Earnings Call Transcript - BDN Q3 2022

Operator, Operator

Good day, and welcome to the Brandywine Realty Trust Third Quarter 2022 Earnings Call. As a reminder, this call may be recorded. I would now like to turn the call over to Jerry Sweeney, President and CEO. You may begin.

Jerry Sweeney, President and CEO

Michelle, thank you. Happy Friday morning, everyone, and thank you for participating in our third quarter 2022 earnings call. On today's call with me today are George Johnstone, our Executive Vice President of Operations; our Vice President and Chief Accounting Officer, Dan Palazzo; Tom Wirth, our Executive Vice President and Chief Financial Officer. Prior to beginning, certain information discussed during our call may constitute forward-looking statements within the meaning of the federal securities law. Although we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. For further information on factors that could impact our anticipated results, please reference our press release as well as our most recent annual and quarterly reports that we file with the SEC. So during today's call, Tom and I will review third quarter results, provide an update on our '22 business plan. And after that, Dan, Tom, George, and I are available for any additional questions. Looking back at the quarter, certainly, record inflation, interest rate increases, capital market uncertainty, recessionary fears have significantly changed the operating and financing landscape. The stability of our operating portfolio, evidenced by low forward rollover, protection from operating expense increases on 81% of our leases, well positions us on the operating margin front, and we will certainly continue to focus on margin improvement as we enter the '23 budget cycle, and we are pleased that our '22 operating and development plans remain on target. The macro environment, however, certainly impacted our capital program. And while we will continue to select planning and approval efforts, future development starts are on hold unless they are fully pre-leased and until the existing pipeline posts more leasing traction. During the quarter, we also terminated several potential acquisitions and accelerated our refinancing and interest rate management programs that Tom and I will review during the course of our conversation. From an operating standpoint, we continue to experience higher physical occupancy, now 60% overall with a high of 70% to 75% in the Pennsylvania suburbs. Hybrid attendance, as you might expect, continues in all of our markets, with Tuesday through Thursday being the most common office days. On those high peak days, we're experiencing closer to 70% to 75% attendance from most tenants. Tenant interest in high-quality work environments remains the order of the day. We see that every day in our tour levels, lease negotiations, and deal executions. In fact, 41%, which is up from 32% last quarter, of the new deals in our operating portfolio pipeline are from tenants looking to upgrade from lower quality, less amenitized buildings. During the third quarter, we executed 513,000 square feet of leases, including 300,000 square feet of new leases. We also posted a rental rate mark-to-market of 16.5% on a GAAP basis and 6.9% on a cash basis. Our full-year mark-to-market range remains 16% to 18% on a GAAP basis and 8% to 10% on a cash basis. Absorption for the quarter was 176,000 square feet. Tenant retention was 90%, and we ended the quarter slightly below 91% occupied and 91.8% leased. It's further worth noting that our Philadelphia CBD, University City, the Pennsylvania suburbs and Austin markets, which cover 93% of our portfolio NOI, were a combined 93.8% leased and 93% occupied. Our spec revenue range remains in the $34 million to $36 million range, with $35 million or 100% at the midpoint achieved. The speculative revenue range represents approximately 1.8 million square feet, of which 1.7 million or 94% is already executed. The portfolio is stable, and our forward rollover exposure through 2024 averages 6.5%, which ranks us third out of 17 office REITs. Further, our annual rollover exposure through 2026 is 7.3%, also ranking us third out of 17 REITs, and we continue efforts to reach out into the maturity curve on a daily basis. We did post FFO of $0.36 per share, which was 2% or $0.02 above consensus estimates. We beat those estimates primarily due to the combination of improved operating results, lower interest costs, and a higher-than-anticipated gain on the 3151 Market Street formation. So while exceeding consensus estimates for the quarter, we're keeping our FFO range unchanged at $1.36 to $1.40 per share, primarily due to the unstable interest rate environment and the impact of any potential sales. Based on 2022 leasing activity and higher EBITDA, our third quarter net debt-to-EBITDA decreased to 7.2x on a combined basis, and based on our development activity, we are projecting to be at the upper end of our current range of 6.6 to 6.9 at the end of the year. Our core EBITDA metric of a range of 6 to 6.3 focuses on our operating portfolio by eliminating joint venture and active development and redevelopment projects. We continue to believe this is a more accurate measure of how we manage our core portfolio, and those metrics are noted on Page 31 of our supplemental materials. In looking at leasing activity, demand remained encouraging during the third quarter. Our total leasing pipeline is 4.8 million square feet, broken down between 1.5 million square feet in the operating portfolio and 3.3 million on the development project. The 1.5 million square foot existing portfolio pipeline is up 430,000 square feet from last quarter, with approximately 208,000 square feet in advanced stages of lease negotiations. Also, as I mentioned, 41% of that new deal pipeline consists of prospects looking to move up the quality curve. The 3.3 million square foot leasing pipeline on our development projects increased by over 300,000 square feet during the quarter. The deal conversion rate in the second quarter was 40%, up from 38% last quarter and in line with prepandemic levels from the fourth quarter of 2019. Another good sign is tenants continue to accelerate their decision time line. This past quarter, the median deal cycle time improved by an additional 4 days and is now equal to pre-pandemic levels. In looking at liquidity and dividends, we currently have $350 million available under our $600 million line of credit. With our targeted development spending and absent any other financing sources, we anticipate having over $300 million of that line available at the end of 2022. Our $0.76 per share dividend is well covered with a 53% payout ratio. We know there is a focus on near-term maturities, so Tom and I will address them during our comments. We have a $350 million bond maturity in February of '23. We are confident we could refinance these bonds in the investment-grade market and continue to explore shorter-dated maturity bond options in that investment-grade market. We are also, however, actively pursuing several other more flexible financing options, including secured and unsecured property and portfolio financings through the bank and other traditional institutional financing sources. This $350 million bond in February is our only wholly-owned balance sheet maturity until our next bond matures in October of 2024. We do have 2 joint ventures with nonrecourse loans maturing in 2023. We are already in discussions regarding extensions and exploring other financing sources for those loans as well. The first is a $208 million loan in our Commerce Square joint venture. This is a very low-levered financing with over an 11% debt yield on income in place. We're already in discussions with the existing lender for an extension as well as exploring other financing sources. The second maturity in the joint venture framework is in August of '23 and refinancing discussions are underway. From a capital allocation standpoint, we continue to assess forward capital spending. In addition, we are marketing an additional $200 million of properties for sale as part of our ongoing price discovery process. In looking at our development opportunity set, as I mentioned earlier, other than fully leased build-to-suit opportunities, all future development starts are on hold, pending more leasing on the existing pipeline and certainly more clarity on the cost of debt capital and cap rates. We also terminated 2 potential acquisitions that we had underway since the quarter end. When you look at our development pipeline, our remaining total Brandywine net funding obligation on all of our wholly-owned and joint venture development projects is $115 million, which includes $11 million remaining to fund on our 3151 Market project and $17 million for remaining tenant improvement spending on our now 96% leased 405 Colorado. As you'll note in our supplemental materials, our equity requirements on Schuylkill Yards West and Uptown ATX Block A are fully funded. We also announced as part of our press release, the commencement of our 155 King of Prussia Road project. This 145,000 square foot project is 100% leased to Arkema and will serve as their North American headquarters. We anticipate the project stabilizing in the fourth quarter of '24. We are already proceeding on a 60% loan-to-cost construction loan to help finance this project. And based on that, as of quarter end, we only have $18 million left to fund on this project, which again is included in the above $115 million total forward spend obligation. Our 250 King of Prussia Road project in Radnor is now over 53% leased, having signed 28,000 square feet of leases this quarter. The current pipeline totals 254,000 square feet. And again, our remaining $20 million spend on this project is included in the $115 million forward spend noted on that schedule. In looking at University City, our B.Labs project is doing extremely well and is leased to 15 different companies. A number of these companies are already expressing needs for additional space. So building on this success, we do plan to convert another floor totaling approximately 27,000 square feet to meet existing incubator demand. In addition, as noted on previous calls, feasibility studies remain underway to add another 78,000 square feet of life science capable space through Floor 9 including space being vacated by existing tenants. On looking at Schuylkill Yards, our 3025 JFK project, which is a life science residential tower remains on time and on budget for Q3 '23 delivery. We currently have an active pipeline of nearly 400,000 square feet, which is up 73,000 square feet from last quarter. The pipeline is expected to continue as construction progresses. In fact, with the superstructure nearing completion, we have conducted over 100 hard hat tours for prospects and their representatives. Our $56.8 million equity commitment is fully funded, our partners' equity investment is also fully funded, and the first funding of our construction loan has commenced. As you know from our supplemental package, in Schuylkill Yards, we can develop another 3 million square feet of additional life science space. And as another step in the execution of that plan, our 3151 Market project, which is a 441,000 square foot dedicated life science building, is on schedule and on budget. That project will be completed in the second quarter of '24. On that project, we have a leasing pipeline of about 400,000 square feet, and we plan on obtaining a construction loan in the 50% loan-to-cost range early in '23 as funding of that construction loan is not required until the third quarter of next year. Construction is also on time and on budget at Block A, at our Uptown ATX development. Additionally, as noted in our announcement, during the quarter, we did close on our construction loans totaling $207 million. On the office component, which is 348,000 square feet, our leasing pipeline is 1.5 million square feet. When we take a look at our development pipeline, the key phrase with that forward pipeline is timing flexibility as evidenced by low land basis per FAR and product diversity. Of the 14.2 million square feet we can build, we can do about 3 million to 4 million square feet of total life science space and over 4,000 multifamily units. Our overlay approvals, particularly at Schuylkill Yards and Uptown ATX give us a degree of flexibility to further adjust that mix to meet market demand. As evidence of the low land basis per FAR, you will note in our statements that we did record an $8.7 million land gain on the land contribution to our joint venture. Looking at other capital components, while our '22 business plan did not and does not specify a dollar volume of property dispositions, we have been active in this area as well. As I mentioned, we have over $200 million of assets in the market for price discovery. We anticipate continuing to sell select noncore land parcels during '23, as we did in '22. We have approximately $110 million of assets under firm agreements of sale that we expect to close before year-end. We also expect that sales of select properties out of our existing joint ventures will occur over the next 4 quarters, and dollars generated from these activities will certainly be used to reduce leverage, fund our development pipeline, and look for higher-yielding growth opportunities. Tom will now provide an overview of our financial results.

Thomas E. Wirth, CFO

Thank you, Gerard. In the third quarter, our net income reached $13.3 million, or $0.08 per diluted share, and our funds from operations totaled $61.8 million, or $0.36 per diluted share, which is $0.02 above consensus estimates. Our results exceeded expectations, and we observed several differences compared to our second quarter guidance. Interest expense was $1.2 million lower than projected, mainly due to the timing of capital expenditures and interest rates being slightly lower than anticipated. We have maintained our full-year guidance. Portfolio operating income was about $72 million, surpassing our second quarter guidance of $71 million. Land gains exceeded our forecast of $1.5 million, driven by a higher gain on the formation of our joint venture at 3151 Market Street. Our third quarter debt service and interest coverage ratios were 3.7 and 3.9, respectively, consistent with second quarter results and in line with our forecasts. Our third quarter net debt to EBITDA ratio was 7.2, slightly above our high-end guidance range of 6.6 to 6.9. As Jerry indicated, our 2022 guidance remains unchanged. While we exceeded consensus, we remain cautious regarding interest rates and expect an increase in interest expense of about $4.5 million in the fourth quarter. We see opportunities to reduce some of our floating-rate interest exposure through hedging and asset sales to decrease our floating rate line of credit balance. Looking to the fourth quarter of 2022, we anticipate property-level operating income to be around $72.5 million, slightly higher than in the third quarter, as we expect a modest net absorption increase. Total interest expense is expected to rise to $22.5 million, mainly due to forecasted higher interest rates, with capitalized interest approximating $2 million. The contribution to our funds from operations from our unconsolidated joint ventures is projected to be $5.5 million, and our general and administrative expenses for the fourth quarter will be $8 million. We expect term fees and other income to be around $3.5 million for the fourth quarter, with net management fees of $3 million, and a net gain and tax provision totaling $700,000. In terms of refinancing and liquidity, we are evaluating options to enhance liquidity as we plan for future financing. We believe we can refinance the $350 million bonds maturing in February 2023 with a shorter-dated bond in the current market. As Jerry mentioned, we are exploring several options that will allow us to repay the 2023 bond and reduce the outstanding balance on our line of credit, including secured and unsecured financing options, and potential asset sales this quarter and in the future. We expect to raise between $550 million and $650 million in proceeds over the next 90 days, which will be utilized to settle the February bonds and reduce our floating rate line of credit. Our fourth quarter capital plan is straightforward, totaling $110 million. Our cash available for distribution payout ratio is expected to stay between 84% and 95%, likely at the higher end of that range. The 2022 cash available for distribution range is above our historical run rate due to higher capital costs related to increased leasing activity in our owned and joint venture portfolios. We anticipate spending about $45 million on development and redevelopment, $33 million on dividends, $10 million on revenue-generating and maintenance activities, and $12 million in net equity contributions from our joint ventures. Based on this capital plan, we project a line of credit balance of around $299 million at year-end, with approximately $311 million available. We also expect our net debt-to-EBITDA ratio to be at the top of our guidance range of 6.6 to 6.9, primarily affected by the timing and scope of development expenditures. Regarding liquidity, we have plenty of capacity in our line of credit. We expect to invest an additional $115 million in our active development projects going forward, and targeted asset sales will help cover that balance as well as reduce our line of credit. We anticipate our debt service coverage ratio will be around 3.5, with an interest coverage ratio of 3.8, and our net debt to EBITDA will be between 40% and 41%. We recognize that our net debt-to-EBITDA is currently elevated due to our development and redevelopment pipeline, but we believe this is temporary. Once these developments stabilize, we expect our leverage to decrease. To illustrate how our investments in future development affect our current leverage, we currently have $428 million invested in projects that contribute little to no earnings in 2022, which increases our leverage ratio as of the quarter's end by 1.2 times. We expect these projects to generate an additional $64 million of cash net operating income over time, and we are confident in achieving the expected investment yields. Once these active projects are stabilized, we forecast our leverage to decline back into the low 6x range. As noted earlier, we plan to offset the current development range with targeted asset sales in 2022 and 2023. Until these developments are stabilized, we are including a core net debt to EBITDA metric of 6.5 at the end of the quarter, which excludes our joint ventures and active development projects. I will now hand the call back to Jerry.

Jerry Sweeney, President and CEO

Tom, thank you. Well, to kind of wrap up our prepared comments, the portfolio remains in solid shape. We know that there are concerns about the future demand drivers. I think what we're seeing right now in our leasing pipeline is continued new additions by tenants looking for an upgrade of their inventory. At this point in the cycle, they are prepared to pay for that upgrade. So we're still posting very good operating metrics. Looking forward, as we move into more uncertain times, our average annual rollover exposure through '24 of only 6.5% with the strong mark-to-markets predictable and manageable capital spend and accelerating leasing velocity, we think puts us in very good shape. So as usual, we'll end where we started, and we really do wish you and all your families well, and we're delighted to open up the floor for questions, Michelle. We do ask in the interest of time, you limit yourself to 1 question and a follow-up.

Operator, Operator

Our first question comes from Brian Spahn with Evercore.

Brian Spahn, Analyst

So you talked a bit about the leasing demand pipelines. But maybe could you just provide some more color on the demand you're seeing specifically for the spec development projects in Schuylkill Yards and Uptown ATX for both life science and traditional office. And I guess how much activity in particular are you seeing from large potential users of these spaces?

Jerry Sweeney, President and CEO

When we assess our pipeline, particularly for Uptown, which is still in the early stages of development, we are seeing strong interest. There are several potential tenants who are evaluating the project. Given their size, the discussions tend to be complex and are ongoing. Additionally, we have a variety of other tenants looking at options that include both multi-floor and single-floor spaces. Currently, we are not considering smaller users than one floor due to the demand; we are monitoring this closely. It's important for us to evaluate the larger prospects first to determine our space availability. We are pleased with the activity level in this area. Similarly, at Schuylkill Yards, the construction of the superstructure at 3025 is set to be completed by the end of November, and we have progressed with six out of eight levels of the window wall system for the life science sector. We are actively conducting tours with potential tenants and their brokers, and the interest here is robust. We are looking at larger users needing up to 70,000 to 80,000 square feet, while also considering smaller users. For 3151, which is just starting after the groundbreaking, the tenant interest ranges from single-floor users needing about 35,000 square feet to those looking for a couple of hundred thousand square feet. This interest comes from established life science firms, as well as companies transitioning from local incubators to more advanced spaces, alongside significant institutional demand from healthcare and academic sectors.

Brian Spahn, Analyst

Got it. And you touched on additional asset sales as well. Could you maybe just talk about what you're seeing in the transaction market today in terms of bid-ask spreads and to the extent you can't complete additional dispositions, what are the funding plans for development? And how would you say that impacts your thinking around the dividend?

Jerry Sweeney, President and CEO

Yes. Well, I think in terms of the funding plan around future development, we framed out or tried to frame out fairly clearly that the forward committed development spend we have, what we have underway is $115 million. So we have plenty of capacity with our plans in place to fully fund that out. As I mentioned, we're also given the uncertainty in the interest rate and cap rate climate right now, putting a number of projects on hold until we get more clarity on where those markets and those pricing levels will be, but more importantly, where the source and uses play out. So hopefully, that answers the second part of your question. In terms of the asset sales, it's not a lot of trades have occurred because you're really seeing that there's still a bit of a disconnect between seller expectations and buyer aspirations, so to speak. And the buyers are tending to do their pricing models and their equity return models based upon where they see debt is. The debt markets, frankly, have been a little more volatile of late, as we all know. So that's creating some confusion in terms of what the appropriate price levels are. I think in general, for the assets we do have in the market, we're very pleased with the number of confidentiality agreements that folks have signed to get access to the information as well as the number of tours. So there's a high level of interest out there in terms of potential buyers. We are seeing target pricing levels of somewhere 10% to 15% below originally targeted levels of a couple of quarters ago. And that's, I think, one of the reasons why you're not seeing a lot of things trade. But I think the level of activity that we're seeing and the quality of the buying pool is good. I just think the pricing metrics are a bit unclear right now based on where the debt pricing levels are.

Operator, Operator

Our next question comes from Michael Griffin with Citi.

Michael Griffin, Analyst

Maybe following up on that disposition question. Do you have a sense of the targeted buyer pools for these proposed dispositions? And is there one capital partner that might be more attractive kind of relative to others in terms of these transactions?

Jerry Sweeney, President and CEO

Yes, Michael. Right now, our bidding pool includes a variety of foreign investors, as well as Tier 2 institutional investors and syndicators with available funds. The assets we have on the market vary in value from approximately $20 million to about $80 million. This gives us a diverse range of asset sizes. We've been pleasantly surprised by the number of people touring the properties. The investment brokers we've engaged are focusing on securing debt commitments as much as they are guiding equity investors through the properties. After an impressive lobby, a common question is about the project's debt costs. Therefore, we’re actively reaching out to different lending sources to understand the current debt pricing levels. We're well-prepared to respond to pricing offers as they come in. The agreements we have in place will be executed at a cap rate below 6%, and we are optimistic about closing these deals by the end of the year. The remaining properties on the market are a mixed bag, including some we consider non-core that we are testing at a higher rollover stage of the project life cycle, alongside more stable assets.

Michael Griffin, Analyst

And then just maybe on the upcoming debt maturities and refinancing prospects. Do you have a sense of the potential term in rate for these? And Jerry, I think you talked about it being more shorter-term debt. Is there any possibility of maybe terming it out for longer?

Jerry Sweeney, President and CEO

Tom, do you want to take that?

Thomas E. Wirth, CFO

I believe the debt and refinancings we are targeting will mainly be in the 5-year range, although some might be a bit shorter. Currently, we are looking at a 5-year timeline. With the bond deal as a possibility, we are also considering options that would allow us to exit or refinance these instruments earlier than the 5-year period, should conditions improve.

Operator, Operator

Our next question comes from William Crow with Raymond James.

William Crow, Analyst

Great. I have a couple of broader questions here, Jerry. If we look back five years, Philadelphia was seen as a valuable asset in the Mid-Atlantic, ready to welcome many New Yorkers who were moving due to difficulties in their market. Today, however, there seems to be a shift in perception. I'm curious if your tenants have changed their view on the Philadelphia market, particularly regarding the safety of the downtown CBD area. Could this shift potentially impact future demand?

Jerry Sweeney, President and CEO

Excellent question. I mean, look, I think Philadelphia really has benefited in the last half dozen plus years from bringing a lot of new in-migration into the city and into the suburbs as well. And I think that we've continued to see a number of companies move into the Philadelphia market. That slowed, of course, during the pandemic, but we also were able to pick up a couple of new tenants in our portfolio that were actually new to the region during the pandemic Center City, Philadelphia. The tone of a lot of these major cities has certainly changed, where Philadelphia is making amazing progress on an economic growth trajectory. I think there is some concern about the safe and clean components that you're seeing in a lot of other cities. I think there's a lot of attention being focused on that. It's certainly a bit of a concern by some tenants. But I think the general perception, Bill, is viewed as transitory. A lot of efforts are underway both in the public and private sectors to provide methods to alleviate those concerns. We're in close communication with the regional rail authority and what they're doing, certainly working with the business improvement districts in the city of Philadelphia to ensure that issues like that are, in fact, transitory and will be readily addressed. But it's certainly a topic that comes up in all candor with some discussions as people are looking at Philadelphia from the outside. I think that when we get them through the door and we walk them through the vitality of the parts of the city where we're doing business, certainly, a great green shoot is the potential continued growth of the cell and gene therapy business in Philadelphia, and that's an academically anchored program. Roche Pharmaceuticals, Bill, as you may recall, they announced they're building a $600 million manufacturing research lab directly across from our IRS post office building, and that will house a whole range of employees from all over the world. So that type of investment activity we think portends well, particularly for University City, but I think we readily acknowledge in all of our tenant business discussions that these major cities, including Philadelphia, have transitional issues they need to work their way through. I don't know if that answers your question or not, but...

William Crow, Analyst

Yes, that's helpful. It’s beneficial to hear your thoughts if we don’t move in that direction. Regarding your second question, it’s smart to bring this up. You mentioned the advantage of having very few lease rollovers in the coming years, and I completely agree. My question is whether there has ever been a time in the last 15 years when you would consider switching some short-term lease expirations for more long-term leases. It seems like we haven’t experienced a period with healthy mark-to-market rents. It feels like we've been stuck in a no-growth environment since the Great Recession. Is that an unfair assessment?

Jerry Sweeney, President and CEO

I apologize, Bill. You keep cutting in and out. Are you asking if we think there will be a time when we look at shorter lease maturities to create more intermediate-term upside in the rental NOI?

William Crow, Analyst

Yes. I apologize for the reception here. The question is whether there has been a moment in the past 15 years when having near-term maturities was beneficial. It seems like we've never reached a time when the mark-to-market was appealing enough to warrant having many near-term maturities.

Jerry Sweeney, President and CEO

I think generally, we haven't experienced that. However, from a submarket perspective, there have been positive moments. For instance, our Radnor and University City portfolios have found success with bridge term leases, allowing us to significantly increase our run rate. We haven't observed the same in the Washington, D.C., Northern Virginia, Maryland market. There were similar moments in Austin, Texas, several years ago with 3-year leases that included good escalations. It really comes down to submarket dynamics, and we analyze our forward rollover by submarket, assess existing occupancy levels, and adjust our marketing strategy accordingly. One of the ongoing challenges over the past six years has been rising construction costs, which can overshadow the benefits of shorter-term leases needed for immediate gains. Nonetheless, there have been instances of success. We engage in many spec suites built for smaller tenants with leasing terms typically in the 3- to 5-year range, achieving higher-than-average rents while offering tenant flexibility. Historically, we've found that these tenants either renew or a new tenant occupies the space as-is. Our approach has been more tactical than strategic. I appreciate the lease structures we've adopted, with around 81% of our leases acting as an effective hedge against inflation. Our average annual escalations range from the high 2s to low 3s, ensuring annual rental rate increases. We also review our average lease terms every year as part of our business planning process.

Operator, Operator

Our next question comes from Daniel Ismail with Green Street Advisors.

Daniel Ismail, Analyst

Maybe going back to an earlier response, Jerry, I believe you mentioned on the dispositions, those being a sub-6 cap. Are those stabilized? Or is there some leasing to do there?

Jerry Sweeney, President and CEO

One is fairly stabilized, and the other is a residential project.

Daniel Ismail, Analyst

Got it. And for clarity, I believe earlier this year, you guys placed a 1900 market on the disposition block? Is it safe to assume that, that is not included in that $110 million?

Jerry Sweeney, President and CEO

It is not, Danny. That is correct. We still have that in the market. You may recall, we launched that right before Memorial Day. With the summer approaching and the volatility at that time, we postponed the bid day. We are still in discussions with a couple of high-quality buyers. This highlights the need to secure debt financing. We are taking an approach of introducing various types of products into the marketplace to gauge where we believe pricing will stabilize. We will analyze the data we receive and compare it to our internal valuation from a net present value perspective of holding that asset versus selling it. I believe we will maintain this discipline over the next few quarters as we observe the market clearing prices for some of these asset sales.

Daniel Ismail, Analyst

Got it. I have one last question. You mentioned terminating a few acquisitions this quarter and announcing the build-to-suit developments. How are you viewing those opportunities given the share price, which is currently over 10% flat cap rates and potential share repurchases?

Jerry Sweeney, President and CEO

Yes, share repurchases are definitely an option for us. We want to ensure we focus on securing liquidity and addressing near-term maturities while also aiming for additional asset sales. We recognize the importance of that, and it will be part of our strategy once we achieve our near-term refinancing goals that I mentioned earlier. I hope that addresses your question.

Operator, Operator

Our next question comes from Steve Sakwa with Evercore ISI.

Steve Sakwa, Analyst

Jerry and Tom, I just wanted to circle back on some of the debt stuff. And I understand it's a little fluid in terms of whether you're going to go 5 or 10 years. Right now, the curve is obviously inverted. So 10-year treasury is obviously below the 5-year. But how are you guys thinking about spreads? I guess I'm just trying to get a better handle on where you think all-in fixed rate debt cost would be today? And then secondly, is there anything you can tell us about the $250 million term loan that expired in October?

Thomas E. Wirth, CFO

I will address a couple of your points. Looking at the investment-grade bond market, we see that there is an inverted yield curve. When we assess 5-, 7-, or 10-year bonds, the pricing remains quite similar and is generally high. Currently, we are seeing investment-grade bonds priced around the 7% range, especially with the market remaining open. Our credit spreads have slightly decreased to balance the rate changes, leading to a flat curve where the net yields among 5s, 7s, and 10s show minimal differences. Regarding your second question about the $250 million term loan, it was extended as part of our line of credit. We had a swap on this term loan that lasted until October, but now it will float, and we have yet to place a new swap on it. We are considering the potential for a long-term swap to establish a fixed rate, but we haven't made that decision yet.

Operator, Operator

There are no further questions. I would now like to hand the call back to Jerry Sweeney for his closing remarks.

Jerry Sweeney, President and CEO

Great. Well, Michelle, thank you very much for your help today. Thank you all for participating in our call. Wish you a great holiday season, and we look forward to updating you on our fourth quarter results and '23 business plan after the first of the year. Have a great day.

Operator, Operator

This concludes the program. You may now disconnect.