DCT - Earnings call transcript Q4 2017 | Duck Creek Technologies Inc

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Operator

Good morning ladies and gentlemen and welcome to the DCT Industrial Trust Fourth Quarter and Full Year 2017 Earnings Conference Call. All participants will be in listen-only mode [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions [Operator Instructions]. Please note today’s event is being recorded. At this time, I would like to turn the conference over to Melissa Sachs, Vice President of Investor Relations. ahead. go Please

Melissa Sachs

and everyone details fourth Hello Today's you joining our Officer, our for will Murphy, guidance. and Thanks Chief XXXX the our and and quarter's full Industrial's Financial President Hawkins, Phil quarter led will call. Executive year DCT Officer; be Matt provide Denise. who by thank Chief on XXXX call and earnings results

and about other Region, Doyle, estate will DCT be the Managing markets answer to Neil developments Additionally, Central questions real activity. Director available of

the Before the like over today's our and in described Phil, with XX-K to be Actual including differ statements statements will by of Federal XX-Q. to in remind include those forth the those limitations, as reports projections, a by set on without of within materially regarding will expectations. and I Form results remarks from forward-looking Securities plans release call statements may our turn variety includes, future quarterly I Laws. risks, updated the on filed meaning Form everyone SEC, would that earnings call This forward-looking in our management's or affected

this conference financial Reconciliations are may will the of section these dctindustrial.com. now refer call, to at And measures. be measures supplemental, call certain I available turn the non-GAAP non-GAAP financial which our Phil. Relations Investor we of on over can on in Additionally, found our to website

Phil Hawkins

value of for investment also for morning with as margin developers and In NOI joining strong of other high another fourth we thanks fourth $XXX X.X% an at growth call. well. XX%. quality progressing an well projected and and favorable million located, stabilized estimated everyone and year owners dynamics capped Good Rent the four yield excellent distribution development pipeline and creation remained quarter, Leasing market is Thanks assets DCT. of Melissa. assets. off our quarter for The were

new four projects South buildings pipeline of XX% and the in current now of the two is and Florida, start stabilization the these With Atlanta leased.

XX% pipeline all projects quarter's in However, future. active on basis, executed now a Leasing will same expect are a discussions leases we last the near is phase in leased. the and lease-up number of be portfolio on

took During selling sales for and advantage are investment market under we year of the by $XXX quarter, just XX X.X%. of strong projected assets on yield the million

objective January. completed For XXXX, exit tax sales were XX.X% both reflecting in reasons, from philosophy of consistent focusing real maximize Charlotte. These and we closed our strategic selling in of with presence further strong markets, estate. leased, we These four and which people stabilized capital Louisville, have exited our of our assets where and terms both assets these of end to our assets value. earlier in long-term And Memphis we a like

is XXXX for outlook our similar ahead, Looking to very XXXX.

remain demand new developer and starting respect supply customer rental modestly leasing market continue to rates, growth will will with in vacancy well healthy, in expect them. will while as to up as to We low rate average response disciplined projects both will the remain behavior mid-single-digits, move

and capital, deploying assets portfolio, our selling operating for the strategy our result, remains a As same.

quickly on up continue we'll levels we as rent as in focused this deriving and not to the same-store mostly we're as acquisition And rents, from able speculative to compete environment, projecting developing a our in basis expect well we're move on entitlement occupancy growth process. land significant bumps, assets, we new While results. that here, remain as

provide our initial that, turn few in opportunities we more With our who expect results uses the XXXX. find QX term will and market capital. realized of We color will over to been acquisitions continue for provide least have values better at where and and growth have assets active that Matt, let longer me guidance to we attractive seller to be quality also continue will that teams an a stabilized for

Matt Murphy

believe for specifically good XXXX in the everyone. a Thanks Phil and major from metropolitan active our industry Market in efficiencies of continuing importantly, networks and space new year, on both levels already was terms beyond. just in their the evolving for rental rates advantages in they're rents users heights, demand to to investments occupancies seek served remarkable DCT's these able shape, are to prime both many DCT. to take invest what continue capital of us as space ability at driven which willing world. in to capitalize particularly these and has trends were trends morning bodes and in rapidly historic we beginning to more the distribution facilities, of areas. and generate and in locations their and well Perhaps and to improve and logistic they industrial are XXXX pay well own very XXXX competitive

occupancy, with metrics well-positioned From the strong pipeline XXXX. $X.XX we was in for initiating in $X.XX retention diluted with Our roll, fully of NOI quarter Operating all and XXXX expect We're very operating our substantial to rent operating per very our drive to us our fourth rent performance funds including very conclusion and leave an very to and from a quarter remain expectations year. guidance growth, share. between -- earnings metrics, solid creating growth along an XXXX. development our and consistent lofty growth, exceptional operations portfolio, and value was exceptional were perspective,

consolidated operating and Our between XX.X% based averaging occupancy upon XX.X%. guidance is

perhaps XXXX spreads achieved or releasing in XXXX. a to in below expect be little we those similar We to

Although, as to vary numbers always, tend these quarter-to-quarter. from

expiring the only compared XXXX. during XX% almost in X% the signed to despite recession We in these expect spreads of leases that releasing were XXXX% fact

market to and free project trends experience terms, lease continue including rent rental very other and rates We in ramp-ups. and positive

impact those produce for X% XX% of on future in a midpoint same-store in as future have to those XX% does annual All At stabilized The XXXX same-store of and basis. to year as flat cash and occupancy XX.X% our one ramp-ups. metrics bumps is free than rent, all average portfolio all guidance, the be and annualized annual combined exceed include decline essentially should January excellent a the future leases rent of up. for It X% that straight-line a in currently slight buildings will the Currently, XXXX. portfolio be The any releases and XXXX. same-store which spreads, represents greater of releasing X.X% be that strong a expected of between X.X% acquisitions rent in these bumps, factors compared to by X% should between operating for included ramp average our Xst, our and an cash XXXX growth portfolio have or guidance NOI noted dispositions. experienced occupancy of not growth driven basis potential of NOI on

deployment. Turning to capital

$XXX bottom range upper of start anticipated entitlements the will that are more in under several to end the million projects, depend on securing projects, All online and challenging development the $XXX our successfully beyond a of development feel range starts contemplates end confident million. process in environment. final today's that or of we at and/or in on We the leasing control. guidance existing Our continues in and or the currently between own starts get

XXXX. in includes between of million and acquisitions $XX also guidance million $XXX Our

XXXX, at While that will market maintain find value it's a risk plan, to optimistic that very our guidance teams returns. market continue we our attractive our our to is based will similar which to debt opportunities ratio adjusted achieved create and to capital for a on today, funding what challenging With portfolio in plan a we XXXX. respect simultaneously are acquisition upgrade EBITDA

assets. mix of be a sources capital a of with dispositions and opportunistic towards likely selling will bias Our equity issuance like continued

up guidance continuous a may $XXX $XXX both improvement that of drive issuance to closed for and is of dispositions $XXX strategy which $XXX per long-term between short-term even January. which We share in and at dilution the our approximately come earnings. portfolio, of the if cost modest our million, flow in Our critical and addition contemplates the to million and equity million and believe it subtraction, cash growth, includes value million, element

funding the accomplished XXXX in are maturities million as as proceeds and capital Finally, our several plan debt contemplates towards the what over of we've have we proud transaction our years $XXX paying DCT. the last with we summary, XXXX In a targeted of year middle revolver. at in towards very down debt well

way that consumers American most maintaining also allowed directly us has an incredibly for is will on I goods people that very today, organization our created which and and focused financial the that generate we be are in portfolio We're significant and fortunate best-in-class optimizing portfolio, exceptional changes have and an procuring a many years. positive creating to in from to changes reports benefiting shareholders. We continue of value that operation for think long-term industry believe is the produce

that also that, turn purpose and of track with And our our so ultimately embark results but looking Pleased you. on I'll defined over we aware past Thank success record, With forward. on a sense questions. is for XXXX optimism. with it very

Operator

Thank ahead. go first and begin question-and-answer will from Stifel. Instructions] Please will we you. Ladies Your the question gentlemen, [Operator Guinee session. John now of come

Aaron Wolf

calling doing? This Guinee. everyone all. Wolf is Aaron is Hey John for in How

Phil Hawkins

Good.

Aaron Wolf

$XXX so XXXX that type how have did of FFO? question, Quick Great. on drag asset million much do or the in What sales?

Matt Murphy

the ones year, difficult closed the somewhere have but Matt. According Yes, or looking basis, for $X.XX got question my you really other probably leverage quarter, fourth you're about expectations assume math the would dispositions and specifically assumption to around to a it's it $X.XX just if because it's make is somewhat we to otherwise. a It's basis. on have this a answer share neutral we and throughout a happened the leverage neutral on you've what in not that between at

X%. little a than So, less

Aaron Wolf

noticed just Okay, anything NOI, you. came rebates if noticed of helped if great. pretty we a one down tax I there significantly. or more. G&A, anything that that like And percentage bring number And down. as that unusual Thank wondering --

Matt Murphy

more sort answer inflation-ish, a just the is than maybe a I G&A than No, perhaps growing NOI got G&A. rate short bit is NOI and faster we've growing little of think faster. inflation at

Aaron Wolf

taking Okay, my Thanks for great. questions.

Operator

Please come will next ahead. of The Korchman go from Manny question Citi.

Manny Korchman

large you your outsized Hey basis Matt, move-outs? good everyone. basis that morning in have guidance, or occupancy known are do any

Matt Murphy

foot or Two, the than feel including The is of Yes, the feet known those, largest, about. those that XXX,XXX of we have -- short basis but basically we three rolling. the good greater move-outs, largest know we answer pretty there's three Atlanta of going six we're are short-term, space XXX,XXX some have are a we get scheduled It's in although moving April. square We that potential losing, build-to-suits. year. expire to in know we back but to a they a this for into we're think

we that we're So, one. know moving

sort pretty We sure XXX,XXX-ish of we known of XXXX. move-outs, get in won't any two one others occupancy which have we're

healthy it expires. day pretty the that The good, going other, we negotiations space to backfill have on

of those probably we XXX,XXX, to little "know Beyond that, going in basis weighted of get be between Most a there's tend end that back XXX,XXX, terms square feet back." more we're to bit timing. XXX,XXX

but point -- you out or So, three tell move this have we rescued would known what last year, I that were probably also I four. will thought at

So, is this characterize expirations as I much only known move-out But and XXXX, course. a think we fairly would have the not remaining in off level of I pretty far low certain.

Manny Korchman

terms Got especially changed it. then And all you. recent of developments, in in your assumptions at of terms Thank have timing?

Phil Hawkins

We've be a in Thankfully, on as pretty fortunate No, months. little well. of we'll expect close little average, short that. a short XX we've to the XX it months, in maybe be under past, to been

get project build go leased, the to a a a sophisticated, outs -- that in mind. bunch just a my shorter tenant takes And getting more little take that couple to through process. few occupied between and tenant a just a lot longer it of but go get not it's XX XX have and We months longer,

Matt Murphy

underwriting. XX from have to I a lease a budgeting you for perspective, to new months And you downtime we add am know But that coming. I'll there's all unless assuming that, developments tell there's budgeting,

Manny Korchman

Thanks Good. guys.

Operator

of from Please come The Bank Merrill Lynch. will next go ahead. of America question Jamie Feldman

Jamie Feldman

look And be Thanks morning. you can drag or just just moving there not guess drag and to amount it's is a I into space Great. out known that think you going the out? on a that is same-store? -- will you we total good -- that as XXXX, is of I And do meaningful meaningful? -- move-outs. back the think what's there

Matt Murphy

sure don't a I amount just don't it range Yes, I specific have me numbers retention retention of that in would I front tell budgeting of But years. I'll lower assumptions might we've last I'm sort number to it, problem the the I of a is the say XXXX way that a footage the that's not think think is that out going that our within affected last the I do anyway. I been and total in number think on that I look move square strong for years. What would it nor say is have a of few went -- share; that I couple think be spaces. there I is kind of like is experienced anything is is unusual to [ph] few a I'm of extremely for adversely through is probably XXXX. going the the of would result don't at grow you

anything are fact, we've move-out the I general In fact, that and that trends such I we think re-leasing the about, as the as to I does not talked soon said, are like that move the available about I that seeing excellent just activity it, it's prospect space about out, continue. see as continue became feel been think I atypical. to The likely space as

impact only -- the and think that the perspective. adverse on translates of unusual happens in probably honestly, from an that's I growth everyone into same-store says I that X spreads, year think that rolls little XXXX and a of we're get later releasing that Y the you is as probably same-store has roll the thing of bit it standard would normal percent math XX% a because

fact, future of little just you all little a XXXX, amount have dampens a bit happening later space all XXXX. uncertain sets up But these a of In of for perhaps it's if -- better but you are assumptions events. that's smaller

Phil Hawkins

similar budget in with is in much budget retention But XXXX too our XXXX. very had it budget assume I discussion.

You some count in wins didn't we get the on may that budget.

may get losses. a few You

there's budget that XXXX But the in know. don't different is just XXXX nothing You the retention than budget.

Jamie Feldman

Can on for here early negotiations then on about your helpful. talk question. reform? warehouse? Okay, NAFTA it's What that's mean any And And thoughts maybe to thoughts a demand? questions for just picture bigger going the you tax

Phil Hawkins

Maybe benefit not companies to a on as how reform, of real maybe than businesses of a modest They early I rate, will tax invest just more little much don't the into think, depreciation accelerated more estate. lower too get because to a will it in me, appreciation be tell But benefit. believe it's be. accelerated a corporate their equipment. benefits of but it I modest,

So, it as we if a up with doesn't competition set could've, us by putting did in they us buyers. corporate

we positive, any the so more haven't will healthy. reform demand. change be I'm think a sure Demand But So, it one of keeps that will at I anyway. least overall, tax been modest strong notice in seen trajectory demand maybe it has not factor that

Jamie Feldman

Okay.

Phil Hawkins

fact well, off a so ago. I treated REITs might the well. treated mean, well a could, also that add communicating year Hill. REITs, XXXX appreciative I was hats was the NAREIT will say -- benefits, the dividend thankfully, to REITs mean, I'm were was for I it exchange, I The too, But treated which not think with of well. given

Jamie Feldman

NAFTA at read-out early any then And or-- Okay.

Phil Hawkins

believe, NAFTA our just if changes? is country the and think happens? canceled, what -- sure trade, I our that I If anything global trade. -- mistake believe in it's becomes, question a I economy. what And hope, for benefits three reach its will will terminated, change, I conclusions global I that be of impairs If -- hope the that I rational negotiators or over and we'll out have that -- the in our more all thoughts that a and but certainly, results countries. it for modest see the hope compromises find more time, I work hopeful rational politicians will and for

Jamie Feldman

Okay.

for warehouse So, [Indiscernible]? what guess, and based markets I you redo for early too a demand on like

Phil Hawkins

on-shore subject Yes, maybe. couldn't help, maybe in manufacturers Mexico, more

heard, run, consistent likely very into be march focused think it if two on. in good, maybe. one on remains NAFTA. another. for product I consumption consumption would our of will of impact getting some customers trade that's is move and versus and will demand, right overall, us. on and consumption good If a But -- short the It out between have their therefore, warehouses on market, impact the regardless have I might submarket think But modest I As and warehouse

Jamie Feldman

All right. Okay. guys. Thanks

Operator

come Please next The of ahead. go KeyBanc. will from question Mailman Craig

Craig Mailman

and of track the a of at points headwinds be with that move-outs. XXX kind we I some the here talk over you the But bit know headwinds of expiration points, about cut good coming occupancy had you the of what about your little ahead. setting same-store talked you a year? throughout level of record way couple some years basis Matt, in kind pretty basis of could guidance, a tailwind could go could guys. one guys as initial Hi have XXX

Matt Murphy

It's and I the average conservative market. predicting things because it. to. in Well, today I'm read night, guidance. potential very I there's ways, where I three the on probably same-store that talked sit We notes we of interesting. touched get slower that about some have In one hot think a occupancy we is that last

So, being you could assertive. look as at that

the The guidance other are predicated same-store move-ins natural is make with I've sort It's of space if It's we've is got the budgeting. seen paper That moves strike move me budget of Honestly, is occupancy. thing to predict in it Having a going you're fast availability based XX.X% hard that, I someone on currently look psychology not said limited waited. at space. trading the terribly with is the conservative. on bull's-eye to tenants back-end today. as doesn't of on February little vacant

So, benefit. occupancy XX.X%, birthright saying would we're a a a occupancy is get to to long certainly either. not It's that way be going

there why are that's So, ranges.

of precedent, rents. much that's any, if is The other historical thing probably

such a I again our you've the We heard rents. in tight growth of it; It's underestimated market. have have -- we've said we others this impact time time industry think say and in and the

need are to get it. these companies they're that rents. instances at And be least in of to some these they some a Some these underestimated so commodities to as locations pay what result, we've willing -- to of important or

rents NOI longer a [Indiscernible] probably I and history as that were time. much miscellaneous probably in period talked outstanding income, -- a rents. we And what we does would is -- But likely one it's think about is you as XXXX both other that be that reality the upside significant. rent to when in of is space those the of I always in majority to growth going respect on potential enormous while that terms before an we're what's not get based mechanics on rent. because of which same-store it's it be if is for But talking to and XXXX talking about that rolls, clearly, upside with Well, there's was potential NOI not about talk is theoretical about NOI. it I this higher of going as less tell and them in all, there

number, XXXX ring projecting not prediction a is than a high one in low number, less so is It's And income we're miscellaneous what actually a in that huge of of events. that's -- of just seven-figure series and we that a experienced XXXX. six-figure totally

both potential potential and upside So, downside. that has

before, upside bull's-eye think absolute there it clearly, a I've higher, go it. our occupancy on budget. hell is the said but you're less lot as in is a staying had And XX%, number at So, my that's about what past in I the same-store a way than we've when doesn't

Craig Mailman

maybe, dispositions. then Phil, And on helpful. That's

obviously guys early the year. executed bigger in You the on sales

do rather you to be Or ago? it today that how just back single are back that to in pruning? Was assets going markets you with versus perspective that the it easier active? is continue Just look Is just was from months are And curious thinking demand portfolios. you'd Blackstone out? there today, at about, guys the as seeing whole XX very market opportunistic premium portfolio to for what than get market being you're in

Phil Hawkins

than X% lot call but there. was we Memphis, in strong, growth end portfolio reason that answer one more at today ago you one portfolio in for I hard a three we which while market in it's to even The we premium believe the don't all would Well, is two measure, significant was portfolio, there. it would the change it is with to it's up. there's Charlotte we actually guess, quality why portfolio we've was all a lead last our the the you be and months you is that what maybe execution. And would a is or sell looked us assets, four Orlando, the there is -- decided lower and a bid if what in sizes. competition quarter premium. indeed, because which to But in Southeast More over almost known in have have The it know it we gotten would call that stronger X%, markets of

hand, don't or markets are homogenous On product the to we large have left other portfolios that type. relative

don't I And like in see XXXX. think something that so you'll

at is out execution or because quite a what Southeast The have pension deep with been six pricing that's would the very saw the industrial deeper pool ago. We months felt we from strong couple today we had funds healthy. and right right of all of of It's a portfolio, each to had demand for the Canadian be But was want and other that having REIT size four other the pretty across. We of actively close And There's expect we sales we buildings have funds choice. one we pool. Similar it. out us, luxury The now it's do. on we But a we've picked call. very and the for the it's compete had will packages that. we've there. done, focus top are than two bought a I'd money a a knowledge lot in private say public even equity end it bidders

Craig Mailman

you. Thank Great.

Operator

go ahead. Please question next Street of come Eric from Frankel Green The will Advisors.

Eric Frankel

just your the in development bit XQ from starts quarter a I came expectations. for It guidance quarter. on little based about starts Thank that the want your seems talk fourth in below development you. to fourth guidance

implied, a probably for different as was that are feel obviously type a of large sites. process starts, dependent the You acquisition. you few XXXX fairly But on then

came side. robust little in a demand the also on to tenant relative light that bit So,

-- characterized you maybe see in that bit on maybe guidance increasing of and your extend a more XXXX? probability can the development little So,

Matt Murphy

I'll take certainly start. I'll so part Eric, that. of Well, the first

the Our midpoint our XXXX $XXX million. $XXX We guidance -- started was million. of at in guidance

I couple disclose last is tally final a right the down out hard think figure night because in starts fourth enroll because guidance But $XXX absolute independently quarter I the don't of Phil? is So, if And that gotten don't the you the development guidance. $XXX middle. know, was the and we that was questions million million. you, to then was I've the number what

Phil Hawkins

I made think development when last leasing. years time that comment the not procurement to we're at overpromise development over to several year, don't with I each there's we land this a of starts entitlements lot similar and here control on respect a

we to that I But hopefully, better leasing. development. certainly control much opportunity over we that love, and Although believe some in we focus to it's XXXX like the I assets have on look maybe for a lease than that we put on underwrite faster otherwise position ourselves project we lease-up in of a that in same and in market. overpromising what's not the pipeline that sure already the in make prior

of holding a to okay also counting range, This feel and end beat confident there Matt in. guidance the quality should about there's I But said good range -- is room we and perspective, also, range, just think feel for from about I'm I remarks, our are more the is last like because that of in about also as and years the lot chance out are performance So, if about is projects the I probably highly on better midpoint thinking we than is of about the more it. upside. projects or prepared in something people as lower we downside quality honestly, the thinking think not I we his a the be do always thought very -- feel do quantity and several There more but XXXX how quantity it. we quantity, is different and we with get either. and we're consistent not to results of it's of guidance high can our

Eric Frankel

for Thanks clarification. the Okay.

Regarding the acquisition. fourth quarter

involved transaction. deal that current I generally, in of the given Maybe those you maybe more can new whether relatively become of available. asset. that the I'm about development that increasing of volume kind Chicago, think Neil, just looks that will kind type are more were circumstance, talk a like assuming you of opportunities since with these of in and

Neil Doyle

Yes Essentially, a brand-new is Eric. Sure, from acquisition private it's an mean, building. Class this a -- A I developer.

As everywhere all everything but we to ourselves, prefer build times. always, can't we be at

and our goals developer. private then, now complement So, and of strategy sort the that,

in I and think to submarket, really XXXX pricing, have in state-of-the-art, good. here get I-XX, the tough good. asset take for in And mindset we a pricing. to XXXX construction was get market know are the pretty leasing you land It's They XX XXXX. it in pretty XX-foot there. to clear Things been

So, when is opportunity mean, the I presents itself, you XX% probably institutionally I-XX. owned in

When market, was the Class available feet jump. ours. three feet, XXX every probably and and be XXX,XXX A, building size today, that's are at I-XX, if this do that's I to first be those was deals But eight the facility as of buildings and one roughly in you're faces the I point over square a day. to when going two on, range. which to that see set. with of maybe looked year right, most divides there'll if case, XXX,XXX competitors can competitive do, what can attractive you're probably will that one sub at they the out XXX,XXX a And opportunities decided will two And the feet up show is the there when I XXXX this we about think trailing we back divide we for their there probably come I this, million facility was look don't building. So, think, But looking in itself.

looking should deal that math And going period. having The smack middle a our have of with the we of the here. pretty in forward so -- lease-up to really we're asset XX. be says math we And right should that comfortable an says to quality that

sort a deal, We're So, turned of And it how but that about turns specially submarket out. excited year we'll see it it. late over. pretty is itself was

forward, to we'll XX of I-XX is at your will And for lot XX. generation. Going a that's and second clear be in sitting going be competition

So, else in similar appears we'll it then great question. answers the deal. a is We hope on horizon fashion see to-date your if XXXX. and I anything hope that in

Eric Frankel

but the back in exactly, Not jump queue. I'll

Operator

question will Sun ahead. of Trust. go The from Please come Bin Kim next Ki

Ki Bin Kim

Thanks. morning Good everyone.

back going in your XXXX comments XXXX, lease about and Just spreads Matt. to

at volume due that look there is the is a coming that spreads chance next If you mix year, lease actually and accelerate?

Matt Murphy

chance. there's sure, a Well,

thing it recession mentioned comments, the quarters, I account to time said last and rapidly I many -- totally about times, talking try against predict Having leasing talked the takes XXXX. have sort in think spent outcomes. during lot think think only of because of spent we potential actually of those. the As remaining compared XXXX seen the that, such X% it impact. this impact into my my favorite is a lot of market wide you've really, that the really pre--- the comparisons as the leasing lease has defensive I least I've said I the in as there's spreads an And previous that leasing. a several of years and I do that of in -- roll rents is, range we releasing to of the were And the of I doing that what and grown time exceed that about a so in is post-recession

potential. it's So, I got think a

exceed to XXXX wouldn't predicted unlikely in but happened year what honestly it a doesn't won't. it's it, think ago. mean have that I I

I like I feel So, credibility issues. have

possible. it's think I

Ki Bin Kim

all And Where checked the in haven't your I -- company basis have in about you do lately. think exposure, expiring you about your And really is rents? XXXX. rental that XX% exactly? those California Northern math in what that But

Matt Murphy

to sorry. I have Bin, rule, pretty that's granular. we Well, that, good mean, less today. -- enough Ki Northern a detailed place feet, information general X%. space Yes, I is answer is don't I have releasing little California than know which a pretty be square XXX,XXX as a to darn

a concentration. So, I don't I mean as that think of huge

to come I up which why But obviously, in don't project. what development northern We having struggling California think [Indiscernible] leasing is our of our have; the with big Northern as the activity is I outside, California biggest was

Ki Bin Kim

feet will million X.X meant I for you expiring? square XXXX, have

Matt Murphy

talk that, about definitely to prepared I'm XXXX. Sorry, not

Ki Bin Kim

guys. All right. Thanks

Operator

from The go ahead. next Blaine Please question Heck Wells of Fargo. will come

Blaine Heck

lowest you pipeline pretty similar Thanks. development seen a in it I XXXX, Good preleasing, prelease lease guys were space you very of seems, able started couple the we've while. one with just a little the is up to of in morning. but a quarters. when And of that think, rate lot to Phil,

some bit big seeing I in, in far in on little development be quarters? point developing markets pipeline it guess Or as is take you the leasing you're coming longer think you given can can So, demand the in think cycle? dynamic at this strides the might any that and a similar reason as see in do what you're to the there

Phil Hawkins

more a more we is a there -- little was a than then Back more of at started little This much one-time. that. diffused

that going it I happen. and it under leasing We've get construction. I'm that to of shifted a fairly five number forth I that a until pretty We But personal being prospects than or next to a got know one and of the need we a some I what a am back what in each two to What five those be even I jump all prepared it happen leases, absolutely fell to most confident that are little to is to a -- -- number month not up of But the don't at being or But the expect to negotiated that lease quickly now are but we and to buildings down. swoop. good remarks have happen that a just -- we're But in activity were that's be of fact. is in of feeling the proposal will bit may could enough happen gets more modest. lease, there happen. therefore, NOIs go Could goes yes. terms answer more up where that have our we that So, say optimistic. There's are about was in teams any mean, that even that? I if of my lease. because certainly said I before to them

Blaine Heck

uptick that market market back Neil largest maybe can some and then whole? thoughts DCT as for the All a you within us helpful. recently. second And second right, supply feel to We've in question. your the an the Chicago's there's been peers you how I your go for there that's AVR. just then hearing Can on position market? give from And about

Neil Doyle

XXXX was well. think and been of the probably of there has XXXX hesitation, and side. it look bit leapfrogging call the on happened now market XXXX a whole. as the if a absorption a the a has that you supply product great development developer was as of The at expect is And ago, construction awful did of absorbed. what's is you lot on under got an in Most as year middle And side. I halted of year half another what numbers, year was it, absorption private the you Sure.

began I naturally. be, to demand is And the outstrip way will XXXX. So, do in is it said it quoted itself keeps to that tamper think if supply up absorption to the current be,

are that's think banking I seven our back a we're or look seven sub middle on. we're mean, If submarkets the four I X% I markets focused, of sub all the what in six step O'Hare vacancy. and at where is twos. take

about really So, good we tight infill feel markets. the

I've when demand, to the supply a X I need look every on at you without with building said give submarket -- at needle IAD IAD much default. absorption But picture. always is a there by and and so I repeat look mover and really think built you million that's I it Chicago clearer always myself. and at But drive think construction. this plus. to hate you will It drives before,

think sense. for take of And But and you what supply better bodes out get activity" if equation, a the So, the experienced, in tight, "user the very happens that hand. you I I've as well at XXXX. we'll see is Chicago

Blaine Heck

Very helpful. it. Thanks. Got

Operator

UBS. go will Yulico ahead. of be from question next Please The Nick

Nick Yulico

touching be What markets picking Dallas. supply occupancy of a other on guess to up may are markets? couple on meet those demand, I Thanks. and impacting your where how it is pricing sounds thoughts Atlanta, like supply

Phil Hawkins

far and where Chicago at markets the commodities as boxes A to if you answer big True, look in the box South they sub demand leasing And you both Dallas, buildings healthy. Atlanta And built, in sometimes lot for markets, don't. those look and strong. cities, we've have the are those and inflows far Atlanta then look lease-up at the markets Atlanta, infill -- very been in North, -- applies if in Dallas. the those numbers We submarkets forma very is sub faster supply in. pretty it's Dallas for fast, two pro been buildings the far strong to are south. the market. insulated got a It's relative to being quickly Atlanta sometimes need country. our But at you as as than just around to and city. stay inside we're closer up think and you which building both -- other Neil's is demand

we you commodity customers Chicago, it's And cheap frankly, can you've the land. got to cater definitely where almost to to aren't away But try buy just so a of Atlanta flat, that, so many where interested. both everywhere. and But locations, far of applies it lots strategy, Dallas and frankly,

Nick Yulico

that's helpful. Okay,

question. Just one other

quote, assumptions it to the are takes development projected what stabilized for stabilized the deals? lease get On on to long pipeline to your you that up how yields there

Matt Murphy

mentioned It's I it's earlier, As Matt. always. almost almost -- it's

you're of out from occupy, it it XX XX Phil completion. not think mentioned, that can't that I an to assuming as but it months fact, lease, will exemption In occupy months

Phil Hawkins

Unless update re-leasing place we activity. that there's in a for obviously, lease

Nick Yulico

Okay. guys. Thanks

Operator

ahead. The from Morgan. J.P. Please will Mueller next question go come Michael of

Michael Mueller

the Hey, you just any that can you just give an a debt you're quick us idea one deal and Matt, thinking about duration pricing? for here. mentioned, the ballparks on

Matt Murphy

Yes.

specifics, far, primarily to easy. public think the far is and little in a I'm get in it's the duration clearly, into the far, tenure. by the market By public thinking of is yes, I terms liquid most BUT early So, market, XX-year

where given probably going where to exactly treasuries X% I'm or a to range. are year. I be be, middle likely think of deal. you for I between XX-year and minus the give thinking know a plus assuming don't to in are X%, the I'm X.XX% treasuries

Michael Mueller

That Okay. it. you. was Thank

Operator

go of BMO come Jeremy Metz question will from Markets. Please ahead. Capital The next

Jeremy Metz

Hey guys, morning. good

if supply then on from Just in a was to a which that on you can expectations leasing of now. any are coming right level terms of are markets perhaps markets the perspective? your underperforming watch kind your comment just new activity, I wondering broad And list

Neil Doyle

not I back. Across color. clearly doing Board, be both little is Houston bit answer to come add -- I'll the well. similar are be The none. short -- And to answer can't those of has none market the and so the

XXXX Although we leasing in spreads. Houston both had year in great terms rent of in a and

there. thankfully, pause a never we, So, took

frankly, that Inland leasing, list. add we that, list. the get away IAD, inspect built. it building you same Central we about. them. location. It's to talked Empire development it lease the Atlanta Pennsylvania, add I into a boxes might commodity and And to from It's on East, to that and big Dallas it's Chicago, try would mentioned where Our to stay quote we I supply from got don't want that. a ones. in watch perspective, We've And the market it's the

Jeremy Metz

Okay, appreciate that.

you in option. land coming under you Just starts you the on Matt, remarks, have development. are want to quickly that from expect currently switch had your or gears opening mentioned all

the do using honest, thinking broadly of scheme XXXX? that be are that enough sort today way same land And prices of land being So, sort you you continue past the you what further? Or that, pressures need land replenish on of have today? start more to

Phil Hawkins

takes that the let work part, finally is that. we may get long be away. clearly a few XXXX Phil; into XXXX. This are enough we land -- go long right to take working that of land most there need a But on at The we it's going me it XXXX, cycle on pieces is shot answer to now now.

of million being million I company, to right you $XXX cadence, is want $XXX kind the or volume. I will, don't [Indiscernible] a as starts about if think think, I million. of

challenging. That's if the The going is how But it $XXX really that's end. million $XXX Some on hasn't process on might and about process sweet be lower is for higher up, think most. years, markets hopefully, land think tough. cooperate. and it's up. I little The the likely this entitlement it's everybody set Prices the that, as below it. -- our are market keep end the process how also million that we're other a above But tough. and $XXX that. And depending a would else XXXX point, and than I beyond news might continues changed. the good economics willing, will million at so entitlement the be that, times, tough in spot God to little It's and that better

changed. you're And would the many and strategy I changed not so it our land becomes, But has ways, successful. market say once hasn't positive in a

We land banking. are not

to going too and friend I think lease go over you hold and of use the about, XXXX we're economic So, you're will to won't late we'll time know be right certainly, be much And starting not into There it feel not it's bankers. in capital. not start it exceptions, get that XXXX. because many we own for land but trying be land much buying usually. years that don't XXXX. when we is land it in and don't By land, XXXX ready will land good 'til we your not and

Jeremy Metz

Thanks guys.

Operator

from of Please will go question next Rich Anderson ahead. be Mizuho The Securities.

Rich Anderson

Thanks. Good morning.

return if for could kind of to just tax a second. reform So, I

you're Amazon you more It not has wondering another business, deductible have -- not. of industrial so while from estate, deductible lower real business of at Target did, for if maybe Walmart space rents not. does of can like the the a to much that been it benefits the but that of on of actually it's America, about this be corporate where America is of not corporate outtake any -- cap think tax continue there's rents least a I'm them. do to fortunate shift because I'm think a One been distribution you fact you to curious, but as for see there's relevance interest continue when seeing that it. be that the and has the the fully its chance generally others renter

Phil Hawkins

-- Target leasing and or Walmart way, the leasers active very lessees. By are --

Rich Anderson

own some. they But

Phil Hawkins

money to at space, things than happen or to ago But have the it. length you four availability that need probably invest lot amount some. of the of a thought a and we question those They're -- a lease. own their of own they're reasons capital, and they there's the of going decision it of business. to and time believe company capital that lease. three rules of get accounting predictably They own there's to going corporations they driven in got years cost their or see the of that the have would number And We more when that happened. Certainly, didn't

out a is those lot there there's that on going more decisions. strategic operational think I and that drives

impact, We've incremental, It's selling of to price. industrial. take happy We're buildings. we're love beauty enough be -- So, buying buildings We've leasing don't may very from been a -- company sell I any have one we in buyer every then it and them at users. haven't tax letting vacant. been it obviously. sale been own shift -- the universe a buildings and and with back. buildings the users not for will There companies is out weight no modest each mat, of them buying We've will, you seen are and reform about companies one company's But from and in yet, the for better this believe there to right to decision. the our if them than of

likely based make -- So, the probably we'll react possible the best and on the to the on circumstances the customer-by-customer ground environment discussions at for or we'll time. and decision company-by-company more

Rich Anderson

Is the the judging cap Is you said NOI get that can unless the you differently they're and the and at way? best fact rate is math doing better not owner/occupier. they're because buyer pricing that that

Phil Hawkins

Exactly, exactly.

Rich Anderson

a just have XXXX Matt. for one lease baked into then your quick income Do any you termination outlook? And

Matt Murphy

quarter $XXX,XXX that XXX% [Indiscernible]. have of No, couple I first it's not a sure true. in the is pretty I'm

answer no. the that, Beyond is

Rich Anderson

Okay. Thanks guys.

Phil Hawkins

Thanks Rich.

Operator

Petersen Jon of ahead. Please next go The from question be Jefferies. will

Jon Petersen

lot picture, been really had a been in XXXX. lower free much rents a Straight Thanks. has like Pretty just long asked. and I line much big those one of a negotiation. But were in XXXX Great. was time. expect question. rent free to how modeling everything They've you I'm year. rent trend I those factoring bigger is maybe guess, as we think out items kind curious line towards and XXXX, how just

Matt Murphy

it's of the pictures And lease, and the number think rent to about and of definitely swings distributed the initial correlation a think free straight-line saw boring. free lease; the way half the half in rent normally properties is lease-up is a second is development negative big have big to are easier. part in you bumps. in there rent. number frankly XXXX, first a I the Straight-line rent in without So, free always high What the drives It's you positive rents. that assuming extremely of

free a to straight think up I pipeline will XXXX -- push balance the rent, as rent, straight that the lease rent. So, element development about is right now and likely up line of that sheet XXXX drive we which healthy will have pretty line over

a all bumps. actually the long-winded new And part a of always in rent line positive, model get I've a of turns funny happens. credit, it's driving present been non-answer, making a associated longer. company seen on four so straight tends development, in I've happens I statement at will apologize. the that time rent in reduction close, rent And That's that forecast. that of have when it never if always rent, five never a almost but it never of but negotiated when is it it other I you when cash, result, will, rent it income of in a be or keep tend seen being leases seen straight terms it a that you but per stuff the months by most happens not it they I lease-up in and actually overall leases. I've predict. because free don't start. free top to -- as to line year to is bumps you think term as continue never I've the the are development that's free It's And there, to you end always the you to of number that to assumptions day, leasing have out at year initiate hard when It's be it whatever development with. debit you space. It's be my only closely follow you're about longer

Jon Petersen

Okay. Thank you.

Operator

Advisors. ahead. Green Eric from of next question Frankel follow-up is Please a go The Street

Eric Frankel

you. Thank

clarify. Neil, to detailed Just response. do very the I appreciate

you assets gave already more buy You that that question of good that the merchant particular broader over explanation more was a to why than next My did given opportunity couple has regarding years on been developed investment. built.

I way off think you land buying the construction you're pricing described it and base that was XXXX's interesting. XXXX price

more opportunities think about could along. wondering was I So, if you come

Neil Doyle

Eric, -- been It's an exactly from that set. my there that. before. misconsuming opportunity fault We is

business. part do of of just It priced guys fact, our They're more from an for that ago, a DCT, they I the had years In Chicago same They is sources the value-add. certainly in the one purchased asset three developer hold at the believe many something companies. we as stabilized. world was bought opportunity correctly. type of long-term private

need You hang to around.

to contact. think keep in while, once need we our goals each You complement And and I in will can a other. intersect

So, Go we'll happens. what see ahead.

Phil Hawkins

we're got a Eric. I once to their that and pay of got ourselves. we'll and We've to the But quick, we've them our sign it rather his -- risk, do answer, will us don't everything. to for to on big along ability seldom The it. the we're take executed take It's do frequent. as it's business sense we've to and it of first part intersection our happens we at while, plan. it. is on as ability than I in real consider early, said in just a happy when and opportunity developer think it But out a to can't line, more add do Neil makes And willingness said not a-- sell to Neil an

Eric Frankel

lot lease obviously question lot more in of One it actually a Cincinnati. XXXX, is Thanks. roll-over There for but Okay. of Neil. you, concentrated a in isn't

leasing the in market. you there outlook maybe investment could overall So, outlook that talk and your about

Neil Doyle

really we have a top today. are Kentucky Absolutely. much the for way without Central into strongest Northern strong doubt, just just been the And of this in markets demand. This Amazon of going in they are began but has the on operations flying, here. market, being to hasn't the push Cincinnati not push, it Amazon Airport the road. of Region a extent the is, amazing one down They

is tight. supply deal is I you'll as put in -- for has you. reactive the Absorption in side our with a us Cincinnati, see heavier for and portfolio in XXXX, I'll little extremely extremely But perspective, think been do it is Cincinnati So, on comes. that year strong. this XXXX it XXXX some and perspective but we'll from

XX call it, are is have leases renewing. that, in let's We market. XXXX. towards between full feet, XXX,XXX need got, the in We XXX,XXX do road XXXX half that to We've in feet, XX we down two of where well tenants a

lot But just of after units record another So, we've small easy. to that, not got year. says a track it's go,

I three the pretty stay to good us running. boost, confident to has been that expect So, years Amazon this very strong. again, market last with And Cincinnati

Phil Hawkins

the comment there to add I'll local Eric pressure put And on team. one

we'll have we're to XXXX hopeful as addition a that, project In development in well.

market. feel how about that's we the So,

Eric Frankel

much on to your Okay. of Is too more queue? the I time. up want anyone take there else don't

Phil Hawkins

ahead. Go

Eric Frankel

speaking It this was related actually is -- of Amazon.

about participate XXXX next in for the Can unique they're maybe So, of a small leasing footprint down dense confirm or it's a over kind experimenting supply there their evolve activity over new type and property whether high how you the chain, years them likely areas. in rumor rumor, that there's leasing that's where I that clear with couple ultra-high, out assets adding has you their an road? building talk of population and and a potentially building activity their expected to think you'd

Phil Hawkins

To remains I can builder now build far and pretty a don't us for which what probably first an tell sweet that. bank. pretty development they I that them, planning are when to as well they're as in of specialty involved can't land not as can -- spot, all asset don't you, to special suits, active sweet we're is speak -- with. -- isn't terms I and right it others, likely generation, going both something generation I we the a be paying it tell our that's our But are is in second renewals both of they spot. we not as vacancy details There the activities, are But with -- again, not robust. have urban

Eric Frankel

got. Okay. Thanks. That's all I've

Phil Hawkins

Thank you, Eric.

Operator

back closing Ladies for Phil and the his I'd like session. over will remarks. to Hawkins our question-and-answer to gentlemen, hand conclude this conference

Phil Hawkins

good us, to going everyone, over focused a and thanks, of joining. in the number year month investment which going Hey, got many front I have on executing. seeing for of forward up look a of to conferences hope, We've to be is We're next any Matt available any who or the to you aspects our are time. With happy are on And to by further of also call care about company, I that, business and a good take phone want talk weekend. do and have you if that there.

Operator

you this has for conference Thank disconnect concluded. Thank the At presentation. may you, your sir. today's Ladies lines. gentlemen, now attending and time, you

Duck Creek (DCT) 2 Feb 182017 Q4 Earnings call transcript