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spk09: Good day and welcome to the second quarter 2024 Alexander and Baldwin Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Please be advised that this call is being recorded today, 25th of July, 2024. I would now like to hand the conference over to Brandon Myers,
spk00: Investments Manager, please go ahead. Thank you, Operator.
spk04: Aloha, and welcome to Alexander and Baldwin's second quarter 2024 earnings conference call. My name is Brandon Myers, and I'm the manager on the A&B investments team. With me today are A&B's Chief Executive Officer, Lance Parker, and Chief Financial Officer, Clayton Shunt. During our call, please refer to our second quarter 2024 supplemental information available on our website at investors.alexanderbaldwin.com forward slash supplements. Before we commence, please note that statements in this presentation that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. These forward-looking statements include but are not limited to statements regarding possible or assumed future results of operations, business strategies, growth opportunities, and competitive positions. Such forward-looking statements speak only as of the date the statements were made and are not guarantees of future performance. Forward-looking statements are subject to a number of risks uncertainties, assumptions, and other factors that could cause actual results and the timing of certain events to differ materially from those expressed in or implied by the forward-looking statements. These factors include, but are not limited to, prevailing market conditions and other factors related to the company's REIT status and the company's business, the evaluation of alternatives by the company related to its non-core assets and business, and the risk factors discussed in the company's most recent form 10-K, Form 10-Q, and other filings with the Securities and Exchange Commission. The information in this presentation should be evaluated in light of these important risk factors. We do not undertake any obligation to update the company's forward-looking statements. Management will be referring to non-GAAP financial measures during our call today. Please refer to our statement regarding the use of these non-GAAP measures and reconciliations included in our 2024 second quarter supplemental information material. Lance will start today's presentation with an overview of the quarter, then hand it off to Clayton for discussion of financial matters. To close, Lance will return for some final remarks, and then we will open it up for your questions. With that, let me turn the call over to Lance.
spk05: Thank you, Brandon. Great job on the introduction, and congratulations again on closing the land sale that we'll mention later in the call. Everyone joining us, aloha. Throughout this year, our team has focused on four objectives. First is operational excellence, which includes providing the best commercial real estate platform that enables our tenants to thrive and in turn will create results for our shareholders. Second is to grow our commercial real estate portfolio through internal development and external investment opportunities. Third is to maintain a strong and flexible balance sheet to support that growth. And last is to further streamline our business and cost structure. With help of employees like Brandon, I am happy to report that we have made progress in each area, and we are raising our guidance to reflect our year-to-date results and improved outlook for the year. Clayton will discuss guidance in more detail on our call, but first, let me share some highlights from the quarter, starting with our portfolio. Total NOI grew by 1.1%. Same-store NOI grew by 0.9%. and same-store NOI, excluding collections of prior year reserves, grew 1.7%. As we indicated on our last call, we expect our quarterly results to fluctuate, and this quarter was an example of that. NOI growth was impacted by the renewal of the Windward City Shopping Center ground lease during the second quarter last year, which provided an ABR increase of $1.1 million. We continue to have a positive outlook on the leasing environment in Hawaii, and executed 47 leases in our improved property portfolio and achieved blended spreads of 7.3% on a comparable basis. Our same store leased occupancy was 94.8%, 50 basis points lower than the same period last year due primarily to a move out in the first quarter of 2024. Same store economic occupancy at quarter end was 93.7%, up 50 basis points from the same period last year and up 40 basis points from last quarter. Turning to internal growth, we are focused on unlocking value within our portfolio. Pre-construction work has progressed at our industrial build-a-suit at Maui Business Park. We expect construction to begin in early 2025 and anticipate $1 million of additional APR when it becomes economic late next year. We also have five photovoltaic projects in various stages of development. Combined, these projects are expected to add between $400,000 and $600,000 of incremental NOI as they come online in the next 18 months. In addition to these internal opportunities, I am encouraged by the volume of investments we are seeing externally. Although pricing remains challenged with wide bid-ask spreads, we will be opportunistic with capital recycling to make accretive acquisitions. Clayton will speak to the strength of our balance sheet, so let me provide an update on our streamlining efforts. We ended the quarter under contract to sell 81 acres of non-core land. The sale closed in July at a price of $10.5 million and enables us to continue improving our cost structure going forward. In addition to these results, our improved outlook is also supported by other indicators. The unemployment rate in Hawaii at the end of June was 2.9%, compared to the national average of 4.1%. And although May year-to-date visitor arrivals were down 4.1%, primarily to the lingering impact of the Maui wildfires, foot traffic at our retail centers grew by 3.3%. With that, I'll turn the call over to Clayton. Clayton?
spk07: Thanks, Lance, and aloha, everyone. Starting with our consolidated metrics for the second quarter, Net income available to shareholders was $9.1 million, or 13 cents per diluted share. Income from continuing operations available to shareholders was $11.7 million, or 16 cents per diluted share, up 8% from last year. Loss from discontinued operations was $2.6 million, or 3 cents per diluted share, reflecting the resolution of a liability related to our legacy operations. Total company FFO was $20.6 million, or 28 cents per diluted share, as compared to $19.8 million, or 27 cents per diluted share in the same quarter last year. Included within total company FFO was 28 cents per share of CRE and corporate-related FFO, which effectively comprised the entirety of our total company FFO for the quarter. In comparison, our CRE and corporate-related FFO for the second quarter of 2023 was 25 cents per share, and the 3 cent, or 12% increase from the prior year quarter, was due primarily to lower G&A. FFO related to land operations was negligible during the second quarter of 2024, as compared to 2 cents per share in the same quarter last year when the segment benefited from a $3.2 million land sale. AFFO was $16.9 million or 23 cents per diluted share for the second quarter of 2024. This compares to $18 million or 25 cents per diluted share in the same period last year. The decrease in year-over-year AFFO was due primarily to higher maintenance capex spend and reflects timing differences. Each of these metrics for the second quarter of 2024 benefited from collections of prior year reserves of approximately $400,000 or a penny per diluted share versus $600,000 in the second quarter of 2023. G&A expenses decreased by $2.7 million or 26.8% to $7.3 million as compared to $9.9 million in the second quarter of 2023, largely reflecting achievements in cost reductions due to our simplification and streamlining efforts. As a result, we are expecting our 2024 GMA to be in the range of $29.5 million to $31.5 million. Turning to our balance sheet and liquidity metrics. At quarter end, total debt outstanding was $470 million, and we had total liquidity of $473 million, made up of approximately $30 million of cash and $443 million available on a revolving credit facility. We issued an eight-year unsecured private placement note in April with a stated rate of 6.09% and used the proceeds from that note to repay a mortgage that matured during the second quarter. In addition, we used one of our two forward starting interest rate swaps to hedge the floating interest rate on our revolving debt when it became effective in May. As a result, all of our debt at quarter end was at fixed rates and we ended the quarter with a weighted average interest rate of 4.75%. Net debt to adjusted EBITDA was 3.7 times compared to 4.2 times at 2023 year end, primarily reflecting the impact of non-core land sales that occurred in the first quarter of 2024, as well as lower G&A. With respect to our dividend, we paid a second quarter dividend of 22.25 cents per share on July 8, and our Board declared a third quarter dividend of 22.25 cents per share that is payable on October 7. In the coming weeks, we will be establishing a new at-the-market program to replace the existing ATM facility that expires in August. The ATM program provides efficient access to capital markets and together with our existing share repurchase authorization, enables us to have the necessary tools in our capital allocation toolkit as we evaluate opportunities to maximize shareholder value. As Lance mentioned, based upon our performance in the second quarter and our improved outlook for the remainder of the year, we are again raising our guidance. We now expect same-store NOI growth in the range of 1.25% to 2.25% and we are maintaining our guidance for same-store NOI growth, excluding collections of prior year reserves at 2.1% to 3.1%. We are also raising our FFO guidance and now expect 2024 total company FFO in the range of $1.17 per share to $1.26 per share. The improved FFO guidance consists of higher CRE, and corporate-related FFO per share, where we are now guiding to a range of $1.04 to $1.08 per share, due primarily to NOI improvements and G&A cost reductions. Total company FFO also comprised of land operations FFO, where we are increasing our guidance to a range of 13 cents per share to 18 cents per share. As Lance previously mentioned, we closed on the sale of 81 acres of non-core land in the third quarter, which generated a margin of approximately $5.2 million. Our increased guidance related to land operations reflects the impact of this sale, improvements to our cost structure, and our improved outlook for our legacy joint ventures. Finally, We're also raising our 2024 AFFO guidance to a range of $0.99 per share to $1.08 per share, due primarily to the improvements in FFO. With that, I will turn the call over to Lance for his closing remarks.
spk05: Thanks, Clayton. I'm pleased with what we've accomplished in the first half of the year and how we are positioned for the remainder of 2024. Our assets are performing well. We're making progress in finding opportunities to grow our portfolio, have the balance sheet capability to support those investments, and continue to become more efficient as we further streamline our business.
spk00: On that note, we'll now open up the call to questions. Thank you.
spk09: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys.
spk10: Your first question is from the line of Alexander Goldfarb from Piper Sandler. Your line is now open.
spk00: Hey, Alex, you there? Sorry, the mute button.
spk06: It's a new feature I'm just getting to learn. So apologies about that. Aloha. Aloha. Hey. So just, you know, a few questions here. You know, certainly good quarter. You know, things are going well. You guys have worked hard over the past, well, for many years, but certainly everything coming together in the past few years. So just a few questions on what we should expect, you know, first, and this is a topic that I've asked before, but just want to get a better handle on your rent spreads. And certainly over trailing four quarters, you know, around 8%, it's definitely lower than what we see from the mainland competitors. But also my understanding is you guys are, are more akin to federal in that you have more, your portfolio has embedded bumps annually. So again, can you just sort of break out, you know, when we see an 8.3 average or, you know, 7.3 in this quarter versus what we see double digits from the mainland peers, can you just walk a bit more through that? Because certainly the demand for your real estate out there is quite strong and presumably, you know, there's not excess supply, so you have pricing power. But, you know, when we look at the rent spreads, it doesn't necessarily reflect that. So, Maybe just parse through more of what's going on with rents and how much you guys just remind us how much you guys get on annual bumps.
spk05: Yeah, so I would respond by saying, you know, I think it would be hard for me to draw an exact comparison to our peers in the mainland. But what I can say is that our portfolio is consistently resilient. And so, you know, to your point, We typically on a contractual basis will see 3% annual increases, particularly for a lot of our inline tenants. In addition to that, we'll get percentage rent clauses on many of them. But, you know, as we've also talked about in the past, we don't have as many larger or mainland retailers here in the islands. And so we view that certainly from a long-term growth perspective as an opportunity as we continue to court people into what is a high-performing market. But what we also haven't seen is some of the negatives that come with that, and particularly on bankruptcies and watch list tenants. And so while those converting some of those more lower rent to higher cut-up opportunities may exist in other portfolios, they don't typically exist within ours.
spk06: Okay. Okay, cool. Next is on the land business. Certainly good to see you guys continue to wind that down. But, you know, you've spoken in the past about the legacy cost, both liabilities, I think pension, and there's some other overhead. So I think the number was something like six or seven million annually, I think was something like that. Can you just walk us through, you know, this land sale that you did in July, how much that goes towards, you know, removing that legacy overhead expense that's associated with the land business. And, uh, you know, if this accelerates, you know, expectation that that could be, you know, something that may be, you know, cease to exist in the next six to 12 months, or if you would advise us that, Hey, don't get too carried away. That legacy expense is probably going to be with the company for a few more years.
spk07: Yep. Hey, Alex. It's Clayton. Happy to take that question. So let me just start off by reiterating the fact that one of our priorities for the company is to continue to simplify the remaining non-core assets and liabilities. And with that comes an opportunity to continue to streamline the cost structure itself. We have had some success this past year with, In the first quarter, we had a sale of some non-core lands and we referenced during our prepared remarks that we had completed another land sale in the third quarter. That did provide us the ability to effectuate some additional cost efficiencies which we're going to be able to benefit from this point forward. And so, our current expectation is that our, overall carrying costs for the segment itself will be at a run rate of 4 to 5 million on an annualized basis. Timing for the completion of us being able to simplify the segment is, I would just say that it's timing is difficult and, you know, the land sales itself are episodic. But I just want to emphasize the fact that this does remain a priority for us.
spk06: Okay, so that's cool. So we'll go down, I think before it was, what, six or seven million? Now it goes down to four to five. Or an annualized run rate. Yes. Okay, okay. And just the final element is it almost sounded like you guys are seeing more external investment opportunity. And what we've always been accustomed to is in Hawaii, just things – take a lot longer. One, not as deep of an investment pool. Two, there may be an asset or whether it's a building or ground lease or something that's already sitting there that takes time or that owners just are hesitant to sell. But Lance, in your comments, it almost sounded like stuff was freeing up a lot sooner and that maybe we'd see an acceleration of your investment pace. So can you just let us know if it was, if that was just specific to one or two deals or if it's describing the overall environment?
spk05: Yeah, I want to, I want to be transparent, but also cautious because we don't guide to acquisition activity. But I will say that it is fair to say that we are seeing more opportunities at the top of the funnel. And so really that's movement from where we were, you know, call it maybe six months ago, where everybody, the market was more frozen. Potential sellers were really on the sideline. We're seeing people, you know, sort of move off the sideline. Now, it's not to say that seller expectations in terms of pricing has moved. And that's really what needs to happen next. But we're starting to see some thawing of those first steps. And so I wanted to articulate that. And again, without guiding, but it, you know, it would not surprise me if you start to see some potential opportunities before the end of the year.
spk06: Okay. And then just, sorry, one more. Apologies. You said you're going to reauthorize the ATM and just looking at least on our NAV, you know, you and your peers are still, you know, at some healthy discounts, double digit discounts to NAV, you know, on our numbers, you know, 25% or so. Can you just talk about ATM issuance relative to NAV? Is it, would you wait until the stock is back to NAV? Is it something, Like, how do we think about that? Because you're looking to renew it, and yet, from an NAV perspective, you know, you're still below where it would be accretive to issue.
spk05: Yeah, you know, as Clayton remarked in his comments, we view the ATM as an important tool. And so, really, to sort of bookend both ends of where our stock may be trading, whether it's stock repurchases, which we did some modest amounts back late last year, or potential equity issuance. The ATM was not to signal that there is any, you know, imminent equity issuance, but it is to make sure that we do have that tool available to us. And as we think about opportunities in the market, you know, we're always looking for accretion. And so, you know, we would look for, you know, to make sure that in, I guess, philosophical terms, at or above NAV, but it's really more about accretion in the opportunity. And I guess that's probably how we would think about any potential equity issuance.
spk00: Okay. Great. Thank you. Thanks, Alex.
spk10: Your next question is from the line of Rob Stevenson from Janie.
spk09: Please go ahead.
spk01: Good afternoon, guys. Clayton, I just want to make sure that I understand. The guidance increase, $0.10 to $0.12. The land sale gain is $0.07. The other $0.03 to $0.04 in the commercial real estate portfolio, is that the cost structure savings and the JVs that you mentioned at the end of the comments, or is that the other sort of half penny in land operations? How should I be thinking about that $0.03 to $0.04 in the commercial real estate portfolio and what's driving that?
spk07: Yeah. Thank you, Rob, for the question. So, The answer to that is the land operations is separate from the commercial real estate. So the comments with respect to the land sales does not pertain to the 3 to 4 cents that you're referencing. And so the 3 to 4 is a function of just our outlook with respect to the commercial real estate performance overall on the NOI front in addition to cost efficiencies with respect to our corporate. overhead and so uh that's what was intended to be reflected with that guidance adjustment okay that's helpful and um proceeds from the land sale just pay down the line or did it go to something else uh the proceeds for the third quarter land sale is what i think you're referencing and so uh we had received the cash proceeds as is being applied to debt and ultimately In our, as we had indicated in the past, our strategy would be to ultimately recycle that into investment opportunities as they arise.
spk05: Okay. I'll just add to that, Rob, you know, to Clayton's point about recycling. This would be a great opportunity, really, where we take proceeds from non-income producing land and have the opportunity to look for opportunities into income producing assets. And so to my remarks and to Alex's question really about the market and being a little bit more opportunistic on capital recycling, this could be a good opportunity to use it.
spk01: All right, that's helpful. And then any incremental known move-outs of consequence at this point? And how should we be thinking about the net FFO addition when you put the lease but not commenced against any of the potential move-outs over the next six to 12 months?
spk05: I don't think there's anyone from a major rent role perspective that we're too concerned about. You know, I think the team's done a really good job of laddering out our weighted average lease terms. And so as we look at lease in the near term, feeling pretty confident about the performance of the portfolio.
spk01: Okay. And then just two quick ones. What's the incremental solar opportunity beyond the five projects? that you have in progress? I mean, how many additional projects do you think you might start as those come to conclusion?
spk05: You know, Rob, I'd say we really haven't scaled those yet. I mean, these are, you know, great investments for us, obviously, first from an ESG perspective, but maybe as, if not more importantly, from a financial perspective. And so we were conscious in starting with, you know, our largest assets where we had the most economies of scale and we were able to drive the biggest benefit. And so the example being, you know, our first two generating almost a million dollars in NOI. So as we think about the rest of the portfolio, I think we'll be able to provide some of that visibility. But that's really, you know, what we're focused on right now are the five that I articulated. And I will say that this is a priority for our team.
spk01: Okay. And then last one for me, is there any update on the 40% leased retail property in Kauai? I'm going to butcher the name, but Waipoloi?
spk05: Waipoloi, that's pretty good. So nothing, no updates to provide as of the end of Q2, but it is a priority for us as well.
spk01: Okay. Thanks, guys.
spk00: Appreciate the time. Okay. Thanks, Rob.
spk10: Your next question is from the line of Mitch Germain from CitizensJump. Please go ahead.
spk00: Hope you guys are well.
spk08: So taking your comment about the acquisition markets or investment markets, what is driving kind of the change to you becoming a bit more constructive about the level of activity you're seeing?
spk00: It's a great question.
spk05: And I'm not sure that, you know, we're not probably have more insight into the buyer side of the equation than we do into the seller side. But that being said, you know, there is no lack of interest for buyers. And so I think, you know, just given the fact that we have not seen a lot of trades in our market, I think, you know, sellers can construe that to having a little bit of pent up demand. and having a willingness to really come out and test the market. You know, interest rates are still high, but there's a lot less, you know, questions around the availability of capital. It's really more about the cost of capital. And so I think part of that is leading to, you know, again, sellers sort of coming off the sideline and at least seeing if there are, you know, if they can narrow that bid ask spread that we have seen over the last couple of years.
spk00: Great.
spk08: sales on the year have you changed yours you know looking to accelerate the sale of these parcels is it um you know is is it a a pricing mechanism in terms of what your you know kind of you kind of reduce kind of what your ask is like what is what's causing this activity to now accelerate here
spk05: You broke up for just a minute. I want to make sure that we got the question right. Are you asking about the land? No, no, no.
spk08: I was asking about why the land sales appear to be accelerating a bit here. Is it a function of your cost expectation maybe has come down a bit, or have you changed the methodology in how you're marketing or who you're marketing to?
spk05: You know, I mean, it seems like there is clearly a shift because we had gone you know, a decent stretch without any major land sales. And now two quarters, you know, we're providing results that we did not guide to. And so I can certainly appreciate that perspective. You know, as we shared last quarter with the 300 acre sale, you know, that deal came together so quickly. It really from start to finish was in a matter of weeks. And it was because we had an existing relationship with the buyer. And so, We were very opportunistic. It was less about us changing our methodology or pricing expectations. And I would say that this most recent 81 acre in some ways, I mean, it was a little bit longer in terms of the process that we were going through, but it came together very quickly at the end. And there's also, you know, a lot of for land deals, whether it's availability of financing, just questions around potential entitlements or other things. you know, there's more risk in closing these deals. And that's why they tend to be more episodic and more difficult for us to guide to. So I don't think there's anything different from our perspective. And as Clayton indicated, you know, this remains a priority for us. So it always has been. And when we do get the opportunity to get close, you know, we're going to definitely move to close that gap and strike because, you know, it is nice to be able to make additional progress in trying to to narrow this portion of our business.
spk00: Great. Thank you. Okay. Thanks, Mitch.
spk10: Your next question is from the line of Brandon McCarthy from Cdoti. Please go ahead.
spk00: Hey. Good afternoon, everybody. Thanks for taking my question. Hey, Brandon. Hey.
spk03: I just wanted to start out looking at the capital allocation framework. You know, I know you mentioned the acquisition opportunities out there look a little more promising at the top of the funnel. But then you also mentioned the recent land sale, the proceeds went towards debt pay down. I'm just wondering if you could provide some insight on how you rank your capital allocation priorities at this point in time.
spk07: Yeah, no, happy to take that question, Brendan. This is Clayton. As far as that capital allocation goes, we evaluate each investment opportunity based upon the return that's expected to be provided and want to ensure that we get an appropriate risk-adjusted return. And so with that in mind, you know, we look at opportunities, whether it's acquisitions, whether it's, you know, share repurchases, even if we were to be issuing equity. And so I think for us, the key is ensuring that we're going to get the appropriate risk-adjusted return. And so that's the lens in which we view it.
spk05: And Brendan, maybe I would add to that. You know, I would say that as we survey the market, we have an appetite really for all of our existing food groups. So it's not like we have a specific allocation that we're trying to achieve and saying, you know, We like the fundamentals of retail. There are specific assets that we really want and ones that work, we will pursue. Same for industrial, same for ground leases. And so to Clayton's point, you know, it really does come down to risk-adjusted returns. And not to say that we're completely agnostic, but in many ways we are. We're really looking about, you know, just opportunities from a holistic perspective as opposed to more specific allocations.
spk00: Great. Great. Thanks, Lance. Thanks, Clayton.
spk03: I want to take a step back, look at the big picture. I know that you mentioned, Lance, I think you mentioned foot traffic growth was healthy in the second quarter. Can you provide some insight on what you saw from a tourism perspective?
spk05: Yeah. So tourism numbers, you know, year to date are down. We've never fully recovered from 2019 pre-pandemic numbers. But maybe more important to call it pre-pandemic, 29 also represented an all-time high for the state in terms of visitor arrivals to Hawaii. And so we got, you know, sort of high 90s back to fully recovering. If you compare 2024 year-to-date to 2023, we are down about 4%. And I would say that's led almost entirely by Maui. You know, some of the islands are down a little bit. Some are up a little bit. But the impacts of the Lahaina wildfires in August of last year, you know, continue to flow through the market. Maui specifically is down almost 25%. And so, you know, I want to reiterate just, you know, as significant as it was for the island and the impact that we're seeing in the state, you know, we were very fortunate in that none of our employees or none of our assets were specifically impacted by that. And so we don't necessarily see those impacts at the property level. But across the state from a tourism perspective, you do. And so really my comments on the foot traffic was intended to not necessarily counterbalance that, but I think to reinforce a point that we've made in the past about the fact that our portfolio really is more need-based. It's more neighborhood-based. We are not entirely dependent upon the tourism industry to drive our retail sales. Of course, tourism is a major driver of our overall economy, and so that does help.
spk00: But we're not dependent on it. Got it. Got it. One more question for me.
spk03: Just looking at the updated guidance, what are some of the main factors that you think might, you know, provide further upside or downside looking at the rest of this year? Obviously, I assume, you know, further land sales would be one of them. But what are some of the other factors there?
spk07: Yeah, sure, Brendan. So I guess if you think about it from the low end of the range, bad debt expense clearly could be a, well, actually bad debt expense could be a positive or negative in terms of the guidance and pushing and pulling where we end up. I would also say just looking at our tenants, a delayed occupancy. So to the extent that we're able to lease up or get additional on commencements that could potentially push us towards the lower end, and the inverse holds true as well. So, but all in all, you know, we felt comfortable that where we stand, what we're seeing, we felt comfortable increasing our guidance overall.
spk00: Great. Great. Thanks, Clayton.
spk03: One more question, if I may. Just looking at NOI at the asset class level, Yeah, obviously offices is down through the first half of the year. Retail a little bit more flat and solid growth in industrial.
spk00: Can you just talk about the trends that you're seeing in industrial versus retail? Yeah. You know, I would say overall retail remains strong.
spk05: Really what was sort of what is driving our performance there is is recoveries from prior years. And that's, you know, that kind of reflected in the way that we, the nuanced increase in the same-star NOI with our guidance going forward. And as we indicated, I mean, we did on a year-over-year basis, you know, have some fluctuations in the portfolio, some one-time events that sort of caused that, as well as some bad debt recovery. And then on the industrial side, I would say just good performance. You know, the market continues to remain strong. Vacancy rates are still, you know, at if not the lowest in the country, you know, very close to the bottom. It did tick up a little bit, but, you know, we're talking about going from 80 basis points to 110 basis points. I mean, that's just to, you know, give you some sense of the tightness of our industrial market here.
spk07: I think the main takeaway here, Brendan, if I could just add on, is the fact that when you take a step back looking at our guidance, We've, number one, we increased our guidance with respect to NOI. And number two is we had made comments earlier in the year that one shouldn't expect that there's going to be, I guess, a straight line or consistency throughout the year, quarter to quarter. And so, as we said in the prepared remarks, this is an example of it with respect to the second quarter. We're happy with the results, and at the end of the day, we felt comfortable given the performance and the outlook that we raised our guidance.
spk00: That's helpful. Thanks, everybody. All right. Thanks, Brennan.
spk09: There are no further questions at this time, so I'll hand the call over back to Clayton Chen for closing remarks. Please go ahead.
spk07: Thank you, Operator, and thank you all for joining us today. If you have any follow-up questions, please feel free to call us at 808-525-8475 or email us at investorrelations at abhi.com.
spk00: Aloha and have a great day.
spk10: This concludes today's conference. Thank you for your participation. You may now disconnect.
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