DRE - Earnings call transcript Q4 2019

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Duke Realty Quarterly Earnings Conference call. [Operator Instructions].

As a reminder, this conference is being recorded.

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

Ronald Hubbard

afternoon, XXXX welcome earnings Good quarter our and year-end call. everyone, Alicia. to and fourth Thanks,

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

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

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

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

James Connor

Thanks, Ron, and good afternoon, everyone.

saying Let revised me our of start outstanding XXXX by exceeded XXXX We our that guidance Realty. throughout for met all or year Duke the including another year. goals, was

from up financial that We also capped a off for the year XXXX operational quarter sets perspective an and us with start fourth great to an beyond. and excellent

highlights U.S. at recap were signed stabilized leases, XX% just starts rent and were portfolio at of our full growth at rent nearly some XX% year, our throughout XX% our about on property leased We've and coastal We that XX% increased respectively, expectations. X.X% basis We same-property XX% X completed numerous in leases and green ESG guidance REIT which that manner million $XXX million and an the our Tier of revised AFFO million leased bond and by average industrial the most and are of our we debt raised obtained dividend leases by $XXX on me of development second-generation at of raised the XX% X.X%, ESG $XXX company in billion million we for adjusted square year, run XX offering XX.X%, cash new placed We million XX% grew We FFO in-service renewed Let GAAP now our We grew service markets. first exceeded We acquisitions. common of including portfolio and an developments regular respectively. X.X%. growth leased. X.XX%, responsible of NOI which $X.X finally, $XXX and of commenced with with achievements. yield equity. by preleased, an about issued quarterly of an on an feet to of the average. $XXX a culture And We outstanding average dispositions on per share year. our in XX% of continue million maintained from

fourth market our base turn Now cover let the cover and Steve to to me quarter on touch it Schnur -- over the to fundamentals.

Steven Schnur

X% Thanks, Jim. about for nudged year the by end I'll million of rates quarter this year X.X% vacancy up base first by the demand about the to square We X.X% X fundamentals. on market XXXX. feet, the and for during continue the about the under-construction think X.X% exceeded feet about was earlier the at national square important million about of million is U.S. rents across I X.X% The XXXX about note at year. XXX vacancy over average. or XXX that the and happening, pipeline Market country the grow basis stock. below points to to from touch anticipated square in which full it's about feet long-term overall XX Supply still prior at at year-end

our tenant X.X%, approximately is to and list, the our less X currently in North submarkets total X add is these of total than now quarters, submarkets the last years quarter up we last few over next discussed us NOI these submarkets mentioned we there to a that add out roll exposure If of revenue. the the balance. for are X% watch As handful of Houston and

development not activities. the manageable now they're expected XXXX submarkets and, yet have of obviously, exposure these modest, high-supply we to our So focus

remains Moreover, exceptionally and in grow. solid submarkets in the and the demand very focused U.S. to strong we're nationwide

us. excess all of We In of square record entire we square leasing feet signed million X.X X signed an strong with mentioned, feet, demand square feet, over Jim for was finished X XXX,XXX XXX,XXX in for well-located as continued of of million of quarters XX a over had leases XXX,XXX which average spectrum. the leases of across with quarter feet the and a year, our a feet, consecutive of string leases strongest X leases fact, executed, which size demonstrating spaces

addition, lease was business Depot, Foods transaction the including quarter X.X repeat term and lease the transaction Home Barrel. years. notable few were with during customers, US average the Crate quarter we this Samsung, more and In A signed of Amazon,

term got also expired GAAP in rent the had New of excess third late team in Northern known when growth a front expiration. new We to Jersey, XXX,XXX XX%. facility in backfill XXXX I'll a highlight of square years, has of a it of lease a a an lease The lease of XX our foot new where in XXXX. signed incidence quarter

and on still We of about projects, also million build-to-suits, months quarter of outperformed which projections all space under-development XX% signed feet original rate. tremendous had spec rental a X.X X recently we underwriting first-generation and our excluding When the leasing side. roughly by square on the completed on lease-up or

to e-commerce was And entitle. building and by building in a before may project signed a ground tour of in for property you November, NAREIT broke in years million have land Southern a It in square early the a was We spec entire we these 'XX. have lease our the completed, of California assemblage One parcel major X X retailer. that took with seen November. some X foot was

Meadowlands this large-sized expertise demand major user e-commerce as to as New infill another yet mid- is and markets. for the immediately in believe foot well of our spec example and, Jersey a entire We for lease in building. The fourth facilities the the was development densely-populated with quarter the where XXX,XXX facility in completion, a submarket, e-commerce we second signed example upon delivered a

The full lease and to XX.X% with our end, led GAAP realized combined XX% with the quarter XXX,XXX size, by At year for quarter, the us deals growth for fundamentals, XXX,XXX portfolio growth rent we of the great strong quarter XX% stabilized looking under activity in-service another feet feet. XX% rent was leased. over deals for XXXX, GAAP. at for cash growth for in XX% and And

expect in portfolio. level the the rent in by to We single-digit be supported lease which upside growth general, in continue over capturing XX by to a growth rent similar on expirations mark-to-market months, to be our XX% range XX% and, to mid- market rent XXXX to XXXX in relatively our next

quarter X projects projects These breaking on totaling a Hartsfield starts California. had also Home development a as $XXX XXX,XXX and million. on New over quarter, We Atlanta tremendous the Northern build-to-suit Jersey in well include for spec in Southern in the foot as Airport near fourth ground Depot

Our The X of at totaled in pipeline to expected billion XX% development pipeline XX%. XX% excess year-end markets. preleased is and generate to coastal $X with was Tier allocated margins

One on development. last note

established our to needs facilities responsibility our As attain customers you all the meet saw objectives. with from Not to LEED growing a but will future month, only this certification. recent a help to press universe corporate of of own a this it'll policy enhance release goals, develop sustainability we've earlier initiative

the of own and long over operating it our the portfolio. term, efficiency We also will believe improve desirability

for I'll disposition to cover the with And turn over it Nick to quarter. Anthony the that, activity acquisitions and

Nicholas Anthony

In acquire acquisitions. exposure Ohio. on We and quarter to had of an $XXX fourth strategy facility our coastal both in sold turn, increase our quarter, a million. $XX used we Consistent assets Tier X X and Steve. to Columbus, to X million facilities in with dispositions comprised proceeds Indianapolis totaling of Thanks, of portion X the active markets, in projects these we

investments transaction Park the call. I One of Florida mentioned was submarket, a square a asset foot South newly on the last in our at Medley XXX,XXX Countyline in completed quarter's

investment Bay of second in XXX,XXX foot square The facility the a California. was Northern submarket East

initially, these we profile minor higher some given we long-term the be anticipate the from of there'll growth dilution acquiring. accretion, While are trades assets asset

this continue the tenant potentially few in mostly XXXX to buildings expect a dispositions recycling Midwest Midwest We outside and to exposure. in manage markets our with

balance sheet to activities. results now over I'll our earnings cover Mark turn and to it the

Mark Denien

to the everyone. our to per for for the continued rent quarter both the was represented the in result FFO XXXX. was XXXX fourth of reported and an $X.XX XXXX represents occupancy. core as of annual XXXX, Good per quarter FFO increase. for $X.XX the share leases a increased and as compared I'm over to FFO increase that full X.X% X.X% Nick. growth core of year afternoon, well per increased $X.XX in report Core lease-up third new to Thanks, developments investment which core share quarter share and and compared an the second-generation on the FFO The of year $X.XX in pleased share share compared was quarter per for per $X.XX

to as was for and per full fourth XXXX for FFO, year $X.XX $XXX defined share quarter. XXXX for the NAREIT, for year million XXXX. totaled by $XXX AFFO share per million the $X.XX the full compared

Our a share increase annual a on results to adjusted represented basis. AFFO XX.X%

full and a on the cash growth NOI will and was respectively. a which continue rent as net lease the quarter XX.X% XXXX. X.X% within in growth anticipate NOI December for of X.X% properties, strong was the for was driven offset recently-developed and same-property fourth basis a quarter growth was X.X%, quarter, growth XX for of our X.X% basis robust decline We Same-property properties XXXX, total X fourth average we the operating new of commencement continued XX, up point quarter GAAP keep a pace development the non-same-store from a ended and net on occupancy Same-property months up months XX income income XXXX. operating be growth, from the basis Same-property for portfolio by to of source starts. year which for

first of of U.S. an During face at by $XXX a in issued X.XXX%. the quarter, such the we bonds, green rate the million issuance industrial REIT fourth

and in $X.X XXXX redeemed of maturities were debt no now $XXX We early also significant which notes, no to borrowings until billion our XXXX. line on XXXX mature We million with finished set credit. have of unsecured

proceeds of received the from hand portfolio final sales. cell. end with payment $XXX are the medical We dividends, to the available fund cash growth well at earlier month asset this which we million after XXXX exceed as seller million of and to XXXX, Annual intend for for expected XXXX office expected from funds on beyond, million on financing XXXX our in $XXX as in reinvestment $XXX that

opportunistic to with and expect growth issuance, increase funding in able of leverage we levels. potentially sources a these be continued moderate ATM to With finance equity

to guidance to I'll our turn it provide back before I get outlook a Jim into components. macro over

James Connor

Thanks, compared tensions, currently Mark. strong XXXX, recent outlook relatively be labor week. news From to environment continued around steady easing from in XXXX to markets upside expect by with X%, we and perspective, with earlier as evidenced macro this consumer trade the some potential a economic GDP the forecast of confidence

today pipeline not of earlier. alluded bit a supply the to is Regarding elevated, fundamentals, as real Steve estate material concern, but

fact, unleased basis I'll I've averages. a U.S. still which downside pipeline, rates national square only the feet points once estimated If million would which XXX X.X%, historical vacancy vacant segment about In of the will rise share complete, remain XXX that statistic done below to before. is in the

if environment and supportive the of depicted and, starts. Our view new market continued a the growth is sets pricing supply that remain of picture submarkets constrained, we maintain as majority a just for power thus, quite macro overall positive and year fundamentals our up development can steady is

over With guidance XXXX turn Mark to our metrics. back that, discuss let it me to

Mark Denien

Yesterday, for share core FFO $X.XX Jim. range per Thanks, to per with $X.XX. $X.XX announced share XXXX of midpoint the we of a

between share a X.X% on of AFFO adjusted basis in growth and range X.X%, midpoint to X.X%. with announced also the We

be portfolio to in-service range average XX.X%. to is XX.X% expected Our occupancy

of decrease growth as Same-property in largely to X.X% our maximizing occupancy rent of X.X%. focus growth leases when same-property to we as actually will growth at by projected growth range is times temporary result we periods in expect in be roll, driven which slight a the may on rent NOI portfolio Same-property vacancy.

expect to we total did we XXXX is some during some we to to lease re-leasing leasing being of on expirations at -- increases strong approximately our early the favorable pull level able our expiration result able the X% environment, XXXX current from expect rate a to that take the to In portfolio advantage rental our pull what into year. of into XXXX rental continue new XXXX be renewals low accelerate teams Similarly, XXXX. in of very expires expirations of similar addition, rates. efforts lease to This

of Midwest pruning-related, expect from certain the in range come alluded. million capital we The submarkets proceeds well recycling majority modest Nick the $XXX front, $XXX expected building as On to managing-tenant of to exposures are dispositions as million. dispositions some from

Development a at $XXX continued $XXX Tier $XXX continuing X million with about target XX% million with projected preleased. starts range maintain Acquisitions are million to of markets. focus a in are a projected to pipeline on range a a million to coastal $XXX of in

continues XXXX. guidance initial of pipeline Our we the to guidance build-to-suit higher remain XXXX and development than our prospects is robust, provided for

range by the $XX million $XX Difficulty]. Our ERP is expense impacted levels which of a to are [Technical was new million than system. lower slightly These implementation G&A G&A XXXX, of

estimates on we website. to XXXX current continued our the and More X.Xx. embedded a of side, we document are fixed debt-to-EBITDA be credit a rating. in On metrics X.Xx parameters of finance of Investor range range of staying assumptions These growth, our leverage be guidance earlier, expect to to balance XXXX X.X should well to able expect with comparable XXXX to X.X Relations within in of sheet components be And the mentioned capital available and range net to charge specific coverage are the while the the levels. sources of in

Now I'll final it to Jim for back comments. turn

James Connor

Thanks, Mark. a to closing, first Realty, many year like and highs. XXXX for I'd great In what Duke all-time reiterate with record was

balance been XXXX ahead been to our to, growth will it's and value as we high XXXX, XXXX. alluded future. pipeline company Mark margins. is As into exceptionally pure-play on strong good achieve just to markets, With a look our since operating as we results positioned ever type in our ground fund industrial of create we've development about able of teams the in creation our best-in-class growth very to beyond all sheet, earnings at The well replicate logistics as our ability the optimistic remain the of becoming into

so. We our Tier grow coastal ability to our have -- markets and developed ability do demonstrated continue we've in the X to we'll

have. us thank remiss colleagues if continued of their their didn't want of at allowed our I'd all level the hard our success to that to recognition the Realty my support has dedication of of also achieve good stewardship Finally, investors and I and we be work for capital. Duke their of thank I for invested all

up Now it open we'll for Instructions]. [Operator questions.

Operator

Instructions]. [Operator

the Manny comes question Korchman from first line Citi. Our of with

Emmanuel Korchman

gotten Nick, this to tenant and weak but of trim managing there Or be big I those on exposure tenant think you where assets larger from Is about with too tenants? it then you mentioned to that want just is issues? that trim you exposures where some exposure. Mark think selling tenant talked first exposure manage repeated, could tenant fact your you've the side you

Nicholas Anthony

we years, Manny. we that a latter, business over tenant consistently to have lot more do Obviously, prune of done of we the assets continue we with the to a It's large to do business have is continue those some with. this them. And as

Emmanuel Korchman

appropriate determine revenue Are the teams guys control touch and terms or a have Or and rate more in your to not? occupancy is revenue market between then a using you building what's and of it system you and rental to retention of And managing sort growth, in place? do management feel management just system relationship that?

James Connor

our Yes, market and we we market We sure compare system. have what projected data fair do that Manny. pricing. to get is We've we're deals rate deals make forecasting budgeting with with got basically part downloads getting rental can believe of

So we capability. do that have

Operator

Our from Anderson line with next comes the Rich question SMBC. of

Richard Anderson

e-commerce, couldn't out maybe the figure condition question of for that. of damaging X-X, I so oversupply. been the queue, In not a has a for sorry Jim. there age Anyway,

things growth. you're stop it fairly could to years. perspective when an like? have what an oversupply going any just Do market it sort Do obviously, a national easing even like? sky the substantial because, e-commerce correct think that's of of of look think have the an vision of a sort that here. in sense past I your still over what might situation you several do I is more those rent of getting would of growing substantial off look What a to drop event? ran guys wonder be trees be or type of now, Because from you

James Connor

into Rich, in we the specific in about population And we e-commerce regional limited remember, more around seeing and, barrier companies desire major talking I their oversupply e-commerce think consumer major time that submarkets. we're what entry. would that. what We've that development most have and Amazon different is is financial don't won't they national are to get much today starting seeing think companies at facilities year But for already was the in Amazon you typically most they closer markets. couple last-mile is one to healthy not made I companies the promise The extent fulfillment correction of with have to would otherwise point is your in I in where the and lot being the the Well, out are of activity that generally all oversupply. and primary and of drive not of oversupply are to XX-hour that of answer place the the areas, a let in low a a digress submarkets me handful I -- retail industry that's spent a But And about closer question, into to what those pretty be ideal ways. to to the Most you're all is quite think there's submarkets looking candidly, the mean it their greenfield others oversupply. today crisis. ago. today of

Richard Anderson

Okay.

do perhaps as have portfolio, the smaller you lot so that to yourselves of moving mind, you categories get business do And a e-commerce but time? different-sized Obviously, in have in? the closer with over see in evolves you appetite an

James Connor

make would of couple comments. a I Absolutely.

have Amazon major get Dade Southern quarter, our much for If the mean, East deals infill and from the Steve XXXX up in same highlighted of we teed in down California Bay, touched in San the the that Home County on fourth area, a closer in with just that Francisco I can't market and tri-state Miami. projects Depot Meadowlands, you've covered in in in the you redevelopment the the lot transaction

So would of Tier his footers, make, if Steve the love focus But I size you coastal to will quarter But square was that. said you we that X continue fourth from markets. we comments, average all and get deal million on see I in those XXX,XXX as headlines the other feet. in the our comment lot think -- us in a

XX,XXX footers. square of million about other and square the not it's footers with We're mix. doing plenty So along XXX,XXX

the better been growth portfolio. couple the development It very performance is quarters to seen in Not of the gone think trying growth broad-based bigger to square for smaller XX,XXX that from people. rent see the but that happens that XX% our to buildings, development. quite in combat through the We've feet buildings continue we than have last take focus And is buildings us people of just pipeline the you'll just on buildings. to the haven't to candidly, has, we bad. rent and in better just buildings million smaller the from And feet. a square Steve with be time bigger time, X

see to focus us that. continue on you'll So

Operator

Our next question comes Thillman from the line Baird. of with Nick

Nicholas Thillman

It's Rodgers. with Nick Dave here

Looking at like like looking this and a into that Is year run to $XXX last good million $XXX dispositions, roughly you XXXX? $XXX million million had year. around rate

Nicholas Anthony

little levels few so. for would those run yes, -- higher this But year. that years. I would the say, next Probably at that a we'll I Yes, consistently say

James Connor

like. that would the all to I depends it is, looks Nick, development pipeline variable the add what

course lower perform end obviously, we XXXX the was start year, activity into we last year, at development development levers able $XXX or the of were increased XXXX, the not help million of a to dispositions the but, that's markets $XXX Our did going that the can well the just at simply over by little because activity pull million. has particularly accelerate of of guidance and to fund one

Operator

Jamie Our Bank of next of question comes from Feldman America. the line with

James Feldman

question. I you want Great. to And the hear back can go supply to me? --

James Connor

Jamie. Sure,

James Feldman

supply to discussion. good. Okay, to want back the I go

not-oversupply playing oversupply you mean and when fundamentals broader pushing you like people specific I'm and markets, submarket, how in people on And or our submarkets? submarkets. aren't Like, just same on different you're concessions just just an able market? you impact about still treating how these does in within the oversupply completely curious, talk them color to I push the that's like, have that as rents So back out give that. Can anything some the

James Connor

I-XX Steve Chicago's watch And when Yes, in side, But any our XX the give in Take can the let more the that of we've down simply in corridor, that and they of although, have the you color. probably XXX customer take particularly different kind of have year you bit huge they me because off half second start base. little Chicago. away, and a and which a major vacancies are had with would basis I and metros, like to of you list, past, talked box then you DuPage markets in probably big took softness that but in XX points. miles market, suit County O'Hare, Chicago tell

are to few to you'd see market. people markets to market I-XX take softer very And the Dallas softness market few prices those people the DFW south were in and down. drive of to that advantage going market. our in corridor I same South if to one to go There's the in of the think the the to leave advantage So go that world of very take leave going you miles XX are and the of Dallas,

it they they people where could because generally, happen, need Now where are be. are but, to -- they that's

Steven Schnur

submarkets, your out there that. dividends rep think, the but like is There to have tenant the advantage that some local markets try and your an there's is clients, I is think knowing their obviously, Yes. to do for cases product, best knowing some -- drafting pays Jamie, of I'll operating I it our and they add the well. with folks teams knowing some can we very

James Feldman

the that weaker when more bleed any submarkets, pretty you market? Or your consistent? about have across are there So think do entire it's

Steven Schnur

of on drag it there's I-XX. mentioned, kind down bit south in the if think is. looking requirement at, I and the with use use Chicago, far metros, that No. depends the how I-XX I'd a what depends it facility Again, like Again, there that of I South of ultimate say, it Jim size big mean, what Dallas. the is little same you're is. south,

to need specificity if of level to that's really to affect drill or You you into understand not. that going

James Feldman

And think year, Okay. out ended your last you I at -- than I guidance about you're growth think much me, out came a then X.X%, lower you if at -- finally than same-store higher much you NOI you think that. came and ending for rate

how you're getting conservative what you higher you're guided to -- it year to your I think year? baked what -- initial talk now take initially like a $XXX even Just this billion. finishing numbers you estimates? you got just into million current Can of kind $X.X And your how how and is through the of lot for starts to or lower? the would at much

James Connor

years guidance able it's to, last spec well of focus the we Jamie, occupancy out Mark and would budget What an is, start that and think what tell our year conservatism and We build-to-suit not Yes. continued lead overly as comes it's be start from seeing today, think the did that before, leasing time chime become outperform alluded into given service we're it as of budget it. I in to I'll first-generation with our It's there. our build pure-play, process world, appropriate couple would amount in It's don't Steve to activity We you aggressive We it can put to overly August we rent everything in. up to keeping and a then the up literally there. the us above our second-generation on pipeline growth. last has, XX% that budget since in space or development keeping aggressive. preleased. like

So we did That continue will the outperform. we give do ability that, to to which us can last year.

that's is, are to come because future that XXXX. the fall number, this to That's little going if other hundred starts by, XXXX. not from earlier we've talked even there's starting development that's those million those buildings got in a in line bottom Even we're to to pick which that new very, growth we outperform in several income The they're thing, remember if you beyond, very year. dollars, build-to-suits, the going about on

So growth focus all continue keeping occupied what is rent building continue we're metrics. leasing, will on XXXX doing for XXXX. in us to to But pipeline allow and the in the to and growth, outperform

Mark Denien

build add another virtually happen in and to to that, had there. or tenant year be perspective, a the not in prudent some doesn't normalized But issues believe we it portfolio bad debt bit guidance upside no we 'XX. from a more little on our same-property And Jamie, a we would I perspective, default in of same-property only or from thing 'XX either is it If amount there certainly any successful have that, a of would like based having that. issues budgetary

James Feldman

Okay.

your same-store that Is a So how points growth much -- how drag? of is? basis many

Mark Denien

bad which and same, debt, it's it, want to sometimes are whatever occupancy, basis points. XX one about look you call the at you If

James Feldman

XX, X-X.

Okay.

Operator

question with next of Our Malhotra comes line Morgan Vikram the Stanley. from

Vikram Malhotra

overall. to may across lagging how smaller are look fact that to supply alluded numbers I'm cash numbers sort Just ones. you spreads. just small box, the of maybe assuming that clarify XX% give can you larger wanted And so big of giving, XX% chains, the on the that were kind sense you their to, of sizes? a were box property the this, of that, rent I alluded retool those peers to And to the just the starting retailers related rent your now us to one some

what big a well? demand. box there's seeing that pickup Is as And so in you're

James Connor

much great and you we us. consumer But supply nearly get products at credit XX-hour one that's reengineering one because, things delivery. tailwind been chain the retailers the expectations overnight, effectively, other to, set has is Amazon Well, as alluded alluded has of to in consumer for earlier e-commerce that doesn't is, a as their calls

to if compete, a you do So allow have you want supply that place have can chain to in to you that.

So of you there's I'll then Steve that us. that's big And obviously, of for repositioning. been benefit been, some the let lot another give a And details.

Steven Schnur

I before thing side. get I'd the add into guess one rent growth I

in a from demand widespread. and it's my broad mentioned Just pretty comments, I standpoint,

beverage, I that XPL, is e-commerce, deals and past year. think leading well or the retail, demand category saw some food we auto this as and

to rent back growth your I'll our by size, on question So breakdown. give you

XX% For and cash deals 'XX, XX%; our and between XXX,XXX was XXX,XXX was XX% cash growth under XX% GAAP our XXX,XXX was cash, to was was GAAP. and feet XX% over cash rent XXX,XXX XX% XXX,XXX and GAAP; for XX% and XXX,XXX XX.X% GAAP;

particular, good that of quite So been big a very of in in out to past. as the box some again, assets own, think comment, across have opposite the board, I Jim there made the the we headlines

Vikram Malhotra

Okay. for me. last then just Great. And one

we'd would step "Hey, that tenants it know, of don't sort some So of back supply -- just do want but it get any because call cited of not the some to certain say, rents, I just you the of seeing fully and more XPLs have if to a submarkets I and of or are operational Are the you or markets, markets of to but of slowing because you if because hesitating issues?" go -- -- markets absolute down call how where level list, labor into find or maybe this there watch any challenges your labor. labor

James Connor

is we our something the whether to do yes, that land. well look I mean, have want side, tenants. It that But to there of our studies major and labor as I it as how relates so make labor is big we very the we Yes. think there. bit we're there's surprisingly, -- take prepared ones and and is issue address parcel overlays submarkets, you're as an to at on oversupply specific for oversupply serious any One, with actually on two exposures concern. a overlap guess, the Labor talked it mentioned is we say, big I labor investment that if land we little things. I'd in we've pretty markets issue, think looking I that a every And well or a about you what not issue standpoint. for from

Operator

question Street the line Green with Eric next comes Our from Advisors. Frankel of

Eric Frankel

and GAAP difference what of the growth? cash can your growth just your per Just same-property NOI NOI same-store the guidance, provide you drives explanation between

James Connor

the we Probably Yes, biggest thing Eric. look the same if added XX at to XXXX is property, pool. properties you

stabilized kind properties So XXXX. these of end are that of at the got

full if So now time the X years. first to it's you've XXXX, you got go

add X/X/XX. XX on you were all which already leased of in, So properties those most

but So burn growth rent X, get growth through is some at rent either exactly the have cash free you you least. some rent do and/or rent bumps GAAP the off

the driving the gap that's GAAP factor and that, little cash biggest So bit bigger number. between normal probably maybe a the than that's

Eric Frankel

acquisition it just then little I that quarter, think bit your disposition investments get is actually yield you a the always narrow than looks you rates. And cap Okay. on this lower Nick, this per on But you've your a say couple somewhat years And actually can color of a basis. fairly deals your kind actually what you in of Maybe provide on the on struck? just you some relative X.X% because looks yield acquisitions expect high? -- quarter

Nicholas Anthony

trading little this it a partially of was of quarter, was in industrial industrial. it pure because for quarter Yes, we're narrower terms more a

had mix. have assets sold couple the pricing. got some actually may we And We a just of quarters, in spread very other also it's markets little bit the Midwest made good other our some Class that in that of flex assets Some a wider. there A the facilities or

depending mix, So on results I should similar the going on see a forward, spreads. you think

Operator

comes with of Our the from next Frank line question Lee BMO.

Frank Lee

of with this expiring portfolio able you're a only the renewals, complete X% earlier, mentioned early You year. of to decent amount

a Just off bit want for higher how do to sense versus a renewals on you balance decisions rents? holding get of potentially early

Mark Denien

bit. a chime little I'll start in and then maybe Steve can

what kind XXXX, actually expire. leasing we to of If basis you look going doubled on amount from of did at renewal we was a the

look happen let again think to keep only and that, we those thing XX% roll just of how comes can part, The about you're would that actually that that not to at renewed I By early that's -- quarter So a expiring, date the quarters if lease mind XXXX, lease the we that leases. X% for haven't early. renewals, when couple forecast a But earlier, lose look I'll Steve of a talk we the in to years maturity it got closer the in most talking comes, if it. already about and going of -- we're you you early. talking talk time We're economics, tenant. the couple

XXXX talking of doing that first the we're are be to and likely going will lot second those and deals be of So quarter, third in a be about expiring in now, 'XX. deals the half we'll renewals the early

So Steve they're look an at from I'll it we let then and not how extremely early, on comment economic perspective.

Steven Schnur

I a mentioned, Yes, of this Mark market. our -- it's perspective, is operations front as an from it's getting out But think an asset where landlord's focus still of management exposure terms in is. in

is discussions. in critical welcome call, these, table, to an want happen So deems renewal term -- discussions facility, and many those of up the side what the tied they the investment other lock tenant facility want where to their mission longer they we times, make and from we'll their early

Frank Lee

and able Also Tier down, spreads expectations a Okay. rent then mentioned non-Tier to versus your in level remarks break growth similar that that this Are your of prepared you you -- expect X rent between X you markets? year.

Steven Schnur

rents rent our has consistent markets. And term, of have of lot pretty a because, markets. markets lot obviously, they in got a do that that growth embedded in a noncoastal growing coastal them. It's longer-term with faster are the are Tier across several But to we've actually of years all in the lot than X leases the lease of

across we're of seeing pretty our consistent So really rent growth a all markets.

Operator

the comes next Capital from question of Michael with Our RBC Carroll line Markets.

Unidentified Analyst

This for is Jason on Mike.

that tenant comfortable what Nick on to with level single comments looking of exposure. around and dispositions. follow-up you're concentration a wondering before Just trim Mark's begin you with I'm

Mark Denien

when And to XX%. think. I that getting simply was have Well, X.X%, that said, approach what perspective single Last X% going of we're from we somebody NOI concerned of the we we've always number because business with is tenant an seeing year, approaching going our would XX%. amount that start tenant largest

manage we're the try and trying select the pricing targets that. and with appropriate and be most Look to portfolio proactive and best peel tenant portfolio, lease out the to get expirations So at on. of just hopefully at our that look

Operator

John line comes with from the Guinee question of Stifel. next Our

John Guinee

be If might there If and million correct? million. Jim, looks for a held XX down that's sure say, square down typo in do you're those square your foot, feet land buildable only it me it like not assume, wrong, And in reduced months, are if your development have million capacity. per about $XXX correct around and you XX but is. to, you're financial the you've where $XX by down $XX last statements, And of numbers you say, inventory? right, I'm then development your land

James Connor

John, push anticipated. little And favorable lower we a the probably actually we our would but quarter told more the days and numbers of closer a have finished XXXX us into Well, we are year little bit XX that -- that had than robust first quarter closings assure the I you in million, I number to the ability be thought a some correct. fourth somewhat $XXX that's you ago land to development activity balance. gave would

also is the that's land You to contract. books have remember, It's control not that under agreement. we on yet option or under

have we or do So there. referenced million land just access to $XXX more the that's

of tell challenges. I biggest our one all talked we've land is and will And you, about this,

area better the ourselves. different in for more we've infill lot in every out the markets. able been opportunity sites, we've Tier markets the that's the where to particularly, X talked an differentiate Quite complicated the And about the pursuing candidly, day, of are We a site, us. as coastal

development to us So with making that entitle X a see not cycle. little the on last are monetized year, bit we're $X land or of careless in that's billion going one are probably take active the that, in bets you I probably million just at or to doing this years we But think $XXX point the put in given the into pipeline. X development. the be cycle, to really acquisition will land continue side, land the we very huge caveat to where interested

going. earlier we million sort to the will that answering land. million keep pipeline replicate can have As of our I that, some We'd build-to-suit worth occupancies can $XXX keep to buying We us out up. and like said, of another questions, $XXX

John Guinee

the you And pipeline your to Exchange dividend where Okay. was dividend what them? taxable versus income? payout need if increase? most recent be how Mark, then are much sheltered Nick your And in any XXXX against disposition can And or to gains a ratios up relative

Mark Denien

to our development. been We're that. pretty do XXXX was increase quite in development our XXXXs. up but our -- last quarterly much of our able we those October. raised dividend it, We been John, all to XXXXs $X.XX because It's shelter -- in we have Most we've but we've gains the somewhat against Yes, able through complicated, October. frankly, dividend can been

the my those XXXX I able our XXXXs. note creating $XXX prepared we gains to -- we been the that income is collected medical through coming have of installment from in office final we've So remarks cell. last in on taxable mentioned Nick's million. year the the shelter there that

will but well. gain So to to that another our I XXXX we have But long-winded think dividend requirement, trigger as raise close. meet in answer, we're don't pretty our

Operator

from comes of the of America. Bank Jamie question line next Our Feldman with

James Feldman

could think what this year markets I'm market sorry, your Did across be say missed rent if -- you guys I rent you growth? it. growth

Mark Denien

kind that around XX kind to it to Yes, that. upper better mid- to months, or next Jamie, 'XX, the what think is XX was pretty similar in a of GAAP look on little said low of Generally, maybe double XX% we cash I on to going and XXs digit, the for think we growth rent basis. a

James Feldman

-- thinking leasing This or market actual is about your growth. rent I'm spread

Mark Denien

we'll of sorry. which mid-single higher to on I'm coast. think the think I 'XX, Oh, had and part U.S. in the in Yes, market is country, Jamie, growth we digits similar of see single sort the I we you'll said rent what digits comments, digits my some see to double probably middle in

Operator

Eric from Advisors. line do we a of Street Green Frankel question the with follow-up have And

Eric Frankel

expectations of for how your accounted starts' me? for, understand Can of development you just me already or 'XX kind much -- called for is help excuse

James Connor

For development starts? our XXXX,

Eric Frankel

Yes.

James Connor

we spec own I the either we've mean, control. of of would house. with the I projects Obviously, got tell you, that build-to-suit short or side the land identified

Our question? good, If build-to-suit answers that but looks component. pipeline your today variable the that's

Eric Frankel

Yes.

James Connor

year XX-XX. XX did should this XX were build-to-suits. say, is were spec and projects mix That XX I in and We XXXX,

Eric Frankel

kind that beginning the of activity then year, generally? And some is towards end Okay. dependent timing or that year, the investment your just to Midwest just of is sales of your of be -- on the the your of year, this going

Nicholas Anthony

sort our how out. It pretty of activity, on evenly investment we year. it stage will be it the depends throughout That's but spread

we've closed this one quarter. so asset think I far

second be third will and heavier. first and little might I think quarter little maybe quarter the a be lighter, a

Operator

[Operator with Mueller JPMorgan. Instructions]. of And we a question the do Michael line have from

Michael Mueller

the building the comes is to consider mix few years? wondering starts. than be of was saw infill you when Is past any what it sizes XXXX over development to different or that you I would your

James Connor

don't I think No, so.

is to the You of the max have lot by driven building. size building a of the the out infill, We're to size. remember, trying land simply the

one mid-sized feet, the So one in XXX,XXX feet. XXX,XXX building of it next square be be might a might case,

target not size that trying the one it's we're versus other. to specifically So

trying trying what maximize we're the On the to infill, we're do. value. really It's to

Operator

next Our the Yulico with question Scotiabank. Nick comes of from line

Joshua Burr

can development exposure Nick. Josh Tier breakout goal disposition the is you give you're current talk this and for X development And higher markets? your guidance? to the in about year, that how you on Burr XX% And And if Could This given markets? could then see X your trending? to of you Tier spreads that the a getting us get you

Nicholas Anthony

continue from the X, a coastal asset to moved of of that value to on gross X, value overall, land XX%. XX% our just And by asset on went X we just Tier XX% on year-end bank we grow. coastal expect to that XXXX. Tier gross the -- from basis Tier XX% XX% Yes, with is we start to because in And I'll then that. markets, Basically,

are So steady, the coastal growth most of Xs is holding Tier Xs. noncoastal basically the and the Tier in

Mark Denien

would yields. I then just And on comment the

the healthy. very on the margins tell still are you question yield very, think had I I'd spreads. a you,

I think at perspective. our XX% margin pipeline whole from a is

to expect that we think I continue.

high-barrier Nick creating a now but deal did the what lower. but really just rates on came are It great of a down. just we're that's down our year, infill because markets. more is the lower factor of because yield through. of Our during basis a It's development is And went in the come cap these yield value, done GAAP

Operator

Kim the Bin comes from Our next with Ki of question line SunTrust.

Ki Bin Kim

is how there. you behave I'm those higher at to or markets other you to becoming that in prone oversupply, exposure are and lower as that oversupplied. of don't like have maybe know for I seeing to lot Is back typical learned cycles, free we've just a rent looking a what the are submarkets? it But it rent? Going as submarkets TIs of lesson when in fairly those seen Like what kind

James Connor

rental we Yes, obviously, free rates. you're in in, entry you're those the that I about, barriers think creep creep submarkets concessions seeing seeing on to talked in We've pressure don't starting that to up. have terms seen of rent TIs

concern, you are else, gets yes, would mean So bigger lot a anything the I of of whether it's those tell the these supply. about headlines that I relative things. handful to or talked submarkets

to I still continue XXX we feet think we'll that mind, up, of good long as the space. you And keeps see historical to that's need did better keep in number as in XXX economics about average year and absorption million our than million. the of for

Ki Bin Kim

net in what are Well, markets? like rent declines think those the effective you do

James Connor

a say. worst mean, I submarkets, you've type that's -- mean the to But hard I I you've of It's seen maybe stat. seen probably probably XX% think nuance in declines.

Ki Bin Kim

into that I want I it say there's satisfied portfolio in? Tier you are pretty way, to Okay. buckets go Xs? you Tier your Within bucket, with X should do more submarkets submarkets X this movement or guess that think Tier last of those Or And you do you submarkets? kind even are within within just question. those to reshuffling what barrier the in you're

Nicholas Anthony

looking we're our improve Ki and it. Well, always I portfolio at that we ways Bin, can mean,

costal Xs. happy have say, an that either where in prune portfolio occur, that situated those while we asset would markets, we mostly Tier we Tier acquisition relatively now. Xs in noncoastal those be there a something that or that a very would will got to I may a new portfolios in it's right the going the out through with We're are for one and if had we're not or we've the of Xs. may X where times So Tier be submarket

Operator

Instructions]. [Operator

Ronald Hubbard

hopefully forward again. at seeing getting regional for like during as today. industry the to our well I'd out the joining as look Thanks, everyone year We to to Well, call markets. various you conferences thank many of

Operator

AT&T Thank our and for That service. does for you conference conferencing using for participation conclude today. your

disconnect. You may now

Duke Realty (DRE) 30 Jan 202019 Q4 Earnings call transcript