First Industrial Realty Trust Inc (FR) 2012 Q2 法說會逐字稿

Good morning. My name is Steve, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Industrial Second Quarter Results Conference Call. (Operator Instructions) I'd now like to turn it over to Art Harmon, Senior Director of Investor Relations. Please go ahead.

Thanks, Steve. Hello, everyone, and welcome to our call. Before we discuss our second quarter 2012 results, let me remind everyone that the speakers on today's call will make various remarks regarding future expectations, plans and prospects for First Industrial. These remarks constitute forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. First Industrial assumes no obligation to update or supplement these forward-looking statements. Such forward-looking statements involve important factors that could cause actual results to differ materially from those in forward-looking statements, including those risks discussed in First Industrial's 10-K for the year ending December 31, 2011, filed with the SEC and subsequent '34 Act reports. Reconciliations from GAAP financial measures to non-GAAP financial measures are provided in our supplemental report available at firstindustrial.com under the Investor Relations tab. Since this call may be accessed via replay for a period of time, it is important to note that today's call includes time-sensitive information that may be accurate only as of today's date, July 26, 2012.

Our call will begin with remarks by Bruce Duncan, our President and CEO, and our CFO, Scott Musil, after which we will open it up for your questions. Also on the call today are Jojo Yap, our Chief Investment Officer, Chris Schneider, Senior Vice President of Operations, and Bob Walter, Senior Vice President of Capital Markets and Asset Management. Let me turn the call over to Bruce.

Thanks, Art, and thank you to everyone for joining us today. As you saw in our press release, we had a productive quarter on many fronts. I will begin my comments by talking about an important new lease, and then discuss the new developments we have launched in the third quarter.

We know that many of you have had your eye on our 692,000 square foot First Inland Logistics Center development in the Inland Empire. Rest assured, our management and regional leasing team have, too. We are delighted to announce that we recently signed a 15-year lease agreement for the facility with a leading specialty retailer.

First Inland Logistics Center will serve as one of their critical distribution facilities on the West Coast due to its proximity and access to the ports of LA and Long Beach. The lease also includes the excess truck yard, which was a unique feature of our property that fit our tenant's needs. The lease is expected to be reflected in our occupancy statistics in the fourth quarter.

When we last spoke to you, we discussed how we believe additional developments could provide us with better investment opportunities than acquisitions, and contribute to our goal of upgrading our portfolio. First Inland Logistics Center is a great example of the type of property in which we want to invest.

To that end, in late June we closed on the acquisition of three development-ready land sites in our target markets and have launched those developments. Two of the sites are in Southern California and were acquired as a package. The first site is located in a constrained infill location in LA County adjacent to the 710 freeway, approximately 25 minutes directly north of the ports of LA and Long Beach. There, we are building First Bandini Logistics Center, a 489,000 square foot distribution center. We believe it will be a perfect home for a company located in the South Bay, or Vernon Commerce submarkets that want to upgrade to a state-of-the-art cross-dock facility with abundant trailer parking that is scarce in this submarket.

Total investment is estimated at $54 million, with an estimated yield, based on first year stabilized NOI over our GAAP basis, of 6.5%. The facility is expected to be completed in the third quarter of 2013.

The second site is located in Chino, California, an infill submarket in the Inland Empire West. The site will be the home of First Chino Logistics Center, a 300,000 square foot distribution center. The building will offer excellent functionality with double-stacked trailer lots that are difficult to find in the market. Users attracted to the Chino submarket want to take advantage of lower rental rates relative to nearby Los Angeles locations and lower transportation costs compared to eastern Inland Empire options.

Total investment is expected to be approximately $20 million. The estimated yield, based on the first year stabilized NOI over our GAAP investment basis, is 7.1%. We are targeting completion in the second quarter of 2013.

We also acquired a site in central Pennsylvania, in York, that will be the home of our First Logistics Center @I-83. We are developing a 708,000 square foot distribution facility to meet market demand where the supply of buildings greater than 500,000 square feet is limited.

As you all know, this area is what we refer to as the backdoor to the Eastern Seaboard, as it serves as a very popular distribution location for large companies and 3PLs to transport their goods to the key population centers on the East Coast.

We like the investment characteristics of this market and have a successful track record, having developed approximately 9.4 million square feet there since 2000. Recall that we also acquired a distribution center in York in the first quarter, leased on a long-term basis to Navistar.

We expect to invest a total of $34 million in this development, and are targeting a yield of approximately 8.4%. Again, this yield is based on a first-year stabilized NOI over our GAAP investment basis. Our plan is for the facility to be completed by the end of 2013.

Finally, we also recently commenced an expansion in Minneapolis as part of a long-term lease renewal. We are investing approximately $8 million to add 156,000 square feet to our existing 425,000 square foot building. We were pleased to help serve our customer's needs through this mutually beneficial investment.

By executing on these developments, we will add value for our investors, make progress on our mission to upgrade our portfolio, and further demonstrate the strength of First Industrial's team and platform.

Leasing is central to our execution for our new buildings, as well as for our existing portfolio, so let me discuss our leasing results for the quarter. We increased occupancy 50 basis points since the end of the first quarter to 87.9%. Compared to a year ago, our occupancy was up 180 basis points. Same store cash NOI growth was good at 5.3%, excluding termination fees, on the heels of our 6.7% gain last quarter. The growth was driven by increased occupancy year-over-year and rental escalations on in-place leases. And it was also helped by other one-time items. Scott will walk you through the details shortly.

Regarding our top 10 vacancies, which we discussed at the time of our Investor Day last November that some of you are tracking, we gained about 180,000 square feet of occupancy within this group during the quarter, with the vast majority of the gains coming from short-term leasing. While these properties currently represent approximately 200 basis points of occupancy opportunity compared to 325 basis points at Investor Day, we still have ample work to do to stabilize them with long-term leases to drive internal cash flow growth.

Regarding the state of the overall leasing market, the national industrial market shows positive absorption for the eighth consecutive quarter. Demand has been moving along with the economy and new supply remains low by historical standards. We continue to see leasing activity across our markets, but tenants remain deliberate when making decisions.

Historically, we have seen a summer lull and we are currently experiencing a similar phenomenon. Much like last year at this time, we have a mixed economic and political news which further cloud our visibility on the leasing environment. Environment aside, our team continues to push to win new tenants.

As we telegraphed last quarter, sales activity was light, as expected. We sold four buildings totaling 127,000 square feet for $3.8 million. Three of these buildings were in Detroit and one in Atlanta, and all were sold to users. The second quarter sales were completed at more than 60% above book value. Subsequent to the quarter we completed another sale totaling $3.4 million in Detroit to an investor. In total, we have completed $27 million of sales year-to-date. Our sales target for the year remains $75 million to $100 million, so we have some work to do.

On the balance sheet side, given the low interest rate environment, as well as our ability to prepay some higher interest rate mortgage debt later this year and next, we decided to access the secured market. We have received a new loan commitment for $100.6 million from a life insurance company at an interest rate of 4.03% with a 10-year term.

One last item I would like to touch upon. As we noted in our press release last night, we have reached a preliminary agreement with the IRS related to our 2009 tax refund, which totaled $40 million. Assuming final approval of the agreement, we expect to repay the IRS approximately $5 million. Scott will walk you through the details.

Before I turn it over to him, I would like to extend many thanks to my teammates at First Industrial for their contributions across all aspects of our business. We have work to do, but I know they share my excitement about our opportunities and our focus on our mission to deliver value to our shareholders. With that, Scott?

Thanks, Bruce. First, let me walk you through our results for the quarter. Funds from operations for the second quarter of 2012 were $0.15 per share compared to $0.24 per share in the second quarter of 2011. Second quarter results reflect a $0.07 per share loss on the retirement of debt due to our tender offers we discussed on our last call.

Second quarter results also reflect a one-time charge of $0.06 per share related to our preliminary agreement with the IRS related to their audit of our 2009 tax year of our taxable REIT subsidiary. I will discuss this in further detail shortly.

Comparing 2Q 2012 to 2Q 2011 before one-time items such as losses from early retirement of debt, restructuring costs, impairment of undepreciated real estate, and our tax agreement, funds from operations were $0.27 per share versus $0.21 per share in the year-ago quarter. Please note that the beta for the second quarter of 2012 between NAREIT FFO and NAREIT FFO before loss from retirement of debt and the income tax charge is $0.12 per share.

When you add together the loss from retirement of debt of $0.07 per share and the income tax charge of $0.06 per share, this sums to $0.13. The difference is due to rounding. EPS for the quarter was a loss of $0.16 per share versus a loss of $0.06 per share in the year-ago quarter.

Moving on to the portfolio. As Bruce discussed, our occupancy for our in-service portfolio was 87.9%, up 50 basis points from 87.4% last quarter, and 180 basis points from 86.1% at June 30, 2011.

In the second quarter we commenced approximately 3.5 million square feet of leases. Of these, 0.5 million square feet were new, 2 million were renewals, and 1 million were short term. Tenant retention by square footage was 71%, in line with our expected average retention for the year of 65% to 70% and consistent with our long-term track record.

Same-store NOI on a cash basis excluding termination fees was positive 5.3%. 3.8% was related to occupancy, rental rate bumps and lower rent concessions, with the remaining 1.5% due to restoration fees, real estate tax appeals, and other one-time items. Including termination fees, same-store NOI was positive 5.9%.

Rental rates were down 3.2% cash-on-cash, and on a GAAP basis they were up 2.5%. Leasing costs were $2.23 per square foot for the quarter, reflecting the high percentage of renewals. For the year, we continue to expect our average to be in the range of $2.40 to $2.60 per square foot. Lease termination fees total $735,000 in the quarter.

Moving on to our capital market activities and capital position. As noted on our last call, during the quarter we retired $87 million of senior notes at an average yield of maturity of 7.08%. Approximately $78 million were longer dated notes with an average yield of maturity of 7.4%.

As we have discussed on previous calls, we can prepay a total of approximately $63 million of secured debt in 2012 and 2013. Of this amount, we can prepay $13 million in the fourth quarter, and another $50 million next year, with an average coupon of 7.5%.

As Bruce discussed, we obtained a loan commitment from a life insurance company for a new 10-year $100.6 million secured financing. The locked interest rate is 4.03% with a 30-year amortization, and the loan is anticipated to close in the third quarter. A portion of these proceeds are expected to be used to retire the $63 million of secured debt at a positive spread of approximately 3.5%. Please keep in mind that this transaction remains subject to due diligence and documentation, and there can be no assurance that it will close or generate the proceeds we anticipate. We did not use our ATM during the quarter.

Updating you on our debt-to-EBITDA ratio, we were at approximately 7.05 times at the end of the second quarter compared to 6.95 times last quarter. As we noted last quarter, our goal for this ratio is approximately 6.5 times, and we plan to get there through leasing and capital market activity.

Thinking about our liquidity, we currently have $123 million on our credit facility of availability. In addition to our credit line, we expect to have approximately $100 million from the new secured loan, plus approximately $64 million of gross proceeds from asset sales in the third and fourth quarter, assuming the midpoint of our sales guidance.

So, our total liquidity is $287 million. We also have access to the equity markets, including our ATM, for growth opportunities or deleveraging.

On the uses side of the ledger, we have approximately $70 million of incremental cost related to the new developments in the expansion, plus another $63 million to retire the secured debt I just mentioned, for total uses of $133 million. This would leave us with $154 million of excess liquidity.

To update you on a few additional balance sheet items, our weighted average maturity of our unsecured notes and secured financings is six years with a weighted average interest rate of 6.6%. These figures exclude our credit facility. Our cash position today is approximately $18 million.

I wanted to provide some details on the tax refund matter that Bruce mentioned. After further discussions with the IRS, we have reached a preliminary agreement related to our 2009 $40 million tax refund, which, as you recall, was related to the tax liquidation of our former taxable REIT subsidiary. The total adjustment to taxable income based on this preliminary agreement was approximately $13.7 million, which equates to approximately $4.8 million of tax. We also owe the IRS accrued interest which approximates $0.5 million as of June 30. There are no anticipated penalties related to this matter.

While the local IRS office has agreed in writing to this settlement, you should note that the settlement amount is subject to final review and approval by the Joint Committee on Taxation. There can be no assurance that the settlement amount I just discussed will be approved at the level we currently anticipate.

Moving on to guidance. Our FFO guidance is now $0.86 per share to $0.96 per share. Excluding the estimated $0.07 per share loss from retirement of debt related to the tender offer, and the $0.06 per share charge related to the anticipated IRS payment. Guidance for 2012 FFO is $0.98 to $1.08 per share.

The key assumptions are average in service occupancy of 87.5% to 89%. Same-store NOI on a cash basis is now projected to average positive 3.5% to 5% for the four quarters of 2012, reflecting the benefit of the second quarter performance.

G&A for the year in the range of $22 million to $23 million, an increase of $0.5 million at both ends of the range due primarily to professional fees related to the IRS settlement.

JV FFO of approximately $1 million, an increase of $0.2 million due to a lease commission expected to be recognized in the third quarter. I would also like to note that we expect a capitalized interest of approximately $1.5 million to $2 million, or $0.02 per share for the remainder of 2012 related to our new development projects. We do not expect to capitalize any G&A related to these developments.

Please note that our guidance does not reflect the impact of any future debt issuances other than the approximately $100.6 million loan commitment we discussed earlier; the impact of any future debt repurchases or repayments prior to maturity other than the $13 million of mortgage debt we plan to pay off in 4Q, as we discussed earlier; any additional property sales or investments during 2012, other than the impact of the developments and expansion we discussed earlier; any NAREIT compliant gains or impairment charges; nor the potential issuance of equity. With that, let me turn it back over to Bruce.

Thanks, Scott. Before we open it up to questions, let me just say that we are excited about leasing our First Inland Logistics Center. We are also excited about our new developments, both from a growth perspective and for their contributions to our mission to upgrade our portfolio. Leasing is at the heart of the value creation proposition for our new developments and our strategy to drive cash flow growth from our existing vacancies and enhance the value of our portfolio.

We have work to do here, and our team is up to the challenge. Lease up of our portfolio is also our path to reinstating the dividend. We will continue to evaluate our position with our board as we execute our plan.

And, finally, as I like to say to my FR colleagues, it's deeds, not words. We have a great team and platform. We have been executing on our plan, and we look forward to continuing to show you our progress.

We will now be happy to take your questions. As a courtesy to our other callers, we ask that you limit your questions to one plus a follow-up in order to give other participants a chance to get their questions answered. You are welcome to get back into the queue. And so now, Operator, may we please open it up for questions.

(Operator Instructions) And your first question comes from the line Mike Mueller from JPMorgan. Your line is now open.

Hi. Scott, first a question on the same-store NOI guidance increase. How much of the increase of 50 to 100 basis points is attributable to kind of the one-time stuff that you mentioned that was in the same-store number for Q2 versus how much of it is more of a recurring increase?

Mike, as I mentioned in my comments, about 3.8% of the 5.3% change was due to occupancy, less free rent and rental bumps, and 1.5% of the 5.3% change was due to restoration fees, real estate tax appeals, and one-time items. So, if you were to look at our first quarter same-store NOI guidance, we anticipated about 2.4% of same-store NOI growth second, third and fourth quarter. If you look at our new same-store guidance this quarter and you do the averaging, we are expecting about 2.5% on average for the third and fourth quarter related to same store growth.

And that's at the midpoint.

Okay. So, it's up marginally on more of kind of a core operating basis?

Up 0.1% compared to last, right.

0.1%, got it, okay. And then I guess also on core growth, thinking about the leasing spreads. Low single digit negative this quarter and last quarter. Can you tell us what you're thinking about, what you're seeing for the second half of the year? And then what were your expectations heading into 2012?

I would say our expectations for the year, we have a minus 5% to minus 10% spread, and we've done better both in the first and second quarters. So, we are pleased with that. We are making progress there. I think some of it also is related to we've been doing more renewals, so that has an impact, too. But we are encouraged, the markets seem to be firming up and we'll see how we do the balance of the year, but we kept our guidance as minus 5% to minus 10%.

Okay. Okay, thanks.

Your next question comes from the line of John Stewart with Green Street Advisors. Your line is now open.

Thank you. Bruce, could you give us a bit of color on the terms of the lease you assigned on the Logistics Center in the Inland Empire?

I would say that -- let's just compare it to, in terms of our pro forma, we achieved our pro forma rates on this.

Which was?

Jojo, in terms of rents in general, in that market, why don't you just talk about in general on what we were thinking.

Rent in general is in the low 30 per square foot per month, low 30s for the building only, and just like Bruce had mentioned, we had leased an 8.34 acre truck yard. So, that rent is in addition to low 30s.

And any free rent on the deal?

Yes, there is going to be free rent of about five months.

Okay. And sorry to belabor -- one more and I'll jump out of the queue. Just, Bruce, for those of us who don't have the benefit of being a fly on the wall in the boardroom, how would you characterize your discussions with the board when the dividend policy comes up? Is it we just need to make a little bit more progress on some of these large vacancies, or let's continue to batten down the hatches, things look uncertain and we'll put off a dividend as long as we can?

I think people are encouraged. I think that if you look at where we are, though, we picked up 50 basis points in occupancy in the second quarter, but that just brought us even to what we lost in the first quarter. So, we are even to what we were in the end of 2011. So, we need to make more progress. As you know, we've got a goal to hit 92% occupancy by the end of 2013, so we've got to make some progress from where we are right now, but I think we're encouraged, but we want to see more -- the board would like to see more leasing.

Okay, thank you.

(Operator Instructions) And your next question comes from the line of Daniel Donlan from Janney Capital Markets. Your line is now open.

Thank you. Just real quick, Bruce or Jojo, what's driving the difference in your development yields between different spots in California and then PA. Is it just you're going in land cost?

Sure, Jojo, do you want to handle that?

We're a total return investor, so what drives this is our estimation of rent growth. So, where we expect higher rent growth, like in California, we would develop at a lower return. We expect rent growth in central Pennsylvania as well, but not as much as in California.

In addition to that, when we look at our yields, we want to look at exit values. So, for leased product, for example, in the LA County market, those properties, Class A lease, would trade in the 5% to 5.25% range. In West Inland Empire, those properties would trade in a 5.5% to 6% range. And then in the central PA, it should reflect a 7% range. Now, we are long-term investors, but we look for total return at the end of the day, but we also want to juxtapose that to where the value today. I hope that answers the question.

That more than answers the question. And then just what gives you confidence to build these spec buildings? Is it that do you expect -- is it partially driven by online retailers potentially moving into California? I know Amazon has talked about it, but what gives you the confidence that you can build these and lease them out by the time you deliver them?

Well, here, number one, we had success at First Inland Logistics. Number two, if you look at these sites, the Bandini site is a fantastic site right off of 710. And if you look at the competition, first off, it's a very tight submarket in terms of the market, that and South Bay. The occupancy is very high, the vacancy is very low. And this is a new facility, state-of-the-art, and so we're very bullish on this piece of real estate. We think it's a great long-term add to our portfolio. And Chino, too, is an infill sort of West Inland Empire market, and the market is tight there, so we like that. And in central PA, that market is tight. As I said, there's not a lot of buildings over 500,000 square feet available, and we've got a good track record there. We developed there, as I said in my comments, over 9 million square feet here very successfully since 2000. So, we're very excited about that opportunity as well. But, again, the proof is in the pudding. It's our job to get these up, built and leased, as we did with First Inland Logistics.

Right. And just a quick follow-up to that. Do you have a couple of tenants in mind? Do you think you can pick off from other buildings or do you feel just that confident in the market?

We feel confident in the market.

Okay. I'll circle back in the queue.

And your next question is a follow-up from the line of John Stewart with Green Street Advisors. Your line is open.

Thank you. Scott, could you give us a bit of color on the decision not to capitalize G&A on these new projects?

Sure, John. Basically ,we looked at what the dollar amounts would have been and the dollar amounts were immaterial, so we decided not to capitalize G&A related to those projects. So, it was basically a decision on the costs were immaterial.

Okay. And, Bruce, I was hoping you would give us a bit of color on the -- or help us understand how you're feeling about the disposition target based on what you've got in the queue for the second half.

I feel -- we kept the guidance the same, John, at $75 million to $100 million. We like to hit what we say, so we know we have work to do, but our guidance is $75 million to $100 million, and we'll let you know when we close these things.

Okay. And then lastly, just hoping you could share with us your thoughts on -- we've heard from several of your industrial REIT peers this week, kind of, I guess, mixed messages in terms of the momentum on the ground. I was wondering if you could share with us what you are seeing real time, sort of last 30 to 60 days?

I'd say we've come into the summer and there's a little bit of slowdown in activity. Again, we've seen this last year, too, but if you look overall, there are people out and about looking for space and we are working hard on it. I would say tenants are taking longer to make decisions and commit. And we've had a couple of situations where we thought we were at the finish line and they've come back and say we're going to take another look, we're going to delay it another two or three months and not finalize it. So, that was frustrating, but that happens.

But the good news is, if you look at it in these markets across the country, occupancy is going up. There is less space available, and you are seeing activity, but it's less than it was three months ago, but this is the summer and usually it slows down a little bit. So, we'll have to wait and see, but our mission to lease up the spaces and we're seeing -- you know, we've made progress in the second quarter and we want to make progress in this coming quarter.

That's helpful. Thank you.

Your next question comes from the line of Ki Bin Kim from Macquarie. Your line is now open.

Thanks. If we go back to the development, what are your longer term plans for financing those projects, and given that interest rates are low, at least temporarily, would you be willing to maybe let your leverage rise up a little further in terms of equity?

Yes, good question, Ki Bin. From our standpoint, again, when went out and did the secured debt commitment, the reason we're doing that is, number one, as Scott mentioned, we've got some debt that we can prepay at pretty high interest rates both at the end of this year and next year, about $63 million worth. And we could use the balance for other things such as these developments. We want to make sure we have plenty of capacity so we don't have to raise equity, but we definitely do want to continue to delever the Company, so an equity is one way we can do it. But the best way we can do it is lease out the portfolio, and we're all over that. So, it's possible in the short term we're using more debt because we haven't raised any equity yet.

Did you tap ATM in the third quarter?

We have not tapped ATM in third quarter.

Okay, and this last question, when you look across your land bank, I know for the new deals you bought land, but how much of the land bank you have currently is close to being viable for maybe expected development?

We've got a number of great sites. Jojo, do you want to just talk about those, the ones in Pennsylvania and the others?

Sure, sure. You know, as Bruce mentioned, is our site in Allentown, which we are positioned to build. We are waiting for the right time. We want to make sure, just like when we identify developments that Bruce announced, is that we wait for the time in the market where demand is exceeding supply. And that's two large DCs in the Allentown market.

It's all in about 600,000 square feet.

Totaling about 600,000 square feet. And then, again, in a number of sites that we have, the demand does not exceed supply and there is not an acute shortage, so we'll wait for the right time for our product.

But we have good land. When the time is right we will put it into development, but right now in terms of the nearest thing for us to start is the Allentown site. We also have something up near Diapers. That would be a build-to-suit site if we get a tenant for it.

Okay, thank you.

(Operator Instructions) And your next question comes from a follow-up from the line of Daniel Donlan with Janney Capital Markets. Your line is open.

Thanks. Just real quick, going back to development, I'm sorry if I missed it. Did you guys provide a first year yield, GAAP yield on that project?

On which one?

Sorry, First Inland.

First Inland we did not provide it. If you look at our written down basis, I think it's about 8.1. And if you look at our non-written down basis, our total cost it was about 6.6.

Okay, perfect. And then you mentioned some talk about short-term leases, I think you said 200 basis points. What needs to happen to get those to be long-term tenants, and how much of that is just your typical short-term tenant occupancy, your 3PL, stuff like that?

Well, a lot of it is typical 3PL occupancy in terms of people doing that. And sometimes, though, they get more comfortable with contracts, so they want to sign -- they want to sign a longer term lease with you. So, I mean, it's a lot of that. But, again, these are relationships you had, for a lot of them, it goes up and down over time.

Right. Well, I guess the question would be how many of these short-term leases do you keep signing, or have they been in place for well over a year?

Yes, just -- this is Chris. The overall, as far as the short terms, our run rate, it's pretty typical. As far as that we're typically on the short term, we are about 1 million, 1.2 million square feet, and then month-to-month another 900,000 square feet. So, it's been historically right around there. A lot of those turn into longer term deals.

Okay. And then last question for me, I promise. As you look out to the back half of the year and into 2013, what percentage of the leases that you have rolling do you think are subject to the high escalators that you guys have been able to achieve, call it 4%, 5%, 6%, or even more than that? Could you maybe give us a ballpark number there?

Yes. What I can give you is for the 2012, all the leases that we have signed there, that population, the annualized rent escalators is about 3.6%. So, again, compared to our long-term historical average of 2.5% to 3%, we're still higher than that historical average. So, that's probably going to be pretty typical going forward.

Okay. And in terms of expiring leases or, excuse me, leases that are renewing or just leases that are currently in the pipeline, how many of those are subject to the higher escalators?

Historically have been about 65% of the leases have been -- had bumps built into them.

Okay. All right. Thank you.

Thank you.

And there are no further questions at this time. I'll turn the call back over to Bruce Duncan.

Great. Thank you, Operator, and we thank you all for participating on the call today. And please feel free to call us if you have any questions. Thanks again.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.