Q1 2025 EastGroup Properties Inc Earnings Call
Speaker Change: Good morning, ladies and gentlemen, and welcome to the Eastgroup properties first quarter 2025 earnings conference call and webcast.
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Speaker Change: Following the presentation, we will conduct a question and answer session.
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Speaker Change: This call is being recorded on Thursday April 24th 2025, I would now like to turn the conference over to Marshall Loeb. Please go ahead.
Speaker Change: Good morning, and thanks for calling in for our first quarter 2025 conference call as always we appreciate your interest Brent Wood. Our CFO is also on the call since we'll make forward looking statements. We ask that you listen to the following disclaimer.
Speaker Change: Please note that our conference call today will contain financial measures such as P&L I, an SSL that are non-GAAP measures as defined in regulation G. Please.
Speaker Change: Please refer to our most recent financial supplement into our earnings press release, both available on the Investor page of our website and to our periodic reports furnished or filed with the SEC for definitions and further information regarding our use of these non-GAAP financial measures and a reconciliation of them to our GAAP results.
Speaker Change: Please also note that some statements. During this call are forward looking statements as defined in and within the safe harbors under the Securities Act of 1933. The Securities Exchange Act of 1934 in the private Securities Litigation Reform Act of 1995.
Speaker Change: Forward looking statements in the earnings press release, along with our remarks are made as of today and reflect our current views about the company's plans intentions expectations strategies and prospects based on information currently available to the company and on assumptions it hasn't.
Speaker Change: We undertake no duty to update such statements our remarks, whether as a result of new information future actual events or otherwise.
Speaker Change: Such statements involve known and unknown risks uncertainties and other factors that may cause actual results to differ materially.
Speaker Change: Please see our SEC filings, including our most recent annual report on Form 10-K.
Speaker Change: For more detail about these risks.
Casey: Thanks Casey.
Casey: Good morning, I'll start by thanking our team.
Casey: They've worked hard and we've made solid progress on several of our 2025 calls I'm proud of the results achieved.
Casey: Our first quarter results demonstrate the quality of the portfolio, we built and the resiliency of the industrial market. Some of the results include funds from operations. Excluding in voluntary conversions were $2.12 a share up seven 1% for the quarter over prior year.
Casey: Now for over a over a decade, our quarterly <unk> per share has exceeded the <unk> per share reported in the same quarter prior year truly a long term trend.
Casey: Quarter end leasing was 97, 3% with occupancy at 96, 5%.
Casey: Average quarterly occupancy was 95, 8%, which although historically strong is down 170 basis points from first quarter of 2024.
Casey: Quarterly releasing spreads for 47% GAAP and 31% cash.
Casey: Cash same store NOI rose five 2% for the quarter despite lower occupancy.
Casey: And finally, we have the most diversified rent roll in our sector.
Casey: Our top 10 tenants falling to seven 1% of rents down 70 basis points from a year ago.
Casey: We view, our geographic and revenue diversity is strategic paths to stabilize future earnings regardless of the economic environment.
Casey: In summary, we're pleased with how 2025 began the tariff discussions dramatically raise market uncertainty in terms of severity and duration or even likelihood of any downturn.
Casey: The address the uncertainty we're focusing on a couple of things first we're focused on leasing to maintain occupancy and making the best quick leasing decisions we can.
Casey: Secondly, we're grateful our balance sheet, including outstanding forward equity agreements position us well.
Casey: We've raised our threshold for new investments and development starts and so theres better economic visibility and from another perspective, and certainly typically allows opportunistic investments, making balance sheet flexibility all the more valuable.
Casey: In terms of the portfolio square feet leased in the past two quarters or two of our top three historically that momentum speaks Holly in terms of the quality of our team our properties and our markets.
Casey: The leasing market was improving and then trade talks created uncertainty it's too early to tell the widespread tenant reaction.
Casey: As we've stated before our development starts are pulled on market demand within our parks based on economic uncertainty. We're re for forecast in 2025 starts to 250 million.
Casey: We're projecting the majority of the starts in the second half of the year, we made solid progress on development leasing year to date, how however expectations are for slower deliberate decision, making near term.
Casey: Our emphasis is on expectations.
Casey: Active prospects thankfully remain active prospects.
In terms of starts will ultimately follow demand on the ground to dictate the pace.
Casey: Longer term the continued decline in the supply pipeline is promising.
Casey: Starts were historically low again this first quarter, we expect the uncertainty to further delay new plan starts.
Casey: The combination of limited availability and new modern facilities, along with higher development costs will put upward pressure on rents as demand strengthens.
Casey: And as demand improves our goal is to capitalize earlier than our private peers on development opportunities.
Casey: Just on the combination of our teams experience.
Casey: Balance sheet strength.
Casey: Listing tenant expansion needs and the land and permits we have in hand.
Casey: Brent will now speak to several topics, including assumptions within our updated 2025 guidance.
Speaker Change: Good morning, our first quarter results reflect the terrific execution of our team.
Speaker Change: Overall performance of our portfolio and the continued success of our time tested strategy.
Speaker Change: <unk> per share for the quarter exceeded the midpoint of our guidance range at $2 12 per share compared to $1 98 for the same quarter last year, an increase of seven 1% excluding involuntary conversion gains as a reminder, we typically incur about a third of our annual G&A expense in the first quarter.
Speaker Change: Primarily due to the accelerated expense of newly granted equity based compensation for retirement eligible employees, which totaled approximately $2 5 million during the quarter.
Speaker Change: From a capital perspective, we were opportunistic in accessing the equity market.
Speaker Change: During the quarter, we directly issued common shares for gross proceeds of 6 million settled forward shares agreements for gross proceeds of $67 million with an additional settlement of 45 million after quarter end.
Speaker Change: Electively those shares issued in the first quarter were initiated at an average price of $176 per share.
Speaker Change: As of today, we have 145 million in outstanding foreign agreements at an average weighted price of $183 per share and full capacity of our $675 million credit facilities and.
Speaker Change: In January we refinanced 800 million dollar unsecured term loan.
Speaker Change: The credit spread by 30 basis points, resulting in savings of approximately $1.5 million over the remaining five years of term.
Speaker Change: In March we repaid a $50 million unsecured term loan and I only have $95 million of debt maturing for the remainder of the year.
Speaker Change: Although capital markets are fluid our balance sheet remains flexible and strong with record financial metrics.
Speaker Change: Our debt to total market capitalization was 13, 7%.
Speaker Change: Adjusted debt to EBITDA ratio increased to three times and our interest in fixed charge coverage increased to 15 times.
Looking forward, we estimate <unk> guidance for the second quarter to be in the range of $2 13 to $2 21 per share and $8.81 to $9. One set for the year, excluding involuntary conversion gains which is up slightly from our prior guidance.
Speaker Change: Mid points represent increases of five 9% and seven 2% compared to the prior year.
Speaker Change: Our revised guidance increases the midpoint for cash same store growth by 40 basis points.
Speaker Change: And increases average occupancy about 10 basis points, considering the uncertainty in the markets and the volatility in our share price, we reduced development starts by $50 million and reduced our capital proceeds by $190 million.
Speaker Change: This assumes that we do not raise any additional external capital and utilize our revolver facilities.
Speaker Change: G&A increased due to less overhead capitalization as a result of reducing development starts and increase in accounting for equity based compensation.
Speaker Change: Our tenant collections remain healthy and bad debt as a percentage of revenue was lower in the first quarter compared to 2024.
Speaker Change: We continue to estimate uncollectible rents to be in the 40 to 50 basis point range of revenues a little ahead of our historic run rate and.
Speaker Change: In closing we are pleased with the start of the year, especially considering the macro uncertainty related to tariffs and prolonged higher interest rate environment.
Speaker Change: And as they have and as we haven't been as good in uncertain times in the past, we will rely on our financial strength the experience of our team and the quality and location of our multi tenant portfolio to lead us into the future now Marshall will make final comments.
Marshall Loeb: Thanks Brent.
Marshall Loeb: In closing I'm excited about the start to the year. Our management team has worked through numerous periods of uncertainty before and we'll navigate our way through this turn as well.
Marshall Loeb: Godless severe environment, our goals are to drive <unk> growth per share and raised portfolio quality. If we can do those will continue creating NAV growth for our shareholders.
Marshall Loeb: And stepping back from the near term I like our positioning as our portfolio benefits from several long term positive secular trends such as population migration near shoring and onshore and trends evolving logistics chains, and historically lower shallow bay market vacancies well.
Marshall Loeb: We also have a proven management team with a long term public track record our portfolio quality in terms of buildings and markets improves each quarter, our balance sheet is stronger than it's ever been and we're upgrading our diversity both in our tenant space as well as our geography, we'd now like to open up the call for questions.
Marshall Loeb: Thank you.
Marshall Loeb: Ladies and gentlemen, we will now begin the question and answer session.
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Marshall Loeb: Eliminating this session to one question only per participant one moment. Please for your first question.
Blaine Heck: Your first question is from Blaine Heck from Wells Fargo. Please go ahead.
Blaine Heck: Okay, great good morning.
Speaker Change: Can you just touch a little bit more about the pace of leasing you're seeing thus far in the second quarter, whether youre seeing a notable pull back in activity and whether that's any more apparent.
Speaker Change: Civic markets or if there are any of that are more insulated and related to that.
Speaker Change: Quickly you think leasing could return to normalized levels or better given pent up demand.
Speaker Change: Once trade agreements start to materialize.
Speaker Change: Hey, good morning, Blaine it's Marshall.
Brent Wood: I'll take a stab and Brent jump in with any color I'll take a start at that.
Speaker Change: And we've been.
Speaker Change: We're really pleased with our leasing volume I think frame the industrial but if I go back just a moment, our our fourth quarter was our best quarter ever in terms of square footage leased in our first quarter was our third best quarter ever so really as kind of post election as some of our peers have thought things seem to feel like there was maybe at least you.
Speaker Change: For better or worse, you had an election behind you and you had some things like that and we had a lot of volume and as you said supply has been really it's been falling now for 10 quarters. It's <unk>.
Speaker Change: Certain markets as low as it's been in eight to 10 years in terms of whats ended up construction pipeline. So we're excited about that longer term in terms of leasing volume I know it's been it.
Speaker Change: It was early this month, it's really been awfully soon to tell I haven't we haven't really seen leasing volume there as well in a really specific one market and even one building where we've had one I believe was just before kind of tariffs were announced at our Domingos building its near that it's in.
Speaker Change: Carson, California near the ports of L. A and long Beach, where we've had two different leases out on that building and both prospects. Neither has gone away, but in both cases, they put things on hold until there was a little more certainty in that.
Speaker Change: Get that they were Asia and related port related users alike that our buildings by and large but for the vast majority serve that.
Speaker Change: Consumer we want to be as near the consumer as we can be and not port related so our leasing volumes have really not shifted we're happy with where we said at the end of April, but it's still kind of a wait and see but today. If you talk to our teams in the field.
Speaker Change: I've said, California, and specifically L. A orange county, which is not new that market has been struggling for a little bit. That's why we felt it in the other markets still feel knock on wood pretty solid probably the further east you go in our portfolio better the better the leasing volume is down in the Carolinas Atlanta, Florida has been a little better.
Speaker Change: Ahead of some of our other regions, but it's not to say, Texas is bad it's just not quite the pace we've seen in the eastern region of late.
Speaker Change: Great. Thank you.
Speaker Change: Youre welcome.
Speaker Change: Your next question is from Sameer can all from Bank of America. Please go ahead.
Sameer Canall: Hey, good morning, everybody Marshall one of the comments you mentioned that in the press release and even kind of your opening remarks was that.
Sameer Canall: You're working to complete leases as quickly as possible right given sort of the macro environment, you talked a little bit about the urgency.
Speaker Change: Maybe expand on that just I mean are you willing to be a little bit more flexible with tenants in terms of their demands are you.
Speaker Change: What are you, giving up on your end to kind of get the leases through just is at lower rents to gain the occupancy.
Speaker Change: Maybe help us think through that thanks.
Speaker Change: Sure Good question and good morning, everyone.
Speaker Change: It's good to see what they're doing it with a new business card congrats on the new roles there.
Speaker Change: And then in terms of leasing maybe a little bit as I spent on it.
Speaker Change: The two leased as we've been out for example in Los Angeles on this building that the terms are pretty similar and I are are.
Speaker Change: Leasing attorneys that we use are usually pretty prompt, but we've said.
Speaker Change: Let's try to move as quickly as we can and responding to their counsel his comments getting permits getting everything we can because it feels like your one news cycle away from someone saying, we're going to put things on hold so thankfully to date it hasn't been the economics and we I think we've all.
Speaker Change: These wanted debate fast on our leased on leasing, but we've said in this environment, probably theres, even more of an emphasis let's try to turn the lease comments as quickly.
Speaker Change: Let's get proposals out as quickly as we can because you're in.
Speaker Change: Things were going great through March and they haven't certainly haven't turn but theres a lot of reasons, where people could put things on hold and that's what we said, okay, let's let's take the burden hand, let's get the deal done as quickly as we can I think in terms of credit and things like that we've held our standard way.
Speaker Change: We haven't really thrown in more tenant improvements and things like that that that said I would say you always have to realize I wanted to say just your market, but your submarket and what your competition is I think Ken and Los Angeles, We would probably stretch a little more than just that that market still has negative absorption compared to a loss.
Speaker Change: Dallas Houston Orlando Charlotte.
Speaker Change: There, we would probably stretch a little more to make a deal we don't want to make a bad deal and.
Speaker Change: The beauty of an industrial product, unlike some other sectors or tenant improvements.
Speaker Change: Really our usually average about a dollar per square foot per year of term and the majority of that 60% of that commission. So that's where I like that our Ti numbers are so much lower than other product types and we're trying to be careful and get letters of credit and things like that so so far we haven't.
Speaker Change: It's been more about timing than terms, a long winded way of saying.
Speaker Change: Okay.
Speaker Change: Thank you Marshall and thank you for the comments as well.
Speaker Change: Oh, you're welcome.
Speaker Change: Yeah.
Speaker Change: Your next question is from Craig Melman from Citi. Please go ahead.
Speaker Change: The Domingos building.
Craig Melman: I know you guys put that into redevelopment. This quarter just kind of curious was that always the plan to put into redevelopment. After starship left or was that because of some of the kind of commentary you were getting from some potential tenants there and you know just what's embedded in guidance.
Craig Melman: For the the backfill of that building I know you guys came in a couple of quarters. They had on Collins just kind of curious.
Craig Melman: What is embedded from a timing perspective for starship.
Speaker Change: Sure Good morning, Craig.
Speaker Change: I guess, a little bit just the history on that building and that'll kind of lead me in.
Speaker Change: The redevelopment, we we acquired this building and it was in the 96.
Speaker Change: And we were fortunate enough to have the same tenant in it through the end of 'twenty 'twenty. So it got dated it because it was accustomed warehouse port related heavy tenant active tenant use maybe a better way to say it we had it scheduled for a redevelopment in 'twenty two.
Speaker Change: <unk>, one and if you remember that was kind of win L. A went bonkers writers are several months into COVID-19.
Speaker Change: Before we could start the Redevelopments Starship said, we'll take it as it is and we were able to negotiate a minimal tenant improvements on a pretty big rent bump and then then when they went bankrupt or really got into trouble kind of starting lash mid last year and into bankruptcy so where.
Speaker Change: We're putting in is a sprinkler systems not even more than you wanted know naughty FSFR, where it is.
Speaker Change: Again, an active use but we've had an asphalt truck court. So we're replacing that with concrete really modernizing the building motion sensor lining building.
Speaker Change: Our second office component, which really all of our buildings have so that it can be a multi tenant building. So I would describe it as really 30 years of deferred T. I that we're kind of now we have a chance to do the good problem is as it's always been leased and then really are our definition.
Speaker Change: Which you may have seen the press release us in some of our peers in terms of Redeveloped not all that call. It rounding 8 million that were putting into the building isn't thankfully more than 20% well in excess of 20% of our base. The Senate. After 30 years, so that through at the end of the redevelopment. So hopefully we can.
Speaker Change: Look we've got <unk>.
Speaker Change: Several prospects the activity that's been good on this building, it's actually been better in the last call. It 90 days than it's been at kind of at any point in terms of releasing it. We've just probably I won't say celebrate too early but when you think when you have a lease out and youre going back and forth with attorneys comments, but that's where both of the.
Speaker Change: The tenants and I get it their boats importing from Asia has said, we're going to wait two or three months and.
Speaker Change: Look I guess, they all I'm, hoping they're waiting for headlines and as soon as they're <unk>.
Speaker Change: First of all with the environment, we've got several active prospects on this space that we can get it get it leased that said, we won't be able to finish the improvements to the building we don't have a truck or today it'll be probably July timeframe. When we think we can finish all the improvements and and then I think in our budget, we have got it being lease several my.
Speaker Change: After that so we've kind of icons the big Con space. We thought we were getting ahead of this year's budget, but it's it's too early to tell on this one I think we since it's in redevelopment, it's usually 12 months after.
Speaker Change: We finished development or this is the first redevelopment we've done in about a decade.
Speaker Change: We were talking earlier internally.
Speaker Change: And hopefully we can beat that year, and we'll pull it back in the operating portfolio and that's that's been contemplated in our original budget that we've had this pent up need.
Speaker Change: Really modernize this building and so in our original budget. We had had it planned is a redevelopment we had it planned in 'twenty one and then we planned it again in 'twenty five.
Speaker Change: And just to be clear Craig we got this question. Some so in our original first guidance back in February that Domingos was not we did not have that included in same store. So it was not something we changed from last guide to this guide in terms of how we were looking at that so it. It didn't have a we had a 40 basis point increase in our St.
Speaker Change: Store Guy this time, but that was not any part of it in terms of how we're handling that and as Marshall said from a guidance standpoint, we're showing up you know a tenant may be occupied that building in fourth quarter. So we're not showing anything imminent there. Although we are marketing this space and they've got prospects, but from a budget standpoint, we're not showing anything happening there tool Leighton.
Speaker Change: A year.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Your next question is from Alexander Goldfarb from Piper Sandler. Please go ahead.
Alexander Goldfarb: Hey, good morning, good morning down there.
Speaker Change: So a question for you Marshall.
Speaker Change: <unk> talked about delaying the.
Speaker Change: Development starts until later in the year, which obviously reduces the overall amount you plan to start.
Your comments on the leasing environment apart from L a being.
Pretty healthy so.
Speaker Change: My question is what's really going on that's causing you to pull back on development starts and from a tenant perspective, it doesn't sound like there's any real.
Speaker Change: Fear about tariffs.
Speaker Change: It sounds like that businesses are just sort of operating in whatever tariffs are going to happen people just feel like theyre going to manage it. Okay is that sort of the general takeaway or is this people want to see actual tariffs in place before they start.
Speaker Change: <unk> there plans I'm just trying to understand your comments on the overall healthy leasing environment apart from la.
Speaker Change: Versus youre pulling back on development when it would seem that your hand is strengthening there is that yes.
Speaker Change: Your merchant builders are have pulled back dramatically.
Alex: Good morning, Alex and further question I would I would say expectations Youre right.
Speaker Change: Four months into the year things have gone.
Speaker Change: As budgeted or a little ahead, so where we are better off than we thought we would be and ultimately on our starts. This year I hope are kind of a new number 250 million turns out to be low we'll go as fast as prospects lease space kind of in good or bad markets will go as quickly as we can get the next building.
Speaker Change: <unk>, so, but it was more with the uncertainty of tariffs uncertainty.
Speaker Change: Likelihood of a recession increased and things like that that you see in the news we thought our starts.
Speaker Change: It could be one or two buildings to get to that 50 million and one or two to three projects. There's a good more than like.
More chance that some of those get delayed than there was when our original budget. So in the field, we've not seen the pull back and we may not at either it could get resolved it may not happen, but kind of expectations are that I think a number of prospects will.
Speaker Change: The corporate will say, let's put decisions on hold for 30, 90 days kind of like what happened to us in L. A and that could end up more likely than not that with nothing that no. There's nothing specific identified that say three of our developments get pushed into maybe first quarter of next year than the fourth quarter of this year.
Speaker Change: That will go ultimately will go as fast as the market allows but it was really more just expectations than anything factual today.
Speaker Change: Thank you.
Speaker Change: Youre welcome.
Speaker Change: Your next question is from John Kim.
Speaker Change: BMO capital markets. Please go ahead.
John Kim: Thank you you talked about L, a being weak and wanted to ask about.
Speaker Change: Leasing spreads you had this quarter, which.
Speaker Change: We're up 5% on a GAAP basis.
Speaker Change: I realize it might be a small sample size, but it does seem low in light of market mindset of increased 30% over the last five years.
Speaker Change: I was wondering if you're just being.
Speaker Change: Defensive ultra defensive in that market and if this will be representative of Z spreads going forward in this market.
Speaker Change: Yeah. Good morning, John I don't think its representative I think of a surge.
Speaker Change: Los Angeles Youre right its a.
Speaker Change: We're about 5% of our NOI in L. A and just didn't have many leases roll first quarter. So there is more embedded growth and our portfolio. Then that shows that said I would say.
Speaker Change: Los Angeles is one of the few markets, where and where we've seen rents go backwards and where.
Speaker Change: Absorption is still negative I think the numbers I saw were about for L. A not inland Empire, but L. A negative 2 million square feet of absorption and that was the ninth consecutive quarter. So that's really an aberration to us were Dallas and Atlanta have.
Speaker Change: <unk> years of positive net absorption so that market to me it doesn't feel like it's found its footing, yet, but but 5% is abnormally low and I would expect as the year plays out that number will grow more in line with what you said you know kind of depending on where how new the how recent the leases that rolls that will do a little bit.
Speaker Change: Better on our radiation spreads in Los Angeles, and then first quarter and its really is just kind of a.
Speaker Change: Statistic statistically odd sample set.
Speaker Change: Great. Thank you.
Speaker Change: Youre welcome.
Speaker Change: Okay.
Speaker Change: Your next question is from Vikram Malhotra from Mizuho.
Speaker Change: Securities. Please go ahead.
Vikram Malhotra: Good morning, Thanks for taking the question. So just wanted to follow up on development.
Speaker Change: A couple of parts to it just one can you give us a sense of like what you actually need to lease up this year to kind of hit the middle of the guide or even maybe the low end of the guide.
Speaker Change: Related to development one of your peers talked a lot about build to suit activity picking up.
Speaker Change: Versus last year, and I'm wondering kind of what youre seeing in your markets on on built to suit and then just finally on that development, you mentioned higher yields or higher under our changing underwriting do you mind, just giving us more color there. Thanks.
Marshall Loeb: Yeah, Hey, I'll jump in Vikram on the first part it from a from a guide standpoint of development really as Marshall mentioned not only did we take the development start number down a little bit. We also pushed the starts back in the year and really more just from a point of being conservative more so as Marshall said, if we can do it faster we will we're not.
Marshall Loeb: We're not making it an arbitrary assessment of we're just going to delay. It was just more of the uncertainty of just pushing that back some.
Marshall Loeb: To that vein, our lease up of projects too, we we pulled that back and push that back a little later in the year as well so we have de Minimis almost no.
Marshall Loeb: <unk> or leasing income projected second and third quarter and what we do have projected in the year is embedded in fourth quarter. So to your point of what what kind of have to take to for that to have impact into lowers from the midpoint. It would it would have to be something that would drag through the year prevented us from getting tenants and a few spaces by fourth quarter.
Marshall Loeb: So we hope that proves to be a conservative approach.
Marshall Loeb: But that's just what we where we stand at the moment. So we did soften both of those and then I'll, maybe let Marshall talk about the build to suit activity or from that standpoint really for us.
Marshall Loeb: As we always have vikram that with our buildings and multi tenant style development parks build to suits are great. When you can get them, but when you're building 100, 150000 square foot building designed for two to four or five tenants build to suits for us more.
Marshall Loeb:
Marshall Loeb: Less frequent.
Marshall Loeb: We can have those opportunities you'd like to remove the leasing risk, but for us it's not something we're seeing.
Marshall Loeb: An increase in interest in <unk>.
Marshall Loeb: Relative toward the product type we offer.
Ronald Camden: Your next question is from Ronald Camden from Morgan Stanley. Please go ahead.
Speaker Change: Great just two.
Ronald Camden: Quick two parter just staying on the development just any sort of quick indication of how much construction costs have gone up and which parts and which pieces of it.
Ronald Camden: And what magnitude and then the follow up is just on you know we've heard.
Ronald Camden: More utilization of space from <unk> curious, if you're seeing that as well and any other sort of tenant bases that are.
Ronald Camden: Usually utilizing their space more in this environment.
Marshall: Hey, Ron good morning, its Marshall.
Ronald Camden: Yeah.
Ronald Camden: Much more concerned about development demand then thankfully construction cost has come down about 10% to 12% in the last year and speaking with our construction team. So far there anticipations, we don't really use lumber so that won't be a factor that's one of the items that.
Ronald Camden: Potentially go up what we've heard is rebar, which honestly, we will use that in the concrete maybe up about 10% and storefronts, where we'll have the aluminum storefront. So I think the flip side of that which will help industrial developers is as the construction pipeline is so low and that's really across all.
Ronald Camden: Product types, what we're hearing is the <unk>.
Ronald Camden: General contractors in the subs are so hungry for business and there is labor availability that there wasn't at the peak.
Ronald Camden: I think what what impact we will get from tariffs will be knock on wood pretty minimal as the feedback. We're hearing roofing materials are largely U S based things like that so I think our concern are much more about the.
Ronald Camden: The numerator the demand side than the denominator side in terms of the impact.
Ronald Camden: I think in terms of utilization probably the bigger the space.
Ronald Camden: More the tenants can invest and ultimately invest in this space and utilize that ours is oftentimes just such a SaaS throughput kind of like that last mile delivery. So.
Ronald Camden: Don't know that our tenants specifically are utilizing their space much more and I think that if anything where it has been it's been a pent up demand because of the economic uncertainty.
Ronald Camden: A lot of our conversations over the last 12 to 18 months has been weak.
Ronald Camden: I'd like to expand and I'm trying to get corporate forgive me approval. So that's probably in itself lead to more intense utilization of their space, but what we're excited about if we can get that kind of a clear runway of like we had in fourth quarter and first quarter, you saw the leasing volume or how well R. R.
Ronald Camden: And our type buildings for kind of leasing the 10 development leases that we've gotten signed year to date, including several of those were after April soccer. So we're happy to see that volume.
Ronald Camden: And I think it's there we just need a little bit of a stable economy and our model works really well as what the last two quarters have shown us.
Speaker Change: Helpful. Thank you.
Ronald Camden: Youre welcome.
Ronald Camden: Okay.
Ronald Camden: Yeah.
Ronald Camden: Your next question is from Todd Thomas from Keybanc Capital markets. Please go ahead.
Todd Thomas: Yeah, Hi, Thanks, Marshall you mentioned in your prepared remarks that you raised your threshold for for new investments and Brian you touched on some of the changes you made to the outlook related to development starts, but curious if you can talk about acquisitions and provide an update around how you're thinking about return thresholds.
Todd Thomas: For for acquisitions and can you comment on whether you've seen any change in in sellers' willingness to transact or any deals pulled from the market or any any fallout related to some of the uncertainty here over the last few weeks.
Todd Thomas: Yeah, Hey, good morning, Todd.
Todd Thomas: On acquisitions I guess.
Todd Thomas: Again, it's only been a few weeks, but what we've done.
Todd Thomas: There were a couple of projects won we were kind of in the last <unk>.
Todd Thomas: Rounding third on an acquisition, we hadn't been awarded it but we were one of I think two or three.
Todd Thomas: We were very open with the seller that.
Todd Thomas: Given the change in capital markets that we were valuing it differently. So we we ultimately which we never do resubmitted our third offer at all.
Todd Thomas: Probably up 50 to 75 I'm trying to do it from memory 50, or so basis points higher yield that went ahead and went through we were the only public better at that point I don't want to violate our confidentiality agreement, but that one didn't re trade, but we've pulled back on a couple of acquisitions, we maintained our.
Todd Thomas: <unk> guidance in terms of volume and a $150 million for the year, but we we moved it to later in the year really in.
Todd Thomas: And our thoughts were our own cost of capital has.
Todd Thomas: Has moved higher and our ability to issue equity that window closed. So we want to be very careful with our own capital on glad we have the Brent and the team had the the equity forwards raised on our line of credit has nothing on it but where our access to capital suddenly changed in early April and we want to be very.
Todd Thomas: Prudent in how we use it so we backed away from a couple of acquisitions I Hope I don't regret them later in the year, but at the time, we thought that was the right thing to do one acquisition.
Todd Thomas: Just heard that the.
Sellers' expectations. The two things we've heard one was a 25 basis point increase in the cap rate they were expecting which we didn't view that is enough to really pull us back into the bidding process on it and and we'll see where it ultimately in both of these were new and multi tenant leased kind of eastgroup type properties.
Todd Thomas: Projects in existing markets and then I have heard from the brokers that there are several sellers that may shell, they're listening and come back to market later, so I won't.
Todd Thomas: Look uncertainties, usually when we found our best opportunities and it may not help this year's budget, but patience is usually rewarded so we've just said, let's let's wait for both of these were good investments, but they werent compelling enough given the environment. So that's where it's kind of said, let's be a little more comfortable before we brought.
Todd Thomas: Ground on the next development and they are little more enthusiastic about our not that we werent enthusiastic, but we didnt think either of these were were steels. We were just paying market for good properties long term. So we backed up we've backed away from a couple of things and I have not really seen in the market. It play out one one went through as.
Todd Thomas: Just one I am hearing is moving back up 25 basis points, we will see if the brokers call us back at an even better price next week, we'll say.
Todd Thomas: Yeah.
Okay.
Todd Thomas: Okay.
Todd Thomas: Your next question is from Mikael <unk>.
Todd Thomas: <unk> from Deutsche Bank. Please go ahead.
Mikael: Oh, yes. Good morning, everyone. So just wanted to stick on the topic of tariffs that again.
Mikael: But maybe that kind of drives more manufacturing and things like that to.
Mikael: What happened within within the U S just kind of curious.
Mikael: The whole idea of onshore and how you kind of think about that whether you think that could actually be a reality this time around.
Mikael: But in.
Mikael: The last Trump administration, where it was also.
Speaker Change: Potentially discuss Justin Yeah, a lot of onshoring activity.
Tayo: Good morning Tayo.
Mikael: One that.
Mikael: Questions I'm qualified to answer questions.
Speaker Change: Look I think the administration's goal is clearly to have more U S based manufacturing I hope that happens if it does it's good news for Eastgroup and a couple of ways one it'll be a slow moving train to build the factory and get the production end, but we've certainly seen it in places.
Mikael: Like Austin with Tesla, a lot of the Green energy.
Mikael: Some of this we're servicing in Dallas, one of the semiconductor plants that are new where it'll whereas when I say it'll help us probably twofold theres a good chance those manufacturing plants will be in our sunbelt market, it'll they'll probably be in the Carolinas, and Georgia, Texas, Arizona, it'll probably more likelihood.
Mikael: Then in new England, typically are that's where they haven't gone to California or things like that and we'll pick up the supplier we won't have the plant, but theres a good chance we will have the supplier to the plan. So.
Speaker Change: I hope that's true and then the other thing that may be more likely than potentially onshoring that it seems like and again. This is outside of my well outside my expertise, but that if.
Speaker Change: If you think who will be the trading partner that ultimately lose stands to lose the most would be China and that's been the trend of China, plus one manufacturing I think Mexico will be a net winner of that and we're certainly running from San Diego to Arizona and Texas have.
Speaker Change: Unlike those markets in and of themselves Phoenix is a good market that also happens to be near Mexico, same with Dallas and Austin, So I like that where I think if we have near shoring will be a beneficiary in those markets.
Speaker Change: And there'll be fine with or without it but I think.
Speaker Change: Look I think it's coming I think it'll just be it's been coming it's just been a slower play we've seen El Paso, there for several years, where we were.
Experiencing doubling of rents on our re leasing at the El Paso has slowed down a little bit, but we were doubling rents in El Paso for two or three years for the first time in 15 or 20 years ever as Brent just said.
Speaker Change: Yeah.
Speaker Change: Thank you very much.
Speaker Change: Youre welcome.
Speaker Change: Your next question is from Mike Mueller from Jpmorgan. Please go ahead.
Speaker Change: Okay.
Speaker Change: Quick question on development are there any specific characteristics of the developments that you essentially took out of your start guidance versus the ones, where you think you'll move ahead with sooner.
Speaker Change: Hey, good morning, no nothing it was maura.
Speaker Change: Nothing specific it was up you know if you asked the field probably development starts will be pretty similar to what they thought in our original budget. It was more outlook.
Speaker Change: Especially if it's wrong I won't pull Brendan it was more our own Ani is over.
Speaker Change: Where the economy was heading and that we said look it's probably kind of it's probably not going to this.
Speaker Change: Loudness want speed up development it'll slow it down so without any specific markets. We said all right maybe I could see maybe three projects around 50 million getting kicked down the can time wise a little bad debt, it's not that they won't happen. They just may happen in 2026, rather than 2025, but if.
Speaker Change: If the tariff discussions get resolved more quickly they could I could easily see us moving back to $300, the optimist and make us easily moving back to 300 or above wherever the market kind of as much as it lets us do.
Speaker Change: Got it so it was sort of a high level.
Speaker Change: Change as opposed to just on the ground project changes basically yeah nervous people at corporate yes, okay. Okay. Thanks.
Speaker Change: Youre welcome.
Speaker Change: Your next question is from Rich Anderson from Wedbush. Please go ahead.
Rich Anderson: Thanks, Good morning.
Speaker Change: Marshall you said.
Rich Anderson: Active prospects remain active.
Rich Anderson: Which is good but perhaps hesitant.
Rich Anderson: I'm wondering if you guys can draw any similarities to times in the past about how to manage the current situation because it seems to me if.
Rich Anderson: If the concern is a recession it doesn't it doesn't appear like there are the building blocks for.
Rich Anderson: A deep recession to take place. So if there was this pull forward of demand scenario that like you've seen in the past during the early stages of the pandemic.
Rich Anderson: Are there are there similarities in terms of the cadence of how things might go from here that are guiding your decision tree.
Rich Anderson: Mentioned, reducing development, but you could turn that on pretty quickly in this space and in your world. So I'm just wondering how much you're looking at.
Rich Anderson: Past peer rates to guide you in the future that Doug will be my question. Thanks.
Rich Anderson: Good morning, Rich. Thanks, I think this one is a little different to me and when I think of.
Rich Anderson: Covid and the GSE or even way back when the tech bubble and some things those.
Rich Anderson: To me years in the making and Werent very.
Rich Anderson: Quick fixes this one feels.
Rich Anderson: Sudden suddenly hit and manmade and so it could maybe go away just as quickly if they announce trade agreements with a number of countries. This could dissipate more quickly than the subprime mortgage crisis or some things like that.
Rich Anderson: We're not I'm grateful, we're very tenant diversified and and close to the consumer and that we and other meetings. We've reminded people look we've been in markets like Houston and Jacksonville for 30 years, but we're not near the Port we may have missed some opportunities not being at the port, but we've always.
Speaker Change: I wanted to be near the consumer so if it does affect us it will affect us more than that more than global trade that'll be a recession I like your optimism that you don't do that.
Speaker Change: Sunday Mentals arent, there and you're right our active prospects when I talk to the teams in the field.
Speaker Change: Don't often come up in our conversations unless they've been watching our stock price or reading the Wall Street Journal Thankfully today. So there is that dichotomy. This one does feel a little different but we've said really this year, we've talked to our own board about capital markets, it's going to be the world's seem so much more volatile.
So when the windows, there, let's either raise the equity or let's make sure we get the lease signed before the next tweet comes out or something in peoples.
Speaker Change: Sort of like when things get bad they get bad in a hurry and they get.
Speaker Change: The improved gradually and get bad in a hurry. So we've said, let's start let's get the lease signed if youre comfortable with it we don't have to negotiate.
Speaker Change: Hence degree of everything.
Speaker Change: Don is better than perfect. Sometimes so that's kind of where we've typically are but that's where we've really emphasized with the team here in the last since April 2nd tons better than perfect. Yeah, I would just add to that rich it's kind of like a do you use an analogy kind of like a good recipe you don't in markets. Like this you don't Doctor. It you just if you have a good recipe you just execute it.
Speaker Change: And we've had a long track record of doing that so as Marshall said in this year just heightened awareness of executing what you do again, a long track record of doing what we do and as Marshall mentioned earlier, a lot of times and uncertainty it can create maybe even opportunity to get something disjointed and something breaks loose from someone else and so you keep your eyes.
Speaker Change: Open for those opportunities as well, but yeah, we've got a long track record of and a great balance sheet to handle whatever comes our way, but I think it's just heightened awareness of executing and kind of sticking to the blocking and tackling of your core business, which which we've had a long track record of doing.
Speaker Change: Great. Thanks, everyone I appreciate it.
Speaker Change: Yeah.
Michael Carroll: Your next question is from Michael Carroll from RBC capital markets. Please go ahead.
Michael Carroll: Thanks, Marshall I wanted to follow up on your comments regarding the acquisition market and how you changed your underwriting or looked at an asset differently that caused you to increase the cap rates by 50 basis points.
Speaker Change: Can you provide us some details and how are you looking at that acquisition differently. I mean did you change your cash flow assumptions or did you just increase.
Speaker Change: Your return hurdles just given the market uncertainty I guess, how specifically are you looking at that differently now.
Speaker Change: Yeah that was then again Ross right or wrong.
Speaker Change: It was it was a newer asset existing market leased credit yes.
Speaker Change: I will credit the sellers they had they had a good project on the market. It was more our own access to capital we've been able to use Brent and the team are ATM fairly regularly we knew that Linda was.
Speaker Change: Closed we saw uncertainty as Brent meant just mentioned leads to opportunities and we felt like this was a good but not a great investment. So we said what makes it a great investment and maybe not very creative.
Speaker Change: Creative we thought 50 60 basis points, a little bit lower price per square foot long term and a little better yield mark to market going forward.
Speaker Change: And again the market, we blinked, maybe but the market didn't it hasn't closed yet, but the market went forward, but it was really thinking of alerts.
Let's be not that we're not always mindful of how we use our capital, but when that window is closed and also closed for the world for a little bit.
Speaker Change: That let's have that flexibility there may be some opportunities coming and this was a good but not great opportunity and we kind of.
Speaker Change: Backed into in a quick manner, where do we think where do you feel like this becomes a compelling investment not just a good investment.
Speaker Change: Your next question comes from Michael Griffin from Evercore ISI. Please go ahead.
Michael Griffin: Great. Thanks.
Michael Griffin: Kind of curious your thoughts on sort of the tenant health environment and you know I realize that you have a very diversified tenant base, but I imagine that if there are cost pressures on some of those may be small and medium businesses that could be occupancy of your facility. They could really feel maybe more of a squeeze on margins. So can you give us a sense.
Michael Griffin: You know are you monitoring anything there you know is there anything we should kind of keep in mind from that tenant health perspective, particularly for that that cohort of tenancy.
Speaker Change: Yeah and Griffith welcome aboard good to have you good to have you following us we appreciate it.
Speaker Change: Our tenant collections as I mentioned sort of in the prepared remarks begin remains healthy.
Speaker Change: That said were.
Speaker Change: We're still looking to be in that I think as I mentioned in the comments that 40 to 50 basis points of <unk>.
Speaker Change: Of.
Speaker Change: Uncollectable rent relative to our overall revenues. That's just slightly ahead of sort of our historical average a little bit below where we were for 2024. So first quarter was kind of running the way. It has been lately and as of now we're not projecting you know much of a change in that.
Speaker Change: Someone asked me today about rent about tenant health since April 2nd we haven't even had another rent checks come due yet like literally measure it and even due yet so it's early and to the extent that it might impact we will see our portfolio and our tenant base has been.
Speaker Change: In the high growth markets near the near the rooftops, we've tended to move more with the overall.
Speaker Change: <unk> of the local metropolitan area, and less with if container traffic flows coming in and out of Asia or somewhere else. So.
Speaker Change: That would be to say I think it would take more of a trickle through process and for the consumer ultimately to get hurt for it than to feel more into our portfolio if that were to happen but.
Speaker Change: The tenant helps good our California last year was about 80% of our bad debt in the first quarter that was 50% so still.
Speaker Change: More proportionate share relative to the to the group, but that said to seven tenants comprised almost 90% of the bad debt in the first quarter. So it still is a manageable figure and.
Speaker Change: Again, just maybe slight uptick from historical averages but.
Speaker Change: First quarter was kind of the same cadence that we had experienced last year or so.
Speaker Change: As of now that's until we are until we see something different on the ground. That's what we've dialed in and that's what we're anticipating.
Speaker Change: Great. Thanks, so much.
Speaker Change: Yes, Thanks, Chris.
Speaker Change: Your next question is from Vince to bone from Green Street. Please go ahead.
Speaker Change: Hi, Thanks for taking the question.
Speaker Change: Can you discuss just how much additional development leasing that has not yet occurred is included within our <unk> guidance like how many you know sense is kind of speculative if you will from the additional stabilization of that.
Speaker Change: Of the lease up pipeline.
Speaker Change: Yeah, it's as I mentioned earlier, we've not put an exact number out there because again the leasing is fluid and one of the reasons were hit.
Marshall Loeb: Marshall mentioned, we signed three leases since we even prepared the budget.
Marshall Loeb: Obviously, the budget gets prepared in advance of the documents going out and so some of that has already been made its way through but it's more fourth quarter weighted.
Marshall Loeb: Hesitant to give a range, but it's more than that I would say five to six range total for the year in terms of specs.
Marshall Loeb: Mount that we would need to accomplish again backend weighted and some of that has taken place. So that's not a.
Like I say that that's literally a spot number that can move week to week, depending on leasing and what the assumptions are but.
Marshall Loeb: We did take that number down relative to what it was our last original guide in February So we pushed it back and took it down.
Marshall Loeb: And just to put that in context, that's a pretty low figure for this time of year for us given that we typically do does strictly spec development.
Marshall Loeb: And so that that figures lower than then it would be in a typical year for us if we were getting along at a little higher development pace.
Marshall Loeb: No that's really helpful. I appreciate the color. Thank you.
Marshall Loeb: Yep.
Marshall Loeb: Yeah.
Speaker Change: Your next question is from Nick Feldman from Baird. Please go ahead.
Nick Feldman: Hey, good morning out there maybe just two quick ones Brett first on bad debt as a percentage of revenue for the first quarter whats the exact number on that.
Nick Feldman: The exact number for those.
Nick Feldman: Sitting on the edge of their seats here, let's say Ive got it it was a four 9%.
Nick Feldman: And we're showing about four and we've got dialed in for the year about 45, so as I mentioned, we're kind of depending on quarter.
Nick Feldman: The first quarter was obviously actual than the other three quarters are more not tenant specific but just placeholders and like I say I think were showing.
Nick Feldman: Said 40 to 50 basis points and literally I think 45 is what we're showing for the average for the year. So.
Nick Feldman: No. That's helpful. And then just last one kind of development yields.
Obviously in the supplemental numbers kind of went up.
Nick Feldman: Comments at a little bit on construction costs in certain markets coming down a little bit, but maybe talk about market rent growth dynamics youre kind of seeing in each of the markets and what's driving sort of the yields between the cost versus just rate growth.
Nick Feldman: Yes, we were happy to like I guess.
Nick Feldman: Good morning.
Nick Feldman: Developments that we've delivered we were actually at a 9% which was a good bit above what we had underwritten one of those the larger of the two was a was a pre lease in San Antonio. So we were happy we had a good land purchase we had no carry because it got leased and it was a was it one of our pre lease or build to suit.
Nick Feldman: Suite for that tenant so happy to get those yields they went up it's really been more rent growth and I would say.
Nick Feldman: We were feeling pretty good about rent growth, it's it's awfully new.
Nick Feldman: New now, but I'd say absent southern California, probably inflationary, but and the optimist in me when I look at how low the vacancy rate is so we're about three.
Nick Feldman: 3% vacant within each group's portfolio and our market, usually where there's kind of a rule of thumb, where there is vacancy in our market the bigger the space the higher the vacancy rate.
Nick Feldman: Our 92% of our rents coming from tenants under well, maybe a couple of stats, 92% of our rents coming from tenants 200000 feet and below and 75% of our revenues come from tenants under 100000 feet and Thats, where there is just such a low vacancy rate it won't take a lot of.
Nick Feldman: Stable demand to work through call. It the 4% market vacancy and there's just an empty pipeline that where we think we'll have a real job, especially on our private peers to get back in the development game and you can that we can deliver a building an eight or nine months. So that's where we really get excited is when things.
Nick Feldman: Do turn and I've been predicting the turn way too early so far but.
Nick Feldman: I think we will have a good runway of development coming out and that'll that'll push rents and ramp up our development pretty quickly when and if we get there we were certainly moving there the last six months and we'll just see how this plays out in this near term, but so far still so good so far.
Nick Feldman: Very helpful. I appreciate it.
Nick Feldman: Youre welcome.
Speaker Change: Your next question is from Brendan Lynch from Barclays. Please go ahead.
Brendan Lynch: Great. Thanks for taking my question Marshall, you talked a bit about tenant diversity and low correlation of rent from individual tenants. How should we think about the correlation between customers serving similar end markets and how they will perform if we enter a recession.
Brendan Lynch: Yes, I mean, I think that's our forget Brendan good morning, that's our fear is really or not.
Brendan Lynch: It's just there is a recession and where it shakes out I think that.
Brendan Lynch: Things that make me feel better what we said our like our kind of defensive positioning that thankfully in a growing market with a growing e-commerce component.
Brendan Lynch: That just at those two in themselves are going to lead to more demand and and we also see within our tenant base kind of our tenants are that customer part of their strategy is to faster and faster you can deliver whether it's goods or services, that's where the market's going so it's pushing.
Brendan Lynch: All of our tenants to have that kind of hub and spoke last mile delivery. So we like that in terms of just being a little more insulated than say port related and things like that but I do think you know.
Brent Wood: I like that we're down below 6% of our leases rolling for the balance of the year, where 90 surround it were around where we ended the quarter still around 97% leased so we feel pretty good about that end and as Brent mentioned earlier bankruptcies, but it is that if Doug.
Brent Wood: We're really consumer dependent and if the consumer starts to really falter it will.
Brent Wood: Our balance sheet is safe, but don't worry out of 1400 tenants, how many of them get pulled into that.
Speaker Change: Great. Thank you for the color.
Brent Wood: Youre welcome.
Speaker Change: Your next question is from Alexander Goldfarb from Piper Sandler. Please go ahead.
Brent Wood: Hey.
Speaker Change: Thanks for taking the follow up.
Speaker Change: Marshall just.
Speaker Change: Not necessarily your real time leasing discussions, but just tenant conversations in general as people contemplate all the different tariff headlines and reports that we're all reading what are the tenants really saying about how they're thinking about their business meeting are they concerned about simply costs going up.
Speaker Change: Or are tenants more concerned about their actual business.
Clothes or cut down or I'm, just trying to understand obviously, there is nervousness over or is there a recession or not.
Speaker Change: You tend to think through about the ramifications what is really their biggest concern is it more the cost to cost of operating or if their actual business.
Speaker Change: May be diminished.
Speaker Change: I don't think it's so far thankfully not the tariff discussions.
Speaker Change: Were much more related Ive Kidded and said the closer to New York you are the more tariffs are in a conversation that it's been much more capital markets Wall Street than in our tenant conversations and it's been more about does the space work, what tenet improvements negotiating terms I was.
Speaker Change: Reading a list.
Speaker Change: Couple of your peers mentioned, our Tampa for example, our Tampa occupancy went down and that's a handful of tenants, but when you look at what happened. There was it wasn't nothing was tariff related it was one company got ball one shut down up U S operations things like that it really wasn't.
Speaker Change: It was not tariff related it's really making sure their business model works and sometimes it is getting the right amount of square footage, where they're debating how much square footage do we need in that in this environment. That's what I've heard some of the brokers say.
Speaker Change: The tenant Rep brokers every time, we meet the tenant tells me they need 20000 50000, you know, it's a moving target signing the right space. So it's been more that related than my cost are going to go up as a result of tariffs if that's helpful.
Speaker Change: Thank you.
Speaker Change: Youre welcome.
Speaker Change: Your next question is from Blaine Heck from Wells Fargo. Please go ahead.
Speaker Change: Great. Thanks for taking the follow up several of your peers ran our stress test analysis on their operating metrics to indicate whether.
Speaker Change: Significant deterioration in fundamentals could still result in earnings within the guidance range.
Speaker Change: It does seem like you guys are in a more stable position than peers, thus far but I am curious as to whether you went through a similar exercise and if so which metrics were stressed and by how much and kind of what the end result was.
Speaker Change: Yeah, we did blayne, we looked at that we looked at occupancy we looked at what if no more development leasing happens during the year, what if we don't have any more development starts.
Speaker Change: Bad debt were to double but then you get into does that happen today does that happen August one does that happen and we kind of as we were doing that.
Speaker Change: Kind of remind us why we're not big on IRR models to more you played with the different components.
Speaker Change: The more you played with them in dire situations. The worst the results were so that we looked at it we feel again, we feel good about where we are obviously, we we not only reiterated guidance, but we actually bumped it a sin after a strong first quarter.
Speaker Change: So.
Speaker Change: Don't really want to put numbers to exit so many variables and obviously like I say, even looking at something like bad debt or occupancy okay. Not only do you lose 200 basis points, but at what point do you begin to lose it you know as we sit here in April were one third of the year and we haven't lost it so.
Speaker Change: We looked at it and it would take some serious stress to push us out of the low end of the range, let's just put it that way.
Speaker Change: And a third into the year, we're not seeing or feeling that at the moment and as you mentioned, where where I think a little bit more slightly insulated from that with our business type and reminder to our balance sheet.
Speaker Change: In a position where.
Speaker Change: We hope to do things as we've talked about today, but we don't have to do anything and we're in a very good position. So.
Speaker Change: We stress tested it and more for our own internal.
Speaker Change: I would also mention that we continually stress test our cash flow as well and it's not just happenstance that we had a good draw on the forward and our revolver available we've always been looking at our needs for.
Speaker Change: Capital and we've always look 12 months out and to make sure if the even in good times, if the world stopped tomorrow and we can raise another external dollar we want to make sure that we've got are immediate.
Speaker Change: Cash needs taken care of for an extended period and so we've always stress tested.
Speaker Change: We haven't always from an operation standpoint, but we did this quarter and feel good about where we are.
Speaker Change: There are no further questions at this time. Please proceed with closing remarks.
Speaker Change: Thank you everyone for your time and your interest in Eastgroup, We hope we got to your questions. If not we are certainly a phone call or an e-mail away and look forward to hopefully theres. A couple of calls there is a couple of conferences coming up here in the next months six weeks, we see you. There. So thanks for your time and have a great day. Thank you.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today we.
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