Good day, and welcome to the EastGroup Properties Q3 2022 Conference Call and Webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Marshall Loeb. Please go ahead.
Good morning, and thanks for calling in for our Q3 2022 conference call. As always, we appreciate your interest. Brent Wood, our CFO, is also on the call this morning. Since we'll make forward-looking statements, we ask that you listen to the following disclaimer.
Please note that our conference call today will contain financial measures such as PNOI and FFO that are non-GAAP measures as defined in Regulation G. Please refer to our most recent financial supplement and to our earnings press release, both available on the investor page of our website, and to our periodic reports furnished or filed with the SEC for definitions and further information regarding our use of these non-GAAP financial measures and a reconciliation of them to our GAAP results. Please also note that some statements during this call are forward-looking statements as defined in and within the Safe Harbors under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995.
Forward-looking statements in the earnings press release, along with our remarks, are made as of today and reflect our current views about the company's plans, intentions, expectations, strategies, and prospects based on the information currently available to the company and on assumptions it has made. We undertake no duty to update such statements or remarks, whether as a result of new information, future or actual events, or otherwise. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. Please see our SEC filings, including in our most recent annual report on Form 10-K, for more detail about these risks.
Thanks, Keena. Good morning, and thank you for your time. I'll start by thanking our team for another strong quarter. They continue performing at a high level and capitalizing on opportunities in a fluid environment. Our Q3 results were strong and demonstrate the quality of our portfolio and the resiliency of the industrial market. Some of the results produced include funds from operations coming in above guidance, up over 14% for the quarter ahead of our initial forecast. This marks 38 consecutive quarters of higher FFO per share as compared to the prior year quarter, truly a long-term trend. Our quarterly occupancy averaged 98.3%, which was up 120 basis points from Q3 2021. At quarter end, we're ahead of projections at 99% leased and 98.5% occupied, matching our company record occupancy.
Similarly, quarterly re-leasing spreads were strong, both above 39% GAAP and 23% cash. Year to date re-leasing spreads are similar at 3% and 22% GAAP and cash, respectively. Finally, cash same-store NOI reached 8.7% for the quarter and stands at 8.9% year to date. In summary, I'm proud of our year-to-date results and the positioning this gives us to finish the year. Today, we're responding to strength in the market and user demand for industrial product by focusing on value creation via raising rents and new development. I'm grateful we ended the quarter 99% leased. To demonstrate the market's strength over the past two years have produced a number of quarterly records for the company. Another trend we're seeing is more widespread rent growth.
Re-leasing spreads have trended higher than in 2021, and more importantly, across a broader geography. I'm happy to finish the quarter at $1.77 per share in FFO and raise annual guidance to $6.93 per share, up 13.8% from the 2021 record. Helping us achieve these results is thankfully having the most diversified rent roll in our sector, with our top 10 tenants only accounting for 8.9% of rents. As we've stated before, our development starts are pulled by market demand within our parks. Based on our read-through, we're adjusting forecast 2022 starts to $375 million. Through September 30, we've completed 11 development and value add projects, with 10 of those rolling into the operating portfolio, fully leased at an average yield of 6.6%.
In addition to these, we have another eight projects which are 100% leased prior to construction completion. We're happy with the consistent value creation these represent, and we'll continue to closely monitor development progress given heightened economic uncertainty. Given the shift in capital markets early Q2, we're taking a measured approach on new core investments. We're also carefully evaluating each new development site given the level of demand and longer timeframe often required to put these sites into production. Brent will now speak on several topics, including our updated projections within the 2022 guidance.
Good morning. Our Q3 results reflect the terrific execution of our team, strong overall performance of our portfolio, and the continued success of our time-tested strategy. FFO per share for the Q3 was on the high end of our guidance range at $1.77 per share, and compared to Q3 2021 of $1.55, represented an increase of 14.2%. The outperformance continues to be driven by our operating portfolio performing better than anticipated, particularly occupancy and rent rate growth. From a capital perspective, macroeconomic concerns have caused the stock market to further decline, including our share price. As a result, we only issued $1 million of equity. We have been intentionally de-leveraging the balance sheet over the past several years, placing ourselves in an advantageous position to pivot to debt proceeds for capital sourcing.
During the Q3, we closed on $125 million of senior unsecured notes with a weighted average fixed interest rate of 4.04%. This issuance included two tranches, one for $75 million with a five-year term and another for $50 million with a two-year term. We also agreed to terms on the private placement of two senior unsecured notes totaling $150 million. One note for $75 million has an 11-year term and an interest rate of 4.9%, and the other $75 million note has a 12-year term and an interest rate of 4.95%. The notes were issued and funded after quarter end.
As a reminder, the company does not have any variable rate debt besides the revolver facilities, and our near-term maturity schedule is light, with only $115 million scheduled to mature through August of 2024. Although capital markets are fluid and have risen in cost, our balance sheet remains flexible and strong with healthy financial metrics. Our debt to total market capitalization was 21.3%. Unadjusted debt to EBITDA ratio is down to 4.88x, and our interest and fixed charge coverage ratio is at 8.9x. Looking forward, FFO guidance for the Q4 of 2022 is estimated to be in the range of $1.73-$1.77 per share and $6.91-$6.95 for the year, a 3 cent per share increase over our prior guidance.
The 2022 FFO per share midpoint represents a 13.8% increase over 2021. In closing, we were pleased with our Q3 results. As we have in both good and challenging times in the past, we will rely on our financial strength, the experience of our team, and the quality and location of our portfolio to lead us into the future. Before I turn it back over to Marshall, I want to note that fortunately, our Florida portfolio sustained minimum damage as the result of Hurricane Ian in September. With the aid of insurance proceeds, we will replace two older roofs on buildings in Fort Myers. We do not anticipate any meaningful financial impact to the operating portfolio because of the storm. Now Marshall will make final comments.
Thanks, Brent. I'm proud of the results our team created year to date and the position it leaves us in for the balance. Internally, operations remain historically strong as our results indicate. That said, the capital markets and overall environment are volatile. While never fun to live through, a couple of thoughts that may prove helpful. First, our team has worked together through several downturns and forecast downturns before. Our strategy shifts, but it's not uncharted waters. Secondly, the industrial market has been red-hot the past few years, so some level of market concern we view longer term is healthy for a sustained positive environment. Meanwhile, our buildings are as full as they've ever been, and rents are rising throughout our portfolio.
We'll work to keep occupancy high, continue pushing rents, and listen to tenants and prospects to accommodate their demand in the market as we've always done in good and bad markets. Longer term, I remain excited for EastGroup's future. There are several long-term positive secular trends occurring within last mile, shallow bay distribution space and Sun Belt markets that will play out over years, such as population shifts, evolving logistics change, et cetera, which we are well positioned for. Will now like to open up the call to take your questions.
Thank you, Mr. Marshall Loeb, President and CEO. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. At any time your question has been addressed and if you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Craig Mailman from Citi. Please go ahead, Craig.
I know Brent, you said there's no real impact from the hurricane, but anything on just development timelines or impact on Q4 recognition that we should be aware of?
Hey, Craig. This is Marshall. I'll comment. Good morning, and I'll let Brent chime in. We were fortunate with Hurricane Ian in that we didn't have a lot of extensive damage. You know, a couple of roofs we're gonna work on that were already budgeted in next year's budget to begin with. It was more of a revenue loss in Q4 and that, if you look at our development schedule and our supplement, there's three buildings in Central Florida that are now scheduled to deliver in January. There's two in Fort Myers that are 100% leased, and one in Orlando. All those we had partial revenue budgeted or expecting it in Q4, and now we've pushed that back into early next year.
With Hurricane Ian, and rightly so, all the utility companies and the inspections are focused on residential first with commercial second. We've fallen back in queue, and hopefully we can maybe get those online still this quarter, but we pulled those out of our budget. That was really the more impact to us, was we were trying to deliver fully leased buildings. Long term, it's not a problem, but Q4 we lost $0.02 or more that we were expecting to have through Hurricane Ian on timing.
Okay, that's helpful. No anticipated kind of impact to the 2023 run rate. It's just a shift from 4Q to 1Q, is how we should think about it.
Yeah. The yields on the assets are fine and they're leased. It's more timing. We'll have maybe some number. We had some cleanup and things. We'll have $100,000 in expenses maybe in Q4 from Hurricane Ian, but that's more gutters and cleanup, and some of that will get capitalized as well. In terms of run rate, your short answer is no.
Perfect. And then just moving to the development pipeline, this has been sort of a big engine for you guys over the past couple of years, and I'm just kind of curious, your yields have kind of stayed in that high 6% range, but now your cost of capital is kind of creeping up, narrowing that gap. I know that, you know, historically, you guys have had sort of a pull method of demand from the ground. I mean, is there a thought process that even if there is that pull from your local guys, that maybe you do kind of halt until yields reset higher to give you that more comfortable spread between financing and just returns?
A good question and correct too, in that we're still thankfully seeing the pull and demand. Unfortunately, cost of equity and then cost of debt and even availability of debt have gotten tighter throughout this year. You know, I would say early in the year, in certain markets, we probably would have developed into. Thankfully, we didn't need to, but we would've gotten into the fives or, you know, even low fives maybe in certain markets where cap rates were in the threes. With cap rates moving and costs moving, now we're. You know, as you said, what's in the pipeline is at a projected 6.8%. What we've come out of the pipeline is a 6.6%. So we're certainly looking harder at our development pipeline and where there's returns, and then pushing those a little bit higher.
Now I would say maybe the other good news thing we can, as we think about it, is we use current construction pricing and current rents in our pro forma. Even with the kind of shakiness or uncertainty this year, rents have continued to climb in our markets. With the volatility, there's so many of the local and regional merchant developers that have been pulled out of the market. We're expecting a pretty steep decline in construction and in supply, probably starting second half of next year. That makes me hopeful.
We're seeing a little bit of pickup in delivery time, and I think construction pricing and deliveries, it's gonna take some time to work through the system, will come our way because I think there'll be a lot of construction companies that, whether it was industrial construction or hotel or office or any other product types, that's gonna really slow down into 2023.
Just, you know, you make the point that price supply, you know, there's a lot of concern about industrial supply that it seems like you guys may pull back in the near term, some of your competitors may pull back, the merchant builders are pulling back. That just continues to put more upward pressure on market rents and the absence of availability here in a lot of markets. I mean, from your conversation with brokers and tenants in the market, do they acknowledge that, you know, rent growth has to possibly accelerate from here to make development pencil to get the availability that they may need to grow their supply chains? I know it's sort of a circular kind of argument.
Yeah
I'm just kind of curious if the market participants are starting to talk about this as a potential, you know, byproduct.
I think and I'm following you. I think people have certainly stepped back. Where you used to, you know, you, me, and Brent could have had a site, and once we got it zoned and entitled and got plans, we could have flipped it or if you're early in construction. We've really stepped out of the forwards and the acquisitions beginning in about May. We've not actively bid on those. People weren't afraid of vacancy, and we lost, you know, any number of those that we bid on because you can underwrite whatever rent you want when it gets delivered in eight months to a year, and that's come to a halt. I do think you're going to see.
Certainly, we'll see less supply once things move out of this pipeline that's under construction. I think because of people's cost and where land costs have gone right before kind of things ground into price discovery in Q2, you'll see higher rents. I guess the caveat or what makes me hesitate there thinking it through is just where demand goes. Right now, I think tenants, you know, look, as of today, we're about where we ended Q3. We're still 99% leased, 98% occupied. Thankfully, we've stayed full, but every tenant has to be watching the news and reading the newspaper, too. Everyone's got to be a little bit uncertain, and so I just don't know if things get bad or how bad they get.
We're kind of keep waiting for the demand to slow down, you know, really since April and Amazon's announcement. Thankfully, we haven't, you know, kind of each month, we kind of keep waiting for cracks in the system and haven't seen it. With the lack of supply, if demand can hang in there, it'll be really a great market to be in in 2024, I'm hopeful.
Great. Thanks. I'll cede the floor. Thanks, guys.
Sure. Thank you.
At this time, I would like to remind you, if you would like to pose a question, press star then one, and try and limit your questions to two only, if possible. You may always re-enter the queue. Our next question is coming from Camille Bonnel from Bank of America. Please go ahead, Camille.
Pipeline in markets like Phoenix and Dallas are not directly competing with your assets. Can you comment more specifically if you're seeing any change in appetite for location where tenants are basing their operations just given the tightness of the market? Are you seeing them move out further to the suburbs or relocate to other markets with better pricing?
I guess maybe two type tenants, and Camille, good morning, this is Marshall. The larger box buildings, you know, they'll usually stay in a market like Atlanta or Phoenix. They'll do a market-wide search, you know, and that's usually why they end up pretty far out in the suburbs. It's where it makes sense. That's where the land is cheaper and they're more price sensitive. It ends up being a little more of a commodity business. You can have several guys with, you know, with big box deliveries, and it's very price sensitive, you know, astute tenants. We like tenants that have to be, you know, ideally near their customers infill.
Even though you see markets like Phoenix or Atlanta, where people talk about supply, I think it maybe speaks to the difference of our product, that we're 100% leased, thankfully, in both of those markets. Where we do shift away from the city center, maybe like in a, I'll stick with Phoenix and Atlanta, we're where the population growth is, so that, and we've spread out a little bit in Atlanta, but that golden triangle between, say, ten o'clock and two o'clock in Atlanta. In Phoenix, a lot of the new deliveries are out southwest. That's where the land's less expensive. We've preferred the East Valley of Phoenix, and it's really the Southeast Valley, and that's where the residential growth is.
Those customers, they're certainly, everybody's rent price sensitive, but they're looking more at hiring availability and the type of workforce you can hire and then really the transportation cost. We've seen a number of tenants in, I'm thinking in Dallas, where we had Trane and Red Bull recently both sign leases in two different parts of Dallas with us, thankfully, because they needed to be near their customers and because they didn't want their drivers tied up on the road because some of those cities have gotten so large you can spend all day, even with a cheap location, with drivers on the road, and the transportation costs will offset the rent savings.
Okay. For my second question, could we please discuss Houston? Your portfolio occupancy has been very strong in recent quarters, but it looks like some space was given back this quarter. Just given that this market represents 14% of leases expiring in 2023, can you update us on how demand, the demand pipeline is looking here?
Yeah, Houston, you're right. We've got a fair amount of roll. By the time we finish the year, Kevin and the team there, that'll probably come down. That's about an average year for us at 14%. We're a little bit higher today than where we finished the Q3 in Houston, so that the team's already done a nice job backfilling some of that space. It's a market that's always made people nervous because of oil, you know, the volatility of oil prices. We've historically stayed, you know, kind of 94%-97% leased there.
I wouldn't call Houston the, you know, one of our top handful of strongest markets, but it's also a very stable market, but fifth largest city in the country, things like that, much more diversified than I think people outside of Houston or outside of Texas view that market. We're comfortable there. We've come down. We were north of 20% in Houston in terms of revenue. Now we're below 11%. The team does a good job of creating value via development, and we've got a couple of Houston assets that we're looking to exit. We'll keep building there, but probably develop a building to, you know, high sixes, ideally. And in the past, we've been able to sell things in the fours or so even in the fives now today, if we had to.
We'll keep kind of letting the rest of the portfolio grow, manage the size of our portfolio in Houston, and feel pretty good that it's a solid, stable market as much as any market can be given the national headlines today.
Thank you.
You're welcome.
Our next question is coming from Alexander Goldfarb from Piper Sandler. Please go ahead, Alexander.
Good morning. Good morning down there. So two questions. First, Marshall, just appreciate your comments on the overall demand north of 98% occupied, clearly, you know, incredible statistics. You know, others in REIT land, you know, are talking about slowdowns, but nothing is at all. You know, I mean, I assume that you guys are looking carefully for cracks, but nothing is going on. You know, as you look across the tenants, whether it's, you know, people who, you know, home builder oriented or maybe tech oriented or, you know, some of the areas that may be impacted by higher rates or pullback in corporate spending, are you not seeing any impact at all? Or is it that whatever area or industry has pulled back, it's been more than offset by other tenants?
Good question. Good morning. It's probably a little more of the latter and that, you know, certainly we're, you know, one, you mentioned home building. We've been concerned about that, and especially in the Sun Belt. You're in some markets where there's thankfully a lot of population movement to those markets, but that also leads to home building activity. We're watching those. Although if you ask me to list the homebuilder bankruptcies we've had, I couldn't. You know, when earlier in the year when Amazon made news, but we really had not pursued Amazon on new leases for a number of quarters. FedEx has been in the news of late, and both of those are top ten customers, but neither one, you know, but to combine, they're about 3% of our revenue. We've been able to offset.
If Amazon slows down and FedEx, it's not that it's a huge portion of our business. There's other tenants taking that space. Our bad debt this quarter was a tenant who's in the pharmaceutical business. They, without, you know, getting too much into their business, they lost a lawsuit and immediately filed Chapter 11. That was another one of the hits to our Q4 is a tenant that filed Chapter 11. We're working to either collect the rent or get that. That's about a penny, a little north of a penny of Q4 loss. The good news is if we do get the space back where their rent sits, it's about 50% below current market rent, so we'll be able to push the rents there, hopefully, pretty handily.
That was literally 95% of our bad debt in Q3 was a tenant, and they lost a lawsuit to a competitor and filed Chapter 11. We're watching for it and trying to be attuned to it. Our you know, I would say our bad debt historically has run about maybe 20-25 basis points of revenue. I think seems like a concern we hear from the Street is smaller spaces must mean smaller tenants. I think our bad debt and our history doesn't prove that out. This quarter it was a tenant, and we'll see. With 1,600 tenants, I like that. 'Cause I mentioned in the call, our top 10 tenants are under 9% of our revenue, and most of those are in multiple or several of those, multiple locations.
If we did, and we're not aware of anything, did lose a FedEx or an Amazon or Consolidated Electrical Distributors, we wouldn't or Lowe's, we wouldn't lose them in every location. You might lose them in a location.
Okay. The second question is, you mentioned in the response to the last question on cap rates, and you mentioned maybe Houston is now, you know, sort of in the fives. Can you just talk overall about cap rates? I mean, you bought a bunch of land in the Q3, you know, in development yields have come down, it sounds like a little bit, but curious to hear what's going on in the cap rate side of the equation.
Yeah. No, and we're watching it. I wouldn't call Houston in the fives. Right now we're still. It's been just several months of price discovery and maybe with a bigger preference. We stepped back from actively bidding on acquisitions and even value-add acquisitions in May. What, you know, most of what I know is anecdotal. We talk to brokers often, but we're not in the bidding process. Where cap rates have moved the most material is a single-tenant long-term lease. It makes sense, it's more like a bond. Those cap rates have moved up. If it's multi-tenant, say it's a multi-tenant project with shorter-term leases and odds are those are gonna be below-market given where market's been the last couple of years. Those cap rates have been stickier. They've moved up, but they've held in there.
We've got a few smaller assets on the market. There's definitely fewer buyers out there. There's price discovery. What we're hearing is there's a lot of institutional demand for industrial product. It's attractive compared to the other, you know, property flavors at long-term for a number of reasons. It's really where, you know, things just aren't trading as much. There's a lack of debt, so there's very few portfolios on the market and nothing is trading. I think with the lack of debt and equity, it's going to stay that way for a little bit of time. That's what's made us be very cautious and careful on our development.
Although still in the high sixes and the way we look at, especially when we have a park, we need to get each one justify the next development based on its return. We're, you know, as you mentioned, 99% leased as a company and 100% leased and probably a good half dozen of our active development markets. If an existing tenant needs space, we've always said someone will deliver them that space, and I'd rather move them within our park, and we can backfill their existing space, whereas the market's this tight at a higher rent than we're collecting today. We were careful, I'd like to think, earlier in the year, and we're even more careful right now, just watching for a slowdown, but we're watching for it, but really haven't, knock on wood, been impacted through October 25.
Thank you.
Sure.
Our next question is coming from John Nickodemus from BTIG. Please go ahead, John.
Hello. Thank you, and good morning, Marshall and Brent. Just a quick question regarding sort of return hurdles you're looking at when making acquisitions or any of your developments. Just was curious if there are any changes for your team there, you know, given the current market conditions, and you said you haven't been impacted as much, but just anything you're monitoring there, any changes you've made, you know, sort of in the past few months.
Yeah, I would say a good question, and again, we probably earlier in the year, if you had called us on a new development and, you know, probably the right market and the right, you know, more importantly, right sub-market, we would have looked at a development in the fives, just given the long-term growth prospects of that. Now we would probably move that well into the sixes because our cost of capital has gone up. We never have needed to go there on our development pipeline, but a couple of value adds, that's where we avoid the construction risk but take on the leasing risk. We've looked at those at the fives and even, I think we did one last year in California kind of in the fours. We would probably look more carefully.
We've stopped the value adds altogether and probably moved our own development kind of hurdle up by 75-100 basis points just because our own capital is, you know, a little more precious given where pricing is. We wanna keep some dry powder because we think there's going to be some opportunities as these small, local and regional developers. I don't think there'll be a lot of distress out there, and some of it may come via land, and we've been able to acquire a land site. A couple that we're working on: one we've closed, one we haven't, where it was the person that had it under contract was unable to perform, and we were able to get repricing on it.
We're trying to be cautious with our capital, and we have moved our development yields up over the course of this year. We'll just see where, you know, I don't think interest rates are coming down, unfortunately, with the Fed and everything else anytime soon. I'm probably worried more about our own existing tenants and the impact on them as this plays out too.
Great. Thanks so much, Marshall. That is super helpful. Just the second one from me.
Yeah. You're welcome.
I know we've seen sort of more macro headlines about a shift from port activity, sort of from the West Coast over to the East Coast. You know, Houston would be a notable example of that, just due to several different reasons. I'm just curious if this is something that, you know, you've seen impacting your business, and if so, how? Or your business and your tenants, I guess.
Yeah. It's interesting to watch, and we haven't really. You know, I think there is a good industrial development or ownership play at the ports. You know, I hear, you know, kind of like you, we read about it. I hear the Port of Savannah, Georgia's done very well and certainly the Port of Houston. We probably benefit indirectly, but we've avoided the port, you know, really directly port-related buildings in terms of development and acquisitions. My fear is it's just not a world we've played in. You get more into logistics and how that works. I guess personally I remember watching a video of how the Port of Jacksonville had really improved their port, and I'm getting excited, and then it hit me.
There's probably a video just like this for Virginia Beach and Savannah and Miami. I always assume there's someone in Bentonville, Arkansas, or somewhere like that deciding where the best place to ship their goods is. I think in terms of, you know, if we've avoided port, you know, sub-markets. Where we do think we'll benefit, and we're seeing that benefit, is more onshoring or nearshoring of manufacturing. In South San Diego, we've benefited there. It's not really ports, but it's, you know, maybe port of entry. With our Amazon delivery earlier this year, we bought several buildings that were 50% leased from an institution end of last year. El Paso's been a good market. Phoenix, Tucson. If I think about ports, we're probably along the border.
The shift too from manufacturing, especially in technology, we're benefiting with Tesla coming to Austin and Samsung and things like that. We're bullish on Austin long-term, and we've seen not so much the manufacturers, but the suppliers both in Austin and San Antonio. We've benefited from that. I'm calling ports to mean, you know, ports of entry, not seaports. Hopefully that's helpful.
No, that's really helpful, Marshall. Thanks so much.
You're welcome.
Our next question is coming from Jason Belcher from Wells Fargo. Jason, please go ahead.
Hi, good morning. Just wanted to ask about the Horizon West 2 and 3 developments. I noticed you transferred those into the operating portfolio in Q3 upon reaching the one-year post-completion threshold ahead of that otherwise 90% occupancy threshold trigger. You know, all the other developments that went into the portfolio in Q3 are fully leased. Just wondering if you could give us an update on the Horizon West developments and maybe comment on any drags on occupancy there that you can share.
Yeah. No, we're happy with Orlando, and it's a strong market there. We like the park. It's about 50,000 sq ft, you know, and you're right. I guess, you know, I usually have conflicted emotions. We've transferred 11 buildings this year, and 10 of those are fully leased, and Horizon 2 and 3 is where we missed it. It's more timing. We'll be fine on Horizon West. Horizon West 4 is a big box building. That's one that we'll deliver in January. That one's 100% leased. So the park is doing well, and we'll, you know, continue our development as long as the demand there continues. You're right. That's one, and I guess bigger picture, I say conflicted.
You know, I always think too, if we're hitting on 10 out of 11 and the profits are there, and again, now with a little more uncertain timing, part of me says, if, given the profit spread, should we be hitting on, you know, 12 of 16? Because you may be better off and look, it may take us an extra quarter to lease it, but at the end of the day, it, that may be a 10 basis point return difference on a good asset. So we'll be. We're comfortable with Horizon West 2 and 3, comfortable with the park in Orlando. It just, this is one that took a little longer to lease up than some of the others in that park have.
Understood. Thank you. You know, I guess, for my second one, I know you're not giving guidance yet for 2023, but just given the rising rate environment and its impact on the investment sales market, maybe if you could, just talk maybe big picture, how you're thinking about, acquisitions versus development going forward. To what extent do you anticipate the pipeline for acquisitions, you know, at least at attractive pricing, could expand over the next year?
Last several months, you know, handful plus, we've not been active in the acquisition market. That said, you know, I think it would be. If we bought something, it would need to be a unique situation, a building around the corner in a submarket we're in, you know, next door or something like that. At some point, if the market stays this kind of volatile, if we could find the right acquisition and really that delta. If we're still developing to call it a 6.8, and you could get a unique acquisition to step in on timing, we might. It would probably need to be a unique acquisition, you know, for a core acquisition.
That said, we've stepped in a couple of times on land pricing already, where it's been land we really like, where one was a local developer, was running out of time, couldn't raise the capital. We stepped in. They made some money, but not nearly what they were hoping to. We've been renegotiating a number of our land acquisitions. We're careful on land. I would say on the land acquisitions, we've dropped some peripheral land sites. We've dropped the more expensive ones. We've dropped the peripheral land sites. If we can find a good infill land site that we really like, I'd rather not carry it. If we had it and it's a mild downturn, I think that's the one part that's really been our bottleneck the last few years, is finding good land sites.
I think there'll be, what we're hearing from brokers, any number that where the contracts have been extended and the contracts will be dropped. We've dropped a few of them ourselves, probably. It's always a little bit painful, but they're still out there, and we can always circle back to them at the right time, hopefully.
Thanks very much.
Sure. You're welcome.
Our next question comes from David Rodgers from Baird. Please go ahead, Dave.
Hey, guys. It's Nick on for Dave. I kind of wanted to touch on something from the prepared remarks on the widespread rent growth across the nation. Maybe what are some of the markets that you're kind of surprised with the rent growth numbers, just looking across the portfolio?
Yeah. You know, a good question, and I guess surprise, you know, it all goes back to what are your. You know, to me, I'm kind of looking at ours, and I like year to date, because in any, you know, with our size portfolio, in any quarter, you could get an odd mix. Tampa, you know, Florida all in all, has been a strong market, north of 40%, Tampa at 50%. You know, I look kind of throughout our portfolio. I know Las Vegas has been a strong market, and I'm looking at GAAP numbers at 66% to. I think that we're at 39% for the quarter, 36% for the year is a really strong number for us. Really all of those markets, I think we've been happy with.
Austin, I guess I'm not shocked at north of 50%. We, as I mentioned earlier, we like Austin for, you know, it's the capital, it's a university town, there's some topography issues, there's technology, and it's hard. You really can't build on the west side of Austin because of the aquifers and the topography. We think that's gonna be a really strong market. Thankfully there's any number of them. Last year we were in the low 30s on a GAAP basis, which was a record year for us, but we had some large leases in California roll that really helped us get there. This year we haven't had the benefit of that, but yet we've had a better year. That's what feels to me more lasting and more, probably more indicative of the market, of just where.
We've said before, I think people on Wall Street gets the lack of land in maybe the coastal cities, but cities like Dallas where there's supply in Dallas, but reading the CBRE reports the new supply in Dallas, it's a big number at 65 million sq ft, but it's 73% of that is in what they've classified as outlier markets where we're not. Those are the things that surprise me, or you realize just how little land there is, as big as Dallas is, as big as Phoenix, as big as Atlanta is, where you look at where the new supply is. If you can find those sites. We're happy with where rent growth has been. It may.
You know, who knows with the economy, it may slow down a little bit, but I'm grateful that we have the embedded rent growth where we've been. I was just reading where Atlanta rents are up 18% year-over-year. If that slows or even pauses, we've got some room to continue pushing rents until hopefully we get to the other side of whatever. If we do go into recession, it's. We can get to the other side of that and still show growth through that, through pushing rents.
That's helpful, Marshall. Maybe a question for Brent. With the current stock price, you guys said you're probably not gonna be issuing equity, but you did mention incremental debt and kind of flexing the balance sheet. For, like, leverage parameters, like, where are you flexible taking leverage at this point? Just looking at development opportunities and future acquisitions.
Yeah. Good morning, Dave. You know, we are flexible in that, you know, we've obviously put ourselves in a position to be able to add debt. I don't think going back six months ago, we didn't realize debt would double in cost, you know, over the course of the year, which has obviously caused a problem. Yeah, we were really proactive intentionally early in the year. You know, we've issued $525 million of debt so far. Like I say, we were intentionally proactive in the first half of the year with expecting rising rates. We've been able to do that at a 3.8. We've been able to provide a lot of runway for ourselves. We're, you know, very low draw on a revolver currently. We're in good position to go out into next year.
As Marshall's been saying, from both a leasing standpoint and a capital access standpoint, we'll just have to see how that plays out. We're also looking at less expensive options that we can do. We're pursuing maybe exercising a portion of our accordion on the revolver. You know, our revolver total capacity is just $425, which is relatively small given our size, and we've benefited from that 'cause it's been low cost to us for a long, long time. Maybe expand that just to give us a little more liquidity and flexibility and timing, a few holes in our laddering that would be shorter term in nature.
You know, trying to pull all the levers early that we can that give us the best cost, if you will, or least expensive access to capital. We're in a good position to get out into next year, and we'll just have to see how it plays out. You know, the price has come back a little bit, low 150s. You look at NAVs, and that ranges from 136-216. I think it's safe to say consensus NAV right now is an average of I'm not sures and I don't knows, and we don't know either.
You know, we haven't totally given up the idea, and we're not dialing it into anything we're forecasting, but we haven't given up on the idea of accessing equity potentially at some point over into next year if you know, if the Fed could say they're backing off and if you know, if the company's still doing strong and depending where the share price is, how much cap rates move, where people think NAV is at the moment. We're in a good position, as we always typically are. We're in a good position to be able to be you know, very measured in what we do, and that's what we'll do. We're in a good spot going into next year.
I'd also point out on our development pipeline sheet, you know, you see $600 million of total development, a lot of projects there, but there's only $190 million of spend left to put all of that $600 million, $600 million it cost. It's more, you know, the value of that's probably closer to $1 billion, but we've only got to spend $190 million left to unlock that. Yeah, we're in a good position to take care of that. You know, again, as we get out into 2023, we'll just see what the market is dictating to us, and we won't fight it. We'll respond to it, as best we can.
All helpful. Thanks, guys.
Yep.
We now have a question from Bill Crow from Raymond James. Please go ahead, Bill.
Yeah, thanks. Good morning, Marshall, everybody. Marshall, as you think about what's happened to rent growth over the last, I don't know, 10 years, and you think about the mark-to-market that you're reporting this year and I assume next year, at what point do we hit really tough comps? In other words, when did the real acceleration take place? Was that kind of a 2018 event, 2017 event? I'm just trying to think of your average six or seven-year lease term. When do we start to see those more difficult comparisons?
Good question, and I'm thinking as I'm answering your question. I believe this is our, and I may be off here, our eighth year of double-digit rent increases. You think, you know, usually we're four- or five-year leases and that, and again, it hasn't always been in the thirties. It started out in the, you know, the low teens, the high teens and up. That said, you know, and this is anecdotal, one of the spaces I mentioned we re-leased in California last year. For an example, we had about a two-thirds rent increase on a big space. This is down near the port. Last week, I was in California with a couple of our team and we were just talking about that space, and they think our rents are 50% below market.
Even though we raised rents by two-thirds, you know, we're wishing we had signed a one-year lease, not a five-year lease, because the rent, the market's doubled since we signed it. I guess I'd say personally, and maybe this is the. You know, Brent and I have both been in the industrial market probably combined more years than we really wanna sit down and add up, but I never expected industrial rents to do what they've done the last handful of years. We'll start to run into higher comps, but maybe just given the how people deliver and the demand for I wanna order or I want.
Whether it's ordering online, ordering by phone, however, and I want it delivered more quickly, or Sunbelt cities have grown so much, traffic has gotten so bad that you need multiple sites, you know, in different parts of the city. Thankfully, our rents are just a low part of the cost structure, makes me feel pretty good of given where. You know, I feel for our tenants, given where their employee wages have gone the last few years and where transportation costs are, it feels like it gives us room to push rents. We can't, you know. Look, we'll push rents, but we can't set market rents. We're following where the market takes us, but it's been pretty broad spread. If you have well-located, well-designed product, it's, there's a million ways to.
You know, I guess there's 1,600 ways to use our buildings as our tenants show us. I feel pretty good going forward about our ability to produce rent growth, even if the market needs to take a minute and pause because of the economy. We're probably already into some of those hard comps to a degree, and that we're, you know, eight years into double-digit rent growth.
Yeah. I would just add to that, Bill. I think if you figure any given market, depending where you are, is increasing year-over-year, 5%-8%. Over the course of a five-year lease, I mean, you're looking at 25%-40%. From a comparable standpoint, I don't know, like coming out of the Great Recession where you might have had some of those comparables. You know, if the market can maintain or it has maintained that sort of growth, so I don't know that there was anything that was, quote, "left behind" or that was pre a certain hard date like it was in the Great Recession. Yeah, I think it really comes down to, you know, demand and the health of the market.
If it, you know, whether or not it can sustain that, I think the comps, as Marshall was saying, have kind of just continued to kind of step on each other, moving up and up and not necessarily, you know, not having a soft spot to look back to. You know, maybe if supply comes down next year, as Marshall alluded to, with maybe some of the developers becoming more, you know, unable to access capital and slow that down. If demand can hang in there, then hopefully those could be some drivers to, you know, help rents hang in there. If demand hangs in, I think the comps will be there.
Yeah. No, I appreciate it. I want to ask a follow-up question. A two-parter, hopefully short answers here. Don't want to use up too much time. On the construction environment, any change, and I know you addressed this a little bit, on the Horizon lease-up, but any change in the lease-up duration on average of your new development pipeline? Second of all, I'm assuming the costs overall to build are at least starting to come down, if they haven't already come down, when you think about land and, you know, when you think about some of the construction materials. How far are we off of peak, if we are off of peak pricing? Thanks.
I think maybe I'll answer them in reverse order. I think we're maybe slightly off of peak. We're seeing faster delivery times a little bit. That's the good news, and that'll help thin out the supply pool. You know, it's one of the things. It just takes longer for everybody to finish construction. The supply numbers have gone up just because of the gestation period to deliver buildings. We've seen some pricing come down. There's been some offsets. What I'm hearing is roofing materials and this or that are down, but concrete prices are up. We're maybe 5%, no more than 10% off the peak pricing. I think that'll take another quarter or two to really start to play out, hopefully. Then on demand we still feel pretty good. Our demand for our development...
Yes, we, you know. To me, we missed a spot on Horizon West, and it was a good question, but that's really one tenant. Well, you know, look, if we were 50,000 sq ft, we would have been eleven for eleven. I wouldn't. I would hesitate to take that. You know, I would take our 99% leased as a better read on market industrial. I know I'm selling here, but that's the truth. That's over a larger pool of assets than the one building where we got 50,000 sq ft. We feel still pretty good. We leased over 500,000 sq ft this quarter in our development pipeline. We've got some other pre-leasing. I think as tight as the markets are, it'll be interesting. I think the push-pull will be.
What we're hearing is there's really the lack of available space. You know, I had dinner with a tenant rep broker the other night, and they were complaining how their business isn't fun because there's not many options to show their tenants, and everything they show them, there's competition for and things like that. And then the other flip side of that is every tenant's taking a little bit longer to make a decision. What we're hearing is leases are still getting signed, but the decision-making, probably rightly so, given the economic climate, is taking a little bit longer. We'll keep watching the development pipeline pretty closely. We think it's been a great way to create earnings, create NAV over the years for us, and we'll, you know, try to. We'll let the market tell us where we need to take that next year.
We've certainly built more buildings the last couple of years than I would've estimated to begin the year. If the market slows, we'll slow down our development pipeline. As we mentioned, we've already kind of pushed the yields we need to, given where our cost of capital has moved during the year.
Great. Thank you for the time.
Sure. You're welcome.
Thanks, Bill.
We have a question from Ki Bin Kim from Truist. Please go ahead, Ki.
Thank you. Good morning.
Good morning.
Marshall, I want to go back to your comments about smaller spaces perhaps not equating to higher risk or more fallout in a recession. I was wondering if you could just provide more color around that. Tied to that, I'm sure it's changed over the years. How has that portfolio handled a moderate recession?
Yeah, I guess going back, we've been. Good question. You know, I'm kind of a couple of names when we look if you look at our top ten tenants and some of those names. I was really looking at some of the leases we've signed this quarter, where I think people think of, you know, smaller spaces. It's KeyBank, Brenton and Marshall. You know, we just left our garage and opened a space. We've, you know, within our development pipeline, I mentioned Trane and Red Bull, HD Supply, Frito-Lay, Walmart. Those were all in the last month to two of some of the leases. We historically have quoted bad debt.
I would've probably told you two or three years ago, 40 basis points of revenue, and that's really moved down in the last, call it, 10 years and down to, you know, kind of in the 20 basis points. Some of that, with the market this tight where tenants are in trouble, we can backfill their space at a higher rent and get the term fees, is what our team has done a good job. If I go all the way back to. I'm kind of looking at our bad debt numbers. In 2008, 2009, we were probably averaged about 100 basis points. Then since then, it dropped dramatically. Probably the Great Financial Crisis, we were a much different company in terms of size and probably tenancy too.
We weeded out a lot of our rent deferral customers during the COVID timeline. We were able to replace, thankfully, in a strong market. That's a great time to improve your credit. At the peak, and then in 2020 during COVID, I guess looking at that, we were about 75 basis points of bad debt. Last year, we had negative bad debt, so that we recovered a lot of the tenants we'd reserved. Most of that, like this quarter, the bad debt was a tenant, and even then it was a straight line rent write-off, not a cash, not back rents that we had to write off. That's a lot of stats in a short period of time, but I hope that's helpful.
Yep. You know, if I think about the GFC, so you're not alone in this, but you guys did lose occupancy, so maybe not bad debt, but you had a lot of, I mean, I'll put in quotes, a lot, right? It's all relative. You had tenants not renew, and your occupancy went down several hundred basis points. I'm just, I guess I'm curious, if you look at your portfolio composition today versus maybe the GFC, is there something structurally different about it? Do you have less, like, housing related tenants? Any kind of color you could provide around that.
I think, and Brent chime in, what I would say is some of our markets, you know, they're that much more infill, you know, that much bigger cities, Dallas, Phoenix, Orlando. You know, we went to those markets, they were growing, and 14, 15 years later, they're that much larger. I think we'll do a little better. We've got a little more. You know, there's much more to the city than there was. I know we talked about Fort Myers, and someone said in the last downturn, you know, home building was 105% of the GDP in Fort Myers and areas like that, and it's still a fast growth area. I feel better about the cities we're in. You know, back then, we were more concentrated in certain markets that were more.
We've spent a lot of time the last handful of years spreading out our geographic diversity. I think that, you know, the tenant diversity and the geographic diversity. You know, I was talking to one of our peers the other day, and their comment was, during the GFC occupancy dropped, I believe it was maybe 425 basis points. One difference today, if we go into something that severe, I guess there's that. The good news is market-wide occupancy, we're probably 500, 600 basis points higher, depending which market you pick. The markets are that much more full than they were heading into the financial crisis.
This one feels more government induced than home building induced and things like that in terms of just raising interest rates to finally pull inflation in line. I'm glad that, you know, whether our portfolio is at 99% and our markets are at, you know, 95%-99% leased as well. I feel a little better that it may not be as severe as the financial crisis. I'm rambling, but that much more institutionally owned in all of these markets. I think even if it's a local developer, they've got an institutional financial partner, so they've probably already stopped merchant developing. They have stopped in the forwards and things like that. I think supply will shut off faster than it probably did in, say, 2007, 2008.
Okay. Thank you, Marshall.
Sure.
Our next question comes from Michael Carroll from RBC Capital Markets. Please go ahead, Michael.
Yeah, thanks. Marshall, I want you to touch on your current market rents today. I know given that your portfolio is a little unique with the infill shallow bay type exposure. I mean, how different is rent growth within your portfolio versus the rest of the market?
I know you said earlier that Atlanta rent growth was up, I think it was 18%. What was your portfolio's market rents up, compared to that in Atlanta compared to that 18% number that you highlighted?
Good morning. I'm just looking back. The 18% was what I was quoting from CBRE, and I promise we didn't rehearse this. We were 25% just north of that cash in Atlanta year to date, a little over 31% GAAP. In Atlanta, maybe it helps too in that same CBRE piece, the market vacancy is 4.2% and shallow bay is 3.4%. Typically, where we say there's, you know, it's helped that our peers are larger and mostly they're private. You know, as the pension fund advisors, they've got so much capital to put out, and it's easier to build because of the land availability and the zoning on the perimeter of a city than on an infill site. That's where the big box is.
The average building, for example, in Atlanta is about 325,000 sq ft, and most of ours are, you know, maybe 90-150. It's a little bit different product being delivered, and I think that helps us avoid being commodity and hopefully allows us to push rents. We've seen even smaller spaces. You know, I know one of our private peers, Link, was talking about basically the demand they're seeing in like 15,000-25,000 sq ft spaces. Our average tenant size is in the low 30s, so a little bigger than that, but we've seen some doubling of rents. That's as much a function of just to build those spaces out, the tenant improvement allowance. Given construction costs, you need to have rents like that.
No one can afford to build out a 20,000 sq ft space by the time you get the office and the restrooms and the warehouse lighting gets awfully expensive. That should help us to push rents, and it steers a lot of our peers away from it because it's just as much work probably to build an 80,000-90,000 sq ft building as it is a 600,000 sq ft building on the edge of town. It's probably harder to go through the zoning.
Okay, great. Thanks, Marshall. You mentioned earlier in your prepared remarks that your underwriting for development has changed. I think you touched on a longer timeframe. Did I hear that correctly? Were you referring to the construction timeframe or the lease up of developments that you've been changing?
It's really more, and I apologize if I misspoke. It's the yield. Maybe where we've looked, it's the yield. You know, kind of the yield hurdle for new developments. Where we would have looked in the fives maybe in the right market, right sub-market, now we're in the sixes. I think our, you know, our lease up of development, you know, we'll still pull buildings into the portfolio at the earlier of 90% occupancy or a year past certificate of occupancy. Thankfully, those have been rolling in. It's been the latter of, hey, we're 100% leased, we're moving into the portfolio. All but the one we stubbed our toe on a little bit this quarter.
No changes other than, given our cost of capital and the market cap rates, even though it's still pretty fuzzy where cap rates are or where they're going to settle ultimately, we've pushed our yield requirements up. But we still underwrite the current market rents and current construction costs and all the things like that that we've historically done.
Okay, great. Thanks.
You're welcome.
We now have a follow-up question from Craig Mailman from Citi. Please go ahead.
Hey, guys. Thanks for taking the question. Just quickly, Marshall, I apologize if I didn't hear this. Did you provide a kind of an embedded mark-to-market for the portfolio, either for the 2023 roll or just kind of in general? Or have one that you could provide?
Yeah, I know a couple of our peers do that, and we just haven't been that great. In portfolio, we've always said we haven't done it for 2023. Short answer is no, we haven't done that. We've always hesitated taking the, you know, the time. If a lease doesn't roll for three, four, five years and market rent's changing so much. It's something we've discussed, and it's not something I don't see the market changing much from where it is today unless demand really unwinds. We've not formally disclosed a mark-to-market.
Okay. Just second, you know, I know we've talked a little bit about the development pipeline and maybe some slowing here. Just Brent, as you look out at kind of what's delivering, what may be starting, I know it may be early for that budgeting process, but do you feel like cap interest burn off is gonna be material at any point? Or because things are coming on so well leased from an earnings impact, it's not something to be that concerned about yet?
It really wouldn't be something we'd be that concerned about, Craig, unless, you know, if the market dictated such, either via slowdown leasing or excess cost of capital, whatever. You know, whatever our development starts might be this year, I think we're projecting 375. If that number were to come down next year, you know, that would have an impact on capitalized costs. Obviously, you'd be doing it on a smaller number, whether it's cap interest or, you know, the capitalized cost and offset, you know, overhead and G&A. You know, so at this point, you know, it doesn't feel that it would be that way, but that would be the, you know, the thing to watch. Craig, it would be, you know, kind of a proportionate, and we disclose those capitalized numbers, you know, in the tables but you know, if that number were to be
2.75% or whatever the number is versus, you know, 3.75%, then those capitalized numbers would come down as well. They would move in a proportional sort of movement. That would be something to keep an eye on. Certainly, that sort of ancillary side note, I mean, really, what's gonna drive our decision-making is the strength of the market and access to capital. Like I say, we're in a good position to enter the year in 2023 kinda continuing where we are, but it's just something we'll have to closely monitor both from a continued, hopefully strength in leasing and then also from, you know, what's our access to capital and what does that cost. You know, we'll make those decisions as we get there.
You know, if it were to be lower and wind up being lower, then that would have some bottom line impact, certainly. Like you say, a little too early to tell at this point, you know, where that will shake out.
Great. Thank you.
Yep.
We have a question from Ronald Camden from Morgan Stanley. Please go ahead, Ronald.
Hey, it's Ameen for Ron. I just wanted to follow up on some of the earlier, you know, cost of capital questions. You know, I understand that you guys, you know, did some debt offerings, you know, more recently. I think those were priced, you know, in the Q2 of the year. Just, you know, if you were to, you know, offer the same type of debt today, you know, where would that be, you know, relative to the under 5% cost on a blended basis previously?
Yeah. It would certainly be higher. I mean, obviously, cost moves, and you're right. Like I say, we intentionally have been pretty, I guess I would say, aggressive in the early part of the year with anticipation of higher, you know, movement in cap rates. Certainly, we we're right in that. You know, if we were to look at long-term debt today for us, and again, I'm talking more estimated 'cause we haven't been in the market recently, and it can move. You know, it moved while we're on the phone call today, I mean, that's how much it can move. You know, I would say it would probably be, you know, somewhere around that 6% area for us on long-term. That's like 10-year plus, you know, fixed rate debt.
As I mentioned earlier, we're looking at some, you know, shorter term options that give us flexibility. As I mentioned, maybe exercising a portion of the accordion to expand our revolver, you know, balance. Looking at a few holes in our laddering, where maybe it would be shorter term debt, maybe priced a little more favorably. We've still got a few other levers that we're looking to pull and process. If you're looking at longer term debt, I mean, it certainly has moved up and continued to move up. You guys, we've been talking about this morning, it's one of the factors as we get out into next year that we're gonna have to, you know, monitor in relation to cost of it relative to what we can, you know, invest it at.
That makes sense. You know, just, you know, on internal growth, you know, I think some of your peers have talked about, you know, there's a big spread between, you know, leasing spreads on commenced leases versus signed leases. Are you guys seeing that within your own portfolio as well, you know, just on a cash basis and on a GAAP basis?
I'm not sure I follow that. I mean, our numbers have been pretty consistent for a number of quarters now in terms of cash rents being strong and still slightly inclining or increasing, and then GAAP numbers increasing. From signing to commencement, generally, for development, there could be a few months, and for a vacant space, it's generally pretty quick turn. I don't know that we've seen any big change from signing to commencement. I'm not sure if I've totally follow the question. I don't know. I don't know if that helped.
Yeah. That answered my question. Yeah, just if there was kind of a, you know, big, you know, jump in market rental rates, you know, the past couple of months, given there is, you know, kind of like you said, you know, three to six months lag between, you know, when you commence on a rent versus, you know, when you sign the rent. I think you answered it.
Yeah. I know some of our peers historically have waited till they've delivered buildings to really start leasing. Look, that's paid off the last few years. We'd like to, you know. Ideally, we wanna run out of land in our park and things like that, so we've been maybe a little more chicken. Usually, if things get bad, they turn bad quickly. If somebody's ready to sign a lease, and we're a long-term owner, we'll negotiate the rent hard but fairly, but we'll go ahead and sign a lease when the tenant's ready to lease or when they're ready to renew and view it almost as dollar cost averaging.
If we've got 3 million sq ft or 4 million in a market, we're gonna have some expire at a good time and some at a bad time in the market. We'll go ahead. I agree with Brent and your comment earlier, thankfully, they've been moving up the last several years and continue to have that upward pressure today.
Great. Thank you, guys.
Sure.
This concludes our question and answer session. I would like to turn the conference back over to Mr. Loeb for any closing remarks.
Thanks everyone for your time. If there's any questions or follow-up questions, certainly Brent, Stacy, Tyler, and myself are available. If not, we look forward to seeing an awful lot of you at Nareit in just a couple weeks in San Francisco. Thanks for everyone's time.