Welcome to the Rexford Industrial Roundtable here. I'm happy to have the Rexford team with us this afternoon. I'll turn it over to Laura Clark, CO O, who can introduce the team and then opening remarks.
Thank you so much, Samir. Thank you all for spending time with Rexford today. With me today are our Co-CEOs, Howard Schwimmer, Michael Frankel, and our CFO, Mike Fitzmaurice. I'll begin with a brief overview of Rexford before highlighting our recent operating and disposition and capital markets update. I'll then turn it over to Fitz to cover our current capital allocation priorities. Quickly, Rexford Industrial is the largest U.S.-focused industrial REIT. We have an exclusive focus on creating value within infill Southern California. Our 51 million square feet portfolio represents the highest quality and most functional industrial product within our submarkets.
Our differentiated value creation strategy is supported by a number of key factors: one, our superior long-term supply and demand fundamentals; two, a disciplined approach to capital allocation, which is continuously reevaluated and adjusted based on market conditions; our vertically integrated team; a substantial embedded NOI growth profile; and lastly, a fortress-like balance sheet. These all position Rexford to deliver long-term value through all cycles. Our focus on infill Southern California is grounded in the compelling long-term fundamentals of the market. While Southern California has recently experienced a cyclical downturn, it is a top 12 economy in the world and the nation's largest gateway and first and last mile distribution market. It is supported by compelling long-term sector demand drivers, which Rexford is uniquely suited to benefit from.
While uncertainty in today's macroeconomic environment remains, we are encouraged by the positive leasing momentum our team is driving across our uniquely positioned portfolio, as demonstrated by our operating update issued last week. A few highlights: in July and August alone, we executed a total of 1.9 million square feet of leasing, exceeding our second quarter leasing volume. Leasing spreads remained healthy and in line with our expectations at 30% on a net effective basis and 15% on a cash basis. Same property occupancy increased 50 basis points- 96.6% compared to the end of the second quarter. Notably, our leasing activity included the execution of a 500,000 square foot space at our 1601 Mission property.
In line with our internal strategy of continuously assessing our portfolio on an asset-by-asset basis, we ran a two-pronged review of the Mission property, weighing a repositioning plan against leasing the building in its current condition. Given the unique circumstances with the functionality of the building and use restrictions within the municipality, we prioritized leasing the building as is at a strong 43% cash leasing spread. Importantly, we avoided construction and lease-up risk, additional capital investment, and downtime while driving over $3 million of annualized NOI. In regard to our repositioning and redevelopment projects, we leased more than 400,000 square feet year to date in the quarter, and year-to-date activity is now 1.1 million square feet, equating to over $20 million of incremental annualized NOI. Importantly, we continue to effectively allocate capital towards our most accretive opportunities.
We remain highly focused on opportunities that drive the highest risk-adjusted return, taking into account market conditions and our cost of capital. Fitz will go into more detail around our priorities.
Thanks, Laura. As demonstrated by our performance here today, our focus has been on capital recycling. By disposing of selective properties, we can realize the value that we've created through our business model and opportunistically and accretively redeploy into share purchases and targeted repositioning and redevelopment opportunities where we're yielding about 11% returns. Year- to- date, we've sold about $166 million of assets at a 4.2% exit cap rate and recycled about $100 million into share purchases where we achieved an implied FFO yield of about 6.4%. It's about a 220 basis point spread. Importantly, that was a significant discount to our intrinsic value. The Board did also authorize a $500 million share purchase program. That's a fresh new one that demonstrates our commitment to continue to accretively capital recycle, but also our belief that Rexford stock is a very, very good investment.
Repositioning and redevelopment, we've stabilized nine projects this year, just north of a million square feet, 15% incremental returns. We're also driving operating leverage. Earlier this year, in January, we made some tough decisions. We had a strategic reduction in force. We also cut other corporate expenditures that allowed us to maintain G&A levels at about $82 million, despite growing our portfolio about 5 million square feet over 2024. We will continue to look for ways to drive operating leverage as another lever that we can pull to create value for our shareholders. As we look ahead, our embedded NOI growth positions us very, very well to have significant share appreciation as market conditions stabilize. Today, we have $195 million of incremental NOI stemming from repositioning and redevelopment, contractual rent increases, and our mark-to-market opportunities, pretty significant.
Supporting that growth is a fortress-like balance sheet, like we talk about it inside our four walls. We're net debt to EBITDA today at four times. We have $1.6 billion of liquidity, which is going to support the execution around our priorities through all points of the cycle to help and to create durable and strong long-term shareholder value. With that, Samir?
Yeah. No, thank you for that. I guess you talked about the pickup in leasing in July and August. Maybe for the people in the room, help us kind of think through what's sort of driving that pickup.
Yeah, I'll start. We certainly saw a pickup in July and August. I think it's important to kind of frame what typically happens over the summer months. There's seasonality in leasing, and we typically see a bit of a slowdown in those months. July and August pickup was a pleasant surprise within the market. There's a number of factors that we see driving that. It's not one single factor. I would say, Samir, that we're certainly seeing tenants need to make decisions. Generally speaking, our tenants' businesses are healthy. Our bad debt levels remain low, lower than expectations. Our retention levels remain very healthy. All that being said, given the uncertainty and volatility earlier in the year that may have caused some pause, tenants need to make decisions about their real estate needs.
That could be driven by the need they have lease expirations, they have contracts they've executed, product coming in. It could also be driven by the fact that they want to get into more functional space, more high-quality space that allows them to more effectively operate their businesses. I think overall, while we don't have full visibility into tariff policy to date, certainly some of the fear and anxiety about elevated levels of tariffs, I think those have calmed down to some extent. At the end of the day, their businesses, they're thinking strategically about how they're going to continue to execute on their business models. They're getting strategic about how they're thinking about their logistics and supply chains. That is driving their need to make real estate decisions today.
Maybe I'll add just a little bit, because I think the diversity of tenants in terms of the types of businesses and their different sectors, as reflected in the leasing activity the last few months, is really indicative and important to look at, because we have a lot of sectors that are experiencing pretty exciting secular growth within those sectors. For example, aerospace and defense, even consumer products, food and beverage, were prominent in leasing activity. Construction trades, wholesale trade, business-to-business, wholesale trade, industrial inputs, things like that. Incredibly diverse. Electric vehicles is another area where we've seen a lot of activity. I think we look for that. We look for the diversity of activity. Somebody asked earlier in a meeting, what's the trend in terms of sector and tenant demand? I said the trend is there is no trend. It's extremely diverse.
It's reflective of the incredible and diverse economy in Southern California. I think for us, those are some of the leading indicators that we look for. I think the other thing about the leasing activity that characterizes, we're locking in 3.5% annualized embedded rent spreads in the leasing activity that we accomplished the last few months. I think the tenants are telling us through their behaviors that they expect to pay more rent in the future. That has a pretty nice compounding impact over time.
What about when you think about the Southern California market? I mean, there's the Inland Empire, there's all the different breakdowns you have in your presentation. Talk about the different markets. What are you seeing? When you say, when you talked about that pickup in activity, where was it more prominent and also sort of box size here?
Thanks, Farron. I'll take that one. I think it's pretty broad-based. We've seen the activity pick up pretty much in every one of the submarkets throughout Southern California. Vacancies are still elevated in a few of the submarkets where we maybe had a little more supply delivered. Some of the demand in those markets still isn't enough to bring it down and pick up some of that excess supply, which is mainly buildings over 100,000 feet. As you've seen in our most recent leasing results, certainly a big change in the market from now where we have activity on about 85% of our vacant spaces. If you even drill down a little bit further, we have another, I think it's 1.1 million square feet of our repositioning projects to lease up the remainder of this year.
We literally have activity on about 100% of those spaces, where you're even trading paper on two-thirds of them.
Just stepping back a little bit, because I'm not sure everybody here is as familiar with the Rexford business as some of the folks who have been covering us for a long time. When Samir asked about how do you see the markets and what's happening in different markets, remember that Southern California is about a 2 billion square foot market. There's the Inland Empire East, which is a very big box market, low barrier, because there's lots of land. Then there's the rest of the market that we call Enfield Southern California. That's about 75% of the market, plus or minus by square footage. That's where we focus. We only focus on the Enfield markets. If you're asking us to comment overall on Southern California, that Inland Empire East, that big box market, is a very different segment.
When you hear others, for instance, Perla just talking about Southern California, their comments reflect more of the IE East. The demand dynamics from tenant base, the supply dynamics are fundamentally very, very different there. There's an endless supply of land for new development. That's the first differentiation. As Howard described, we do have some subtleties within our Enfield markets. I just want to make sure that that differentiation is clear.
Just a reminder, I want to keep this interactive. If there's any questions, please go ahead and raise your hand.
On the operating metrics, so everybody's aware, the LO flooring space was not part of Same Store. Correct?
Correct. That wasn't part of Same Store. It was slated for a reposition at the start of the year, so it was taken out of the Same Store.
OK. None of that 50 basis points increase in Same Store was related to LO flooring?
No, about 40 basis points was related to positive net absorption, and then about 10 basis points from a few assets that we sold that were vacant.
I know you talked about the 15% cash and the 30% net effective leasing spreads. Did that include LO flooring, or it didn't ?
It did include LO flooring, but I think it's worth noting what the spreads were without LO flooring. To your point, we reported 30% on effective, 15% on cash without LO flooring in there, 22% on net effective, and 10% on cash. The releasing spread associated with LO flooring space was about 43%. Maybe it's a good opportunity for Laura to talk about the dynamic of the asset and a little bit about how we run strategic plans, multiple strategic plans on assets.
Yeah. I mentioned in my prepared remarks that we'd run a multiple-prong approach. Every asset within our portfolio has a strategic plan. We are constantly evaluating those strategic plans and changing those strategic plans, going in different directions, depending on market conditions, depending on regulation, et cetera. In some cases, that can mean that we lease a space as is. Others, it's moving forward with the repositioning and redevelopment. In other cases, we may decide that a disposition is the right path. In this asset is obviously a very large space for us. Our average space size within our portfolio is 26,000 square feet, so 504,000 square feet is an outside size space for us. This is unique in terms of its functionality. It has great loading, but it is low clear, a 20-foot clear building located in the city of Pomona.
As we were looking at the repositioning plan and how we could position this for future repositioning, we certainly thought that there was value that could be created there. There also has been recent regulation change within the city of Pomona, where this asset is located. It restricts the use of 3PL and some distribution, which limits the tenant pool and tenant demand pool in the future. As we assessed both these paths, leasing this property as is, we thought, was another viable option. We've had this property in the market, and we actually got several offers, and we're able to move forward with the execution of this lease, which we think is a great opportunity to drive current cash flow today, as I mentioned, over $3 million of annualized NOI. We signed a five-year long-term lease, which is going to allow us to generate income, high credit quality tenant.
In the meantime, we'll use our team and the relationships that we have within the city to hopefully work towards change around this regulation. We're really excited with that path. I know that this is one example. It's a large space, so it gets more prominence. We're doing this in every size space, from 5,000 square feet- 25 square feet- 50 square feet- 100,000 square feet within our portfolio, and constantly reassessing the opportunity and what's the right path to create the most value in our assets.
This is a great result for us. We avoided the lease-up and the development risk. We got cash flow in the door day one at a very, very healthy spread. To Laura's point, the lease commenced in August. Very, very happy with the execution.
As part of the update, you also talked about you announced the two dispositions that are under contract. Maybe provide some color around that, cap rates. What does that pipeline look like in terms of what else you can sell and potentially buy back stock?
Right. We have a pipeline currently under LOI or contract at another $90 million. We don't really talk to any of the yields and so forth on that pipeline until the transactions are closed. The $166 million that we did close so far this year had an implied cap rate of about 4.2%. Those were selective transactions. Some of them were owner-user. One was a condo converter who was kind of a cap rate buyer but paid a premium because of the upside they saw in the asset. I think every day, it's important to understand we are looking at and studying our portfolio and determining which assets are ripe where we've created the most value. Perhaps there's some risk, or perhaps there's even greater efficiencies. For example, some of the assets we sold are multi-tenant.
Those operationally are more intensive, and we can recapture that capital and deploy it into more efficient assets and really work on our margin and increasing the margin in the business.
I'll touch on share purchases. There's a lot of considerations that we put on the table when we consider allocating capital, specifically around share purchases. A couple of things that are prominent in our minds. One is protecting the balance sheet, protecting our leverage. Today, we're at 4.0 times. We like to toggle between 4- 4.5. That's where our comfort level is today. Also, liquidity. Liquidity is very important for us. We're a capital-intensive business. We have a significant amount of capital to redeploy into repositioning and redevelopment over the next three-plus years. That's where we're achieving the double-digit returns. That capital is very precious to us.
What has helped us throughout the year and positioned us to buy back shares, which we did in early August, is dispositions. At the start of the year, we didn't announce a number. As you progress the year, today we're at $166 million. Like I said in my prepared remarks, we have another $90 million under contract. That does position us from a leverage standpoint, from a liquidity standpoint, to take advantage of those share purchases and do it at a significant discount to our NAV.
On the acquisition side, is it sort of pencils down at this point? I know in the earnings call you talked about maybe potentially some, but where are you with acquisitions at this time?
Yeah, look, we're in a very fortunate, luxurious position that we can drive significant value per share growth without buying an asset. That's through all the embedded internal growth that we have through the repositioning and redevelopment we have embedded in our portfolio today. We're just going to enjoy that. We're going to continue to create a ton of value that way. There's no hurry. We'll see what the market brings into the future. By way of magnitude, today we're sitting with about 28% embedded NOI growth in the portfolio. $70 million of that is driven by the repositioning and redevelopments.
Another $105 million of that is driven by the releasing spreads, the 3.7% releasing spreads that are currently embedded within our portfolio on average. Another $20 million as we monetize the mark-to-market and across the portfolio. I want to note that that $70 million provided through our repositioning and redevelopment activity only includes product that is in process today, in process and lease-up, or in process under construction. Behind that, we have a deep pipeline of opportunities that we carefully mine over time and will be added into that active in-process flow as we move forward. It's a significant opportunity for the company going forward. That gives us the luxury of not having to rely solely on external growth to drive significant per share value growth in the company for shareholders.
The one topic I wanted to ask about was certainly Elliott becoming a top shareholder here. Do you have any comments on that situation?
Yeah, we haven't had any substantive discussions. We don't really know what they're thinking. We look forward to meeting with them in the not-too-distant future.
OK, so no conversations, no?
Yeah, we really have not had any conversations, any substance whatsoever. We look forward to that, though.
Okay, and just your view on, we talked about the Southern California market. What's your view on sort of market rents at this point? Any idea on how much further market rents could even fall before stabilizing here, like at this point?
That is the magic question. I've heard it a few times today and yesterday. Here's what we can guarantee you. After we bottom out, we're going to call the bottom. Hard to say. I can say there's a really favorable backdrop.
First of all, if you look at market occupancy, we never had a big vacancy problem in our infill Southern California industrial markets. Actually, you'd say that if you looked at just where we're sitting today on a market perspective, it's almost fully occupied in terms of just a normalized market. That's good. We're seeing an increase in activity in our portfolio. That's really good. We're seeing tenants signing up for very aggressive contractual rent bumps. That's great. If you look at the conversations that we're not having with tenants, it's inspiring. It's good. It's positive. During the great financial crisis, I can tell you there were different conversations occurring. It was kind of like, hey, I'm in trouble. I need 20% less rent on my, can you help me out? We are not having any of those types of conversations with our tenant base.
It's more about, are they comfortable to make a growth decision right now? Anecdotally, tenants are telling us business is pretty good. Actually, consumption has held at levels that are pleasantly surprising us. There's still a lot of confusion out there around tariffs and inflation. Rates sound good. Maybe rates are coming down. That's positive. There's still relative uncertainty out there. Despite that, we are seeing a lot of this pent-up demand coming to market, which we've talked about today. I think the backdrop is favorable. Leading indicators are positive. We'll see where we go into the end of the year and next year.
Yeah, and a couple of things that I'll add. When you think about the 1.9 million square feet, we got a lot of questions about what's happened with market rent growth in the last 60 days. We'll certainly update our look on market rent growth when we report our earnings next month. What we have seen is that to be able to execute on this 1.9 million square feet of leasing quarter -to- date, it hasn't meant that we've needed to go and cut rates another 10% or 20% to get that level of activity. I think that's really important. Also, I think that you look at where we're signing from a spread perspective, 30% on a net effective basis, 15% on a cash basis. If you look at where we are year- to- date, we're right in line with our guidance expectations.
What I would say is that we're signing at rates that are in line with our expectations. At the end of the day, it's a space-by-space decision. We are prioritizing occupancy today that's going to drive that future cash flow growth for Rexford.
On the leasing, obviously, sure, rebound. What does the pipeline look like going forward in terms of both volume and rates?
Yeah, it's a great question. Is this a pull forward of, or is this, does this pent-up demand, and what's behind it? When we look at the overall kind of our pipeline of activity, and we're very early in September, I would say that September has the level of activity we saw in July and August and has continued into September. We have activity on about 85% of our vacant spaces. When we think about that in relation to where we were about 45 days ago, that was about 80%. Somewhere between 80%- 90% of activity on vacant spaces is a healthy level of overall activity. I think it's important, though, one thing that we don't talk enough about, and that I think that you all probably don't ask us about, is the team. Our business model is different than others. We have a vertically integrated business model.
What that means is, number one, as you all know, we're focused in one market. That positions us very uniquely to be able to drive leasing and drive execution in a different way. We have an in-house leasing team, in-house property management, in-house development and construction, in-house asset management. What that allows us to do is when there are tenant requirements in the market, when there is that incremental demand in the market, we are uniquely positioned to go and capture that demand. I can give you example after example of how we do that. I'll give you one for now. Let's say that you have a tenant that's in the market and they're looking at three other spaces. They're thinking about, how am I going to set up my business here? How am I going to rack this? How can I essentially open the doors?
Instead of saying, hey, here's a racking vendor, go call them and get a consultant, we use our team. We use our in-house design team. We can literally put a space plan and a racking plan in place for a tenant within less than 24 hours. We don't only just say, okay, we'll go call the racking vendor. We'll get on the phone with them. We'll tweak that plan. We'll work with them at no cost. Essentially, what we're doing is we're taking out the friction points. We're also reducing the time that it takes to then move that transaction closer to a lease execution and then closer to commencement. That's just one example that I could give you. I could sit here for hours and talk about all the different ways that our team is driving execution.
If you look at what we're doing in the market, it is what is driving the outperformance of that, plus the quality and functionality of our portfolio. It's what's driving the outperformance from a leasing perspective today.
The one thing I wanted to talk about, we talked a little bit about yesterday, was the earnings growth, the positive FFO growth into next year and even the years out. I know, Fitz, you kind of highlighted, maybe just remind us sort of the building blocks of growth.
Sure. I'm not going to give you guidance. I'm not going to give you guidance.
No guidance.
The building blocks for next year, I think a lot of it comes down to repositioning and redevelopment. This year, we've executed about 1.1 million square feet year- to- date, which is a significant contribution thus far this year. Associated with that, we have about $10 million coming online this year. If you annualize that, it's about $40 million. It's an incremental $30 million next year, which is great news, as I tell you, when going into 2026. Also coming offline, we have future starts in the second half of this year, about $4 million incrementally in terms of 2025. If you annualize that, it's about $16 million. It's a $12 million headwind in 2026. The other nuance in 2026 for repositioning and redevelopment is the Hertz asset. We have, on an annualized basis, about $9 million or so coming offline as of 3/31 next year when they expire.
We could extend that. For the ones that are modeling out there, I would model 3/31. The other levers that we are hopeful we can pull is same property occupancy. As most of you are aware, we had a decline of about 100 basis points in 2025 versus 2024. We're at about 96%. We think stabilized for this portfolio is 97%- 98%. We also have contractual rent increases in place. Today is about 3.7%. Lastly, the lever we pull is operating margin. Being in one market is great. Having local boots on the ground is great, achieving those economies of scale. We continue to drive down expenses as well.
Mike, can you tell what the net net repo redevelopment contribution for next year is?
Net, net, net, all those numbers I gave you, it's about $8 million positive based on what we have visibility on today.
You talked about cost. On the transaction side, felt like you're not looking to acquire. Help us understand how big that team is on the investment side today versus last year or 24 months ago.
Yeah, one thing I'll mention is we did announce, or we did some strategic changes on that team. We had a net reduction really across the company in the beginning of the year. Most of it actually impacted the acquisitions team. I think today we're probably about eight people on that team. At the peak of the market, we were probably around 20. Significant pull-in on the team. We're sort of going through a restructuring right now. We have an amazing talented team that's not just acquisitions. We've got people that are forward-facing in our leasing team, and they're pretty influential as well. We're really sort of taking a different look and approach to the acquisitions. As we've talked about here, we have a lot of growth to be captured within the portfolio.
The acquisitions are going to be, I think, more opportunistic going forward as opposed to one of the larger drivers in terms of increasing NOI generation.
Great. The other thing we had talked about, I know there's some confusion on this 3% cash mark-to-market going forward. I know, Laura, we talked about what does that mean if that number gets worse from a sensitivity standpoint? What does that mean for Same Store NOI growth?
Good question. 3% mark- to- market is for the 1,600 plus leases within our portfolio. As most of you know, we stagger our lease maturities. On average, only about 15% of our rent roll expires in any given year. As we look into at least next year, our in-place ABRs are right around $15.50 per square foot. We're currently signing leases today at $18. I'm not saying that's your spread, but just kind of give you some leading indicators. It also depends on the mix, what's expiring next year. Not everything that is expiring next year was originated in 2021 at the height of the market in terms of market rents. A lot of what is expiring next year had lease terms of 6, 7, 8, 9, and 10 years. We still believe there's markets for rent in 2026.
Let's talk about the acquisition team repositioning. Is that a response to the environment, or is that a long-term strategic decision that's seen as a lot of changes?
Yeah, I mean, I think at this point into the foreseeable future, it's a long, medium-term decision. We've learned a lot in the past years. I think we're really focused on reinventing how we do that type of business.
I think it's about just making the company more effective overall, frankly. Achieving the same results, which is nobody penetrates Southern California the way we do. You've heard us, many of you, talk about our research-driven efforts, where we're catalyzing, we're identifying investment opportunities before the brokers are even aware of them. We're bringing the brokers in, creating a lot of value for the brokers as well. That is going to continue. The way we allocate the resources internally is shifting, and we're leveraging our people differently. Actually, I believe we're going to enable ourselves to penetrate our market even better. I wouldn't say that a reduction in people in that area is going to reduce our effectiveness in the market. We're actually going to, we believe, make ourselves more effective. When the time comes to make investments, we'll be that much better positioned.
Remember, historically, most of our transactions were through off-market and lightly marketed situations where we're creating an advantage, because A, we're not competing with the rest of the buyer pool out there. That translates into investments that are achieving much better than market yields on investment.
I was thinking that part of the reason you were able to get so many off-market transactions to be lightly marketed is that you have a lot of people on the ground.
It is more about the mix of people. The people on the ground are what we call our forward-facing; in another type of company, you would call them the salespeople. They're out in front. We are still going to have salespeople out there, but the way we operate the back end is going to be a little bit different because we don't want to replicate, for instance, underwriting related to asset management as related to acquisitions. You don't need to duplicate headcount for that. That is where we're finding a lot of efficiencies. The portfolios have a scale now that we've really professionalized the asset management function, so there is no need to replicate that also in the acquisitions team. That is just one example of how we're creating efficiency and actually increasing our effectiveness, not reducing it.
Yeah, the other thing that I would add is that our investments team isn't the only ones on the ground, right? That can help drive transactions, right? Driving those relationships with the brokerage community and then insights into the market. We have our leasing team, we have our property management team, development and construction team. Each of those individuals, so much of it's about how we utilize our team even more holistically across the business. Like we are today, many on our investments team are helping us drive leasing transactions, right? It's really thinking about how we most effectively utilize our great team.
I just heard a change in the number of forward-facing people, you're saying.
There is a shift. We are changing how we want to deploy those people. Net-net, the number of those people probably won't be too dissimilar, to be honest. I would say that the people that we're deploying now are more effective than the people that we had in those roles on average one or two years ago.
We only had about four forward-facing people at any one time. There was just a larger team backing them up. I think at this point, we want to be nimble, and we want to be able to flex as the market and the capital allows. It's just a different way of really accomplishing the same thing as Michael was describing.
By the way, it's not just the forward-facing people on that team. We have a marketing team that really helps to put the Rexford brand out there. This is really about the Rexford brand and capability in the market. I don't want to say that the people are fungible. They're not. We're trying to bring the right people that can take that brand and run with it in the most optimized fashion. That's not for everybody, especially in sales. You've seen a lot of salespeople, they want to just be a one-man shop. They operate like a silo. At Rexford, it's a system. It's a method. We're going to further leverage that.
At the appropriate time.
Just in our general approach, same with leasing, by the way.
Rapid-fire questions. We're at the end here, so I have to ask these. When the Fed starts to cut rates, do you expect long-term rates to decline, stay flat, or potentially rise?
Fitz, you're our finance guy.
Stay flat.
All right, flat. AI initiatives, higher, flat, or lower next year?
Spending on AI initiatives.
I'm going to go with higher.
OK, sector, same strength. NOI growth for your sector next year, higher, lower, or same?
I'd say higher.
Yeah.
OK.