Earnings Call: Q3 2019

Oct 31, 2019

Greetings and welcome to the STAG Industrial Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt Spennard, Senior Vice President of Investor Relations. Thank you, sir. You may begin. Thank you. Welcome to STAG Industrial's conference call covering the Q3 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 section. On today's call, the company's prepared remarks and answers to your questions will contain forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward looking statements include 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 company's filings with the SEC and the definitions and reconciliations to non GAAP measures contained in the supplemental informational package also 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 Q3 earnings call for STAG Industrial. We're pleased to have you join us and look forward to telling you about our Q3 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 Mecke, 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. Yesterday, we announced acquisition volume of just over $300,000,000 for the Q3. This brings our year to date total, including acquisitions that have closed subsequent to quarter end to approximately $875,000,000 As a result, we have raised the top end of our 2019 acquisition guidance to $1,200,000,000 a significant increase from our initial volume guidance. We have already closed well in excess of any previous year's acquisition totals, ensuring this will be the company's most successful year on the external growth front. At the same time, our operating metrics for the 1st 3 quarters of 2019 remain strong. We achieved cash releasing spreads of 11.4%, retention of 74% and same store cash NOI growth of 1.9%. All of these metrics meet or have surpassed our initial and any subsequently increased 2019 guidance. This has prompted a further upward revision to our 2019 same store NOI guidance this quarter that Bill will describe in his remarks. This marks one of the company's most successful years producing internal growth. STAG has demonstrated the rare ability to provide both external and internal growth. Growing GDP and in particular continued strong consumer spending provides strong demand support for the industrial sector. The continued growth of e commerce, the associated supply chain reconfiguration and the increased inventory needs are large additive drivers of industrial demand. As we have previously highlighted, STAG's portfolio is located proximate to centers of population and is directly benefiting from these secular tailwinds. Consistent with headlines and various industry reports, STAGS markets continue to benefit from healthy demographic trends. The trends in population and employment growth, which drive income growth and industrial demand, have generally been positive nationwide, and this holds true when looking at our largest market exposures. Population growth and specifically growth in prime working aid population helped drive metro GDP growth. Metro GDP is projected to grow across our top market exposures and broadly across our portfolio wide market exposure. This has driven our robust portfolio operating metrics for this year. This fall, we rolled out our 3rd annual comprehensive tenant survey. This survey has proven to be a viable tool that allows us to gain additional insights into our tenants' view on their business, the world and how their current and future real estate needs are being met. Consistent with last year, the results from the survey show an increase in business activity both at the corporate and building level. 52% of respondents indicated business activity is increasing at the corporate level and 41% indicated an increase at the building level. The macro environment continues to be uncertain, specifically with regard to trade wars. In response to a direct question related to the impact of tariffs and other restrictions, our tenants indicated that on average, there was a small negative impact to their business with responses ranging from a large negative impact to a small benefit. We continue to believe it is too early to tell what these impacts will be, but note that the results from the tenant survey indicate that the tone has become more cautious compared to our survey from 1 year ago. STAG's emphasis on geographic and industry diversification should provide a level of protection should negative trade impacts start to be evidenced. E commerce is clearly an important and growing incremental demand driver at 44% of our portfolio's buildings are currently handling ecommerce activity and 47% of respondents indicate that ecommerce activity has increased in their facility over the past year. These responses have grown compared to last year and we expect this trend to continue. It is important to note that the traditional demand drivers for industrial real estate, such as GDP growth and improved business confidence, continue to provide baseline support to industrial fundamentals. The survey results are consistent with our operating results. The increase in business activity and increasing importance of e commerce to our tenants businesses have directly contributed to our strong operating results over the past several quarters. With that, I will turn it over to Bill, who will discuss our operational results. Thank you, Ben, and good morning, everyone. Core FFO was $0.46 for the quarter, an increase of 2.2% compared to the Q3 2018. Leverage remains at the low end of our guidance with net debt to run rate adjusted EBITDA of 4.7x. Acquisition volume for the 3rd quarter totaled $303,000,000 with a stabilized cash cap rate of 6.8% and a straight line cap rate of 7.2%. The straight line cap rate incorporates weighted average rental escalators of 2% associated with this quarter's acquisitions. This brings acquisition volume through Q3 to $748,000,000 with stabilized cash and straight line cap rates of 6.5% and 7.1%, respectively. Subsequent to quarter end, our acquisition volume to date is $126,000,000 The demand for our buildings continue to be reflected in our portfolio operating results with new and renewal cash leasing spreads of 19.7% and 8.6% respectively. Straight line releasing spreads for the quarter were robust as well with new and renewal straight line releasing spreads of 24.7% and 14.8% respectively. Retention for the quarter was 61%. Same store cash NOI grew by 1.3% for the quarter, which was positively impacted by our retention and cash releasing spreads and partially offset by a decline in occupancy within the same store pool in the 3rd quarter. Year to date, same store cash NOI has grown 1.9%, driven by a retention rate of 74% and a cash releasing spread of 11.4%. This was partially offset with a decline in occupancy in the year to date same store pool. As Ben mentioned, these metrics have exceeded our budgets and have contributed to our increase in same store cash NOI guidance for 2019. Moving to our capital market activity. As previously discussed on the Q2 call, we funded Term Loan E and originated Term Loan F. Term Loan E has a notional of $175,000,000 and is fully swapped with a fixed rate of 3.92%. Term Loan F has a delayed draw feature and is currently undrawn with a notional of $200,000,000 and is fully swapped with a fixed rate of 3.11%. On September 24, we completed an equity offering at $29 per share, which resulted in aggregate net proceeds of approximately $362,000,000 with a portion of those proceeds to be received on a forward basis. We received net proceeds of 100 $57,000,000 in September and expect to settle the forward contract and to receive the remaining $205,000,000 in the next few months. The $157,000,000 of immediate proceeds were used to fund our 3rd quarter acquisitions and the $205,000,000 of proceeds to be forward settled will help fund upcoming identified acquisitions. At quarter end, net debt to run rate adjusted EBITDA was 4.7 times. Our fixed charge coverage equaled 5 times and our available liquidity is $623,000,000 We have updated our public guidance to reflect our activity to date. We now expect acquisition volume to be between $1,100,000,000 $1,200,000,000 This includes between 50 $1,000,000,000 $100,000,000 of value add acquisitions. The stabilized cash cap rate guidance has also been updated to a range of 6.3% to 6.5%, and we expect the straight line stabilized cap rate to be approximately 50 basis points higher. G and A guidance has been decreased to a range of 36 dollars to $36,500,000 We have reduced our granular disposition guidance range between $50,000,000 $75,000,000 and refined retention guidance to 75%. Finally, we have increased our same store cash NOI guidance to a range of 2% to 2.25%, which reflects the impact of our leasing success year to date. All 2019 guidance can be found in the supplemental posted to our website in the Investor Relations section. I will now turn it back over to Ben. Thanks, Bill. This quarter and for the year to date, STAG has again demonstrated the strength of our portfolio, of our operating platform and of our investment thesis. This strength was evidenced by our historic quarter for acquisitions and our outstanding Q3 and year to date operating metrics. With our successful equity transaction in September, our conservative balance sheet and our healthy pipeline of potential accretive acquisitions, the company is well positioned to close out a very successful 2019. We thank you for your time this morning and for your continued support of our company. I'll now turn it over to the floor for questions. Our first question comes from Sheila McGrath with Evercore. Please proceed with your question. Yes, good morning. Ben, acquisition volume in the quarter was a record and you up guidance meaningfully. We keep hearing how competitive it is to acquire industrial buildings. Just wondering if you could give us some insight how you're able to continue to capture this kind of volume at attractive cap rates? Good morning, Sheila. Thank you for participating, and thank you for the question. As we've talked about in previous quarters, we have built and continue to augment and the experience of the team continues to grow. So it's really by covering a broad swath of the fungible industrial market. And a lot of it is in areas where we don't have significant institutional competition. So we look at 60 or so markets. And again, in a lot of those markets, we're not competing with large potential buyers. So it's an iterative process. We still only buy about 15% of what we underwrite and we underwrite a very small portion of the things that we identify, only the things that we think we have a reasonable chance of acquiring. So it's a large iterative process that by virtue of the experience and maturing of the organization and the growth of the organization allows us to identify and acquire at those types of volumes. Have you added to the acquisition team this year? We made a decision a number of years ago to grow our own acquisition people. And so we are have people that have moved up through the ranks of financials, analysts, the senior financial analysts and now have been rotated out into the field and are picking up coverage in markets. So the number of people we have outward facing has gone from effectively 5 or so to 8 or so. They're out there interacting with brokers, identifying assets and helping us identify those acquisitions that you see in the acquisition totals. Okay. Great. And any update on your New Jersey development project? Sheila, this is Dave King. That project is due to deliver in December. It is both on time and on budget. And we expect to meet and most likely exceed pro form a on that. Okay, great. Thank you. Thank you. Thank you. Our next question comes from Michael Carroll with RBC Capital Markets. Please proceed with your question. Ben, can you talk a little bit about your near term, I guess, investment activity? What's driving the lower acquisition yields? Do you have any other lumpier transactions coming in, in the Q4? So the acquisition yields, I mean, I think you're referring to cap rates. Cap rates, as we've discussed for a point in time measure, we're still adhering to and exceeding our long term return metrics in terms of IRR, FFO or CAD per share over time. And so from quarter to quarter, we see cap rates move up or down depending on the mix of what we're acquiring long term leases with little capital expenditure and good contractual rental bumps obviously can be bought at lower cap rates and still deliver the same kind of returns. So I don't think you're going to we're very comfortable that our acquisition guidance for the year remains solid in terms of cap rates expected. So I don't think you really should expect to see anything different in the Q4 than what we normally acquire. It's just there are mix changes from quarter to quarter that result in different reported cap rates. Okay. Do you have another, I guess, larger acquisition coming in the 4th quarter with an expanded lease term, and that's what's driving it a little bit lower? No. Again, it's just the same mix that we always buy. There could be depending on the mix, I don't know particularly, but it could be some sale leasebacks in there or something that is longer term with again, which would have a lower initial cap rate, lower again, with rent bumps, etcetera. Yes, Mike. I mean, for the year, 6.5% on a cash cap rate, and that's within the range of our guidance for the year. So the only quarter that we dip really below that was Q2. So we're not expecting anything like a Q2 cap rate for Q4. Okay, great. And then can you talk a little bit about your, I guess, new same store guidance that you raised this quarter? What's driving this improvement? Is it just the strong year to date leasing trends that you've been able to record? That's the biggest that's one of the biggest drivers, Mike, is just the you're seeing the strong leasing trends, you're seeing the cash flow of rents that and as just to remind you, those are leases that have commenced. So if they've commenced later in Q3, you're going to see that roll through the rest of the in Q4 and drive the year to date results. Okay, great. Thank you. You're welcome. Thank you. Our next question comes from Blaine Heck with Wells Fargo. Please proceed with your question. Thanks. Good morning. Ben, there has been a lot of discussion in the industrial sector about rent growth differential between smaller buildings and big box with smaller reportedly seeing better growth. You guys have a pretty good mix between the 2. So I wanted to get your take on the subject and whether it's size that's the biggest determinant of rent growth or if it's more based on the submarket or availability of land or some other factor? Well, I think long very long term rent growth in industrial markets is cost based tends to be cost based. So when you have very hot markets and land prices go up, you can see unusual rent growth in those markets for a period of time. The history has been and of course we can accept that this time may be different, but the history has been that rental growth for industrial properties is pretty much the same across all the top 50 or so markets. It has different variability depending on where you are in the cycle. And that's also true likely true for smaller versus larger. I would say smaller spaces are more expensive to build and maintain and therefore may have some type of underpinning for higher rent. But I don't think that's an underpinning for higher rent growth as much as it is for higher absolute rent. So I think our belief is that the smaller spaces are to the extent that they're outperforming in this market is more of a cyclical, I wouldn't even say anomaly, but more of a cyclical feature. Yes. And Blaine, when you look at the stats within our portfolio, we're not seeing that our large boxes are producing as good as rent growth as the small boxes. All right. That's helpful. And you guys bought a building in Memphis over a 1,000,000 square feet, which I think is the only one that size you bought in a while. Can you just talk about what attracted you to that asset and whether we should expect you guys to purchase some of these larger buildings going forward? Sure. It's Steve. This building, what attracted to us, it's a Class A building with a long term tenant in it that just recently expanded into it was originally a 2 tenant building. The tenant that's there now expanded into the balance of the building. It's in a great logistics location. It's near the BNSF intermodal yard in Memphis and near the airport. So we are very bullish on the property. And to the extent that the tenant ever decides to leave and the tenant's been there almost in the 19 or 20 years, We're very comfortable with the re leasing prospects of that site as well. And I think to the generally the question about whether or not we're comfortable buying 1,000,000 square foot buildings, like everybody else in the industry, we have there's some degree of consideration of the fact that there haven't been a lot of 1,000,000 square foot buildings enrolled. We have been looking at the statistics on that, and we derive comfort from the statistics on 2nd generation space leasing of those buildings. But it's certainly something that we pay attention to as we do with all the buildings underwriting, how the reuse of that building would occur should the tenant lease. All right. Thanks, guys. Thank you. Our next question comes from Dave Rodgers with Baird. Please proceed with your question. Yes, good morning. Ben, maybe on the acquisition front, you guys have done a lot of the acquisitions this year on a one off basis, which again is a good testament to the strategy you've got. But talk about maybe why you haven't been able to find as many value add opportunities as you increased guidance that was not an increase? And then can you also talk about the portfolio premium for your type of assets in your markets that are keeping you back to the single asset trade? So I'll address the second one first. The portfolio premium in markets that are deemed more risky, whether they are or not, is a subject that we would be happy to discuss at length. But the markets that are deemed more risky on an individual asset basis, the premium is higher if you bought. I mean, it goes to the ridiculous extreme. If you buy 50 treasury bills, the risk is the same as if you buy 1. I think some people view assets in for instance Inland Empire West as being relatively low risk. The portfolio premium you would see on a collection of assets in an exit 8A in New Jersey or in Ontario, California or in Long Beach, those types of things have very little in the way of portfolio premium. If you have a collection of assets in fungible markets like, say, Cincinnati and Indianapolis, which are deemed a little bit more risky generally, you'll see a bigger portfolio premium. And so we believe that as we work across the 60 or some markets that we operate in, we see different levels of portfolio premium accruing to those assets we acquire in those various markets. I'm sorry, the first part of the question, I've forgotten value add. Value add. Value add. Value add. So we have a level of inquiry that we have with regard to value add. We have we're out looking for value add transactions, and we acquire them as they come through our filter and we can buy them for the returns that we're looking for. So we may identify a great value add asset, but somebody else is willing to pay more than will allow us to achieve the returns we're looking for. So we are throughout the year continuing to look, we don't have a cap on the amount of value add per se. It's our expectation that the value add will be on the range of maybe 5% to 10% of our asset acquisitions for the year. And the timing of those acquisitions, you could see a quarter where all 5% to 10% occurred in one quarter or you could see it spread throughout the year. But the we are open to acquiring them. We're looking for them and we'll acquire them. Again, we get the returns that we're looking for in those acquisitions. And Dave, just regarding the portfolios, when we still underwrite portfolios, about 20% of our pipeline is portfolios. It's just we're very disciplined on price and have not been able to acquire those portfolios due to price. Got you. That's helpful. And then maybe on the disposition side, you actually took guidance down. And I realize there's a high level of scale in your business, Ben. But as you kind of think about increasing the guidance for acquisitions to $1,200,000,000 at the top end, nothing really kind of bubbles up that you kind of start to say, hey, we need to do a little bit more of the recycling on Well, I mean, I think it's a little bit of the same thing. We have filters that we've set up in terms of disposition and we've talked about those filters in the past. From quarter to quarter, we'll have different levels of disposition. But we're always looking at and evaluating potential dispositions. This is separate aside from sort of capital raising dispositions, which we've done a couple of times in the past. But as we look at our portfolio, as we've talked about in the past, there are assets that we are interested in owning long term. That would be the vast preponderance of our portfolio. But there are some assets, the flex office assets that we've discussed, we will get rid of overtime, I shouldn't say, dispose of overtime. And we continue to look to do that on an opportunistic basis. As we look at our portfolio, there may be times where we decide that there's another sub segment that we would look to dispose on. But mostly, we're looking at it on the same way as we do on acquisitions on a granular basis, on an opportunistic basis. And last question for me. Just on the retention. Year to date, your retention is in line. In the quarter, it was a little bit lower. Kind of remind us what's going on there and then the backfill of any opportunities. And then as you look out into the early part of 2020, any tenants that we should be kind of paying attention to? Thanks. Yes. Dave, thanks for the question. I mean, we're very comfortable with our guidance for the year. Our long term retention has been in that range. And so we don't expect anything unusual from and as we've discussed, from quarter to quarter, you're going to see lower and higher numbers, but we're comfortable with our guidance for the year. Our next question comes from Jamie Feldman with Bank of America Merrill Lynch. Great. Thanks and good morning. Can you talk more about the study you mentioned? It sounded like you're seeing an increase in e commerce type tenants in the portfolio or at least e commerce activities. Maybe if you could just provide more color on exactly what people are saying and are there certain sectors that are using your assets more than they were in the past? Anything you can provide would be really helpful. Yes. So Jamie, that's referring to our tenant survey. This is our 2nd year of doing the 3rd year of doing the comprehensive survey. Time does fly. And so the survey is an indicate we get we ask our tenants specifically what they're doing in the building with regard to e commerce. Now I'm not going to tell you that it's regular household goods or anything like that. It's just general e commerce activity that we're inquiring about. And as you might expect, since our portfolio is representative of the industrial assets in the United States, our portfolio as in e commerce activity is increasing generally across the United States, our portfolio is experiencing that same increase. Okay. Are there certain regions or certain property sizes or certain locations within markets that tend to be getting more No. E commerce activity tends to occur in your populations. Our assets are located approximate to populations. I think it's important to note that sort of whether you're talking about last mile or last touch, that doesn't mean 1 mile, 5 mile radius the last touch assets are in most population centers are out and around the beltways around those population centers, which may be 10 or 15 miles away from sort of the most dense population. And I know in particular, as an example in Boston, the last touch stuffs all occurring out around 128 and beyond. And so our assets are proximate enough to those population centers and how the people that are delivering to those last touch consumers, they're proximate enough for the purposes of those that activity. And then what about other characteristics like dock doors on both sides of the building or truck courts, certain sizes of that? I mean, are there any trends you're seeing that even help you as you think about your next round of acquisitions, certain characteristics that matter more than others? Sure. As you know, when we underwrite an acquisition, we're looking at the features of the building that will affect, obviously, the tenant retention. So we want to know the building is fungible has the features that our tenant current tenant uses. But we also want to know if and when that tenant leaves, does this building have features that are attractive to the tenants in that specific market and submarket. And as we underwrite those buildings, if the building is short on dock doors or if the market is a market where they want cross dock instead of single loaded, we're putting in our underwriting the capital cost of converting that building to that to have those features. And if the building is not if it's a building with no side yard or something like that, so you actually can add cross dock facility and it's a market. We're either going to assume that we can't lease it for a longer period of time or assume we'll have to lease it for less rent because it's a less fully featured building. All that's part of the underwriting. And as we look at assets individually, which is again is predominantly how we buy assets, we're able to again identify and acquire assets, have good long term viability in those markets. But are there certain characteristics of building today that would you wouldn't even consider them where maybe 3 or 4 years ago you would have? Like has the market changed that much or not really? No, the market hasn't changed that much. Okay. And then following up on the same store question, guys have had pretty healthy leasing spreads, accelerating leasing spreads for many quarters now. What is how do you think about your same store potential in 2020 versus 2019? I mean, can you see accelerating growth based on how you're doing? Well, we were obviously, we're not in a position yet to talk about our to give guidance on 2020. I think one of the things as we think about same store NOI, one of the things that I like to think about is we have a different acronym, SANG, which is stabilized asset NOI growth. We have a our same store pool is at the end of the year probably going to be about 70% of all of our assets and another 20%, 25% of our assets are actually stabilized. So we have a significant portion of owned assets that are not in our same store pool, but are producing 2.5% or so growth through contractual rent bumps. They're stabilized assets. And so we think that the SS NOI stat is a little misleading with regard to our portfolio in particular. But we're very comfortable with our projection with our recently revised projection for the year and we're very comfortable that our portfolio will continue to operate well and we will visit guidance as we move into 2020. Yes. But Jamie, as you pointed out, the leasing spreads has been a big driver in the acceleration of our same store NOI over the past several years. All right. Do you have a sense of what your mark to market looks like for 'twenty? So I think that still gets into guidance for 2020. We've told you we've mentioned from time to time that the we believe our portfolio is in aggregate slightly under market. We can continue to have that belief. Thanks, Jamie. Thank you. Our next question comes from John Massocca with Ladenburg Thalmann. Please proceed with your question. Good morning. Good morning. So just looks like I look on the balance sheet side of things, you've been a little bit wider in terms of the issuance on the ATM. Obviously, having the 2 offerings in place recently probably drove that. Was that more of a structural shift where that will be more of a capital raising focus going forward and maybe less emphasis on the ATM? Or is it just a matter of deal flow for acquisitions being what it was that bigger chunks of equity made more sense? And if it becomes more granular, say, the start of next year, ATM is still kind of the primary equity raising vehicle? Yes. Just taking a step back, John, I think ideally, we like to match fund our acquisitions with both debt and equity. Historically, the ATM has been a great tool to do that. Given the increased deal volume, we elected to do some larger bought deals and this recent bought deal had a forward component, which allowed us to match fund identified acquisitions, both under contract and LOI. And we'll continue to be flexible with how we raise equity and try to match fund as best we can our acquisitions. Yes. And I would say to sort of confirm and reiterate, Bill is saying is we're happy with the ways that we have raised equity and we're happy with the fact that we have multiple ways to access the equity markets. Okay. And I know it's probably a little bit early days, but did you see any impact potentially on your automotive supplier tenants from the GM labor stoppage at all? Is there anything notable? No. We checked in with them, obviously, on the news of the strike. And there seemed to be a degree of concern, but no real impact. Okay. And then one quick detail one. How much of the expected value add volume this year has been completed already? And how much is kind of remaining, let's say, at the midpoint of guidance, that $75,000,000 We've completed I mean, right now, if we don't complete any other value add deals for the year, we will be within our guidance range. Okay, perfect. That's it for me. Thank you very much. Thanks, Tom. Thank you. Our next question comes from Jon Petersen with Jefferies. Please proceed with your question. Great, thanks. I wanted to ask about your G and A in the context of you guys lowered it this quarter and now you're a company that's acquiring $1,000,000,000 of properties a year. The the increased momentum and activity in the business over the last year, whether you think you can continue to scale that number over the next couple of years? Yes, I think we'll be able to continue to scale that number. If you look back several years, G and A as a percentage of NOI was mid to low teens. We continue to drive that number down. And there was a variety of items that drove the reduction in G and A guidance this year, but we're very comfortable with the revised guidance for the rest of the year. Okay. And then I wanted to ask about property taxes. It seems like across most real estate types, municipalities are getting more aggressive with trying to increase people's property taxes. I know you guys pass those through to customers, but I'm kind of curious just in the negotiations with customers on rents, whether they look at things in terms of total cost of occupancy and whether that increased property taxes have any impact on their willingness and ability to pay rents or whether those sort of things are thought about separately? I think by and large, our tenants do look at total operating costs. We are we aggressively appeal our property taxes and are successful in many cases. But you're right, they are pass through to the tenant. So we don't necessarily feel the immediate impact of those. We do perhaps see in an abatement rolling off situation or something like that. Our net rents might change, but incremental increases in property taxes haven't been that significant to change our net rents. Okay. And then just one more. I apologize if I missed this, but did you guys give any update on the development in New Jersey? We did. You want to know what it is? Yes. Can you repeat it for me? Did you lease it? On time, on budget, on pro form a or better. The next question comes from Jamie Feldman with Bank of America Merrill Lynch. Just a quick follow-up. I just wanted to get your thoughts given we've been in this recovery for a while now, we're starting to see construction rise. Just how are you guys thinking about the supply risk in your markets or supply growing your markets versus maybe this time last year? And what's the implications for the ability to push rent? And are there certain Yes, I think there's no question that if you look at a national aggregated scale that supply is more of an issue than it was a year ago. Most of our activity is in markets that are less impacted by excess supply. There continues to be the preponderance of supply continues to be in a few of the top 10 markets of the oversupply, if you will. So there's no question that it impacts rents. And I think in places like South Dallas, your the expectations are for continued negative rent growth. We are as our portfolio is we think is remains pretty balanced with regard to supply and demand. So we're not expecting any material impacts on rent growth because of that. So do you could you see rents accelerating still in your market? I think rents will continue to move up at a measured pace. We've always had a long run of very high rental growth. We expect to see continued rental growth. But what's important, I think, in the exercise of our investment thesis is we underwrite every market, every submarket and indeed the building itself, the characteristics of the building itself to understand and or project the rent growth for that building in that submarket. So again, we're not really a top down. Dallas is going to grow at 3%. It's what's going on in this particular industrial park in Dallas or in Cincinnati or wherever. So we're very granular in how we look at rent growth. And I think that has provided us a cushion of safety and conservatism in our underwriting. We have reached the end of our question and answer session. So I'd like to pass the floor back over to Mr. Butcher for any additional concluding comments. Well, thank you very much, operator, and thank you all for joining us this morning. Think our results both on the acquisition operating side are as we've mentioned in our comments initial comments are reflective of an investment thesis that is has worked and it continues to work, and we're very excited about the prospects of continuing to execute it as we move forward. Again, thank you for your time this morning. Ladies and gentlemen, this does conclude today's teleconference. Again, we thank you for your participation, and you may disconnect your lines at this time.