remainder of this year and about 200 million next year as well. Got it. Okay.

Speaker Change: Okay, and- Oh good, and Teryler. Yeah, I'll ask the audience of the second part of your question around how we're thinking about spending. I mean, we have a variety, you know, we've got a pipeline of-

Speaker Change: Youth is in which to fund, we have a pipeline as acquisitions of about 200 million. We also have about 75 million of additional repositionary development to spend through the remainder of this year and about 200 million next year as well.

Howard Schwimmer: And maybe last quick one. I think during the quarter, you had sequential occupancy declines of about 200 basis points. San Diego and Ventura. And any color there in terms of some of the moving parts? Yeah. It's really a number of properties in San Diego in particular, average about 15,000 square feet. There were two larger property moveouts, roughly about 30 to 40,000 square feet. One of those actually in San Diego was already released at a 50% cash spread. And the other one we expect to release at about a 50% cash spread. And Ventura, we had a, it was made up of about seven properties average in 26,000 square feet.

Speaker Change: Got it. Okay. And maybe last quick one. I think during the quarry had sequential occupancy declines about 200 basis points San Diego and Ventura and any color there in terms of some of the moving parts.

Speaker Change: Yeah, it's it's really a number of properties in San Diego in particular, average about 15,000 square feet. There were two larger property moveouts, roughly about 30 to 40,000 square feet. One of those actually in San Diego was already released at a 50% cash spread and the other one we expect to release at about a 50% cash spread and Ventura, we had it was made up of about seven properties average in 26,000 square feet driven by about two large moveouts still around 40,000 square feet, expected releases at about a 30% cash spread.

Howard Schwimmer: Driven by about two large moveouts, still around 40,000 square feet, expected to release at about a 30% cash spread. Got it.

Unknown Executive: Okay, thank you.

Blaine Heck: And your next question comes from the line of Blaine Heck with Wells Fargo.

Speaker Change: Got it. Okay, thank you.

Speaker Change: Yep.

Blaine Heck: Your line is open. Great thanks.

Speaker Change: and your next question comes from the line of blame heck with Wells Fargo, your line is open.

Howard Schwimmer: Good morning. Can you talk about AV-98 and the impact on your portfolio? I guess, are there any planned redevelopments or repositioning projects that may not be possible to build out given the increased restrictions? And then on the other side, you know, you expect this to result in better long-term rent growth? Could it actually push tenants into other markets? Just how are you thinking about the net effect of all of the aspects of that bill?

Speaker Change: Great. Thanks. Good morning. Can you talk about AV-98 and the impact on your portfolio? I guess are there any planned redevelopments or repositioning projects that may not be possible to build out given the increased restrictions? And then on the other side, you know, you expect this to result in better long-term rent growth. Could it actually push tenants into other markets? Just how are you thinking about the net effect of all of the aspects of that bill?

Howard Schwimmer: Hi, hi, Blaine. It's Howard. Maybe just high level to start for the benefit of others. Listen, you know, AV-98 is really viewed more as state level zoning changes and primarily dealing with setback requirements near sensitive uses, such as homes, schools, parks, et cetera, and it's really addressing this by buffer zones. Really most impactful to buildings that are logistics projects that are 250,000 feet in larger nominal impact to product below that, but certainly some. As far as, you know, impacts for Rexford, you know, really no material risk to us for any of the projects right now we have in our pipeline.

Howard Er: Hi, my name is Howard

Speaker Change: Maybe just high level to start for the benefit of others listening.

Speaker Change: AB98 is really viewed more as state-level zoning changes.

Speaker Change: and primarily dealing with setback requirements.

Speaker Change: and your sensitive issues such as home, schools, parks, etc.

Speaker Change: and it's really addressing this fight by...

Speaker Change: Buffer Zones.

Speaker Change: really most impactful to buildings that are logistics projects that are 250,000 feet in larger.

Speaker Change: Namelimpact to product below that, but certainly some.

Speaker Change: as far as, you know, impacts for, for Rexford, you know, really no material risk to us for any of the projects right now we have in our pipeline.

Howard Schwimmer: There's no impact at all for repositioning and renovating buildings, unless you're going to add more than 20% to the size of the building, and that's a greater occurrence, you know, in terms of our repositioning. And, you know, really, you know, to the latter part of your question or the initial party question, I should say, you know, this possibly does create more value in our 50 million square foot portfolio. Because of the challenges, it does present, but mostly these impacts are going to be seen throughout the larger big box markets, you know, out East. Great.

Speaker Change: There's no impact at all for repositioning and renovating buildings, and unless you're going to add more than 20% to the size of the building.

Speaker Change: and that's a rare occurrence in terms of our repositioning. And really, to the latter part of your question or the initial part of your question, I should say, you know, this possibly does create more value in our 50 million square foot portfolio because of the challenges it does present. But mostly these impacts are going to be seen throughout the larger big box markets out east.

Blaine Heck: Thanks, Howard. Just following up on same store and the decrease that seems to have been driven mainly by occupancy headwinds. I guess when you look at the timing of occupancy commencement on vacant space, which I think you mentioned earlier on in the call, is being a little.

Speaker Change: Great, thanks Howard. Just following up on same store and the decrease that seems to have been driven mainly by occupancy headwinds. I guess when you look at the timing of occupancy commencements on vacant space, which I think you mentioned earlier on in the call is being a little bit more delayed than expected and then also movement of properties into and out of the same store pool. I guess how do you see same store occupancy comps as we move into 2025 and how that could influence the same store and why as we look forward.

Blaine Heck: A little bit more delayed than expected, and then also movement of properties into and out of the same store pool, I guess, how do you see same store occupancy comps as we move into 2025 and how that could influence same store and why as we look forward. Blaine, that's a great question. And we look forward to providing same property and a wide growth and guidance when we report for quarter earnings.

Speaker Change: Blaine, that's a great question and we look forward to providing sing property in a wide growth in guidance when we report forthquarter earnings.

Blaine Heck: Fair enough. I guess, you know, it's the LL Flooring asset going to remain in the think circle. That's the big one.

Speaker Change: Fair enough, I guess, you know, is the L.L. fluorine asset going to remain in the sink circle.

Howard Schwimmer: Okay, that's a good, yeah, that's a good question. As you know, in terms of LL flooring, you know, we've, this is a property and I'll just give a little bit more color here. And this is a, we had to execute a short term lease with LL Flooring at a rent that was 250% below market. We've been in the process of this redevelopment. We're actually currently in entitlements. We're very excited to deliver buildings to the market that really can't be replicated, given the regulation that's in place in this particular municipality. So it's a great opportunity to create a long-term value.

Speaker Change: That's a big one. Okay, that's a good question. In terms of law, a little flooring.

Speaker Change: You know, we've, this is a property and I'll just give a little bit more color here and this is a, we had to execute it a short term lease with L.O. Floring at a rent that was 250% below market. We've been in the process of this redevelopment. We're actually currently in entitlements. We're very excited to deliver buildings to the market that really can't be replicated given the regulation that's in place in this particular municipality. So it's a great opportunity to create long term value. And, importantly, because of, because of the low rent, the 250% below market rent, it's going to have an outsize impact on occupancy, but not necessarily on, in a lot because, because obviously,

Howard Schwimmer: And importantly, because of the low rent, the 250% below market rent, it's going to have an outside impact on occupancy, but not necessarily on in a line because obviously the below market rent. So all that being said, it is redevelopment.

Unknown Executive: And so we will most likely be moving it into the same property pool next year. Okay.

Speaker Change: and the Blue Market rent. So all that being said, it is a redevelopment and so we will most likely be moving it into the same property pool next year.

Unknown Executive: Great. That's. Yeah.

Blaine Heck: And then just to follow up on some of the questions on your acquisition appetite, you guys talk about the steady state cost of capital. Can you give us any color on where that steady state cost of capital is? I guess just, you know, what's that input when you're evaluating value creation or recreation from deals?

Speaker Change: We can start out. Okay, great that's.

Speaker Change: Yeah, that's funny, it's very funny.

Speaker Change: And then just to follow up on some of the questions on your acquisition appetite, you guys talk about the steady state cost of capital. Can you give us any color on where that steady state cost of capital is? I guess just, you know, what's that input when you're evaluating value creation or or a repression from deals?

Michael Frankel: Well, hey, Blaine, great to hear from you today. Thanks again for joining us. Michael here. We don't disclose how we perceive our cost capital. I'll tell you that our expectations are that our acquisition activity, on average, is accretive to today's cost of capital. Great.

Unknown Executive: Thanks, Michael.

Vikram Malhotra: And your next question comes from the line of Vickram Malhotra with Mizuho.

Speaker Change: Great, thanks, Michael.

Speaker Change: And your next question comes from the line of Vikram Malhotra with Miss Uho, your line is open.

Vikram Malhotra: Your line is open. Thanks for the question.

Michael Frankel: I guess maybe a last, nearly at the same time you'd sort of mentioned that this is sort of the baby, the best time to acquire and it's going to, you know, you'll see why. And I'm just wondering, could you sort of maybe size the TAM for us today? Like what's the theoretical whether it's pipeline or the full opportunity set for you to acquire it, you know, stabilize the Vick's, we develop it and then get whatever 100, 200 basis point tire. I'm just wondering, like, has that opportunity said just reduced given market conditions?

Vikram Malhotra: Thanks for the question. I guess it may be a last, narrate, same time. You sort of mentioned that this is sort of the baby the best time to acquire and it's going to, you know, you'll see why and I'm just wondering, could you sort of maybe size the tam for us today, like what's the theoretical whether it's pipeline or the full opportunity set for you to acquire it, you know, stabilizing the backs we developed it and then get whatever 100, 200 basis points higher. I'm just wondering, like, has that opportunity said just reduced given market conditions? [inaudible]

Michael Frankel: Hey, Vickram. Thank you so much for joining us today. Appreciate it. We don't really see the opportunities that having shifted. You know, Rexford's business model is predicated on a pretty unique market opportunity: almost two billion square feet of product with an info Southern California, over a billion square feet of it built prior to 1980, replete with opportunities to create value by buying a lot of these legacy assets, mostly within place cash flow and ability to take them with nominal investment to a substantially higher level of cash flow per share. And that market opportunity continues. In fact, I think our access to that are direct addressable market opportunity with respect as improving over time.

Speaker Change: Hey, Vipram. Thank you so much for joining us today. Appreciate it. We don't really see the opportunities that having shifted, Rexford's business model is predicated on a pretty unique market opportunity, almost two billion square feet of product with an info Southern California over a billion square feet of it built prior to 1980, replete with opportunities to create value by buying a lot of these legacy assets, mostly within place cash flow and ability to take them with nominal investment to a substantially higher level of cash flow per share. And that market opportunity continues. In fact, I think our access to that are direct addressable market opportunity with respect to improving over time. That haven't been said. We're going to be exceedingly judicious, careful, and conservative in terms of how we acquire and when we acquire. And I think, you know,

Michael Frankel: That haven't been said, we're going to be exceedingly judicious, careful, and conservative in terms of how we acquire and when we acquire. And I think, you know, this is certainly a market environment where we're going to have heightened caution and scrutinize our investment opportunities that much more, as we always do, frankly. So I think the key driver is Rexford in that respect, in terms of governing the pace at which we acquire. And I think it's the same posture we take at all phases of the cycle, but we're only going to focus on the very best opportunities for shareholders.

Speaker Change: This is certainly in a market environment where we're going to have heightened caution and scrutinize our investment opportunities that much more as we always do frankly. So I think the key driver is Rexford in that respect in terms of governing the pace at which we acquire and I think it's the same posture we take at all phases of the cycle, but we're only going to focus on the very best opportunities for shareholders. [inaudible]

Michael Frankel: That's fair.

Laura Clark: I was hoping you can give a bit more color on the decision to kind of take away the three-year guide. You know, I know you mentioned market dynamic, but I guess, you know, SoCal or the West Coast has been challenged for a while. So could you give some more color, like what's the change in the last three months for you to pull the guide?

Speaker Change: That's fair. I was hoping you can give a bit more color on the decision to kind of take away the three-year guide. You know, I know you mentioned market dynamic, but I guess, you know, so-called or the West Coast has been challenged for a while.

Speaker Change: Could you give some more color like what specific change in the last three months for you to pull the guide?

Laura Clark: You know, I'll just add to Laura's comments briefly earlier. And it's just that, you know, we're really good at industrial real estate in Southern California, you know, creating value in our after-class. We're less good about prognosticating about, you know, two, three years out where the economy goes, where overall, you know, that external factors may go that impact at the end of day decision making for our tenants. And so I think for us, we've found it's more prudent to focus on the business in hand to provide the annual guidance that we have a history of providing, where we have more visibility and transparency into the tenant base.

Speaker Change: You know, I'll just add to Laura's comments briefly earlier and it's just that, you know, we're really good at industrial role-state in Southern California, you know, creating value in our asset class. We're less good about communicating about, you know, two, three years out where the economy goes, where overall, you know, external factors may go that impact at the end of the day decision making for our tenants.

Speaker Change: And so I think for us, we've found it's more prudent to focus on the business in hand, to provide the annual guidance that we have a history of providing where we have more visibility and transparency into the tenant base. And it does not really reflect any long term concerns about our infill Southern California market. In fact, I think the backdrop is very favorable for our business in our markets. And frankly, the health of our portfolio continues to be very healthy by all the metrics that you see predominantly in high occupancy. So it doesn't really reflect concerns about our market or the tenant base. It's really more about focusing on what we do best, which is creating value in a real estate.

Michael Frankel: And it does not really reflect any long-term concerns about our infill Southern California market. In fact, I think the backdrop is very favorable for our business and our markets. And frankly, the health of our portfolio continues to be very healthy by all the metrics that you see, you know, predominantly high occupancy levels, exceedingly low bed debt, etc. So it doesn't really reflect concerns about our market or the tenant base. It's really more about, you know, focusing on what we do best, which is creating value in a little safe.

Howard Schwimmer: Okay, and then just last one two numbers questions, just given for the high sublet volumes across the West Coast or parts of SoCal, do you mind giving us like what percent of your portfolio is sublet number one and number two, just given all the leaving that you may have already done for the fourth quarter or probably even the first quarter, can you give us a sense of where you think the near term rent spread they're trending?

Speaker Change: Okay, and then just last one, two numbers questions just given for the high sublet volumes across the West Coast or parts of SoCal, I should say, do you mind giving us like what percent of your portfolio is sublet number one and number two, just given all the leaving that you may have already done for the fourth quarter or probably even the first quarter, can you give us a sense of where you think the near term rent spread dark trending.

Howard Schwimmer: Thank you. Yeah, sure.

Howard Schwimmer: Hi, Vikram, it's Howard in terms in terms of sub leasing this past quarter actually the amount of sub leasing occurring occurring our portfolio came down. It was equivalent to about 30 basis points of our occupied square feet, which was comparable to 60 basis points last quarter, and which is really, you know, more and I'd say overall in line with where our projection in terms of one quarter of 24. But you know, to put some numbers around that, you know, the amount of product in our portfolio that was actively on the market for subleasing at the end of the second quarter was one and a half million square feet, and that's also declined.

Speaker Change: Thank you.

Howard Er: Yeah, sure, I think I'm in Howard.

Howard Er: in terms of sublacing.

Howard Er: This past quarter actually.

Speaker Change: The amount of sublacing encouraging our portfolio came down. It was equivalent to about 30 basis points.

Speaker Change: of our occupied square feet, which was comparable to 60 basis points last quarter.

Speaker Change: and Richard's really more in, I'd say, overall in line with where our projections in terms of one quarter of 24.

Speaker Change: But, you know, to put some numbers around that, you know, the amount of product in our portfolio that was actively on the market, for sublies at the end of the second quarter was one and a half million square feet, and that's also declined. That's now down to 1.3 million square feet. So, subliesing is always a good indication of what's happening and changes in the market. And so, you know, I think that's, you know, at the moment, a bright spot in the market, when you see those, those numbers start coming in.

Howard Schwimmer: That's now down to 1.3 million square feet. So sub leasing is always a good indication of what's happening and changes in the market. And so, you know, I think that's, you know, at the moment a bright spot in the market when you see those numbers start coming in.

Howard Schwimmer: And then, in regards to leasing spreads that we're seeing quarter to date, really coming in at this point in line with our expectations. Our guidance implies that in the 40% and that effective area, in 25% cash area, for portfolio.

Samir Kanon: And your next question comes from the line of Samir Kanon with Evercore ISI. Your line is open.

Speaker Change: Lewis.

Speaker Change: and your next question comes from the line of Samir Kanal with Evercore ISI, your line is open.

Samir Kanon: Good morning, everyone. Hey Howard, I guess my question around it is around in Lynn Empire. The West was still down about 3%. But certainly you saw a bit of an improvement from the prior quarter when you look at it sequentially. Are you seeing some improvements there, you know, getting sort of less bad as we think about the market bottoming or even stabilizing here? Well, you know, our average product size in the market, the space size is 30,000 feet. So it's performing much differently than the broader market. And, you know, rent decline in terms of that product size in the Lynn Empire, you know, 50,000 feet under which is a lot of the space we have there and throughout the portfolio is actually, I'd say, slowed down in terms of, you know, where you're seeing any of the rent decline.

Samir Kanal: Good morning, everyone. Hey Howard, I guess my question around it is around in Lynn Empire, the West was still down about 3%, but certainly you saw a bit of an improvement from the prior quarter when you look at it sequentially. Are you seeing some improvements there? You know, getting sort of less bad as we think about the market bottoming or even stabilizing here?

Speaker Change: Well, you know, our average product size in the market, the space size is 30,000 feet.

Samir Kanal: Performing much differently than the broader market.

Samir Kanal: and rent decline in terms of that product size in the inlet empire.

Samir Kanal: you know

Samir Kanal: 50,000 feet and under which is a lot of the space we have there and throughout the portfolio.

Samir Kanal: is actually, I'd say, slowed down in terms of, you know, where you're seeing any of the rent decline.

Howard Schwimmer: And today it looks like it's happening, you know, more in some of the larger spaces, about 50, about, you know, well, about 100,000 square feet. So, you know, it's voting well, I'd say, in terms of how we see the market and really where the average size of 25,000 square feet in our portfolio less. And if you sort of step away from that in Lynn Empire, but just kind of look at the broader market in Southern Calamie, are you seeing any sort of green shoots at this point where you start to say, you know, maybe the market rent grows, the market rent starts at the bottom, and it's currently seeing them come down.

Samir Kanal: and today it looks like it's happening more in some of the larger spaces.

Samir Kanal: Bob Fifty, Bob 100,000 square feet, so it's voting well, I'd say in terms of how we see the market and really where the average size of 25,000 square feet in our portfolio list.

Speaker Change: And if you sort of step away from that in an empire, but just kind of look at the broader market in Southern Calamity. Are you seeing any sort of green shoots at this point where you start to say, you know, maybe the market rent grows, the market rent start to bottom, and you sequentially have seen them come down.

Howard Schwimmer: As we think about 2025, is there any sort of green shoots you're seeing in the rise, and they make us kind of feel like that market starting to stabilize or at least start to get less bad.

Speaker Change: As we think about 2025, is there any sort of green shoots you're seeing in the rise in the makers?

Speaker Change: I kind of feel like that market started to stabilize or at least starting to get less fat.

Howard Schwimmer: Space Mary, yeah, I can maybe provide a little bit more detail around what we saw in the quarter from a sub market and size performance because it really is dependent on some market and size. In terms of the third quarter, we saw the smallest declines in rent and the San Fernando Valley, Orange County, and San Diego markets. We saw accelerated declines in mid counties in the San Diego Valley. When you look at the market in terms of the size segments, our smaller spaces, the exited relative strength, spaces under 50,000 square feet, so less decline and market rent compared to those over 50,000 square feet.

Michael Frankel: Okay, thank you. And some of you are just add one thing in terms of green shoots, you know, tenant behaviors. We look at overall tenant behaviors and we don't see tenants, you know, really shedding space in our portfolio in any material way. In fact, you know, they continue to lock in very high annualized contractual rent bumps and the leasing activity that we're executing. And I think that the lease bumps they were signing today and through the last quarter are very good leading indicators in terms of tenant expectations and tenant health. And when we see them continue to lock in, you know, 3.9% to 4% on average, you know, annual rent escalators in the leasing activity that they're locking in for the next two, three, four, five years.

Speaker Change: Okay, thank you.

Speaker Change: and some of you are out of just adding one thing in terms of green shoots, you know, tenant behaviors. We look at overall tenant behaviors.

Speaker Change: and we don't see tenants really shedding space in our portfolio on any material way. In fact, they continue to lock in very high annualized contractual rent pumps and the leasing activity that we're executing. And I think that the lease pumps that we're signing today and through the last quarter are very good leading indicators in terms of tenant expectations and tenant health. And when we see them continue to lock in 3.9 to 4% on average annual rent escalators in the leasing activity that they're locking in for the next two, three, four, five years.

Michael Frankel: You know, I think the tenants are telling us that they expect to stay in the space; they expect to pay more rent; they value the space; they need the space; it's essential for their business. And so I think, you know, there are green shoots, but you probably have to look at some of the holistically look at the tenant behaviors.

Richard Anderson: Thank you. And your next question comes from the line of Richard Anderson with Web Bush.

Speaker Change: Thank you. And your next question comes in line of Richard Anderson with Red Bush. Your line is open.

Richard Anderson: Your line is open. Thanks, team.

Richard Anderson: Good morning. So just a comment on perhaps the linearity or lack thereof of market rent changes. You mentioned 7.5% down; you're over here this quarter. The number was down 2% in the first quarter. What happens if next quarter it's like 7.5 again? I mean, I just wonder, in your mind, is this a linear exercise where when we see something stop declining, then that's a pretty good sign that, you know, we're getting someplace, or could this sort of be all over the map, you know, based again on tenant behaviors and, you know, the psychological exercise to try to figure out where they're going to, where they're headed.

Richard Anderson: Thanks, team, good morning. So, just a comment on perhaps the linearity or lack thereof of market rent changes. You mentioned 7.5% down over your this quarter. The number was down 2% in the first quarter.

Richard Anderson: What happens if next quarter it's like seven and a half again? Like I mean I just wondered in your mind is this a linear exercise where when we see something stop declining then that's a pretty good sign that you know we're getting someplace or could this sort of be all over the map. You know based again on tenant behaviors and. [inaudible]

Speaker Change: The psychological exercise is trying to figure out where they're going to, where they're headed.

Michael Frankel: Hi, Richard.

Michael Frankel: It's my go. Thank you so much for joining us today. I think it's much as we have tried to describe it, frankly, for the last, you know, year and a half or so, which was following, you know, the incredible acceleration and increase in rent we saw during the pandemic. We expect to see some normalization, and that the normalization should be based on tenant behaviors. We're observing that the normalization should be, you know, some moderate rent declines, you know, plus minus 1, 2, 3% sequentially, a quarter of a quarter. You might even see some gains in certain submarkets, quarter of a quarter, but not to expect anything really dramatic based on the tenant behaviors we continue to see.

Michael Frankel: Hi Richard, it's Michael, thank you so much for joining us today. I think as much as we have tried to describe it, frankly, for the last, you know, year and a half or so, which was following, you know, the incredible acceleration and increase in rants we saw during the pandemic.

Michael Frankel: and we expect to see some normalization and that the normalization should based on ten of the behaviors we're observing that the normalization should be, you know, some moderate rent declines.

Michael Frankel: Plus, minus one, two, three percent sequentially, a quarter of a quarter, you might even see some gains in certain sub markets, quarter of a quarter, but not to expect anything really dramatic, based on the ten behaviors we continue to see, and when that ends and we finally see, you know, Ren Grove kick in more strongly, it's just hard to say, you know, it's very difficult to predict that sort of an inflection point, but that haven't been said, you know, we're really comfortable with the backdrop, you know, ten in health in our portfolio, it continues to be extremely strong, and we do think it's a very favorable backdrop that pretends well for market rent growth, just hard to predict exactly when you start to see that inflection.

Michael Frankel: And, you know, when that ends and we finally see, you know, rent growth kick in more strongly, it's just hard to say; you know, it's very difficult to predict that sort of an inflection point. But that hadn't been said, you know, we're really comfortable with the backdrop, you know, tenant health and our portfolio continues to be extremely strong. And we do think it's a very favorable backdrop that pretends well for market rent growth; just hard to predict exactly when you start to see that inflection.

Unknown Executive: Okay, fair enough.

Unknown Executive: And so when you think about that dynamic, minus 2 to minus 7 and a half, and, you know, wherever it may go from here, how does it that you underwrite the next redevelopment and repositioning project relative to where you expect market rents to be? Are you haircutting that even more to make it pencil? I'm just curious how you get comfortable redeveloping projects with, you know, the... ...down.

Speaker Change: Okay, fair enough. And so, when you think about that dynamic, minus two to minus seven and a half, and you know, wherever it may go from here, how does it that you underwrite the next redevelopment and repositioning project relative to where you expect market rents to be? Are you haircutting that even more to make it pencil? I'm just curious how you get comfortable redeveloping projects with, you know, the moon down in market rents. [inaudible]

Unknown Executive: John in Markerence. I'm finally just to clarify that minus 2% plus or minus, and then minus 7.5%. Those aren't apples to apples. The minus 7.5% will be a year-over-year comparison, whereas the minus 1.2% will be a sequential change. So we don't, we're not seeing anything. No, I think that's, unless I'm reading it wrong, it was minus 2 down in the first quarter of this year on an apples-to-apples basis. I might; I believe I see that, right? But perhaps I'm wrong.

Speaker Change: I'm finally just to clarify that minus two percent plus or minus and then minus seven and a half percent those aren't apples to apples and minus seven and a half percent will be a year over a year comparison whereas the minus one the two percent would be a sequential change. So we don't know. I think that's unless I'm really wrong it was minus two down in the first quarter of this year. [inaudible]

Speaker Change: I believe I see that, right? But perhaps I'm wrong, but at any rate, the question still applies on how you underrate.

Unknown Executive: But at any rate, the question still applies on how you underwrite redevelopments in this curve. So we take a granular bottoms-up approach on redevelopments, and we take a close look at where, you know, where, where we think rents are for the given opportunity in space. And we really do take a bottoms-up approach. And we take into consideration where rents are today and where they're trending. Okay. And apologies if I have that number wrong. I very might well have it wrong.

Speaker Change: Reed Development.

Speaker Change #100: in the Stern. So we take a granular bottoms up approach on redevelopments and we take a close look at where we think rents are for the given opportunity and space and we really do take a bottoms up approach and we take into consideration where rents are today and where they're training.

Speaker Change #101: Okay, and apologies if I have that number wrong, I very much.

Michael Frankel: What about space utilization or respective vacuency? Do you have a read on that and what, how that's competing with the need for more space from your tenants? I think, as I mentioned earlier, you know, we can see very high utilization among our chemists in their spaces within our portfolio. And again, we think contributes favorably to the backdrop that we see. And that's more about decision making and less about, you know, fundamentals. And so, you know, again, we continue to see, you know, very favorable levels of utilization within the portfolio. Okay.

Speaker Change #102: Well, I'll have it wrong.

Speaker Change #103: What about space utilization or respective of the occupancy? Do you have a read on that and what how that's competing with need for more space from your tenants?

Speaker Change #103: I think as I mentioned earlier, we continue to see very high utilization among our tenants in their spaces within our portfolio and again, we think contributes favorably to the backdrop that we see that it's more about decision-making and less about fundamentals and so again, we continue to see very favorable levels of utilization within the portfolio. Okay, last question, status of the CFO ? Hello? Hi

Unknown Executive: Last question, status of the CFO? Higher?

Unknown Executive: That's a great question. We're making a great progress.

Unknown Executive: And we're going to let you, let you all know as soon as we have a definitive answer that we're super excited at the progress and super excited for the company and shareholders in that respect. Okay. Wonderful.

Speaker Change #104: That's a great question. We're making a great progress and we're going to let you let you all know as soon as we have a definitive answer but we're super excited that the progress and super excited for the company and shareholders in that respect.

Unknown Executive: Thanks very much.

Brendan Lynch: And your next question comes from the line of Brendan Lynch with Barquays.

Speaker Change #105: Okay, wonderful. Thanks very much.

Brendan Lynch: Your line is open. Great.

Speaker Change #106: and your next question comes from the line of Brendan Lynch with Barclays, your line is open. Great, thanks for taking my question.

Howard Schwimmer: Thanks for taking my question. On LL flooring, where do they on the watch list and more broadly, how many tenants are currently on the watch list? Were they on the watch list?

Brendan Lynch: On LL Floring, we're today on the Watch List and more broadly how many tenants are currently on Watch List.

Laura Clark: It was a bankruptcy, so it did hit our watch list. In terms of the overall watch list, it continues to be very consistent with what we've seen throughout the year. We have less than 10 tenants on the watch list, and really no changes in terms, trends in terms of industry concentration. I mean, I'll note that our bad debt levels continue to be very low, very healthy. Year-to-date, we're at 50 basis points, and in projecting 50 basis points for the full year. Great. Thanks. That's helpful.

Speaker Change #108: Were they on the watch list? Yeah, it was a bankruptcy, so it did hit our watch list. In terms of the overall watch list, it continues to be very consistent with what we've seen throughout the year. We have less than 10 tenants on the watch list and really no changes in trends in terms of industry concentration. I mean, I'll note that our bad debt levels continue to be very low, very healthy, year-to-date, we're at 50 basis points. And I'm projecting 50 basis points for the full year.

Howard Schwimmer: And then on the dispositions, I know you don't want to speak too much about the 90 million that could be coming.

Speaker Change #109: Great thanks, that's helpful and then on the dispositions I know you don't want to speak too much about the 90 million that could be coming but can you discuss the characteristics of the assets you have sold here today and how we think about what you're prioritizing when disposing of assets?

Howard Schwimmer: But can you discuss the characteristics of the assets you have sold year-to-date and how we think about what you're prioritizing when disposing of assets?

Howard Schwimmer: Hi, everyone. It's Howard. For the most part, they've been some multi-tenant type projects, very management intensive for our team, and not much growth that we were projecting going forward. Small building that we just transacted on was 25,000, I think 25,000 in change, that we did a light renovation. And the equivalent cap rate to the projected rent on that versus the sale was very attractive. I believe it was in the low force on a market rental rate. So, yeah, there are typically assets where really there's no more value creation, opportunity, or sometimes it can have to do with the margin that we're achieving on an asset.

Howard Er: Hi, everyone. It's Howard. Yep, for the most part, they've been some...

Howard Er: Multi-tenant type projects, very management intensive.

Howard Er: on our team, and not much growth that we were projecting going forward these.

Howard Er: Small building that we just transacted on was 25,000, I think 25,000 change.

Howard Er: that we did a light renovation, and the equivalent cap rate to the projected rent on that versus the sale was very attractive, I believe it was in the low force.

Howard Er: on a market rental rate. So there's typically assets where really there's no more value creation, opportunity, or sometimes it can have to do with the margin that we're achieving on an asset. There's just some of the more intensive management or capital needs that we might be seeing coming up that we'd like to avoid, because they're not going to produce any incremental value.

Howard Schwimmer: There's some of the more intensive management or capital needs that we might be seeing coming up that we'd like to avoid because they're not going to produce any incremental value.

Howard Schwimmer: Great.

Unknown Executive: Thank you for the call.

Michael Frankel: And that concludes our question-and-answer session.

Michael Frankel: I will now turn the call back to management for closing remarks. Well, we'd like to, on behalf of the company and our board of directors, thank everybody for joining us today. We wish you a great rest of the quarter. Happy holidays, and we look forward to reconnecting next quarter.

Operator: And ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.