DRE - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, good afternoon. Thank you for standing by, and welcome to the Duke Realty First Quarter Earnings Conference Call. [Operator Instructions]

At this time, it is my pleasure to turn the conference over to our host, Vice President, Investor Relations, Mr. Ron Hubbard. ahead. go Please

Ron Hubbard

everyone, earnings afternoon, welcome our Good to and quarter Tom. call. first you, Thank

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

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

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

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

James Connor

and good Ron, Thanks, everyone. afternoon,

First associates, families we on and our well. your all are you behalf of hope safe all of of and

normal, and appropriate the person which we Our that today considering at prepared be remarks believe market NAREIT given than are meeting volatility will longer a not we June. in in is little

on are our quarter for opening are more first the year. will results, going remarks, and markets our the response the My I we detail comment what re-projected pandemic, team. balance on then our in of initial provide to will the and We guidance operating managing over how today’s team our to three challenging environment, highlights, our first it I turn balance the topics; of leadership to quarter is seeing

our great like have telecommuting. and thank technology we demonstrating amidst in would and the resilience around planning Thanks state-of-the-art are the interruption to who adaptability to I global the transitioned First, Duke Realty previous country team seamlessly steps, the business pandemic.

level the contracted our pandemic. this virus, Realty this health functions. throughout Duke ensure financial on government all to high CDC challenge of perform continuing operational to facets the everyone’s in This No and and with of COVID at the - of steps has are and a various from challenges one includes team execute to guidelines. line all continues and We collaborate safety and our team

We all started leases. $XXX fourth quarter. balance have was X XXX% growth our for our of operational bolstered debt of until financial the in We few developments and refinance. XXXX. with a achieved to million, second unsecured we We XX% issuance generation totaling an three highlights the feet Turning pre-leased. that signed square We leases. maturities now rent quarter no note And significant sheet million

Now of of leadership magnitude operating let as current the cannot of do our manage the environment. cycles, potential predict our by covering highlight me we the We coming the direction clearly focus and the or our areas following team timing of areas a change sense through within the but get depth we business.

actively our First, COVID rent and in we for deferral customers with for the safety certain entering of in and/or to into operational collection are of protocols dialog plan. issues potentially pertaining a rent, all situations, existing

safety, development very on government pipeline, protocols our any for Steve worker Second, depth maintaining in moment. focused in and project we mandated safety delivery on project maintaining Schnur schedules and speak are a more amidst will just this shutdowns. budgets

the we a just until speculative decided XXXX major deployment, few minutes. timing specifics starts, more more and to have on halt or on impact temporarily any expectations around dispositions Mark Third, acquisitions post-COVID will new capital have in clarity we world. development layout of the

manage are the of G&A the the savings recovery. pace Fourth, to economic implementing measures we of shutdown the help cost and depending length on

the our frequent markets, each and closely more demand monitoring of is trends Fifth, XXXX. we underwriting scenarios, providing tenant near-term cash we are in focused modeling on and supply trends credit XX into are updates, since team for forward expected the and both and flow monthly looking performance

roadmap lead of to our communicate as directors. weekly a sometimes meeting to and and And board well finally, the executive organization team our is daily as

operational the And to Steve over side. it let me cover to turn now

Steven Schnur

I front, operational feet quarter will the then March, the XX Thanks, collections. demand results, on market on up slow topic finally space. ended Jim. touch and The of million starting decision-making to even about strong market I will early review the given in the rent absorption. achieved relatively first of our lack fundamentals, overall with of And of cover availability square

Deliveries were million vacancy XX mid-X% feet, end. equating quarter to about a rate square at

As expect, you to in from the would the economy. demand going decline for outlook XXXX is slowing

of it predict of to to-date, direct-to-consumer through are April we this given the basic healthcare, of other While seen reverse the from trends of logistics course second and time as is leasing industries at important the type we demand demand. demand And necessities. too beverage, seeing and half a range March in difficult such food have and e-commerce

XXX And What bit this will scenario no of square at looking is be the an a rate million space I under into a demand think new as X.X% topic. know would if in May, not you on from offset and of the pipeline XXXX. demand little clear. completing yet in will bound we more vacating we today of to construction maybe feet, half about first June we market upper be the exact of X.X% assume get probably stress vacancy customers the But of to the

and inventory this of we more incremental inventory fulfillment stock demand space distancing XXXX safety direct year, home economic should and when and into stay this likely recovery. increase solid. given storage later the with planning for see area believe and the potential It an more will However, we stay resiliency fairly new social activities at of

think a starts, new fairly will we forward, balanced supply-demand as deliveries of peers and therefore, well XXXX. so have speculative significant I going have note date in I we, who public equation would a decrease our in likely see back reported is to that as also development it all pulled on

to solid still first first This to XXXX. the Turning portfolio, of our even square the feet very we mid-March, X leases. is market by higher starting of own with executed a quarter signing soften million quarter than in

included short-term which feet consistent is and it March past was our short-term Nearly with included activity. leasing and in performance were square million in $X - half leases, of of in the this XXX,XXX activity

include leases. foot April, a long-term feet quarter, first far the in deal lease a foot Raleigh. X.X for in Columbus with short-term we in square signed transaction renewal leases two a Northern of foot million in tenant a California, across square a early Thus in have XXX,XXX had XXX,XXX properties a XXX,XXX feet executed who These renewal Nashville new and XXX,XXX

the the As you X.X and during transactions of for can quarter and immediate see years. level lease stronger the re-leased is occupancy backfills, was of closed term with expirations an in-service quarter first When first across XX.X%. considering spaces by XX.X% lease we these demand currently our deals, larger our average quarter renewals and

XX% for rates. result activity a The led and the lease growth, to mentioned, XX% our strong combined as The fundamentals, in mark-to-market with cash portfolio basis. pre-pandemic quarter, leases and another of rent of rental is XX% GAAP on great about Jim

we and our in XXXX expiring of in addition, only X% leases XXXX. In X% have

the net These coupled compared of operating estimate, low much greater with annual likely other income expirations, a lease supports of to with levels volatility expirations. companies mark-to-market and lower level

Now I will performance. cover our recent rent collection

this rents, originally-built of of XX% XXX% rents we XX.X% April of and of February our January and rents. both As our a March over our now morning, collected have

about collected I XX% would we have to date. add that May of also rents our

a get if we go a detailed through from We have process request a we for tenant deferral. a

First, such programs. lending sources and facilities we as any their all government bank encourage the customer liquidity to look available at

we their performance. one improve statements, have if lending and and applied that reduce each are of with cost measures they government what checklist Next, financial they operating requesting their the a evidence programs provide qualified they tenant to other for taking

conclude process on review to credit At updated an staying of of and perform some decision then the power whether customer. the We we assess time, offer will type the deferral. that

months. it a base months three to is rent amount see paid deferral, of with generally partial within generally we months still six deferred to with agreements process, result months Although be back this early in interest to in the two XX these

we As for we a received last request in considered of It XX% release base. our reported that of is at note night, to from portion are only about these deferrals our being time. press important this tenant rent have

evidenced feet. environment tenants that the requests come more As acutely, under are as our our impacts the of of have definitely tenants from fact feeling XXX,XXX this by smaller majority

leasing government Until feet. there would clarity short-term and only development is than outcome activity a to XXX,XXX leases, done feet that less I tenants million shelter-in-place of have from COVID is add orders X of this more of a is treatments, also length when exclude the near-term COVID of you rent of on square of XX% date, regarding the the the the deferrals. we uncertain bit

rent dialog as Jim alluded with maintain will our his Going a maximizing on active with collections. our forward, to we opening remarks, focus and customers monthly in

Depot, longer under-appreciated few. Home aspect base, customer lease we tenants and Let UPS, a to terms a investors an top me Target, relatively out Amazon, we is our of just Clorox strong risk proposition, also horizon. Realty’s feel lower such it name reward equity long-term been have with Duke view our point those particularly including our this and for the Samsung, rollover, has with as that very Coupled that Walmart,

development $XXX We mentioned, ground starts, growing of strong XXX% projects a million, build-to-suit on as leased. also Jim all had quarter the spite uncertainty. totaling of broke in three We

pipeline pre-leased at markets. allocated X assets $X.X at quarter pipeline XX% these XX. development coastal of March was XX% to Our also totaled end Tier with This billion

incur to have deemed close had of and one timing businesses government XX the projects work them Regarding two we some sort back online. of various actions now our delivery with stoppage of of down non-essential, certain

only a minor be months as months one on to will completion that and only by project delay project next now three We back week. online two expect about

actively fantastic site impacts. teams been project we of engaging the the minimizing are level, prospective the At Duke a doing with and And have project contractors job tenants.

everyone have tenants’ It in not material issues are knows viewpoints. of we from any seems together. this heard We

all and open facilities. hard for business complete to we are our of working are We

economic development As upon have guidance. spec reflected our business environment the half speculative is last development second depend the starts will updated all new Future of of as temporarily outlook we the for XXXX. and month, in suspended

potential of a an that however expect would build-to-suit we solid capital forward. allocation going be creditworthy of do have We with customers projects pipeline accretive

had acquisitions we of of closed dispositions, a light building, square in a sale Louis. St. We As foot quarter XXX,XXX and XXX% on far the a activity. as leased

dispositions, on. expect, our reduced will for touch Mark guidance you As which have we

market conditions. number have later we do quality subject assets still to year, are a improving we to good expecting sell However, this that of

Tier will towards XX% funds. well disposition a continue our of as objective XXXX, of Our the to by geographic exposure end source activity as provide X contribute

find We and of on We acquisition to have some and turbulence see. side. sheet advantage of expectations that to in light connections quickly balance the industry the transactions react to have we opportunities opportunistic take also market any hope reduced the

financial Mark our I and now guidance to will update. results turn over discuss it to

Mark Denien

is $X.XX per afternoon, quarter quarter $X.XX Thanks, in non-cash per to and approximate portion everyone. Steve. to grant. negatively expense which compared quarter the Good by was from the expense general resulting stock-based core administrative the of of fourth a significant the accounting fourth share FFO for item annual first requirement was normal Core impacted quarter to share Core FFO XXXX. increase share per to a of an our compared $X.XX compensation of immediately FFO XXXX,

also quarter from this recognized Core rent impact FFO straight almost COVID-XX line we the was share receivable negatively per $X.XX of by for the impacted outbreak. collectability reserves

$X.XX first Improved growth reserves, with largely share increased core the collectability consistent XXXX. of resulting diluted offset from operating share of per FFO performance occupancy rent these and per quarter in

the with quarter FFO share $X.XX on refinancing debt cost share XXXX, first for for by decrease per loss during $X.XX the transaction per defined as the an reported NAREIT share of quarter compared we resulting of extinguishment executed from quarter. the from approximate per the to $X.XX We

compared quarter recognized the for during AFFO quarter. $XXX the of impacted the the quarter million line not XXXX. totaled by quarter first reserves to we for straight $XXX the AFFO collectability was during million

NOI XXXX property a ended for growth months basis XX, X.X%. the March on three Same cash was

and occupancy the XXXX. free this benefited property rent XXX rent first growth of basis NOI increased same off about to burn from compared points growth, addition the of quarter In quarter to

a GAAP GAAP recognized quarter NOI XXX X.X%, a basis reserves from rent as as the number this for from basis the point which due was impact mainly on lower collectability impact on non-cash a the through free the first well cash lack Same basis. of property quarter burn was than off

materials discuss our schedule I liquidity strong and new supplemental point XX. to that Page we a position want our on added on out

the completion available illustrated provide than to our development funds that more pipeline sufficient in for we schedule, fund reinvestment As including our expect dividends. pay liquidity will operations, this of and

I tenants would various to over metrics about is true rent next months. rent the deferrals on that from little various considering liquidity. and accounting our even bit to the cash few like of This when impact collections we forms the of of a certain may to relief extend talk impact the

collectible, really AFFO the and of are year no immaterial rent FFO, to As impact positive there on term short-term an but accounting there future be agreements on variances deferral impact extent beyond To or one deemed long could repayment any NOI be as stretch FFO. negative by in offset years NOI. and in no AFFO is impact the

any way be in reserves they uncollectible, flow for overall liquidity will impact position. cash any be a deferral rent short-term negative to will these not in impact it all on our be then To but the affect From extent and our are materially agreements a bad there cash included debt obviously metrics. liquidity perspective, will deemed flows

cash of Let are flows show you an the talking we magnitude to about. me give example you

$XX are million. monthly rent Our approximately billings gross

our of XX% branding our even tenants or end annual monthly value requests, that lease on half rent. those annual requests you of to XX% our and value be gross would If relief $X.X on gross we net lease deferral assume of grow million up an of

assume total XXX relieve all revenue. of XX% at gross the granted rents three $XX of months. about you of of for three that that months annual month, over If requests is This relief million of were each is basis points then

AFFO Our dividends million. approximately rate of less quarterly run $XX is

and level deferrals. even deferrals aspects my during of or not our Also, these ample expect $XX equate to This lost all flow. repayment even of million, deferral cover does dividend. periods liquidity we revenue in at we of this example these do So to totaling in cash have our operations

we In unsecured weather February that COVID X.XX% to mature outbreak, us million to the $XXX XX-year interest standpoint, the putting to X.XX% a we a $XXX in capital at proceeds ended which million an the of even XXXX, a June transaction bore From executed redemption XXXX. secure set prior of and of the of up issued in position notes crisis. coupon for notes rate and at of coupon used rate a early unsecured were more

we report stress have at REITs various of recently covered and Credit test this universe. ranked on XXXX. result the until Fargo’s transaction, published of any fist October strongest their Research on a do and metrics, to end of year debt liquidity, we in XX team As not based maturities significant projected Wells credit a out EBITDA

are XXX% a liquidity needed. This is source and quality. virtually Lastly, another very in high metrics ever not that included what these reliable provides institutional is of of properties if our unencumbered funds

X.X Our leverage like I pandemic’s XXXX metrics and coverage charge made result the XX-month we to chain. from our the are X.X of very and supply conservative now that times. of with address economy net changes debt the have to would ratio the on guidance EBITDA times at fixed impact trailing to

midpoint. $X.XX from $X.XX for range guidance $X.XX First, a $X.XX we the of FFO share, our to range to have to decreased to to diluted of per share core $X.XX a equates decrease per previous the which diluted

for rents in share quarter. midpoint reserves $X increase a per of FFO including and collectability equates increase assumptions, points. from guidance total is lease-up decreased delayed estimated or million the $XX or the of XXX a core This lost $X.XX to of The basis charge million by taken defaults first driven

debt, and straight I cash all bad debt, be line basis delayed that in will, from assumptions is is space. inclusive point want revenue It lost reserves, bad from currently to XXX all occupancy if debt. clear not of you increase bad vacant defaults this lease-up

loss tenant I the widely the vary make-up. ultimately million If XXX based mentioned correct, just on this timing points split between or estimated of and categories revenue additional of that basis $XX is could

will write-off, defaults now, cash already basis combination delayed up basis basis reserves, be XX we straight and made line quarter are increased from assumptions. XXX basis a lease-up first debt as from that bad the was this XX points of of of and points But points in booked increase estimating of points which XX from

revenue original we basis our XX of addition guidance. points in is the to an annual This had

have to revenue translate results. of necessarily reserve. also or the numbers out So basis at property these want not same XXX that $XX we million to points now total do midpoint, point I

Bad vacant and in much of occupancy properties space assumptions results. receivables not the debt straight same decreased pool. reserves is same are that property impact cash line of currently part our not And do property in

to on basis. is total same a facing. coming estimated try reasonably in potential Thus, we the times impact We property take are XXX unprecedented lost given conservative only revenue approach with our up the

tenant to exposure a withstanding different for time. of including have overall to present, our this many We these from exposure period prolonged individual that a and environment risk for potential various pressures time will smaller ways, experiencing looked at industries tougher greater tenants concerns shutdowns in exposure

increase in reviews. quarter the of receivable $X to first the reserve is accumulation our Our million straight these line we all of took

perspective, at was at total balance receivable that of end For million, a line $XXX straight about $X XXXX the our reserve of net time. million

So we this million increased by $X $X million. that reserve

As you given appreciate, I’m sense experiencing we approach prudent very degree increase year made we our this process was present at time, time at the the of have can is changes given since extreme difficult extreme the a to take this but reserve thought it uncertainties been and end. to this sure

remaining term average in X.X mind Keep is years. our lease

average, receivable collect to time the line it period on takes balance. that is straight So of the

of For our industrial perspective, in debt portfolio points expense. XXX bad XXXX, experienced basis

About half billed of other of was half of write-offs write-offs straight the line receivables. receivable that and

basis basis after basis points this annualized In bad loss vacancy debt, from addition to an XXX had on of of points XXX rent we defaults. tenant

we bad basis from rent defaults just XXXX. lost of total, in points XXX debts in and So had

purposes. comparative is year, arrived merely estimates at we how our not this for but This for

impacting we then otherwise stronger out increased are situation costs decrease the our have from stronger of now been much current in expectations in negatively carry guidance and much core back tenant FFO to did would than come development long-term. Also, revised this portfolio our a have We resulting that capitalized. base

the core we share $X.XX share. For in on for FFO similar from also to NAREIT we range FFO debt addition $X.XX have $X.XX to extinguishment took to quarter, of per the the first per reasons, range $X.XX a decreased of our to loss in the guidance previous

a increase the range We to operations from in adjusted guidance previous X.X%. the and share funds also to for X% basis from our an X.X% on adjusted range revising of of X.X% between are change

debt Even charges these of our core any strong in on earlier, a durability dividend per bad coverage against expectations, with revised these not our with estimated AFFO. negatively current low-XX% impact quarterly remained stated impact range. to As may dividend portion that FFO have the of share, from the $X.XXX do operations funds high-XX% rate adjusted of

property generation second positively collectability by impacted X.XX% for a to cash economic in receivables from be to on of tenants. decreased Cash previous our of will to from growth the on same on rental For and cash we lost of growth X.X% yet growth X.X%. a offset billed leasing, property have range number XXXX range conditions by rent expected same rates NOI challenging reserves basis, guidance our a X.XX% for NOI the

expense debt line GAAP straight will from same impact - bad but property The impact cash rents growth, will same not same property.

and wider variance property cash XXX property same the XXX at than about basis between will points points. growth GAAP basis to So normal be same growth

$XXX which $XXX revised Steve primary in our a $XXX original new starts, million to we development XXXX our guidance driver guidance XXXX temporarily of to As which speculative $XXX have is now to million noted, downward compared starts, to range was million. development million of halted for the

drivers million. $XXX estimate from also and $XXX were original million dispositions, have of million acquisitions which to guidance to our for to temporarily volume to the disposition new $XXX $XXX million the primary lowering We

or The expected decrease earlier. stabilized is from range we impact from while XX%, revenue a total decrease original reserves of XX% XX.X% occupancy a million of our decrease occupancy of monetary have guidance this to of points in-service we average to share $X.XX a XX for to total basis of basis the guidance range included XXX XX.X%, which to I in-service mentioned average is in midpoint, the original midpoint. $XX our Finally, for a our decreased of decreased per points occupancy the

now back closing will I a Jim for turn to few it remarks.

James Connor

compared ago. crisis Mark. downturn, quarter earnings first Thanks, an of closed unprecedented midst on which our the guidance just a XXXX global We of three the XXXX outlook has announced to when changed economic fundamentally and we health months in

year, Mark the our walked growth. you as for midpoint supports our year-over-year of just positive through earnings guidance revised expectations However, the

and We durability believe on successfully us reflection business this profile of organization period. is will our challenging navigate the merits gives and this of through a time that confidence the our fundamentals corporate

So near-term. priorities the summarize our I will in

maintaining our capital allocating prioritizing continuing growth health members, income, and safety that dividend, pipeline and responsible our position net the strong We over best lastly, balance development leasing operating to sheet maximize are environmentally facilities, ourselves any delivering the and the comfortably team of very to new completing and portfolio long-term. for supports our carefully

up comments, will we have got are back ask and of one that, with to now to our dialogue long question, get with So we just the participants the queue. to you our little course introduction lines a keep Since and that in I open the welcome audience. would

we take questions. Tom, now will

Operator

Thank with Instructions] Yulico the today first Scotiabank. line you. [Operator ahead, of comes sir. Nick go question Please from Our

Sumit Malhotra

Nick. is for Hey, This good morning. Sumit in

in the in able I potentially space of of amount of the kind to QX. noticed small we space the bad tenant? concessions Just could debt how re-lease what sort of addition, you in a and the talking And bad were question highlight you debt tenant And industry offered. had? if was guess, to about quickly and are activity affiliations what sizing a tenant type market? terms quick what the the on of We and

sort incoming what came the affiliation and just - what of to and So terms get a who the sort then sense there? industry who was what and tenant, out trying to is of So this And went situation? related industry of industry. in in income same of the

James Connor

line. of tenants. is Yes. cash Sumit, I This loss was will straight it no a is take all rent There reserve, that. not

waiting space, like lost are occupancy not with. backfill are we the we is and what not that So we dealing to is it

review we looked it different have effectively of every very took We is for them. news may at comprehensive of that lot tenant in recently our database. not that tenants bad looked a at a And individual ways. favorable We

the of haven’t the April us request most are looked Steve deferral mentioned, tenants of that us from tenants that which as our in We haven’t tenants paid are rent at lot small a small all nature. of rent, paid yet tenants,

So of the we all risk bad for by together up straight debt COVID. a looked those we are sort grouped and tenants piece. put We the impacted line on industries heavily higher reserve that at more tenants in

related now up Right industries balance. planning, only about are industries and hospitality, In we those is tenants group reserve X%, be event put automotive receivable really those recreation. that straight of but like airlines, total, There on travel, a line exposure. did industries

mind, escalators. on of tenants, keep to balance was our straight balance some to in given sometimes that got the through ago $XXX receivable is been years million these rent, you built rent sheet. line So It overtime is up free

straight So we it line that about It reserve the quarter. current that we for revenues not have is years about first cash rents. is past in recognized

lost it a is not like occupancy it not we So is issue, tenants.

that As good now. Steve collecting is mentioned, cash are right very our we

right on on given year reserve now. $XXX we point that it just on thought the our world, the end, reserve the seem at time million going everything given in were comfortable we world, ought at everything prudent to be if We this with in increasing going that

Sumit Malhotra

misunderstood, backfill quarter? there wasn’t in sorry I if the Mark, but

Mark Denien

and that that I XX%. XX% expired. Backfills backfills include represented of we the Well, about tenants when about you renewed say XX% would

James Connor

got... Yes, we debt nothing that do the just to had with is took. That bad

Sumit Malhotra

Okay.

James Connor

has with nothing to debt. That bad do the

Sumit Malhotra

Thanks. Understood.

Okay.

Operator

Our next Please question comes from go Morgan. Mike ahead. J.P. Mueller,

Michael Mueller

quick question. Yes, A hi.

of have the you that I’m all baked or about think the the throughout is On X the the decline the point to July place assuming that into occupancy half just carryover. takes are year? on basis bleed because asking second a second I’m slow XXX of year, XXXX more of half trying you it

James Connor

Yes. Mike, an It look that number. at necessarily didn’t is average way. we

before it that of it an second kind is, think on now. it of I way the But of slowly really you the could probably we year. reality average, guess, X early start will modeled increase, I like X. kind probably average, and right happens of is half in happen think July July on So it to the on The then,

Michael Mueller

Got it.

you. Okay. Thank

Operator

question And go Feldman we a Please from have Jamie ahead. Bank America. representing of

Jamie Feldman

Great. hear Can you me?

James Connor

can We Yes. Jamie. hear you,

Jamie Feldman

wanted picture inventory restocking of get inventory, things bit thinking incremental Can to you is go Steve’s quantify of on Thanks. does kind through demand over your and tenants of normal? back so? kind get what year comments trying a guys of tenant or thinking are the like the to terms the little Just when this to your back to we what just I in sense emergency a long-term. what average and get do world look in a maybe

Steven Schnur

access and base with the guess, that we days more Sure, Jamie. conversations I One last I points. customer do our will make other than time than today. had two is, we probably XX no

our talking down and of to one CEO real having are We to conversations customers the every from estate the directors.

A lot on has think of talk resiliency been I stock. is there anecdotal. been lot a Secondly, of safety it and

right we percentage now who that is have increase specifics don’t have is of that to Our is that or say I affect. inventory are in beginning specifics on what yet. on to going that. going customers be can’t going any about where be that talk to or to We

James Connor

discussion, assembly been the in talked years. ongoing is about back the and has larger that add. to jobs of has think been So for which to Jamie, of all last is I way part ensuring which the manufacturing couple goes of going the I would accelerate, This and

back over couple inventory I and of years chain more their bring plans responsibility existing into in So in to here think you will the of they more so the U.S. that quicker. place see begin companies next access continue to put the that U.S. can many to of supply into

Jamie Feldman

considering of your or base that is talking about say what like would percentage tenant And Okay. maybe that? you

Steven Schnur

Probably XX% talked the people have we far. of to so

Jamie Feldman

right. all Okay, Thank you.

Steven Schnur

It is an Jamie. evolving situation,

Operator

Next to go of go representing Jeremy BMO. Please we Metz will line ahead.

Jeremy Metz

hour. on of Mark, a guys. through protection thanks ran embedded you great lot math past your the Hey, in

strong. were collections April Your

expect you could I was little grand color you to have? $XXX wondering was, on I a total a bit give as appropriate if only if lines, have here the along would decide that get color also deferral just little just rainy us here, love cash those same to it in day cushion got that million I’m the your line but idea, you You on protection. but the amount of boost building to it though requests position. deep, of be of thoughts that you a to Thanks. built doesn’t are an

Mark Denien

things couple Well, I year pipeline and we there knew Sure, everything borrow that of get were sources would have us, a next one, this would when us if front through no including development well into other say. our Yes. we Jeremy. capital funding we in available. that year, comfortably money, Number of

in companies were kind and companies a the was XX-year mid-to-late were interest at accessing accessing of That pushing time is with the not March. debt the A-rated companies markets markets on X%. that That where were debt money rates

when Would not So it. that it do sure. we we today? I’m is did

cash as now. with here we sit We comfortable are that

well believe We us are available fund our going to Certainly we development. our below and slowly XX-year are and open. the to We that burn money can now do through markets X%. capital

sitting right it when not it be will long-term. know think just balance on it But don’t did is the keep that our I important there that now. to it, on for sheet perspective I So is we

Jeremy Metz

Thanks, Mark.

Operator

ahead. with from Wells question is Fargo. go next Our Please Blaine Heck

Blaine Heck

tough it do Good definitive probably probably people any this to year? you Is a different this I this were in point, afternoon. And ultimately at rent respect to or is nationally you that answer do now effects growth Steve, differs question expecting markets you think give think Jim thanks. how mid-single-digit really building negative a sizes that Great, crisis growth think this or do the to but I or with turns the to think near-term? positive rent flat something like pre-COVID. specific or negative? know

Steven Schnur

question disagrees sure and he I Yes. answer with me. Jim Blaine, chime will in will if if I’m the

situation. the first quarter very the in in So I I a is will tell it we with I were you, success quarter. fluid pleased first do think our think

the will thing in growth. as think which the by a a in not I past. we think the We lot now. of do have, rent I positive as think submarket, portfolio, highlighted rollover we I we very rollover it our in very do view still But right have in varies have well we

outlined softer in some past, think particular, have submarkets growth. flat we not the will I rent experience in probably if markets some the of negative

happy be volume market do with right would the soft now. will of we that would on our that. Houston metrics the one pretty area think point be But the as throughout end out at of the I a pretty year, we day, leasing I

James Connor

the rent seriously we the I of and half was Yes. not. they is, going negative our confidence second below see are I the to thought where is reflected our add guidance. deteriorate thing our in Blaine, continued growth we numbers to zero, the world you think think year, positive only in I If revised would in were at would or

able we new to there. of the going are So of I alluded a to the is to think good the there earlier, we be has gives a rest Steve spec that And scenarios pretty ground virtually achieve for supply then you to number as a But halt. of out year. think what understanding

spigot off everybody and quickly. And goodness, the pretty XXXX able was still turn to thank remembers

So that once under virtually is $XXX is million construction gets the delivered, it. that

people So behind is still new as there because to XXXX lot isn’t I thought supply that. nearly no a there as has of demand there is going originally bad and out coming look in think

half XXXX year the some and with you very scenarios is modest balanced in the healthy. of second where could just So see reasonable demand very

Blaine Heck

helpful. Great, Thanks.

Operator

question go we ahead. can’t of And Please hear Mr. we have Rodgers line Baird, you. with Baird. the Dave from a

James Connor

There Go Dave. is. ahead, it

Dave Rodgers

Can you hear me? guys

Steven Schnur

can. we Yes,

Dave Rodgers

deals of about but guess much couple couple cancelled looked but a demand that. question you you did walked land in really good maybe of how know the development, on It don’t the heard, you some I I of a Sorry or quarter build-to-suit parcels, on about the like of talk away. side.

where and if Is that of So on land how well? you your to Thanks. additional be in then accelerate terms last build-to-suit in go there would thoughts think around light comments you I yields cap guess on you made the side really those some helpful do parcels to can a the you build-to-suits question. as of are just much willing maybe

James Connor

I quarter. start the Well, Dave, land will did Steve first I think away will off. this. three team sites fairly I walk in large tag and We from

something of Our total there $X.X write-off was the range about in million.

of that another lot go was I to you that million, $XX on remember have to And million. those three from, price purchase those money a the vertical is sites believe. while for away walk was And to the overall three parcels cost $XX

plenty or land demand. we was on thought inventory is current suspended those. of build-to-suits meet the that are got, that we process that because pending development, We entitlement our as entitled So given through didn’t saw, our have way you of to working any build-to-suit in that have we prudent we speculative

land have more is the but those. from color. purchase you in add budget throughout we just away And some the prudent we step thought remainder the do year, of it Steve, some can for to

Steven Schnur

credit see get think of we will just think on good you with the add do I that I us those build-to-suit many Dave, will can as customers. I side, as

build-to-suits, talked past, closely that think Our in it of a pretty pipeline an and this customers. that is metric the on our health I the because of the have track indication we we environment is about

today probably pretty over XX it healthy. about That is what days maybe for is food supplies, it but it household consumer ago, some is beverage, us still And down e-commerce, XX XX% and pipeline days goods. to was

that. in active are we So

are able that of are think is we outperform hopeful goes a on. we the our business that on to I piece as year that

Dave Rodgers

was that part or any construction And expectations change of just in the other yield costs? around

Steven Schnur

be I think, I to have And sites. do, see think stoppages in margins. be my always for some in see will covered I yields like we behind done got some has we with our in land mean, will good I I there us. different I increase don’t areas think in the comments in that discussion cost. been so. No, about And work most seems don’t any some part mean what our consistent past assets, competition some we I the but have good we

Dave Rodgers

Great. Thank you.

Operator

a Manny go from Citi. Please with question Next is ahead. Korchman

Emmanuel Korchman

be and XX in the understand track that now months committed rather they or in to spaces to talking of if to building it them those there developer build-to-suit about have it get Maybe the go afternoon, down everyone. peers that they that tenant tenant of sort more or months terms the in shop and Good you or and once are take of Hi. into sites the spec market you fewer around with Do build-to-suit. psychology want couple what a is than follow-up available? to six months last think does out nine questions

James Connor

X feet Yes. to Manny, people terms our in We it of our have as generation think well. first the available in early changed peers of I is how call little many have portfolio, outlook. a space still fundamentally million square make really of and their do

I way. to it term not going affect got a these is users term we food think a as situation, this and beverage, have what in to affect or you the it that shorter e-commerce in scenario So positive Steve number to at is to, going going or of is as through who a are affect a going it their is today are is, of what business longer if it alluded looking case

spec that they exactly want of e-commerce different And it. they they they your to traditional And want, go facilities as what they are so many route build-to-suit could substantially and than get the building. choosing of where many these facilities and food to when you want, off-the-shelf know, are beverage

said, down, have a demand pretty still So got that is pipeline. why, is we although good Steve

a think have a we work support our months better all major have always to months. clients business. are they of indication outlook to that and need and through obviously is will I of our taking facilities in think in this for will that that XXXX we the XX lot place the to we And I the way And next believe short-term. companies XXXX real be a said, And XX in

Emmanuel Korchman

Jim. Thanks,

Operator

we And Please to with SMBC. ahead. go go Rich Anderson’s will line

Richard Anderson

Good afternoon.

sort if like XXXX. that XXX I’m So to I basis in I in just comments, And here points, thinking me? in gives court did of reserve the there guidance of starting XXX and wrong test today point confidence compares with of go listen of but doubt. that Mark’s no feels me I line It the of preliminary is COVID as exercise. XX me, I quarter, will go was to a of XXX in correct I’m light but to you curious rent, stenographer a the basis that that that was fact forward? from a will know, what non-cash sort don’t straight the the basis time way. And taken points we pre-COVID or of that back the And is catch XXX also it stand my points What first have and kind that

Mark Denien

Well, bit. maybe a little

script First no of pages all, fun was Rich, for to it me of six read either.

try apologize a there that. we of because to thought had for I And data get it So that questions. out was all important have to I lot

Richard Anderson

problem. problem. No No

Mark Denien

just delayed things is keep would is lease-up in mind, that of say. really XXX XX just couple The said me space. a basis timing - let I currently there I points, of available So from

about really want to are and debt that. you whatever XXX you basis talking call the to it So XXX when drops down points bad you take defaults,

that already the I differently. current now. basis say not QX week going would world But took effectively a in on based was the March line of points straight it the of a last on exercise. environment right XX from was done we our end This and pre-COVID little through for that in like everything

our term all lease look is that. back rent off free most asset remaining the buildup So our over say, and on current day actual Like several escalations a the we are average, of cash and on in took, rent lease forward, burns And those we rents. term on I on lot from million years. the And an of of that tenants it remaining balance $XXX as that million reserves is of that years tenants. all are that our sheet, $XXX this X.X the of all

$XXX million it kind this of average about next get here are to last So of month we over in. over back look are scrubbing out this, think way all to thought the the we X.X sit as like we going of all years got on and about the we we

a was March at they it XX. So booked exercise, got much very post-COVID

Richard Anderson

the have of guess enough XXX wonder does get dig? when about totality, Okay. And if you is are The how a that its business, to a going underlying is, to business make sorry, you expectation the from what what your - thoughts? follow-up. just last I you done would year to starts back I’m in question versus bigger XXXX your

Mark Denien

forgot I question. answer that of XXXX, was XXX No, Yes, your okay? part to the

Richard Anderson

me. excuse XXXX, said, you thought I

Okay.

Mark Denien

Maybe sorry. did, XXXX. I’m meant If I’m did. I I I sorry.

Richard Anderson

Okay.

Mark Denien

bad as ever my is, is better portfolio was better and that much base it around. got tenant time And so this as we point much have And XXX. a

Richard Anderson

Thanks probably XXXX, You very my much. bad. said

Mark Denien

problem. No Yes.

Operator

a is Bin SunTrust. from ahead. Ki next with Please go question Kim And

Ki Bin Kim

points to much decline tenants you basis of the The XXX for taking? that Thanks. are second how specific half, that general occupancy is just conservativeness versus tied a

James Connor

you piece little one-off Ki is try the I like a tenants, basis. to with is tied But occupancy Bin, dollar match we would very piece, of on what up specific I if the like say to, it kind to tied said, will.

like we portion these looked some put that. more reserve a of on or when at generic industries troubled So and of up a general a we

all up we for put it planning, tenants, you if mentioned hospitality really I that travel, airlines, will. that, automotive, like of population So event

tenants were were in that that most April one-off smaller the here but one-off, there, tenants industries tenants. was a tenants for There owe was few done of still the but and many. more groups part, rent. It it it vein than a was few like us more There around and not tenants

Ki Bin Kim

I here. If some offset service doing are your second G&A that general is contractors Okay. that because development the some you capitalized a third-party revenue. tied and quick to call could you it currently question that development is is the of What risk squeeze of

the onto at income G&A risk that the capitalized comes is is what statement? So

Mark Denien

Yes.

in. our G&A not revised So we factored did guidance we that and I mean

you So is you two things really offsetting have happen. what have

reducing are We costs. overhead

are We our overall reducing costs.

reduce what easy. that It is to very do. travel entertainment cost and is that big of easy Some now, right and part we is a of

So are we at, revised last compensation this year reducing we are metrics won’t same be year. are reducing bonuses some travel costs, the we as costs,

our in got absorption reducing things And And you pool we So have is overall development. are G&A costs. is decreased other. two that flat decrease of decrease each a from we offsetting offsetting we the our as that have to going why left are

Ki Bin Kim

Okay. Thank you.

Operator

question Michael line representing a Capital. ahead. Please of have Carroll RBC from the We go

Michael Carroll

And out? your delayed moving that just is thanks. revenue And into lease-up remarks. you just is basis prior in your assumptions, had or assumptions dive taking is really in guidance know current the Yes, a that that related back that prepared XX you said But in quick. vacant there wanted those leasing is is the points just you your space of that numbers parts that to real I lot completed I that are spec related in that to developments Mark, portfolio? to

Mark Denien

space spec it It currently of but those space, is scheduled underwriting. We a available both, currently all our underwrite come most is. and lot Michael. it pushed not It space is is to available up yet leasing spec it of always online is of year then in spec a is our that some space lease some but which - this space, assumptions. back We to And year.

thought year, But when beating we because been we the at we out with budget it, up the beat have and like things that we things of could have beginning and came our months. nine leasing more we been

year taking are approach. one of more that we Now

So we back yet. leasing, not spec the in pushed some population that is

currently. population that two the space spaces the empty delivered spec We pushed quarters, last generation older and back three that of the was or been most on then was leasing of second quarters some which now, over some is in just

bit everything, spec space. is mainly little but So it of

Michael Carroll

Thanks. Okay.

Operator

And line Please Malhotra’s Vikram ahead. with go Stanley. will Morgan go to we

Vikram Malhotra

Thanks.

two questions. Just quick

of different in for the quality-wise, all customer the differences portfolio what being of tenant sort that collection the of back for interesting, I want month make-up I I rent XXX go just the thanks you second. So that give the and of sense to likely is historically can versus portfolios encompassing just talk recession. two first maybe collections of just a first, bad to it you that XX% may So you very towards sort what recognize comparison following say the XXXX confidence impactful? The you the about to the clarifying month? be us the will the definitely can done including of end of is the less debt. is but be gives question. have in kind May,

James Connor

population I we reason better cycle, we Yes. in this three, One, smaller it I in generically, I reasons. last markets. tenants, we of reason Two, will better the say a cycle have than the credit. small better mean, few just credit just we have are think we with much better The much space - off quality And guess. have tenants. local why are I

small back of XXXX, was you places spread our markets. had If of system, in which spaces where lot space now to is our a is small South our that are across high-barrier space non-coastal Generally lot go we Florida, where that. before like small a in not

are your portfolio So for collections. all we other confident better those why May the And reasons, that comment will highly our time. is perform much then on this

which probably month. is is vary would little that of behind we know, a from You can bit where month prepaid normally as but to yesterday, XX. That rent honestly was greatly quite be,

see paying happy early. still that us are tenants to We are

probably cash haven’t So normal, if guess, for a little you tell I I but not rents be lot. a any had behind seen We would just I that today yet. may to bit

Vikram Malhotra

you. Thank

Operator

Okay.

go go will Stifel. with Please ahead, [Operator Guinee. Guinee John to we Instructions] Mr. Next

John Guinee

Southern or your those overall data on and California, markets reason just below Great. all to Northern noticed XX%. portfolio Any Pennsylvania Thank lease-up, I rhyme to be lagging? appear you. California for

James Connor

going I’m on supplemental? John. page are the are you you get in where at, What to

John Guinee

It page the California as it sub-XX% I’m higher right well see about talks column portfolio. I Northern sub-XX%? as not surprised Pennsylvania And of far occupied to Southern is anymore. the and well on sort on was

James Connor

Well, a couple. on Okay. can I comment

spec the is The the in column far California XX.X%. right underdevelopment, projects which actually it. includes Southern has

Northern at XX%. we So actual one in-service the XX% our is in-service. building, just on The California is are

the other construction. then is under building And

the It one How zones, Lehigh we to side Steve? So of in Valley. many get on over no delivered and have on just Pennsylvania, is spec still issues the west And year either of we got building those. that up. leased ago a we

Steven Schnur

XXX zones.

James Connor

Yes.

a So building. one that really big is that drag is on

but to we prospects just have leased. got looking at one We get it, that

John Guinee

Great. Good Thanks luck. guys.

James Connor

Thanks, John.

Operator

we to And line with Please Advisors. will ahead. go go Eric Frankel Street Green

Eric Frankel

markets my time couple question. are maybe sales? you kind the it about of is terms you is know place for of in capital you what and on in Thank early, taking you guys all very of talk just over assets the as months. seeing pricing the last and But remark, I real could

Realty Nick Corporation Duke Anthony -

Yes. Eric, is Nick. this

be of going lease most under pre-COVID things appear the participants X% know, at there You would some agreement you market on to about deals have discounts. core X% put hold. I tell that that are long-term to

type value-add People wait market. rents and stuff. And before start some points multi-tenure taking see the of they trades into type waiting see of any are back in going approach, just and data to a then terms

Eric Frankel

Okay. for the Thank you color.

Operator

And with we of from have a Bank Jamie Feldman question America.

Your line is open.

Jamie Feldman

guys curious just talk pipelines. had you know private you much a I’m REITs in mentioned supply? quick have development what seeing Just from pretty public their follow-up. I stopped terms the guys of are of and market supply speculative the

Steven Schnur

Sure, Jamie.

side the back is But hold their their private capital as private is back as well. the I think holding we that stack. or whether side have seen well decision

pipeline I XX I I as learned - our of lessons Jim you years that. I XXXX think see guess, all we because as healthier think ago. indicated, So I will think get we a supply into mean,

Jamie Feldman

you. Thank Okay.

Operator

Gentlemen, further questions there at time. no this are

James Connor

may of Tom. many the everyone rest with for forward joining I year. engaging Operator like Thanks, you line. to of thank the today. Look disconnect would the throughout the to you call

Operator

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

You disconnect. my now

Duke Realty (DRE) 30 Apr 202020 Q1 Earnings call transcript