Eastgroup Properties Q4 2025 Eastgroup Properties Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Eastgroup Properties Inc Earnings Call
Speaker #1: ladies the and gentlemen , and welcome to Eastgroup Properties . Fourth quarter , Good morning , Earnings 2020 Call and Conference Webcast this time , .
Speaker #1: only all lines Following the on a question will answer Should you session conduct a At please presentation , we mode . star one on your touchtone questions , We phone .
Speaker #1: ask that limit you please yourself to question . If one you have additional listen press questions , you may star one again . If at any time during this call assistance , please press operator .
Operator: I would now like to turn the conference over to Marshall Loeb, CEO. Please go ahead.
Operator: I would now like to turn the conference over to Marshall Loeb, CEO. Please go ahead.
Speaker #1: call is being you need 2026 . I This to turn the conference over February 5th , to on Marshall Loeb CEO . recorded ahead Please
Marshall Loeb: Good morning, and thanks for calling in for our Q4 2025 conference call. As always, we appreciate your interest. I'm happy to say that joining me on this morning's call are Reid Dunbar, our President, Staci Tyler, our CFO, and Brent Wood, our COO. Since we'll make forward-looking statements, we ask you to listen to the following disclaimer.
Marshall Loeb: Good morning, and thanks for calling in for our Q4 2025 conference call. As always, we appreciate your interest. I'm happy to say that joining me on this morning's call are Reid Dunbar, our President, Staci Tyler, our CFO, and Brent Wood, our COO. Since we'll make forward-looking statements, we ask you to listen to the following disclaimer.
Speaker #2: always , we morning and Good interest . to say I'm happy that joining me on morning's call are read Dunbar , our president , Stacy this appreciate your and our CEO Brent Wood , Tyler , .
Staci Tyler: Please note that our conference call today will contain financial measures such as PNOI and FFO that are non-GAAP measures as defined in Regulation G. Please refer to our most recent financial supplement and 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. 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, and the Private Securities Litigation Reform Act of 1995.
Please note that our conference call today will contain financial measures such as PNOI and FFO that are non-GAAP measures as defined in Regulation G. Please refer to our most recent financial supplement and 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. 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, and the Private Securities Litigation Reform Act of 1995.
Speaker #2: ask you Since we'll listen to disclaimer .
Speaker #3: note that our conference call today will contain financial measures such as NOI FFO that are non-GAAP measures as and defined in G . refer to our regulation supplement and our earnings press Please available on the investor page of our website into our periodic both furnished or with the filed for .
Speaker #3: release , definitions and further information regarding use of our these non-GAAP measures reconciliation GAAP of them results . Please also that some this call are looking forward statements as defined in and within the safe harbors Securities Act of 1933 , the Securities Exchange Act of the 1934 and Securities under the Reform Act Litigation of 1995 .
Staci Tyler: 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. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. Please see our SEC filings, including our most recent annual report on Form 10-K, for more detail about these risks.
Staci Tyler: 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. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. Please see our SEC filings, including our most recent annual report on Form 10-K, for more detail about these risks.
Speaker #3: looking in the Forward press release , along earnings with our remarks , are made as statements today reflect current views our company's of the plans , intentions , expectations , strategies and prospects based on the information available to the company and on assumptions it currently has made .
Speaker #3: We update such statements or remarks , whether as a undertake no new result of information , future events or otherwise or statements actual .
Speaker #3: Such involve and unknown known risks , uncertainties and other may cause that factors actual results to differ materially . Please see our SEC filings , including our most recent annual Report on Form 10-K .
Marshall Loeb: Thanks, Staci. Good morning. I'll start by thanking our team. They worked hard through a volatile environment last year, and I'm proud of the results achieved. Our fourth quarter and annual results demonstrate our portfolio quality and resiliency within the industrial market. Some of the stats produced include funds from operations for 2.34 a share, up 8.8 percent over a quarter, and for the year, FFO per share growth was 7.7 percent. For over a decade now, our quarterly FFO per share has exceeded the FFO per share reported in the same quarter prior year, truly a long-term trend. Quarter-end leasing was 97 percent, with occupancy at 96.5 percent. Average quarterly occupancy was 96.2 percent, which was up 40 basis points from fourth quarter 2024 and reverses a downward trend we've experienced the last several quarters.
Marshall Loeb: Thanks, Staci. Good morning. I'll start by thanking our team. They worked hard through a volatile environment last year, and I'm proud of the results achieved. Our fourth quarter and annual results demonstrate our portfolio quality and resiliency within the industrial market. Some of the stats produced include funds from operations for 2.34 a share, up 8.8 percent over a quarter, and for the year, FFO per share growth was 7.7 percent. For over a decade now, our quarterly FFO per share has exceeded the FFO per share reported in the same quarter prior year, truly a long-term trend. Quarter-end leasing was 97 percent, with occupancy at 96.5 percent. Average quarterly occupancy was 96.2 percent, which was up 40 basis points from fourth quarter 2024 and reverses a downward trend we've experienced the last several quarters.
Speaker #3: more detail For risks .
Speaker #2: Thanks , . Casey morning . I'll start by thanking our They worked hard through a volatile environment last year , and I'm proud of the achieved fourth quarter results and .
Speaker #2: annual results portfolio our quality resiliency within industrial the market . Some of the stats include funds from produced and 234 share , demonstrate up operations 8.8% over quarter , and for the year , FFO per share growth was 7.7% for over a decade now , our quarterly per share FFO has exceeded the FFO per share .
Speaker #2: Reported in the same quarter prior year . Truly , a long term trend . Quarter end leasing was 97% , with at 96.5 .
Speaker #2: Average quarterly occupancy was 96.2% , was up 40 basis from fourth points quarter 2024 and reverses a downward trend . We've experienced last several quarters the .
Marshall Loeb: Also notable was same-store occupancy at 97.4%. This strength shows the trend we've discussed, where the portfolio is well leased while development leasing has been taking longer. Quarterly re-leasing spreads were 35% GAAP and 19% cash for leases signed during the quarter. Annual results were higher at 40 and 25% GAAP and cash, respectively, and cash same-store rental line rose 8.4% for the quarter and 6.7% for the year. Finally, we have the most diversified rent roll in our sector, with our top 10 tenants falling to 6.8% of rents, down 40 basis points from last year. We target geographic and tenant diversity as strategic paths to stabilize earnings, regardless of the economic environment.
Marshall Loeb: Also notable was same-store occupancy at 97.4%. This strength shows the trend we've discussed, where the portfolio is well leased while development leasing has been taking longer. Quarterly re-leasing spreads were 35% GAAP and 19% cash for leases signed during the quarter. Annual results were higher at 40 and 25% GAAP and cash, respectively, and cash same-store rental line rose 8.4% for the quarter and 6.7% for the year. Finally, we have the most diversified rent roll in our sector, with our top 10 tenants falling to 6.8% of rents, down 40 basis points from last year. We target geographic and tenant diversity as strategic paths to stabilize earnings, regardless of the economic environment.
Speaker #2: Also was same store occupancy at This strength shows trend we've the portfolio the is well discussed with leased , while Leasing has development been taking longer releasing quarterly 35% spreads GAAP and 19% cash during the leases .
Speaker #2: results were signed Annual quarter 40 and 25% GAAP and cash , respectively , and same store cash NY rose 8.4% for the quarter and 6.7% for the year .
Speaker #2: have the most diversified Finally , we rent roll in our sector with our top ten tenants falling to rents , 40 basis 6.8% of down points from last year .
Speaker #2: target geographic We and tenant diversity as strategic paths to stabilize earnings , regardless of the In summary , pleased with we're results our and excited economic quantity of development leasing signed during the about the quarter , along our current prospect activity .
Marshall Loeb: In summary, we're pleased with our results and excited about the quantity of development leasing signed during the quarter, along with our current prospect activity. Reid will now walk you through more of our Q4 details.
Marshall Loeb: In summary, we're pleased with our results and excited about the quantity of development leasing signed during the quarter, along with our current prospect activity. Reid will now walk you through more of our Q4 details.
Speaker #2: . Reid will now walk you through more of our fourth quarter details in terms of leasing . Fourth quarter improved materially from third quarter results , especially in development , leasing .
Reid Dunbar: In terms of leasing, Q4 improved materially from slower Q2 and Q3 results, especially in development leasing. Our Q4 development leasing accounted for 52% of our annual total square footage, which makes it our best quarter of overall leasing in over 3 years. We're excited to see this pickup in momentum, with the key being sustainability. The headline volatility impacted long-term decision-making last year. We believe businesses are more accustomed to outside noise and simply can only delay expansion decisions so long. We continue seeing a flight to quality, which has contributed to EastGroup's portfolio occupancy outperforming the broader markets. As Class A Shallow Bay continues to be absorbed and new supply lagging, we anticipate increased decision-making and deal velocity. On the other hand, our development pipeline is leasing and maintaining projected yields, but at a slower pace.
Reid Dunbar: In terms of leasing, Q4 improved materially from slower Q2 and Q3 results, especially in development leasing. Our Q4 development leasing accounted for 52% of our annual total square footage, which makes it our best quarter of overall leasing in over 3 years. We're excited to see this pickup in momentum, with the key being sustainability. The headline volatility impacted long-term decision-making last year. We believe businesses are more accustomed to outside noise and simply can only delay expansion decisions so long. We continue seeing a flight to quality, which has contributed to EastGroup's portfolio occupancy outperforming the broader markets. As Class A Shallow Bay continues to be absorbed and new supply lagging, we anticipate increased decision-making and deal velocity. On the other hand, our development pipeline is leasing and maintaining projected yields, but at a slower pace.
Speaker #2: Our fourth quarter leasing accounted for 52% of our annual total development footage, which makes it the best quarter out of our overall leasing. And over three years.
Speaker #2: We're excited to see this pickup in momentum, with the key being sustainability. The headline volatility impacted long-term decision-making last year. We believe businesses are accustomed to outside pressure and, simply, can only delay expansion decisions.
Speaker #2: long we continue seeing a flight to quality , which is contributed to East Group's portfolio occupancy outperforming the broader markets as class A bay shallow continues to be and absorbed So lagging .
Speaker #2: We anticipate increased decision making and deal velocity . On the other hand , our development pipeline is leasing and maintaining projected yields . But at a slower pace .
Reid Dunbar: This, in turn, lowers development start projections from earlier in the year. On our development starts, as we stated before, pulled by market demand within our parks. Based on current demand levels, we are forecasting 2026 starts to $250 million. Longer term, the continued decline in the supply pipeline is promising. Starts remain historically low again this quarter. Couple this with the increasing difficulty we're experiencing with obtaining zoning and permitting. As demand increases, supply will be more challenged than historically to catch up. This limited availability and new modern facilities will place upward pressure on rents as demand stabilizes. And as demand improves, our goal is to capitalize earlier than our 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.
Reid Dunbar: This, in turn, lowers development start projections from earlier in the year. On our development starts, as we stated before, pulled by market demand within our parks. Based on current demand levels, we are forecasting 2026 starts to $250 million. Longer term, the continued decline in the supply pipeline is promising. Starts remain historically low again this quarter. Couple this with the increasing difficulty we're experiencing with obtaining zoning and permitting. As demand increases, supply will be more challenged than historically to catch up. This limited availability and new modern facilities will place upward pressure on rents as demand stabilizes. And as demand improves, our goal is to capitalize earlier than our 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 #2: This , in lowered turn projections earlier in the year . On our development starts stated before , our pooled by demand within market our parks based on current demand levels , we are forecasting 2026 starts to 250 million longer term , the continued decline supply pipeline is promising .
Speaker #2: Starts remain historically low . Again this quarter . Couple the this with experiencing increasing difficulty we've with obtaining zoning and demand increases as more historically to challenged than catch limited .
Speaker #2: and new modern availability stabilizes and demand as improves . Our goal is to capitalize earlier than peers on development our on the combination of our opportunities based team's experience , balance our sheet , existing strength tenant needs , permitting and the expansion land and permits we have hand from an investment in perspective , we are excited to continue to be our Las growing footprint .
Reid Dunbar: From an investment perspective, we're excited to continuing to be growing our Las Vegas footprint. We also added new land development sites in San Antonio and in the fast-growing, supply-constrained Northeast Dallas submarket. Finally, as an important part of our long-term strategy, we continue modernizing our portfolio with our upcoming Fresno market exit. Staci will now speak to several topics, including our assumptions within our 2026 guidance.
Reid Dunbar: From an investment perspective, we're excited to continuing to be growing our Las Vegas footprint. We also added new land development sites in San Antonio and in the fast-growing, supply-constrained Northeast Dallas submarket. Finally, as an important part of our long-term strategy, we continue modernizing our portfolio with our upcoming Fresno market exit. Staci will now speak to several topics, including our assumptions within our 2026 guidance.
Speaker #2: We are we also added Vegas development sites in San Antonio fast growing , supply and constrained Northeast Dallas submarket . Finally , as an important part of our in the modernizing our portfolio with our upcoming exit continue .
Staci Tyler: Thanks, Reid, and good morning. We are pleased to report strong results for the fourth quarter and year 2025. These results were achieved by our team through variable market conditions that improved during the last few months of the year. Our FFO results for both the quarter and year met the upper end of our guidance range at $2.34 per share for the fourth quarter and $8.98 per share for the year 2025, which represents 7.7% growth over prior year FFO per share, excluding gains on involuntary conversion. The outperformance in fourth quarter was primarily driven by property net operating income and continued strong performance by our 62 million sq ft operating portfolio, which ended the year 97% leased and 96.5% occupied.
Staci Tyler: Thanks, Reid, and good morning. We are pleased to report strong results for the fourth quarter and year 2025. These results were achieved by our team through variable market conditions that improved during the last few months of the year. Our FFO results for both the quarter and year met the upper end of our guidance range at $2.34 per share for the fourth quarter and $8.98 per share for the year 2025, which represents 7.7% growth over prior year FFO per share, excluding gains on involuntary conversion. The outperformance in fourth quarter was primarily driven by property net operating income and continued strong performance by our 62 million sq ft operating portfolio, which ended the year 97% leased and 96.5% occupied.
Speaker #2: Stacy will now speak to several topics , including assumptions within our our 2026 guidance .
Speaker #4: and good morning . We Thanks , Reid , pleased to are strong report results for the fourth quarter and These results by achieved our team through variable market conditions that improved during the few months were year .
Speaker #4: FFO: Our results for both the quarter and year met the upper end of our guidance range, at $2.34 per share for the fourth quarter and $8.98 per share for the year 2025, which represents 7.7% growth over the prior year.
Speaker #4: over FFO per share , year 2025 . voluntary conversion , the in fourth outperformance quarter was primarily driven by property net operating income and continued strong performance by our 62,000,000 square foot operating portfolio , which ended the year 97% leased and 96.5% occupied .
Staci Tyler: We also achieved net interest expense savings that resulted from lower bank credit facility balances and a lower interest rate than originally projected on our new $250 million unsecured term loan that closed in November at 4.13%. We ended the year with $19 million drawn on our unsecured bank credit facility, leaving available capacity of over $650 million as of the end of the year. Our debt to total market capitalization was 14.7% at year-end. Our Q4 annualized debt to EBITDA ratio is 3 times, and our interest and fixed charge coverage was over 15 times. Our strong and flexible balance sheet positions us well to pursue growth opportunities that align with our time-tested strategy.
Staci Tyler: We also achieved net interest expense savings that resulted from lower bank credit facility balances and a lower interest rate than originally projected on our new $250 million unsecured term loan that closed in November at 4.13%. We ended the year with $19 million drawn on our unsecured bank credit facility, leaving available capacity of over $650 million as of the end of the year. Our debt to total market capitalization was 14.7% at year-end. Our Q4 annualized debt to EBITDA ratio is 3 times, and our interest and fixed charge coverage was over 15 times. Our strong and flexible balance sheet positions us well to pursue growth opportunities that align with our time-tested strategy. Looking forward to 2026, FFO is estimated to be in the range of $2.25 to 2.33 per share for the first quarter and $9.40 to 9.60 per share for the year. Those midpoints represent increases of 8% and 6.1% compared to the prior year periods, excluding gains on involuntary conversions that result from insurance claims.
Speaker #4: also achieved net expense interest savings that resulted bank credit from facility lower and a lower balances interest rate than our new projected on originally $250 million that unsecured closed in term loans November 4.13% .
Speaker #4: at We ended with $19 million drawn on our unsecured credit facility , leaving the year capacity available of over $650 million as of the end of the year total market capitalization was 14.7% at year end .
Speaker #4: . Our fourth quarter annualized debt to Our EBITDA ratio is three times , and our interest and fixed charge coverage was over Our and flexible balance sheet 15 times .
Staci Tyler: Looking forward to 2026, FFO is estimated to be in the range of $2.25 to 2.33 per share for the first quarter and $9.40 to 9.60 per share for the year. Those midpoints represent increases of 8% and 6.1% compared to the prior year periods, excluding gains on involuntary conversions that result from insurance claims. We are projecting strong cash, same-property net operating income results for 2026, with a midpoint of 6.1%, driven by rental rate increases on in-place and budgeted leases, and expected same-property occupancy of 96.3%. The midpoint of our 2026 guidance assumes $250 million in new development starts and $160 million in operating property acquisitions, which includes an acquisition in Jacksonville that is currently under contract with money at risk.
Speaker #4: Positions us well to pursue growth opportunities that are time-tested and align with our strategy. Looking forward to 2026. FFO is estimated to be strong, in the range of $2.25 to $2.33 per share for the first quarter, and $9.40 to $9.60 per share for the year.
Speaker #4: Those midpoints represent increases of 8% and 6.1% compared to the prior year periods, excluding gains on voluntary conversions that result from insurance.
Staci Tyler: We are projecting strong cash, same-property net operating income results for 2026, with a midpoint of 6.1%, driven by rental rate increases on in-place and budgeted leases, and expected same-property occupancy of 96.3%. The midpoint of our 2026 guidance assumes $250 million in new development starts and $160 million in operating property acquisitions, which includes an acquisition in Jacksonville that is currently under contract with money at risk. Our rent collections currently remain healthy and in line with historical averages, so our projections for 2026 uncollectible accounts include a typical run rate in the range of 30 to 35 basis points of revenue. Please note that projected G&A expenses for 2026 are $27 million, which includes an estimated $4 million, or 7 cents per share, in costs related to the executive team transitions that were announced in December. Also, as a reminder, approximately 32% of the annual G&A expenses are expected to be recognized in Q1, primarily due to accelerated expense for employees who are retirement eligible under our equity incentive plans. We have $140 million in unsecured debt maturing during Q4 2026.
Speaker #4: claims We are projecting cash , same property , net operating income for 2026 , with a strong results midpoint of 6.1% , driven by rental rate on increases in-place and budgeted leases expected same occupancy property and of 96.3% .
Speaker #4: The midpoint of our 2026 guidance assumes development $250 million in new starts , and $160 million in operating property acquisitions , includes an acquisition in Jacksonville which that is contract currently under at with money Risk rent .
Staci Tyler: Our rent collections currently remain healthy and in line with historical averages, so our projections for 2026 uncollectible accounts include a typical run rate in the range of 30 to 35 basis points of revenue. Please note that projected G&A expenses for 2026 are $27 million, which includes an estimated $4 million, or 7 cents per share, in costs related to the executive team transitions that were announced in December. Also, as a reminder, approximately 32% of the annual G&A expenses are expected to be recognized in Q1, primarily due to accelerated expense for employees who are retirement eligible under our equity incentive plans. We have $140 million in unsecured debt maturing during Q4 2026. We plan to fund those debt repayments and new investments throughout the year with our bank credit facilities and new debt issuance of $300 million.
Speaker #4: Currently, our collections remain healthy and in line with historical averages, so our projections for 2026 uncollectible accounts include a typical run rate in the range of 30 to 35 basis points of revenue.
Speaker #4: Please note that projected G&A expenses for 20 , 26 or $27 million , includes an which estimated $4 million , or $0.07 per share in costs related to the executive team transitions announced December that were .
Speaker #4: Also , in as a , reminder approximately 32% of the annual G&A expenses are expected to be recognized in first quarter , primarily due to accelerated expense for employees who are retirement eligible .
Speaker #4: Under our equity incentive plans, we have unsecured debt of $140 million maturing during the fourth quarter of 2026. We plan to fund those with our bank credit facilities and new debt issuance throughout the year. While our guidance assumes new debt issuance, we will issue $300 million.
Staci Tyler: We plan to fund those debt repayments and new investments throughout the year with our bank credit facilities and new debt issuance of $300 million. While our guidance assumes debt issuance, we will remain flexible and monitor the equity market and may utilize both debt and equity as sources of capital. We're pleased with our strong performance in 2025, and as we look ahead through the year 2026, we are confident in our high-quality portfolio of well-located multi-tenant assets and in our team's ability to execute in this steadily improving environment. Now, Marshall will make some final comments.
Staci Tyler: While our guidance assumes debt issuance, we will remain flexible and monitor the equity market and may utilize both debt and equity as sources of capital. We're pleased with our strong performance in 2025, and as we look ahead through the year 2026, we are confident in our high-quality portfolio of well-located multi-tenant assets and in our team's ability to execute in this steadily improving environment. Now, Marshall will make some final comments.
Speaker #4: remain flexible and monitor the equity markets and may utilize both debt and equity as sources of . We're pleased capital with our strong performance in 2025 , and as we look ahead through the year 2026 , we are confident in our high quality portfolio of well-located multi-tenant assets and team's in our ability to execute in this steadily improving environment .
Reid Dunbar: Thanks, Staci. In closing, we're pleased with our execution for the quarter and year. Market demand is picking up momentum, and we're hopeful it's sustainable.
Marshall Loeb: Thanks, Staci. In closing, we're pleased with our execution for the quarter and year. Market demand is picking up momentum, and we're hopeful it's sustainable. ...Regardless of the environment, our goals are to drive FFO per share growth and raise portfolio quality. If we can do those, we'll continue creating NAV growth for our shareholders. Our executive team restructuring is a reflection of the growth we've achieved, and even more so, the opportunities we see within our markets. 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, evolving logistic chains, and historically lower Shallow Bay market vacancies.
Speaker #4: Now, Marshall will make some final comments.
Speaker #2: Thanks , Stacy . with our closing , we're pleased year . Market demand is momentum and we're hopeful it's sustainable and regardless of the environment .
Marshall Loeb: ...Regardless of the environment, our goals are to drive FFO per share growth and raise portfolio quality. If we can do those, we'll continue creating NAV growth for our shareholders. Our executive team restructuring is a reflection of the growth we've achieved, and even more so, the opportunities we see within our markets. 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, evolving logistic chains, and historically lower Shallow Bay market vacancies. 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, both in our tenant base as well as our geography.
Speaker #2: Our goals FFO are to drive per share growth and raise portfolio quality . If we those , continue Nav growth for our we'll shareholders .
Speaker #2: executive Our restructuring team a reflection of the growth , and even achieved more . so , the As opportunities we see within our markets .
Speaker #2: from the Stepping back near I like our as positioning portfolio our is benefiting from several term long positive secular term , trends , such as population migration , nearshoring and onshoring trends evolving logistics and historically lower shallow bay market vacancies .
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 ever, and we're upgrading our diversity, both in our tenant base as well as our geography. Well, now, we'd like to open up the call for any questions.
Speaker #2: We have a proven management team with a long-term public track record. Our quality portfolio in terms of buildings and markets improves each quarter.
Marshall Loeb: Well, now, we'd like to open up the call for any questions.
Speaker #2: Our balance stronger sheet is than ever , and upgrading our we're diversity our base as well as tenant geography . We'll now open up any the call for questions our
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two, and if you are using a speakerphone, please lift the handset before pressing any keys. A reminder to please limit yourself to one question, and you may re-queue with any additional questions. The first question comes from Craig Mailman at Citi. Please go ahead.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two, and if you are using a speakerphone, please lift the handset before pressing any keys. A reminder to please limit yourself to one question, and you may re-queue with any additional questions. The first question comes from Craig Mailman at Citi. Please go ahead.
Speaker #2: .
Speaker #1: you Thank Ladies and
Speaker #1: you Thank Ladies and . gentlemen . We will now begin the question and answer
Speaker #1: session . Should you have a question , would like to please press the star by the one on your touchtone followed phone . will hear You a prompt that your hand has both in been raised .
Speaker #1: If you decline from the polling process, please press star, wish to, followed by the two. And if you are using a speakerphone, handset lift the please pressing any keys.
Speaker #1: A reminder to please limit yourself to one question and you may recur with any additional questions . The first question from comes Craig Mailman at Please go ahead Citi .
[Analyst] (Citi): Hey, good morning, everybody, and congrats to Reid, Staci, and Brent. I see Brent is already enjoying his promotion by not talking on the call.
Craig Mailman: Hey, good morning, everybody, and congrats to Reid, Staci, and Brent. I see Brent is already enjoying his promotion by not talking on the call.
Speaker #1: .
Speaker #5: Hey , good morning And everybody . to congrats read Stacy and Brent . See , already enjoying his not talking on the . call
Reid Dunbar: Oh, Craig, give me a, give me a break. I'm here.
Brent Wood: Oh, Craig, give me a, give me a break. I'm here.
[Analyst] (Citi): I wanted to just dive in a little bit more on the development leasing, 'cause that was a big uptick. I know, Marshall, you had foreshadowed that, last quarter's call on the NAREIT. Just can you just walk through kind of what the a little bit more into what the prospect activity looks like and any trends you're pulling away from either sectors that are more active than others? Also just give us a little bit of a sense of, are these all organic growth to the portfolio, or are some of these existing tenants that could leave some holes in the existing portfolio as they move into new space?
Craig Mailman: I wanted to just dive in a little bit more on the development leasing, 'cause that was a big uptick. I know, Marshall, you had foreshadowed that, last quarter's call on the NAREIT. Just can you just walk through kind of what the a little bit more into what the prospect activity looks like and any trends you're pulling away from either sectors that are more active than others? Also just give us a little bit of a sense of, are these all organic growth to the portfolio, or are some of these existing tenants that could leave some holes in the existing portfolio as they move into new space?
Speaker #6: Craig , give me a give me a break . I'm here .
Speaker #5: I wanted to just dive in a little bit more on the leasing because a big development uptick . And I know , Marshall , you had foreshadowed that last quarter's call and then can you just walk through kind of what the a little just into what the prospect activity bit more looks like and any trends you're pulling away from , from either sectors that are more active than others .
Speaker #5: And also just little bit sense of give us a , are these organic all to the portfolio some of these existing , or are tenants that could leave some some holes in the existing portfolios ?
Marshall Loeb: Hey, good, good morning, Craig. Yeah, good question. It was mostly, you know, it was, it was, I guess, interesting isn't a great adjective, but we had activity all during the year, and then in Q4, maybe it was long enough beyond Tariff Day that people started finally making a decision and getting leasing, development leases signed. There weren't expansion. A couple were existing tenant relationships, where, "Hey, we have you in Orlando, and you need space in Tampa." And that was kind of a full building lease the team was able to get signed there. So in terms of kind of trends, what I would say is it, it felt like you finally break through the ice a little bit, and we got, you know, more than half of our development leasing signed for last year, happened to be in Q4.
Marshall Loeb: Hey, good, good morning, Craig. Yeah, good question. It was mostly, you know, it was, it was, I guess, interesting isn't a great adjective, but we had activity all during the year, and then in Q4, maybe it was long enough beyond Tariff Day that people started finally making a decision and getting leasing, development leases signed. There weren't expansion. A couple were existing tenant relationships, where, "Hey, we have you in Orlando, and you need space in Tampa." And that was kind of a full building lease the team was able to get signed there. So in terms of kind of trends, what I would say is it, it felt like you finally break through the ice a little bit, and we got, you know, more than half of our development leasing signed for last year, happened to be in Q4.
Speaker #5: They move into new space
Speaker #2: morning good Craig . Yeah . Good question . It was mostly you know , it was it I guess interesting in the was great adjective .
Speaker #2: had activity all during the But we then in fourth quarter maybe it was long enough beyond Tariff Day that people
Speaker #2: started finally decision and getting year . And signed . There . weren't were existing tenant Okay , relationships where , hey , we have you in Orlando and you need space in Tampa .
Speaker #2: It was kind of, and that a full building lease, the team was able to get signed there. So in terms of kind of what I would say is it felt like trends, like you finally break the ice a little bit and we got more through the development leasing signed for last year, which happened to be in the fourth quarter.
Marshall Loeb: You know, the tricky part is I sure hope that's sustainable. We have good prospect activity. The other thing, a little bit, that helped us last quarter with such a high square footage is the construction pipeline being so low. I think it's with the construction pipeline being so low, we have probably 6 to 8 conversations in varying stages, and they won't all happen, but where prospects could take, you know, a majority of all of a building, a couple of buildings, a pre-lease, kind of build-to-suit opportunity. So that gave us a little bit of that confidence to raise development guidance this year, we think, as some of those happen. It's a mix of expansions. You know, relocation from California is one of the prospects. It's kind of a mixed bag and simply new to the portfolio, things like that.
Marshall Loeb: You know, the tricky part is I sure hope that's sustainable. We have good prospect activity. The other thing, a little bit, that helped us last quarter with such a high square footage is the construction pipeline being so low. I think it's with the construction pipeline being so low, we have probably 6 to 8 conversations in varying stages, and they won't all happen, but where prospects could take, you know, a majority of all of a building, a couple of buildings, a pre-lease, kind of build-to-suit opportunity. So that gave us a little bit of that confidence to raise development guidance this year, we think, as some of those happen. It's a mix of expansions. You know, relocation from California is one of the prospects. It's kind of a mixed bag and simply new to the portfolio, things like that.
Speaker #2: You know , part tricky is I sure hope that sustainable we have good prospects activity . The other thing a little bit that that helped us last quarter such a high with footage square , is and I think it's with the that construction pipeline being the low .
Speaker #2: We have probably 6 to 8 conversations in varying stages , and won't they all happen . But we're prospects . take Could , you know , a majority of all of a building , a couple of buildings , pre-lease kind a to suit opportunities .
Speaker #2: So that's that a little bit of that confidence gave us development guidance this to raise as think some year . of those We , and it's a mix of expansions , you know , relocation from California is one of the prospects .
Marshall Loeb: So I'm glad that it's, it's pretty broad-based. And when I was looking at just the markets where we could have these pre-leases, it is probably about six different states, so it's pretty spread out. It's not any one market, things like that. So I'm cautiously optimistic as we turn the page. I'm really proud of the team, a good Q4. We kind of finally got through and got things signed, and we have good activity to date. It's just that conversion rate that'll be key.
Marshall Loeb: So I'm glad that it's, it's pretty broad-based. And when I was looking at just the markets where we could have these pre-leases, it is probably about six different states, so it's pretty spread out. It's not any one market, things like that. So I'm cautiously optimistic as we turn the page. I'm really proud of the team, a good Q4. We kind of finally got through and got things signed, and we have good activity to date. It's just that conversion rate that'll be key.
Speaker #2: of a mixed bag . And and simply new to It's kind the portfolio . Things like that . glad that it's it's pretty based .
Speaker #2: And when I was looking at just the markets where we could these have leases , it is probably about six different states . So it's pretty spread out .
Speaker #2: not It's Things any one market . like that . I'm So cautiously optimistic as we turn the page . We had of the team .
Speaker #2: A quarter . good fourth We kind finally of really proud got through and things signed got and have good activity to date . It's just that conversion key .
Speaker #2: A quarter . good fourth We kind finally of really proud got through and things signed got and have good activity to date . It's just that conversion key rate And and I would add to comments on specific development leasing the in year , our some of the average lease Marshall's size in quarter the actually jumped to a little over 60,000ft² , which was a nice uptick from previous which quarters , obviously helps move the .
Reid Dunbar: I would add to Marshall's comments on some of the specific development leasing in the year. Our average lease size in the quarter actually jumped to a little over 60,000sq ft, which was a nice uptick from previous quarters, which obviously helps move the needle. And then geographically, it was very dispersed. We saw great activity, really, from Florida all the way to California. So all of our development markets, we were fortunate to land some new deals in the quarter.
Reid Dunbar: I would add to Marshall's comments on some of the specific development leasing in the year. Our average lease size in the quarter actually jumped to a little over 60,000sq ft, which was a nice uptick from previous quarters, which obviously helps move the needle. And then geographically, it was very dispersed. We saw great activity, really, from Florida all the way to California. So all of our development markets, we were fortunate to land some new deals in the quarter.
Speaker #2: And then geographically , it needle was very saw dispersed . We great really from Florida all the way to California . So activity , development markets , we were fortunate to to all of our land some new deals in the quarter
[Analyst] (Citi): Great. Thanks.
Craig Mailman: Great. Thanks.
Reid Dunbar: Thank you.
Reid Dunbar: Thank you.
Marshall Loeb: Welcome.
Marshall Loeb: Welcome.
Operator: Thank you. The next question comes from Samir Khanal from Bank of America. Please go ahead.
Operator: Thank you. The next question comes from Samir Khanal from Bank of America. Please go ahead.
Speaker #2: Thank you . Great . .
[Analyst] (Bank of America): Good morning, everybody. Marshall, I guess your comments are very encouraging to hear, especially from, you know, even listening to the last question on development leasing. I guess, how is that translating into pricing or market rent growth? I guess, where do you see market rent growth going this year at the national level? And maybe talk about markets which are outperforming or even, you know, lagging at this point. Thanks.
Samir Khanal: Good morning, everybody. Marshall, I guess your comments are very encouraging to hear, especially from, you know, even listening to the last question on development leasing. I guess, how is that translating into pricing or market rent growth? I guess, where do you see market rent growth going this year at the national level? And maybe talk about markets which are outperforming or even, you know, lagging at this point. Thanks.
Speaker #1: next question comes Thanks . from Thank Bank of Kunal from America . Please go Sameer . The
Speaker #7: morning guess your Marshall . I . comments Good are very encouraging to especially hear , from , you know , even listening to the last development leasing , I that guess .
Speaker #7: everybody .
Speaker #7: question on translating into pricing or How is market rent growth , I guess . Where rent growth this year market at the national going level ?
Marshall Loeb: Sure. Hey, good morning, Samir. It feels like, you know, it's hard to speak for us, maybe a little bit nationally. We're so focused on more of the Smile States, but I would say rent growth, you know, even and we're pleased demand's picked up, you're right. Have not really seen that translate into rent growth just yet. I'm optimistic because construction pipeline is at a 7- or 8-year low, and that it's gonna take a while to catch up, that there will be rent growth, but we're not seeing it just yet. We're still in all of our markets, maybe absent California, probably inflation plus a little bit. So rents have hung in there. Construction pricing's come down, so we've been able to, you know, maintain our yields a little north of 7 on the developments and things like that.
Marshall Loeb: Sure. Hey, good morning, Samir. It feels like, you know, it's hard to speak for us, maybe a little bit nationally. We're so focused on more of the Smile States, but I would say rent growth, you know, even and we're pleased demand's picked up, you're right. Have not really seen that translate into rent growth just yet. I'm optimistic because construction pipeline is at a 7- or 8-year low, and that it's gonna take a while to catch up, that there will be rent growth, but we're not seeing it just yet. We're still in all of our markets, maybe absent California, probably inflation plus a little bit. So rents have hung in there. Construction pricing's come down, so we've been able to, you know, maintain our yields a little north of 7 on the developments and things like that.
Speaker #7: And maybe talk about markets which are or outperforming , you know , even lagging at this point ? .
Speaker #2: Sure .
Speaker #2: Hey good morning Thanks Sameer . But it feels like , you know , it's hard to speak maybe a for us , little bit nationally where the on more focused states .
Speaker #2: we're would say rent small growth , we're pleased picked up Demand's .
Speaker #2: right . even really seen that translate you know , Have not into growth just rent yet . I'm optimistic I'm because do you see construction pipeline is like a seven , eight year low that it's and take a while to catch up , that there will be But we're not rent growth .
Speaker #2: seeing it just yet . still in all of our We're markets , maybe absent California , probably inflation , plus a bit little .
Speaker #2: rents have there . So pricing has hung in Construction come So we've down . been able to , you know , our yields a little north of seven on the developments maintain things like And there could you know , look be an point .
Marshall Loeb: Look, there could be an inflection point. I keep calling for it, and eventually I'll be right on when rents pick up again, because I think there's just not much supply out there. And as demand does stabilize, it won't take a lot of kind of positive and just stable demand for people to start pushing rents. But we're not, unfortunately, not seeing it quite just yet. But, you know, we're at least we're trending in the right way as we ended the year.
Marshall Loeb: Look, there could be an inflection point. I keep calling for it, and eventually I'll be right on when rents pick up again, because I think there's just not much supply out there. And as demand does stabilize, it won't take a lot of kind of positive and just stable demand for people to start pushing rents. But we're not, unfortunately, not seeing it quite just yet. But, you know, we're at least we're trending in the right way as we ended the year.
Speaker #2: that . lot of And kind of positive and just stable for demand to start pushing rents . people But we're not unfortunately , not seeing it quite just yet .
Speaker #2: inflection keep I it . And calling for I'll eventually be right on . When pick up because I think there's just supply out again , as demand does rents not much stabilize , it there .
Speaker #2: But you know, trending in the right way, at least. We're, as ended the year, what? At, we.
Operator: Thank you. The next question comes from Blaine Heck from Wells Fargo. Please go ahead.
Operator: Thank you. The next question comes from Blaine Heck from Wells Fargo. Please go ahead.
[Analyst] (Wells Fargo): Great, thanks. Good morning. Just taking Samir's question a step further, I know you guys are typically hesitant to forecast rent spreads, but just looking at your expirations this year, the average rent is a bit lower than your forward-year expirations at this time last year. I guess, does that give you any confidence that you can hold spreads somewhat steadier year-over-year? Or is that lower, expiring rent, more of a function of the mix of markets and just lower rent markets rolling over this year?
Blaine Heck: Great, thanks. Good morning. Just taking Samir's question a step further, I know you guys are typically hesitant to forecast rent spreads, but just looking at your expirations this year, the average rent is a bit lower than your forward-year expirations at this time last year. I guess, does that give you any confidence that you can hold spreads somewhat steadier year-over-year? Or is that lower, expiring rent, more of a function of the mix of markets and just lower rent markets rolling over this year?
Speaker #1: Thank you. The next question comes from Wells Fargo. Go ahead, please.
Speaker #8: Great . Thanks . Good morning . Just taking some mirrors . a Question step are typically you guys hesitant to forecast but just looking at your spreads , expirations this year , the average rent is bit lower than forward your year a this expirations at time last year , I guess .
Speaker #8: Does that give you any confidence that you can hold somewhat steadier year over year , or spread lower rent more of function of mix of the markets and rent markets just this over year rolling ?
Marshall Loeb: Yeah. Hey, Blaine, it's Marshall. You know, I felt. You're right. I felt better, probably right, looking at what has expired, but it is more market by market and even submarket by submarket in some of our markets as to where. But, you know, look, it's definitely trending down, but still, you know, look, I'm happy we ended the year at 40%, although we were lower at the end of the year, net effective than when we started the year. I think it will keep drifting down. Hopefully, and we'll hang on to it. We're several years away from having negative rent growth, and I remind myself, look, we're in a cyclical business.
Marshall Loeb: Yeah. Hey, Blaine, it's Marshall. You know, I felt. You're right. I felt better, probably right, looking at what has expired, but it is more market by market and even submarket by submarket in some of our markets as to where. But, you know, look, it's definitely trending down, but still, you know, look, I'm happy we ended the year at 40%, although we were lower at the end of the year, net effective than when we started the year. I think it will keep drifting down. Hopefully, and we'll hang on to it. We're several years away from having negative rent growth, and I remind myself, look, we're in a cyclical business.
Speaker #2: Brian , it's Marshall Yeah . know , I
Speaker #2: right . You're right . I feel Looking at what is probably . expired . But but it is more market by market and even submarket by submarket .
Speaker #2: our And some of markets lower as to where . But you look it's know trending still I'm down but definitely happy we ended you know look the year at 40% .
Speaker #2: Although we were lower at the end of the year . Net than when we started the year . I think it will drifting down .
Speaker #2: Hopefully , you hang on keep We're to it . several years away from having negative rent growth and I remind myself , look , we're know , we'll cyclical It's always underbuilt .
Marshall Loeb: It's always underbuilt and then overbuilt, and we're underbuilt, and it's, we'll, as the market shifts, kind of as we were talking the last question, I think you'll have that rent inflection and we'll relift our mark to market within our portfolio. So we'll, we should have good, positive re-leasing spreads this year. I think they'll be probably more like the back half of the year than the first half of last year. And then it's just when does that market turn? Because there's not much vacancy. And even in the Shallow Bay, because we have the older buildings, there's more functional obsolescence in Shallow Bay than there is big box, because no one was building big box buildings 20 years ago.
Marshall Loeb: It's always underbuilt and then overbuilt, and we're underbuilt, and it's, we'll, as the market shifts, kind of as we were talking the last question, I think you'll have that rent inflection and we'll relift our mark to market within our portfolio. So we'll, we should have good, positive re-leasing spreads this year. I think they'll be probably more like the back half of the year than the first half of last year. And then it's just when does that market turn? Because there's not much vacancy. And even in the Shallow Bay, because we have the older buildings, there's more functional obsolescence in Shallow Bay than there is big box, because no one was building big box buildings 20 years ago.
Speaker #2: overbuilt we're we're underbuilt and we'll as the it's shifts , kind of as we were talking last question , I think you'll have that rent market and we'll inflection relive we'll mark to market within our we'll , we should have positive spreads releasing this year .
Speaker #2: think there'll good portfolios . I be So back probably more like the half of the last the first half of year than year .
Speaker #2: And then it's just when does that market there's turn ? Because not not much vacancy . And even in the shallow bay , because we older have the buildings , there's more obsolescence functional in shallow Bay than big box because there is one was building big box no .
Speaker #2: And then it's just when does that market there's turn ? Because not not much vacancy . And even in the shallow bay , because we older have the buildings , there's more obsolescence functional in shallow Bay than big box because there is one was building big box no buildings Blaine , I would add , you 20 years ago know specific to some of the , speaking markets , I like our So as California has maybe diversity .
Brent Wood: Yeah, and Blaine, I would add, you know, speaking specific to some of the markets, I like our diversity. So as California has maybe slowed some, other markets like Houston, which is, you know, one of our larger markets, has actually picked up some of that steam. So our diversity definitely helps as, as we go into the future quarters.
Brent Wood: Yeah, and Blaine, I would add, you know, speaking specific to some of the markets, I like our diversity. So as California has maybe slowed some, other markets like Houston, which is, you know, one of our larger markets, has actually picked up some of that steam. So our diversity definitely helps as, as we go into the future quarters.
Speaker #2: Slowed some other markets like Houston, which is, you know, one of our larger markets, is actually that up some of steam.
Speaker #2: picked So our diversity definitely we go helps future into the quarters .
[Analyst] (Wells Fargo): Great. Thank you.
Blaine Heck: Great. Thank you.
Operator: Thank you. The next question comes from Alexander Goldfarb from Piper Sandler. Please go ahead.
Operator: Thank you. The next question comes from Alexander Goldfarb from Piper Sandler. Please go ahead.
Speaker #8: Great . Thank you .
[Analyst] (Piper Sandler): Hey, good morning down there, and, congrats all around in Reid. I'm assuming they told you all about the joys of endless NAREIT. So welcome, welcome to Reidland.
Alexander Goldfarb: Hey, good morning down there, and, congrats all around in Reid. I'm assuming they told you all about the joys of endless NAREIT. So welcome, welcome to Reidland.
Speaker #1: Thank next you . The question comes from Alexander Goldfarb from Piper Sandler . ahead . Please go
Speaker #9: , good morning And congrats all Hey around . I'm told you all about the joys of endless , right ? welcome , So assuming they down welcome to Wheatland .
Speaker #9: there . . Question for you guys on competitive supply . You know , industrials a big are always institutional demand area and hard to that , believe you know , are things if good to getting better , that , you know , competitive supply is going to diminished a level .
Marshall Loeb: Yep.
Marshall Loeb: Yep.
[Analyst] (Piper Sandler): Question for you guys on competitive supply. You know, industrials are always a big institutional demand area, and hard to believe that, you know, if things are good to getting better, that, you know, competitive supply is gonna remain at a diminished level. So what are you seeing for the appetite from lenders, whether it's banks or private credit for development? And from the institutional equity side, what do you see as their appetite for existing versus getting back into development?
Alexander Goldfarb: Question for you guys on competitive supply. You know, industrials are always a big institutional demand area, and hard to believe that, you know, if things are good to getting better, that, you know, competitive supply is gonna remain at a diminished level. So what are you seeing for the appetite from lenders, whether it's banks or private credit for development? And from the institutional equity side, what do you see as their appetite for existing versus getting back into development?
Speaker #9: remain at So are you what seeing for appetite from lenders , banks or whether it's private credit development and from the for institution institutional equity what do you see side , as their appetite for existing versus getting back into development ?
Brent Wood: Yeah. Hey, Alex, this is Brent. Good to chat with you. Yeah, competitive supply, as Marshall alluded to, we feel good about where that is. We spend a lot more time as a team talking about demand relative to supply. It's still tight. And when you look at multi-tenant, that vacancy rate is about half of the overall or half of the bigger box space at about 4.5% on a national level. But, you know, the one analogy we've been kind of giving, if we could just have a little better uptick in, you know, signing and, and momentum, you know, we have a land bank and land inventory. We have literally plans with permits ready to go. We're obviously still actively developing, but we desire to do more, and we're poised to move very quickly.
Brent Wood: Yeah. Hey, Alex, this is Brent. Good to chat with you. Yeah, competitive supply, as Marshall alluded to, we feel good about where that is. We spend a lot more time as a team talking about demand relative to supply. It's still tight. And when you look at multi-tenant, that vacancy rate is about half of the overall or half of the bigger box space at about 4.5% on a national level. But, you know, the one analogy we've been kind of giving, if we could just have a little better uptick in, you know, signing and, and momentum, you know, we have a land bank and land inventory. We have literally plans with permits ready to go. We're obviously still actively developing, but we desire to do more, and we're poised to move very quickly.
Speaker #6: Yeah . Hey , Alex , this is Brent . Good with you . Yeah . Competitive to chat supply is Marshall alluded to .
Speaker #6: good about where that We feel spend a lot more time as a team talking to supply . relative It's tight you look at when multi-tenant .
Speaker #6: about vacancy rate is about half of the overall or half of the box space at about bigger That 4.5% on a national level .
Speaker #6: the one analogy But we've been we could kind of just have a giving , if better uptick in design , you signing and know , we momentum , you know , a land bank and land have inventory .
Speaker #6: We literally have with permits go . ready to We're actively obviously still developing , but we plans and we're poised to move more very quickly .
Brent Wood: You see, we got it to a little bit of a higher number this year, but we could accelerate from that, and we're poised to do it. You know, our competitive set tends to be good regional developers, and, you know, there are equity guys, partners out there. You know, there's been risk off. I think that will begin to unthaw if the market turns some. You'll certainly see that come back around. But there's gonna be a lag time there for them to... You know, typically, those type groups don't carry land inventory, so they may have to secure a site, which can be very time-consuming, get their equity partner together, and get some of those ingredients together.
Brent Wood: You see, we got it to a little bit of a higher number this year, but we could accelerate from that, and we're poised to do it. You know, our competitive set tends to be good regional developers, and, you know, there are equity guys, partners out there. You know, there's been risk off. I think that will begin to unthaw if the market turns some. You'll certainly see that come back around. But there's gonna be a lag time there for them to... You know, typically, those type groups don't carry land inventory, so they may have to secure a site, which can be very time-consuming, get their equity partner together, and get some of those ingredients together.
Speaker #6: you see , guided to a little And we higher number this year we could that . And we're poised to do accelerate from it .
Speaker #6: Competitive set, you know, ours tends to be, but good, regional. And there are developers, equity guys, partners out there—there's there.
Speaker #6: . competitive set You know , our tends to be But good regional . And there are developers equity guys partners out you know been You know risk off .
Speaker #6: begin to the unthaw if some . You'll come certainly see that that will I think market turns there's going to be a time there for them .
Speaker #6: you know to , , typically those groups don't type land lag inventory . So they But secure a site which can be very time get their partner together equity some of those consuming , ingredients together .
Brent Wood: So much like we did coming out of the great financial crisis, we were sort of first to market, so to speak, and really ramped up and got more of our portion of the activity, and we kind of fancy that happening again. If we could have a nice uptick, we could lean into it faster and ahead of the competition, maybe play a few innings of the game before the other team gets ready to play. And so we've, to be fair, been saying that for about 24 months running now. But the ingredients are there for that to happen, and I'm confident it's gonna happen. It's a matter of when. Could this be the year? We hope so.
Brent Wood: So much like we did coming out of the great financial crisis, we were sort of first to market, so to speak, and really ramped up and got more of our portion of the activity, and we kind of fancy that happening again. If we could have a nice uptick, we could lean into it faster and ahead of the competition, maybe play a few innings of the game before the other team gets ready to play. And so we've, to be fair, been saying that for about 24 months running now. But the ingredients are there for that to happen, and I'm confident it's gonna happen. It's a matter of when. Could this be the year? We hope so. ... we're poised. If it is, we'll lean into it, and if it's, you know, kind of like it's been the last couple of years, we'll, you know, paddle with it sideways if that's what it gives us. But we feel good about where the competitive set is and our ability to lean into it if we're given that opportunity.
Speaker #6: So much like coming out of the Great Financial Crisis, we were sort of first to market, so to speak, really, and we did up and got more of our activity.
Speaker #6: portion of And we fancy that happening nice a If again . have uptick , we it into faster and ahead of the could competition , maybe play a few innings of the game before the other team ready to gets .
Speaker #6: play And we so , to be been saying that for about 24 months now . But the ingredients are running there for that to And confident it's going to happen .
[Analyst] (KeyBanc Capital Markets): ... we're poised. If it is, we'll lean into it, and if it's, you know, kind of like it's been the last couple of years, we'll, you know, paddle with it sideways if that's what it gives us. But we feel good about where the competitive set is and our ability to lean into it if we're given that opportunity.
Speaker #6: matter of when happen . It's a could this I'm be the year ? We hope so . We're If it is , poised .
Speaker #6: we'll lean into it . And if it's , kind of like it's been in the last couple of years , we'll you know , we'll , know , paddle with it sideways if that's what it you gives us .
Speaker #6: But we feel good about where the competitive set is and our ability to lean into it . If we're given that opportunity .
Operator: Thank you.
Alexander Goldfarb: Thank you.
[Analyst] (KeyBanc Capital Markets): Yep.
Brent Wood: Yep.
Operator: Thank you. The next question comes from Nick Thillman at Baird. Please go ahead.
Operator: Thank you. The next question comes from Nick Thillman at Baird. Please go ahead.
Speaker #9: Thank you
Speaker #6: Yep
[Analyst] (Baird): Hey, good morning. Maybe a question for the COO or president here on continuing on the land bank here. The overall basis here is around $32 a buildable foot. I'm sure there's a little bit more permitting and costs that have to go into that number. But as you just look at these new starts and potential yields, assuming relatively flat just rent growth here, like, what, what kind-- type of yields are we talking about on additional starts from here?
Nick Thillman: Hey, good morning. Maybe a question for the COO or president here on continuing on the land bank here. The overall basis here is around $32 a buildable foot. I'm sure there's a little bit more permitting and costs that have to go into that number. But as you just look at these new starts and potential yields, assuming relatively flat just rent growth here, like, what, what kind-- type of yields are we talking about on additional starts from here?
Speaker #6: .
Speaker #1: Thank next you . The comes from Silman at Baird . Please go ahead Nick .
Speaker #8: Hey . Good a Maybe question for CEO or president continuing on the bank here . The
Speaker #8: overall basis here is here on around $32 . A land buildable morning . foot there's a . I'm sure little bit .
Speaker #8: that permitting . And have to go but as number , more you costs into that just look at these new starts potential assuming relatively yields , flat , just rent and here , like what type of yields are we talking about on additional starts from here .
Marshall Loeb: Yeah. Hey, it's Nick, it's Reid Dunbar. I would say going forward and into 2026, we would anticipate similar yields of what we've achieved in '25. And thanks for pointing out the land bank. It at a little over 1,000 acres, you know, that is something that we are bullish on, and as Brent mentioned, that's not easy to come by. The permitting and entitlement periods now take longer and longer, and more and more challenging. So the fact that we have the land that we do, the portfolio and the relationships that we have, we feel like we will be able to take advantage when that demand starts to pick up with the team in place. And a majority of our land, especially for second phase developments, have permit in hand.
Reid Dunbar: Yeah. Hey, it's Nick, it's Reid Dunbar. I would say going forward and into 2026, we would anticipate similar yields of what we've achieved in '25. And thanks for pointing out the land bank. It at a little over 1,000 acres, you know, that is something that we are bullish on, and as Brent mentioned, that's not easy to come by. The permitting and entitlement periods now take longer and longer, and more and more challenging. So the fact that we have the land that we do, the portfolio and the relationships that we have, we feel like we will be able to take advantage when that demand starts to pick up with the team in place. And a majority of our land, especially for second phase developments, have permit in hand.
Speaker #2: Hey, yeah, it's Dunbar. I would say going forward, and into 2026, we would anticipate similar yields to what we've achieved. And thanks for pointing out the land — it's over a thousand acres.
Speaker #2: You know, that is something that we are bullish on. And as Brent mentioned, that's not easy to come by, that the permitting and entitlement periods now take longer and longer and are more and more challenging.
Speaker #2: So, the fact that we have the land, that we do the portfolio, and that we have—like, we feel we'll be able to take relationships, that advantage, when that demand picks up—team in place.
Marshall Loeb: So the team is geared up and ready to go, assuming the leasing continues to occur.
Reid Dunbar: So the team is geared up and ready to go, assuming the leasing continues to occur.
Speaker #2: majority of And our land , specialty for second phase developments our re have hand . the team is geared up is ready to and , assuming go the leasing to occur to .
Operator: Thank you.
Operator: Thank you.
[Analyst] (Baird): Thank you.
Nick Thillman: Thank you.
Operator: The next question comes from Brendan Lynch at Barclays. Please go ahead.
Operator: The next question comes from Brendan Lynch at Barclays. Please go ahead.
Operator: Great. Thanks for taking my question. Maybe one for Staci, and congrats again on your new position as CFO. You suggested that guidance assumes additional debt issuances, but maybe you would consider issuing equity. Can you talk about what would make you toggle between the two in terms of capital allocation when looking at the development pipeline and perhaps scaling that beyond what you've guided to, and potentially additional acquisitions throughout the year?
Brendan Lynch: Great. Thanks for taking my question. Maybe one for Staci, and congrats again on your new position as CFO. You suggested that guidance assumes additional debt issuances, but maybe you would consider issuing equity. Can you talk about what would make you toggle between the two in terms of capital allocation when looking at the development pipeline and perhaps scaling that beyond what you've guided to, and potentially additional acquisitions throughout the year?
Speaker #1: Thank you. Next, the next question comes from Brandon Lynch at Barclays. Please go ahead with your question.
Speaker #10: Great . Thanks for taking my question . Maybe . And Stacy congrats again on your new position as CFO . You suggested that guidance assumes additional consider issuing but you would equity .
Speaker #10: Can you talk about the what would make you between in terms of capital allocation ? When development looking at the perhaps beyond what you've scaling that do toggle additional and acquisitions throughout the year potentially
Staci Tyler: Sure. First of all, thanks, Brandon. Appreciate that. Excited for the team. And yes, as we enter the year, our guidance does assume $300 million in debt issuance, and we really are constantly monitoring the debt and equity markets, remaining flexible. And while we assume debt issuance, we're monitoring the cost of that debt versus cost of equity. Ideally, we're in a situation where we can toggle back and forth and have a balanced approach. But, you know, in guidance, we contemplate debt. We have plenty of room on the balance sheet to fund the opportunities that come our way this year between development starts and acquisitions. So we could certainly issue debt or debt and equity beyond the $300 million, and we also have plenty of capacity on our bank credit facilities.
Staci Tyler: Sure. First of all, thanks, Brandon. Appreciate that. Excited for the team. And yes, as we enter the year, our guidance does assume $300 million in debt issuance, and we really are constantly monitoring the debt and equity markets, remaining flexible. And while we assume debt issuance, we're monitoring the cost of that debt versus cost of equity. Ideally, we're in a situation where we can toggle back and forth and have a balanced approach. But, you know, in guidance, we contemplate debt. We have plenty of room on the balance sheet to fund the opportunities that come our way this year between development starts and acquisitions. So we could certainly issue debt or debt and equity beyond the $300 million, and we also have plenty of capacity on our bank credit facilities.
Speaker #10: ?
Speaker #4: all , First of Sure . thanks , Brendan . Appreciate
Speaker #4: And yes , as we our guidance enter the does 300 million in debt assume issuance really are we constantly and equity . flexible .
Speaker #4: And yes , as we our guidance enter the does 300 million in debt assume issuance really are we constantly pipeline and while debt issuance , we're monitoring remaining assume cost of markets monitoring the equity .
Speaker #4: Versus a situation, ideally, we're in where we can debt forth and have a balanced approach. But guidance, we're in debt.
Speaker #4: We of room on contemplate the have plenty , you know , opportunities that the come our way . year . Between and This acquisitions .
Speaker #4: We of room on contemplate the have plenty , you know , opportunities that the come our way . development to So we issue debt or debt and beyond could the certainly we equity 300 million .
Staci Tyler: I mean, at year-end, we had less than $20 million drawn, so over $650 million available. So we can immediately fund those opportunities that, you know, we think make strategic sense for the company, and then we can either issue debt or equity beyond that. But right now, we're around 3 times debt to EBITDA. So when we think about the strength of our balance sheet, we have a lot of dry powder. You know, sub 5 debt to EBITDA would be a long-term range that we would want to stay in. But even with the debt that we have contemplated, we're still in the low 3s as we think through the end of the year. So plenty of capacity if we were to find additional opportunities.
Staci Tyler: I mean, at year-end, we had less than $20 million drawn, so over $650 million available. So we can immediately fund those opportunities that, you know, we think make strategic sense for the company, and then we can either issue debt or equity beyond that. But right now, we're around 3 times debt to EBITDA. So when we think about the strength of our balance sheet, we have a lot of dry powder. You know, sub 5 debt to EBITDA would be a long-term range that we would want to stay in. But even with the debt that we have contemplated, we're still in the low 3s as we think through the end of the year. So plenty of capacity if we were to find additional opportunities.
Speaker #4: also have plenty of capacity on credit facilities . At year end , we had less And than drawn . So 20 million our bank over 650 million can .
Speaker #4: available . So Immediately those fund opportunities that you that , know , we think make strategic we company . And then we can either debt or equity sense beyond now we're around that .
Speaker #4: EBITDA . So when we think about the strength of our balance sheet , have a dry lot of powder . , You five debt to EBITDA sub be we we a long term would range that we would want to stay in .
Speaker #4: Even with that we have contemplated, we're still in the low threes as we issue end of the year. So plenty of capacity.
Staci Tyler: So it's really not that we have capital constraints, it's more of the opportunities that we find, and that's what the teams are working hard to find those opportunities that make sense. And with accretive acquisitions on day one, we can certainly enjoy using that dry powder to continue to grow earnings.
Staci Tyler: So it's really not that we have capital constraints, it's more of the opportunities that we find, and that's what the teams are working hard to find those opportunities that make sense. And with accretive acquisitions on day one, we can certainly enjoy using that dry powder to continue to grow earnings.
Speaker #4: If we find additional were to it's really not that we opportunities , capital constraints . of the opportunities that we find have It's more hard to that's what to find those opportunities that make sense .
Speaker #4: And with a creative acquisitions . on day one , And and can certainly using continue to that grow earnings . Great . powder to Thanks , enjoy .
Operator: Great.
Brendan Lynch: Great.
Staci Tyler: Thanks, Brandon.
Staci Tyler: Thanks, Brandon.
Speaker #4: we Brendan
Operator: Thank you. The next question comes from Todd Thomas from KeyBanc Capital Markets. Please go ahead.
Operator: Thank you. The next question comes from Todd Thomas from KeyBanc Capital Markets. Please go ahead.
[Analyst] (KeyBanc Capital Markets): Hi, thanks. Good morning. Appreciate all the commentary around development leasing in the quarter and the prospect pipeline. Sounds encouraging. What's assumed in guidance in terms of development lease-up, both on assets already converted, you know, including Horizon West, perhaps, and then, you know, what about the Q1 and Q2 scheduled conversions? You know, how are you thinking about the lease-up and sort of what's included in the guidance?
Todd Thomas: Hi, thanks. Good morning. Appreciate all the commentary around development leasing in the quarter and the prospect pipeline. Sounds encouraging. What's assumed in guidance in terms of development lease-up, both on assets already converted, you know, including Horizon West, perhaps, and then, you know, what about the Q1 and Q2 scheduled conversions? You know, how are you thinking about the lease-up and sort of what's included in the guidance?
Speaker #1: you . The Thank question comes from Thomas from next KeyBanc Todd Capital Markets . Please
Speaker #1: .
Speaker #11: Thanks . Good Hi . morning . the around development quarter and the in the prospect commentary . Sounds encouraging dry assumed in in terms of guidance development lease up both on .
Speaker #11: assets already You know , converted . West What's perhaps . you know And then , what about the one Q scheduled conversions ? How are you thinking about the lease and sort of up included in the ?
Speaker #11: assets already You know , converted . West What's perhaps . you know And then , what about the one Q scheduled conversions ? How are you thinking about the lease and sort of up included in the what's
Marshall Loeb: Hey, Todd. Good morning. It's Marshall. For the year, we have around $0.07 of spec development leasing, kind of assumed in our budget. And that kind of mirrors our starts this year as well, and that it's pretty back-end weighted. So we're low the first two quarters of the year, and then it picks up in Q3 and Q4. And yeah, and so there's—we've got some time to identify. We've got some leases signed, obviously, in Q4, therefore getting those tenants in and the build-out finished and things like that, but at least those are signed, and it's more construction.
Marshall Loeb: Hey, Todd. Good morning. It's Marshall. For the year, we have around $0.07 of spec development leasing, kind of assumed in our budget. And that kind of mirrors our starts this year as well, and that it's pretty back-end weighted. So we're low the first two quarters of the year, and then it picks up in Q3 and Q4. And yeah, and so there's—we've got some time to identify. We've got some leases signed, obviously, in Q4, therefore getting those tenants in and the build-out finished and things like that, but at least those are signed, and it's more construction.
Speaker #2: Todd good morning . It's Horizon Marshall
Speaker #12: For the year . We have
Speaker #12: around $0.07 of spec . development leasing kind assumed in our And and that's kind of starts this mirrors our year as well . And then it's pretty back end So weighted .
Speaker #12: we're low . The two quarters of the year . And then budget . it picks in third and fourth quarter . And And so we've got some to some identify .
Marshall Loeb: But in terms of landing new tenants, getting them in, really the impact will be in Q3 and Q4, and that's, you know, if I'm an optimist, that's also gives us a chance where we could get ahead of this year's budget.
Marshall Loeb: But in terms of landing new tenants, getting them in, really the impact will be in Q3 and Q4, and that's, you know, if I'm an optimist, that's also gives us a chance where we could get ahead of this year's budget.
Speaker #12: fourth quarter that those tenants build finished and things we're getting like that . obviously in But at signed and it's those are out more construction .
Speaker #12: terms But in of landing new getting tenants , them in third be in impact will that's , leases optimist , that's gives us a get ahead of this chance if I'm an .
[Analyst] (KeyBanc Capital Markets): Okay. The $0.07 is all new incremental leasing or related to new incremental leasing? Or is some of that-
Todd Thomas: Okay. The $0.07 is all new incremental leasing or related to new incremental leasing? Or is some of that-
Marshall Loeb: Yes
Marshall Loeb: Yes
[Analyst] (KeyBanc Capital Markets): ... from the Q4 leasing that'll come online late in the year, though?
Todd Thomas: ... from the Q4 leasing that'll come online late in the year, though?
Speaker #11: The
Speaker #11: $0.07 is all incremental leasing new or related to new incremental year's
Marshall Loeb: It would be new spec. If you said how much speculative leasing do you have in this year's budget, it's $0.07 of the $9.50, and that's back half of the year. Does that make sense?
Marshall Loeb: It would be new spec. If you said how much speculative leasing do you have in this year's budget, it's $0.07 of the $9.50, and that's back half of the year. Does that make sense?
Speaker #11: .
Speaker #11: that quarter from the that will come online late leasing year ?
Speaker #12: It's the $0.07 of that's year . That sense .
Brent Wood: Okay. Yep, got it. That's helpful. Thank you.
Todd Thomas: Okay. Yep, got it. That's helpful. Thank you.
Marshall Loeb: Sure.
Marshall Loeb: Sure.
Operator: Thank you. The next question comes from Rich Anderson from Cantor Fitzgerald. Please go ahead.
Operator: Thank you. The next question comes from Rich Anderson from Cantor Fitzgerald. Please go ahead.
Speaker #11: Got it . That's helpful .
Speaker #11: you Yep . back
[Analyst] (Evercore ISI): Hey, thanks. Good morning, and congrats, everybody. So Marshall, every brain has four lobes, so I wanna get to one or two of Marshall lobes. And when you're thinking about, you know, guidance going forward, last year at this time, it was $8.80 to $8.90. You did $8.95, so you beat that by $0.10. You beat same-store NOI by 100 basis points, ultimately, versus the initial guidance. So, that year, last year, required hopscotching through Liberation Day, new politics, and so on. So, you know, when you think about the forward view today, I imagine you feel more confident than you did a year ago today.
Rich Anderson: Hey, thanks. Good morning, and congrats, everybody. So Marshall, every brain has four lobes, so I wanna get to one or two of Marshall lobes. And when you're thinking about, you know, guidance going forward, last year at this time, it was $8.80 to $8.90. You did $8.95, so you beat that by $0.10. You beat same-store NOI by 100 basis points, ultimately, versus the initial guidance. So, that year, last year, required hopscotching through Liberation Day, new politics, and so on. So, you know, when you think about the forward view today, I imagine you feel more confident than you did a year ago today.
Speaker #1: next question from . Thank you . The from Cantor Fitzgerald . Anderson ahead .
Speaker #1: next question from . Thank you . The from Cantor Fitzgerald . Anderson ahead . also
Speaker #13: Hey , thanks . morning . And everybody So Marshall , brain every lobes . has four So I want to Good get to .
Speaker #13: Marshall Loeb 1 or 2 of you're . When thinking about , you know going forward . Last time , year at this was 880 to 890 .
Speaker #13: You did 895 . it So you beat that by $0.10 . You You same store NOI by 100 basis points . Ultimately , the initial versus guidance .
Speaker #13: So and that year last when you're hopscotching year how hopscotch . Yeah . Hopscotching through new Liberation day on . and so So you think about the politics forward view today , I imagine you feel confident than you did a year ago more what's the about reality setting your in mind guidance with perhaps And a cleaner sort of runway ?
[Analyst] (Evercore ISI): What, what's the reality about setting guidance in your mind, with perhaps a cleaner sort of runway? You know, is there an element of conservatism? Do you kind of put yourself in a position to hopefully have a beat and raise type of year? Like, what's the reality factor around setting guidance today with, you know, hoping to expand upon it as the year progresses? Thanks.
Rich Anderson: What, what's the reality about setting guidance in your mind, with perhaps a cleaner sort of runway? You know, is there an element of conservatism? Do you kind of put yourself in a position to hopefully have a beat and raise type of year? Like, what's the reality factor around setting guidance today with, you know, hoping to expand upon it as the year progresses? Thanks.
Speaker #13: know , is there know , when you element of an You conservatism ? Do you kind of put yourself in a position hopefully have a to beat and raise year , like , how does how does what's the reality type of around setting today with , you know , to hoping expand upon it as the year progresses ?
Marshall Loeb: Hey, Rich. Good morning. It's Marshall. Yeah, I don't know that I have a frontal or a rear lobe, actually, which is just a last name, but I appreciate the creativity. You know, on our budgets, they bubble up kind of suite by suite from the field. So we'll look rather than corporate budgeting and saying, "Hey, here's what you need to do," that may or may not be realistic. So that's kind of always been our approach. They know what they can do, and then the regionals will challenge them on the budget to try to make sure it's not either. And then you kind of get to know personalities. I could one day over a beer, I can tell you who's conservative, who's aggressive, and who's usually spot on on their budget and things like that.
Marshall Loeb: Hey, Rich. Good morning. It's Marshall. Yeah, I don't know that I have a frontal or a rear lobe, actually, which is just a last name, but I appreciate the creativity. You know, on our budgets, they bubble up kind of suite by suite from the field. So we'll look rather than corporate budgeting and saying, "Hey, here's what you need to do," that may or may not be realistic. So that's kind of always been our approach. They know what they can do, and then the regionals will challenge them on the budget to try to make sure it's not either. And then you kind of get to know personalities. I could one day over a beer, I can tell you who's conservative, who's aggressive, and who's usually spot on on their budget and things like that.
Speaker #13: Thanks
Speaker #13: .
Speaker #12: Hey , appreciate the creativity I name , but . You know , on our budgets , we'll . bubble up . They sweet from the field .
Speaker #12: Good morning. It's Marshall. I don't know if I have a frontal or I have a rear lobe, actually a last.
Speaker #12: So we'll look than rather corporate saying , hey , budgeting and you need here's what sweet by to do . may or may not be That that's kind of always been our realistic .
Speaker #12: They approach . know what they can do . And So then the regionals will challenge sure it's budget not them on the to try either .
Speaker #12: And then to make get to know you kind of personalities . I can , you know , one day I can tell you who's conservative , aggressive and who's usually on on their spot and like that .
Marshall Loeb: So I think what I'll compliment the team, we'll scrub the budget and usually push, and it ends up a little higher than what bubbles up from the field, but they do a great job of finding ways to beat it. Once we set it, we, we do talk about what's our budget versus what's our goal, and we'll find ways to beat it. You know, in, in terms of a year ago, we felt, you know, here's what I guess one of the cautionary tale is: We felt good. Last year, fourth quarter was our best, one of our best quarters for leasing. First quarter was really good. It was really Liberation Day. It was kind of, you know, starting April, where it felt like, you know. I remember that first quarter call where people were thinking, Have you stress tested the lower end of your guidance?
Marshall Loeb: So I think what I'll compliment the team, we'll scrub the budget and usually push, and it ends up a little higher than what bubbles up from the field, but they do a great job of finding ways to beat it. Once we set it, we, we do talk about what's our budget versus what's our goal, and we'll find ways to beat it. You know, in, in terms of a year ago, we felt, you know, here's what I guess one of the cautionary tale is: We felt good. Last year, fourth quarter was our best, one of our best quarters for leasing. First quarter was really good. It was really Liberation Day. It was kind of, you know, starting April, where it felt like, you know. I remember that first quarter call where people were thinking, Have you stress tested the lower end of your guidance?
Speaker #12: So I think what I'll the we'll budget and compliment scrub the push , and it ends up a little higher than bubbles up what from the field .
Speaker #12: So I think what I'll the we'll budget and compliment scrub the push , and it ends up a little higher than bubbles up what from the usually who's do a job of finding ways to Once we beat it .
Speaker #12: set it , we what's our about versus what's do talk budget goal . we'll find And ways our to it . in beat terms of a You know , we year felt , you know , here's what I ago , guess where the tale is .
Speaker #12: cautionary We felt team , good last year , fourth quarter our best , one of our best was leasing . quarters for First quarter was really good .
Speaker #12: It was really Liberation was kind of , you know , starting April where it felt like I remember that first quarter , you know , call where people were saying , have you stress lower end of your guidance and things like that ?
Marshall Loeb: Things like that. So, you know, for what it's worth, if we guess this year, I would say, I think people are maybe a little more numb to headlines, but I'm expecting a year where we'll have some tumultuous headlines, and I just hope that doesn't throw long-term capital allocation decisions, meaning development leasing. But I'm expecting it to be, like last year, it was a good year, but it was choppy water for a lot of the time, and I would guess this year, until we get closer to midterms or whatever. But look, at the end of the day, regardless, we got to go lease, you know, this space and this building. It's, I like, kind of simple and straightforward.
Marshall Loeb: Things like that. So, you know, for what it's worth, if we guess this year, I would say, I think people are maybe a little more numb to headlines, but I'm expecting a year where we'll have some tumultuous headlines, and I just hope that doesn't throw long-term capital allocation decisions, meaning development leasing. But I'm expecting it to be, like last year, it was a good year, but it was choppy water for a lot of the time, and I would guess this year, until we get closer to midterms or whatever. But look, at the end of the day, regardless, we got to go lease, you know, this space and this building. It's, I like, kind of simple and straightforward.
Speaker #12: So , you tested the for what it's worth , if guess , I would say this year people are maybe a little I think more Day .
Speaker #12: but I'm expecting have a year some where we'll tumultuous headlines . And I hope that doesn't throw long term capital allocation Meaning development , decisions . leasing .
Speaker #12: but I'm expecting have a year some where we'll tumultuous headlines . And I hope that doesn't throw long term capital allocation Meaning development , decisions .
Speaker #12: To be like last year. It was a year, but it was good choppy water for a lot of the time, and I guess this year—until closer to when we get to midterms or whatever.
Speaker #12: But look , at the end of the day , regardless , we got to go lease . You know , this this building .
Marshall Loeb: We know what our task is to go get the vacancies, especially within our development leasing done, and that'll pull the ticket for the next building as well. So I hope we're being conservative, and I'll let you be the first one to remind me that we were conservative then, if you're right.
Marshall Loeb: We know what our task is to go get the vacancies, especially within our development leasing done, and that'll pull the ticket for the next building as well. So I hope we're being conservative, and I'll let you be the first one to remind me that we were conservative then, if you're right.
Speaker #12: So it's I like how simple and straightforward task is to go we know what our vacancies , within development the ticket for the that'll pull done .
Speaker #12: Next building as well. So, and hope we're being conservative. And I'll let you be the first—we were the one to remind me—that we're being conservative.
[Analyst] (Evercore ISI): Is guidance versus goal, like, what's the typical spread there? This is not a second question, by the way, but I mean-
Rich Anderson: Is guidance versus goal, like, what's the typical spread there? This is not a second question, by the way, but I mean-
Marshall Loeb: Yeah, it's not.
Marshall Loeb: Yeah, it's not.
Speaker #12: Then I right .
[Analyst] (Evercore ISI): Yeah, got it. Yeah.
Rich Anderson: Yeah, got it. Yeah.
Speaker #13: is just
Marshall Loeb: Yeah, no, there's no, there's no increment. They just, you know, look, our comp in the field is set. If you can beat your goals, you know there's a little more incentive, and that's where... But there's no, you know, $0.06, $0.05, anything. It's just, "Hey, this is what we've all signed on to, and so it's your job, one, to deliver it. And then, two, if we can help you or find ways to get a little ahead of it, that's, that's what benefits our shareholders." So how do we, you know, find that window? Really, depending what the market gives. Sometimes it's leaning into development, sometimes it's leaning into acquisitions or buying value add, or being creative and figuring out how to make a lease work that looks like it's about debt or something like that.
Marshall Loeb: Yeah, no, there's no, there's no increment. They just, you know, look, our comp in the field is set. If you can beat your goals, you know there's a little more incentive, and that's where... But there's no, you know, $0.06, $0.05, anything. It's just, "Hey, this is what we've all signed on to, and so it's your job, one, to deliver it. And then, two, if we can help you or find ways to get a little ahead of it, that's, that's what benefits our shareholders." So how do we, you know, find that window? Really, depending what the market gives. Sometimes it's leaning into development, sometimes it's leaning into acquisitions or buying value add, or being creative and figuring out how to make a lease work that looks like it's about debt or something like that.
Speaker #13: goal . Is the guidance typical spread This is not a second question , by the way . But I mean , like . yeah .
Speaker #12: there's no get the just , know look .
Speaker #2: Our comp in the
Speaker #2: if you is said can beat your goals , know you there's a
Speaker #2: that's
Speaker #2: we've all It's on incentive . one to job it . And And then signed can find ways to get a little ahead of it .
Speaker #2: deliver that's what benefits our shareholders . So how you do , you know , find that field pending what the window gives . Sometimes it's leaning development .
Speaker #2: Sometimes it's market leaning into buying value . or creative figuring out how to we make a lease being that looks like it's about debt or It something work that .
Brent Wood: Yeah, I would just add to that, Rich, you know, having been in the field, it gets, you know, I think our midpoint of guidance just a slight bit lower, you know, for 26 than 25. But if you asked us, do we think occupancy would be lower? Not necessarily. But when you get in that 96%, 97% range and you're rolling budgets up, it, you know, it becomes challenging to say, "I'm gonna be 100% leased this year, and everything's gonna go..." And it could, but then as you roll it up organically, being 20 basis points down in that sort of range is really, you know, just a deal going here or there, one way or the other.
Brent Wood: Yeah, I would just add to that, Rich, you know, having been in the field, it gets, you know, I think our midpoint of guidance just a slight bit lower, you know, for 26 than 25. But if you asked us, do we think occupancy would be lower? Not necessarily. But when you get in that 96%, 97% range and you're rolling budgets up, it, you know, it becomes challenging to say, "I'm gonna be 100% leased this year, and everything's gonna go..." And it could, but then as you roll it up organically, being 20 basis points down in that sort of range is really, you know, just a deal going here or there, one way or the other.
Speaker #6: would just add
Speaker #6: to that , Yeah . know , like having been I it it you field , in the our midpoint of guidance a slight bit just lower , 26 and gets , if you 25 .
Speaker #6: lower . Not necessarily . we think that 9,697% range and rolling budgets you're you up , know , becomes challenging to going to be say , I'm But and and everything's going could .
Speaker #6: But then
Speaker #6: organically , being 20 bips down in occupancy would be sort of range is that really you know , a deal going here it other .
Brent Wood: So, I hope, as you said, our trends have been to be a bit ahead of where we are, and we feel like we could do that again. But, you've got to have a starting point somewhere, and obviously, this is the jump out of the gate and, you know, the field just trying to be reasonable with what they're seeing, and then we certainly hope to better it as we go through the year.
Brent Wood: So, I hope, as you said, our trends have been to be a bit ahead of where we are, and we feel like we could do that again. But, you've got to have a starting point somewhere, and obviously, this is the jump out of the gate and, you know, the field just trying to be reasonable with what they're seeing, and then we certainly hope to better it as we go through the year.
Speaker #6: really , have a you've got to just obviously somewhere , and , and we the gate this is jump out of , you know , the and be reasonable seeing .
Speaker #6: there one way or the So I as you said , our trends have been a bit of where ahead we are feel like we could do that again .
Speaker #6: And then we in the field hope to with what we go through the year.
Operator: Thank you. The next question comes from Michael Griffin from Evercore ISI. Please go ahead.
Operator: Thank you. The next question comes from Michael Griffin from Evercore ISI. Please go ahead.
Speaker #13: everybody
[Analyst] (Evercore ISI): Great, thanks. Wanted to circle back on supply and maybe, you know, dig a little deeper. You know, obviously, it feels like maybe there are gonna be some puts and takes of 26, but the outlook feels better, I guess, relative to 2025. But, you know, Marshall, if we do see this inflection point, is there a worry that supply could then follow, precipitously pick back up, and then we're just kind of in the same state we've been in over the past couple of years of overbuilding? Or are there, you know, maybe more onerous, whether it's regulations, cost constraints, kind of governors that would put a, you know, meter on that, I guess, forward future shadow supply?
Michael Griffin: Great, thanks. Wanted to circle back on supply and maybe, you know, dig a little deeper. You know, obviously, it feels like maybe there are gonna be some puts and takes of 26, but the outlook feels better, I guess, relative to 2025. But, you know, Marshall, if we do see this inflection point, is there a worry that supply could then follow, precipitously pick back up, and then we're just kind of in the same state we've been in over the past couple of years of overbuilding? Or are there, you know, maybe more onerous, whether it's regulations, cost constraints, kind of governors that would put a, you know, meter on that, I guess, forward future shadow supply?
Speaker #2: welcome . You're
Speaker #2: .
Speaker #1: Thank you . The next question
Speaker #1: ISI . Please go
Speaker #14: Great . Thanks . I
Speaker #14: Great . Thanks . I
Speaker #14: back on supply and wanted to dig a little . You know , obviously it deeper feels maybe there are going to be to be and takes . 26 .
Speaker #14: back on supply and wanted to dig a little . You know , obviously it deeper feels maybe there are going to be to be and takes .
Speaker #14: point , is worry that there supply like could then follow Pick precipitously ? we're just and then state we've been in over the kind of in years of overbuilding ?
Speaker #14: Or there , maybe more you whether know , it's cost constraints , regulations , kind of governors that would put a , you know , meter guess , forward future that , I supply .
Marshall Loeb: ... Good morning, Michael. I think, you know, and I don't mean to be, but a little bit yes and no, in that I think the no part of my answer, you're right. The getting permits and things, and we've, you know, I've usually attributed it to Amazon. Everybody wants the good or service or package delivered quickly, but no one wants the distribution building in your neighborhood. So we've seen zoning get materially harder and more time consuming when we go through. And so that's what we'll. And as Brent mentioned earlier, the private developers typically aren't structured balance sheet-wise to carry land, carry a construction team, have a permit in hand. So long term, yes, you know, we're a cyclical business. It'll attract capital.
Marshall Loeb: ... Good morning, Michael. I think, you know, and I don't mean to be, but a little bit yes and no, in that I think the no part of my answer, you're right. The getting permits and things, and we've, you know, I've usually attributed it to Amazon. Everybody wants the good or service or package delivered quickly, but no one wants the distribution building in your neighborhood. So we've seen zoning get materially harder and more time consuming when we go through. And so that's what we'll. And as Brent mentioned earlier, the private developers typically aren't structured balance sheet-wise to carry land, carry a construction team, have a permit in hand. So long term, yes, you know, we're a cyclical business. It'll attract capital.
Speaker #2: Michael . morning I Hey , good think , you know little bit . Yes
Speaker #2: no . And that I think the , the no part of and my answer right that getting don't mean to shadow , you're and know , I've usually things and it to . you .
Speaker #2: wants the good or service or delivered Everybody quickly . But one wants the distribution your neighborhood . So no seen building in get materially more time harder consuming .
Marshall Loeb: Where people are making money, other people imitate and jump in, and everyone became an industrial developer last cycle, and we overbuilt. So, so long term, you're right, but I think it's gonna be that... I say longer term, it's gonna be measured in a few years before people can kind of gear back up, get the land, get through permitting. And I know how much we struggle finding good land sites. It will take a while for people to find the site and get through the process.
Marshall Loeb: Where people are making money, other people imitate and jump in, and everyone became an industrial developer last cycle, and we overbuilt. So, so long term, you're right, but I think it's gonna be that... I say longer term, it's gonna be measured in a few years before people can kind of gear back up, get the land, get through permitting. And I know how much we struggle finding good land sites. It will take a while for people to find the site and get through the process. Thankfully, it's something we purposely have, but we have the team, the land, the balance sheet, and the permits in hand, and that will give us, you know, several quarters, if not a couple of years, head start before the local guys start getting land, and they get it permitted, and then flip the land and all the things.
Speaker #2: It'll attract capital people are Other making imitate money . and jump in and people will an industrial everyone became last cycle . And we carry So , so long term .
Speaker #2: You're right . But I think it's going to be that I'll longer term it's say going to be in a few years before of gear can kind back up , people much we get the land , how finding good struggle land sites .
Marshall Loeb: Thankfully, it's something we purposely have, but we have the team, the land, the balance sheet, and the permits in hand, and that will give us, you know, several quarters, if not a couple of years, head start before the local guys start getting land, and they get it permitted, and then flip the land and all the things. So it will get overheated. That's just what we do. But we'll have a pretty long runway before we get to that. And along that way, that's when our mark to market should pick up, and when you'll see our development starts go from $180 million last year, which we scaled back, to hopefully that, you know, wherever the market takes us, $400 million in starts or more.
Marshall Loeb: So it will get overheated. That's just what we do. But we'll have a pretty long runway before we get to that. And along that way, that's when our mark to market should pick up, and when you'll see our development starts go from $180 million last year, which we scaled back, to hopefully that, you know, wherever the market takes us, $400 million in starts or more.
Speaker #2: flip the and all land the things so it will And then get overheated . get it That's just what we do . But that we'll have a runway that .
Speaker #2: And along before that way , that's when our mark market to tick up . And when you'll development should go we get from year , which starts , back to hopefully that , you know , wherever takes us scaled 400 million in starts or more the market
Reid Dunbar: Great. Thanks so much, Marshall. Appreciate it.
Michael Griffin: Great. Thanks so much, Marshall. Appreciate it.
Operator: Thank you. The next question comes from Mike Mueller at JP Morgan. Please go ahead.
Operator: Thank you. The next question comes from Mike Mueller at JP Morgan. Please go ahead.
Speaker #2: .
Speaker #14: Thanks Appreciate it .
Speaker #15: Sure .
Speaker #15: welcome . You're welcome .
[Analyst] (JP Morgan): Yeah, hi. With the expanded management structure, what aspects of your operations do you think you're gonna be better at than before you added the extra depth?
Mike Mueller: Yeah, hi. With the expanded management structure, what aspects of your operations do you think you're gonna be better at than before you added the extra depth?
Speaker #1: from Mike The Mueller at question comes JP Morgan . next ahead we .
Speaker #1: from Mike The Mueller at question comes JP Morgan . next ahead we
Marshall Loeb: All the things I delegated, I guess, would be my answer one. Look, I'm excited. A good question. I'm excited for the team and maybe a little bit. I'll go to the... If you're in a car, I'll go to the rearview mirror and then the windshield. We had not changed our structure, and it's worked, been a little over 20 years, and we were 19 million square feet. And just as the world evolved, and it's gotten more complicated with corporate responsibility, the company's grown. We've took square footage and property-wise, a lot more analysts and things. And so our team was just... We've got a really strong team, and I'll tie that into why we've usually found ways to beat our budget. So I'm excited for all three of them.
Marshall Loeb: All the things I delegated, I guess, would be my answer one. Look, I'm excited. A good question. I'm excited for the team and maybe a little bit. I'll go to the... If you're in a car, I'll go to the rearview mirror and then the windshield. We had not changed our structure, and it's worked, been a little over 20 years, and we were 19 million square feet. And just as the world evolved, and it's gotten more complicated with corporate responsibility, the company's grown. We've took square footage and property-wise, a lot more analysts and things. And so our team was just... We've got a really strong team, and I'll tie that into why we've usually found ways to beat our budget. So I'm excited for all three of them.
Speaker #16: of your aspects operations do you think you're going to be at than better before ? You added the depth .
Speaker #16: extra
Speaker #2: would my guess my answer be one I look I'm Good question . I excited for team and and maybe a little bit I'll the the if you're in a go to go to the and then the mirror windshield .
Speaker #2: We had not changed our structure and it's worked , but a little over 20 years , and we were 19,000,000ft² . And just as the evolved and has gotten more rear view corporate we , the company has grown , we've picked square footage property responsibility , wise a lot more analysts and things .
Speaker #2: world was probably I'll put it on myself part time . COO last few . And got a great for the years background and tied into zoom road calls , Non-deal , conferences .
Speaker #2: And so our just we've team now . I'll why we've tie that strong into got a usually found ways to beat our budgets .
Speaker #2: And so our just we've team now . I'll why we've tie that strong into got a usually found ways to beat really I'm excited all three of them .
Marshall Loeb: I was probably, I'll put it on myself, part-time COO for the last few years, and Brent's got a great background, and just the more I got tied into Zoom calls, non-deal road shows, conferences, it's harder to just go sit in a suburban with the brokers and stare at a piece of land in Austin, Texas, and all the fun things that we do. So I'm excited about that end. Excited for Staci, who's, you know, been with us for, as young as she is, an awful long time and taking on more and more. And then Reid, we've done so well in the central region. We said, "Okay, let's get Reid involved with..." as you've seen us kind of work through our markets where, you know, look, I'm excited.
Marshall Loeb: I was probably, I'll put it on myself, part-time COO for the last few years, and Brent's got a great background, and just the more I got tied into Zoom calls, non-deal road shows, conferences, it's harder to just go sit in a suburban with the brokers and stare at a piece of land in Austin, Texas, and all the fun things that we do. So I'm excited about that end. Excited for Staci, who's, you know, been with us for, as young as she is, an awful long time and taking on more and more. And then Reid, we've done so well in the central region. We said, "Okay, let's get Reid involved with..." as you've seen us kind of work through our markets where, you know, look, I'm excited.
Speaker #2: I All Great .
Speaker #2: harder to just go sit in It's in a the suburban with the and stare shows of land in Austin , Thank you . delegated I Yeah .
Speaker #2: harder to just go sit in It's in a the suburban with the and stare shows of land in Austin , Thank you . delegated I Yeah . Marshall .
Speaker #2: and all the fun that we we do . So I'm excited about that . And things brokers excited for Stacy , that us for as young as she is , an awful long time .
Speaker #2: And more and more been with and and then Reid , we've pretty long done so well in the central region . We said , let's get Reid involved with okay , is you've seen kind of this through our work markets you know , look , where , excited .
Marshall Loeb: We're talking with one of your peers yesterday, where we exited Santa Barbara. We're maybe a few weeks away from exiting Fresno. We've sold 4 of our 5 buildings in Jackson, and Reid took us into Nashville, and John Coleman and team into Raleigh of... We spend a lot of time talking about where do we want our capital allocation and researching where are those markets we can create a lot of value with development. But then the other way we can create value for our shareholders is where do those rents go over time, and where is population moving, and land constraints, and things like that. So just as we grow our... You know, it's gotten, which is, you know, comes with growth, more complicated, and we said, "Okay, let's divide this up," and it's just time to do it.
Marshall Loeb: We're talking with one of your peers yesterday, where we exited Santa Barbara. We're maybe a few weeks away from exiting Fresno. We've sold 4 of our 5 buildings in Jackson, and Reid took us into Nashville, and John Coleman and team into Raleigh of... We spend a lot of time talking about where do we want our capital allocation and researching where are those markets we can create a lot of value with development. But then the other way we can create value for our shareholders is where do those rents go over time, and where is population moving, and land constraints, and things like that. So just as we grow our... You know, it's gotten, which is, you know, comes with growth, more complicated, and we said, "Okay, let's divide this up," and it's just time to do it.
Speaker #2: We're talking with yesterday one of your peers where we exited Barbara , where Brent's weeks away from exiting Fresno we've five buildings sold four of our , Jackson and Reid us into , you know , Nashville Santa .
Speaker #2: John Coleman and into team Raleigh of we spent time talking about took where do and want our allocation where those markets we can of a lot value with development , but then the other way we can And create value for our shareholders is researching rents time , and population and land where does where go that .
Speaker #2: So just as we grow it's gotten which know , comes with growth more is , you complicated . And we said , let's divide up .
Marshall Loeb: Every 20 years, we'll rethink our structure a little bit, so we'll get a lot more operating efficiencies in.
Marshall Loeb: Every 20 years, we'll rethink our structure a little bit, so we'll get a lot more operating efficiencies in.
Brent Wood: Yeah. I would just jump in and add to that. Like Marshall said, as we've grown as a company, everything we've done, kind of, which is fun, we're very horizontal, it happens organically, and the addition of myself and Reid kind of expanding roles, you know, I view it more as just trying to help, not change of strategy or anything, but help support our team in the field and be a little more communicative from corporate to the team in the field. And look, when you're on the ground in development leasing and all the things you're doing, and our team does a great job of that. But for us, for three, also trying to help think strategically, think long term, think runway, you know, where do we have more opportunity?
Brent Wood: Yeah. I would just jump in and add to that. Like Marshall said, as we've grown as a company, everything we've done, kind of, which is fun, we're very horizontal, it happens organically, and the addition of myself and Reid kind of expanding roles, you know, I view it more as just trying to help, not change of strategy or anything, but help support our team in the field and be a little more communicative from corporate to the team in the field. And look, when you're on the ground in development leasing and all the things you're doing, and our team does a great job of that. But for us, for three, also trying to help think strategically, think long term, think runway, you know, where do we have more opportunity?
Speaker #2: And it's just time to do it . Every 20 years we'll rethink our bit . So we've got a lot more our , you know , operating efficiencies in .
Speaker #6: and the addition of of myself and Reid and kind of expanding roles , you know , I view it more as just trying help , not to change of anything , but strategy or help support our team in the field and be a little more corporate to , to the team in the field communicative look , when you're .
Speaker #6: And on the and ground from from leasing and development , all the doing , and does a great job of that . also trying to our team think strategically , things you're think long term , think runway .
Brent Wood: You know, communicate capital access or limitations from corporate to the field. So just, you know, better with that, more efficiencies, more perhaps analytical review within our portfolio and looking at trends and those things. So just sort of an exciting time to take it the next step and put ourselves in a better position to keep doing what we do, but do it maybe a little better, more efficiently, and, you know, lean into it just as well as we can.
Brent Wood: You know, communicate capital access or limitations from corporate to the field. So just, you know, better with that, more efficiencies, more perhaps analytical review within our portfolio and looking at trends and those things. So just sort of an exciting time to take it the next step and put ourselves in a better position to keep doing what we do, but do it maybe a little better, more efficiently, and, you know, lean into it just as well as we can.
Speaker #6: know , where You have But for us , opportunity ? You know , communicate capital access or limitations from corporate to the field .
Speaker #6: So just you know better with that . More efficiencies , more more perhaps analytical review our within portfolio . trends and those things .
Speaker #6: So just sort of an exciting time to to take the next step and put ourselves in a keep doing what we do , but do it maybe a little better , more efficiently , you know , lean into it just as , as well as we can .
Speaker #6: So just sort of an exciting time to to take the next step and put ourselves in a keep doing what we do , but do it maybe a little better , more efficiently , you know , lean into it better
Marshall Loeb: You know, I apologize. I agree with Brent, totally. I should have said, I talked about the rearview mirror. The other reason that led us to this was that, look, we talk about this inflection point, and I think if, you know, pick whatever. So if we were in a classroom, you can see it coming. You can see the low supply, you can see demand, you can see the delay in supply coming. One of the goals, as we talked about, is, while we have the land we do and every, the balance sheet, we really wanna step in and, you know, make hay while the sun shines when you're in a cyclical business. We're gonna stay disciplined with our new investments, but we really wanted to have the right team in place and the right structure in place.
Marshall Loeb: You know, I apologize. I agree with Brent, totally. I should have said, I talked about the rearview mirror. The other reason that led us to this was that, look, we talk about this inflection point, and I think if, you know, pick whatever. So if we were in a classroom, you can see it coming. You can see the low supply, you can see demand, you can see the delay in supply coming. One of the goals, as we talked about, is, while we have the land we do and every, the balance sheet, we really wanna step in and, you know, make hay while the sun shines when you're in a cyclical business. We're gonna stay disciplined with our new investments, but we really wanted to have the right team in place and the right structure in place.
Speaker #2: You
Speaker #2: apologize , I agree with Brent totally . and should have added , I the rear view mirror . talked about The other that led us to I this was reason that talk about this point , and , look , we I think know , you if pick whatever .
Speaker #2: If we were in a classroom , you can see it coming , you can see the low you can see can see demand , you the delay in supply coming with goals is we talked one of the about is we while supply , we have the land we do and sheet , we really want to step in balance and , you know , make hay while the sun shines .
Speaker #2: When cyclical business, we're going to stay disciplined with our new investments. But we really wanted to have the right team, in the right structure, in place.
Marshall Loeb: We've grown a lot, and growth, just for growth's sake, is never a goal of ours, but we really think we're gonna have a really good opportunity as the market stabilizes, to really take advantage of our competition lagging behind us with our skill set, and we needed to restructure our team a little bit so that we could move more quickly on those opportunities.
Marshall Loeb: We've grown a lot, and growth, just for growth's sake, is never a goal of ours, but we really think we're gonna have a really good opportunity as the market stabilizes, to really take advantage of our competition lagging behind us with our skill set, and we needed to restructure our team a little bit so that we could move more quickly on those opportunities.
Speaker #2: We've grown a the growth just lot and growth's sake is never for a ours , but we really you're in a think we're going to have a really good opportunity as the market goal of to really take our competition , behind us with our advantage of skill set .
[Analyst] (Mizuho): Got it. Okay, thank you.
Mike Mueller: Got it. Okay, thank you.
Speaker #2: And we needed to restructure our team a bit so that we move more quickly on those opportunities.
Marshall Loeb: You're welcome.
Marshall Loeb: You're welcome.
Speaker #2: could move
Operator: Thank you. Next question comes from Vikram Malhotra at Mizuho. Please go ahead.
Operator: Thank you. Next question comes from Vikram Malhotra at Mizuho. Please go ahead.
Speaker #16: Okay . Thank you .
[Analyst] (Mizuho): Morning. I just wanted to clarify sort of two things, and maybe you can expand. I guess, one, you've started new developments. You've talked about, like, an improving cycle, and trying to take advantage of, you know, when things turn further. I'm hoping you can give maybe more granular anecdotes, either by tenants or from peers, your, your folks in the field, on, like, what's actually turning, kind of this new upcycle. And then related to that, just where your thoughts are on absolute rents in the Sun Belt. You've had this fantastic run, and from an occupancy cost standpoint, I'm wondering, is there a chance there's a sticker shock just from the absolute rent levels we've seen? Thanks.
Vikram Malhotra: Morning. I just wanted to clarify sort of two things, and maybe you can expand. I guess, one, you've started new developments. You've talked about, like, an improving cycle, and trying to take advantage of, you know, when things turn further. I'm hoping you can give maybe more granular anecdotes, either by tenants or from peers, your, your folks in the field, on, like, what's actually turning, kind of this new upcycle. And then related to that, just where your thoughts are on absolute rents in the Sun Belt. You've had this fantastic run, and from an occupancy cost standpoint, I'm wondering, is there a chance there's a sticker shock just from the absolute rent levels we've seen? Thanks.
Speaker #15: welcome You're .
Speaker #1: from Thank you . question The next Vikram comes Malhotra at Mizuho . ahead
Speaker #17: wanted to clarify , sort of two things . And maybe you can I guess started new developments . You've talked about like an one , you've improving and trying to take cycle advantage of , you know , when things turn further .
Speaker #17: I'm hoping you can give maybe .
Speaker #17: anecdotes , either by tenants or from your folks in the field on like , what's kind of this turning new upcycle and then actually related .
Speaker #17: where are on your thoughts in the rents Sunbelt absolute . You've fantastic an had this occupancy cost standpoint , I'm wondering , is there a chance there's a sticker shock just from the absolute rent Morning .
Marshall Loeb: Yeah, maybe a couple of thoughts I'll try and Vikram, good morning. That, you know, what makes me more excited, and again, what I would say on the development side, it's one, the quantity of development leasing we got. You know, I mentioned over half of our annual total was in Q4. The sizes of those leases were larger, as Reid mentioned, than. So we're seeing tenants under 50,000 sq ft, but now we actually got some larger tenants and people being more comfortable with their capital allocation and kind of layering in on top of that. It's abnormal for us, or it's atypical for us to have as many large tenants. What, 92% of our rents come from tenants under 200,000 sq ft.
Marshall Loeb: Yeah, maybe a couple of thoughts I'll try and Vikram, good morning. That, you know, what makes me more excited, and again, what I would say on the development side, it's one, the quantity of development leasing we got. You know, I mentioned over half of our annual total was in Q4. The sizes of those leases were larger, as Reid mentioned, than. So we're seeing tenants under 50,000 sq ft, but now we actually got some larger tenants and people being more comfortable with their capital allocation and kind of layering in on top of that. It's abnormal for us, or it's atypical for us to have as many large tenants. What, 92% of our rents come from tenants under 200,000 sq ft.
Speaker #17: ? Thanks .
Speaker #15: Yeah , maybe a couple of thoughts . I'll try . And Vikram . morning . That
Speaker #15: .
Speaker #2: What makes it good for me, more again, what I’m excited about, it’s one, the quantity of the leasing we got. You know, I mentioned that over half our total was annual, just in the fourth quarter.
Speaker #2: The sizes of those leases were larger mentioned , Reid than than . So we're . As seeing 50,000ft . But now we actually under got some larger tenants being more their capital comfortable with allocation and kind of in on top of that .
Speaker #2: layering It's for us or its abnormal for atypical us to have as many large tenant . What 92% of our rents come from tenants under For us to 200,000ft² ?
Marshall Loeb: For us to have 6 to 8 to 9 conversations going on with, "We'll take a couple of your buildings," or, "Can you build me a building?" and things like that, and they're not all over 200,000 feet, but they're all certainly north of 100. We won't get all of those, and some will be put on hold and every other reason, but just the quantity of those decisions and really the diverse tenant base, and diverse geography.
Marshall Loeb: For us to have 6 to 8 to 9 conversations going on with, "We'll take a couple of your buildings," or, "Can you build me a building?" and things like that, and they're not all over 200,000 feet, but they're all certainly north of 100. We won't get all of those, and some will be put on hold and every other reason, but just the quantity of those decisions and really the diverse tenant base, and diverse geography. You know, if it was all happening in Florida, it might be one thing, but it's really across all three of our regions in multiple markets, and you kind of go, "Okay, it feels like the ice is thawing a little bit." If we got this many finished, and we've got this much more dialogue going from the field, where they're, you know, when we talk to them, we'll say, "Hey, I got a call, and someone wants a 150,000-foot pre-lease," you know, there's a lot to work through. So that makes us feel a little better. And then we do look each quarter, while we lose tenants, kind of going on the absolute rent, where we still have that embedded growth.
Speaker #2: have six to 8 to 9 conversations going on with take a , we'll your buildings , couple of or can people build me a building and things And they're like that ?
Speaker #2: not all over they're all north of 100 . And we won't get all of those . certainly And some will be put on hold every other .
Speaker #2: reason And but the quantity of those decisions really , the diverse tenant and and geography , base was know , if it all Florida , in happening it it's thing , but really across all three of our regions and multiple and markets , of go , it feels okay , like the ice is thawing a little bit .
Marshall Loeb: You know, if it was all happening in Florida, it might be one thing, but it's really across all three of our regions in multiple markets, and you kind of go, "Okay, it feels like the ice is thawing a little bit." If we got this many finished, and we've got this much more dialogue going from the field, where they're, you know, when we talk to them, we'll say, "Hey, I got a call, and someone wants a 150,000-foot pre-lease," you know, there's a lot to work through. So that makes us feel a little better. And then we do look each quarter, while we lose tenants, kind of going on the absolute rent, where we still have that embedded growth.
Speaker #2: If we got this many finished, and we've got this dialogue going from the field there, you know, when we talk to—got a where someone calls and wants a 150,000-foot pre-lease.
Speaker #2: You know , there's a lot to work through . So that makes say , hey , I better . look each we do quarter us feel while we tenants kind of going on the you much more rent And then where we have that absolute embedded growth .
Marshall Loeb: If there's sticker shock, all of our tenants, even renewals, have a tenant rep broker, so that's usually where they'll get the sticker shock if it does come, before they talk to us. We don't lose tenants over rent. It's usually a consolidation or leaving the market or every once in a while, a bankruptcy or something like that. You know, we can only charge market rents or maybe a little above market rents if we're doing a good job managing the park and things like that. But thankfully, you know, the rents are the rents in the market, and we're, and look, and we're a really cheap alternative as people move to faster and faster service. I think if you don't have that last mile distribution hub, you may can cut costs, but you're gonna cut your service so badly.
Marshall Loeb: If there's sticker shock, all of our tenants, even renewals, have a tenant rep broker, so that's usually where they'll get the sticker shock if it does come, before they talk to us. We don't lose tenants over rent. It's usually a consolidation or leaving the market or every once in a while, a bankruptcy or something like that. You know, we can only charge market rents or maybe a little above market rents if we're doing a good job managing the park and things like that. But thankfully, you know, the rents are the rents in the market, and we're, and look, and we're a really cheap alternative as people move to faster and faster service. I think if you don't have that last mile distribution hub, you may can cut costs, but you're gonna cut your service so badly.
Speaker #2: there's If sticker shock , all of our tenants even renewals have a tenant rep broker . So that's usually where they'll get sticker come it does before talk to they shock .
Speaker #2: And we lose rent, tenants if—over consolidation or leaving the market for a while, it's a once in a—like, something like that.
Speaker #2: every usually You know , we market rents or can maybe a little only bankruptcy or market rents above if we're doing job managing the a good park and things like that .
Speaker #2: But thankfully , you the rents rents in the we're market and and we're and really cheap . Alternative is know , people move to faster and faster service .
Speaker #2: I think if you don't have that last mile distribution hub , you may can cut costs , but you're cut your service . may you So badly if your Trane air conditioning or Home those one of have a low cost structure , but your revenue is going to be falling even faster
Marshall Loeb: If you're Trane air conditioning or Home Depot or one of those, you can have a low-cost structure, but your revenue is gonna be falling even faster.
Marshall Loeb: If you're Trane air conditioning or Home Depot or one of those, you can have a low-cost structure, but your revenue is gonna be falling even faster.
Brent Wood: Yeah, and I would just add to that, Vikram, that, you know, as far as absolute rents, and certainly rents have had, you know, significant increase, you know, say, even post-COVID, but really supply and demand, right? So I mean, the demand, you know, the options are limited. So, you know, if you need the space, you've got to pay to get it. I think one important thing to note about this cycle of sorts is that the vacancy is much tighter than we've seen in some of the other cycles. If you go back to Great Financial Crisis, you started seeing vacancies get into the 12, 14%. Like, I think our operating portfolio maybe got down to 88% or something, and certainly we've not seen anything near that level.
Brent Wood: Yeah, and I would just add to that, Vikram, that, you know, as far as absolute rents, and certainly rents have had, you know, significant increase, you know, say, even post-COVID, but really supply and demand, right? So I mean, the demand, you know, the options are limited. So, you know, if you need the space, you've got to pay to get it. I think one important thing to note about this cycle of sorts is that the vacancy is much tighter than we've seen in some of the other cycles. If you go back to Great Financial Crisis, you started seeing vacancies get into the 12, 14%. Like, I think our operating portfolio maybe got down to 88% or something, and certainly we've not seen anything near that level.
Speaker #6: really demand . supply and mean , So I you know , if you need space , you've got to the pay to get it .
Speaker #6: I think thing to note about Vikram , sorts one important the vacancy is that cycle of is much tighter some of the cycles .
Speaker #6: seen in great financial crisis . You started seeing vacancies get other the 12 , 14% , like I think operating go back to portfolio got down to 88% into certainly we've not seen near But the point being is , even when right now , I you look mentioned level .
Brent Wood: But the point being is, even when you look right now, I mentioned earlier in multi-tenant vacancy being 4, 4.5%, well, if you say things have been, quote, "slow" over the last few years, and you're still running at a 4.5% vacancy, there's not... Again, we're talking about not a huge pivot or tsunami that we need to kind of turn and get things, you know, to where, where that you could push, even push on rents. Because, you know, we don't have that wall of vacancy that got dumped into the market, and mainly because capital got pulled back, and so supply began to come down even when leasing was still strong. So we don't have that wall of vacancy to work your way through to get back to a good, stable market.
Brent Wood: But the point being is, even when you look right now, I mentioned earlier in multi-tenant vacancy being 4, 4.5%, well, if you say things have been, quote, "slow" over the last few years, and you're still running at a 4.5% vacancy, there's not... Again, we're talking about not a huge pivot or tsunami that we need to kind of turn and get things, you know, to where, where that you could push, even push on rents. Because, you know, we don't have that wall of vacancy that got dumped into the market, and mainly because capital got pulled back, and so supply began to come down even when leasing was still strong. So we don't have that wall of vacancy to work your way through to get back to a good, stable market.
Speaker #6: our vacancy being for 4.5% . have been say things slow over the last and you're still running to 4.5% not there's again , vacancy , about not we're talking a huge pivot or tsunami that we need to kind turn and get of things .
Speaker #6: You know , to where you could push , even push rents you know , we don't because , wall of that got the market mainly .
Speaker #6: where we've We we've kind a of sideways good have maintained uptick on room to there's stable . push rents market if we you know , versus , relative dumped into I think today .
Speaker #6: capital got back . And so pulled supply began to , even when leasing strong . come down wall of work your to get back to way through to a good vacancy that , stable market .
Brent Wood: Thankfully, we've kind of maintained a sideways, good, stable market. If we uptick, I think there's even room to push rents versus, you know, relative to sticker shock of where they are today. So time will tell, but as Marsh said, much more time spent in our shop talking about demand relative to rents.
Brent Wood: Thankfully, we've kind of maintained a sideways, good, stable market. If we uptick, I think there's even room to push rents versus, you know, relative to sticker shock of where they are today. So time will tell, but as Marsh said, much more time spent in our shop talking about demand relative to rents.
Speaker #6: So shock or where time will tell . But as Mark they are to more spent in talking about our shop thankfully to rents .
Marshall Loeb: ... Makes sense, and, congrats, everyone, on the new roles. You know, Reid, Brent, Staci, look forward to working with all of you in the, in the, in your new roles.
Vikram Malhotra: ... Makes sense, and, congrats, everyone, on the new roles. You know, Reid, Brent, Staci, look forward to working with all of you in the, in the, in your new roles.
Speaker #17: Makes congrats And everyone on the roles new Brent . You know read Stacy . Look forward to working with all of you in new in your roles .
Staci Tyler: Thank you.
Staci Tyler: Thank you.
Reid Dunbar: Thank you.
Reid Dunbar: Thank you.
Operator: Thank you. The next question comes from Eric Borden from BMO Capital Markets. Please go ahead.
Operator: Thank you. The next question comes from Eric Borden from BMO Capital Markets. Please go ahead.
Speaker #4: Thank
Speaker #4: you .
Speaker #18: Thank you
[Analyst] (BMO Capital Markets): Hey, good morning, everyone, and congrats. I just wanted to circle back to the occupancy. You know, I appreciate your comments on the decline related to a couple leases in 2026. But just curious, how much of the expected decline is in Q1 is related to move-outs versus development projects being added to the operating portfolio?
Eric Borden: Hey, good morning, everyone, and congrats. I just wanted to circle back to the occupancy. You know, I appreciate your comments on the decline related to a couple leases in 2026. But just curious, how much of the expected decline is in Q1 is related to move-outs versus development projects being added to the operating portfolio?
Speaker #18: .
Speaker #1: Thank you. The next question comes from Eric Borden with BMO Capital Markets.
Speaker #19: morning , Hey , good everyone . And
Speaker #19: . I just wanted to circle back to the occupancy . appreciate your comments on You know , I decline related to a leases in just much of the expected decline curious how is couple first quarter as in the related to move question versus projects being operating to the portfolio 26 . ?
Speaker #19: . I just wanted to circle back to the occupancy . appreciate your comments on You know , I decline related to a leases in just much of the expected decline curious how is couple first quarter as in the related to move question versus projects being operating to the portfolio 26 .
Staci Tyler: Really, in Q1, there's not much of an impact from development transfers. We're seeing that more as we look throughout the Q2, Q3, and Q4. And I think some of that, as Marshall alluded to earlier, is opportunity for us. We have some work to do, but that's where we could hopefully see an increase in our occupancy, actual occupancy, compared to projections as the year goes on. Q1 is pretty flat, really, from Q4 to Q1. So we start projecting that for later in the year, and again, that's the budget and not the goal. Just with the uncertainty in the environment, it's hard to know exactly the timing of when we'll see occupancy there.
Staci Tyler: Really, in Q1, there's not much of an impact from development transfers. We're seeing that more as we look throughout the Q2, Q3, and Q4. And I think some of that, as Marshall alluded to earlier, is opportunity for us. We have some work to do, but that's where we could hopefully see an increase in our occupancy, actual occupancy, compared to projections as the year goes on. Q1 is pretty flat, really, from Q4 to Q1. So we start projecting that for later in the year, and again, that's the budget and not the goal. Just with the uncertainty in the environment, it's hard to know exactly the timing of when we'll see occupancy there.
Speaker #4: Really ,
Speaker #4: in first quarter ,
Speaker #4: in first quarter ,
Speaker #4: There’s some of it in transfers—development, more so, as seeing that. But the impact—development outs—look, the second and fourth throughout, and I think some of that, Marshall alluded to earlier, is some work to do.
Speaker #4: compared Actual to projections . As We have first quarter pretty is flat , really , from fourth to first quarter . So we start is projecting later in the year .
Speaker #4: again , And that's that's the budget and not the goal . with the Just and the It's hard environment . know to exactly the timing of when occupancy but that's definitely as as we But occupancy for the look year 26 where we at do see a decline in from 25 to 26 , it really is those development transfers .
Staci Tyler: But that's definitely as we look at occupancy for the year 2026, where we do see a decline in projections from 2025 to 2026, it really is due to those development transfers. The core portfolio that's in place is not declining. It's the drag. We would be flat if not for those development transfers.
Staci Tyler: But that's definitely as we look at occupancy for the year 2026, where we do see a decline in projections from 2025 to 2026, it really is due to those development transfers. The core portfolio that's in place is not declining. It's the drag. We would be flat if not for those development transfers.
Speaker #4: The core due to there . , that's that's in is place not declining . the drag . We would be for those transfers development
Reid Dunbar: Eric, I would add, you know, with the increasing development projections, to some extent, that comes at the decline of same-store sales. So a lot of our leasing comes from our existing tenant base, which typically is consolidation or expansion. So as our development business grows, our same-store sales may decline, so we're taking, at times, half a step back to take a full step forward. But net-net, you know, FFO, we anticipate to increase and, you know, we see that as a winning strategy.
Reid Dunbar: Eric, I would add, you know, with the increasing development projections, to some extent, that comes at the decline of same-store sales. So a lot of our leasing comes from our existing tenant base, which typically is consolidation or expansion. So as our development business grows, our same-store sales may decline, so we're taking, at times, half a step back to take a full step forward. But net-net, you know, FFO, we anticipate to increase and, you know, we see that as a winning strategy.
Speaker #18: And
Speaker #18: Eric , I add , if not you know , with the would . increasing projections , it to some extent
Speaker #18: Development comes at the decline. Flat—our leasing comes from our existing tenant base, which typically is consolidation or that. So as our business grows, our same store sales development may decline.
Speaker #18: So we're taking, at times, half a step back to take a full step net. But net, you know, step anticipate to increase and see that as a winning, you know, strategy.
[Analyst] (BMO Capital Markets): Great. Thank you.
Eric Borden: Great. Thank you.
Operator: Thank you. The next question comes from Omotayo Okusanya from Deutsche Bank. Please go ahead.
Operator: Thank you. The next question comes from Omotayo Okusanya from Deutsche Bank. Please go ahead.
Speaker #19: Great . Thank you
Speaker #19: .
[Analyst] (Deutsche Bank): Yes, good morning, everyone. Just a follow-up question around tariffs. Just kind of curious, your thoughts at this point on, you know, the Supreme Court and how things may kind of turn out from that end. And even if the Supreme Court does kind of say, you know, current tariff policy is not constitutional or legal, kind of what happens next, and how do you kind of think your tenant base kind of deals with all that in terms of, you know, either kind of pulling back on a wait and see basis or they just kind of keep taking up space because they need to? Just curious how you're thinking about all, like, that whole iteration around tariff policy.
Omotayo Okusanya: Yes, good morning, everyone. Just a follow-up question around tariffs. Just kind of curious, your thoughts at this point on, you know, the Supreme Court and how things may kind of turn out from that end. And even if the Supreme Court does kind of say, you know, current tariff policy is not constitutional or legal, kind of what happens next, and how do you kind of think your tenant base kind of deals with all that in terms of, you know, either kind of pulling back on a wait and see basis or they just kind of keep taking up space because they need to? Just curious how you're thinking about all, like, that whole iteration around tariff policy.
Speaker #1: question Thank you . comes from Omotayo
Speaker #1: go ahead .
Speaker #20: Yes. Good morning, everyone. I just have a follow-up question around tariffs. Just your thoughts at this point on, you know, the curious court and FFO—how we think about things from that and how it could turn out at the end.
Speaker #20: even if And Supreme Court the kind of does may kind say , you Current policy is not legal , kind of happens next .
Speaker #20: even if And Supreme Court the kind of does may kind say , you Current policy is not legal , kind of happens constitutional or And how do you kind of think your tenant kind of deals with all that in terms of , you either kind of on a wait and see basis or pulling back they just kind of keep taking up space because they to .
Marshall Loeb: Good morning, Tayo. Yeah, good, good question, and I, and I think thankfully, I guess, as we think of the tariffs, one, you know, certainly it's that noise level or headline impact, tweet impact on our tenants, that you'd love to minimize that so that their decision-making goes smoothly. So I, I hope there's not shocks to the system like that. The only other comment is, is tariffs hit us last year, and we really rippled through it. It did impact us on our, say, our Dominguez building a little bit, where prospects, it's, it's near the ports of LA and Long Beach in that South Bay area, Carson, California. But, but by and large, it, it also reminds us over the years, where we've said markets like Houston and Jacksonville, where we've been in since the nineties, where we, we like metro area distribution.
Marshall Loeb: Good morning, Tayo. Yeah, good, good question, and I, and I think thankfully, I guess, as we think of the tariffs, one, you know, certainly it's that noise level or headline impact, tweet impact on our tenants, that you'd love to minimize that so that their decision-making goes smoothly. So I, I hope there's not shocks to the system like that. The only other comment is, is tariffs hit us last year, and we really rippled through it. It did impact us on our, say, our Dominguez building a little bit, where prospects, it's, it's near the ports of LA and Long Beach in that South Bay area, Carson, California. But, but by and large, it, it also reminds us over the years, where we've said markets like Houston and Jacksonville, where we've been in since the nineties, where we, we like metro area distribution.
Speaker #20: you're thinking Just about all like that whole iteration around tariff policy .
Speaker #2: Good morning . Yeah . Good . Good question . And I you know , I think thankfully , I guess as we think of the tariffs , one , you know , certainly it's that noise level or headline impact tweet our tenants that you'd love to minimize impact on that their decision making goes smoothly .
Speaker #2: So I hope not shocks to the system like that . The only other comment is tariffs hit us last year . And we really rippled through it .
Speaker #2: Did us on impact our our Domingo's building a We're prospects . It's it's near the ports of LA and Long Beach in Bay that South area .
Speaker #2: Carson , California . But but by and large it reminds us over the years we've said markets also like Houston Jacksonville , where we've been in since the 90s , where we like metro area distribution , we want to be that last mile and a fast growing , higher income area because that customer base is a lot stickier .
Marshall Loeb: We want to be that last mile in a fast-growing, higher income area, because that customer base is a lot stickier. And if you're buying a good or service, or I'll go with a good, you don't care if it came from China or Mexico, you just are buying the item online, and you want it delivered to your home or business really quickly.
Marshall Loeb: We want to be that last mile in a fast-growing, higher income area, because that customer base is a lot stickier. And if you're buying a good or service, or I'll go with a good, you don't care if it came from China or Mexico, you just are buying the item online, and you want it delivered to your home or business really quickly. So that noise is a good reminder for us why ports are so volatile, and we're not trying to guess which port is going to gain. I'm not smart enough to guess which port's gonna gain and lose market share. We're just pretty confident that Orlando and Atlanta and Dallas and Phoenix are gonna have more people over the next 5 to 10 years, and we want to be in the middle of all that with the best, most convenient location. So we try to... Again, I think we try to take as many ways as we can as a company to minimize or eliminate risk, whether it's how we develop in phases in a park, or being near consumers, or our balance sheet, or all the things we can do.
Speaker #2: And if you're buying a good or service, or go with a good, you don't care if it came from China or Mexico.
Marshall Loeb: So that noise is a good reminder for us why ports are so volatile, and we're not trying to guess which port is going to gain. I'm not smart enough to guess which port's gonna gain and lose market share. We're just pretty confident that Orlando and Atlanta and Dallas and Phoenix are gonna have more people over the next 5 to 10 years, and we want to be in the middle of all that with the best, most convenient location. So we try to... Again, I think we try to take as many ways as we can as a company to minimize or eliminate risk, whether it's how we develop in phases in a park, or being near consumers, or our balance sheet, or all the things we can do.
Speaker #2: You’re just buying the item online and you want it delivered to your home or business really quickly. So that noise is a good reminder for us.
Speaker #2: Why are ports so volatile? And we're not trying to guess which port is going to gain—we're not. I'm not smart enough to guess which port is going to gain and lose market share. We're just pretty confident that Orlando and Atlanta and Dallas and now, more going to Phoenix, are places where people will be over the next 5 to 10 years, and we want to be in the middle of all that with the best, most convenient location.
Speaker #2: So we try think we try to take as to again , I many ways as we can as a company to minimize or eliminate risk , whether it's how we develop in phases in a park or be near consumers balance or our sheet all the or things we can do , but we also say as we're as we're reducing that risk , we don't want to reduce the return at all .
Marshall Loeb: But we also say, as we're reducing that risk, we don't want to reduce the return at all. So that's just kind of one more way we go about it, and we can't eliminate the headline risk and how people make decisions, but we're working on it. We'd sure like to.
Marshall Loeb: But we also say, as we're reducing that risk, we don't want to reduce the return at all. So that's just kind of one more way we go about it, and we can't eliminate the headline risk and how people make decisions, but we're working on it. We'd sure like to.
Speaker #2: So that's just kind of one more way we we go about it and we can't eliminate the headline risk and how people make decisions .
[Analyst] (Deutsche Bank): Gotcha. Thank you very much.
Omotayo Okusanya: Gotcha. Thank you very much.
Marshall Loeb: You're welcome.
Marshall Loeb: You're welcome.
Speaker #2: But we were working on it. We'd sure like to.
Operator: Thank you. The next question comes from Jessica Zheng at Green Street. Please go ahead.
Operator: Thank you. The next question comes from Jessica Zheng at Green Street. Please go ahead.
Speaker #20: Gotcha . Thank you very much .
Speaker #2: You're welcome .
Staci Tyler: Hi, good morning. Just building on that previous question, just curious if you're seeing a pickup of, you know, onshoring or nearshoring related leases in any of your markets recently?
Jessica Zheng: Hi, good morning. Just building on that previous question, just curious if you're seeing a pickup of, you know, onshoring or nearshoring related leases in any of your markets recently?
Speaker #1: Thank you . The next question comes from Jessica Zhang at Green Street . Please go ahead .
Speaker #21: Hi . Good morning . Just building on that previous question . curious if you're seeing a pickup of Onshoring or Nearshoring related leases in any of your markets recently
Reid Dunbar: Yeah. Hi, this is Reid, Jessica. You know, activity for nearshoring has definitely at least-
Reid Dunbar: Yeah. Hi, this is Reid, Jessica. You know, activity for nearshoring has definitely at least-... From what we're hearing from the brokerage community and some of the prospects has definitely picked up. You know, markets like Houston and Dallas are actually seeing an uptick in kind of advanced manufacturing and end users that need higher power requirements. So I'd say that is a driver and will be a tailwind for us going into the future. You know, a lot of our markets that we're in don't specifically cater to, you know, those larger users, but a lot of the ancillary users we may benefit from going forward. So I'd say that is a driver and will be a tailwind for us going into the future.
Speaker #21: .
Speaker #18: Yeah . Hi , this is Reed .
Brent Wood: ... From what we're hearing from the brokerage community and some of the prospects has definitely picked up. You know, markets like Houston and Dallas are actually seeing an uptick in kind of advanced manufacturing and end users that need higher power requirements. So I'd say that is a driver and will be a tailwind for us going into the future. You know, a lot of our markets that we're in don't specifically cater to, you know, those larger users, but a lot of the ancillary users we may benefit from going forward. So I'd say that is a driver and will be a tailwind for us going into the future.
Speaker #18: Jessica . You know , activity for Nearshoring has definitely at least from what we're hearing from the brokerage community and some of the prospects has definitely picked up , you know , markets like Houston and Dallas are actually seeing an uptick in advanced manufacturing and and users that need higher , higher power requirements .
Speaker #18: So I'd say that is a driver and will be a tailwind for going into the future . You know , a lot of our a lot of our markets that we're in don't specifically cater to , you know , those larger users .
Speaker #18: But a lot of the ancillary uses, we may benefit from going forward. Thank you.
Brent Wood: You know, a lot of our markets that we're in don't specifically cater to, you know, those larger users, but a lot of the ancillary users we may benefit from going forward.
Brent Wood: You know, a lot of our markets that we're in don't specifically cater to, you know, those larger users, but a lot of the ancillary users we may benefit from going forward.
[Analyst] (Morgan Stanley): Thank you.
Jessica Zheng: Thank you.
Operator: Great, thank you.
Operator: Great, thank you.
Operator: Thank you. The next question comes from Ronald Kamdem from Morgan Stanley. Please go ahead.
Operator: Thank you. The next question comes from Ronald Kamdem from Morgan Stanley. Please go ahead.
Speaker #22: Thank
Speaker #22: you you . Great . .
[Analyst] (Morgan Stanley): Hey, just to, I guess, a quick two-parter, but... So, so first, obviously, the development leasing was encouraging. The guide sort of assumes, you know, I think starts are picking up, got some acquisitions. Just, can you remind us what the spread is looking like today between sort of cap rates and IRRs on acquisitions versus, versus development that you're starting? Just curious what that spread is. And then the, the quick follow-up is just the exit of Fresno. Any other sort of markets where you're paring back, to capital recycle? Thanks.
Ronald Kamdem: Hey, just to, I guess, a quick two-parter, but... So, so first, obviously, the development leasing was encouraging. The guide sort of assumes, you know, I think starts are picking up, got some acquisitions. Just, can you remind us what the spread is looking like today between sort of cap rates and IRRs on acquisitions versus, versus development that you're starting? Just curious what that spread is. And then the, the quick follow-up is just the exit of Fresno. Any other sort of markets where you're paring back, to capital recycle? Thanks.
Speaker #1: Thank you . The next question comes from Ronald Camden Morgan Stanley . Please go ahead
Speaker #23: just
Speaker #23: I . Hey , guess a quick two parter , but so so first , obviously the was encouraging . The guide sort of I think assumes , starts are picking up .
Speaker #23: Got some acquisitions . Just can you remind us what the spread is looking like today between sort of cap rates and IRR on acquisitions versus versus development that you're starting ?
Speaker #23: Just curious spread what that is . And then the follow up is just the exit of Fresno . Any sort of markets where you're other paring back capital to recycle .
Marshall Loeb: Hey, Ron, good morning. It's Marshall. I'll go reverse order. Yeah, the markets we're exiting, as we mentioned, this is, it goes back a few years. Santa Barbara, excited about Fresno. It's a project Brent and I bought in the '90s, and so just modernizing and updating our portfolio, and we'll, hopefully, we'll have that closed in a couple weeks or so. Jackson is another market where we had five buildings, we're down to one building. We'll continue to. It's leased, but work on an exit there. And then the other one we've said is, and you've seen us go into Raleigh and Nashville. We've talked about Salt Lake, potentially. Again, capital city, has technology, university presence, and we may never get to Salt Lake, but I'd rather not surprise anyone.
Marshall Loeb: Hey, Ron, good morning. It's Marshall. I'll go reverse order. Yeah, the markets we're exiting, as we mentioned, this is, it goes back a few years. Santa Barbara, excited about Fresno. It's a project Brent and I bought in the '90s, and so just modernizing and updating our portfolio, and we'll, hopefully, we'll have that closed in a couple weeks or so. Jackson is another market where we had five buildings, we're down to one building. We'll continue to. It's leased, but work on an exit there. And then the other one we've said is, and you've seen us go into Raleigh and Nashville. We've talked about Salt Lake, potentially. Again, capital city, has technology, university presence, and we may never get to Salt Lake, but I'd rather not surprise anyone.
Speaker #23: Thanks .
Speaker #2: Hey Ron . Good morning . It's Marshall I'll go reverse order . Yeah . The markets we're exiting . As we mentioned this goes back a few years .
Speaker #2: Santa Barbara, excited about Fresno. It's a project Brent and I bought in the '90s, and so just modernizing and updating our portfolio.
Speaker #2: And we'll hopefully have that closed in a couple of weeks or so. Jackson is another market where we had five buildings. We're down to one building.
Speaker #2: We're continue to . It's leased , but work on an exit there and then the other one , we've said seen us go and you've is , into Raleigh and Nashville talked about Salt Lake , potentially , again , Capital city has Technology , university presence , and we may never get to Salt Lake , but I'd rather not surprise anyone .
Marshall Loeb: But New Orleans being another market where we could scale back a little bit there. And so that's kind of how we're thinking on our markets. And then I'm going back. The first part of your question was on development leasing and kind of how we're seeing it. But yeah, we're encouraged where we're headed with it. I think it's going in our direction. And look, I think on the development, I guess I'm remembering, we've been developing to call it a low 7, 7.1 to 7.3, is probably our average on a ground-up development. And really, the acquisitions we've made have been more strategic than opportunistic, we've said. It's been the building around the corner and something in our submarket.
Marshall Loeb: But New Orleans being another market where we could scale back a little bit there. And so that's kind of how we're thinking on our markets. And then I'm going back. The first part of your question was on development leasing and kind of how we're seeing it. But yeah, we're encouraged where we're headed with it. I think it's going in our direction. And look, I think on the development, I guess I'm remembering, we've been developing to call it a low 7, 7.1 to 7.3, is probably our average on a ground-up development. And really, the acquisitions we've made have been more strategic than opportunistic, we've said. It's been the building around the corner and something in our submarket.
Speaker #2: But New Orleans being another market where we could scale back a little bit , there . And so that's kind of how we're thinking of on our markets .
Speaker #2: And then I'm going back to the first part of your question was on development leasing and kind of how we're seeing it . But yeah , we're we're encouraged where we're headed with it .
Speaker #2: I think it's going in our direction and , and look , I think on the I guess I'm development , remembering we're , we've been developing to call it a low seven , seven 1 to 7 three is probably our average on a ground up development .
Speaker #2: And really the acquisitions we've made have been more strategic than opportunistic . We've said building it's been the around the corner and something in our they're submarket , still in the low to mid fives .
Marshall Loeb: They're still in the low to mid fives, so there's still a lot of demand for quality, industrial, Shallow Bay buildings. Cap rates have been pretty sticky. And kind of given that, we're probably on the high end, maybe 180 basis points, better return, closer to 200 on a development today than a straight-out acquisition. And that's why we really haven't bought a portfolio or anything. It's usually been one-off buildings here and there, and the bigger the portfolio, the lower the cap rate. It attracts more capital, and it gets priced like that, but it can certainly drift into the fours in some of our better markets as well.
Marshall Loeb: They're still in the low to mid fives, so there's still a lot of demand for quality, industrial, Shallow Bay buildings. Cap rates have been pretty sticky. And kind of given that, we're probably on the high end, maybe 180 basis points, better return, closer to 200 on a development today than a straight-out acquisition. And that's why we really haven't bought a portfolio or anything. It's usually been one-off buildings here and there, and the bigger the portfolio, the lower the cap rate. It attracts more capital, and it gets priced like that, but it can certainly drift into the fours in some of our better markets as well.
Speaker #2: So there's still a lot of demand for quality industrial shallow bay buildings , cap rates have been pretty sticky and kind of given that we're probably the high end , probably on maybe 180 basis points better return closer to 200 on a development today than a straight out acquisition .
Speaker #2: And that's why we really haven't bought a portfolio or anything . It's usually been one off buildings here and there , and the bigger the portfolio , the lower the cap rate it attracts more capital and it gets priced like that .
Brent Wood: Yeah, I'll just add to that, Ron, of the development leasing, as Marshall said. But, you know, what I'd like to see is just some consistency. You know, with Q1 last year was good, Q2 and Q3 was challenging, Q4 ended well. But trying to just stack good quarters behind good quarters would be nice. And so, hopefully, we can get a little more quieter macro environment, rates continue to come down, the economy slightly uptick better. Again, just kind of get that confidence in executing and moving a little faster would all work in our favor. And so, you know, excited about Q4. We need to stack a couple of those together. And again, we back end loaded our start, so we're, you know, hoping for that, but we'll see.
Brent Wood: Yeah, I'll just add to that, Ron, of the development leasing, as Marshall said. But, you know, what I'd like to see is just some consistency. You know, with Q1 last year was good, Q2 and Q3 was challenging, Q4 ended well. But trying to just stack good quarters behind good quarters would be nice. And so, hopefully, we can get a little more quieter macro environment, rates continue to come down, the economy slightly uptick better. Again, just kind of get that confidence in executing and moving a little faster would all work in our favor. And so, you know, excited about Q4. We need to stack a couple of those together. And again, we back end loaded our start, so we're, you know, hoping for that, but we'll see.
Speaker #2: But it can certainly drift into the fours in some of our better markets as well.
Speaker #6: Yeah, I would just add that Rhonda, the development leasing, as Marshall said, but you know what? What I would ideally like to see is just some consistency.
Speaker #6: You know , first quarter last year was was good . Second and third was was challenging . Fourth ended well . But trying to just stack good quarters behind good quarters would be nice .
Speaker #6: so we can get hopefully And a little more . Macro quieter environment continue to rates come down the economy slightly uptick better again kind of get that confidence in executing and moving a little faster would all work in our favor .
Speaker #6: And so , you know , excited about fourth quarter . We need to stack a couple of those together . And again we back and waited our start .
Brent Wood: But we're in a good position, you know, if that happens.
Brent Wood: But we're in a good position, you know, if that happens.
Speaker #6: So we're we're you know hoping for that . But we'll see . And but we're in a good position . You know if that happens .
[Analyst] (Morgan Stanley): Helpful. Thank you.
Ronald Kamdem: Helpful. Thank you.
Brent Wood: Thanks, Ron.
Brent Wood: Thanks, Ron.
Marshall Loeb: Thank you.
Marshall Loeb: Thank you.
Operator: Thank you. We have no further questions. I will turn the call back over to Marshall Loeb for closing comments.
Operator: Thank you. We have no further questions. I will turn the call back over to Marshall Loeb for closing comments.
Speaker #23: Helpful . Thank you .
Speaker #6: Thanks , Ron .
Speaker #18: Thank you .
Marshall Loeb: Thanks, everyone, for your time and interest in EastGroup. If we didn't get to your question or if you have anything to follow up, certainly feel free to reach out to us, and we look forward to seeing you probably here in a few weeks, most of you. Thank you.
Marshall Loeb: Thanks, everyone, for your time and interest in EastGroup. If we didn't get to your question or if you have anything to follow up, certainly feel free to reach out to us, and we look forward to seeing you probably here in a few weeks, most of you. Thank you.
Speaker #1: Thank you. We have no further questions. I will turn the call back over to Marshall Loeb for closing comments.
Speaker #2: Thanks, everyone, for your time and interest in EastGroup. If we didn't get to your question, or if you have anything to follow up, certainly feel free to reach out to us, and we look forward to seeing you—probably a few of you—here in a few weeks.
Brent Wood: Thank you.
Brent Wood: Thank you.
[Analyst] (Morgan Stanley): Thank you.
Ronald Kamdem: Thank you.
Operator: Bye-bye.
Staci Tyler: Bye-bye.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for your participation, and we ask that you please disconnect your lines.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for your participation, and we ask that you please disconnect your lines.
Speaker #2: Most thank you .
Speaker #6: Thank you .
Speaker #18: Thank you .
Speaker #24: Bye . .
Speaker #1: gentlemen , Ladies and this conference call for today . concludes our We thank you for your participation , and we ask that you please disconnect your lines .
