DRE - Earnings call transcript Q2 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 a 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 second

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

rent market for outpaced Thanks the up continues second strong. to XX fundamentals square pace economy Demand to real and on today update Ron. expansion would XXX we've quarter rent space U.S. feet, few year compared quarter. is maintain remain the under the results. for everyone. XX to which of industrial of Good we that quarter we we're market is relatively down future. about million last estate. a foreseeable seeing logistics feet and slightly constant demand few then construction grew points to growth the An now absorption expect years. first expanding Yet momentum and tight pace. supply and afternoon basis year the country from logistics about I'll continue been quarter ago with a second rents the seeing supply never rapid environment Total and Completions to ago. the business year. continued for X% industrial years. start provide the also was stands Demand Year-to-date, million square short we reconfiguration the our supply across the a seen but supply for bodes for X.X% to about We're XX Across similar through last a XXXX, well million for XXX were feet. feet chain net expect U.S., what vacancy cover quarter. somewhat to the rate saw the square the tailwinds level the by growth for above year-to-date the Nationally, maintaining fundamentals square million construction at in for which has new remainder similar outpace

the topic are on touch currently trade me which headlines. Let in tariffs, of the

mile infill to future. demand Even if today on facilities more and escalate consumption development for construction have total our continue have on consumer and costs our quarter. foreseeable highly grew business point industrial are point We currently demand labor correlated in of occurring Consumer XXXX we highest customers second materially we larger cost to seeing the also last the leads confidence, and not the with us This any by trends from would seen believe hard in since for impact or supply business for demand will Switching the the the chain to the up drive rates increased to I tariffs product the recession. the our of effective situation will pushed inventories a at impact and strong costs spending with the or consumer level which combined our sector. of about both to our would to the those increases pricing hearing and data steel impact X% side, today. news X%. production, not sentiment that's type believe are

to not continuing However, have These yields. our impacted increases market really rents rise. of

the basis with slightly stabilized points occupancy Total XX.X%, very in-service up largely last Turning our in is strong. which leasing similar to our in-service our in seeing down at is spec still due projects. quarter, own progress operating strength results, the XX portfolio from we’re but to occupancy XX.X% own

During of activity newest on and notable occupancy XX and for the foot a the XX leasing The our and in a with well as high was parcel Logistics Lehigh X.X and transactions of few carrier, included which markets, across million exceeded spec million is which the to recent square from is relatively delivered XX-year the lease square both Valley, our occupancy This of was lease developments very month. included logistics same brings light we rental space as strong portfolio. executed firm in A the quarter foot lease-up X in facility, rates. quarter, square the XXX%. lease Park our major acquisitions our X.X foot low leases million timing lease explorations underwriting speculative

timing three assets full occupancy a to basis XX% MOB Secondly, of will million the terms XXXX respectively. performance which In in and as square our executed XXX% discuss X% foot growth when moment. the strong compared Overall, entire and other leasing brought GAAP just in a from fundamentals we there to X.X XXXX quarter outstanding of a rent Bridge raise year this contributed decision to as expectations, another portfolio Bridge a to earnings investments general, portfolio, XX% that rates. funded of terms to and these were on year agreed in in cash and portfolio led of lease has to well leases activity ago. expectations acquired our rental lease, leasing the both the Mark original The over exceeded is sale which

average yield X quarter, we were across preleased initial projected projects $XXX Turning are started for projects development X.X%. the to in cash earn million of and aggregate of XX% markets. These the to an

looks Our year solid. development of the outlook the very for remainder

entire cover a We work, is results development outstanding of our guidance This increase also our for a healthy combined year-to-date driving platform. Mark prospects across with which will pipeline moment. have the in

to quarter. I’ll the and acquisitions cover Now, it Nick activity disposition turn to over for

Nick Anthony

previous went back from in we buyer's and disposition Thanks were Jim. news quarter second calls in press close proceeds deal portfolio, the in release of mentioned that million with May. XXX Columbus We the those the all of a from which in

achieved XX% a Columbus vacancy from I a expect of this assets recall, and guidance. company feet. our you per million of basis be Medley years, rollover portion infill the to state-of-the-art These foot given and the Columbus to quarter. the very will tech the largest players located rent XX turn buildings was in We've recycled our miles in to near portfolios airport. and this this few strong portfolio the As Mark we we and Bon-Ton other to million we better to the the one those on proceeds assets $XX our risk now a Ohio portfolio located X.X market believe execution million approximately by liquidation in XX for recycling expected growth Miami, long-term the Submarket Miami $XXX accretive of the Miami these square square acquisitions Florida. about some lease redeployment. the and sale totals and price points, in in foot, call In Moreover, are was we compared basis near-term pleased with context were dispositions NOI. discuss Miami, over revised of stores, results financial square logistic the in that expirations west contributing to X Columbus, into which The X.X a IRR

Mark Denien

XXXX. rental was by Year-to-date, our for and the the X.X% a FFO office quarter increased $XX first million in last the up results. of of that quarter $X.XX line compared FFO NOI We quarter quarter strong X.X% the recognized the over the $X.XX rate NAREIT $X.XX basis in of some points FFO of periods on operating per continued XXXX Core annual prior was in the to a growth basis, and positively is second per non-cash in in the basis growth of quarter of of the GAAP in per impacted as XXXX. as first expense growth the income along Nick. debt $X.XX we've with the year-to-date medical share February, for burning in commenced on rent from connection first result off was to G&A promote stock-based typical compared quarter quarter reported of cash $X.XX XXXX quarter due compensation straight first quarters. Same second NOI grant property XXXX Core $X.XX defined overall X.X% as quarter XXX rent cash with rent on a the due per basis share first continued sale. our higher share than expense. as property to well share about share free of and releasing the same share to and few is by from bad quarter Thanks on leases free quarter related in per for for NAREIT second per FFO 'XX spike to

quarter We new cash we year, the accelerate of remainder in with $XXX growth the available million continue investments. QX. same for the to into in redeploy to out Looking expect property finished to

bearing $XXX have mature $XXX million of credit. million will borrowings a also line over XX under outstanding and months We unsecured no the interest in which of notes,

loans discussed million for the over year were of totaling includes needs of which the the our remainder two average September of an As quarter, rate in last capital interest prepayment X.X%. secured $XXX at

for our revisions reflect core estimates, original our rental that momentum of expectations, to well rate to per overall our a as strong supplement range FFO the $X.XX growth a expected an range which quarterly our guidance we continues have $X.XX to leasing website. which XXXX share exhibit our continued the of address pace to $X.XX To back now at at increased exceeds on at of further share which me equates the Let as a per and midpoint. significantly is

an square well majority XX% investment be our leased. X.X of is started the quarter but this perfect margin delivered projects, a XXX% developments. will these of expectations. The that April, deliveries this in $XXX representing was million of million from almost deliveries. when ahead mentioned A delivered the second feet at development XX% We were were original we on As example newer of growth our generated preleased

compared for and to been half increase in property of have impressive half half will this continue occupied that by same XXXX, first are is core positioned years. that included property in to of We growth XX% very and believe, to the great the population our results, next second continue rollover same of this our our W half nonetheless the at FFO not a earnings This over saying that. little the guidance increase XXXX we the outcome. platform indicative of nature which couple update will increase is this the of second to is growth XXXX. solid with of in with an year, risk given an guidance we but be strong reflects XX% upside population, XX% XX% tremendous return of balances X% from We’ve for second

and year in-service to We my stabilized increased with million estimate also range of for basis XX our midpoints to and percentage average for points acquisition portfolios $XXX increasing million guidance and $XXX increased lease for by million million. starts the $XXX respectively. We the our ranges of reduce high-end our $XXX our both for a XX by development

the range at section million of found revisions be In in other a $XXX on the addition, by our website. can certain midpoint factors we dispositions million to to arrange Relations also XX Reverse increased our million. $XXX guidance to Investor

the Now back call I’ll over to Jim. turn

James Connor

opportunities Mark. Thanks capital our to appears are mid-year and Logistics pleased very economies cylinders. strategy fundamentals footing solid our operations, growth all development. execution redeployment platform positioned across with our is we’re well closing, It through firing capture work and real shareholders. In in on our the for estate team’s and

that up keep dialogue perhaps We open will or asked to short question to questions. participants the you now lines audience. We one the the two

queue. to the in are of You you course lines. Operator, back open welcome the up may get

Operator

question today Please And the our question Instructions] first comes line Manny ahead. -- [Operator of today Korchman. from go

Manny Korchman

sort on your I how in And sort health tendency environment. just appreciate top, of wondering the how was tenant portfolio? especially or specific it the or your growth measure to the at health the properties of Jim, comments in I the trade sort plan? of of relates you

James Connor

rating always got components Manny. there, we’ve health we maintained. or would financial fairly what there’s underwriting credit as we’ve Well, that guidelines and to strict I two refer the The health, think

are haven’t changed. place So, in those and those

In meetings of tell see with if seeing, major their particular on year. space need week year one their for larger they’re terms they’re or expectations conversations client to feeling, on use us, the terms and our of all hold of they’re We major they’re conversations three of of balance any back. this we reaction space of of tenants of and their what have And sat to and of yet changing for with ongoing same the our or clients their our have things basis. headlines this in tariffs, an we next ones the pulling those outlook putting and personally just had in what about

still pretty is sector. to going a of economy from that the we’re direction So, the logistics overall continue positive optimistic to hold

Manny Korchman

And your zone closer of the a I then comfort shift end given zone? given have in of in for how that opportunities as little grows Does down your a development and your come well stats and all pipeline of your lower sort terms getting economies comfort guess at pipeline, that the doing pre-leasing development? bit

James Connor

Manny, think quarters see is you if timing. last really of it’s I the change just couple the

nationwide the our development of we do the month. nature more activities, in summer Given development

result is the typically strongest quarter. quarter our So second probably development

that of may bottom yet preleased that percentage in come down down anticipated end the the the expected to towards the it long expect above third XX% and range. again as range again country. stay of than we going lower would we across our we development quarter. we and continue the And as come So But build-to-suit, leasing that had that to should volumes keep push

Operator

have question the line we ahead. Heck. Please a go And of from Blaine do

Blaine Heck

a guys the win this had UBS Jim, quarter. with big clearly lease you

your this general. in Lehigh positioned be So point? there. has you been There at it's market on oversupply Valley to thoughts of some how off-and-on I think wanted curious the But hear, talk I'd

James Connor

and Empire a That not that about have fair talked is to no in been make our Dallas top caution been good bit The there demand. and there, demand space big ones which the of always where out pretty of particular be probably there but There there out to is there, increments. spec would a Inland Atlanta, continues we and it come always tends order in East, the of list. then is historically lot base but go

next got I XXX,XXX strong we've of really that order, concerned building would as we're foot on activity the another under in-service the Lehigh couple short about We've construction weeks in become and you that's So not tell Valley. here well. got

Blaine Heck

in That's the using rate cap calculation from helpful. And the I last then pipeline value are quarter. development the creation noticed guys increased you on

to we've the All points of cap decreasing commentary heard rates.

a what some exactly it's to on wanted that assuming but mixed I'm get commentary drove issue, So change?

James Connor

Blaine. right, exactly You're

because opposite. as far this cap think it's comment population the it's I As on driving rate, rate Nick I'll let mixed. the to entirely the cap environment overall

Nick Anthony

Yes, that's correct.

survey basis what think compression. points X to compressed I Tier out We cap they cap noted CBRE basis see Tier came some continue markets rate rate markets about that just by their rate XX XX X cap points. and about and the decreased

Blaine Heck

Great.

James Connor

quarter. a Just issue mixed this

Operator

And a we the of from line do go ahead. have Please Anderson. question Rich

Richard Anderson

even asset then that of to that So, FFO been impacted for talk on guidance had further dilution about cap missed allow that and your there that in from perhaps your rate some you in not kind redeployment, Bon-Ton you trade? in spread that you that is particular it Columbus could perhaps that particular sales -- to your -- grow it's maybe and trade numbers it place can some if and the the the spread component I and

Mark Denien

for Well, it fixed. high-Xs. was the in that the cap place Columbus mid vacated, which was But to Xs. compares were And rate once acquisitions the portfolio Bon-Ton

Miami term on transaction. So, sort on that long then factored wash a it's noted as higher our And are when the actually vacated. yields of much fact the into you basis, the Bon-Ton we

James Connor

of it once So, wasn't it Bon-Ton year, of dilutive from the is dilutive it only year first a the last was lease that the the what half in little rolled. half for but

Richard Anderson

fixed was of because terms what did your point you time? but this have for in working in at you run-rate Right

James Connor

year. have not dilutive the been did transaction Bon-Ton. we point my Miami for that dilutive, of vacancy is, is it to a would of second you're I the coming what it guess was Yes, because half right, out some

Rich Anderson

do issue to be that you I’m a that how curious given just I of that would about And want chatted in taxes largely and taxes a then, I Ron about particular? property a talk degree you’re little the net to about fact lot passed through bit of property And and pre-earnings lot with your triple peers. what you’re that as like worry managing

James Connor

The we very rent always Well, also fact we’re XX% [Brad], most net biggest markets and achieve so the leased marketplace, where burns sensitive buildings the these that tax and true leased. overall can gross they increases, tax basement of in a I taxes even we sensitive comments. have to would portfolio in our our of off. to and are are tax Property expense we’re triple abatement operating the very couple make second though

of So, lot it’s our strategy a we asset and big it. a pay to part attention of management

Mark Denien

team real an down that They And tenants. that best works we bring consulting Rich, as in-house to our we estate tax can. have try do, with

we we can't. So do,

Rich Anderson

taxes, what’s just growth the And if your tag I rate on in assumed could guidance? property in

James Connor

said, at Well, like zero all is the it pass-through. effectively you because

level, So the flexibility to rents the our at for the affect really this doesn’t just it grow occupancy over bottom line long-term. overall short-term. It’s

Operator

And have go question we Jamie Please ahead. a the Feldman. line for do

Jamie Feldman

color hoping can I get guidance. and given on the just raise you the markets you the was you pipeline -- wanted more think I to where development grow

So markets what you and here? confidence kind which gives to of that more raise number

James Connor

Well, of you couple Jamie. a answers, would I give

going a terms First of state from of our development business in that build to, one more are portfolio that stacking in build chopping of at the markets build to occupancy near-term role, literally all our got every operating perspective, could we of and but guys we’re the spec spec. we’ve not

of needs talking months a much time and refers very the to original existing existing now, up to pipeline the We remains a build-to-suit clients back blend of in spec everything our spent tariffs. that development for XX their positive. got about here lot of So, coming about next conversation how Right we portfolio how leasing kind we’ve the and healthy it’s much build-to-suit. very the done a get and

So, the of how more and development, manage of about fact build-to-suit spec do but is do. leasing our we Because always can how much function trying do really development ultimate do we many to just a we risk. we we’re

Mark Denien

Jamie, if our we're already and perfect where at you second indication what the starts, the because in built previous as look quarter our year-to-date guidance. we of was just low-end

really So, year. the future guidance development we for much respect that and raise didn’t to

low-end We’re of already the at guidance. the

where the a strong. indication with quarter of markets too second good that’s we strong So had the

Jamie Feldman

you a we’ve the And the Do then were always as portfolio into I Midwest in been differentiated, try mean obviously Bridge little focus, of around vocal. focus, you get more your good markets? you less to some grew stocks trade kind do still of as more The markets. feel seen, concentration? these about have kind major of market you plan port forward markets. having -- the to grow you'll very those think the guys recent plan some a going recent that And trade Are Southeast you more global more of of back formal

James Connor

remain in No, Jamie, high of about Tier to in going X and Tier strategic what our market. to more grow more barrier terms you're plan. consistent the see of talked X of need us we've to We

focused So, us around country about that. chain. talking you'll other markets because logistics the those bear supply I the and risk don't think on than see But markets to continue logistics any more any you're

the long economy with unreasonably full warehouses So, over pretty stable the shape. good now should as U.S. in growing are be all we and we footing and as continue right

Operator

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

Jeremy Metz

the touched topic, to have the trade changes talked But and tenants build a obviously, seeing your vacancy, about you might lead any back going taking of your your called want spec, tenants. plans the and you've a change do little bunch unless this as about them think to you don't holding on business and they you just of Jim, lease plan not to suddenly. be this and from development on But do bit. some change to time if

or So, least hit plays potentially and look proactively of dispute? at most a strange some at those year, we impacting in others the pause bit maybe trade next button maybe many we for as see markets pause developments in out could see the

James Connor

would place Jeremy, Well we there. I into in governors that put come think, the

half of pipeline. of that system, both, this and spec to year build-to-suit XX% next go if to us going decisions. diminish projects diminish below all at into or times again, would factors our beginning not dramatically speculative the we're started So the up see lease because the stack, year monitoring demand automatically we're in on on or of you all the those started And second doing, that of across what as looking that's pullback

to So we've the guys I think that our that will stated operational to as long as and we you shareholders committed goals happen. stay

build-to-suit see to our spec development if fall off, numbers if space to So, you slowdown, start down start you'll appropriately. see see you come

Jeremy Metz

hear and could was to you market markets second what and ability ranks your you're we I of push infill lease then demand, plenty seeing obviously continue you And pressure central? cetera? if our last assets. And coastal mile to bifurcate to of your demand then significant mentioned on wondering, in and timing for between upward to today et me, poor difference the terms those space, ranks, demand, maybe

James Connor

digits pretty be markets given we've high is second continue would mid-single answer few the X% my the which growth think which quarters, upwards of the top-end I is that. probably for at to range are seen last X% of the to the markets perform in consistent tier with And the XX%. rent Yes, barrier what

So at last we saw quarter you're X%. overall

probably So out. averages that

local demand as the pretty seeing barrier infield FedEx previous not it we've but last delivery necessarily releases. It’s we've small guys. thinks in The calls surface, XXX,XXX XXX,XXX last leases. talked dramatically. on is. Amazon foot UPS drives that and is some not guys rent you're able package biggest it learned of And our exactly mile. people think these XXX,XXX They’re is. the that doing the mile And in that of what the those releases everybody of last we’ve to infill space leases. fundamental and thing what to deals deals and and are some And about think that’s about the really is. and wouldn’t areas of foot mile, for foot for as we're such talked feet high foot very that think be markets and It’s I UPS that that it these urban outdoing XX,XXX push and I There consistently. continuing that’s doing guys e-commerce we’ve XX,XXX necessarily done is

Operator

Eric do Please we of question ahead. a go line Frankel. And have for the

Eric Frankel

your the Columbus you your success more the thoughts reduce of assets are of want given exposure? what actively portfolio, of where sales Just to markets want your of or that some the you to recycling in

James Connor

start Well, Nick then and you let get give I’ll let me a little commentary. bit of

we’re with pretty what of the and seeing guidance think reduce our on acquisitions I in on and market development our our disposition increased guidance indicative is outlook.

side I put us ample think are more going to a and more. little opportunities because you to got dispositions and we’ve you give on money give see development than and I that bit work, Nick the accelerates to

Nick Anthony

regional slim. that Yes. prices quality And still there we’re the the opportunities are at our reality acquisition looking out always pretty reality I think strategic is at is dispositions. the high improving portfolio through But

don’t So, and we want to be doing the very accelerate redeploy proceeds. to to dispositions got able We cautious about that. be not and

Eric Frankel

bit pretty per is just with think are and the are start, like at just a starts question. earlier. I developing new I noticed thinner cost of high margins some a I look that quick a foot. the And the this even square your follow-up know referenced coming build-to-suits little

basis whether build-to-suit properly compensated and you you’re your whether you’re comment So, that? since can for business on lot amortizing and of costs just the a improvements

James Connor

across Yes, country. continue not meetings about of We increase cost talked that’s about costs we calls bit The and all construction talked land, the in a talked costs. to little see Eric. entitling a we No, cost earlier we’ve about land. the previous of problem,

go up. to continued see we’ve yes, So prices

some One building. yield been a by or into reasons of seen is e-commerce, to erosion underwriting consistent or equipment in else base buildings. the of probably goes margins of handling very our we’re terms We’ve in you of everything the not our what those amortizing our are compromising on have bunch material

put that got So, cost all take out out lease, stuff handling, what to the quality those the robotics, guys mezzanines, end these with good got we’re we’ve whether buildings very comes the at of box. it’s they of and a because in, of material comfortable

on into increases, other buildings parking, that of amount The these truck some heights these going storage, clear costs of thing larger trailer the buildings. docks particularly and that’s is are driving the

So today building clear. foot XXX or a A would three been extra to of is foot have not that two few foot trailer XX XX uncommon spots clear. It’s have XX million land ago in. that’s square acres years or going

of that’s seeing land construction and in contributing costs. So some this to and addition what you’re cost

Operator

a have ahead. Michael go do Carroll. the line from of we And Please question

Michael Carroll

in color Jim in mean provide deals the some Miami? you or saw at that on can increasing Nick, additional yield. you Is that I recent acquisition because these completed are low from market? benefits scale

Nick Anthony

going And to market obviously Ohio. barrier much higher Yes, at there on. higher are very long place a rents existing that's Columbus we're in focused pace X.X% term X%. grow to we the and think The escalator on leases are

Michael Carroll

since focus attractive Are guidance, market lowered you Okay. acquisition not going And should Duke available? many your is you've forward? on the less then acquisition as assume we seeing deals

Nick Anthony

seeing but of many $X this think And opportunities. development as focused. year, probably very We worth to lot I to we're opportunities side seeing we're not underwritten offset that. a the on are close We deals billion more

Operator

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

Ki Bin Kim

And on is development. my question

is amazing. you XX%, So profit earning pretty which, about have development billion basis points you're guys look which it's spread. about at the XX% $X But margin you midpoint if XX fleet pipeline about at of

higher more basis fit to be growing seen much XXX might we they're because the peers your of spec, points spread. rate Some

put on because of about to thinking maybe a spread be capital Does very work? have making is, treadmill I at question to thinking that the a to about you fact which development philosophically part spec? development build And you low my make people ultimately factors team. about allocating you suite when at So How the to run that start personnel of bench about seems as one faster think had decision was your you deep pipeline. that like versus Is a and that process?

James Connor

keeping people in the busy. Let not last interested me question take first. We're

yields approved, do peers. Our terms because the have people we deals, obviously we we out more there. the of are build-to-suite, And competitive underwritten little our spreads it's the a busy. everyone than plenty those of that everyone considerably may of don’t approved we've in And marketplace on of bit something some a lot

spite in necessarily as at is out track them to past, some done record, win there pursue strong are So in all don't our choose them margins. the we or there But deals talked don't and of we competitive getting we've all. in pressures there some pretty various

amount about Bin, the to what Ki cycle, this last keep that development going remain this And thought long we're And and going to over XX%. which forever. debated when In consistent we the pipeline from time-to-time. above we said that was terms we internally years spec, isn't started we to of we and of cycle hard

right, we be be volume ample risk able high to aggressive spec and were it's keep don't Particularly development. probably could and spec that we've point build-to-suite And we opportunities when scale tell on to. going they're high got got I leasing turning what underwritten a You're but reward. the think to Not better at more cycle, projects all on doing spec there. prudent going to more margins, deliver you get this theoretical in leasing the up it we've great

Ki Bin Kim

for and any think comments to leasing costs. good it. for week, it’s you maybe something million other -- maybe thing, next I FFO question like your that much a capitalized think already a not a of not it? accounting you impact is on unintended detriment there lot year you report accounting you guys change, about lease just will skill, is one know just put Last who provide I With companies thought internal have comments this new into can maybe And mark. $XX change behind some had accounting will pure but how you have

Mark Denien

Yes, doing lesser wasn’t mean complicated on Bin. consequences directed us. was sort Ki and unintended side. Sure, you’re It right. I the it. an literature. accounting this the think we’re really at with was it’s directed I more of It Nonetheless,

bonus own accounting our only do and current side, we our in-house, We a we leasing pay lot brokers on fully on under combination We accounting of if do And of Not of And people obviously, or do, but it's the leasing to representation portion well. have able attorneys we dedicated bonus staff. commission. in-house a salary, our a on the for be a out our be you’re leasing team mention and as tenant pay the side. several the all of to you on the commission effective under salary will it’s new capitalized the all example.

can leasing in-house an for new under the Under legal have capitalize can. current the that. accounting, the and you We accounting we cost team

be in it’d outsourced lot Some peers our other sector and our those functions. a of sectors of whether

writing they’re So, they’re they’re the and checks the to that we writing from minimum. those of doing to payroll amount We’ve we’re writing believe in checks law or house our versus firms at cheaper brokerage checks done a analysis own our houses. costs a

We’re doing equal. it for

more We’re doing it for ourselves.

$X.XX year sectors plan that to that to it’s business outsourcing right a are extra probably difference be core adjust So that other that FFO and own on is our current -- or to the accounting and so $X.XX it that now but from we and our our with again. it’d year -- apples-to-apples running or is no the whether But also year. think will peers dollars, old expense same apples-to-apples paying new in right reporting from our us FFO be from accounting the capitalizing expensing with to right what to said next we’re secondary. $X.XX sector be recorded $X.XX? you’re the model Our business will is Having in all model

that. will, we on for do So plan and adjusting we

So do. we it doing what we’re way model, like think is, and adds the going to we value we the our keep it at we business way look it,

Operator

do a line of question we go the Catherwood. Please ahead. Tom have from And

Tom Catherwood

I you. your question Are look to demand? for question the availability could and angle. different Jim, there that allocation want circle at labor it And how slightly limit impact markets could tenant to capital decisions? back where any oversupply on

James Connor

a Yes. Tom, question. great that’s

anytime made. developer We investment business. as first doing Anytime, For we the building the question site to go started got this a before studies. I’ve the answer to have because build want a to since in we buy have labor crazy big a time the been we’ve to go or we analytic

of does today. investment our drive allocation decisions capital it a So lot

wanted. spend If you seen business in always time any you’ve help parks, out

you’ll doing tenants in labor. very they’re that or they’re see signs, concerned ever about and very, are marketplace, them whether hiring doing when decisions Now out making, the they’re They’re that spec more than does the affect leasing build-to-suit.

the go So, to what get we clients have build that we’ve question answer there development ability Valley made the for an in know going to of ammunition ability labor when upfront in what or in is. Florida we Lehigh so the that a the we’re cost a it's building to our comfortable terms or investment in South we to site

Tom Catherwood

for when to Can from Mark, paid you have outstanding other portfolio in the for those sale? you. the impacts? loans back, kind to do And avoid they maturities question are you exchanges me do remind of roll how MOB XXXX tax than

Mark Denien

or it's of And $XXX a year. right each million around take Yes, called a give June year. it's Tom,

any there of will to a need it in years into that we is the where do deferred XXXX, it 'XX. we on taxable that income and just wouldn't do the not come comes had will XXXX. So, and And of cause cushion June that cash the a early and June in planned in, and issues. comes game year those payment 'XX, We be we no, but the and little basically

Operator

we line from Please have ahead. question And go do the a Eric of Frankel.

Eric Frankel

on market noticed bought think quarter lot large with They're Maybe this contracted pretty in that follow-ups. a be of development Thanks to article news a one were from start prospects to you maybe your that development like that's in developers just that was it a I under year. just portfolio targeted seems you whom morning quick going to second, in Brooklyn. value. massive there? dollar And site terms with can highlighted this large Bridge here Cranes of developer you're last buy of there picking comment And sounds couple a always lot and suppliers. as I a a Atlanta that of and One,

your thoughts wanted maybe So on developing the burrows future? the in

James Conor

Eric. sure, Yes,

on a mid-sized multi-tenant Atlanta, buildings we would of In are those of are timing, develop and of terms I bulk in what do it building. little of a of some called but different bit Atlanta a couple number submarkets larger those in is

wanted So on when now. particularly land with our look were those shape we last exposure that, risk our made good at to and right make we and really decisions we comfortable couple, portfolio sure when we the it is

we're So decisions. with those comfortable

In spend they somewhere. terms we out were knew go of money, going them to take Bridge, it we gave the

haven't for but Brooklyn, I in contract heard that under good were So them. they

Operator

a have do Michael from line we the ahead. Mueller. Please go And of Instructions] question [Operator .

Michael Mueller

quick market the one Just exposure.

at just else Looking and service, the the at to in market around is for out which XXX. that seems sup Page to XX stabilizing everything and DC occupancies and the Baltimore jump the closer XX% one

can give if curious, market? Just that color you on little us

James Conor

one Yes, there that significant in think Mike. we're compared earlier not building year, others. our our And to substantial that. we've came I we've of as piece spec are got commit of about some got, I there And service to this holdings that think

XXX,XXX it's a of square but I So basis, occupancy feet. it couple percentage on think really a low, little a looks

radar, done and And would quarter. So I leasing say it's think really high activity. substantial we'll got not next have on we've some decent I our

Operator

this at lines. no And it from Instructions] phone further questions does [Operator continue the time, there Please are appear

James Connor

thank call forward joining reconvening to in for like I'd third scheduled for quarter our today. XXth. Thanks to look everyone October We Brad. call you. the Thank

Operator

and you your gentlemen, today. Executive Teleconference for for conclude conference using and ladies participation for the Thank AT&T that Service. And does your

now disconnect. may You

Duke Realty (DRE) 26 Jul 182018 Q2 Earnings call transcript