Q2 2025 EastGroup Properties Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the east group properties. Second quarter, 2025 earnings conference call and webcast conference call at this time. All lines are in listen-only mode. Following the presentation, we will conduct a question and answer session.
Marshall Oak: Is at any time during this call, you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, July 24th 2025. I would now hand over the card to Marshall Oak president and CEO to begin the conference. Please go ahead.
Speaker Change: Good morning and thanks for calling in for our second 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 asked you. Listen to the following disclaimer.
Speaker Change: Please note that our conference call today will contain Financial measures such as Pi and ffo that are non-gaap measures as defined in regulation, G.
Speaker Change: Please refer to our most recent Financial supplement and our earnings press release both available on the investor page of our website.
Speaker Change: And to our periodic reports furnished or file 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 to find in and within the safe harbors under the Securities Act of 1933, the Securities Exchange Act of 1934, and the private Securities. Litigation Reform, Act of 1995 forward-looking statements in the earnings. Press release, along with our remarks are made, as of today, and reflect, our current views of the company's plans, intentions expectations, strategies, and Prospects, based on the information currently available to the company. And on assumptions, it has made we undertake no duty to update such statements or remarks. Whether as a result of new information future or 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. 10K for more detail about these risks.
Speaker Change: Thanks Casey. Good morning, I'll start by thanking our team. They've worked hard this year and we've made Solid progress towards our 2025 goals and I'm proud of the results. We've achieved.
Speaker Change: Our second quarter results demonstrate the quality of the portfolio and resiliency within the industrial Market.
Speaker Change: Some of the results produced include funds from operations for 221 per share up, 7.8% for the quarter over prior year, excluding involuntary conversions.
Speaker Change: Now, for over a decade, our quarterly ffo per share has exceeded the ffo per share reported, and the same quarter prior year. Truly a long-term trend.
Speaker Change: Quarter, and leasing was 97.1% with occupancy at 96%.
Speaker Change: which although historically strong is down 110 basis points from second quarter 2024
Speaker Change: Quarterly releasing spreads for 44% Gap, 30% cash.
And year to date, results are similar at 46 and 31 percent Gap in cash respectively.
Speaker Change: Cash same store. Noi Rose 6.4% for the quarter, despite the lower occupancy.
Speaker Change: Finally, we have the most Diversified rent. Roller in our sector with our top 10 tenants, falling to 6.9% of rents down 90 basis points from last year.
Speaker Change: We target Geographic and revenue diversity as strategic paths to stabilize earnings regardless of the economic environment.
Speaker Change: In summary, we're pleased with our midyear results. The Tariff discussions raised Market uncertainty towards long-term capital decisions.
Speaker Change: To address the uncertainty. We're focusing on a couple of things.
Speaker Change: The first is leasing to maintain occupancy and we're making the best quick leasing decisions we can.
Speaker Change: Today's environment likely won't be tomorrow's environment, literally.
Speaker Change: Secondly, we're grateful our balance sheet positions us well during volatile moments.
Speaker Change: This strength allowed us to invest, 61 million and 2, new properties. Raising our Market ownership in Raleigh to roughly 600,000 square feet, all near the growing Research Triangle Park,
Speaker Change: In terms of leasing second quarter square footage, slowed compared to the record setting prior to quarters.
Speaker Change: In terms of total leases, however, the actual signed was greater during the quarter.
Speaker Change: As it played out the market bifurcated, such that we're continuing to convert prospects roughly 50,000 square feet and below.
Speaker Change: And our larger spaces have prospects, but decision-making time is elongated much like we experienced last year.
Speaker Change: That's impacting Us in several ways. First delaying expansions means the portfolio remains, well, least. And as a head of initial forecasts, on the other hand, our development pipeline is leasing and maintaining projected yields, but at a slower Pace. This in turn lowered development, start projections from earlier in the year.
Speaker Change: And our stocks, as we've stated before are pulled by market demand within the park.
Speaker Change: Based on current demand levels. Where refor 2025 starts to 215 million with a lean towards the back, end of the year.
Speaker Change: We're making solid progress on development leasing however, larger square. Footage decision-making is slower.
Speaker Change: Our emphasis is on forecasted expectations as our active prospects. Thankfully remain active, and things can swing rapidly. Like they did late last year.
Speaker Change: And turns of starts we ultimately follow Demand on the ground to dictate pace.
Speaker Change: Longer term the continued Decline. And the supply pipeline is promising starts. Where historically, low again this quarter. We expect the uncertainty to further. Dampen, new starts near-term.
Speaker Change: The Limited availability and modern facilities will put upward pressure on rents as demands stabilizes.
Speaker Change: And as demand improves our goal is to capitalize earlier than our private peers on development opportunities, based on the combination of our team's experience, our balance sheet, strength, existing tenant expansion needs and the land and permits we have in hand.
Speaker Change: Brent will now speak to several topics, including assumptions, within our updated 2025 guidance.
Brent Wood: Morning, our second quarter results, reflect the terrific execution of our team, the solid overall performance of our operating portfolio and the continued success of our time-tested strategy.
Brent Wood: Ffo per share for the quarter. Met the high end of our guidance range at $221 cents per share, compared to $25 for the same quarter last year and increase of 7.8%, excluding involuntary conversion gains.
Brent Wood: From a capital perspective, we took advantage of favorable Equity pricing early in the year, which allowed us to enter the quarter with the reserve of outstanding Ford shares agreements.
Brent Wood: During the quarter. And after quarter in we settled all of our outstanding forward shares agreements for gross proceeds of 194 million and an average price of $182 per share.
Brent Wood: Our guidance for the for the remainder of the year contemplates that we utilize our credit facilities which currently have the full 675 million capacity available.
Brent Wood: Although Capital markets are fluid. Our balance sheet, remains flexible and strong with near record Financial metrics.
Brent Wood: Ization was 14.2%, unadjusted debt to evaa ratio 3.0 times. And our interest in fixed charge coverage, increased to 16 times,
Brent Wood: looking forward, we estimate ffo guidance for the third quarter to be in the range of $2.22, to $2.30 per share with an average month-end, occupancy range of 95.3% to 96.1%
Brent Wood: for the year, we estimate ffo per share in a range of 8.89 to $93.
Brent Wood: With a midpoint up 2 cents per share from our prior guidance.
Brent Wood: Those midpoints represent increases of 6.1% and 7.3% compared to the prior year.
Brent Wood: Our revised guidance increases. The midpoint for cash, same store growth by 20 basis points to 6.5%.
And decreases average occupancy by 10, basis points. The decrease is primarily due to the conversion of a few development projects prior to full occupancy, considering the slower pace of development leasing, we reduced starts by 35 million.
Brent Wood: Our tenant collections remain healthy and we continue to estimate uncollectible rents to be in the 35 to 45 basis. Point range as a percentage of revenues slightly ahead of our historic run rate.
Brent Wood: In closing, we are pleased with the first half of the Year, especially considering the continual macroeconomic uncertainty.
Brent Wood: And as we have in both good and uncertain times in the past, we will rely on our financial strength. The experience of our team and the quality of location of our multi-tenant portfolio, to lead us into the future. Now, Marshall will make final comments.
Marshall Oak: Thanks Brent. We're pleased with our execution year to date. Putting us ahead of original expectations. Our management team has worked through periods of uncertainty before, and we're navigating our way through this turn as well. Regardless of the environment, our goals are to drive ffo per share growth and raise portfolio quality. If we do those, we'll continue creating nav growth for our shareholders.
Marshall Oak: And stepping back from the near-term. I like our positioning as our portfolio is benefiting from several long-term positive. Secular Trends such as population. Migration nearshoring and onshoring trends of evolving logistic chains and historically lower shallow bay Market vacancies.
Marshall Oak: 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 ever and we're upgrading our diversity in both our tenant base as well as our geography.
Marshall Oak: We now like to open up the call for your questions.
Speaker Change: Thank you, ladies and gentlemen, we will not begin the questions and answer session. Should you have a question? Please? Press star. Followed by the number 1 on your touchtone phone. You will hear a prompt that your hand is being raised. Uh, should you wish to decline from the polling process? Please press the star followed by the number 2. If you are using a speaker-phone, please list the handset, before pressing any questions, any Keys kindly note to please. When that your question to 1 per person 1 moment, please for your first question. Your first question comes from, Samir Canal from b o a. Please go ahead.
Speaker Change: Thank you and and good morning everybody. Um I guess Marshall you know thank you for the opening commentary. Maybe you can talk about the the Cadence of Leasing
Speaker Change: Through the second quarter.
Speaker Change: And any any color you can provide kind of the you know, in July as well. You know, the first few weeks here whether it's in your core portfolio or or sort of the leasing on the development side. Thanks.
Speaker Change: Okay, sure. Hey, good morning, Samir happy to to be helpful. I think, you know, really the first quarter and kind of the tail end of last year were were really strong. We're a market pickup from where a lot most of 2024 was I think the Tariff news shot. People people seem to be, maybe you get, push back on your heels a little bit and maybe once the shock combination of the shot going away or more and more tariff agreements. Like we saw Japan this week and and every day there's a new rumor about a next tariff agreement or new deadline.
Speaker Change: Bit slow a little bit longer a little bit slower and then even if you if you dug through our development kind of the leases that are getting signed it's the 50,000 ft and Below. We've signed several development leases month to date. We have seen pickup like a number of a couple of our peers have mentioned a little bit. June got a little better July maybe a little bit better still but it's been that
Speaker Change: 30 to 50,000 square feet that are coming across the finish line. And, and throughout it, we've got a full pipeline. It it we've have prospects for bigger spaces, it is just the decision-making time and I will add. Um, we've been, I guess the other thing that's been interesting and a a negative way this year, I can think of about close to a handful of times where we've had development leases out for Signature where the tenants changed their minds. So, that's typically that's that happens. But it's happened, more frequently this year. The because the good news is if I pull back where
Speaker Change: Those prospects haven't, it's not like we had changed our mind and we went to another building they've put decision making on hold. We recently had another development lease where they haven't gone anywhere. We were close to lease signing and corporately. It's a national tenant, they put things on, hold they put a freeze on new leases. So it's it's been a little bit frustrating with
The Tariff news. I think people are working there. I'm blaming it. All on, tariffs are working their way through it, and it seems to be the markets thawing and, you know, we're kind of watching it and we'll go as fast as the market. Lets us go. The other kind of thing is we prepare? Maybe 1 thing to note on our developments, we'll go in and build out, we call it spec office. So, all of our vacancy has spec office if things move, or people are ready to move quickly other than a demising wall, potentially, we can have tenants in very as quickly as they want to be in. And so we and and not all of our competition. Does that a lot of the private peers and things like that, they'll tailor the office. So a lot of times you'll get especially a 3pl or someone that wants to move in quickly so it can turn
Speaker Change: Quickly which more quickly than I expected late. Last year, I was pleasantly surprised and it feels like things are getting better, not dramatically but gradually better now.
Blaine Heg: Thank you so much. Your next question comes from Blaine heg from Wells Fargo. Please go ahead.
Blaine Heg: Great. Thanks. Good morning. Um, just along those same lines. It's it looks as though you're expecting a bit more downside to average month-end occupancy in the third quarter. Can you just talk about whether that's driven, mainly by additional underlying properties, coming online during the quarter or whether there are any other significant factors and maybe touch on the leasing activity at those projects that are coming into the portfolio with vacancy and and maybe how much of that vacancy is in spaces over 50,000 square feet which you noted to be a little slower.
Brent Wood: Yeah. Hey, good morning. This is Brent off to kind of take the first part of that then let Marshall speak to leasing at the at the projects. But it just adds some clarity, you know, we had a few questions post-release about hey, a little bit of decreasing occupancy yet your same story. Increase help us kind of sink that together and just want to point out as Marshall as we mentioned, in our prepared, comments development conversions, that that aren't full occupancy, are factored into that overall portfolio occupancy. So, for example, third quarter, you know, we put a footnote this time at the bottom of our guide that's table showing a, a guide of 95.7 for the entire portfolio, but in the third quarter for same store only that's we're projecting 96.7. So that's 100 basis point difference. And you know, again, that's being impacted and we've got we had a couple of projects, second quarter, there are 3 that converted July.
First, that's in that July figure and a few of those aren't even occupied to the extent. They're least we're still getting tenants in. So that had the biggest impact for the, for the last 6 months, we're showing the same store occupancy running about 90 basis points higher than the portfolio. So you know, you saw our midpoint same store increased, that's a direct attribution to the 60 million square foot operating portfolio doing very, very well. And that's just being mitigated a little bit by the slower development, leasing which I'll just let Marshall touch kind of on how that going at the project level. Yeah. And and and thanks, Brent Blaine. The only color I would add if it helps. It's
Marshall Oak: Certainly in 1 corner of it and maybe on both ends. And so if someone wants to to move in you're ready and it really just depends on how many bays in that building you want. And then we'll put the demising wall so we'll build a 120,000 foot building. That can probably accommodate up to you, typically 4 4 different tenants, but it's not in a, in a stronger Market is not uncommon for 1 Tennent to take the full building and then we're scrambling to deliver and build the next building. So they're, they really aren't designed unless you get to the very end of what space is left, we can tailor it for whatever you need. It's a remember someone describing it to me once it's a salami and we can cut it as thick or as thin as you want it. We're kind of waiting for that demand and as the building plays out, you kind of work your way in a towards the middle of it.
Speaker Change: Thank you so much. Um, your next question comes from Greg. Melman from the ITI.
Greg Melman: Please go ahead.
Greg Melman: Hey, good morning guys. Um Marshall maybe just
Greg Melman: Sticking on the topic of leasing. Um, just kind of a 2-part here. Just, I guess number 1 earlier, in your, your prepared remarks, you had mentioned, um, you know, focusing more on occupancy and just getting deals. Done, could you talk about, you know, how the mechanisms you're doing there? Is it rent? Is it concessions? And you know in What markets maybe are you seeing some elasticity to moving some of the economics around to to Spur demand? And then the other part of the question um is just you know you mentioned at the end of last year you were surprised at how quickly, the demand could turn on. Um, and, you know, earlier to some of the other questions you had said that, you know, you've been frustrated that some deals are kind of stalling at the finish line. So I'm just curious as you look at your leasing pipeline
Greg Melman: maybe, if you could kind of,
Tranche it. Like how much of your leasing pipeline is in that really Advanced stage to where if people just decide tomorrow to make that decision how quickly those deals like what magnitude could start to cross the finish line versus, you know, some deals that are kind of earlier in the life cycle.
Speaker Change: Sure, hey, hey Craig. Good morning, happy. I guess I'm and make sure I, I cover all your points if I miss 1, but on terms of leasing response, maybe as I, as I think about, as I mentioned earlier, we've had a, a couple of deals. Really get to the finish line and get put on hold by corporate or someone in the sea suite at the tenant,
Speaker Change: It's not that we're the good news is on our developments when we've looked at them, if you look at what's transferred over, we're getting mid 7s, in terms of yields on what we're building and what we've transferred over. It's not that we're having to drop we're not things aren't stalling over economics, broadly speaking. So we're we're maintaining or really beating our investment committee yields on projects as they do wrap up rents have been a little higher and it's just taking longer to lease but thankfully it's not concessions, maybe the
Speaker Change: The exception I would say to that is in California, and especially in Los Angeles, where we've just had, I was reading 10 consecutive negative quarters of absorption. So that market people are getting pretty aggressive on rent and free rent and things like that. And and that is 1 of the buildings where we've had leases out a couple of times or more and, and things kind of it, things stall there. It's really more in. I think what we try to focus on is before the next political cycle, headline comes
Speaker Change: comes out and someone at corporate puts the extension, on hold, let's get comfortable and know kind of
Where our TI rents work through the legal process. Let's don't get hung up on an eminent domain clause or things that rarely ever come up and have it be legal difficulties? And we say, every deal has a shelf life, you can kill it. Let's go ahead and and try to get things done quickly, but it's not so much. You know, like we our our teams and our Brokers that work with us know, where the market is. And if something's Market let's try to get it signed quickly. You know, in in an up Market, we heard about people waiting that.
Speaker Change: Surprised. I kept hearing post-election people were waiting for the election and you the the broker's always have a reason why it's, it's not least, but it turned out. Fourth quarter was our record quarter for leasing square footage.
Speaker Change: And then Pro Louis made the same comment.
Speaker Change: First quarter was our third best quarter in terms of our company's history in terms of leasing square footage. So I thought there would be more of a lag effect that people would feel comfortable and then Lisa would get signed but really fourth quarter especially the end of fourth quarter, everybody's on, you know, the elections a weekend in November and the second half of December whether it's the broker the attorneys, someone at the at the client is is away for the holidays understandably that that's usually a little bit slower. So
Speaker Change: You know, it's hard to say, I think our pipeline has stayed full last year. It's pretty full. Again, we have a number of a few larger deals that are close to, I hate to jinx us closer to the finish line that I'm hopeful of. But we've had, you know, we, I thought we were in the eighth inning and we were back to the first inning, you know, that's where, you know, it probably got overheated after Co and now, it feels like the pendulum is swung.
Speaker Change: a little bit too far on the
corporate concern. Again, I I think tariffs were shocked to people. They wanted to see what was going to happen as inflation. Going to take off. If if you think back to last quarter, a lot of the concern was have you stress tested your guidance for the low-end? And that doesn't, you know, 90 days later, that's at least listening to our peers and our call so far. That's not what's on people's minds. So I think people are kind of absorbed it and that's maybe where that June and July has been a little better and I'm optimistic, you know that maybe August and September a little better still, and we'll try to again on development starts. We have the land and we'll have the permit in hand and really have the same construction groups that we've worked with we can move.
Speaker Change: Really quickly. Or as quickly as the market, will let us to to break ground on something, and or by having the space built out. If and we've had a few of those where, if somebody wants to be in, in 30, 455 days, we can get you in, we may or may not have a demising wall that we can. A lot of cases, put that in around you. So I think our pipeline's pretty well spaced out normally, where some are we've got, we're trading paper, some release out, some are the leases are pretty far Advanced and and really, where it's gotten. If you talk to our teams, when you get in the red zone, is where things seem to move a little bit more elongated. It's hey, we have a letter of intent, the attorneys are working through the agreement.
Speaker Change: And and that's where I get paranoid. If you're just waiting for that that news that corporates put things on hold and and we're back to Square 1 again.
Speaker Change: Thank you so much. Your next question comes from Nick Tillman from beard.
Speaker Change: Please go ahead.
Nick Tillman: Hey good morning maybe just wanted to touch a little bit on the transaction activity and and maybe some of the yields you're seeing and characteristics of the the Raleigh Assets in particular. But then also maybe touch a little bit on the increase in disposition guys. Um and kind of the the assets you're looking to sell here at the second half of the year.
Sure hey Nick good morning it's Marshall. Um yeah we're excited we we entered Raleigh last year and we bought the that Research Triangle really between um Raleigh Chapel Hill Durham it's a pretty unique.
Speaker Change: Feature within that area in terms of the companies that are investing really you know a big hundreds of millions and billions of dollars and into that research project there's very low vacancy in that submarket. So we like it and and maybe as we think about
Speaker Change: Where we're kind of moving our Capital all to our dispositions into this. What we
Speaker Change: 1 trait, we like is if you can get a state capitol that has a large University presence.
Speaker Change: Those attributes and and are excited about all, you know. And we've got some older markets that have really I'd say almost outgrown those traits like Phoenix in Atlanta where you also have those, but those cities have gotten to be so large. So we, we like that in terms of dispositions and and really the capital markets where on the Raleigh assets I'll be
I'll blend it and try to be a little bit careful because of our confidentiality agreements, but we're kind of
Speaker Change: call it low to mid fives going in cash, uh, and then upper fives in terms of net effective and and really Mark to Market. So and and they were brand new assets 1, delivered in 23, 1 and 24. So we
Speaker Change: We've not seen cap rates move, you know, we, we've saw development leasing slow a little bit in second quarter because of the Tariff news, we thought the acquisition Market may get thrown a little bit sideways to date the the competitions held in there. So it's not a, it's not a, a completely green light on Acquisitions, but we're kind of working our way through. We're always looking at things more strategically or within existing sub-markets and things like that. And and maybe because because of our stock price and the impact and that cap rates were holding up, you saw us last year we've we've got some Service Center buildings that are our last ones, kind of flex buildings and in Houston on the market under contract fingers crossed, those
Speaker Change: Those will close their least, there's nothing wrong with them. They're just service centers, not distribution buildings. We sold a small building, you saw in the Bay Area that we had gotten in a portfolio. A few years ago, 12,000 ft. And we've talked about is we add kind of dots within our map like rolly and Nashville. Some of the older slower growth markets, like a Jackson, uh, New Orleans and a Fresno California. That I think, as we move our investors Capital around, we'd like to get it in place, where we think 1, our Acquisitions are immediately accretive, and their well, positioned for long-term, nav growth, and not that it's not there in Jackson, New Orleans and Fresno, but it will grow faster. And it's a good source of capital when the equity Market's a little bit closed. We viewed that as an attractive source of capital. It's probably not a creative. Well, what we're selling is older. We'll sell it at a slightly higher cap rate that what we're buying but we're I think
Speaker Change: Think we should always be kind of.
Speaker Change: Pruning from the bottom of our portfolio and and putting it where that Capital has a better opportunity to grow.
Speaker Change: Thank you so much. Your next question comes from Alex Goldfarb from Piper Sandler, please go ahead.
hey uh, morning morning down there, uh, Marshall and uh,
Alex Goldfarb: as you look over, the next sort of 12 to sort of 24 months,
Uh, obviously, you guys have benefited as the industry has from the sharp covid. Rent run-ups, and you're still clipping. I think you said 30% cash, rent releasing spreads over the next sort of 12 months. Do you see those? You know, most of your Market still remaining pretty healthy on the releasing spreads or are we sort of getting to the tail end of that. And, you know, over the over that time period we should start seeing like a dramatic slowdown in the releasing spreads and maybe, you know, maybe it breaks up geographically. So maybe certain markets are you're more concerned about this spreads coming in uh, tightening sooner versus some of the other markets, but just looking for some color, as we look over the next 12 months.
Speaker Change: No. Hey, good morning, Alex a good question and if if again, you're right probably each market will be a little bit different on timing but but but but
Speaker Change: Essence of time. Broadly speaking, you're right, we are 2 ways to think about it. Yes, we're working our way through. We've still got it at about 14.15% of our leases rolling for year that coid run up. We've still got a fair amount of embedded rent growth that we're working through with thankfully within our portfolio just by the nature of winner. Our leases role. If I look out,
Not over the next and this is where you get into where I get danger of economic forecasting, 12 to 24 months, what I'm excited about for e-group and really for the industrial space. But especially where we fit in in the shallow bay, where if I use our our quarter in numbers and it's about where we are today. We're roughly 3%, vacant, if you look, and it's in, it's on our investor presentation about page, 10 or 12. There's about 4%, vacancy. And um,
Speaker Change: Square feet and below the the vacancy that's out there in industrial is in the bigger box on the edge of town, not the infill shallow bay. So we're we're generally full. Our peers are generally full constructions at a 10 11 year low, it's going to take a while. We see how hard zoning is. So it wouldn't take much of a pickup and demand. I, I would anticipate in the next
12 to 24 months, there's going to be another period of of pretty decent rent growth where as things pick up, construction pricing, we're not there yet but it should pick up as well as the economy improves and it's going to be a Scramble for people to add new product that I'm anticipating demand to pick up much more quickly than supplying well over build again, but demand's going to arrive much earlier than Supply does. So as we work our way through our embedded growth, I'm more of an optimist. I don't see any secular reasons why I think Industrials just in a slowed down a little bit because of the headlines but I don't see any secular reason why people
Speaker Change: Onshoring nearshoring.
Speaker Change: Population. Migration e-commerce you name it traffic and any of the Cities we're in is bad and getting worse. Why our infill location shouldn't be more valuable? We just need a little bit better headlines for, you know, for a couple of months and I think we'll be, I think rent growth will pick up pretty quickly. So short term, we still have embedded growth. We're working our way through and then a little bit longer term and I've been calling it too early, you know, for the last 12 months. But I think there's not much inventory out there when people come back to the store and are ready to transact. And so, we'll be able to push rents and our development pipeline will which we really tailored them to what the Market's telling us. We've been as high as 400 million right now, we're closer to that 200 million dollar level. But I think I, I would anticipate as getting back to 400 million fairly quickly and that'll stress Brent and his team out of how we fund all that. But we'll, we'll deal with
Speaker Change: that when it comes to,
Speaker Change: Thank you.
Speaker Change: Sure.
Thank you so much. Your next question comes from John Kim from bno Capital markets, please go ahead.
John Kim: Thank you. Uh, maybe a question for Brent. Um, you discussed using the credit facility, uh, more and, uh, you know that certainly makes sense your data is below 3 times now, but can you discuss how you view that the cost of that line in the back half of the Year versus your cost of equity? Given these seem to be right on top of each other right now.
John Kim: Uh, good morning John. Yeah, that's a good observation. It's, uh, something that we really continuously monitor the, you know, we've monitored more frequently over the last 24 months, our, you know, different various opportunities to acquire capital in various ways than we have, you know, in all the years prior it's just been it's it's a fluid you know, the markets are fluid the 10 year up and down. Uh, we were very pleased to enter the second quarter with with stockpile what we've viewed as an attractive price in the first quarter. And it turned out to be that uh we we virtually liquidated. All our outstanding forwards for that 194 million at 182 a share, which we feel like was really good execution. Uh, yeah, you're right that what we projected in the back half of the year at this point is utilizing that revolver which is around that. It's it's variable but it's based off so far and it's pretty, it's pretty stable. It doesn't move a lot and it moves more in lock step with rates or rate Cuts. But we're around the low fives like 5.
Point 2ish. Um yeah, I won't get too detailed on how we view Equity. But, you know, obviously, we look at that commiserate with, with consensus and relative to our earnings growth and our, our earnings per share and and, you know, it's been priced below. You saw, we just did a dab this quarter, the pricing pretty immediately. Went away from us and our, in our view and we had the forward stock pile, so we didn't need that immediate access. So, uh, yeah, we've we've factored in you, utilizing our revolver for the first time. In a while, we have the full capacity available.
But look, that can that can change. As soon as you know, we've got a ton of capacity for death. I mean we've gone sub 3 now on our debt to ibida and we've, we've had the Good Fortune of being patient but is that, you know, is anything comes in line with what we feel like it's a better you know opportunity. Uh we will we will uh we will pull that lever and pivot as needed but it's good to have all that cushion and it's good that Marshall and the team continued to find
Marshall Oak: Acquisitions. We continue to spend development dollars albeit at a slower Pace than we'd like. Um, so we're pleased that we continue to, to be able to, you know, access funds that are created to our shareholders right out of the gate.
Great. Thank you.
Yep.
Marshall Oak: Come on, we'll take the next question.
Marshall Oak: I can have to follow up with a good time.
Sure, sure.
Where, where do you feel comfortable with as far as net debt? But uh, I mean is it is the lower the better?
Hey, you know, I think it's important as a company to have a policy on the, on the top side. You know, where are you comfortable with your, with sort of your max leverage. Um, we've always said on a maximum basis, we'd want it to maintain a 5 handle and ideally be sub 5 where obviously, well below that you know, there isn't
Necessarily a floor as such. I mean for us it's been about being opportunistic and our shareholders have what I would view. As kind of rewarded, our good stewardship of our capital investment over the last couple of years and we've had
We kind of get lost for us for the trees, but we've had good access to equity for the most part of the past couple of years in this higher interest, rate environment. And so, uh, you know, by virtue of having that we've driven our debt to ibaa down more as a byproduct of that function, rather than that being a goal. Um, that being said, it's, it would be terrific to unleash that Runway uh in the future as we when we have better pricing on the debt side and we can push that back up. So I guess John I'd say it's important. I think really important to have a a ceiling of where your max leverage would be. But on the downside it's uh, when you have that opportunity to create that flexibility, it's nice to do it. And we certainly put ourselves in that position and look if Equity rebounds and we can tap into it, we'll push it lower. If that's the best opportunity but, uh, at some point debt's going to come, you know, this inversion has been way more elongated than I would have anticipated but at some point they're going to, as you mentioned earlier, kind of getting on top of
Marshall Oak: Each other at some point, maybe it'll go the other way and then we'll cost match or we'll just select what's best for us and we've got a lot of flexibility to go either way.
Mike Mueller: Your next question comes from the line of Mike Mueller from JP Morgan. Please go ahead.
Mike Mueller: Yeah. Hi. Um looks like he controlled about a thousand acres of land for development and quarter end and you've you've definitely been adding to that. I guess 2 2 questions tied to that 1. Are you ex still expecting to be fairly active over the near-term and kind of, you know, further supplementing that and then are there any parts of the land bank that are more likely to be sitting for a while compared to some other parts of the bank?
Marshall Oak: Um, there might be some hey Mike, it's Marshall, good question. Some may be a little, you know, we kind of look really. The reality is look at it when you think it's kind of Market by market and then especially within our land bank, we can have you look at a market like Atlanta, we can have land on different sides or different parts of it Atlanta. So you you try to always, you know, about a third historically of our development leasing is existing tenants, so we try to have that inventory handy. We we lost a tenant or 2 in Florida, earlier in the year, we really did not have the development where we needed it to be. We've backfilled the space, thankfully, but that's where you you end up.
Can keep accommodating either our neighbors growth or our own tenants growth and so that's kind of how we look at it. I'm sure there'll be some markets, like I think like a San Antonio, we've got a good Lane Bank there it's not as fast growing Market, it's just not as deep as say a Dallas or Atlanta or a phoenix or things like that, where it'll take a little bit longer to work our way through it, but
Marshall Oak: That said we'll we'll mix in different types of buildings and you can work your way through the land fairly quickly. And then we get stressed of where are we going to find the next land in that market?
Marshall Oak: Got it. Thank you.
Marshall Oak: Sure.
Your next question comes from the line of Michael. Carroll from RBC Capital markets, please go ahead.
Yep. Thanks. Uh, Marshall. I want to ask a similar question, I guess related to to the Raleigh Acquisitions. I mean, how aggressive do you want to expand in Raleigh? And, and should we think about these recent acquisitions, more of a strategic way, for East group, to kind of get their foot in the market. And you kind of needed to do that before you can start, um, buying land and building new assets, kind of in that Raleigh area.
Yeah. No. We we like the market, you know. Look if
Marshall Oak: Well, and and we'll be, I've always thought we, you know, we don't have any set goals for anybody in our team to to buy anything in Raleigh, none of their comp in a purposely. We don't do those things. If we find the right opportunity we'll grow there and it just works out oddly enough that we had 2 Opportunity. All kind of we we picked that Research Triangle area, it's not the only area but things kind of turned out our way. And and we were able to pick up a couple of Acquisitions. I think some of it once you are active in a market, people take you more seriously and they know you're willing to commit. So maybe if things are closed, you know, with the, the balance sheet status. Thankfully, that we've got people know, we're a legitimate buyer and so, you might get an award, but, you know, if we were the same size in Raleigh, in 2 years, that would be okay. Um, we, we certainly would look for development or even buying vacant buildings, pending where we are in the cycle. I will say, typically, we'll enter our Market, you know? Usually
We'll miss out on the first few bids and we we did in Raleigh as well and then we were able to get our our first 1 last year and it's a good way to learn the market and then when you've got got a building or 2 that you've acquired, you've got some tenants rolling, you've building those broker relationships, you certainly feel more comfortable bidding on the next new investment, whether that's a building or land. So certainly we'll look for land but we don't and and typically, once we're in a market, I will say
Marshall Oak: And we're there in Raleigh with the proximity to be self-managed. So typically the numbers are about a million square feet, we can go to self-management, which is our our preference in terms of managing our own customers there. And you, you just don't want to go to a market and only have 150,000 ft 5 years later, but we really don't set a timeline. And it, it felt like these more just good fortune fell into place more than I don't, I don't think we should stretch to say just because we're there. We need to justify the next acquisition or 2.
Marshall Oak: Because you could end up, we can do it. I just don't want to overpay for them just uh to to pay a newcomer tax.
Great, thanks.
Sure, you're welcome.
Speaker Change: Your next question comes from the line of victra, mahura for miso. Please ask your question.
Uh morning thanks. Seeing the questions just I guess Marshall too uh, clarification. So you know, 1 I guess your peer 1 of your your larger peers suggested that you know at at current US 7 and a half percent vacancy, you probably don't see Market rent growth for another year or so maybe 2 years and I'm wondering specifically, can you give us some numbers? Like what sort of rent growth? Are you observing in Yorkie markets and then second um they also sort of suggested that tenants are ready to go, ready to sign. They're much more comfortable with sort of the current degree of uncertainty they highlighted a very active building.
Speaker Change: Delta suit Pipeline. And so I'm just trying to get a sense of that versus what you're observing in your markets, that sort of midsize box 100,000, seeing slower decision making. If you can just Square, those 2 things, thanks.
Speaker Change: Yeah, no. I I I can't good morning to speak for them. I would say, we're nationally. Maybe that's about right. Vacancies, 7 and a half percent. We think it seems to have peaked and certainly construction and the
Speaker Change: 4 than 7 and a half percent. It's historically runs lower. Uh, and we that's why we like kind of where we fit on the playground that there's not as much competition. The starts were a whole lot less. Uh so we think our current rent growth is probably somewhere around inflation 0 to 5% depending on the market. It's hard to pick this year. Uh and I think our rents will we should benefit in an economic recovery.
Speaker Change: Earlier than our peers because our vacancy rates so much lower. You know, also have heard people say you want to Market to be 5% vacant or lower for it to become a landlord Market. Well, we're already there today and we're seeing good steady activity. It's just smaller spaces. We're seeing good conversion in smaller spaces and we're seeing good activity. Kind of in all sized spaces, it's just the conversion rate on. Some of those are the gestation period has gotten a little bit longer like it did last year, so that's where. And, and on the bill the suit. We've, you know, we delivered 1 earlier this year. We'll do some of that. I, if we built the bigger buildings, look, it's a business where you can make money and things. It's really not usually people. That want our average tenant size is 35,000 squeak in our portfolio. Our average building size is a little under 100,000 feet
Speaker Change: We'll do a pre-lease building every once in a while, but it's really not our bread and butter. And so, and so I'm glad for them that they have that offer opportunity, but those are typically bigger buildings and larger Capital decisions. I do agree that I think, you know, kind of moving from April 3rd through today, people are getting more comfortable being uncomfortable. That's probably what, you know, some of the comments that June was a little bit better than than maybe April and May and July is holding up, and we think people kind of will get numb to all the volatility and hopefully just get back to running their business. That's what we we internally will, typically try to do that. Of look, we can't control the political settings and things like that. We just need to go at least Sun Coast, Building Number 9, regardless of of what's going on. And that's really what our, you know, teams and our companies trying to do. So I think I think things will settle out and I think in a
Recovery knock on wood. I think will benefit more quickly than our peers because the vacancy rates and the Starks are low and those are simply just really it's easier to find a big box site on the west side of Phoenix than it is a shallow bay infill site and the East Valley of Phoenix.
Thank you.
Speaker Change: Sure.
Your next question comes from the line of Michael Griffin from evercore. Please ask your question.
Michael Griffin: Thanks, um, maybe just going back to the development pipeline for a bit. It, it seems with your commentary, that that expectations are for, you know, probably a longer lease up time. Just given the, uh, you know, the uncertainty and decision-making there. Can you give us a sense when when these projects were initially underwritten was it under the premise of getting some of those larger 50,000 square foot tenants that just aren't back yet? You know, could you try to maybe find more of those 20 to 40,000 square foot, tenants to make up the difference? Or do you really need those larger space takers to come back to start that development pipeline, engine rolling?
Michael Griffin: Yeah. Hey Michael good morning. It's Marshall will you know, even will always underwrite the project and assume a 12-month lease up and that's when they'll roll into the portfolio is is The Sooner of 90% occupancy, or 12 months after completion. And at the peak of the market, the early kind of 2020s.
That was about a 6 or 7 month, period, we were running through and, and those bigger tenants were taking space, and that was really, what was pulling the next landside off the shelf? And we were rolling through it pretty quickly. Um, and and the good news, even though kind of last year and and this kind of recent time period of this year there.
We're we're kidding. We said we've gone from 6 to 16 months of lease up. The good news is, we've been able to maintain or even improve our yields over that time period. And it's, and it's just, the buildings aren't, they're not? They're designed to be multi-tenant. And we're, yeah, you're filling them up with 30,000 foot, tenants, which is which works? It just takes longer to get that done than if somebody had taken 90,000 feet, I don't think it's
Michael Griffin: You're probably also in either you're starting a new business or a lot. A lot of them expanding your business, maybe from 50,000 feet. So that's a lot more equipment there, buying and hiring and things like that. So that's where people are being maybe a little bit cautious. In this environment given the headlines, it's taking on those bigger spaces. You could take on 30 or 40 thousand square feet and it's not as big, a capital investment is taking on the bigger spaces and I expect that to to shift back to a more, you know, look at the pendulum will swing, it'll be a more normalized environment but until it does, that's what's that's slowed, our development Leasing and and look, I'll compliment the team. That's why you've seen us. Bring our starts down, both quarters this
Michael Griffin: You know, each time we've reported each quarter this year of look we'll we'll go fast or slow and it's really listening to what the market will tell you. You've seen us by vacant buildings when our own development pipeline was moving quickly. And that's not something we've been looking at of late just because we're not seeing people.
Michael Griffin: At least on a bigger scale make that be comfortable making those big decisions quite now quite yet. And that's why build a suit is. I'm such a high percentage of the starch right now too. Is people can't find that inventory and are having to build it.
Great. Thanks so much.
Michael Griffin: You're welcome.
Speaker Change: Your next question comes from the line of Vince demon from a Green Street. Please ask your question.
Vince: Hi, good morning. Um, you mentioned earlier that you potentially consider taking on leasing risks with Acquisitions. Are are there many value? Add opportunities on the market today and and curious to hear, you know, how leasing risk is being priced in the private Market versus a more stabilized asset? Like what kind of yield premium can you get you know, to lease a vacant building versus, you know, like a Raleigh where you you know, there's durable income on on day 1.
Marshall Oak: Hey. Hey Vance. Good morning. It's it's Marshall. Yeah, I'm not. I'm I apologize if I'm misspoke earlier. We we've really shied away from, I guess we call leasing risk or value ad.
Marshall Oak: Uh we'll we'll shift back to it. When kind of the new leasing is is the expansions are happening a little more rapidly. So we've
Marshall Oak: Actually even earlier this week, we we looked at something that was, you know, in an existing submarket and we we know the sellers, there's a really I said there's really only 1 1 thing wrong with the building and it before we really even got into pricing, it's just not what we're looking. You see a scaling our own development pipeline back to take on someone else's development pipeline right now so we've not seriously gotten into those questions but
Marshall Oak: So it's a a little bit Alchemy. I don't know where we would.
Shift to where that would look attractive. It's probably a good.
You know, we usually say 150 basis points to over a market cap rate to justify new development. So to maybe take on a value ad where the buildings built and we're taking the leasing on
Marshall Oak: 75 100 basis points, something like that and and we really have not seriously looked at anything we've seen.
Marshall Oak: Locations we like and buildings we like but right now it just it's because it's taking that 16 month period, rather than 6, we'd rather go buy what we're able to buy in the market with its lease. That's new with below Market rents. We think that's a better risk, reward proposition and and that'll change in a couple of months, but that's kind of how we see it today.
Makes sense. I appreciate the clarification and color. Thank you. Sure sure. Thanks s.
Your next question is from the line of Ronald. Camden from Morgan Stanley. Please go ahead.
Hey just uh, really quickly a 2-part or just 1 starting with uh, Southern California. I know you guys don't have as much exposure as your peers but we just sort of love to hear what you're hearing on the ground in terms of activity, in terms of the 3pl. And, you know, when you you think about sort of that cash releasing spread is this the market where you you know, we should be sort of
Marshall Oak: Bracing for things, uh, to slow down pretty quickly. And then my quick follow-up, uh, to the opening comments, which were that, you know, the development pipeline leasing is slowed, which makes sense. I guess my question is, what's going to sort of, is there a specific catalyst? Is it an election? Is it? The last trade deal announced?
Marshall Oak: That's going to get that to unlock, or is this just time used to go by and we need to see how it goes. Thanks.
Yeah um Hey Ron, good morning. I think on Southern California. It's
8th and markets. I've seen after having done this for a while, and usually what slows the market down is over Supply and it's not over Supply. It's uh, maybe in Co all the 3pls took, really
false created some false demand and that bubbles popped, but for 10 consecutive quarters of negative absorption and it was over a million square feet L A Inland Empire was also negative absorption, we just need something to turn there and until it turns, it's, you know,
Marshall Oak: From our perspective, it's hard to predict Market rents until you have at least kind of flat absorption. I think when there's negative demand in the market, we're spoiled and just not used to that. I mean, I think Dallas has had close to 60 consecutive quarters of positive absorption. I just read where Austin had its but it wasn't a big number but it's 44th month, 40. Yeah, 44th quarter, consecutive quarter of positive absorption. So for the bay area has been negative 7 of the last 9 quarters La is 10 and and Counting. I, we'll see what this quarter holds. I know Port demands down and things like that. So we're we're working hard to release the building, uh, that's in our that we're redeveloping their that we've owned but we've also trying throwing out a bigger. Net of saying look we're willing to lease it ORS at the right price will sell the building too if a user comes along or someone wants to. It's just been a it's a
more tricky Market, uh, there especially to see and then in terms of what turns
Marshall Oak: you know, I guess to me, I thought this kind of period of uncertainty was all man-made with tariffs and I'm assuming it's
Marshall Oak: Kind of some numbness to tariff news, which I think is where we're getting to Andor kind of each week. There's maybe a new Trade Agreement reached and I think China seems to be the big 1 once you get there and people kind of know what that certainty is is is is Brent mentioned, we got at least you know the big beautiful bill is done so at least there's some tax certainty for people to plan. There's Japan certainty now and I think at some point you'll
Marshall Oak: reach more of a Tipping Point where people cumulatively decide it's safe to get in the water again, and when that happens, that's where I get, you know, excited to
Marshall Oak: About our low vacancy. And the low vacancy and the
Marshall Oak: I think given how long this downturn is taken, I'll numb not all but a number of our private developer peers, it's going to take them a while to
Marshall Oak: Accumulate the land, get their Capital stack ready and get their construction teams either rehired or re-engaged that we'll have a good head. Start on a number of our peers because we already have those those elements in place and you're just, I'm I'm estimating what that catalyst is and I'll admit I've been, I've called it, you know, I've been an economist calling for the economy to go, you know,
Marshall Oak: Up the wrong way for a while now, but I'll eventually I'll be right and I'll stick with it and I think it'll be as people get comfortable with tariff news.
Marshall Oak: Great. Thanks so much.
Ron: Sure. Thanks. Ron.
Speaker Change: Your next question is from the line of Brandon Lynch from Barclays. Please ask your question.
Brandon Lynch: Great. Thanks for taking my question. Um it sounds like most of your tenants are working through the macro challenges reasonably well, but can you give us an update on your watch list and how you're tracking versus your bad debt assumptions for the year?
Yeah, sure Brendan uh, yeah, we continue our our tendency continues to uh to be in good health we've seen uh basically your quarter over quarter, the same number of tenants, kind of on the active watch list. Uh we were about 30 basis points of of bad debt and second quarter to revenue. Uh, we're still trending lower than than last year. We were, uh, a bit ahead of budget for the quarter, uh, relative to just the bad debt number uh, uh, spot number for second quarter. So we're still looking at that 35 to 45 basis, points of Revenue, kind of being the the Run rate we're using and the the last 6 month guide, uh, but I think the
Brandon Lynch: The, the key number there is, we we didn't see, like I said, we didn't see our number of tenant watch, grow quarter over quarter and you're talking, you know, maybe somewhere in the range of 30 out of over, you know, 15.
Brandon Lynch: 59,000 for the second quarter, uh, 93% of that was, uh, was discontinued within, uh, 5 tenants. So uh, you know, few tenants having the impact. But, uh, all in all, we're very pleased with where that is and and nothing, uh, outside the Norms really jumping out at us. They're thankfully,
Brandon Lynch: Great. Thank you.
Brandon Lynch: Yep.
Speaker Change: Next question is from the line of key and Kim from truist, please go ahead.
John Kim: Good morning. Thank you for taking my question. Um, just a couple follow-ups here on the balance sheet, uh, with your leverage where it is. I was curious Brent, uh, besides the mass working out such that the cost of equity is not too far off in your return versus the cost of that. Are there any other
Major considerations that would kind of lean make you lean towards, you know, maintaining a 3 times leverage balance sheet.
Uh, you know, keeping that something we just have to.
John Kim: To weigh. I mean we certainly are if if all things being equal, if if debt's more attractive to us uh in our evaluation at any given moment relative to equity, we're certainly willing to have that number come up and in fact we look forward to that coming up meeting, we're raising capital for the team to put to work. Um so we're just continuing to monitor, keep it. I mean they've I'm pleased that they're tracking closer to 1 another. It's it's good to have more options than fewer.
John Kim: And so seeing that come in, line more in line. Uh, it's something we're doing and we look at all different Avenues. We were looking at, you know, private Pace placement public debt, unsecured term loans Equity the revolver, uh, you know, all different facets that we can keep track of. We do keep track of but uh you know, like I say there's no magic in being near around that 3 we certainly would grow, you know, be comfortable raising that um if given the opportunity. Um, if all things being equal, you know, kind of we've had a rule of thumb that's worked well that when equities available if you like it you you get it. Um, you'd rather get it when you when it's available and not put yourself in a situation where you've got to do something. And so we're very very pleased that that operating the balance sheet that way, is giving us a lot of flexibility. So we'll still kind of Le continue to look at it through those lens.
John Kim: Okay, and that's the last 1 for Marshall. Uh,
I guess any.
John Kim: Just for Acquisitions. Do you feel like overall you're getting paid for risk? And are those spreads a bit as spread tightening to a reasonable level?
John Kim: Yeah. Hey hey Kean, good morning. Now I think we said, you know, they're for there was a period of time where it felt like acquisitions
John Kim: Were were favorable in terms of the buyer versus The Cellar, where we were getting the call where something didn't close and are you still interested, and that's what led us to implement, Brent the team to forward equity, and things like that. We were pretty active. It feels like the acquisition market. Now has gotten pretty efficient, and there's a number of BS. I think the private bids certainly, when you're running an irr, they probably look through the Tariff news and cap rates have not really moved since April and in fact, may have even gone down a little bit. It's hard to say exactly but it feels a little bit tighter. That was part of our comfort level of raising our disposition guidance. And and also we've said I mentioned earlier, we we can we would consider selling our Dominguez building in La that's under development. That's not in our guidance. So if we sold it, it would be on top of that. But, because the acquisition Market or the disposition Market's been
John Kim: Pretty attractive. We're we view that we like our balance sheet is but it's also a good source of capital if we can find the right strategic Investments whether they be an acquisition or development today,
John Kim: Okay, thank you.
Sure, you're welcome.
Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star. Followed by the number 1 on your touchtone phone. If you are using a speaker-phone, please make sure to lift your handset before pressing any keys.
Speaker Change: Your next question comes from the line of Blaine Heck from Wells, Fargo, please go ahead.
Speaker Change: 5 to 6 cents.
Speaker Change: Yeah. No, it's actually we're down and and Brent chime in. I think we're we're down. Look we we've got a lot of development leasing we're working on uh currently in terms of that that nickel you know, maybe when when we were together in Charleston that's down to about a penny at this point. So within our call, it our 896 of ffo. Uh we've got about 1 cent of development, leasing still to go so thankfully that number's come down and look we could you know depending on how the rest of the year plays out, we could, we could end up having upside to that, I hope. Uh in terms of leasing since quarter in its around, you know they're probably 3 leases and probably around, you know, they're all again kind of smaller that 100,000 ft.
Speaker Change: In total, great.
Speaker Change: Perfect. Thanks so much Marshall. You're you're welcome. Thanks. Bye.
Speaker Change: Your last question is from the line of ammo. Okay, Sama from Deutsche Bank, please ask your question.
Sama: Uh, yes, thanks for taking my question. Um, just curious in terms of the full year occupancy, guided and back. Half of 25. It says, any significant move out and built into guidance and along those lines. If you could talk a little bit, just about the overall tenant watch list, especially maybe some other retail distribution.
Speaker Change: Distribution centers.
Speaker Change: Uh, yeah. I'll take that. Uh I'm going to take a good to talk to you. Yeah there's not thankfully any significant moves out, move outs dialed into the back half of the year. As I mentioned earlier the the actual same store portfolio is running about anywhere from 80 to 100 basis points higher than the overall portfolio, forecasted average for the last 6 months. And again, that's being driven by the, the conversion of, of developments prior to being fully occupied, weighing down on the overall portfolio average. So there's no known move outs. We've got our remaining rollover for the year, uh, down to a pretty diminishing amount. I think we're down in the 4% range or something like that for the year. So um, that part of it feels good. The operating portfolio. You know, we up the midpoint uh all of that feels well and then I'm trying to remember what was your second part or second part of the question. I'm going to tell.
All right, then your tenant watch list, especially maybe anything on the retail front.
The the watch list is remain steady and, uh, if there's any common theme within it. It, it would be a bit 3pl oriented and bit California oriented. Uh, but again, we're running below the Run rate last year and we're still using that. We're only 30 basis points. Second quarter, we're using about a 35 to 45 basis point run.
Rate for the last 6 months of the year and we we hope that proves to be conservative but but time will tell but no specific retail type tenants or anything like that that that have jumped out to us. Um, it's been more broader based than that other than just maybe the the California based Tenney. Um,
Yeah, so hope that's helpful. That's helpful.
Speaker Change: Thank you that 1 quick 1. What was total leasing development in square feet into Q. I can't seem to find that number in the press release or the sub relative to the 114 thousand from from last quarter.
Speaker Change: Yeah, we had 5 leases signed during the quarter, I'm looking at the numbers but I don't have a by quarter, total breakdown. Uh so we can email that to you uh offline. Um, I think it was around 180,000 ft and
Speaker Change: Just in.
2 Q.
We can let's confirm that but tell you it's right around that range, I believe.
Speaker Change: So again, smaller deals coming across larger deals.
Speaker Change: Floating, you're welcome.
There are no further questions at this time. I'd like to turn the call over to Mr. Martial, law for closing comments, sir. Please go ahead.
Speaker Change: Everyone, thank you for your time, uh, and your interest in each group this morning, if I hope, we got to your question, if not, or if there's follow-up questions, Brent, and I are currently available and, uh, look forward to speaking with you again soon. Take care. Thank you.
Speaker Change: This concludes today's conference call. Thank you very much for your participation. You may now disconnect