DRE - Earnings call transcript Q2 2019

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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, instructions will be given at that time. [Operator Instructions] And as a reminder, your conference is being recorded.

I would now like to turn the conference over to your host, Ron Hubbard. ahead. go Please

Ronald Hubbard

you. second Thank everyone, welcome and Thanks, earnings Good call. our quarter to Louise. afternoon,

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

me business risks Before our materially results our made this adversely uncertainties future to call we conference to that and from could subject that be affect statements risks prepared let differ during forward-looking make may other certain results. certain factors remind in remarks, could statements These you expectations. and actual cause

about more or and refer speak the statements SEC For assume we any on that factors, you other to those to forward-looking XXXX, statements. forward-looking with information risk we only no obligation we as our SEC file revise XX-Q Company's All would and of the XX-K update today, or filings. X, have August

reconciliation provide the release. this is we included A in measures to the financial that earnings on non-GAAP applicable GAAP call of our measures most

after distributed Our earnings release night and close. were supplemental last the package market

If you section at receive website are documents our of Investor these dukerealty.com. in copy, the available Relations did a not

earnings our find section call our reports Relations package, well. the supplemental webcast of can You this and an in as website of Investor SEC audio release

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

James Connor

and firsthand and and Demand investment as we've our modern while trade bit, in tied business. exceptionally reconfiguration strong in have Thanks, robust, Ron. Good decelerated afternoon, our trends everyone. remains remains business confidence markets supply points consumer global for spending Moreover, to very logistics witnessed chain space remain a data a strong. few expansion

for the to patches. resilient configuration expansion that could that the we any our margin, on have reiterate of today, the trade light any modernization not but been say soft or have three and from through the quarters, on chain should earlier in we believe not I'll be Regarding two what continued decision-making global consumer impact It's saying we've been last tweet the the customers. observing of impact tariffs, on uncertainties not supply President's

remain balanced. to continued fundamentals Industrial relatively

of feet and there record were remain supply about rates, Second to XX which and both at quarter absorption was change vacancy national low no million X.X%. square

are for there seem exposure we've in sub-markets speaking, a rent these remain natural to discipline few supply there sub-markets. creating on the year quarters, the the compared consistent discussed very Nationally, last the a to majority in have that of the the few quarter ago we be to growth Although the scarcity our in shortages X.X% land trends labor rents are for remainder these of oversupply which dynamics, expect we pockets in markets. a of second little grew quarter Generally and and still year.

we seeing is Total at build-to-suit new to XX.X% square leasing X.X as XX in last million points spec We've facilities similar occupancy are been square own as leasing from projects to well the was had stabilized hearing in of million new Turning some delivered basis feet our portfolio over been concerns operating million portfolio, our feet transactions. X.X with of in feet the XX.X%. overall includes few larger slowing. that that X.X square strength occupancy to portfolio, due which the in own results; volume in up leasing of quarters, leasing

this. As oversupplied, bit low said, just are few we're we've than a other that sub-markets barrier a seeing not

of of spaces lack we matter of lack than demand. sub-markets, large more it's available both For think a

would this results I demonstrate think our for that. quarter

leases excess feet feet. five during quarter signed broad-based, XX Our was leases square including XXX,XXX across leasing and XX markets, square of in over activity the spread XXX,XXX

feet, XXX,XXX growth cash XX.X% we've for year-to-date rent growth growth XXX On XX% square a GAAP realized to for a XX% of rent XX% square and best basis, located greater the XX% more the on feet, for a activity XXX,XXX square between sub-market than leasing XXX,XXX respectively. record importantly, and buildings for are and in and buildings Overall, XXX,XXX rent very strong MSA. and rent square and strong of buildings that and in led basis, feet, This growth reflects buildings fundamentals we between feet rent perhaps very XXX,XXX fundamentals under quarter XX% growth square feet. each

where square Jersey. less. This of We by of sub-market markets well contract starts with new transactions, foot started XX% to last enhance comprise Depot. The eight ago. commercial transaction Home X.X day part this $XXX a with will different build-to-suit project night's site is year two their previously quarter, overall. were chain in state-of-the-art us the a in placed one Perth the billion $X.X million is complex investment announced had of to Home across overhaul delivery brownfield or highlighted a New we located seven The supply announced Amboy development customers and consumer over projects land under Depot's included that two-building, pre-leased million facilities on transaction

executed also e-commerce totaling serve leased two XXX% a major square transactions feet to needs. We mile XXX,XXX for retailer last their build-to-suit

XXX% customers. XXX,XXX pre-leased Hartsfield Atlanta Airport executed near build-to-suit with square foot in also We a a XPL

we XXX,XXX square leasing, on significant a XXX,XXX pipeline XPL our facility square of transaction feet. in development ours executed in feet. development speculative the began in to first We South a expand requested the Lastly, quarter tenant Shortly development a that Florida. we totaling thereafter,

the a the into long-term result, a expanded transaction after lease months turning build-to-suit for a entire building, effectively project we executed started. just this As

fee Amazon. the on a new regarding fulfillment developer were a press you We recent picked Amazon have of Several center for as release Ohio. in by G+X development of up acting the

XXXX. this year. income of will get January facility Since We general our our starts into for have on development will most development will are in our revised guidance operations volume into are balance we the this guidance little the project will occur XXXX XXXX be service new this nor volume of to of or not released XXXX, contractor, in our therefore, counting own in very and it impact incorporating for we incorporated the this development not

at have our are projects construction pipeline feet pipeline XX stabilized XX% projected projects our under second pre-leased to in improved XX%, million due highly percentage pre-leased pool square and development at the the And These in quarter overall keep our in-service costs quarter-end Though mind, our XX%. development starts $XXX quarter. share. X.X occupied had deliveries margins in dipped below to on XX% this million totaling Our over this for is were pre-leased.

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

will We our entire have results, very our is This, healthy combined guidance Mark with of later. our increased outstanding prospects a across which platform. for cover development, year-to-date driving pipeline

activity turn Anthony for I'll Nick cover over to quarter. to and now the it acquisition disposition

Nicholas Anthony

Jim. Thanks,

in recycling Tier the and for both X of capital contributing to be to self-funding proactive our exposure. purposes continue development geographic strategic We achieving greater

foot this the a these sale Ohio, into recently Northern and During XXX,XXX facility we portion quarter, in storage located a Columbus, for East square proceeds XXX,XXX $XX proceeds. completed facility Bay of the California. generated closed sub-market square XXX% leased in foot acquired of turn, $XX cold recycled million which we on in In of million

this out majority and the their portfolios and of At year, we a of the half in Looking process. marking that second the one-off are have to stages assets time, various of couple of The quarter. to to and remaining on selective sales transactions. the pricing we any disciplined the our market will end close expected near challenging acquisition remains remain third are of asset due

market into invest a of these development pipeline. in will our Mark and [Technical revised capital more conditions moment, Difficulty] on current desire guidance As our to our touch

I the financial our to call Mark will to transactions. now capital over results turn discuss and

Mark Denien

with XXXX $X.XX strong to due in Nick. XXXX, grant in Thanks, spike per of along results. was non-cash expense and quarter the share our related typical quarter of February, first the FFO first quarter $X.XX stock-based the compensation to first per and per from Core of operating the administrative general FFO quarter increased in share for quarter $X.XX second annual compared Core to XXXX. in share continued

We to and share our and XXXX. from quarter of increased of quarter as the strong operational defined per quarter for per compared due of for NAREIT in share quarter base FFO the $X.XX XXXX of second $X.XX second per FFO performance. in overall Core first $X.XX the by growth the to share reported XXXX asset

positive defined driven second NAREIT the each lease share of The being of diluted quarters also and impact first results. the increase the had standard operating by $X.XX With per XXXX. for impact as by FFO an approximate new of on

growth X.X% X.X% on from was the down cash quarter the in NOI basis, a for first Same-property quarter.

XXX As you may point positive quarter, off noted from recall impact basis for free from burn rent had we the quarter. last first the

result same-property pool quarter's of well occupancy a strong the This re-leasing is growth prior as the on in growth average period. rate improved as over continued commencement rental

NOI Same-property basis GAAP quarter a on was X.X%. second for the

was an noted the of occupancy as expect Looking high quarter, the moderate comparables, half XX.X%. I due of last same-property that to forward, commencement year half XXXX average occupancy second the second we to challenging more NOI given incredibly and

not levels reasonable year. believe it we remain XX.X% around occupancy last XX%, just to Although the assume we level will our same-property had is achieved

of half be second points will the addition, basis the about by unique for situations. In two XX negatively year impacted

a be the the us, NOI As build-to-suit square growth, mentioned is vacated consolidated XXX,XXX the This drag NOI a spaces feet. a increased same-property until totaling year total expanded call, They we same-property spaces of and the a basis this half have for for on XXX,XXX but last spaces. of of the second on from a about we completed on same their will in great two from re-lease foot creates portfolio about half rent will tenant property we transaction but square points recently our in our XX year. former and with last still the different into strong drag can NOI,

these good is very rent second to outcome prior occupancy point this entire for future the tenant already occupancy growth, better a space this NOI it'll increased have rent later The as the a originally rent be will XXXX NOI with negative a basis transactions lease and Even growth Even overall growth. strong XX guidance. be Atlanta the won't on and to impact in this month. drag second leading news from the still half the The long-term of are until with the situation tough great involves same-property our on commence estimated comps year. though backfill new period, expected that than is same-property from bankruptcy lease and the tenant strong to signed provide we

flow from majority fund proceeds, generated to growth and with operations. flow retained receivable cash the cash continue as our such disposition We notes internally of

growth. we only in Equity share price our relatively and opportunities be outsized a small we'll but we believe warrants for not of our if future, will using portion for consider have growth. major foreseeable have of of capital for prospects significantly addition also growth an $XX before, average as million growth from we given to yet In the and significant of a to issued development, quarters, $XX.XX leverage at next we capacity fund several equity noted increased this our fund the ATM source amounts if price

file us Based to this, program adequate tomorrow to act capacity we under on to do expect give new a program. ATM the

We debt in mid-Xs targeting the to a a basis. leverage increase gradual EBITDA to overall are still to low on

our Let original as which which me share a over recently that an To continues exhibit particular $X.XX year. $X.XX to expected development and guidance back our reflect prior address of on the midpoint at is rate completed for to the range increase now share, growth to equates X.X% our have per strong expectations, XXXX leasing we estimates, and of further revisions portfolios a per growth, continues at FFO core of pace range well our at continued $X.XX website. increased an as our rental to to under quarterly supplemental additional the exceed our and which momentum,

also a to X.X% growth previous to for share range We a of operation, to adjusted range funds are on from from AFFO, our X.X% basis adjusted XX.X% the in of XX.X%. increasing guidance

list $X.X our raising from range increase of very prospect and build-to-suit to million starts $XXX second $XXX million, previous at of $XXX we to significant Given the $XXX the guidance half development for starts the year, of to heading a range million a are and development year-to-date representing into strong momentum the million a midpoint. billion

other certain we be midpoint our by range to on call And $XXX Relations to can $XXX Revisions found million now at back are acquisitions $XX the on a also of the section addition, range decreasing guidance million. our Investor also in I'll over to the turn website. In to million Jim

James Connor

our growth very X new with growth and pleased achieve existing execution our the want objectives obviously website. our In ESG Market everyone single-digit initiatives point We mid-year. Mark. culture dividend published both last to unique element growth and I for should capturing we on are believe positive Responsibility that I are we're closing, and high cash Corporate investment Tier exceptionally our flow, Duke and strong we're in growth team's It's through Realty a fundamentals out Report, differentiator important our quarter, and our of Annual investment customers opportunities of and markets. our review also an would with to which characteristics the and encourage strategy. Thanks, continued proposition. corresponding in

open up the the just to audience we'll to queue. you dialog can course to now you the the questions will participate brief the We to welcomed questions Louise, keep open get and allow everyone ask to lines a to participants in always up now. and are back for few lines of

Operator

Thank Jeremy Instructions] Metz. from you. first is And the the of [Operator Please ahead. question go line

Jeremy Metz

guys. Hey,

the the of on bit market. taking spec even in more you're comfortable little here. given below a your dipped It terms sounds strength developments, pre-leasing In the leasing, XX% like

to XX% it want see expect we that trend number mark? to at you should a So lower do balance more around little that keep or

James Connor

as about were think would at No, this of year again probably NAREIT XX%. dip Citi I talking and simply below actually it last the possibility as is and we we that just timing. this then NAREIT Part early late that started year anticipating it

is we going were second to some aspect start. of of the The of these we size that transactions knew it

that surprised, XX%. So the and be we didn't it it you'll I to end be quarter, third of somewhere number year, by where anybody think moderate back in XX%, I the the over see and between up then, want think will today is too

Jeremy Metz

deal. was there. And if the looked thoughts right. front IPT the at you investment All guys I then on wondering portfolio Any

bigger it? picture, In terms transaction interest or And just maybe you that? if did taking large underwrite portfolio willingness in of then a down like pricing

James Connor

talk can give comments. Nick level then underwriting let some you I'll IPT Well, to and I higher

Nicholas Anthony

today actually barrier exposure, geography grow high be dilutive X the Yes Tier exposure, isn't our going look either. at Tier Jeremy, our we accretive we is it. at and did, as we portfolio perspective look did to from to a Any portfolio we as especially our X quality

it think priced it I a So there well. was and good portfolio really out

James Connor

Jeremy. last balance in our sheet got some our then, it's comment big acquisitions, make it our of And to desire and/or the Yes. I terms with we've guess ability, but clearly, where the ability kind very for to modestly that really and transaction when team senior a at our of leadership major at case endorse IPT you're breakeven dilutive. probably hard and in Board best of pricing the the is looking

the reinvest into pipeline and money balance the making the in value good much for much we'd we're more shareholders. So sheet shape keep rather margins and much development back where higher creation

Jeremy Metz

Got it. Thanks.

Operator

next question from Please [ph]. Katleen The is Burrows go ahead.

Unidentified Analyst

afternoon. guess, morning, Hi. Good or I good afternoon, now good --

Your maybe XQ least history, the highest spreads was at leasing overall. recent history in

wondering going So do was XX%, occupancy of rates right you XX% I you could could you market with in-place and about you rents on stabilized how comment I pushing versus or thoughts either versus occupancy guess just if keep forward? on the think your talked

Mark Denien

I'll a was perspective. start from It with best quarter that. our ever rent growth

on cash that we're year, still that right of basis XX I we'll think the the a full and XX range on year, and internally comfortable that I balance we're think be XX very to for GAAP around still for the year. XX for probably targeting the

year a lot the year. will of half first the last probably So like look half

terms, ago speak. bit once little roll but roll. even we they obviously, levels you because push into signed a doing. because our think longer it keep to to have do on pretty better on a foggier that's And further out gets rents Looking of We go, were in but mind, still of very we finally so little our a we're positive we've leases generally to close next I ability same-property the continue to the have drag longer year, been offs at lease bullish a

you be pretty pushing the just versus questionable, pretty occupancy respect high. think in would level. pushing is, we've we're best trying to some had, I XX% higher off growth we rent you are rents thing say one rents evidence when I The ever may that the seems are but think, rate, enough, of that's would good came quarter that at renewal than So we balance what

Unidentified Analyst

accretive sense. first you generally bunch comments point. acquisitions That how the did on the quarter. grow of versus makes made at is more just I maybe Then know than on The that development. a pipeline this

are to they in be anything So land high least also I of able seeing that entitlements, its at make accretive? to are buying you today keep Duke as guess development volumes you terms wouldn't as and think going while forward, getting saying

Mark Denien

tell of need half No. in I the already you the land would the that development the own we balance of year. we the second that for

in process, active challenge XXXX good that's all on acquiring XXXX there right markets but XXXX and because already looks the and land and entitlement is working the very tying we're our pipeline, now through So for land up but the books pretty the land

Unidentified Analyst

I soon say, you're or terms the rather is outlook, XXXX of to would or not too tell able guess confident in keep in the it point, and being up? this you at XXXX to volumes

Ronald Hubbard

confident you, tell some good long XXXX. on the justify talked as like people We've today, up deal volumes the the to that Home really dynamics I'm Depot of in as it. ground. talented we up keep would got be I Amboy, the back site market deals Perth we'll able about in tied we the And

that's people a So got ground, really good strength of the we've on and ours.

to are particularly opportunities infill right think to value, so I able be the the in to find create So margins we'll strong. markets the continue where

Unidentified Analyst

Great, thanks.

Operator

Please Your next is line of go from question ahead. the Manny Korchman.

Emmanuel Korchman

we anything facilities a or closer larger just terms the Depot moving about of that could just their into population it Jim, in to is revamping there logistics special doing pipeline they're Home talk deal, centers? that's of matter

James Connor

other get versus there they're to some Well, or about Manny, what's their operational our of investment to I a and in enough the knowledge you customers what's their in billion can't $X.X release that direct have in their to stores go ones, in traditional less. tell that than going of I order this products release and press making Depot's Home press day terms

that e-commerce stores They've of now the supplying good more client clients very a this in So, I active or hope versus across become to country are the with to we some the them. specific tell are do they top very opportunity combination now. business can't you some have right ours, is but they three and thereof, our

Emmanuel Korchman

Got then one Nick. And maybe it. for

out to the else pipeline? looking there to that anything development fund you're sell, Just especially

Nicholas Anthony

of agreement on got We've the million I would Yes. half we've process. got midpoint then we and of closed you, under about remainder quarter our in that $XXX dispositions. at we've on a got about tell it,

So think wrapped up like have I most the of third to said earlier, will of quarter. end I this the we close

Emmanuel Korchman

Thanks. Great.

Operator

Next from question is Heck. the of ahead. Please line Blaine go

Blaine Heck

afternoon. Good Thanks.

on with number Number their do project Just any risk build-to-suits. three, you supply have a follow-up chain such get you overhaul? us target conjunction long a in construction? agreement two, a questions on you on can sense low more any with versus on yield do maybe Home is how what them share you projects? give or lease the build-to-suit those like this would term spec And on to Depot Number one, few the can on the guys

James Connor

no Okay. no, I'm and kidding. sweet and Blaine just short XX, reported. It's been

So I can lease. confirm. a XX-year It's

they said, I ours. of As customer good a very are

they're tenant I the our now in think portfolio. third largest

on of them, the garner [indiscernible] do some I able do to from and I in deals. agreements on hope them, or any are we'll be yields We country. in transaction that don't a like really have around with more but business We based can't that. terms our disclose active other margins certainly not just we would additional that conversations facilities place

Blaine Heck

would Okay. it what lower, target XX lower project? it's spec little But bps than a fair maybe on you to bit a say,

James Connor

host this We that in and further but where arguments for would by the along We and margins it's environmental took great project this risk when 'XX amount say, is. It's unbelievable site might when completion is a took hope access those very or back was or valuable an the it are up. raised once and demand this it substantially. We build-to-suits don't site know -- property who some been it tied had we I much tours through thinner to commodity. site we entitlement. took to a of we a fabulous fabulous You for you complete, counter the it's is, out infill through of there haven't towards very, it building traditional cleanup. what either some with We site

So value a there was lot of there. creation

with a combined lease that, tenant, XX-year be you surprised. might think the I with A-rated So

Mark Denien

like Home The would thing with together I clarify come 'XX, getting just Blaine, Depot Jim that happened that mentioned, didn't in until recently. back with other all deal the

it's So were tied together that like back not far. they

Blaine Heck

That's you for the developer. guys you about Is situation? helpful. fee And type of the you'll rare where do some largest will then the one-off talked or development this that common project, think or as Amazon you Jim become of tenants a more be in role more a see

James Connor

I more than would rather tell the it's of exception you rule. that,

you a know, good business with Amazon partner very ours is a we of lot do continue of and As to them.

next We the have built experience understanding country. for have all we them the GXs sortation the we last and techniques. and developing generation, fulfillment doing construction We're We've to and those still some facilities. that own want technology the over mile centers These done facilities.

we So few to like of that these Amazon. do with proposed a we'd

think, try but and and with we're do of I and that takes, we'll Amazon. it it of committed that, how works these beyond out resources to a the to step see amount have back couple So

Blaine Heck

Thanks. right. All you. Thank

Operator

Malhotra is ahead. go question from Vikram Please next Our [ph].

Unidentified Analyst

Thanks taking the for question.

wanted Just your bit comments around growth. market on more a rent color

bit is X% where maybe more more strength little your by seeing versus color is the more is. you a us deceleration markets? mentioned You give what a you your bit there expectation are Can in market, where

James Connor

pretty We're the the seeing markets digits mid-single I Yes. and in broken rent like I and know high growth Interior because and markets. markets double the a referenced consistently this I record, coastal the think digit and I at sound previous second/tertiary think we've in in calls more low Sure, conferences. barrier

the if just and X% the you to coastal barrier reported you think look let's you're if year. forward, X.X%, few XX% say run and that in I second/tertiary, of that about least, markets, we've X% at the end CBRE and at last in seeing to think I average. So at we going And number, the high and the going look seen the is that anticipate years, the XX% interior which to through

Unidentified Analyst

just difference boxes in whether a or I versus where what perspective, for build-to-suits, mentioned that's Okay, seven on These XX-year the done bigger terms more a Home that's Depot of Amazon is typical me the you you're lease. you've there then between cap or for value large the boxes helpful. Home these today XX leases the retailers, And a doing the Depot maybe economics, heard year any for of other average you've trade ultimately five, rate bought bumps basis? could and then year

James Connor

answer Well, in that ways. couple let a me of

be facilities the build-to-suit height, the more reluctant terms to say in trailer bit I'm exact amount of storage, power -- in little are think parking, they of, fact specialized, I they requirements. but in tend build to a clear

that, the the clients for the traditional rents handling robotics you than want probably of a and that the to to see better everything ups with in amount such standard So more a inside investing protect else. garner facility and And material building. extras their with they they're higher would and interest money are given equipment spec in they and facility build as long-term

facilities So improved bigger The little driving these a a clients over longer-term little numbers the highly that's bit because more the are traditional -- spec building. a bit the are are leases.

Unidentified Analyst

and back markets the a referenced peers of supply pull impacting are you moderate seeing but sub-markets that flashing of Okay, one two yellow, markets some where across in our in any that's Are of want hey, you're little are not your helpful. red, that? mentioning or few starts. we just are there the one, then maybe any starts last a markets, maybe to saying, you future. maybe In And

James Connor

Well, the sub-markets any tell made have we and spec think operating in you in of the not we markets right markets. differentiation will of we're those. statement, you I Yes. in today, and build-to-suit last it's of pursuing opportunities I are all part and the the

barrier on building anything property down I right We it sub-markets have development. don't won't I'll Dallas, limit see Dallas, again. in got to available South there. talked we and encourage to these there really And a you sub-markets. it before incentives us about picked own build spec low We've You South spec do all and now but down to market,

up the soft. Central one building in we've would way or there onto and while last got Atlanta, Northeast We quarter have this it's tell PA, list, little and Central modest. in have has you, don't activity, two its PA. we do I it's worked a spec anything

All of and stuff Corridor the IXX Lehigh is little lastly a Valley been Chicago. PA in then, in up has our And soft. was Central the

really tell way that the the I and was I list, but and I on people third it. Although in own talking extent its I Chicago last make to week going off would our you is think, that's of based the in the work to turn about market in activity heard Chicago brokers marketplace, the in and quarter

the characteristics. supply really much got demand very, very sub-markets, good in good rent and growth vast markets in majority check, really think I got the the and is of you you've

Unidentified Analyst

thank Okay, you.

Operator

the from Thank ahead. go you. And Please Eric our next line question Frankel. is of

Eric Frankel

you. Thank

that IPT sales some of have guys occurred assets whether a competitive? on make have you more an you had in of overall whether to based you're things Obviously, and seen just with comment you've GLP, you difficulty a even that markets get pricing the portfolio Just changed? acquiring targeting. [ph] I gone have can want said on you the understanding the want has that

James Connor

a we I those it small seeing are pricing in make deal anything guess other would levels and We've the new. Eric, with Well, of couple levels number mid-sized pricing I with mean XXXX Those seen of comments. a that not started IDI portfolio. I was done.

attracted that some of industrial has course, say, I, to you some trade and at But a sector the argument let's size and change was with size quality that to The that, a accept made industrial size of leases, investors and -- continued NAV between perform of the looking of your of has and come the So to cause good with tenants, the going of strong these market is escalation. in who very based long-term credit strong It's to invest are rent I larger to X.X some think everything very it performing else. opportunities today portfolios guys on projects calculations. sector. should good with X, have portfolios are well. the the

You little to after there during lease place these a people very has capital is lease and buildings put that factor to money. into want attractive become fact the in for their very term, or industrial to the has go term that the

of is the a Nick and the a in there interest speak smaller just to trades interest the that can there, that So everything selling. for premium one-off deals amount out portfolios out lot there and there. we're the is of

Nicholas Anthony

We've activity Yes. on the -- better-than-expected good even portfolio… really had Midwest

Eric Frankel

lot Tier you. interest some X just you that. Tier X and you stated? lowered you're capital your of partnering last both kind simplified understand expansion with your investor Okay, your of a there's markets management some kind structure business and the these and still dilute maybe for And your interest to of where on the And third-party simplify you've ventures. guys years operating construction thank couple office of have scale over out [indiscernible] follow-up of of I some size ever of just and joint X help other markets? considered probably of a up other you private in as Have

James Connor

it's look you owned, potentially structures, have whether acquisition, every wholly time XX-XX Yes. venture lower joint tell capital or at we look that we use a people's to -- even XX.XX at look a various would whether might a other yield parameters. joint it's major Eric, venture at that I we

we've of XX we for got also smaller look probably place years. joint had we've at in pruning portfolio. our of it We number look some at And ventures, which when a

So use it often, use toolbox. particularly given that one do that is packages. an look all we pricing in our that's today to and but we It's it's arsenal portfolios we don't at and these continue where on it,

Eric Frankel

Okay. you. Thank

Operator

The John Please next question from the come will go of ahead. Guinee. line

John Guinee

here. Guinee John

typo, has says in for I'm square dispositions sold Ohio, building there foot it to page hey. XXX,XXX Columbus, at a an acquisitions your First, $XXX a Nick, that got and you and XX, looking foot, because here be

Nicholas Anthony

That correct. typo. a not is that is John,

John Guinee

why? what, Who,

Nicholas Anthony

a just were We seller.

John Guinee

Special improvements, leases. long-term

Nicholas Anthony

player today. with those of e-commerce and major a X% with lease facilities there types XX-year bumps tremendous a on was is it demand So for

James Connor

somebody that this single back a to the transaction interest we work on the long-term answered credit a question in deal. put with lot a of lease million A-rated earlier, to had to opportunity Going is a strong an $XXX we and in for

John Guinee

a Okay. curiosity, of cold in California, Northern then just why $XXX And storage out foot?

Nicholas Anthony

Well, portfolio, first inside about warehouse got intrigued of X.X transaction. our by of our of all, buildings. we've existing We're storage just existing square million cold feet this in

a bunch we but here going very go a was mid-X% on a functional market this were a location, a with are yield to under good asset it's We not in buy and where good the it of stuff, allocated.

liked So we deal and the on it. transacted

John Guinee

etcetera? not effort change Home Okay. you Home dollar guess means Amazon this whole Columbus. their Jim, back you supply into leases, does Xrd giving think, and generation And I renewing the which Amazon XG, mentioned mentioned facility or multi-billion market When functionally Depot, to and Depot then, obsolescence result I chain then in space in

James Connor

come. will day that John,

own. Amazon never have we of as the our not someday. We leased Amazon facilities happen in it tell people, renewed I will that But any

big, out inefficient I material are to that and robotics is, Someday, box, take don't back own small, go they any the get of always space and I obligated to I the too mezzanines. we which of of be a And too and or said, too it any any we back, what handling we all the equipment the out, own building to very plenty of will have not when disciplined invested the consumer height, for been the improvements. I'll a have about an great the of e-commerce go products somebody building or retailer loading, a either inside a and divide that good to, tenant but and company. or money we've good I'll building nice box clean box, I have clear and parking, re-lease power else,

And long Amazon so think Depot long-term very like term. all for I big we'll sound or and anybody Home a these basis the whether on else, it's is our very, boxes, strategy. all strategy our be I in buildings these fine or of

John Guinee

storage in Northern cold California? building that Event

Nicholas Anthony

That there building there is like... space cold storage for is no that -- spec one and

John Guinee

know. I

James Connor

his to He knows he question. answered

John Guinee

you. know. I Thanks. See

James Connor

Thank you.

Operator

you. Thank

is next ahead. go from [ph]. Dave Rodgers Our Please question

Unidentified Analyst

Yes. Maybe for Mark.

other of of that any you you're existing or see look into two out you aware end second be same-store the your XXXX, where might the spaces there year out into the be to the Beyond impact, we leases tenants that the for going moving of the denoted watch as are and developments half should year, to list that tenants of?

Mark Denien

None of Dave. significance, any

the was decline, And just specific closer is point flat. to XX basis tenants. that comp the be period what basis said. We in would it XX described think, about think, of prior point of I occupancy I like XX.X%, two those in I I project XX% to probably that

a as attrition, So can expirations said, is willing will push call than tenants the other because and they're sign. or point we, just ultimately what push XX are as lose rents would where to harder trying I couple to of we basis like I natural hard we

significant nothing So any individually.

Unidentified Analyst

then and Mark maybe And the goal. for leverage just Jim on maybe together

I about have and below been XXXX, guys quarter well since second You I the mid-Xs low you've talked stubbornly think of think about to that.

market. been gets of bit created quite you this capacity? but Because the to that, shown to You've dabbling that. point willingness really liquidity of a ATM and what really extra I the guess in to haven't debt that capacity deploy deploy you've out

So or some us give are more waiting for on something special that? you color

James Connor

think Dave, is they have assets in assets. of I keep you Did that -- ago, think, will have net sells year big of just to a think that's to didn't we reason, problem. and a pricing selling be the for IN I been. I the me. Nick combination asset it's a honesty, put all really a not leverage, back And we this we seller Nick That's question? and time on up projected large a need Every we we as -- existing that markets. say, as half would goes asset a have looking

advantage we've little a more I So side bit on side. we of on taking being been disciplined acquisition the disposition the think it more than and thought

then big been more thought. have seller, reason. That's we've of a we a So would net

Nicholas Anthony

side. our the disposition three-year plan accelerated We've Yes. on

in a XXXX. So amount disproportionate we've had

James Connor

Yes.

get night, creep with you'll just be we to year are targeting up what you, development guidance could to a It's good leverage still that. XXXX. we targeted, and coupled maybe end So I we up year, will or start that levels of taken us in but the those tell to with increase just a I from little longer start a what next put into definitely the out think good last that to see early today

Unidentified Analyst

Okay. Thanks, guys.

Operator

go next Please question Our Yulico. Nick from ahead. is

Nick Yulico

Thanks.

in So maybe if know markets, dig just your some concerns, of have the the I it's list. should South going mean Atlanta, are into Dallas about going expirations, and expirations dealing see supply there you to with? you mean I don't disclose year where where you wanted sub-markets your I your to expirations we Northeast over back or how supplies? some those we but lease through can go market, can sub-markets, some next I by we to Jim, what whether are think lease be

Mark Denien

cover I'll Nick, that.

years, two next of the rollover those no as Over any Jim have sub-markets, virtually in we mentioned.

South and Central out of no coming PA, in So Dallas, over. Chicago Atlanta, Southwest roll Northeast

the In see markets. in coastal of lease our start hit to to fact, more you'll expirations start

years, five to a months, to in here, the I last closer roll back over next but think, we going rollover XX we XX in look to haven't our That's been XX% going newer those been from over move memory through function of so of three to markets, are you has and that's X% markets. markets. coastal yet If coastal those of a about just period just to

specific hitting So near future. the we virtually more mentioned, roll no of sub-markets coastal there's start in our and rolls the markets those

Nick Yulico

then that Okay, on get change mean about I over I touched you've expenditures year? you the more quarter. going something And had in to maybe guidance for just mean you last is this on great. back mean efficiency capital lower the topic. even next quarter, this AFFO. that note I this helpful. That's here can

James Connor

Nick, we've like see attitude. a a our revised I right and and percentage very AFFO that. and wait now tied taken proposition growth in to that We're we stable think

next we into importantly, this in year. been I do think that did probably, 'XX want At any to critical that starting lease capital on could improve years we're have the that. there rollover and is of and a same at chance had last capital to 'XX, we that look for projects more and like couple year, we the accelerate the time, over put we budgeted

up. I think potentially number come we'll we're trying you'll find spend to of So, that. to prudent little I think a it, and we bit see If I our places good have be with can't room think AFFO

could we up certainly just to capital see spending come go and or leasing the from it do we've some safe. You down what in won't could it put be but re-projected, proactive

Nick Yulico

All Thanks, Jim. right.

Operator

Thank you.

Anderson. Our Please the ahead. next Rich question from line of is go

Richard Anderson

Thanks, good afternoon.

at I for that I few your could next or that year, was past, at was question thinking been first least, overall and bite into of same-store elevated growth So whether your level I when my sitting profile XX% not occupied, into same-store the about forming occupancy but you've looking years. occupied, noticed least then at

asking a for you little of of of you sustain I'm So guidance but of about growth and level absence XXXX lay am not here, when worry in up bit so, think do I give growth? the ability when about kind unless into growth giving it, to want think occupancy you about -- to a you

James Connor

don't Rich. we think I worry about it

right, you're that there growth. be occupancy will of think an I absence

we basis XX.X% decrease in Flat pretty last I in for year XX% coming occupancy, half last to. we like this guided the year half to probably prudent just this of that's last low basis to year. if of right about our for and in of that's half a more And the the looking guidance. an XX what with half equal the if point think right. midpoint is, to were at on said now. is thing of but we're occupancy, think last you're mid going the think last on of like the reality That's be same a math, to X%s do I you this, year, you about the probably it the good store the

us with a into still keep fairly for impact And away we're would occupancy, quarter. fairly the period-over-period, this until be that way growth. So think like year. will that XX you work if pool, year. did foreseeable signing really healthy what profile the XX We we're future I that same-property in substantial call, next deals I into next its these will. to a still And not deals won't growth of getting and That function headed even producing same-property substantial on we that that rent that's just with, takes decline

indicator, more So a will, we a or for tailwind lagging -- you of if getting that's us. keep it's

on think our I overall overall we're nice still same-property bullish So to results. ability produce

Richard Anderson

going speaking. with to now, point is own exception to question the we're at not little estate? Okay. if you're the kind to Because turn debt bit choose are own that rule, may some having a future, just better control Jim, fee broadly a and I'm transaction Amazon point that it's balance of start be, saying they there wash lose development their called an into risk at in that companies but you a the real Amazon like is, the a some the then, if a more real leases to their in on trying to along building, dig And deal, further whenever sheet Amazon perspective, estate. from into they that lines,

James Connor

roughly Amazon's to offers, that they've own any got And right their themselves a with any only from any their own throughout to consistent -- us would options their data don't never protect been asked office, industrial, time of they time. have strategy I first else. they and or very XX-year of the don't exercised not all question anybody their tell of with their And think I they Rich, of existence centers. has and has you, one right Yes. been

far don't buildings. capital expenditures significant and mortar, So the for that got are of invest low to returns they've been inside very in they've consistent want bricks to these go them they and too

now, radar. certainly doesn't evolve like will in even just that. would not about the appear change relationship pure fee -- in our a more thinking even right I they're of which case, that I suppose, on they into Could But maybe not future? it's tell are So you developer. the

Mark Denien

not only thing and not add didn't in have was market the why wanted quite but driven Rich would transaction it. Amazon mean we And the specifics project, building That's own is market to I be that did. the happened own we it's building, want because that way frankly, the this particular it a in. to I could on the it of

Richard Anderson

Okay. Good color. guys. Thanks,

James Connor

Sure.

Operator

question Michael line Please Our ahead. of the Carroll. go from next is

Michael Carroll

about seeing, Obviously, uptick guys guess more what's development thanks. is big behind a there? pretty what's I just past there that was you Yes, in announced you're can the your and more behind starts. I disciplined thoughts pretty the today. pursuing there bit guess the interesting you Is have years to aggressive? I breaking it of that mean, want thought a ground. know I I is little few terms deals talk your you get that been process stronger just developments over markets think that? new

James Connor

I'd Mike, make of a couple comments.

First of of all, opportunities. all the lot we've a so, got markets are strong and , very

those who now our us is, year, Jersey, New Northern see more probably those years, California, been have incredibly development on on volumes. impact us, strong. infill take teams to as they younger are the the we starting together, while about to developments make Southern margins starting and many get really talked our ground a or teams on newer, Seattle a you're think, are but California, two are I in earlier, of put And for are to an for impactful that

higher our opportunities So that's and development see those think us one I I obviously think things to continue to the that's pursue you'll of contributing volumes.

we've going be think, that there there and at opportunities of around we'll tell we driving when continues more or And pipeline can enough continue and build-to-suit versus XX%. But and that to we'll But and advance in below what's our reassure plenty do, work that try great we're build-to-suit there to keep still pipeline execute dip value try money that. spec put spec, of think to we and not our spec In for this there. across got out guys that. terms about to is we're creating quarter's we you we're and afraid us prudent opportunities to on just building leasing less us I the in country

Michael Carroll

Okay.

that today, in start development elevated these So mean, beyond? XXXX levels can that we're I and seeing continue

James Connor

guidance. that a right say. General probably can the Counsel I we've now, good down me don't pretty kicking telling that is hall sound like been might Mark's I know Yes. My but on me, running run.

at economic think last the you If we've feels this guidance in this done certainly like macro they of up I strong continue the what long as put years, look continue to we year, as it numbers. been, can our drivers and marketplace three have revised

Michael Carroll

you. Thank great. Okay,

Operator

Mueller. line question of go Michael Please next Our the ahead. is from

Michael Mueller

you Hi, time developments? up spec it's just wondering is to the taking what Yes. lease was the average I

James Connor

months we've months averaging probably been right years. right at all which and consistent the last we've along in averaging been underwriting months, for XX X X now two we're Mike,

change So, underwrite continue but and our months. maybe we're X year right should we one to we underwriting, at

Michael Mueller

it. Got

that Okay, it. was Thank you.

James Connor

Sure.

Operator

a follow-up from ahead. Frankel. have Please Instructions] [Operator go we Eric And

Eric Frankel

Thank you. Yes.

they're thereof? good very I'm of question the a box up if taking at is over activity it's big the just last leasing. e-commerce, all guessing some Has or all what overall exclusively it, they leasing Just wondering I'm change few call the years little it and customer three or nature is doing? four combination of were, bit less on than the Obviously ago. probably business-to-business, Amazon years that

James Connor

two haven't seen to I food, all and it's is a Eric, it's quite and been We get did you, clients. the In the products really strong. The that's very four would XPL ebb then than you tend would nice been more they business amount can't The for one direct or quarter, tell get that guys, others. grocery, But and particular across quarters liquor flow tell the this there it's they we guys busy. sector Yes. get then consumer have anticipated, I e-commerce the with XPL would and deal combination more I general, we but busy a board. probably really any driving thereof. say they has

Eric Frankel

Okay. Thank you.

Operator

at you. queue. this further there time Thank in And questions no are

Ronald Hubbard

the quarter Yes. our today thank we you. for and third look call, I'd everyone tentatively forward Thank to call like XX. during October scheduled to joining reconvene for

Operator

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

disconnect. You now may

Duke Realty (DRE) 2 Aug 192019 Q2 Earnings call transcript