Good day, everyone, and welcome to the EastGroup Properties third quarter 2023 earnings conference call and webcast. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one using a touchtone telephone. To withdraw your questions, you may press star and two. Also, note, today's event is being recorded. And at this time, I'd like to turn the floor over to Marshall Loeb, President and CEO. Sir, you may begin. Good morning, and thanks for calling in for our third quarter 2023 conference call. As always, we appreciate your interest. Brent Wood, our CFO, is also on the call, and since we'll make forward-looking statements, we ask that you listen to the following disclaimer. Please note that our conference call today will contain financial measures such as PNOI and FFO that are non-GAAP measures as defined in Regulation G. Please refer to our most recent financial supplement and to our earnings press release, both available on the Investor page of our website, and to our periodic reports furnished or filed with the SEC for definitions and further information regarding our use of these non-GAAP financial measures and a reconciliation of them to our GAAP results. Please also note that some statements during this call are forward-looking statements as defined in and within the Safe Harbors under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements in the earnings press release, along with our remarks, are made as of today and reflect our current views about the company's plans, intentions, expectations, strategies, and prospects based on the information currently available to the company and on assumptions it has made. We undertake no duty to update such statements or remarks, whether as a result of new information, future or actual events, or otherwise. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. Please see our SEC filings, including our most recent annual report, on Form 10-K, for more detail about these risks. Thanks, Keena. Good morning, and I'll start by thanking our team for a strong quarter. They continue performing at a high level and capitalizing on opportunities in a fluid environment. Our third quarter results were strong and demonstrate the quality of our portfolio and the continued resiliency of the industrial market. Some of the results produced include funds from operations coming in above guidance, up 13% for the quarter and 11% year-to-date. For over 10 years now, our quarterly FFO per share has exceeded the FFO per share reported in the same quarter prior year. Truly a long-term growth trend. Demonstrating the market's normalizing trend, our average quarterly occupancy and quarter-end occupancy are down from both third quarter 2022 and June 30. The quarterly occupancy was historically strong at 97.7%, just down from what were peak levels. Our percent leased, however, remained consistent with June 30, at 98.5%. Our quarterly re-leasing spreads reached a record at approximately 55% GAAP and 39% cash. These results pushed year-to-date spreads to 53% GAAP and 37% cash. Same-store NOI was solid, up 6.9% for the quarter and 8.1% year-to-date. And finally, I'm happy to finish the quarter with FFO rising to $2 a share. Helping us achieve these results is thankfully having the most diversified rent roll in our sector, with our top ten tenants falling to 8.2% of rents, down 70 basis points from third quarter 2022 and in more locations. We view the geographic and tenant diversity as ways to stabilize future earnings, regardless of the economic environment. In summary, I'm proud of our year-to-date performance, especially given the larger economic backdrop. We continue responding to strength in the market and user demand for industrial product by focusing on value creation via raising rents, developments and, more recently, acquisitions. This strength allowed us to end the quarter 98.5% leased and push rents throughout a wider portfolio geography. Due to current capital markets, we're seeing broader strategic acquisition opportunities. It's hard to predict how large the opportunity may be, but we're pleased with our ability to acquire newer, fully leased properties with below-market rents and attractive initial yields. As we've stated before, our development starts are pulled by market demand within our parks. Based on our read-through, we're forecasting 2023 starts of $360 million. While our developments continue leasing with solid prospect interest, we're seeing more deliberate decision making. In this environment, we're also seeing two promising trends. The first being the decline in industrial starts. Starts have fallen now for four consecutive quarters, with third quarter 2023 being roughly two-thirds lower than third quarter 2022.... assuming reasonably steady demand, then in 2024, the markets will tighten, allowing us to continue pushing rents and create development opportunities. The second trend we're seeing is being with developers who've completed significant site work prior to closing. With the forward sale window tightening, it's allowed us to step into shovel-ready sites in several markets, such as Tampa, Denver, Austin, et cetera. Brent will now speak to several topics, including our assumptions within the updated 2023 guidance. Good morning. Our third quarter results reflect the terrific execution of our team, the strong overall performance of our portfolio, and the continued success. FFO per share for the third quarter was $2 per share, compared to $1.77 for the same quarter last year. $0.05 of FFO were attributable to an involuntary conversion gain, recognized as the result of roof replacements that were damaged in storms, along with related insurance claims. FFO per share for the quarter exceeded the upper end of our guidance range at $1.95 per share, an increase of 10.2% over the same quarter last year. The outperformance continues to be driven by stellar operating portfolio results and the success of our development program. From a capital perspective, the strength in our stock price continued to provide the opportunity to access the equity markets. During the quarter, we sold shares for gross proceeds of $165 million at an average price of $177.14 per share. During this period of elevated interest rates, equity proceeds have been our most attractive capital source. In our updated guidance for the year, we increased our stock issuance assumption by $110 million to $585 million, $465 million of which is complete. During the quarter, we repaid two loans totaling $52 million, including our loan remaining secured mortgage. The company's debt portfolio is now 100% unsecured. Also, we refinanced a $100 million unsecured term loan with a 45 basis point reduction in the effective fixed interest rate, while the maturity date was unchanged. That will produce interest savings of approximately $2.25 million over the remaining 5 years of term. Although capital markets are fluid, our balance sheet remains flexible and strong, with record good financial metrics. Our debt to total market capitalization was 18%. Unadjusted debt to EBITDA ratio is down to 4.1 times, and our interest and fixed charge coverage ratio increased to 9.1 times. Looking forward, FFO guidance for the fourth quarter of 2023 is estimated to be in the range of $1.98-$2.02 per share, and $7.73-$7.77 for the year, a 12-cent per share increase over our prior guidance. Those midpoints represent increases of 9.9% and 10.7% compared to the prior year, respectively. The revised guidance produces the same-store growth midpoint of 7.8% for the year, an increase of 50 basis points from last quarter's guidance. We also increased the midpoint of our average occupancy again by 10 basis points to 97.9%. This is the result of outperforming our budget expectations in the third quarter, along with continued optimism for the final quarter of the year. In closing, we were pleased with our third quarter results and are well positioned to close out the year. As we have in both good and uncertain times in the past, we will rely on our financial strength, the experience of our team, and the quality and location of our portfolio to lead us into the future. Now Marshall will make final comments. Thanks, Brent. In closing, I'm proud of the results our team is creating. Internally, operations remain strong, and we're constantly strengthening the balance sheet. Externally, the capital markets and the overall environment remain clouded, and while never a pleasant experience, it's leading to further declines in starts. In the meantime, we're working to maintain high occupancies while pushing rents. And in spite of all the uncertainty, I liked our positioning. More specifically, our portfolio is benefiting from several long-term positive secular trends, such as population migration, evolving logistics chains, onshoring, nearshoring, et cetera. We have a proven management team with a long-term public track record. Our portfolio quality, in terms of buildings and markets, improves each quarter. Our balance sheet is stronger than it's ever been, and we're expanding our diversity, both in our tenant base as well as our geography. We'll now take your questions. Ladies and gentlemen, at this time, we'll begin the question-and-answer session. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask you please pick up your handset prior to pressing the keys to ensure the best sound quality. We also ask that in the interest of time, you please limit yourselves to one question and a single follow-up. Once again, that is star and then one to join the question queue. Our first question today comes from Craig Mailman from Citi. Please go ahead with your question. Hey, good morning. Just, you know, the market right now is clearly focused on sequential market rent growth. And Marshall, I know you guys don't give a mark to market, but I'm just kind of curious if you guys looked at kind of where your market and footprint stacked up from the sequential market perspective and maybe, you know, what impact you're seeing to kind of the trajectory of spreads or your embedded portfolio mark to market from some of the recent kind of movement? Okay. Now, good morning, Craig. Thanks for the question. I guess we—and we, as we look at our kind of what the market's done recently and our mark-to-market, maybe the good news now for a trailing twelve months on a GAAP basis, again, we've got cash numbers have been high, but our trailing twelve months GAAP rental rate increases have averaged 50%, a little higher than that. And this quarter, you know, in spite of all the interest rate increases and things like that, it was a record quarter for us in terms of cash and GAAP spread. So we're in the mid-50s%, and our year-to-date average is in the kind of around 53%. So a little better, but not out of the park, but continually improving there. Then what we were looking at recently in terms of what the market's done this year, I know some of our peers were estimating around 7%. I saw a CBRE number in the mid-7s, but in working with Cushman & Wakefield, we took their NOI market growth rate and really market weighted it based on our NOI, and that's on the overall market, and that gets you just north of an 8.5%. So we're calling... The rent, yes, it's gone negative in L.A., at least as we've read and things like that, but in our markets, you know, using Cushman & Wakefield, it's, call it 8.5, a little above that. Then, really, I would also encourage people, if you're curious, and I wish we had the ability to share a slide, on our investor presentation on our website, if you'll flip through it, if you have a chance, and go to about page 12, there's another chart that shows vacancy rates for 100,000 sq ft and below really have not moved much in a year. That's where what's happened in the market, what's moving the rents is big boxes getting delivered, and those prospects are deliberate, and it's taking a little more time to lease those. So that 8.5%, for our product type, I'd probably add 100 to 150 basis points to that, just because the supply has not been there. And that's why, thankfully, we've seen our occupancy hold and our, our percent leased hold fairly steady this year at 98.5%. So we still feel like we've got good mark to market, although I would agree maybe with where you started the rent. It's not the hyperbolic kind of frenzy that it was post-COVID, but it's still pretty solid rent growth. And a little bit longer term, we're encouraged to see starts fall for the fourth consecutive quarter. I think they'll fall again in fourth quarter, too, just given what, what's going on in the world. So it – if we can stay around 98% leased with supply falling as fast as it is, we feel pretty good about our ability to push rents going forward, assuming steady demand. I appreciate you guys haven't given 2024 guidance yet, but as you guys look at what's expiring next year, it's kind of a lot of 2019 vintage, right? Pre-COVID leases. I mean, do you anticipate continued growth from kind of the mark-to-markets you've seen in the last couple of quarters before maybe it recedes a little bit as you get into some of the COVID-era leases? Or, kind of, again, I appreciate you haven't given guidance yet, but just some framework as people are thinking about- Yeah. -next year. Yeah, sure. Fair question. Yeah, but I, I, you know, I'm, I'm an optimist, so as I preface, I'd say, I feel pretty good about... I feel good about our ability to push rents into next year. And then really, if I parse next year even more, I think the back half of the year, where we said, I think as things get absorbed, what, what little shallow bay, and our average building size is about 95,000 feet, and our average tenant is about 34,000 feet. So again, if you, if you look, those vacancy rates haven't moved. I really feel even better about our ability to push rents, assuming the economy doesn't have to get a lot better, just doesn't get worse, or maybe the Fed eventually stops raising rates or even drops it a little bit. I feel better about the second half of 2024, probably than the second half of 2023 in terms of our ability to push rents. Thank you. Sure. Our next question comes from Jeff Spector from Bank of America. Please go ahead with your question. Great, good morning. Marshall, can you expand on your comments a little bit on the acquisition market? I think in your opening remarks, you said there's more opportunities, and I guess, you know, what's changed? Is there less competition? Or again, somehow sellers are now, you know, being more active. What's exactly changed? A good question. Good morning, Jeff. What—it's been really a more dynamic acquisition market or maybe market on the capital transaction than we've seen in a few years, and it's almost two parts. When we've bid on portfolios, we bid on a couple, and I say portfolios, like 3-6 buildings, we've been clobbered, and those have still traded. There's some out there in the 4s, one, you know, larger one below 4, type cap yield and things like that. But we've seen a few one-off transactions, and the way we've looked at it, whether, you know, we're pretty indifferent between equity and debt, if all being equal, but this year, we've had the advantage of having our equity priced in kind of that low-to-mid 4s implied cap rate, and we've been able to see. We've closed on 3, and then we have another one as we moved our acquisition guidance that we are optimistic about by the end of the year. But the ability to buy new buildings, you know, and markets we're in, submarkets we wanna be in, you know, at a round up, call it a 6 cap yield, you know, high 5, 6 cap, and kind of the trend, and I'm trying to not violate every confidentiality agreement, but and then below market rents. So we have those would've been 4 cap rates or sub-4, 18 months ago, and there would've been a bidding frenzy. But all of a sudden, with debt prices where they are and some of the funds, as we read about and hear about, needing liquidity, and it's awfully hard to sell office buildings, so they're trying to get things closed by the end of the year. And industrial is the most, as the brokers explain it to us, the most attractive product to have on the market. And, and all of these cases, our pitch has been, we're, we may not be your highest bidder, but we're your most certain, that we have the line of credit, we have zero outstanding or roughly a low balance on it, most of kind of second and into third quarter. We have the ability to close, and we know this market and this submarket. And so that's actually worked, where our batting average has been much lower. And then just anecdotally, talking to our three regionals, you know, we have good relationships with the national marketing firms, you know, brokerage firms, and we'll get calls, but the ratio of inbound calls has really increased. All of a sudden, we're a more attractive buyer, and I think it's just been our ability to kind of acquire. So all of a sudden, acquisitions. And I don't think the window will stay open terribly long, but, you know, if our equity price were there, and it's not today, but where it was an awful lot of third quarter, if we can kind of buy new assets at below market rents and get that spread on investments, what we've lined up should add a little more than a nickel to next year's earnings on a run rate, with a, you know, with a $140 million, and the average building is probably literally two years old of those 4 that we've acquired. So we like that model, and if we can pursue that strategy, we would. We don't have the capital today. Our equity's not priced like that, and it's below our NAV, but we'll continue to watch that window. So we've seen some interesting opportunities, and I think we won't change what we're doing, but in terms of product or markets, I think we should pivot our strategy as the market gives us those opportunities. Great. Thank you. Very helpful. My one follow-up is on, again, the comment you made on declines in industrial starts. Are you able to quantify, well, I guess, supply, like the decrease in supply 2024 over 2023, in industrial, whether it's national or in your markets? Have you- Yeah. Do you have any stats on that? Some of the best I could point you to, I hate to, you know, we originally said, this is one call. I wish we had a Zoom call with some of our slides. On our investor presentation, and we just put this up, about page 12 will show you the vacancy rates by size, for anyone that wants to flip through that. I may be off the page, but I'm in the right zip code. About page 10, you'll see national starts, and they've fallen 4 quarters in a row and looked from third quarter last year, which was the peak, and we're down quarter to quarter, about almost 2/3 this quarter. And shallow bay usually makes up, and there's another chart in there that'll show you the shallow bay numbers on our webcast. You know, it's, it's pretty far down. It's usually 10%-15% of supply we feel like in any market's competitive. So the hope being, with starts falling off and the supply construction pipeline emptying out, there'll be a vacuum for a bit, which, you know, should have enable us, kind of, earlier question, to really push some rents. And then, and it'll be a minute before we get there, but should also allow us with our parks, to really, if I'm being an optimist, hope up, ramp up our development pipeline, because people will need expansion space, you know, down the road in 2024, if they feel better about the economy. And usually, that's when our developments lease up quickly, when there's lack of available product on the market, that people have to go ahead and sign a pre-lease and things like that. So hopefully, that's helpful to you. You'll, you'll see the start, kind of, graph, and then where vacancy is, where our vacancy hasn't moved very much with an average building size under 100,000 sq ft. Where the vacancy's really moved is kind of when you get to 300,000 sq ft and above. That's where most of the new product, because that's mostly what's been built and where you could put a lot of capital work the last few years, and it's worked, until all of a sudden, people got nervous about the economy and that's stopped. And I've always said, I like where we kind of fit on the playground. Great. Very helpful. Thank you. Thanks, Jeff. Our next question comes from Alexander Goldfarb, from Piper Sandler. Please go ahead with your question. Hey, morning, morning down there. Marshall, two questions, or I guess one question, one follow-up. First, on the supply dropping out there, presumably this is helping you guys as one of the sole, you know, people who can develop on your own, not having to borrow. So are you seeing this as increased opportunity and you guys wanna ramp it up? Or are the global concerns and sort of all the risks that we read about, interest rates, et cetera, mean that you're probably gonna keep your development program at this level right now? Just trying to understand- Yeah ... you know, as we look out over the next, you know, year or two, where you guys are thinking about putting your shovels. ... Yeah, no, that's a good, a good question, and I figure, I think, you know, we've always said, we'll go, we'll go as fast or as slow as really the market dictates. You know, phase three in a park is moving slowly. We're not going to roll into phase four, but if we run out of inventory, and especially if we have tenants telling us they need, you know, expansion space or neighbors, we'll, we'll move pretty quickly. We always try to have permit in hand. So we'll, you know, and looking into next year, I think the market will get tight, you know, hopefully in the back half of the year, tighter, because what comes out of the pipeline is not being replaced. Where we are seeing opportunities is, you know, over the past few years, there's been such an appetite for industrial product, that developers have been able to go through the permitting, zoning, all the kind of, you know, and it could take years, you know, usually a year and a half at a minimum, in some cases, three years, to get the wetlands, every issue, so that you're ready to break ground. And a number of cases, those local regional developers have then flipped the land or built the building and sold it on a forward basis and things like that, where we've seen in a couple of cases, with the Denver land acquisition we made recently, the one in Tampa. We've got another one that we're optimistic about, one in Austin, where those developers got to the end, and they hadn't closed. I guess I should have backed up, where they've done all this work while it's under contract, but haven't closed yet. So that ability with the forward window tightening, then they needed to, you know, look for capital sources to move forward. And it feels like, my analogy, it's been—we've been able to jump into the game in the fourth inning rather than the first inning. And like in Denver, for example, they had worked on this site for several years, and we broke ground within, I think, call it 60 days of closing. The same thing in Tampa and some of these, where all of a sudden, those opportunities we were getting outbid for years because people wanted, you know, Nuveen, Heitman, you know, you name it, different companies wanting to put capital out. Now, we've become a source for them, where, again, we've said they've created all this work, and if they don't close, the value they created reverts back to that seller, and so they're looking for capital, and we've been able to step in and get really, you know, circumvent an awful lot of that development cycle. Okay, and then, so as a follow-up to that, sort of going back to, I think it was Craig Mailman, who asked about, you know, sort of looking into next year. You guys traditionally are always a cautious group. You know, you, you always think that, like, this year was good, next year will be tougher. But you have the big COVID rent uptick that, you know, creates a wonderful mark to market in your portfolio. You're the sole developer. So what's really the risk here going forward? Is it that your stock remains depressed, thus you can't really issue equity, and that slows down your growth? Or is it truly tenant issues, which so far have not seemed to be, you know, at all, an issue? I'm just wondering, you know, in a tangible way, you know, what is really the risk here to growth? Is it more your equity price or, you know, potential for tenant challenges? Yeah, I'll take a stab, and then Brent can correct me if he disagrees. You know, to me, the risk is always that we've said for years, worry way less about supply than we do demand, given not many people build what we build, and especially today, that's got an exclamation point at the end. I do worry about our tenants' balance sheets, you know, with oil prices higher, you know, labor wages higher, interest rates higher, rents higher, it's a lot on them. So I worry about the tenant demand, but if we can stay full, we do have land for development. We do have, and, you know, I guess in reverse order, we've got the ability to push rents first and that organic growth, and then we can develop and, you know, fund it with dispositions or this or that. It's great to have the equity when we do, and we can take advantage of it in this market, but I'd also say we don't feel compelled. You know, I think we've got a perfectly good company, and if we don't buy a lot, we'll be all right on that. It's a way to accelerate our growth, but we'll have growth one way or the other, and we'll just—I think the way we've tried to view it is be nimble, and what the market allows us, we'll take advantage of it, and we won't change our strategy, but we may change the way we implement it. For several years, when everybody wanted to own U.S. industrial, our attitude was it's better to create it than outbid people for it. And now, if there's some good acquisition opportunities, we'll pivot to that. Doesn't mean we'll stop development if it's there, but we'll pivot to those, and then sometimes it's okay to sit on your hands and wait for a window to open, too. And thankfully, we've got that organic growth that you were talking about. Okay, thank you. Sure. Our next question comes from Nick Thillman from Baird. Please go ahead with your question. Hey, good morning there. Maybe touching on the acquisition opportunities, you guys were pretty active in, like, Las Vegas recently. Are there any, like, specific markets that you're kind of targeting, where you're seeing more opportunities in? You know, a good question. We, as the way we think about it is really, we'll look at our percent NOI kind of as a, as a portfolio and then kind of where we are in, you know, in that market. Las Vegas has been a really strong market. I'll compliment Mark Sacco, our guy, who's been able to really push rents in Las Vegas over the last couple of years, and we're underallocated, and that it's about, I'm looking about 3% of our NOI. So strong market. And really just the way our pricing worked out and really our story, I'm pretty positive on one, if not both of those, that we acquired, there were higher offers, but again, we were the most certain buyer, we believe. And so, you know, the West Coast, the last few years, we've been under-allocated to that market, and we try to look at it, you know, what's the right real estate, the right sub-market, and then also by market. We don't want, you know, any market. We've spent a lot of time bringing Houston down from 20% to, you know, into the tens, as a percent of our NOI too. So that's. Part of it's the real estate itself, and then part of it is how much have we allocated that market. And then we think having more of our NOI from Las Vegas positions us long term to have, you know, higher cash same-store NOI, higher releasing spreads, all the things we get measured by each quarter. But, but that's kind of one of the markets. It's really those high-performing markets. You've seen us do a lot in Austin. El Paso's been a strong market. Florida's had a great run the last couple of years as well. That's helpful. Then maybe touching a little bit on development lease up, and you've really pulled demand from existing parks historically. Maybe just an update on kind of what you're seeing from tenants in your existing parks, like, willing to expand. Are they a little bit more cautious today than maybe, say, six months from now, or like six months ago? Yeah. Like, any commentary around that would be helpful. Yeah. No, we feel good about our development pipeline. Now, we pulled, you know, half dozen buildings in, and we can maybe talk. I'll save it for later in the call, and kind of parsing our development pipeline. Answering your question, I would say yes, and understandably so. People are - we have activity, and we're getting leases signed, getting people, you know, closing, and once you get in the red zone, seems slow. And I think it's all about the economy. It's hard to feel confident to expand your business, probably given the larger climate. So I appreciate, you know, from a future bad debt perspective, I appreciate our tenants and our prospects being a little more hesitant than shooting from the hip from... So yes, it was, felt a little frenzied, kind of post-COVID, to the point where you felt it made you a little bit nervous of, you know, brokers saying things they hadn't seen, you know, in years in their career, you know, revoking offers to tenants and things like that, because the time clock had passed, and things that people told us they'd never done. So I'm glad it's normalized a little bit, and now it feels like, you know, with the interest rates and two different wars and everything else, I get why people are being a little slow and deliberate in their decision making. That's helpful. Thank you. You're welcome. Our next question comes from Todd Thomas, from KeyBanc Capital Markets. Please go ahead with your question. Hi, thanks. First question, Marshall, you know, you mentioned that you've been fortunate to issue equity in the low-to-mid 4% implied cap rate range, and the stock has pulled back more recently. I think you mentioned that you're trading below NAV. I'm just a little confused by some of the comments, you know, around the go-forward plan here. Do you pump the brakes on equity, or do you continue to issue at these levels, you know, vis-a-vis the $125 million of incremental equity issuance that's implied in the guidance that was the updated guidance issued last night? Brent, I'll let you- Yeah, I'll jump in, Todd. This is Brent. Good morning. Yeah, the equity, you know, it's our stock price has had some volatility just due to macro concerns, and so it's moved around a lot. And, you know, even NAV itself has been very fluid this year. I mean, as most everyone on the call realizes, that has been a moving target, but has been drifting down. So, you know, we have full capacity on our revolver. We have just a little bit drawn on our $675 million. So yeah, it would just depend. We've not been crunched for capital so far this year. As you can see, we've been very active on the ATM, somewhere around, I think, $465 million year to date, issued at very good pricing. You know, so we would take a pause at the current pricing, but the way it's moved up and down. But look, if it were to shut us out for an extended period, then you've got to, you know, maybe we won't be able to do certain things on some of the good opportunities Marshall alluded to, maybe on some one-off acquisitions or, you know, that could impact our decisions on starts next year. But, you know, we're just gonna take that as it comes. Again, understanding we have plenty of, you know, of dry powder to fund what we're doing. It's just a matter of the cost of funding, and obviously, we've been very pleased with what we've been able to do this year. And so we'll just, you know, take it as it comes. You know, the way that the market's been, if I can almost look at my phone and see our price drop and say, well, the Fed must have talked about, you know, higher, longer, or, you know, in this odd environment today, you have good consumer news, which is bad, because we want the, you know, the economy to slow, for interest rates to come down. So it's all those factors that go into it. So as we've always been, we'll just be flexible and let's, you know, if the market will allow us, we're excited about, you know, what opportunities are out there. But at the same time, we're not, as Marshall said, we don't have to do anything. Obviously, we'd have to, you know, unwind what we're doing, but. So we'll just take it as it comes. You know, we're in a good position, and if the price raises its head up just for a little bit, we're in a position to grab chunks and continue what we're doing. So we'll just take a you know wait and see approach. ... Okay, and then, it, my follow-up question on the development and value add pipelines, looked like some of the conversion dates moved around a little bit. Some of the 2024, conversion dates, you know, moved into 2025, for example. Does, does that reflect delays in, you know, the, the completion of construction or delays in your assumptions around, around lease up for those assets? And then, can, can you also, just for clarification, you know, just, I'm curious when you stop capitalizing interest and cost capitalization on developments altogether. Is, is that at the time of- Yeah, I guess answering it in reverse. Good morning, Todd. It's, yeah, as you will. We've – we'll always underwrite 12 months after completion to, to roll it in. Well, the earlier of, when we hit 90% occupancy or 12 months after completion. So the... thankfully, the outside date has been, the last few years, has been that 12 months after. The, the movement within completion dates, it. You're right, it's more construction timing related than us, you know, stopping construction, that we really didn't do any of that or things like that. Traditionally, it's been weather and things like that could be one of the reasons, and things have certainly gotten better supply chain-wise, post-COVID. But what we're hearing, kind of ordering switchgear, electrical transformers, those type things, that's really gotten to be... You know, that's always the new item. That takes a year now. So we're able, that we used to be able to deliver buildings in about six months, pre-COVID, and now that's stretched out, and that's what's kept the construction pipeline so full for a little bit longer than it normally does. But any kind of electrical equipment takes a while, and my guess is just the timing here or there on orders or concrete. I guess, the good news in a number of our markets is where we've had the new semiconductor plants or some of the government work that's done between whether it's Dallas or Austin or Phoenix. The bad news is when we're also ordering those same concrete and subcontractors, it's awfully hard to get on their schedules on a timely basis, too, at times. Okay, but I guess if we look at the under construction pipeline and those conversion dates, is that currently, you know, the schedule they are set for when, you know, completion is anticipated? That's... Or, did you move them back, though? It's related to construction completion being delayed. It is not related to a delay at all in your lease-up assumptions. Is that right? Correct. Okay. Correct. Yeah, correct. And just to be clear, we, you know, just on the side of being conservative, we typically always put into the anticipated conversion date that we list there, typically the 12 months out of what we expect to be completion. And then we typically don't narrow that window unless, one, if it's a build-to-suit, obviously, we would base that on delivery day. Or if a project begins to get leased up or to 100%, like you see on the schedule now, we have a project that's 100% leased, but still under construction. We will begin to tighten that window once it's 100%, you know, in that case, it's closer to delivery, but we start from a basis of 12 months outside of our expected completion. And so when those dates move around a little bit, as Marshall mentioned, it's typically that, you know, construction may be bumped back a month or two from the expected- Okay. Got it. Thank you. Sure. Welcome. Our next question comes from Samir Khanal from Evercore ISI. Please go ahead with your question. Hi, Marshall or Brent. This is more of a modeling question. Just curious, your G&A expense guide was down, which was about $0.02 on earnings. I guess, what was driving that? And I'm just trying to figure out the right run rate to use going forward. Yeah, this is Brent. The G&A was down. Actually, our actual expenses for the quarter relative to G&A were along the lines of our budget, but we actually had more capital overhead development costs than we anticipated. And so that capitalization and that line item reduces G&A. So yeah, I think where we are for the three quarters year-to-date would be a good run rate number. You know, for the third quarter, I'd say that quarterly number was a little bit low relative to the other two, and that was just again the capitalization impact of that particular quarter. But I would say for the nine months, the total for the nine months to date is, you know, has landed about where it should be. Fourth quarter, as you can see, we're, you know, pretty much from that point forward. I think that year-to-date number we're forecasting now is a good optimal 12-month G&A figure for us, that pretty much maximizes the amount we can capitalize from the development side of things. Got it. And I guess for Marshall, you know, there's been a lot of conversations around, you know, onshoring. I mean, maybe talk about what you're seeing on the ground, how much of that is a conversation with your customers, and, you know, how much of that is sort of a demand driver in your markets? Thanks. It's definitely helping. I mean, when we look at our activity and markets, you know, especially some of the Texas market. I guess I'm lumping onshoring and nearshoring together. The building we acquired in Dallas, for example, it's a tech company or electrical equipment, and they are a supplier to the semiconductor plant in Sherman, Texas, which is a suburb of Dallas. So again, as we see those things, so many of the different kind of semiconductor EV plants have been Tesla going to Austin, we've picked up Tesla suppliers in Austin, and even we're in Northeast San Antonio, so just down I-35. There's San Diego, we're feeling the effects of Tijuana and Juarez, although we're gonna stay on this side of the border, have really picked up. And then, so many of the plant, you know, whether and even Phoenix has the TSMC plant and some things like that, so it's picked up a number of those. So we're, you know, whether if we're directly involved, maybe, we won't be directly involved. If, if we are, it'll be as a, we'll have the suppliers to that plant, but it's also helping push that economy forward. So I like, again, when I, I mention some of the secular drivers, whether it's just e-commerce growing every year or more people moving to Phoenix or Orlando or, or Dallas, Texas, those, that onshoring, nearshoring, it seems like the tech plants really come onto the U.S., and then you end up with a lot more activity. We've, we've been looking for our next opportunity and, and patient with that in markets like El Paso and San Diego as an example. It's been hard. We've kind of, we'll wait till we find it, but we'd like to grow in those two markets, just given the pace of activity across the border. And I don't think that's slowed down. It really started with some of the trade tariffs with China, and each quarter, it seems that, you know, the Mexican trade with Mexico seems to grow, and China falls as a trade partner. And again, we think between Arizona, Southern California, and Texas, we're in a good position to try to grab our piece of that market share. Thank you. Mm-hmm. Our next question comes from Bill Crow from Raymond James. Please go ahead with your question. Thanks. Good morning. Marshall, you talked about the looming risk out there potentially being the health of the tenant, their balance sheets, et cetera. I'm wondering, as you look ahead to the lease roll next year, is that causing you to think about retention rates being lower than they were, say, this year? No, it's interesting. Like, actually, what seems to happen is when things get bad, like during COVID, our retention rate goes up. And I guess what makes sense to me is, you know, people are nervous to expand or things like that, so you might do a shorter-term renewal. You know, I think next year's roll, we've taken a big bite out of it from where we started. We're down to about 11%. It should be an opportunity for us to push rents next year as we move those to today's market. I guess I just worry about all the compounding effects. I'd say it may be twofold. You know, at a high level, you think of all the things that are impacting any business today, and our tenants aren't immune to that. And so that concerns me, but then when I look at our bad debt and our watch list, it feels very manageable, and it's been--it's been... Actually, each quarter, it's been a little bit less than what we budgeted, knock on wood. So we haven't had the problems that probably that I would have expected at this point in time. I'm glad we have the tenant diversity we do and things like that. And I think the role next year will give us an opportunity to push rents, which will really benefit mainly, you know, assuming kind of a mid-year convention, 2025 even more will benefit next year from this year's rent increases. And I, you know, I hope our tenants, as well as the tenants in the buildings next door, can hang in there, given the drops in supply. Is there any reason to think about a material downshift in same-store NOI as we turn the calendar to next year? Unless we have a lot of tenant bankruptcies, I guess, as I try to, you know, think about it mathematically, it would have to be a pretty big drop in occupancy. Yeah. We only have 11% rolling, and we'll, you know, any quarter it can bounce around, but it always seems that we average somewhere. You know, if you and I were picking up coverage of a company, I would model 70%-75% retention rate. That seems to be our kind of, you know, on an annual basis, about where we shake out at any time. And if the economy gets weak, we might tick up a little bit, and a low number isn't always bad, especially if we're moving them into the next building in our park. Yeah. Okay. That's it for me. Thank you. Okay. Thanks, Bill. Our next question comes from Vince Tibone from Green Street Advisors. Please go ahead with your question. Hi, good morning. It looks like the expected yield on third quarter development starts were slightly higher than the existing pipeline. Can you just confirm if that was the case? And also just discuss kind of where you believe market cap rates are today for, you know, new developments and, you know, what profit margins you're targeting on any new starts, just given, you know, there's a lot of uncertainty right now around where cap rates may be and kind of what profit margins could be on some of these developments. Yeah. No, good, good point. We typically... We'll probably, for a new start now, look, you know, ideally, I'd say, and again, it would depend on if we had some pre-leasing or an existing tenant or what city that's in, but the cap rates will vary. You know, north of 7, we typically said, as a rule of thumb, we'd like 150 basis points above a market cap rate to kind of justify the construction and the leasing risk of a new development. And I will say the cap rates, and you all study it, you know, more closely probably than even we do. It's been a pretty fluid market. We've been able to buy one-off buildings at attractive cap rates... and we've gotten clobbered on some portfolio transactions, where it was meaning kind of 3, 4, 5 building portfolios. So cap rates seem pretty fluid right now. So, ideally, we thought if we can start in the 7s, call it, we have, you know, high 6 to at least a 7, you're looking at our cost of capital. We're creating value above a cap rate when we deliver the building. And what I like about the REIT model, compared to maybe private equity or merchant developer, our bet has always been there'll be another 500,000 people in Austin, Texas, 10 years from now. So if we can start with a good time, so if it helps, that's kind of how we think about it. No, that's really helpful. And maybe just clarify one point. When you say kind of high sixes, low sevens, is that on a GAAP or a cash basis, that yield? It's usually about, call it 10-15. I start quoting GAAP, and it's usually about a 10-15 basis point spread. Got it. Nope. Thank you. That's helpful. And then maybe one more for me. I mean, if you just discuss some trends in the market for development land. I know you guys bought, you know, a few parcels in different markets in the quarter. Just, you know, how volatile is that market? You know, do you think values are down significantly? Or, like, the stuff you even bought in the third quarter, do you think you got that at a much lower price than you would've, you know, 6, 12 months ago? Yeah, the short answer would be yes. And I think what probably, and I can't speak for the, you know, kind of the developer, the groups we worked with on those. They had tied it up a couple of years ago or more, and the markets had - the prices had risen, but then it was - they basically run through all of their contingencies successfully, thankfully, you know, zoning, planning, permitting, all the things like that. And when it came time to close, their options were more limited. So that's probably a trend we're seeing, is the ability to jump into projects that are pretty far along - much further along than us acquiring, you know, a greenfield or a site to start from scratch. Those land prices, they didn't lose money on it, but we were really able to step in at about their basis, because their timing was... They were under some time pressure to get the things closed and perform with their, with their seller there. So we-- it was less than where it would've been at the peak, but they were able to get a successful outcome and, and move on, or in, in one case, in Denver, stay and partner with us on the project in a, in a smaller way. Got it. That's really helpful color. Thank you. You're welcome. Our next question comes from Ronald Kamdem from Morgan Stanley. Please go ahead with your question. Hey, just going back to the same-store NOI guidance, as we're thinking about sort of 2024, maybe can you remind us, so is the lease roll just as large as it was in 2023? And, you know, and obviously, occupancy could potentially be down, but just trying to figure out what are some of the puts and takes as we're rolling into 2024. The lease roll, this is Brent. The lease roll is very similar to be at around 11% at this point. It's a pretty typical standpoint for us. Obviously, the occupancy—we had, you know, if you recall, our original midpoint guide for this year was, I forget the exact number now, but it was several hundred basis points lower than what we've achieved. And part of that is we did anticipate having some occupancy headwind. You know, we didn't know we'd be sitting here in October and still be over 98% leased. We're very appreciative, and the team's executed very well. So kind of, you know, to the comment earlier, that we feel good about the rental rate side of things, the ability to push rents. We've also been able to obtain a bit higher annual escalators in our leases, which add up over time. That's been more in the 4% area, as opposed to maybe 2% or 3% in the past. But, you know, the occupancy is the one bit of a wild card in that factor that, you know, we didn't incur that this year, so now we're guiding to, you know, a much higher, you know, almost an 8%. You know, next year, it just depends if you want to factor in, if we could be in that 97%-98% again, or do you give up a little bit of room or not? You know, that's just part of the factor that's hard to put your finger on at this point. Great. And then my one follow-up is just, you know, you guys are, on the development side, clearly focused on smaller, shallow bay. So does that mean that data center development is completely off the table, or is that something where, on a one-off basis, could pique your interest? I guess it's probably, you know, never say always or never. So, you know, there are circumstances where we would do it, and we have. You know, look, we've got a couple of data center. We've talked to data center brokers. It would be at the margin. It's not going to be a driver of our business, it won't be a focus of our business, but if we had the right center and either could sell the land or ground lease the land, get the right type transaction, then we would look at it or some things like that. But, you know, and we've explored that just from the sense that, look, if there's opportunities there or we're exploring it, we should take advantage of it, but it'll be ancillary and minor to our business. You know, look, we'd rather stick to what we do well and kind of do it over time in more markets or in the right submarkets than tell ourselves we understand data centers, and Brent and I would shoot ourselves, or I would shoot myself in the foot a year or two down the road. But if we do one, it'll be the stars aligned rather than we really went out with a big net looking for data centers. Great, thanks. Congrats on a great quarter. Thanks, Ron. ... Our next question comes from Blaine Heck from Wells Fargo. Please go ahead with your question. Great. Thanks. Good morning. Can you talk about contractual rent increases or bumps and what you guys are incorporating in newly signed leases? And I guess whether you're getting any pushback on that aspect of the lease agreement. And then also just remind us what the average escalator is across your portfolio at this point. Yeah, Blaine, good morning. This is Brent. As I mentioned, we're, you know, we've really done quite well there. You know, anytime you have the leverage, as long as it's been on the landlord side, that's a win we've been able to make. And I would say it's probably been a little more pronounced maybe in Texas, where the annual rent bumps kind of lagged the other markets, and that's caught up some. But I would say that's more in the 4% average. On the portfolio, we've been able to move the average from upper 2s over time to more toward that mid 3 on an average for the annual escalator. So as we turn through 18%-20% roll a year, and we'll continue to be in this strong landlord environment, you know, that's been some wins that we've made. And, you know, obviously, when you're maintaining a high occupancy as we have, you know, that's important because you need that... It's great to have that stabilization, but you also don't want it to be it also needs to contribute, though, to help same-store growth. And so our team's done a good job of executing that in the field and growing that. And I'd say it's a broader base now and across all of our markets, versus it had been concentrated more so at one point, say, California or Florida and some of our other, call it, well, Texas or even some of our ancillary markets are catching up during this period. Okay, great. Thanks. And then, we've heard from some brokers that developers of large box properties have kind of reluctantly begun chopping them up into smaller spaces as demand is smaller in that segment of the market. Have you guys seen any of that on the ground, and how do you feel about that potentially affecting the supply in your segment of the market? I think it's, again, it's Marshall. I think it's inevitable. I guess if you don't lease it or depending on how long you want to carry it, again, I think we could see some of that, but depends on how big the big box is, really. I mean, think of our average tenant size is 34,000 sq ft, and we certainly have tenants that are larger than that. But if you've got an 800,000-foot building, for example, that may be 500 or 600 feet deep, 1 million sq ft building, that depth is probably twice the depth of our, you know, a large building for us. And so for that tenant, what you end up with is, you know, it's a very long, narrow space with very few dock doors, so it's not efficient for those tenants, ideally. You're running the forklifts up and down an awfully long run if that inventory is going from one side of the warehouse down to where the 2 or 3 dock doors. So I think they will break those buildings up, but I think depending on how big they are, that's gonna be awfully expensive when you think of the cost of adding that much more office in, which wasn't in their original plans. And then the demising walls, where you build floor to ceiling, Sheet rock, fire-rated walls, that's gonna be awfully expensive for those developers. And at the end of the day, the loading efficiency isn't. It's not gonna be ideal for those tenants. So I think some of it'll happen, but the die is kind of cast. You've built what you've built, and you can maybe move. It doesn't have to be single tenant, but it's probably hard to put seven or eight tenants in those buildings the way they were designed to, what they were designed for. Yeah, I would even add to that, Blaine. Blaine, when you're building some of those bigger box properties, that sometimes an easy way to look at pretty much the maximum way to divide a large bulk building would be by four. I mean, they don't want to do it, but they would probably say, "We designed where we could do it into a quote, 'quad,' where you could put it, you know, divide it into quarters." But even there, if you're talking about a 500,000-600,000 sq ft building, you're still talking about a 125,000 or larger minimum tenant size. So you're... I like what Marshall said, kind of the die is pretty much cast once you commit to the bigger building. You could put a few tenants in it, but you're still not gonna get down into that 30, 50, 75,000 sq ft tenant size like, like, you know, you would see in a multi-tenant type building. They still really aren't gonna cross-pollinate very much. Great. Thanks, guys. Thank you. Our final question comes from Rich Anderson from Wedbush. Please go ahead with your question. Ugh, final question. Sorry about that. So, I have a question as it relates to acquisitions specifically. You are unique, and then your disposition guidance came down, and your acquisition guidance went up. So that's, that is obviously specific to you guys. But when it comes to operating acquisitions, operating property acquisitions, you mentioned, you know, some of the things with developers coming in the fourth inning, but specifically about operating assets, are you seeing any trends materializing there in terms of the nature of the seller? Are banks involved at all in any cases? You know, I'm just curious if you can sort of give an idea or a picture of what the pipeline looks like of potential sellers of operating assets. Yeah, no, good morning, Rich. We've seen a couple. No banks involved, although, you know, we've been, don't think there'll be a lot of distress, hopeful that that might come in time. It's been. We have seen a couple of pension funds that, that we've either acquired from or had conversations or looked at portfolios and where they've needed, again, I mentioned maybe earlier, they've needed to raise some liquidity, and industrial is what you could sell. You know, kind of some of the funds that have raised are different things, whether it's pension funds or just the fund itself, and they've wanted liquidity, and they were selling their industrial. On the dispositions, and again, they weren't big numbers. What I would say, maybe the difference, the $60 million we had assets, more of a placeholder a little bit, whereas this quarter, and I'm, I'm hopeful by the end of the year, when our next update, we've got it, it's more specific. We've got funds at risk on a disposition. We've got a one that we were looking to sell, where the tenant is the buyer, and hopefully, that, that gives me a little bit higher probability since they know the asset better than we do, probably, at this point. And another under a letter of intent that really, that we thought we might close this year, but as they get their financing, it'll probably drift into, hopefully, January of 2024. They'll get that closed. So that's what drove the drop. So it's, you know, 2, 3, 4 transactions that total that $40 million-$50 million, but I do feel better, call it 60, 90 days later, where we stand on those dispositions in terms... We're just a little bit further down the road with those than we were last call. Yeah. So, we'll keep kind of pruning. It'll be a good source of capital. If equity stays where it is, I like the idea of trading some of our older assets, and if we can find the right one-off acquisition to kind of move chips around, to just kind of nudge growth at a little bit higher rate in the future. Yeah, I was more interested in the acquisition side, but thank you for that color. And then the second question is: You know, you talked about how all the development largely is in bigger assets that aren't necessarily competitive with you and your, you know, 95,000 sq ft average. But do you concern yourself with the secret getting out about this shallow bay model? And you know, if developers maybe wanna dial down their cost profile and build something that's not quite as expensive, do they come into your market a little bit more in terms of being more competitive with you, and you start to see some of that pressure? Or are you just not seeing that, and why not, I guess? You know, since I would think it would be an easier pill to swallow for a, for a merchant developer. Thanks. Yeah, probably. Yeah, no, probably two or threefold. I mean, one, I don't... You know, it's hard to be a secret and have a public company, and, you know, a website, and go to an earnings call and do all the other things we do. So I wish we could be more secretive than we are at times about it. So I think it's out there, and certainly, the number of developers ballooned, kind of, industrial development. Everybody became an industrial developer. We said it was, you know, your Uber driver giving you stock tips. You knew it was things were getting hot. Probably twofold that makes us comfortable is I don't-- It's not like it's a well-kept secret. The big pension funds, our larger public, private peers, they have so much capital to put to work. You know, if our average development is maybe $14 million-$15 million to build a, a building or the next phase, you can stay awfully busy but miss your allocation targets, doing what we do. So I think that's one of the reasons, and even talking to some of the kind of local, you know, regional merchant developers, they're working for promotes and things like that, so you can make so much more money flipping a 500,000-sq ft building than a 100,000-foot building. And then probably, I'm doing it in reverse order. The biggest reason is we struggle to find good infill land sites, and it's, you know, edge of town, you know, low price point, you know, bigger tracts of land, south of Dallas, south of Atlanta, Southwest Phoenix, Inland Empire East. It's easier to find the land and put it into production more quickly than go through all the zoning, permitting issues that we deal with that can be measured in a couple or three years on an infill site. And so I really think, and it's, it's actually gotten worse. It's interesting with the e-commerce, everyone... The dilemma is everyone wants the delivery or the repair person to their house immediately, but they don't want it to originate from around the corner. So I think our zoning challenges have gotten harder over the last couple of years. Yeah. Okay, sounds good. Thanks very much. Okay. Thanks, Rich. Yeah. Ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to the management team for any closing remarks. Okay. Thanks, Jamie. Thanks, everyone, for your time, your interest in EastGroup. If you have any follow-up questions, we're certainly available by phone, by email, and we look forward to seeing many of you in a couple of weeks at NAREIT. Thanks, everyone. With that, we'll be concluding today's conference call and webcast. We thank you for joining. You may now disconnect your lines.