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spk06: earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Zaros, Associate Investor Relations. Thank you, sir. You may begin.
spk08: Thank you. Welcome to Stagg Industrial's conference call covering the second quarter of 2023 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company's website at www.staggindustrial.com under the investor relations section. On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include forecasts of core FFO, same-store NOI, G&A, acquisition and disposition volumes, retention rates, and other guidance, leasing prospects, rent collections, industry and economic trends, and other matters. We encourage all listeners to review the more detailed discussion related to these forward-looking statements contained in the company's filings with the SEC and the definitions and reconciliations of non-GAAP measures contained in the supplemental information package available on the company's website. As a reminder, forward-looking statements represent management's estimates as of today. Stagg Industrial assumes no obligation to update any forward-looking statements. On today's call, you'll hear from Bill Crooker, our Chief Executive Officer, and Matt Spenard, our Chief Financial Officer. Also with us here today is Mike Chase, our Chief Investment Officer, and Steve Kimball, EVP of Real Estate Operations. We're available to answer questions specific to their area of focus. I'll now turn the call over to Bill.
spk02: Thank you, Steve. Good morning, everybody, and welcome to the second quarter earnings call for Stagg Industrials. We're happy to have you with us today as we discuss our results for the quarter. Our portfolio continues to produce exceptional results as seen by our record leasing spreads this quarter. The industrial sector is benefiting from the secular tailwinds unique to our industry, including the near and on sharing and the continued penetration of e-commerce as a method of consumption. Vacancy rates have crept up to approximately 3.7% nationally. While demand for industrial real estate remains historically strong, it has come off pandemic highs as we enter the new normal. Tenants are taking more time to evaluate their space needs. There are more examples of tenants weighing their supply chain footprint against the associated corporate finance costs of outfitting space. These are large cash outlays, which include items such as material handling equipment and automation systems. Nine to 12 months ago, there was strong demand for recently constructed buildings with large footprints, generally buildings north of 500,000 square feet. In today's environment, the $50 to $100 million investments by tenants to outfit large new spaces is being avoided by contracting with third-party logistics firms to manage supply chains. On the supply side, Deliveries are expected to be approximately 3% of the overall industrial stock this year, with nearly half of those deliveries classified as big box buildings with sizes at or above 500,000 square feet. These deliveries are expected to result in a national vacancy rate of 4.2% by year end. This level of vacancy is still indicative of strong conditions. We continue to expect market rent growth in our portfolio to be in the mid to high single digits this year. Development starts, however, are down approximately 30% since the end of 2022. This lower level of development starts, coupled with continued strong demand, should push vacancy rates lower in the back half of 2024. Moving to our portfolio, we are proud to report cash and gap leasing spreads at high watermarks for STAG. As of July 25th, we have achieved 94.2% of the leasing we expect to accomplish in 2023 at cash spreads of 30.6%. After the slow start to the year, we recently have seen an uptick in development and acquisition opportunities as the capital markets slowly normalize. One area where this has been evident is on the development side. There's been a growing number of opportunities as developers look to de-risk their positions. Financing, supply, and leasing risks are pushing some developers to lock in profits today, thereby foregoing a portion of potential upside in exchange for certainty. We see opportunities ranging from the purchase of full entitled land sites with approval and negotiated construction contracts to completed vacant spec buildings. These projects present very limited construction risk with favorable upside in exchange for capital funding and leasing exposure. Also, STAG can be selective, focusing on developments that demise to smaller spaces that align with leasing demand. On the acquisition side, deal activity is restarted. The bid-ask spread between sellers and buyers has begun to narrow towards levels where transactions can begin to clear. Buyers have greater clarity into their cost of capital. Sellers now understand that prices previously achievable in 2021 are not available to them in the current interest rate and macro environments. The ongoing attractiveness of industrial real estate, given the strength in the underlying fundamentals, further supports the case for capital to be placed in our sector. This has resulted in an uptick in deal flow during Q2 and an expectation of increased transaction activity in the back half of 2023, although unlikely to reach levels seen pre-pandemic this calendar year. This thawing in the acquisition market can be seen by recent marketing and closing of several large portfolios of industrial real estate. something that was absent during the recent period of volatile capital markets. Our acquisition volume for the second quarter totaled $40.7 million. This consisted of two buildings with stabilized cash and straight-line cap rates of 6.2% and 6.3% respectively. In April, Stagg acquired a 100,000-square-foot warehouse distribution facility located in the I-287 exit 10 submarket of central New Jersey for $26.7 million. This acquisition represented an opportunity to acquire a low coverage functional asset in one of the nation's top markets. In May, Stagg acquired a fully occupied 134,000 square foot facility in the airport sub market of Greensboro, North Carolina for $14 million. As of closing, this building is leased for 1.8 years to a tenant who is moving to a larger facility at the end of their term. SAG will have the opportunity to realize a 50% or greater rollup upon the release of the building. With the recent openings in the market of a Toyota EV battery plant and an aerospace manufacturing plant, the building's modern specs and airport-adjacent location leave it well-suited to capture the growing tenant base supporting these plants. Subsequent to quarter end, we acquired six buildings for $70.7 million. On the disposition side, We sold five buildings a quarter for aggregate proceeds of $33.8 million. Three of these buildings were non-core assets. The other two buildings were located in Louisville, Kentucky, sold as a portfolio, resulting in proceeds of $26.8 million and reflecting a 6.2% cash cap rate. Here to date, the aggregate cash cap rate on the company's opportunistic dispositions was 5.5%. Finally, I'm excited to announce that Stagg Industrial was added to the S&P Mid-Cap 400 in May of this year. This is a testament to how the markets have begun to recognize the growth of the company and the evolution of the platform. With that, I will turn it over to Matt, who will cover our remaining results and updates to guidance. Thank you, Bill.
spk09: And good morning, everyone. Corporate flow per share was 56 cents for the quarter, equal to the second quarter of last year. Cash available for distribution for the second quarter totaled $87.2 million. We have retained $42.5 million of cash flow after dividends paid this year through June 30th. Leverage is near the low end of our guidance range, with net debt to annualized run rate adjusted EBITDA equal to 4.9 times. Equity stands at $794 million. During the quarter, we commenced 29 leases totaling 3.6 million square feet, which generated record cash and straight line leasing spreads of 28% and 42.6% respectively. we expect cash leasing spreads of approximately 30% for the year. Retention was 79.6% for the quarter and 97.4% when adjusted for immediate backfills. We achieved same-store cash NOI growth of 4.5% for the quarter and 5.3% year-to-date. Year-to-date, we have experienced two basis points of credit loss, with none incurred during the second quarter. Moving to capital market activity, we issued approximately 2 million shares under our ATM program at a gross average share price of $35.86, resulting in gross proceeds of $70.5 million. As of today, we have $61.1 million of forward equity proceeds available to fund at our discretion. The equity will be used to match fund our acquisitions and development pipeline. In terms of guidance, we made the following updates. We increased our cash central guidance to a range of 5% and 5.25% for the year, or 12.5 basis points at the midpoints. This change was driven by improved retention and a modest reduction in expected credit loss from 40 basis points to 20 basis points. We increased our disposition guidance to a range of $100 and $200 million, driven by our progress through today, an increase of the midpoint of $25 million. We updated our retention to a range of 70% to 75% based on leases signed to date. We still expect net debt to annualize run rate adjusted EBITDA to be between 5 and 5.5 times. I will now turn it back over to Bill.
spk02: Thank you, Matt. I'm excited about where the company sits today and the road ahead. I must express my gratitude to our team for their effort and dedication in achieving our goals this quarter. We continue to have extremely strong operational results and forecasts for 2023. We are also benefiting from a conservative balance sheet with ample liquidity. These factors will allow us to take advantage of the opportunities that present themselves for the remainder of 2023 and beyond. We'll now turn it back over to the operator for questions.
spk06: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. We ask that analysts limit themselves to one question and a follow-up so that others may have a chance to also ask questions. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Our first question comes from Craig Mallon. Please proceed with your question.
spk11: Good morning, guys. Just kind of curious, you guys have a kind of a broader portfolio than maybe Some of your peers and more recently, rent growth and sequential rent growth have been sort of top of mind for investors, especially in L.A. and some of the other coastal markets. But I'm just kind of curious, you guys look at your portfolio, your footprint. What are you seeing on on that front from a sequential market rent growth, fundamental kind of stable, stable kind of conditions? that kind of maybe differentiate your portfolio, your growth rate from people that are a little bit more exposed to some of the markets that, you know, maybe really benefited during COVID and are now kind of coming back a little bit to reality.
spk02: Yeah. Hey, Craig. Thanks for the question. Our market rent growth forecast at the beginning of this year, we're mid to high single digits for the portfolio. We affirmed that last quarter. and affirmed it again this quarter. So market rent growth has been pretty stable in our portfolio. Last quarter we mentioned benefiting from some of the nearshoring in our El Paso markets. We're seeing those mega-site investments start to go up in pockets in the U.S., the Southeast, Texas, some Midwest markets. So we think that will be a demand driver for some of our markets as well. We're seeing also some demand coming from logistics tenants continuing to build up their supply chain in our market. So for all those reasons, we've seen pretty stable and strong market rent growth in our markets.
spk11: Do you feel like you kind of mentioned the hesitancy of tenants to make big cap outlays, and so maybe they're using 3PLs in the near term? I mean, do you feel like there's a substantial amount of demand pent-up demand in your markets that if, you know, maybe the Fed pivots or something else gives people more assurances on the economy that you could see almost a re-acceleration, an absorption, and potentially kind of an upper pressure on rents in your market? Or is it just, you know, just it would be incremental on the margin?
spk02: Yeah, I mean, certainly that's a scenario that could play out. I mean, there's a lot of factors that would contribute to that and we need to figure that out. But that certainly could be an outcome. Right now, as I mentioned in the prepared remarks, big box demand is still very slow. We're seeing a lot of demand from 3PLs, which is consistent with last quarter. So overall, I mean, we're really happy where the supply-demand dynamic is for our portfolio and our markets, and our box sizes. As a reminder, our average lease size is 140,000 square feet. And the demand, the supply that's coming online today, about half of that supply is big box supply, 500,000 square feet or above.
spk11: And if I could slip one more in. You guys talked about the acquisitions that you made in the quarter. kind of what the $70 million is at the post-quarter end versus the dispos and kind of your equity availability. I mean, if you guys hit your guidance, what does the accretion on a net basis look like from all the capital recycling activity, you know, within earnings maybe for 23 and what that kind of translates to on an annualized basis for a run rate?
spk02: Yeah, I mean, for earnings this year, there are – Acquisition guidance is back-end weighted. So we're not factoring in a large contribution to core FFO from acquisitions. Dispositions are happening a little quicker in the year. We increased our disposition guidance. But for this year, not a major contributor to core FFO. The acquisition this year should benefit significantly 2024 core FFO. And we'll, you know, we'll obviously speak about that on our later call.
spk06: Our next question comes from Eric Borden with BMO Capital Markets. Please proceed with your question.
spk10: Hey, guys. Good morning. Appreciate the color on the potential development acquisition opportunities and just hoping that you could kind of expand on that, maybe quantify what you're seeing today in the pipeline and what you expect to close in the back half of the year. And then just a clarifier, are those opportunities included in acquisition guidance or are they separate too?
spk02: Yeah, good question, Eric. Thank you. The development opportunities we're seeing, we're really excited about. We've had really great success on our past developments. The developments are not in our acquisition guidance. Any incremental developments would be incremental to that. But they do take time, anywhere from 12 to 15, sometimes 18 months to develop. So the deployment of capital for those will be over a period of time. We're seeing opportunities, as I said, from newly constructed buildings that are vacant to entitled land sites that will run the development to partnering with a developer and providing capital to that developer in return for taking the risk for upside and downside in the transaction. So we're seeing a lot of opportunities now. As we close on those opportunities, we'll be sure to let everyone know. At this point, there's not enough certainty in the pipeline for us to give guidance on that, but as that happens, we will be sure to give guidance and lay out a schedule noting the deployment of capital, when those developments will be completed, the yields, the profit margins, et cetera.
spk10: Okay, that's helpful. And then maybe on the funding side, just how are you thinking about the funding for the remainder of the year, just given your share price today, you have $60 million of forward left versus cost of debt and mix of dispositions, you know, What's the most attractive source of capital today, and how should we think about the mix kind of through the remainder of the year?
spk09: Hey, good morning, Eric. This is Matt. You're right. So we have unfunded proceeds on the forward, roughly $61 million. We're going to use those to fund acquisitions in the future ongoing developments that Bill just mentioned. You know, the capital market has materially improved since April, and, you know, as we've talked about, our initial guidance ranges were set at the beginning of the year to allow us to operate in our target leverage bands. Granted, if we hit the midpoints of our net acquisition volume issued, no equity would likely be at the high end of that leverage range. With this modest amount of equity funding, it's more likely we're going to operate closer to the middle part of our range. But the concept of being able to operate without any additional equity is still in place. As Bill mentioned, we slightly increased the bottom end range of our disposition guidance. So we expect from a funding source, you're going to see, I'd say, incrementally more disposition proceeds.
spk06: Our next question comes from Vince Tabone with Green Street. Please proceed with your question.
spk04: Hi, good morning. I just wanted to clarify the cash cap rates on the acquisitions in the quarter. Just given these are shorter Walt deals, does that 6.2% cap rate reflect, you know, run rate, current NOI, or does this incorporate this kind of big mark-to-market you highlighted, especially in the Carolina property?
spk02: Yeah, it depends on if it's a known vacate, Vince. One of the deals is a known vacate, so that would be a stabilized. And the other one is not a known vacate, so that would be the in place.
spk04: Got it. So basically the year one yield on these is going to be a little lower than the 6-2, just to clarify. Yeah, slightly lower. Yep. Got it. And then just I had a kind of question on the development opportunities. and kind of just really how leasing risk is being priced today. So, you know, if you were going to buy the completed development that's vacant, you know, how much additional yield do you think you could achieve by leasing that building versus just buying a stabilized core property today?
spk02: It depends on the market. It depends on suite size, demand, the supply, but anywhere, you know, call it circa 75 basis points, again, depending on the suite sizes. The opportunities we're looking at on the development side is call it smaller boxes generally, medium-sized boxes. And a lot of times we're building those, we're planning to build those to demise them into two to three suites. So really meets the teeth of the demand.
spk06: Our next question comes from Samir Canal with Evercore ISI. Please proceed with your question.
spk07: Hey, good morning, everyone. Matt, I mean, there's a lot of positivity around the comments here, but, you know, you kept the guidance unchanged. So I'm just trying to figure out, is you kind of, you know, still pretty wide gap considering you're in August here. So I'm wondering what's sort of holding you back here? Maybe talk about the factors maybe to get you to the low end of guidance here. Thanks.
spk09: Yeah, so just to talk about the no change in corporate flow, you know, to your point, we did have a modest increase in our same-store guidance. But look, you know, there's still macro uncertainty as we sit here in July. That definitely influences our view on guidance. You know, we did increase our disposition volume expectation for the year. Look, there can be a timing mismatch between selling an asset and redeploying those proceeds. As Bill mentioned, you know, external growth is really not a material driver to earnings this year. You know, the acquisitions are expected to be back-end-weighted. In terms of the low end of guidance, to the extent something on the macro front really kind of tipped the capital market picture and that flowed into the share price, but we're very confident with the midpoint, and to the extent credit loss comes in lower, et cetera, we would drift towards the higher end.
spk02: Yeah, just to add on to that, I think you'd have to have a real material macro event to push us to the low end of guidance, some significant credit issues in the portfolio. which we're not anticipating, but we certainly don't want to put a guidance range out there that doesn't factor some of that uncertainty into it.
spk06: Our next question comes from Blaine Heck with Wells Fargo. Please proceed with your question.
spk15: Great, thanks. Just following up on some of the earlier questions, can you just talk about how you're thinking about your overall cost of capital today and the spread between your cost of debt and equity? and the required return on investment. I guess, you know, what's that spread on the deals you've executed year to date? And is there a spread that you guys target that we should be thinking about over the longer term?
spk09: Hey, Blaine, this is Matt. I can start with the cost of our capital. So let's start with that. So if we were to go out and originate long-term debt, it'd be in the private placement market. We've been very successful there. We would likely issue something between a seven and 10-year tenor, probably mix both of those. If we were to go to market today, We're in the 5.75% area, notably below the cap rates that we just discussed in a couple questions ago. In terms of equity, we're comfortable with where we issued equity because we had accretive uses for those proceeds. As we sit here today, we would need appropriate uses for additional equity. There has been modest increases in the acquisition activity, but I really want to emphasize modest, particularly compared to what we looked like in 2019. So we sit here today. We like where the balance sheet is. We're looking at the opportunities. We're hoping the opportunities increase. But, you know, we're very cognizant of the stabilized yield versus the cost of debt, and I think that's flowing through.
spk02: Yeah, and then just on the opportunity side, Blaine, I mean, this quarter we're really excited about the two acquisitions we executed on and the low six cash cap range. We can add a lot of value to those assets as well. When you look at what we post subsequent, those six buildings, three-ish, call it Walt, three-year Walt on those, opportunities we can add value to as well. And then when you think about some of these development opportunities that we're very close to, we're close to closing on a few of these, those are going to generate even higher returns. And we feel like in markets that
spk15: some of our stronger markets so great opportunities and certainly a creative uses for where we can raise incremental capital today all right that's really helpful second question just are there any common themes or traits in the properties you guys have sold or those that you guys are targeting for sale in the rest of the year any specific markets you might be looking to exit or tenant industries that you're trying to avoid or is it just more opportunistic
spk02: Yeah, on the industries, not really, right? We really focus on the real estate. So if it's a good piece of real estate, you know, we'll deal with the tenants. With respect to the dispositions, there was a couple opportunistic dispositions. I think year to date, we're in the mid fives for a disposition cap rate, which in this environment was pretty good. And a lot of those properties, Blaine, are either on the cusp of our CBRE tier one markets or just locations that we feel like long-term are not maybe the best for us. One example of a sale was to the tenant itself who just wanted to own the building. So it was a great opportunity for us to realize a pretty good yield while improving the overall quality of the portfolio.
spk13: Thanks, guys. Thanks.
spk06: Our next question comes from Camille Bunnell with Bank of America. Please proceed with your question.
spk01: Hello. Can you talk up to the downtime trends in your portfolio? Clearly you've made significant progress on leasing this year and even factoring in lower retention, your occupancy looks to improve. So just trying to get a sense if anything can detract from this trajectory in the second half of the year.
spk02: Yeah, from a downtime perspective, We're not seeing material changes. I mean, it's basically flat or up just a little bit, but we're not seeing any material changes there. What we're seeing changes in is just tenants taking a little bit longer to make decisions. So leasing space well in advance, a year in advance like they were last year versus now they're taking a little bit more time making those decisions. Part of that's just due to their outlook on the economy. Part of that's due to putting capital in the building and making a long-term commitment to the space and weighing the decision to either go in the space themselves or utilize the 3PL network. So from a downtime perspective, from a concessions perspective, nothing material. From PIs, those are pretty flat. On a free rent perspective, And we're hearing rumblings in the market that free rent's up a little bit. We're not seeing that in our portfolio. We're not seeing that in our lease proposals. So overall, it's pretty consistent with what it has been.
spk01: That's very helpful. And just a bigger picture question on the transaction market, given it looks like you're starting to get more active. What's your view on what's driving deals across the line now, despite no real changes around interest rate and questions around the economy? And have you seen any changes in appetite from sellers and buyers in the recent weeks?
spk02: You know what? I think time has been helpful in that respect. I think the volatility of interest rates coming down has helped. So the stabilization of interest rates. And now sellers really understand where the cost of capital is. And when they know that, that generates where they're willing to trade their assets. So you're seeing that bid-ask spread between sellers and buyers come down. And that's really what's starting to fuel the transaction market. A couple big portfolio deals got done. There's one or two on the market today as well. And those just give a little more confidence to both sides of the equation of what's the right market. When you have a rapid rise in interest rates like we had over the past couple of years, sellers don't know what their properties are valued at. And now that we've had stabilization, I think people are more comfortable with the value of the properties, and that's why you're seeing bills get done.
spk06: Our next question comes from Nick Thielman with Baird. Please proceed with your question.
spk14: Hey, good morning, guys. Maybe touching a little on leasing now with 94% of 23 kind of in the books here. I mean, as we're looking out into 24, do you have any like early indication of kind of where those spreads are coming in? Just trying to get a sense of we have a sustainable like same store performance here going forward.
spk02: Nick, you know, I'm not going to answer the 24 leasing spreads, but I will say the supply demand dynamic in our markets continues to be pretty balanced. We really like how our portfolio sits and how it fits our sub markets. We said this on the last call, we had some El Paso assets roll this year. We had a couple of buildings roll in southern New Jersey. We don't have those same markets rolling next year. But with that being said, supply starts, development supply starts are down pretty significantly year over year. That's going to impact likely the back half of 24. How much of an impact that's going to have, it's hard to measure that today. But overall, we're really comfortable with the portfolio sits. I think if you look at, you know, same store, you know, last year we had some occupancy gains in same store and you had half the leasing spreads. We had no credit loss. This year we're still budgeting some credit loss, and we were 5% same store last year. This year we're still budgeting credit loss. We had double the leasing spreads. We had 50 basis points of average occupancy loss, and we're still in that 5% plus range in same store. So I think you back of the envelope this. It's hard to think we're not kind of in a sustainable same store range for a period of time.
spk14: That's helpful. And then maybe looking at the third quarter acquisitions thus far, it seems as though a little bit more smaller builds, maybe around like 80,000 square feet. So is this more of a shift into just kind of meet that demand or is this is kind of what you're seeing transact on the market today?
spk02: Part of what we're seeing transact in the market, and we're certainly willing to buy bigger buildings. But if it has a shorter Walt on that bigger book building, it's going to result in us paying less for it because of the way the market is today. So I think you're seeing sellers not put those large buildings with shorter walls on the market because they know they won't transact at the appropriate yield they're looking for. So I think part of it's a mixed change in terms of what's on the market, and part of it's just pricing, given market dynamics.
spk06: Our next question comes from Michael Carroll with RBC Capital Markets. Please proceed with your question.
spk00: Yeah, thanks. I wanted to follow up on the 2024 lease expirations. I know, Bill, in your earlier comments, you're talking about, I don't know, some slowdown in the larger blocks of space. I mean, if you're looking out at 2024, I mean, is there a number of large blocks expiring next year, or how is that mixed compared to this year or the past few years?
spk02: Yeah, the... What we're seeing in the slow down demand, and you can put a pin in, you know, what number you want to use as large, 500,000 square feet and above is what we use. In terms of next year, we have nothing 500,000 square feet or above that's rolling. We don't have anything even 400,000 square feet or above that's rolling next year. So for us, what's rolling, you know, meets the demand in our submarkets. So there's nothing abnormal that's happening next year. And just to remind you, our average lease size is 140,000 square feet, so it meets a lot of the demand that's in the market.
spk13: Okay, great. That's all I got. Thanks. Great. Thanks, Mike.
spk06: Our next question comes from Mike Mueller with J.P. Morgan. Please proceed with your question.
spk03: Yeah, hi. I'm curious, on the development pipeline, Can you give us a sense as to how large you want that program to be either, say, relative to annual dollars deployed versus acquisitions or relative to your total market cap? Just some guidelines there.
spk02: Yeah, it's still early days, Mike. As we get more of these under contract or we start to close on more of these, we'll lay out a schedule and give some thresholds there. But we've got a ways to go before – we're putting out thresholds. I know some of the others in the sector have a 10% of enterprise value cap or a little bit north of that. For us, it'll be lower than that, just given it's a newer endeavor for us. But as we close more of these, we'll certainly provide some of that guidance.
spk13: Okay. Thank you. Thank you.
spk06: As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Bill Crow with Raymond James. Please proceed with your question.
spk05: Good morning, guys. Bill, you quoted development starts down 30%. I think others have talked about down 40%. I'm just curious whether you're seeing evidence that the development reduction might be longer duration in nature, or is this just really a pause? I mean, you see it in commercial builders cutting headcount or selling entitled land at a faster pace. It's unique in that fundamentals are really, really strong and we're seeing development slowing dramatically. So everybody just on the sidelines, they're going to jump in as soon as the financial markets, the lending markets recover. What's your take on that?
spk02: Yeah. It's a really good question. We're seeing a lot of, a lot of different things in the market today. I mean, we're certainly partnering with some developers. As I mentioned, we are seeing some entitled landslides come on the market. The merchant developers that can sit on land are sitting on land. You know, what starts the wave of supply again? You know, I think you're going to need a pretty significant decrease in interest rates for that to happen. I think that's really been a big issue for the merchant developers. The markets are great. The fundamentals are great, but it's really the interest rates and the debt capital markets that's putting them on the sidelines. I haven't seen, I guess I'm not close to it, to see if they're cutting headcount or whatnot there. I think what they're trying to do is de-risk their portfolio as much as they can, and that's where And we're looking to partner with some of these folks.
spk05: Yeah. Okay. I think it's a really interesting time from a development perspective. So I would agree. Yeah.
spk13: Thanks, Bill. Yeah. Thanks, Bill. Thanks, Bill.
spk12: There are no further questions at this time. I would now like to turn the floor back over to Bill Cooker for closing comments.
spk02: Thank you all for attending the call this morning. I appreciate the questions and appreciate your support. And we look forward to talking to you all soon. Thank you.
spk06: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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