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spk01: Good day and thank you for standing by. Welcome to the first industrial second quarter 2021 earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your host, Mr. Art Harmon, Vice President of Investor Relations. Thank you. Please go ahead, sir.
spk04: Thank you, Katrina. Hello, everybody, and welcome to our call. Before we discuss our second quarter 2020 results, as well as updated guidance, let me remind everyone that our call may include forward-looking statements as defined by federal securities laws. These statements are based on management's expectations, plans, and estimates of our prospects. Today's statements may be time-sensitive and accurate only as of today's date, Thursday, July 22, 2021. We assume no obligation to update our statements or the other information we provide. Actual results may differ materially from our forward-looking statements, and factors which could cause this are described in our 10-K and other SEC filings. You can find a reconciliation of non-GAAP financial measures discussed in today's call in our supplemental report and our earnings release. The supplemental report, earnings release, and our SEC filings are available at firstindustrial.com under the Investors tab. Our call will begin with remarks by Peter Basile, our President and Chief Executive Officer, and Scott Musil, our Chief Financial Officer, after which we will open it up for your questions. Also on the call today are Jojo Yap, our Chief Investment Officer, Peter Schultz, Executive Vice President, Chris Schneider, Senior Vice President of Operations, and Bob Walter, Senior Vice President of Capital Markets and Asset Management. Now let me turn the call over to Peter.
spk12: Thanks, Art, and thank you all for joining us. Our team delivered another great quarter highlighted by strong operating results, robust development leasing, and more investment for growth. Our efforts were supported by the overall economy, and the industrial real estate sector continued to gain momentum throughout the second quarter. Due to strong second quarter performance and the overall strength of the sector, we are increasing our FFO guidance, which Scott will walk you through shortly. Per CBRE's flash report, net absorption was a healthy 85 million square feet in the second quarter, while completions came in at a three-year quarterly low, of 52 million square feet completions were impacted by reduced construction activity in 2020 as well as the continuing limited availability of readily developable land in highly sought after locations through the first half of this year net absorption was 150 million square feet outpacing new supply of 106 million in the second quarter We were successful in driving occupancy while continuing to increase rental rates on new and renewal leasing. In-service occupancy at quarter end was 96.6%, an increase of 90 basis points from the end of last quarter. This increase in occupancy was accompanied by a 15.7% increase in cash rental rates on new and renewal leasing. The strength and breadth of tenant demand also carried over to our development investments, evidenced by 1.2 million square feet of development leases signed in the second quarter and third quarter to date. We are pleased to announce that our 250,000 square foot building at First Logistics Center at 7881 in central Pennsylvania is now 100% leased to a leading consumer products company. This takes care of the largest vacancy among our completed developments. Also in Pennsylvania, we successfully leased the 100,000 square foot First Independence Logistics Center to the United States Postal Service. In Houston, at our first Grand Parkway Commerce Center, we signed two leases totaling 117,000 square feet, bringing the two-building, 372,000 square foot project there to 55% leased. In Dallas, we just leased 97,000 square feet at first park 121 to a logistics provider bringing the two building 345,000 square foot phase of that park to 64% leased. This is in addition to the 125,000 square foot pre-lease at the last phase of the park that we started in the second quarter as discussed on our last call. We also achieved significant new leasing at our developments in process. In South Florida, we pre-leased 100% of the 259,000 square foot Building 2 at First Park, Miami to a logistics and transportation company. This building is scheduled for completion in the fourth quarter, and the lease is expected to commence in mid-first quarter of 2022. This same tenant also pre-leased 50% of our next start in that park, which I will discuss shortly. We also leased 100% of the soon-to-be-completed 141,000 square foot First 95 Distribution Center in Pompano. The lease will commence by October 1st. Given the strong demand and the ability of our team to replenish our pipeline with profitable development opportunities, we're excited to share several new development starts. In Nashville, we were successful in winning a 692,000 square foot built-to-suit with a leading specialty e-commerce retailer. Completion is slated for the third quarter of 2022. Our projected investment is $59 million. and with a projected cash yield of 6.4%. Taking advantage of the tenant demand we are seeing in South Florida, at First Park Miami, we will start a 219,000 square footer known as building one. As I just noted, we inked a lease for 50% of the space in advance of going vertical. Total estimated investment is 39 million with a targeted cash yield of 5.3%. We are also well positioned for future growth at that park. In addition to what's already underway, I remind you that we can develop another 405,000 square feet on land we own today, and we control another 59 acres developable to 1.3 million square feet for a total build-out of up to 2.5 million square feet. Also in Florida, in the Orlando market, we are starting First Loop Logistics Park. First Loop is a four building project totaling 344,000 square feet with an estimated investment of 45 million and a cash yield of 5.6%. In Seattle, we've launched First Steel, a 129,000 square footer. Estimated total investment is 24 million with a targeted cash yield of 4.7%. In the second quarter, we acquired a strategic site in the I-78-81 corridor of central Pennsylvania for $83 million. Known as First Logistics Center at 283, we have begun construction on the 1.1 million square foot Building A. The site can also accommodate a 700,000 square foot building, which is permit ready. This location is proximate to major parcel hubs for UPS, FedEx, and the U.S. Postal Service, where tenants serve strong East Coast consumption zones. Our total projected investment for the first building is $125 million, with completion targeted for the third quarter of 2022. and an estimated cash yield of 5.1%. In summary, these newly announced development starts totaled 2.5 million square feet with an estimated investment of approximately 291 million and a cash yield of 5.4%. Including these planned new development starts, our development in process total 5.7 million square feet with a total investment of $608 million. At a cash yield of 5.8%, our expected overall development margin on these projects is approximately 50%. We are excited about this robust pipeline and what it means for future cash flow growth. To further bolster our development pipeline, we acquired the remaining 138 acres at our PV303 joint venture for $21.5 million. This price reflects a $10.2 million reduction from our share of the gain and our earned promote from the joint venture. This purchase closes out a very successful JV, which generated a largely unlevered 54% IRR for the partners, and gives us another prime landholding to serve tenants' needs in this high-demand logistics corridor. In addition, just last week, we closed on a 95-acre site in the Inland Empire East sub-market of Banning for $27 million that can accommodate up to a 1.4 million square footer. Vacancy in the Inland Empire East is just around 2%, and there are limited sites that can meet customer requirements in this size range. In total, our balance sheet land today can support more than 12.5 million square feet of new investments, and our share of the Camelback Joint Venture is around 3.8 million square feet. So we are very well positioned for future growth. Second quarter building acquisitions were comprised of an 81,000 square foot distribution facility in Orlando and a 33,000 square foot regional warehouse in Denver. Total investment was $18.4 million and the combined stabilized cash yield is 5.6%. Moving on to sales, during the quarter we sold three properties and one unit for $26.2 million and an in-place cap rate of approximately 5.4%. We also sold one land parcel for $11 million. In total, we have sold $104 million year to date and have reached the low end of our sales guidance range of $100 million to $150 million. Before I turn it over to Scott, who will discuss more details on the quarter and our line of credit and term loan executions, Let me express my heartfelt thanks to the entire First Industrial team for their hard work and many contributions to our very successful second quarter. With that, let me turn it over to Scott.
spk05: Thank you, Peter. Let me recap our results for the quarter. Nary funds from operations were $0.48 per fully diluted share compared to $0.40 per share in QQ 2020 And our same-store NOI growth for the quarter on a cash basis, excluding termination fees, was 2.1%, helped by an increase in rental rates on new and renewal leasing, rental rate bumps embedded in our leases, and lower bad debt expense, slightly offset by a decrease in occupancy and an increase in real estate taxes. Summarizing our leasing activity during the quarter, we commenced approximately 3.5 million square feet of leases. Of these, 1.1 million were new, 2 million were renewals, and 400,000 were for developments and acquisitions with Lisa. Tenant retention by square footage was 71.1%. Cash rental rates for the quarter were up 15.7% overall, with renewals up 12.1%, and new leasing up 22.7%. And on a straight line basis, overall rental rates were up 29.5%, with renewals increasing 27%, and new leasing up 34.4%. Moving on to the capital side, as Peter mentioned, we closed on two financing transactions this month for which the pricing demonstrates the strength of our balance sheet. First, we amended our line of credit, which was scheduled to expire this October. Our new deal is for $750 million, and it matures in four years with two six-month extension options. The interest rate is LIBOR plus 77.5 basis points, a pricing reduction of 32.5 basis points from our previous facility's credit spread. We also financed our $200 million term loan that was due to mature earlier this month. The new term loan matures in July 2026 and has an interest rate of LIBOR plus 85 basis points. This is a 65 basis point reduction in the credit spread compared to our previous term loan. With our interest rate swaps in place, the new fixed interest rate on the term loan is 1.84%. Given the strength of our credit metrics, the line of credit and term loan provide for pricing at the BBB plus BAA1 level, which is one notch better than our current credit ratings of BBB flat BAA2. This favorable pricing will be maintained as long as our consolidated leverage ratio, as defined in the applicable agreements, remains less than 32.5%. We would like to thank our banking partners for their many years of strong support of First Industrial. Reflective of these two executions, the weighted average maturity of our unsecured notes, term loans, and secured financings was 6.5 years with a weighted average interest rate of 3.4%. At June 30th, our net debt plus preferred stock to adjusted EBITDA is 4.9 times. In the second quarter, we paid off $58 million of mortgage loans at an interest rate of 4.85 percent, which leaves us with no other maturities for the remainder of the year. Moving on to our updated 2021 guidance for our earnings release last evening. Our guidance range for NAERI FFO is now $1.89 to $1.97 per share, with a midpoint of $1.93 which is a $0.03 per share increase at the midpoint, reflecting our second quarter performance and an increase in capitalized interest due to our announced development starts. The assumptions for guidance are as follows. Quarter end average in-service occupancy of 96% to 97%, an increase of 25 basis points at the midpoint. Please note that our occupancy guidance now assumes that the lease up of the 644,000 square foot former Pier 1 space will occur next year. Due to additional leasing in our portfolio, we were able to essentially backfill more than enough space as an offset and raise our occupancy guidance. Same story in a wide growth on the cash basis before termination fees. 3.75 percent to 4.75 percent, an increase of 25 basis points at the midpoint due to our second quarter performance. Please note that our same store guidance excludes the impact of approximately $1 million from the gain from an insurance settlement. Our G&A expense guidance remains unchanged at $33 million to $34 million. and guidance includes the anticipated 2021 costs related to our completed and under-construction developments at June 30th, plus the expected third-quarter groundbreakings of First Park Miami Building 1, First Loop Logistics Park, and First Steel. In total, for the full year 2021, we expect to capitalize about $0.07 per share of interest. Other than previously discussed, our guidance does not reflect the impact of any future sales, acquisitions, or new development starts after this call, the impact of any future debt issuances, debt repurchases, or repayments after this call, and guidance also excludes the potential issuance of equity. Let me turn it back over to Peter.
spk12: Thanks, Scott, and thanks again to the FR team for another great quarter as we continue to achieve success on all fronts. Importantly, our pipeline of future projects is the strongest it's been since the Great Recession, which positions us well to continue to drive long-term growth and value for shareholders and serve the space requirements of our tenants. With that, operator, would you please open it up for questions? We ask that you please limit your questions to one plus a follow-up, and then you're welcome to get back in the queue.
spk01: Thank you, sir. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Our first question is from Craig Millman from KeyBank Capital Markets. Your line is open.
spk11: Hey, good morning, guys. Could you just discuss a little bit of the prospect activity at the Pier 1 space and, you know, maybe what is it about the building or the sub market that is kind of elongating the backfill process there?
spk08: Sure, Craig. Good morning. It's Peter Schultz. Activity in the sub market continues to be good. The pipeline for new supply is very limited. and tenants have relatively few choices. The lease signings to date have been in a couple of buildings that were bigger than us or smaller than us. Our building is positioned for immediate occupancy, which is really important in the environment where we're seeing elongated permitting process and delays on materials. So we're ready to go. We've seen a couple of shorter term deals, and that's not really our preference. And some of the longer-term deals are a little slower moving. So we remain optimistic about our success there in the mark-to-market. And as Scotty said in his remarks, you know, given the strength of leasing in the portfolio otherwise, that more than offset that. And we still have that as upside for the rest of the year. So we'll keep you posted on our progress.
spk05: Yeah, Craig, even with pushing out that lease up to 2022, we still plan to end the year around 97% occupancy. So all things being equal, the lease up of Pier 1 is about one percentage point of occupancy. That would push us to about 98%, which is rarefied air in the industrial sector.
spk11: I guess, Peter, are you guys close with attendance, or is it like... your prospect pipeline is thin at this point.
spk08: Craig, I would just reiterate there's good activity in the market. We're evaluating a number of things. As I said, our preference would not be to do shorter-term deals, and some of the longer-term deals are just slower moving.
spk12: And we would prefer, Craig, for it to be a single-tenant building as well, and So the size requirements in the market just need to match up or just need to find the right match.
spk11: Scott, as we think about your same store guidance, you guys are running around a little over 2% for the first half of the year. Is it just going to be a big spike in 4Q as you kind of lap the Pier 1 move out that's just going to get you to the midpoint?
spk05: Yeah, exactly. So if you do the math based upon our annual midpoint guidance of 4.25%, that implies about a 6% same store growth rate the back half of the year. And Craig, you're right, the two main drivers, one is occupancy. So we're going to do better in occupancy on the back half of the year, which will add about 2.3 percentage points to the same store. We're also going to do a little bit better in the back end of the year with increasing rental rates on new and renewal leasing. That's about a 0.6% increase compared to the first half of the year, and that takes care of the majority of the beta to get us to the 6% plus or minus that we think will achieve the back end of 2021. Great. Thank you.
spk01: Our next question is from Kiobin Kim from Truist. Your line is open.
spk02: Thanks, Dawn. Good morning, guys. Good morning, Kiobin. Good morning. So you guys have made some pretty interesting investments in the Phoenix market. You obviously bought PV303, the remaining portion of the land, to 100% ownership, and you have that Camelback land as well. Can you just talk about the supply-demand dynamics in that market, especially given that there's It seems to be about 23 million square feet being delivered in that market and only 25% free lease. I'm not sure how good the broker reports are, but I just wanted to get your take on it.
spk03: Sure, Kevin.
spk02: Hi, this is Jojo.
spk03: Phoenix, I would say, had a record first half in terms of net absorption, and it clearly trumped the completions by almost double. First half of the year, year-to-date net absorption is about almost 12 million square feet, which is one of the highest I've seen it in the last 15 years. So, again, very big demand, a lot of 3PLs, a lot of e-commerce related, a lot of omni-channel. Manufacturers have come in as well, you know, and a lot of demand for data centers. Historically, if you look at what we have, every building that we've developed, we've leased. Actually, either before completion or right after completion, minimal downtime. As you know, we have a 547,000 square feet on balance sheet development and expandable to about 925. And we're actually fielding proposals as we speak on that. So we've gotten proposals and we're looking at our options. Just in terms of even the land that we bought, if you look at that basis, that basis is sub four. In fact, about 360 per square foot. I can tell you today, that's about 45 to 50% below market. So right off the bat, we believe we're in the money and we think in the future that will yield you know, given the basis of where the rents are today, that should be over six easy in terms of yields. So we're very, very bullish, and we're feeling good about our current investments. And by the way, our portfolio there, existing portfolio, is about 98% leased today and going to 100% pretty shortly.
spk02: Okay, thanks for that. And for you, Scott, I know sometimes you guys give some color on the lease spreads for deals that are signed but not commenced yet. So when you look at the pipeline of deals that you have currently, what kind of spreads should we continue to expect?
spk05: So the stat that we're seeing is as of today, we've got 84% of the leases that are expiring this year signed. So that, coupled with the new leasing that we've done for 2021, we're looking at a cash increase in rental rates of about 14.5%. So it's very healthy when you include the renewals, which we've pretty much made it through the year, and the new leasing that we've done. Okay, thank you.
spk01: Our next question is from Rob Stevenson from Janie. Your line is open.
spk14: Good morning, guys. Can you talk a little bit about the Central PA land purchase and the 1.1 million square foot property you're building there? I mean, the land cost alone is nearly two times what you paid on a per acre basis for the Inland Empire parcel. Not used to seeing Central PA trading at that big of a premium to the California land. And then where should rents be here versus the $5 per square foot on your existing Central PA portfolio?
spk08: Rob, good morning. It's Peter Schultz. So a couple of things. In Pennsylvania, As we've said on prior calls, bigger continues to be better. Demand has been most active and consistent in the 700 million square foot range and plus. So that demand profile has been really strong. When you look at the supply, there's certainly been a fair number of million square footers that have been constructed. They're essentially all leased. There's only one other building today that's under construction in addition to ours in central Pennsylvania. So very limited choices for tenants with strong demand. The site, as Peter mentioned in the remarks, this is very close in to Harrisburg, to the parcel hubs and the intramodals, and importantly, a much better labor story than some of the sites say along the southern 81 corridor or up in northeast PA. So we really feel great about that combination of factors and the location. In terms of the price, that's about $46 on an FAR basis, so under the building, which is a site that is fully entitled, permitted, ready to go. So we started construction the day after. So JoJo can talk about the California site that is going through the entitlement process, but we think the opportunity here to create value is quite good with cap rates in that market 3.75 and going lower today. JoJo, you want to talk about that?
spk03: Yeah, yeah. In the NAPR East market, I wouldn't want to peg that as market because that's way below market. We got that deal by assembling six parcels to two different sellers. It took us a year off market. And right across the street, there's already a sale that's about 60% above our basis. So that didn't hit the market. Thanks to the team, to our LA Inland Empire team for getting that deal done. But that's definitely not market. If you look at it, that's under $7 a foot. land prices there where we have this site should be closer to mid-teens. So I wouldn't want to, you know, you shouldn't use that price as market because that never hits the market.
spk14: Okay. And then second question, you know, the pipeline now is about $500 million. You've got 80-ish million rough numbers to be completed in the third quarter and a similar amount of announced starts. You guys have been doing a lot of significant pre-leasing on the pipeline. Do you sit here at the $500 million-ish level? Is that where you're comfortable today? Do you let that drift up as demand pulls you in that direction? Does it fall back to a more sort of $350 million, $400 million-ish? As you look forward, how should we be thinking about the pipeline?
spk12: Hi, it's Peter. Look, we can build about 12.5 million feet on land that we own. That equates to about one, and that doesn't include the $291 million we talked about today. So that's net of that. That's about a $1.3 billion, that's $1.3 billion worth of investments. We also control land where we can invest another $320, and our share of the JV, Camelback JV, is about another $340 million of investments. So if you add all that up, again, net of the 291 we talked about today, that's pushing $2 billion of investment. You can see that our volumes are up today. I think going forward you can expect our development volumes to be higher than they have been historically. Don't forget our company is much larger now today than it was even two or three years ago. So the numbers that you're quoting are probably closer to the go-forward than the historical levels.
spk14: Okay. Thanks, guys. Appreciate it.
spk01: Our next question is from Caitlin Burrows from Goldman Sachs. Your line is open.
spk00: Hi. Good morning. Maybe just a follow-up on that last one. I guess given the land bank that you have and that investment opportunity that you have, what keeps you from moving forward Is it just things take time to assemble, or is there anything else that is keeping you from moving more quickly?
spk12: Well, every single project has a story and a timeline, and it's really just working through that. The entitlement process takes a long time. We do face, as everyone else does, potential delays with commodity inputs. As you know, there are shortages. on steel and other commodity inputs, so that influences the timing. You know we have a speculative development or leasing cap. We have to manage that. We want to make sure that we continue to lease these new developments in a timely way. Building is great, but if you don't lease the buildings, that's not good. And so far, as you've seen, we're way ahead of schedule or ahead of pro forma on the lease up of many of these projects where they're being leased at or near completion and in some cases before we even go vertical. So the market's very, very strong where we own these great sites and we're going to continue to roll them out as they're ready to go.
spk00: Got it. Okay. And then maybe if you could just talk a little bit on what types of tenants you're seeing the most interest from and how deep that is. if there's any visibility to how long you think that deep demand can continue for then supporting those leasing spreads that you were talking about earlier.
spk12: Peter and JoJo, you want to add some color there?
spk08: Sure. Hey, Caitlin, so demand is very good across markets and space sizes. The most active industries would include transportation and logistics companies, e-commerce, food and beverage, consumer products, some apparel, some home building, home improvement. It continues to be very, very good. Tenants need space, and we continue to see a lot of activity across the portfolio. Jojo?
spk03: Nothing really major to add, but existing tenants are not necessarily new or just reconfiguring the supply chain because their online business is continuing to increase. So they just need to add more space.
spk08: Okay, Caitlin, Peter, again, we're not seeing any slowdown to your question of demand at all.
spk00: Got it. Okay, great. Thank you.
spk01: Once again, if anyone would like to ask a question, please press star 1 on your telephone. Our next question is from Michael Carroll from RBC Capital Markets. Your line is open.
spk13: Yeah, thanks. Can you guys provide some color on, I guess, current market rents and how has that changed, I guess, over the past three to six months? And maybe highlight what type of rents that you're able to achieve on the $1.2 million spec development leasing this quarter versus underwriting, if you could provide details on that would be great.
spk12: You guys want to talk about market rents?
spk03: Sure, sure. You know, for the first half of the year, market rents accelerated significantly. at one of the highest paces over the three- to five-year period. I would say the range would be five to 15. It's hard to pick a number because it's different market by market. But towards the higher range would be West Coast, and immediately behind that would be East Coast still markets, and then everything in between in terms of red growth. So it's been very, very robust. The thing is that What's happened in the market for the first half of the year is that supply did not meet the demand, and that's why there is a squeeze.
spk08: And Mike, it's Peter. In terms of underwriting in general, all of the projects have leased earlier at higher rents at lower costs. You know, as we've talked about, we've had a couple that took a little bit longer, but in general, we've beat our underwriting across the board.
spk13: Great. And then can you update us on, like, maybe the development margins that you've achieved, I guess, on the developments that were stabilized in the, I guess, the end of 2020? And then maybe, I guess, I don't know if you provide these numbers yet, but on the developments that are in process right now that are 100% at least, I guess, how are those trending or where are those at right now?
spk03: Sure. So, like Peter said, Peter basically said that out of the $605 million of development under construction at the end of the quarter plus the newly announced developments, our margin there is roughly 50 percent. And so, if you look at the recently announced, they're closer to the low 40s, still significantly above our targeted margins. So, in terms of trending, I would say that overall, first half of this year compared to first half of last year, the margins have compressed a bit, and here's the reason why. Number one, land costs, land prices have gone up, and construction costs have gone up, but the impact of that was much overweight, basically overcompensated by rental rate increases across markets and cap rate compression. So you have some margin compression, a little bit, but then that's primarily overweight by the rental rate increases and cap rate compression. Does that answer your question?
spk13: It does. It's perfect. Thanks.
spk01: And our next question is from Dave Rogers from Baird. Your line is open.
spk06: Yeah, good morning, everybody. Just wanted to ask about size ranges in terms of where rent growth is at. If you mentioned it, I missed it, and I apologize. I can go back. But can you talk about maybe some broad size ranges and how rent performance has been or trended even since the beginning of the year?
spk09: Yeah, Dave, this is Chris. As far as from a size perspective, it's been pretty broad-based across all our size ranges. We're seeing healthy increases, double-digit plus increases across all our size ranges.
spk12: Yeah, I think the slight difference in the last quarter, I don't know if you asked this question or somebody else did, I think last quarter we would have said rents were growing a little bit faster in the smaller spaces. That's pretty much leveled out now, and the larger spaces are growing pretty quickly as well.
spk06: That's pretty much back to parity. Okay, that helps. Has that changed what you're seeing in terms of maybe cap rate compression, either between sizes or what we've seen, I guess, year-to-date from a market-by-market perspective? I think there's been some greater compression either in Bs and center-of-the-country assets. It sounds like maybe Would that also be starting to hit some parity, do you think, or are you still seeing some differences in performance on cap rates?
spk03: In terms of cap rate compression across the board, the investors for all sizes of real estate increase. You have the large portfolio buyers and the one-offs. They're very, very fierce. There's so much capital across the broad spectrum of sizes. And the capital also is across, you know, either acquisition, lease, redevelopment, or development opportunities. There's basically competition on every part and size of the market today in industrial.
spk12: I'd say cap rates would probably come in based on, depending on the market, primary versus secondary, kind of 25 to 50 basis points.
spk06: Okay, yeah, thanks for that, caller. Peter Basile, I think you mentioned the comment of development being larger going forward, sizing up with the company. Maybe we'd argue on this number, but one thing you haven't really sized up is the disposition program, I think, relative to the size of the company. As you accelerate here development this year, and it sounds like into next year and continue to have success, should we start to think about an increased level of asset sales, repositioning even more aggressively than you have been, and funding development that way, or do we think about it more from a you know, an equity perspective?
spk12: I think the timing of sales and the volume of sales, there are a lot of different inputs. One is certainly the position of the particular assets that we're focused on, whether they're fully leased. You know, we're looking to obviously maximize value on those assets. The volumes, I think, going forward are going to be closer to that 100 to 150 range. than maybe a few years ago when we were selling 225, 240. But that can change. Sometimes we get some unsolicited offers that we can't refuse on assets that maybe we didn't have at the top of our list to dispose of, in which case we'll take that opportunity to dispose of those assets. So, yeah, we're not going to probably move up the disposition volume like we are the development pipeline is really the answer to your question.
spk06: Thanks. I appreciate that. Got one for you on bad debt. Can you tell us what that was in the quarter and the impact? I think you said it did have a positive impact on same store. That's been the case, I guess, for many years now. But can you give us an update on that?
spk05: Yeah. Dave, it was effectively zero for the second quarter, which means for the first six months of this year, it's zero bad debt expense. So credit metrics are doing fabulously. And that added about 17 basis points to our same store, which is one of the reasons why we increased our guidance. So very good showing, very low bad debt.
spk06: All right, thank you for that. Last one, I'm just going to go back to Pier 1. Is that a long-term hold asset for you guys if you get it leased up? I guess, you know, going back to Craig's very first question is, I mean, does it have the parking, the truck courts, the height, the column spacing that you want in a building long-term?
spk08: So we really like that. It's Peter Schultz, Dave. We really like that sub-market, as we've talked about in prior calls, high barriers, supply constrained. And we look at all of our assets, as we say, asset management's an ongoing basis. So we'll continue to evaluate that. But we like that sub-market. The assets are very functional. There's this one and the one next to it, which is a little bit smaller. certainly meet the market and compete favorably.
spk06: Okay. Thanks, everyone.
spk01: And our next question is from Vince Deboni from Green Street. Your line is open.
spk07: Hi. Good morning. I had a follow-up on kind of your dispositions. commentary. I'm just curious, given the strength of the transaction market, why not be a little bit more active on property sales, not because you necessarily need the funds, but more to expedite the portfolio goals without going more coastal and then less flex that you laid out the last investor day?
spk12: Yeah. So we certainly think about that a lot. Good question. The nature of the buyers for what we're selling is are typically focused on one-off deals. Maybe they buy a couple at a time. Users buy about 30% of these assets that we're selling. You have the 1031 buyer who is active in these assets, and then you've got the local regional high net worth family offices who are also actively looking at the assets that we're selling. So they don't really lend themselves to big portfolios And the way that we can maximize the present value of those assets is to sell them the way we have. It doesn't mean that we don't consider from time to time trying to pool some together and taking a look at the market that way. So we evaluate all the potential options. And so far, the way we've been doing it has really been the best way to maximize value.
spk07: So, I mean, is it possible to increase volumes in this kind of the way you're doing it? Or you think kind of this, you know, one to 150 range is really the, I don't know, just maybe from a human capital perspective, all you're able to dispose of if you're doing it one at a time?
spk12: No, I mean, we have the resources internally to handle a bigger portfolio sale. And if you've seen in the last five years, we've sold to $200, $230 million at a crack. So, that's not an issue. We're just, again, trying to maximize value and pace it out to do so.
spk07: Got it. That's helpful, Collar. That's all I have. Thank you.
spk12: And, you know, the other thing I'd say is that as we have done that and been patient with those sales, the pricing has gotten better and better and better over time, and the leasing status in those assets has gotten better over time. Next question.
spk01: Again, if anyone would like to ask a question, please press star 1 on your telephone. Our next question is from Mike Muller from J.P. Morgan. Your line is open.
spk10: Yeah, hi. I guess on the acquisition side, it seems like you occasionally do something large, but you knock out a lot of 20,000 to 60,000 square foot buildings. But on the development side, you tend to see a lot of 100,000 to 500,000 square feet buildings. I'm curious, what's driving that disconnect? Is it just you're seeing better economics on acquisitions of smaller buildings or just fewer bidders?
spk03: Joe, do you want to take that? Yes, Mike, a couple of reasons. One is exactly when you're going a little bit smaller size, you're competing to hopefully less capitalized competition. You might be dealing with less sophisticated sellers It's a more fertile ground to do unsolicited or off-market deals, large and large. Large, large sellers typically are well represented and they try to do the most efficient process and therefore there's no value, almost no value to be generated from those kind of acquisitions. Also, if you notice, you know, we're always trying to increase our infill portfolio, so that infill portfolio is a very good strategy. And when you go infill, typically the sizes are going to get smaller. And if you look at a number of our acquisitions, we do do a lot of bolt-ons. What do we mean by that? For example, this Denver portfolio is northeast. It's a neighboring property to our bigger development, so it's easy for us, you know, to get a small profitable deal there. And the same thing with our recent acquisition in Orlando. So that's close to the properties that we already have.
spk10: Got it. That makes sense. That was all I had. Thanks.
spk01: And I am showing no further questions at this time. I will now turn the call back over to Mr. Peter Basile for closing remarks.
spk12: Thank you very much, and thanks to everyone for participating on our call today. As always, please feel free to reach out to me, Scott, or Art with any follow-up questions, and we look forward to connecting with many of you in the near future. Be well.
spk01: Thank you, presenters. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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