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| So the spec business in those markets is obviously much, much better than it would be, say, in the inland sites in the country |
| We delivered another record year of cash rental rate growth on new and renewal leasing and then laid the groundwork for another strong year in 2024 |
| So we were pleased with that result |
| Also, we are well-positioned with coastally oriented land sites that can be put into production and provide attractive risk-adjusted returns as market conditions warrant |
| We're excited about the opportunity to drive cash flow growth by continuing to capture market rent growth in our portfolio from new and renewal leasing, the embedded NOI opportunity within our completed and in-process developments and from our annual escalators and our leases |
| The environment right now is better, much better than last year in terms of getting materials |
| Before I review guidance, let me remind you that on the capital fund we are strongly positioned with no debt maturities until 2026, assuming the exercise of extension options in two of our bank loans |
| Some of the positive things that we're seeing in the market right now is that if you look at the productivity in the last four months of '23, compared to the last four months of '22, it actually increased by 20% |
| And that's being underwritten at today's rate, so significant margin opportunity there |
| We've got a really great asset there |
| So we were happy to take advantage of that opportunity |
| In terms of the economics for 500 Old Post Road, we did better than the mark-to-market that we described in earlier calls |
| Jojo Yap It is a completely new 175,000 square footer and basically based on our numbers today and where construction costs are and based on our land value, we think we can achieve good value creation on that, potentially new 175,000 square feet when the lease expires |
| And that's partly why we're seeing much better activity and faster decision making on the smaller mid-sized tenants |
| Engagement is better |
| We're pleased to announce two big long-term leasing wins in Baltimore |
| We finished a year with some key leasing wins in our in-service portfolio and our developments |
| So that's clearly a sign of maybe a little bit of a positive GDP growth, a little bit of a positive impact from maybe retailers restocking their inventories |
| As I mentioned in my opening remarks, we set a new annual record for cash rental rate increase for new and renewal leasing in 2023 of 58.3% |
| We executed on both sides of the transaction ledger with attractive new investments and impactful sales |
| We're in this period of time now where we think things are improving, less market volatility, a little bit more confidence, inspiring economic data coming out |
| We think we're recovering from the bottom |
| We discussed the opportunity to grow our AFFO as defined in our supplemental to $260 million or $1.97 per share on a steady-state basis by fiscal year 2023, including the $41 million potential NOI impact related to the funded portion of our unleashed developments for 2023 AFFO approximates $289 million, $2.13 per share, which is well above the opportunity we discussed at our 2020 investor day |
| So we had an opportunity to step in there and obviously get some good economics and add some great assets to the portfolio |
| But we're encouraged by the level of activity that we're seeing today |
| Our tax same-store NOI growth for the fourth quarter excluding termination fees was 7.2% and for the year it grew 8.4% |
| I would say, again, that activity is better |
| So it gives us a lot of flexibility |
| 2024 is also off to a good start |
| Bill Crow All right, well, congrats on a great '23 and a good outlook for '24 |
| Statement |
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| There's been labor issues on the West Coast pit |
| So I would say, again, the demand for the largest spaces, so a million up in most markets has been softer |
| So that's part of the challenge for us this year and the projection and Jojo, you can talk more about traffic |
| This year, honestly, is a difficult year to project |
| So if you look at middle of last year and '23 overall prices, material and labor prices came down anywhere from 5% to 8% |
| Importantly, the market has responded to this imbalance appropriately with new starts down around two-thirds from the peak |
| In fact, for the most part, it's going to make any high barrier deal impossible to prep sales |
| So there's a lot of talk about rents generally have come down, you know, 5% to 10% in Q4 last year, but the costs are not supporting it |
| There are certainly disruptions now, as we all know, in the Suez Canal and Panama Canal |
| Although I would say a lot of tenants still continue to be somewhat cautious and methodical about their decisions |
| So in terms of the investment market, Q4 obviously in 2023 was very slow, actually in Q3 and Q4 |
| Two reasons there |
| So there's been a big pause |
| And that is, you know, as we look forward, call it 18 months and interest rates may have come down a little bit and the spreads may have eased a little bit |
| We do know that tenants pulled back a bit from build-to-suits with growing vacancy and more deliveries |
| And that's basically a lot of it's due to the supply cliff that the industry is facing right now |
| Starts are way up, as you know, down about two thirds from the peak in 2022 |
| The pace is tough to call |
| We weren't real sure in a year where the markets were moving quite a bit with a lot of volatility |
| Peter Schultz The pace of change is slow |
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