Earnings Call: Q4 2019

Feb 13, 2020

Greetings, ladies and gentlemen, and welcome to the STAG Industrial Incorporated 4th Quarter 2019 Earnings Conference It is now my pleasure to introduce your host, Matt Spennard. Thank you, sir. You may begin. Thank you. Welcome to STAG Industrial's conference call covering the Q4 2019 results. In addition to the press release distributed yesterday, we posted an unaudited quarterly supplemental informational presentation on the company's website at stagindustrial.com under the Investor Relations On today's call, the company's prepared remarks and answers to your questions will contain forward looking statements as defined in the Private Securities Litigation Reform Act of 1990 5. Forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward looking statements include statements relating to earnings trends, G and A amounts, acquisition and disposition volumes, retention rates, debt capacity, dividend rates, industry and economic trends and other matters. We encourage all of our listeners to review the more detailed discussion related to these forward looking statements contained in the filings with the SEC and the definitions and reconciliations of non GAAP measures contained in the supplemental informational package available on the company's website. As a reminder, forward looking statements represent management's estimates as of today. STAG Industrial assumes no obligation to update any forward looking statements. On today's call, you will hear from Ben Butcher, our Chief Executive Officer and Bill Crooker, our Chief Financial Officer. I will now turn the call over to Ben. Thank you, Mats. Good morning, everybody, and welcome to the Q4 earnings call for STAG Industrial. We're pleased to have you join us and look forward to telling you about our Q4 results. Presenting today in addition to myself will be Bill Crooker, our Chief Financial Officer, who will discuss the bulk of the financial and operational data. Also with me today are Steve Mecky, our Chief Operating Officer and Dave King, our Director of Real Estate Operations. They will be available to answer questions specific to their areas of focus. The Q4 concludes an historic year for STAG Industrial. We successfully executed our 2019 business plan with all of our guidance achieved or exceeded. The company is very well positioned for a great 2020. The U. S. Industrial market continues to perform well. In 2019 rents were up almost 4% in the aggregate according to our friends at CBRE. Completions of 63,000,000 square feet modestly edged out net absorption of 56,000,000 square feet for the Q4. For the year, the market saw 224,000,000 square feet of completions compared to 183,000,000 square feet of net absorption. As a result, vacancy rose 20 basis points year over year to 4.4 percent, but still remains significantly below long term averages. Construction activity remains robust with a pipeline of 309,000,000 square feet of announced development. While most markets remain quite strong, there are a few submarkets with oversupply concerns. The Houston, Atlanta, Chicago and Dallas markets are larger metros with robust construction activity and they're watching certain submarkets in those metros for the effects of oversupply. These submarkets include the North and Northwest Carters of Houston, South Atlanta, South Dallas and the Southwest I-eighty five excuse me, I-fifty five, I-eighty Corridor of Chicago. Our only lease maturity exposures to these submarkets in the next 2 years are in South Atlanta, 0.3% of annualized base rent in 2020 and Northwest Houston also 0.3% of annualized base rent in 2021. We see strength in most other markets nationally, including markets where we own and where we are active. These include markets such as Portland, Raleigh, Detroit, Charlotte and Northern New JerseyNew York. In our view, this robust construction activity and near record low vacancy rates supports long term confidence in the future for the industrial sector. E commerce and its corresponding impacts on the modern supply chain remain dominant forces. Transportation issues, labor cost and availability and proximity to the customer remain critical items for tenant decision makers. As we and others have noted, rent is a small fraction of total logistics costs for our clients. Although supply is on the minds of many in this robust construction environment, we believe a slowdown in demand may be a bigger risk factor to watch. However, as noted earlier, recent demand has remained solid with 183,000,000 square feet of space absorbed in 2019 and with more than 50,000,000 square feet absorbed in the Q4. We continue to monitor the macro economy and the supply and demand fundamentals of individual submarkets. These are important components of our data driven approach to underwriting and to asset management. In 2019, we acquired a record $1,200,000,000 of assets in one off transactions. This was nearly double the amount acquired in 2018. This increase in volume acquired is a measure of both the growing capacity of our skilled acquisition professionals and of our market presence. We also experienced great success in our portfolio operations. Approximately 10,000,000 square feet of leases commenced with 10 percent cash and 18.2 percent straight line rent growth, an increase from 7.9% and 52% for the same metrics last year and another all time high for the company. These robust leasing spreads combined with a strong retention of 76 point 7% resulted in annual same store cash NOI growth of 2.4%. I'd now like to mention a couple of corporate First, as a part of our expanding our business reach, we opened an office in Dallas, our first regional outpost. This location will allow us to more efficiently and effectively operate our national industrial real estate platform. The office will include acquisition, asset management and capital project personnel with regional responsibility focused on the Southwest. 2nd, in November, we announced the appointment of Doctor. Jit Kee Chin to our Board of Directors. She brings a strong background in the field of data analytics and provides valuable experience and insight as we continue to develop our data, analytics and technology infrastructure. As we look forward to the rest of 2020, we see tremendous opportunity to both grow our portfolio externally through accretive acquisitions and continue the trajectory of consistent internal growth. Bill will discuss our various guidance metrics in detail, but I'd first like to touch upon a couple of specific items relating to our 2020 operations. In January, we sold $2,000,000,000 located in Camarillo, California to a regional investor for $88,000,000 a cap rate of 4.9%. We acquired these buildings in 2014 for $55,000,000 at a cap rate of 7.2 percent. 2 of our top 10 tenants have leases maturing this year and are expected to vacate their space. Solo Cup, who currently occupies occupies our building in Hampstead, Maryland has a lease expired in July 2020 and accounts for 1% of our annualized base rent. We are evaluating all options. We'll keep you updated as our plans progress. The GSA currently leases our building located off exit 6A of the New Jersey Turnpike in Burlington, New Jersey. Their lease expires in December 2020 and accounts for 1.8% of our annualized base rent. This asset has attractive development and redevelopment opportunities with multiple potential attractive outcomes. The site features developable excess land that is in the process of being subdivided. The building is currently marketed and we have received multiple offers to purchase the building site at attractive pricing levels. We are evaluating all of our options to lease, sell and or develop this asset. We will keep you updated as to our plans and progress. Finally, yesterday for the first time, we announced core FFO per share guidance for the coming year. The range for 2020 core FFO is $1.86 to $1.92 per share. This is a continuation of our effort to provide transparent and useful disclosure. With that, I'll turn it over to Bill who will discuss our operational results and the remainder of 2020 guidance. Thank you, Ben. Good morning, everyone. Core FFO was $0.47 for the quarter and $1.84 for the year, an increase of 2.2% compared to 2018. Leverage remains near the low end of our guidance with net debt to run rate adjusted EBITDA of 4.8x. Our 2019 acquisition volume was $1,200,000,000 with stabilized cash and straight line cap rates of 6.4% and 6.9% respectively. Subsequent to quarter end, we have acquired an additional 7 buildings totaling $103,000,000 Our portfolio continues to benefit from the strength of the industrial sector as seen by a robust portfolio operating results. Retention for the quarter was 87.4 percent 76.7 percent for the year. Cash and straight line leasing spreads were 6.4% 13.2% for the quarter and 10% 18.2% for the year respectively. Same store cash NOI grew 2.4% during 2019 exceeding the high end of our revised guidance. Same store cash NOI growth was driven by our retention rate of 76.7% and cash releasing spreads of 10%. This was partially offset by a decline in average occupancy in the same store pool. Note that our annual same store pool accounted for 68.2% of the total portfolio at year end. Moving to capital market activity. On December 26, we fully settled the forward equity component of our September 2019 equity transaction. STAG issued 7,150,000 shares and received 202,000,000 in net proceeds. Those proceeds were used to fund Q4 2019 acquisitions. During the quarter, we raised an additional $82,000,000 of net proceeds through our ATM program and funded $100,000,000 of the $200,000,000 delayed draw term loan F. Subsequent to quarter end on January 13, we completed an equity offering at $31.40 per share, which resulted in net proceeds of approximately $311,000,000 with a portion of those proceeds to be received on a forward basis. Net proceeds of $173,000,000 were received in January with the remaining $138,000,000 to be settled in the future. At quarter end, net debt to run rate adjusted EBITDA was 4.8 times, our fixed charge coverage ratio was 4.8 times and our available liquidity was 460,000,000 dollars Our initial 2020 guidance can be found on Page 21 of our supplemental reporting package, which is available in the Investor Relations section of our website. Our 2020 core FFO guidance is a range of $1.86 to $1.92 per share with the midpoint of $1.89 We expect acquisition volume to be between $800,000,000 and $1,000,000,000 for 2020. We expect to acquire between $725,000,000 $875,000,000 of stabilized assets with an expected cap rate range of 6% to 6.5%. We expect between $75,000,000 100 and $125,000,000 of value add acquisitions this year with NOI coming online in 2021. The stabilized cap rate for these acquisitions are expected to be in line with our 2020 stabilized cap rate guidance. We expect disposition volume to be between 150,000,000 dollars $250,000,000 for 2020. We expect the 2020 annual same store pool's cash NOI growth to be between 1 percent 2% for the year. This range includes a credit loss estimate of approximately 50 basis points on the same store pool. Note that the 2020 annual same store pool accounts for approximately 80% of the portfolio as of year end 2019. Our expectation is the same store pool represent between 70% 75% of the portfolio at year end 2020. For the Q1 of 2020, we expect same store cash NOI to be approximately flat and grow throughout the year. We reported 2019 G and A of $35,900,000 slightly below the low end of our public guidance. Our initial 2019 guidance reflected a midpoint of $37,000,000 which included projected additions to headcount and investments in the business. Due to improvements in the efficiency of our systems and processes, we delayed these new hires and business investments to 2020. 2020 G and A is expected to be between $41,000,000 $43,000,000 for the year, of which $11,700,000 is non cash compensation and is reflected in our diluted share count. This G and A guidance includes costs associated with the opening of our second office in Dallas. Business remains highly scalable and over the past 3 years the portfolio has grown 23% per year on average compared to less 3% annual growth in G and A. Looking specifically at Q1 2020, G and A is expected to be between $11,000,000 $11,500,000 due to seasonality. Our leverage range continues to be between 4.75 and 6x with the expectation that we operate the lower end of that band between 4.75x and 5.25x for 2020. Capital expenditure per average gross foot is expected to be between $0.27 and 0.3 $1 for the year. I will now turn it back over to Ben. Thank you, Bill. STAG enters 2020 with significant momentum across all aspects of our business. We continue to see attractive investment opportunities nationwide and our investments in data and technology is reflected in our impressive operating metrics for the year. With our low leverage and ample liquidity, our balance sheet is positioned to support the numerous opportunities we see today and expect to see in the future. We are proud of our historic 2019 performance and are excited continue to execute our business plan in 2020. We thank you for the time this morning and for your continued support of our company. With that, I'll turn it over to the operator for questions. Thank you. Our first question comes from the line of Sheila McGrath with Evercore. Amazon jumped into the top tenant position. Did you acquire another Amazon property during the quarter? We did acquire a building or at least a building, excuse me, to Amazon during the quarter that had been another tenant had vacated. It's also one of the reasons why our TI and BI expenditures are large for the course repairing that building for Amazon. Oh, you had to refit it specifically for their uses? Yes. Sheila, it was a great transaction. We had a tenant that was expected to vacate the building. We agreed to a termination penalty for that tenant. So they gave us termination income. There was no downtime. We signed Amazon up for a 10 year lease with 2.5% contractual rental escalators. And with the in place rent of Amazon higher than the expiring previous tenant? Yes. The face rate was about 10% higher and then there's some amortization of the above standard TIs in there. So that combined with a 10 year term, which makes your commission larger, drives that larger than average transaction cost. Okay, great. And I don't know if I missed this, if you mentioned it, but could you give us an update on the New Jersey development? How's leasing progress going there? And what's your expectation on the stabilized yield on costs that, that might be? We have just completed the building. We are encouraged by the traffic we've seen to date. Our pro form a rents from a year ago are probably low relative to market currently, and we expect to be on time with leasing and other deal terms as we go forward. So we had said that we thought pro form a return on cost would be somewhere in the 8s. So we're now expecting to certainly achieve that, if not do better. And so would that come online this year, you think? Very much expected to come online this year, yes. Okay, great. And just one last one on dispositions in your guidance of $200,000,000 that was certainly higher than we had in our model. I'm just wondering, are these non core assets or just talk about what's driving the volume on this? Well, some a big piece of that was the move of the Camarillo asset from the Q4 to the Q1. So $88,000,000 was shifted from 1 year to the next. So that's a big piece. I don't think Dave? Sure. When we get a vacancy, we market it for sale or for lease and we have seen some pretty good activity in the user buyer market. So as you see solo and other larger vacancies coming, we are marketing those for sale or leases. So we have some probability that we will sell those assets. And that's true of the Camarillo asset as well. That was market for sale lease. There was quite a lot of leasing activity. We just had somebody show up and pay us basically more than we thought it was going to be worth to us on a lease basis. Basis. Our next question comes from the line of Brendan Finn with Wells Fargo. Please proceed with your question. Hey, guys. Good morning. In terms of acquisitions for 2020, are you guys going to be targeting, I guess, assets in the Southeast markets, just given that you recently opened up the Dallas office? I think that our investment focus is to identify individual assets within the 60 or so markets we look at, but defined assets that will deliver the shareholder returns that we're looking to deliver to our shareholders. And so I don't think that the opening of the Dallas office is a specific targeting towards any particular markets. It undoubtedly will produce more opportunity for us in the markets in and around Dallas. So is there a potential for us to be more active in those markets? Yes, but it's not particular that we're targeting those markets because we remain very much a bottom up investor. We're looking for the transactions that make sense, not the markets where we want to try to necessarily try and find transactions. Having said that, we also have our SAG radar system where we do evaluate markets in terms of resource allocation where the markets where we're most likely to find those individual transactions that meet our return requirements. And just to clarify, the Dallas office will be covering the Southwest, not the Southeast. Okay. Got you. That's helpful. And then I guess congrats on the strong rent spreads that you guys had in 2019. What are you guys anticipating in terms of cash rent spreads for 2020? Mid single digits. Okay. And then last one for me. You guys talked about the 50 basis point impact to same store NOI growth in 2020 from credit loss. Does that represent any situations that you're currently monitoring or is that more of a placeholder? That's a placeholder right now. It's similar credit loss that we guided to last year. I'd say the one difference between last year and this year is last year we had a a tenant or 2 on our watch list. We don't have any tenants on our watch list to date. But given where we are in the calendar in mid February, we felt 50 basis points was a good estimate for the year. Cool. Sounds good, guys. Thanks. Thank you. Thank you. Thank you. Our next question comes from the line of Dave Rodgers with Baird. Please proceed with your question. Yes, good morning. Just one follow-up, Bill, on that last question. What was your actual credit loss in 2019 versus the 50 basis points that you had guided to? It was right around 50 basis points. It was right on top of it. Yes, thanks for that. On the term income you mentioned related to that Amazon deal, I mean, was that sizable in the 4th quarter and where was that? It was about $500,000 That's included in core FFO excluded from same store. Okay. And I use rent that's for revenue. Okay. On the asset sales, it sounds like the range contemplates potential sale of both solo as well as the GSA building. And it sounds like that would be get you into that range pretty comfortably. If you don't end up selling those, if you're able to re lease those, how should we think about that disposition guidance? 1, are there other assets you would put in there? And then 2, I think your presentation also mentioned that it excluded portfolio sales. How likely do you think you are to take more to the market and beat that number this year? So we always are opportunistic. As David had mentioned earlier, we take buildings to the market for lease or sale and that we've seen quite a lot of activity from the user market. And so that part of the guidance is reflective of the fact that we are in an environment where those sales are occurring. And so yes, and we do not plan any portfolio sales at this time. So I mean, I guess, you'll get to that guidance one way or the other or I mean the $88,000,000 done? No. Dave, the disposition guidance, once you back out the Camarillo sale is pretty consistent with prior years. So it will be a mix of non core opportunistic dispositions. Depending on the opportunistic dispositions and what we see during the year, it could be the upper end of the guidance or lower end of the guidance. We will update you guys as the year progresses. But seeing we already locked in $88,000,000 of disposition proceeds, that's why you see an elevated disposition guidance for the year. Okay. And then maybe just last on the G and A, you guys gave a lot of detail in the prepared comments. But 17% or 18% increase at the midpoint, the Dallas office and some technology investments, How far does that get you kind of after this year in terms of kind of a big increase this year? How what's the capacity addition? How do you think about that in terms of kind of then the future scale of the business then? Well, we give guidance for 1 year out, Dave. I think in G and A, it's not linear. So as we mentioned in the prepared remarks, we had a CAGR of about 3% over the past 3 years. We came in below the low end of our guidance last year. So some of those, efficiencies that we put in place during 2019 delayed postponed some of the headcount additions that are coming online in 2020. We'll give guidance, G and A guidance for 2021 at a later time, but we did put in our investor presentation in November that we are going to trend down to 10% of NOI over time. Thank you. Thank you. Our next question comes from the line of Bill Crow with Raymond James. Please proceed your question. Hey, good morning guys. What are the expiring rents on Solo Cup compared to market? Dave, they're right at market. So we expect that to roll somewhat sideways, if not a little bit up. Got you. And then I think you bought that for about $44 per square foot. What do you think the market is for that sort of building? Difficult to tell. We if we find a user who's interested in buying, it's probably at that number or in excess as if it's a redevelopment opportunity, it's likely to be below that. Is the extended term you've been reporting on your acquisitions, is that largely driven by that the weighting of the big lease in the Q4, the Amazon lease? And some build to suit acquisitions which are longer term as well. Again, we're not targeting longer lease terms. It's just the mix for that quarter ended up having those longer lease terms, but it is Amazon for sure. Yes, Bill, we didn't acquire Amazon in the Q4. That was a new lease we signed. And there is if you look at the acquisition activity in the Q4, I mean, there's a number of acquisitions that had greater than 10 years of lease term. So it's just a mix of assets as we acquired. We've acquired this year value add acquisitions with that were vacant up through leases that had 15 years of lease terms. So it's a wide range of acquisitions. One final question for me. Your new slide deck talked about healthier same store NOI growth, kind of 2% to 3%. I'm just wondering as you look into 2021, any known move outs that would kind of get in the way of that number? The GSA building that we mentioned, Burlington, looks like that's going to be a known move out and that will be in December. Again, there's a lot of options with that building as we discussed in the prepared remarks. We'll update the street as we go through. And 2% to 3% in the investor presentation is something that we think a good short to medium term number for us that was impacted by the credit loss we discussed as well as the Solo Cup vacancy this year. If your credit loss was 50 basis points last quarter last year and doing again another 50, wouldn't that have been baked into your expectations in that slide deck? Some of it was, yes. But when you layer that back in with the Solo Cup, you're at low twos. Got you. All right. Appreciate it. Thank you. Thanks, Bill. Thank you. Our next question comes from the line of Sarah Tan with JPMorgan. Please proceed with your question. Hi, good morning. This is Sarah Hunt for Mike Mueller. I see you posted accelerating same store NOI results from over the past few years. Could you talk a bit about how you're pushing rents and how we can expect that to trend through the year? So I think as Bill just said, our short to medium term expectations for same store NOI are 2% to 3%. The Q4 slowdown versus the year, just an anomaly of the quarter. Our expectations for the year and for the medium term are in that 2% to 3% range. Thank you. Our next question comes from the line of Michael Carroll with RBC Capital Markets. Please proceed with your question. Yes, thanks. Ben, can you provide some color on the type of investments STEG has made to improve your overall platform that has driven your acquisition hit rate higher? And do you think that improvement in the hit rate is sustainable going forward? Well, the improvements have been both human and machine. So human and that we've added acquisition people that are in the field. So and the people that we have in the field or have been in the field longer. So, reflective of the wonderful place to work at STAG is we are able to retain our employees for long periods of time and they get more mature in the markets that they're operating in. But internally, we are it's basically manipulation of data and systems to more efficiently underwrite, as well as use the data that we have to more efficiently target our human capital as they move out and around in the market. So all those things have come together to help us to continue to identify and acquire those assets. Okay. Can you quantify how that has improved your overall hit rate on type of deals in 2019 versus prior years? Yes, one of the things I would say is that our guidance for this year, I mean our hit rate in 2019 was above our recent trends. And so we think is reflective of the improvements we've made but the guidance that we put out is almost 20% hit rate. The guidance that we put out for acquisitions for 2020 is reflective of some moderation of that hit rate. Maybe back closer to the 2018 numbers at 15%. So although we hope and expect that the improvements that we've undertaken will continue to produce that better targeting that will allow us to have the higher hit rate. We are not baking that into our guidance at this point. Okay. And then just last question for me related to the GSA expiration at the end of 2020. I know that you have talked about either re leasing that space or potentially selling the building. I mean, how are those discussions going right now? And what's the factors that will make you choose re leasing versus selling or vice versa? I mean, as with every transaction we look at, we're looking at the long term returns for our shareholders, what best delivers those returns. This is a building that has and a site that has a lot of demand. This is very close to where we're doing the Burlington ground up development, a mile or so away, I guess, a couple of miles away. And it is an asset that has a very strong leasing market, lots of demand, and we are our confidence is buoyed out of the fact that as mentioned in our prepared remarks, we have people willing to pay us very, very healthy returns simply to acquire the asset and the developable land today. So as with the other Burlington development, we looked at selling the land versus developing the land and we'll make the same kind of analysis here as we look at. This one obviously has the additional component of a building to be leased, but we view this all the components here as plus. That's a very strong market. Great. Thank you. Thank you. Our next question comes from the line of Elvis Rodriguez with Bank of America. Please proceed with your question. Hey, good morning guys. Good morning, Elvis. Quick question on the investment pipeline. So at the end of the year ended at $2,100,000,000 versus $2,700,000,000 at the end of 3Q. Can you just give us an update of what you're seeing and is it becoming harder to meet some of your target yields? Well, part of the problem is that we bought so much in the Q4, we drove the pipeline down. That's a reality, but it's also reality that the simplicity of sort of availability of assets tends to have a stop point at the end of the year. So it would not be atypical for us to have the pipeline dip at the end of the year and then sort of build start to build back up as the new year begins. $2,000,000,000 of individual assets is an awful lot of assets for us to be for anybody to be looking at. It's lots of opportunity out there. These are assets that have gone through an initial triage. Our initial triage is better than it was in the past. So we're highly confident this is a pool of assets that makes sense for us to underwrite. And if we can derive the returns, we're looking for a pool of assets that will deliver to us a lot of good acquisitions. Yes. I wouldn't read too much into the decrease from Q3 to Q4. It's a point in time measure. Ben hit on the reasons why it's a little lower right now. Excellent. So you've obviously grown the business tremendously over the last couple of years, but FFO has only grown, call it, in the 2% to 2.5% range. Can you talk about when we should see that sort of get higher to where your peers are? And in addition, maybe you could target the internal growth piece as well? Yes. I mean, one of the issues is as we grow, we're buying lots of or historically have and continue to have lots of fully occupied buildings. So we do have the occupancy headwind that weighs on as we're continuing to grow. At our IPO, we had an equity market cap of a couple of 100,000,000. We now have an equity market cap over 5,000,000,000 dollars It's been a lot of growth. There continues to be a lot of growth. And unfortunately, that does weigh on because we're continuing to build the machine as well in a very scalable manner, but we're continuing to build the machine. All these things have weighed on. If we simply stop growing, I think you would see more growth fall to the bottom line from the existing portfolio. Yes. We talked about the components of this year's growth. We put our range of core FFO at the midpoint of $189,000,000 So there's a lot of factors every year that impact core FFO per share growth and we discussed those previously. And as Bill has noted before, we have been continuing delevering although our end of the year metrics didn't perhaps show the metrics, the delevering quite as much. Our average leverage during the year was a deleveraging from the prior year. That's right. Okay. That's helpful. Just one more for me. Can you talk a little bit more about sort of tenant demand and rent growth across your market? So I understand you're going to get some of these boxes back and you go the route of perhaps I can sell it or perhaps I can re tenant it. But can you talk about the decision and tenant how tenant demand is wearing weighing on those decisions across your markets today? Yes. I mean one of the things to look at is we classify markets 25,000,000 to 200,000,000 square feet is secondary markets and above 200,000,000 as primary markets. It's interesting to note that within those classifications, the occupancy or the reverse of occupancy, the vacancy in those markets is similar to the secondary markets have actually probably have recently had slightly higher occupancy. And that is a occupancy or vacancy is non retention times downtime. And so if you assume that the secondary markets might have longer downtime, they must have higher retention. But so what I'm basically what I'm saying is these are very healthy operating markets and the results that are derived from operating in the markets we are more active in, which is the lower half of the primary markets and the secondary markets, they have operating metrics that are similar to in terms of delivering operating results similar to or in some cases better than the primary market. So it may not be exactly the question you asked, but we're very comfortable that the markets we operate in will deliver good operating results. They are fungible markets with strong tenant demand, etcetera, and do not suffer from the potential for oversupply that may occur in some of the larger metros where we are less active. Okay. Thank you. That's helpful. Thank you. Our next question comes from the line of John Massocca with Ladenburg Thalmann. Please proceed with your question. Good morning. Good morning. So value add looked like it was a larger component of the acquisition guidance for 2020 versus kind of maybe where, I don't know where it ended up being necessarily for 2019, but as it stood at the guidance for 2019 in kind of 3Q 'nineteen era. So is there some reason that that value add portion of the acquisitions is moving up? Is it what you're seeing in the market? Is it stuff that's already in the pipeline today? Maybe what's driving that? Year over year, John, it's pretty similar. We closed about $100,000,000 of acquisitions in 2019. Midpoint of our guidance is $100,000,000 for 2020. So it's similar year over year. Those are great opportunities. We are balancing how much we acquire as a percentage of the overall acquisition volume. Great opportunities and once we add the value to those assets, whether it be leasing vacancy or expanding a building, generally creates anywhere from 25 to 75 basis points of incremental value at the asset level. So good long term investments, but we do just balance what percentage of the overall acquisition value add acquisition in 2019 was towards the end of the year, so you don't really know necessarily where that stands. But the stuff that was maybe earlier in the year, how have the outcomes for that gone versus maybe what you were budgeting or what you expected? It's very similar to budgeting, if not exceeding our pro formas. Okay. Makes sense. And then one last value add question. In terms of the 4Q acquisitions, outside of Jacksonville, maybe what was value added why was it value add, if you will? I think it was just Jacksonville, Steve, right? No, we had so we had Jacksonville and then you had 2 partially vacant buildings in Texas and South Carolina. So it's primarily just vacancies you're leasing up. There's nothing that's like some TI or Sure. In those specific instances, there's no development or anything. Of that. We're taking advantage of a vacancy that we're looking to lease. Okay. Then on the top tenant list, it was a small mover, but it looks like Fang kind of came down a little bit. Was that an asset you sold or did they leave an asset? That was the Amazon scenario I referenced. So they were going to vacate that space and that's the so we negotiated a lease termination fee and put Amazon into the space with no downtime. Perfect. That's it for me. Thank you very much. Thank you. Thank you. Ladies and gentlemen, this concludes today's excuse me, this concludes the Q and A session. I would now like to turn the call back to Ben Butcher for closing comments. Thank you. Thank you for your questions this morning and for listening in on our operational results. As I mentioned in our prepared remarks, we're very confident about the position of the company, the quality and the engagement of the team and our prospects for 2020. Thank you for your time and attention this morning and we look forward to talking to you again next quarter.