DRE - Earnings call transcript Q1 2018

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Duke Realty Quarterly Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded. turn to to host like now the our conference Mr. I'd Hubbard. Ron ahead, Please go sir.

Ron Hubbard

afternoon to and earnings Greg. everyone, Thanks, Good welcome call. our quarter first

Denien, Joining and Nick Jim are Chief Chief Mark Anthony, me and Financial Officer. Connor, Investment Officer; today CEO; Chairman

prepared to we subject to remind you today risks differ actual results and uncertainties materially let that Before remarks, me expectations. we statements our make cause from make certain are that could

XX-K those about our risk factors, we refer with would file to XXXX, information we December you the XX, more that on have For SEC.

Connor. turn Now prepared statement, for our it I'll over to Jim

James Connor

Thanks, filed of quarter rents development and all time XXXX XXXX. strong Ron, quarter occupancy leasing, afternoon we and start had at an also We good high everyone. grew of up a to we high, fantastic big a We starts. record maintained very a big had a our with levels,

strong to speculative basis During was driven the a facilities. acquired by quarter, by XXX of occupancy we our This XX%. and in-service recently leasing recently points increased primarily projects delivered

in a in-service under million up Our projects a our coming feet, portfolio numbers XX.X%, first total ago. held net points X the at about at XX square which XX.X%. quarter firm year including absorption for quarter occupancy to million XX year the Nationally, increased occupancy to very by development compared solid portfolio basis is our square stabilized feet

to spread square is absorption down On the basis, and million supply New supply between overall XX first which XXXX. XXXX in the XX XX in from of the and full a range. and feet first quarter million net quarter million remains square range quarters XX square was the foot XX trailing feet from million

X% and nationwide remaining last outlook Leading indicators logistics has to been the supply good range. favorable with that business remains range, very also the vacancies in few the in for spot. in economic these XXXX sweets months for the GDP With the demand X.X% real estate X.X% metrics

All and continued strong maintain demand for continued product occupancies of and growth. these rent our to ability high our drivers indicate our

occupancy Turning team With execution portfolio square the X.X evidenced leasing able rents. this to for XX% to on quarter. our the to generation continue our GAAP by great XX% cash we improve over completion leases be second Rent this on million levels, basis. of our high our strong a for with growth basis and leasing, as feet a own occupancy of continued averaged

growth backfill of with leases tenants majority released immediate expiring had lease the all and are XX% country, million reflective six immediate southeastern XXX,XXX in We of XX% markets. Savannah. of X.X Atlanta, the effectively of the activity the during we large across We signed immediate which in increased our backfills from leases totaling we expirations. of seeing [XPL] part of Savannah, new In considering the strong represented the square-foot including after a yet of which rent signed renewed exceptional Port an We this fundamentals space. of the quarter a feet, an square backfills expiring was very expiring

resulted deals substantial leases. over rent the in these of growth All previous

facilities starts strong are assets leases is of Bridge acquired flow as our pipeline commitments original and close in start contribute leased expectations. of with last great our a for as totaling earlier XX% now we also increasing had cash for We We’ve projects was aggregate. six XXXX. the X.X month, in million in ahead new Leasing underwriting. earnings in XX% into place to vacant the were feet this increased development head growth, year a just next $XXX several XX% year which with Overall, occupancy on two notable development preleased square the the be Mark would executed taking million that spaces. well that acquisition. months these our tenant growth of significant in occupancy three expect We moment. and portfolio and and part XXXX Bridge This average will to two out assets is leased to expected the were discuss full of the earnings markets speculative year momentum basis

are pipeline continue had for preleased range. Our at the at our million overall are XX in XX% development These the plus totaling XX projected quarter stabilized square and construction, margins projects under on million share. costs $XXX a projects feet expected end pipeline to percent X.X our in

continue opportunities development very be to strong. Our

square is and And In strong are an our expectations our of additional year. fact, in has for year as remainder feet us for developments the million projected $XXX totaling we’ve started costs, prospects which three increase earlier well to development pipeline this a led X that preleased. the for month, more million the XX%

to disposition Now, and for acquisition let it me Anthony activity turn over quarter. cover our Nick to the

Nick Anthony

a a Thank quarter included XXX million for site. land included represented project accretive feet. This D.C. the front. our had of obsolete and demolition land redevelopment one significant Building totaling value creation totaled while, on for you, in an part centers data shareholders. team an of generating our the the project owned which Jim. quite market XXX,XXX disposition square and by We had of we for office DC three building This dispositions Washington developed on active was the

property total submarket whereby totaling as deferred California Orange tax part the the California were represented feet. of part properties square square two Southern XXX,XXX These we disposed other in feet. XXX,XXX acquired transaction also in we in Southern exchange by and This about the property the We County acquired a facilities party. of Nashville located swap

difficult as extremely find competitive aware acquisition we opportunities thus to and making look risk at continue to the many the adjusted a we're market broader returns. appropriate market, is Regarding

replicate last portfolio recently, noted is did a an Jim we it extremely to will investment As a like difficult Bridge few transaction year. times be

rates. of as team our quality to are today. is experienced XX rate cap at compression make points opportunity high types Even that may now We Jersey assets seek Northern so, in these to continued XX sense economic New selling have basis cap out of sub X% the market

believe X% the Through for rents transaction those discussed grow to rate quick the we mid already X realized On transaction. cap with compression, I expect last lease-up side, portfolio outperformance rate yields Columbus loan and basis disposition our in lease and creation higher along earnings stabilized Bridge our that we have outperform on up. like prospective range the of value to of positive would X to levels to also increases the we call. points revisit the in timing originally and

our you with at leased closing X negotiations for anticipated call, buyers of We in quarter. recall the of the has January Bon-Ton one representing NOI the and from are about sale. late second to billion in portfolio Also prospective as the XX%

we do our the they’re expect Mark aware and protection, monthly bankruptcy not over are on guidance to be of us. While expected still transaction. situation discuss Bon-Ton The current our proceedings any rent prospective to resolve to expect and the liquidation would in results to buyers the now is financial Company. The the in surprise Bon-Ton to turn to this call of closing I of are the bankruptcy update. liquidation

Mark Denien

related for is quarter related to $XXX requirements is the consistent as everyone. reducing for in $XX higher for was with the first the quarter quarter totaled Growth I’m increase XXXX AFFO compared Thanks FFO in non-cash quarter quarter tax line sales fourth the current a quarters pleased share XXXX. largely fourth and over the was core GAAP to to gains offset that for the basis assets the signed FFO level XXXX. two we have costs in of accounting on the than expense This basis. per XXXX of attributable share accounting or a fourth G&A to is by $X.XX AFFO quarter the million defined this a the immediately to lease by significant fourth quarter $X.XX deferred to the first two bankruptcy. some of compensation quarter on a during quarter year's per XXXX in higher in newly million to for expense due with Nick. XXXX improved share GAAP that bad on cash one basis. consistent a impact the first reported $X.XX the G&A acquisitions XXXX. compared with new report of quarter HHGregg debt of developments about of was changes in acquired developed from quarter properties core that as increased expense fourth XXXX. FFO of along straight quarter X.X% our by be of we during rent all our and free $X.XX portion the was the per was of results closing XXXX per XXXX from core compared first than Good This We to overall expense one FFO quarter of the the of land factors basis higher NAREIT to fourth number leases positive brand. had on we years annual operating past last growth The It triggered and points quarter the Same with well had share quarter afternoon to of higher XXX in stock-based cash compared decrease significant biggest last of pertaining property NOI treatment.

rates next couple burns this numbers significant off over as We and in the rental signed cash and rent in. kick on these deals recently expect property increase our to accelerate of free quarters

later needs a We leverage our our we’re any to toX.X% continue under costs equity liquidity at according operate lower to to We level and we XXXX this loans progressing to standpoint, capital are opportunity plan metrics. with million overall capacity a the during From repayable. year $XXX secured business well sheet and balance will A borrowing interest plan. fund without with financial have of our and

to are to We continue portfolio. grow our well-positioned

same on $X.XX which rent website. me pace core We Let share per quarterly increase expected our share back of or at raised guidance speculative previous original our range for range. at from midpoint. previous XX% exhibit midpoint. revisions recent the to is the to share acquisitions to vacant of lease and the $X.XX to X.X% X.X% basis adding range development $X.XX adjusted and range the from portfolio up Similarly, of average XXXX XX.X% a basis comfortable We than points per percentage basis completions address any with our the growth not the reflection a anticipated. to estimates, the XX% FFO on XX total operations in-service from NOI increase growth better-than-expected changes We guidance XX of supplement from to range of increase X.X%. a as we of and stabilized funds and space our increase from XX.X% midpoint. of an for to of XX% faster to now a In make points range our property of did range the and range a previous up the to still We we're to percentage adjusted lease to lease

several for in saying are but amount, been and deck, quarters come and not much earnings we've our our of overall that this would our disclosed opportunity substantial As same grow portfolio from to of part have growth property properties pool. investors in by NOI we currently slide

estimate Our The building range XXX this. development to up Class cap rates growing demand U.S current $XX to proceeds XXX these quarter ability results to of a record and increased was the significant in use from for properties further million the million low previous dispositions the fund also across advantage midpoint, guidance and million reflect pipeline. to changes reflecting take overall our of the our A for

guidance our the development thus the speaking at midpoint. next the can starts generally the in risk-adjusted far million maintain factors prospects to be development and the website. the plans. profile in This certain Investor as support drive section expectations continue to strong for incremental Relations million strong expect found guidance We to XXX starts up this strong year. million we the $XXX to growth remainder preleasing start the in along into for get three in pipeline on of additional revision other to should given return strong the of a earnings we increased QX levels and range April of We year also growth Regarding and XXX our

Now, I to will the turn Jim. call back over

James Connor

more demand estate distribution real strong logistics new the sector players efficiently. both is chain supply for in particularly, e-commerce e-commerce delivering creating to In fulfillment. goods traditional customers us the closing, strategies In and very and foreseeing Mark. for their remain drivers modernize and faster Thanks

We’re execution optimistic of the starts very performance, redeployment through development and team's the remainder of leasing pleased with capital about strong and our year. performance quarter our for we’re the first

to to ask the the two welcome course you the of question keep to back up we or in and very now queue. audience questions lines will are open the We dialogue would short get to perhaps and one

back over call. now operator, will for Greg, turn the We first it the to

Operator

line And Instructions] Manny question first line of Please [Operator your from the open. Korchman. our comes go is ahead

Manny Korchman

when prospects. pipeline or Jim, spoke the increased in in an about development the increase you spoke you pipeline development rents about

wondering build-to-suits? of can was found that entitlement those I Or are you develop So prospects is on? have has either to you opportunities that land or land task terms that tenant in come new

James Connor

a I’d Manny, Well, Obviously, little above keep committed our we you tell percentage that at of to it’s bit preleasing have both. XX% range. or

that projects. opportunities the done, ample finding start then and pipeline good pretty think look based the build-to-suit our filling with to leasing the have are we've build-to-suits And secondarily spec half opportunities are and year. So, that additional got we more we we for on additional the we occupancies second of

requires you've All of land the referenced. that that

have in acquired driving machine service go. recently to entitled the So, land can we've development pretty we or we now that’s that and put It's land well. now either ready right got all

Manny Korchman

And for a quick Nick. one

You find as What today. acquisition. it talked that do development do of looked that to you for out place of you mentioning to lack do there lack acquisitions opportunities portfolios, about hard for get would been portfolios, bigger acquisition How done assets? have smaller to have solve the

Nick Anthony

think the in market that allowed We guess competitors that’s of that provide acquisition. example exchange acquire Well, property not our best were I below an to Southern which provide some we were to was pricing. to California our able us able Nashville property

it's just have I’m there rates it now. creative kid is cap So, very not to you competitive the recent even get right natural a but interest thing, going rates, compressed. out getting And with rising

Operator

to turn ahead. we next Jamie go of Feldman. And line Please

Jamie Feldman

Jim, differences there you some strong. is Southeast are what you any region had standout? more color regional specifically? give then, Can about seeing commented you in that that particularly And that are the

James Connor

Atlanta benefit days Yes, port teams met us, the incredible XXX,XXX for got years and the leadership that Savannah. of seaboard the a a and ago strong Canal in our the off of I quarter, at the is particularly on actually Southeast would is had was port away of our And there guys, demand backfilling key up the a right vacancy -- Panama fastest the I going great think down performance. us Savannah just put a to then really it's literally seeing We with expansion which port the of ago. eastern just growing and of couple clearly opened couple

helping obviously down business drive So that’s us there.

in most So for reported that down as That job did the peers first all us XX had pretty really our good the week good the last a team really of really of or all are -- good. a quarter. have days, in there markets

Operator

Metz. question a from line Please And of we go Jeremy have the ahead.

Jeremy Metz

relative opening Jim, on year. of a so and basis to and your the down million mentioned square supply supply this in feet remarks talked you national I you it demand XX was think being numbers far

spreads, the you all given number? your doing that your expect by we the if And figure so at the sector, development ramp supply the at I peers surprised you throughout portfolio starts wondering here strength to just we at, attractive up were should in look back year? mean, ramp are really own see that Just

James Connor

would you. I agree Jeremy, Yes, with

that, too feet XXX quarter expecting or were that's year are I this supply. we to all think million demand most close I number of think us very XXX being just of minus plus that. million of into wouldn’t by plus read pleasantly square equilibrium much surprised and minus or I a pretty

markets in and couple submarkets a particularly close a from their, within When at we've you right tabs good of that while about and all So, to talked all X.X% of at softness entire time really is worried pretty the we're time. vacancy are future. not the the about for we little now, least across country forcible supply spot a submarkets and there the on keep in I'm

Jeremy Metz

no forecast point, And at in your change this right? real

James Connor

most see end next year, the quarter at vacancy flip equilibrium or of at to much mean we reach equilibrium, you and the for quite absorptions No, the but as I'm at Again good of but been could projection supply I I've nationwide place X.X% consensus pretty think numbers time us is not I those flop a equilibrium. could. think making about saying are pretty some I

Jeremy Metz

And just as a question. follow-up

of terms both In the there the the ahead schedule. of have achieve Bridge it like sounds been timing portfolio, and rents

under underwriting to originally yield. you about I talked just then stabilized announced it think when X% you

wondering So that basis? pencil stabilized does where out today yield a on

Mark Denien

or Nick that that. we the creation. underwritten, XX we I underwrote basis had XX It's like rate what better of think something our basis four originally we mid earlier cap -- to Mark. Based points were XX performance got We with and XX talking compression we value when points think said we've and on

So, points that's probably stabilize that. going and underwriting you could on add basis where another XX to it's that original

Operator

we And go Kim. question Ki line Please ahead. of from a have the Bin

Ki Bin Kim

there lease market Could and based? comp in, it is it you was in that trends or any the there driving help just if fairly by broad spreads was were size

James Connor

Bin, a was at was term this it board. underwritten leases as it the once our rent got rolled pretty across little in growth, in lower, markets across bit across much it it either substantial had you commented board. very so rents the guess you Savannah growth. performing for benefit trophies really like The environment broad-based when a the the but They it's Jim just one lot longer place were really was was Ki I but of the strong weren't best very, already on. probably country.

Mark Denien

we have discount a you little Yes, us. which highly the color go our and XX% it the rents only Ki gives really for would backfills, I don't leasing if we're because professional when bit immediate Bin to and occupied, they add XX% development down think the much ability And occupancy. I -- push out be, that think renewed would is I just

doing place what the when to be tenant and you're of aspiring, they've consequently good backfill in for immediately pretty it's renewing it's right everything, been that's and with XXX% a a space So you're not land now. a

Ki Bin Kim

mean have not about think track larger lease. I of on any kind than momentum worried still Okay and but there -- I from assets seeing development your tenants? Allentown, I record it, am assets too a you’re in you couple on color given

James Connor

you of we’re the Lehigh tell either lot us a shortlisted the Valley -- that that coming that today all. me or worries portfolio got in Greater lot at on the a of exposure I in budget in deal. activity can got we’ve we’ve development Yes, that’s activity, our months, now, at in any next right the six of pipeline There’s

So, I to our the performance lease of -- we to online. quarter space us ability pretty consistent it this as think see last continue we’ll ability did in as comes

Operator

ahead. turn And the next Schiller. of go to we Please Dick line

Dick Schiller

for quick Two me. ones

the same First Columbus for you of I was the secondly, of see all, the set the sale Bon-Ton understand the released? the and assets that there? you'll assets the store could detriment impact then guys in And in one methodology is XXXX clarify change on in to Chicago asset

Mark Denien

same the cover Dick. second property Jim I’ll or the cover Nick let I’ll and question,

number property the the new current methodology quarter, for was X.X. same Our

XX so fourth would sorry quarter the methodology quarter you new the I If basis have reduction of in prior will if so been under quarter our used that a back you that X.X if current look am prior would have reported points methodology. you at X.X, the prior XXXX we the X.X sequential -- quarter,

quarter difference. Nick the or we X.X XX quarter was I’ll the X.X quarter-over-quarter, point to Jim in question. so then, about this second basis address look grew fourth the And it way we from So at let

James Connor

addressed Bon-Ton in Nick Dick. Columbus. Yes,

Bon-Ton in been we pretty there. has we’re So, now is phase. a good place the publicly liquidation in reported think

building. several expectation most assets. was they business which the that the XXX,XXX will the Chicago, the likely summer. the is now space of Our selected so for selling us be that XX-foot up that is of through square potential business, clear in buyers of in There the in breaking is occupies the liquidated The are feet, process building,

a nice it’s really asset. So

portfolio addition, we've building. to increase actually at looking own in got Chicago from In the our

order the bit in be think, I So short little a this will like HHGregg.

get in think we’ll pain, short-term I short we’ll will order think and improve the be backfill gain that it long-term I obviously space the tenant. a better for and NOI fairly quality space because

Nick Anthony

of XX% right that and just four the would are portfolio. to clarify of assets only I sell -- facility, And on represents that Columbus we’ve asset it’s now the one overall

Operator

ahead line And now we’ve next a is from open. of go question Please your the line Blaine Heck.

Mark Denien

best your Blaine. We like question

James Connor

Okay, get Blaine operator, next will to we'll back. go one.

Operator

again, sir. Mr. like try, you a give to Heck, would if your is line open, it

have your on phone might You mute.

James Connor

not maybe Or is next the Who there. Blaine queue? is in

Operator

Next your John Sir, line is go is open. ahead. Guinee. Please

John Guinee

Blaine that question ask. going was the to ask I’ll

James Connor

Sure, John. you will

John Guinee

about X those how assets Can of you selling various like Nick, about And So, relative Columbus? and thinking other up XX? to the you’re out in you’re why of the tightening XX portfolios X Columbus. talk sort places

Nick Anthony

constantly Jefferson, That’s Yes, over that to perspective. lot years the done West XX. diversify Interstate land are that. on a in that build-to-suits trying we’re park assets our selling submarket of a portfolio The of and the option along geographic Columbus from we west a which we’re X is

logical other And so it we’re and portfolio to right monetize size trying made was geographies. those assets sense to ahead redeployment go as as

John Guinee

Blaine retailers. is, the XX% you that leased Bon-Ton And if up was it’s softball. remind of other you ask when brought the Then product, traditional to was question this. maybe look situation Okay. a Jim to And to going then XX% industrial at me

so dropped other strong The anytime that the retailers e-commerce gets soon space? where issue less need traditional

James Connor

that investors. the retailers we in and this. time like HHGregg and is of retailers a unfortunately, the headlines and on John, back look and of had XX% U.S. I the and vast lot everybody Talking meetings Bon-Ton sales about lot $X.X a and the trillion. to sales, or are bricks grow X% of expected mortar and of majority business to I represents conversations a and while leverage many lot they And haven’t in have well been them in of able or or a But do retailers they’re e-commerce, kept and to they not over stores grow their to whether been e-commerce. they’ve e-commerce. supply invest their and opening about in survive. embraced embraced facilities. and They’ve not sales it They've good tough And sales of in few are still their to And of continue smart think made through Well, doing think you E-commerce there haven’t grow the spent those fact step they their bad to the continue shape. invested in tend use about new They’ve chain up. they at. will get of

have So, full the are I so try it’s the tend risk one that be mitigated are of well. portfolio And portfolio. case We empty. unfortunately Bon-Ton retail able think the don’t that is exposure focus Chicago discussed, of out the a of doing assets I to or with from we’ve guys backfilled stay and our guides the but to away think half And sale we glass there much well. year. hopefully we've tough those, have the that will glass the the as half tend end Columbus that strong to and on in by of doing We

not awake things one night. it’s keeps the of So, me at that

John Guinee

Now perhaps that Blaine’s question. I ask my question will

James Connor

Sure.

Operator

go to Blaine of line Heck. ahead. we the Okay, Please turn

Your now is line open.

Blaine Heck

are on more maybe? and maybe you the X are John markets. the what any you give the good job acquisitions markets shows rate me. in Can cap guidance on the focused couple that it but more think the Tier specific on for And on question, where acquisitions In

Mark Denien

to high and two focused or primarily South Northern acquisition one, so Northeast side, the on looked and day we’re the Southern Jersey, some also Florida transition New then we're on in So, East Bay. California,

now numbers. right or forecast in lot those are markets in now, You market trades forecast breaking and off those most low going know very of

there acquisition been opportunities more the us, for development lack of make for up for Fortunately us. to opportunities

Blaine Heck

have a fair. to the And sales, data do deals. center That’s opportunities on guys one you similar any other then quick just

be more with to whether to on that? location of of color I lot but any think I seeing around, infrastructure we’ll a of get the do the and land it some wanted

James Connor

Blaine, Yes, that have tell land. and of trying find I great actually opportunities. center you now a we we do there data can't have expertise we're to deal

than Nick we better there land the the we've potential number industrial lands in a for to we has D.C. In way. in. and referenced and as the just good it got in be done it's Sometimes, of at once viable of that data that to to where those lucky that just go number market also some bought Chicago be around again we a center. We've O'Hare a happened done the really sold

So, that every And trying of to lot than find we’re do good that a that we’re got center the more is the data again, for land that sense we've if business it to of pricing piece that. makes right, develop guys. can then and now we happy

Operator

Please the go we turn Next Eric Frankel. of ahead. line

Eric Frankel

just increase I on to quickly tenants? store that same that assume has been expense passed want focus on through operating results. The increase, can I

James Connor

year so up over quarter this last all over snow. were it were expenses and high reason this the removal last high and was was quarter expenses Snow Eric has quite passed through. It year

Eric Frankel

that spread and market disposition what or quarter buying do pretty bit markets? maybe your and X activity this is right think in you, acquisition the Actually thank Nick, to sense, you is for rate Tier cap take study. good property and Okay, the swap selling interesting. Midwest get is you a want England little in more quite assets

Nick Anthony

before. and but on basis. would in too Well low that high IRR the they seen barrier particular are, at look X a the that how tell -- have and rates Midwest not cap cap lot rate at talked about IR we But the we for record the I levels are Tier basis more swap, we you on numbers

as well. getting very they're low So,

right XXX spread the as does low two is markets as and Indianapolis think take I SoCal XXX now. between to bps

Eric Frankel

to to similar willing Very disposition you move? interesting, to fair be and so say pricing guidance you rates your don’t if that found both would increase today it cap acquisition and assuming will be pretty

Nick Anthony

I that, with our of No we it think portfolio, are all, now. first pretty happy right

So is the last are doing of repositioning little around we bit all the system.

redeploy that’s rather think year. into to forward now year because continue from think that I we will that -- us. going do But to more accretive I would we for to much right We development think

James Connor

mention out The other now to not we our our that. to new is on see for we capital guidance I’d end would I pay of as right and still that’s some just Eric side. the we thing think and to put guidance lower the raised going touch today We guidance towards more acquisition think best trend We dispositions on on our that’s place development. acquisition probably did the raise think

Operator

to turn we next line And Michael of go ahead. Carroll. Please

Michael Carroll

this new add have on on touched market are Tier these to today call, the some opportunities? X are similar Where on development starts? acquisition I regards what the can but with markets? focused color the on the strategy you are in earlier And you to you Jim, know seeing you

James Connor

Well, trying Mike, development We are markets. had in you, in Tier I activity the more and it's doing am X XX% clearly number. X to meeting the yesterday a think the of tell activity market. board we I’d remember I exact Tier development

that really Florida, And the trying Southern So us Jersey, that’s really be where Chicago, to our grow that. Valley, California how we portfolios. for Atlanta, will that's Lehigh would are Dallas or South New define we

you'll in, harvest get continue in think developed done right pretty think I sales over healthy explained would size as us portfolio we pricing that of again good really or that’s six think and Columbus four now and we've see of to some in but out continue Nick done the years seven will all see I build-to-suits we last the that the every as some that. we are will us, you of some we think expect out gains we've coming Columbus markets the And other gains I those and to some there portfolios.

will to you do see us continue I that. think to

Michael Carroll

And those mostly pursue of Tier you X those type are with outside Are relationships? of willing markets? deals what to build-to-suits existing

James Connor

Now, but on it's in we land build-to-suits both own spec it's got have attractive fairly that basis. a we that

are good projects. those making returns really we in So, stabilized

spec development a So Louis, in do we build-to-suit continue and Annapolis and a us St. you building saw the to do in Minneapolis.

for just this will think I that us. continue

Operator

we next of Mueller. line And ahead. to turn Please Michael go the

Michael Mueller

looks up? and are that to level so to just getting complete can trying activity serious are a ago? about or that many that from development how give of typical lease building sense on as tours, as say tenants shall is leasing terms a us thinking how you to some And now compared proposals, year you In levels,

James Connor

the about we would me the talk When have the got. has let month good tell It's answer with been consistent. month-to-month for our you, the level, good Well, I that all first. activity every vacancies. we leadership consistently We activity the team all pretty board, and several quarter-to-quarter we second across review build-to-suit having question last major prospects And years. the review

leasing expression, our only one. an spaces, In terms the of it takes guys have individual

step So and you space that's five to the one, willing can out the for up four takes the or you proposals different and on one guy sign just or have right have can it's term.

ground. good answered of out questions, we the board. the sitting in as I moment of they the start earlier We developments we've approve one following internally today activity So so just got here coming the even them really across are at spec when

land is very but activities some because good have the them a those point, of and in really activity of modest great competitive parts some and in they are that or already established environment. non-existing it's And at

good So over that's kind of of in challenges pretty we all a got month out board long and month but activity way everywhere. the

Operator

[Operator we Instructions] ahead. of Please Jamie Feldman. to go turn line Next

Jamie Feldman

can it opportunities with markets? about Tier guess and your lines I the you bank X development with up just how and versus Tier sticking talk the X maybe land, land

James Connor

sure Yes, Jamie.

I into even the down really want the the million of it land sales minimal through us. but which development. low And say about Our quarter touch land was either million, same land the to and the XXXs in we hours was amount XX about bank monetize up million at quarter, gotten for not end monetize to XXX through about of acquired had low XXX we

the over are So healthy people the landholdings XXX comfortable that land years, and economy a market told XXX think we a healthy as as with we've portfolio long of you or to million. in we're

So below that. we're currently well

barrier high players are making the markets the and more some of X Tier bigger expensive. that of Some were and

level. anticipate face the We've bank for $XXX that's had to land reasonable think. U.S. I of development a is and mark think I day This then keeping process and in stay as And that and calls from us $XXX of not it’s governors before So the million and sites lengthy a for balance that's plentiful the the that at very across between supply check keeping I the is entitled. country the to to get the that of able is of people would the the one the get kind And expect on past market. is land challenges difficulty the land that reasonable about expensive be talked pricing spoken of entitlement and prices and lot industrial good and going today every a amount expensive and as would to we year.

Jamie Feldman

XXX helping it Tier opportunities does line in and Tier of up your the what's So, development what's how with X? up X terms

James Connor

I have enough the have it of a too markets that you some c year, problem land don’t land in me in that in breakdown I this other changes much front and would is tell not I and every I have and year-over-year. markets

we've markets actively we in are the two into like Lehigh land a now. New think last one six in vacant land where inventory we Other looking market for got site for in production, because Jersey got because the like for I right projects no or we our put we're development five more looking land more Valley like So the for ample only Atlanta. places sites have land than next we've

we we million under think that land land mix, I down don't surplus surplus good landholdings what healthy have a there's held right now. XX our are would So call sale anymore for much of that’s

the been core all from we all a prune that’s get and nonstrategic get those few healthy we’ve we’re able last land land, to remember really on residual gone again to and that down retail the very land level businesses rid really office and and in were over now it residual focusing portfolio of own So and industry. the years nice we where

Jamie Feldman

are merchant element the speculative in rate? governors, from change the appetite for mentioned interest you higher costs governor, seeing or of any you then or And land builders for construction higher

James Connor

to as place think o still have ahead levels you’re move reasonable financing those builders of so I governors much institutional I merchant is financing previous to most financing, one cycles, a equity spec and before, of that’s another talked and compared so think combination things level. the having the at order costs at good things very as is looking reasonable get the as element in keeping even today, projects, has we’ve more the are to construction market on kept speculative in

Jamie Feldman

terms change there’s of a appetite? not So, really or their been recently in say would you

James Connor

the think think more years a there development that has I I puts think increased years. get seeing been there's and or I world lot this little some if for the or people think the a been market little that's pretty had reasonable combination those today things throughout to more a challenging, a all of more costs level, build it they it spec, more do makes last now, they but No, could construction at in at sooner, entitled of get could consistently, out they price, any vacancy you’re of that kind bit it would into marketplace financed or I spec if X% land right could, the don't few were so they better the now couple demand

Operator

Please follow-up Schiller. And of from ahead. line Dick go we’ve a the

Dick Schiller

I you. good, Thank am I guys. a don't have follow-up

James Connor

Dick. Thanks

Operator

the Please question Eric our ahead. from go of And comes final Frankel. line

Eric Frankel

expensive activity operations maybe so is there have new up incurred less is becoming tenants your the and CapEx development do your installed by and the question. automated I in given projects? spaces that in follow labor leasing recent Can plentiful more more whether you describe

James Connor

Sure, Eric.

Let that question. give two me you answers to

a we to one things of the labor the piece things land, that do can’t of we that of stay. a major we speak is One peers, and my do I before buy we do

how million labor client, study logistic answers a such site, answer big the have we don’t key on that’s we a number know if dollars in so not the our we’re because many investing criteria for So that one. hand, land before of many fulfillment

with that of and the we’re that for the comfortable own pursuing. labor one we sites every We’re anything

efficient. to In I faster terms and more That’s second part and lot material handling more retailers and CapEx, put companies for looking of yes, of get are the automation, the think of a about your us. e-commerce to CapEx not into question buildings, more

to and So, and docks little lights shipping our office, things of warehouses, CapEx like listened that. bit has

are dollars we’re of deals. package but any those going TI So that’s of the our part that putting into not up,

Eric Frankel

evolving? putting how and do have sense are you get tenants a Right understood. sense just of to But the how are a operations much of your

James Connor

guys with of I that’s much that’s to and the store, They are consumer��s cost have a are consumers book that our And companies the faster some that And the efficient. the the products hugely Eric, multiple high the in handling, get efficiently. they that whether multiple more the these getting and the those think to is big capability the the kind robotics, building XXxX highly are making X%. are And hugely, like they're material more of house, run are this it investment, they to position to $X survive. are They going sophisticated of centers higher Company or levels. investment inventory before of end, fulfillment or these sophisticated buildings. of think a, I at XX makes

Jamie Feldman

One, final question.

on probably little just Can development markets your market and just You England some expect process lower more hard how volumes entitlement in the land bit in less normally to part the cycle. have and build the describing. of would and in X you quite process people secrete about the extensively more of of more now why a U.S.? part the All talk the you’re spoke entitlement England Tier development this particularly it’s and than that, are changed in traditional

James Connor

example, you is this very tight Huston, give Yes. and a it’s I’ll Texas. great

is XXX-year particularly the develop floodplain restrictive ordinances passed is just XXX-year in have made they have that there it that Houston, floodplain. industrial that and a to And industrial in site Houston. of on in a difficult So lot in the is

floodplain. XXX-year not talking about We’re

months. and XXX-year to somewhere to process of our XX the with Wednesday. been the And Tuesday land between and have that’s normal Hudson, believed -- leader maybe going piece XX Houston was to months We’re on XX entitlement floodplain. for what of talking I to David he would from XX raw in Houston or normally take probably office, X

Jamie Feldman

think similar that, probably that to you is applicable markets? other And

James Connor

Yes.

to in much that’s just continuing think the the friendly result entitlement to sensitive trucks. a to but it’s cars and extreme, get They’re that are think even and for I the an make markets. the the of markets most economy road. strength sensitive harder They’re and operated strength getting to of on are and challenging. Midwestern of I processes some time the long process harder business the the that of approval we’ve more Incentives the

Ron Hubbard

seeing New forward I’d joining early York the like disconnect for of many June. We to everyone look the today. Operator, in call NAREIT to the thank may line. you in at Conference you

Operator

does sir. service. Thank our Thank for for that for Teleconference using conference conclude and you your AT&T participation Executive gentlemen, today. and Ladies you,

You now disconnect. may

Duke Realty (DRE) 26 Apr 182018 Q1 Earnings call transcript