Good morning, ladies and gentlemen, and welcome to EastGroup Properties, Inc. Third Quarter 2025 Earnings Conference Call and Webcast. At this time, note that all participant lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. And if at any time during this call, you require immediate assistance, please press 0 for the operator. Also note that this call is being recorded on Friday, October 24, 2025. I would now like to turn the conference over to Marshall A. Loeb, CEO. Please go ahead, sir.

Good morning, and thanks for calling in for our third quarter 2025 conference call. As always, we appreciate your interest. Brent W. Wood, our CFO, is also on the call. And since we will make forward-looking statements, we ask you to 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 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 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 on the company's plans, intentions, expectations, strategies, and prospects, based on the financial 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-Ks for more detail about these risks. Thanks, Casey. Good morning, and I would like to start by thanking our team. They have worked hard this year, and we are making solid progress towards our 2025 goals. I am proud of our results. Our third quarter results demonstrate our portfolio quality and resiliency within the industrial market. Some of the results produced include funds from operation at $2.27 per share, up 6.6% for the quarter over the prior year. And now for over a decade, our quarterly FFO per share has exceeded the FFO per share reported in the same quarter prior year. Truly a long-term trend. Quarter-end leasing was 96.7% with occupancy at 95.9%. Average quarterly occupancy was 95.7%, which, although historically strong, is down 100 basis points from the third quarter of 2024. Quarterly releasing spreads were 36% GAAP and 22% cash for leases signed during the quarter. Year-to-date results were slightly higher at 42% GAAP and cash, respectively. Cash same-store rose 6.9% for the quarter and 6.2% year-to-date. Finally, we have the most diversified rent roll in our sector with our top 10 tenants falling to 6.9% of rent, down 60 basis points from last year. We target geographic and tenant diversity as strategic paths to stabilize earnings regardless of the economic environment. In summary, we are pleased with our results and the increase in prospect activity we are seeing. Converting that activity into signed leases still takes time, but we are pleased to see the growing pipeline. In terms of leasing, the third quarter improved materially from a slower second quarter in both the number of leases signed and square feet. From another angle, those metrics were also markedly improved versus the third quarter of 2024. Similar to last quarter, the market remains somewhat bifurcated such that we are converting prospects of 50,000 square feet and below. Our larger spaces have prospects, and we are cautiously optimistic with improved activity in these spaces. In the meantime, with larger prospects being somewhat deliberate this year, it is impacting us in several ways. First, delaying expansion means the portfolio remains well leased and is ahead of initial forecasts. Our quarterly retention rate rising to almost 80% is an indicator of tenants' cautious nature. On the other hand, our development pipeline is leasing and maintaining projected yields but at a slower pace. This in turn lowered development start projections from earlier in the year. And our starts, as we have stated before, are pulled by market demand within our parks. Based on current demand levels, we are reforecasting 2025 starts to $200 million. Longer term, the continued decline in the supply pipeline is promising. Starts were historically low again this quarter. Couple this with the increasing difficulty we are experiencing obtaining zoning and permitting, and as demand increases, supply will require longer than it has historically to catch up. This limited availability and new modern facilities will put upward pressure on rents as demand stabilizes. And as demand improves, our goal is to capitalize earlier than our private peers on development opportunities based on the combination of our team's experience, our balance sheet strength, existing tenant expansion needs, and the land and permits we have in hand. From an investment perspective, we are excited to acquire the previously announced properties in Raleigh, North Carolina, new development land in Orlando, where we will break ground this quarter, and new buildings and land in the fast-growing supply-constrained Northeast Dallas market.

Good morning. Our third quarter results reflect the terrific execution of our team, the solid overall performance of our operating portfolio and the continued success of our time-tested strategy. FFO per share for the quarter exceeded the midpoint of our guidance at $2.27 per share compared to $2.13 for the same quarter last year, an increase of 6.6%. Our outperformance continues to be driven by good fundamentals in our 61 million square foot operating portfolio, which ended the quarter 96.7% leased. From a capital perspective, we took advantage of favorable equity prices early in the year, which allowed us to enter the quarter with a reserve of about outstanding forward shares agreements. During the third quarter, we settled all our outstanding forward shares agreements for gross proceeds of $118 million at an average price of $183 per share. Our guidance for the remainder of the year contemplates that we utilize our credit facilities, which currently have $475 million capacity available and issued $200 million of debt late in the fourth quarter. As we often emphasize, our evaluation of potential capital sources is a fluid and continual process that can result in varying outcomes depending upon market conditions. Our flexible and strong balance sheet with near-record financial metrics allows us to be patient when evaluating options. Our debt to total market capitalization was 14.1%, unadjusted debt to EBITDA ratio of 2.9 times, and our interest and fixed charge coverage increased to 17 times. Looking forward, we estimate FFO guidance for the fourth quarter to be in the range of $2.30 to $2.34 per share and for the year in the range of $8.94 to $8.98, representing increases of 7.9% to 7.3% compared to the prior year. Our same-store occupancy for the fourth quarter is projected to be 97%, which would be the highest quarter for the year. As a result, our revised guidance increases the midpoint of our cash same-store growth by 20 basis points to 6.7%. We lowered our average portfolio occupancy by 10 basis points due to the conversion of a few development projects prior to full occupancy. Considering the slower pace of development leasing, we reduced construction starts by $15 million. Our tenant collections remain healthy, and we continue to estimate uncollectible rents to be in the 35 to 40 basis point range as a percentage of revenues, which is in line with our historic run rate. In closing, we were pleased with our third quarter results and remain hopefully optimistic that signs of macro uncertainty subsiding and consumer and corporate confidence strengthening is setting the stage for next year. Now Marshall will make final comments.

Thanks, Brent. We are pleased with our execution this quarter and year to date, moving us ahead of original expectations. Market demand seems to be dusting itself off and beginning to move forward again. Regardless of the environment, our goals are to drive FFO per share growth and raise portfolio quality. If we can do those, we will continue creating NAV growth for our shareholders. Stepping back from the near term, I like our positioning as our portfolio is benefiting from several long-term positive secular trends such as population migration, nearshoring and onshoring trends, evolving logistics chains, and historically lower shallow bay market vacancy. We also have a proven management team with a long-term public track record. Our portfolio quality in terms of building and markets improves each quarter. Our balance sheet is stronger than ever, and we are upgrading our diversity in both our tenant base as well as geography. We would now like to open up the call for any questions.

Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process, please press star followed by two. And if you are using a speakerphone, you will need to lift the handset first before pressing any keys. And also note that out of consideration to other callers and time allotted today, we ask that you please limit yourself to one question and get back in the queue should you have any follow-ups. Thank you. And your first question will be from Samir Upadhyay Khanal at Bank of America. Please go ahead.

Marshall, thank you for your commentary. I guess maybe expand on leasing a little bit. Kind of the color that you provided, especially as it relates to the development pipeline. Know you have got World Houston, other projects in Texas. You also take, you know, said the conversion to sign leases are taking longer for those bigger sort of boxes there. So maybe talk around, maybe expand on your comments a little bit and maybe what these prospects need to see to get to the finish line? Thanks.

Okay. Hey, good morning, Samir. Good question. I will try to cover it. I think I would say a couple of things. One, we are certainly more encouraged at the tenor of those conversations is kind of each month gotten better. Maybe starting in May, which was really, was May was when we felt kind of the tariff impact through today. So better than say, when we were I got asked that question earlier in the week when we were at your conference in September, for example. In our portfolio, and maybe we are a little unique in that so much of our of that a third of our development leasing is existing tenant expansion and movement within a park. So we have seen and you seen it in our numbers, our retention rate especially in third quarter, ran pretty high at almost 80%. So the portfolio is benefiting our same-store numbers are benefiting. And then on the flip side of that, and we have we have hit the pop the slow button on our development pipeline or starts, a few times kind of each quarter, bringing it down of like, look, and we do have more prospects than we have had as the years played out. It is getting them and I do not know. I was hoping you know, one, if we have one interest rate cut, according to your economist, we will get another one coming, at least the emails I am seeing this morning and things like that. So hopefully that maybe a little bit of ceasefire in The Middle East, things like whatever it takes to get business sentiment a little bit better, and I would say it is. I people got beyond the shock factor. But look, we know our task at hand, which is to lease these development projects once they will the ones that are in lease up where we finish the construction and the ones that have transferred over. So we are we are not assuming any spec leasing in the balance of the year budget. So I am hoping there is potentially upside there. We are running out of time this year. But we also build out spec suites in our vacancies. So if someone needs to move quickly, which they all do in these smaller spaces, we are able to accommodate that. So things are better, but they are not it just it has been an odd year that you send out leases, and they have not always come back. I remember that more. That has been more eventful this year than it has been in the prior five years. Thank you. Sure. Thank you.

Next question will be from Blaine Matthew Heck at Wells Fargo. Please go ahead.

Great. Thanks. Good morning. Following up on development, can you just talk about how construction costs have trended more recently and whether that has been a constraint on starting more projects? And kind of related to that, where do you think market rents are relative to rents that would generate acceptable yields for you guys on those development projects?

Good morning, Blaine. We have seen construction pricing come down really with a lot of it is we have have been watching with everything going. We have not had labor issues. And usually what our construction teams will say is that we get pricing. It may be a little high, but once they realize you are really serious, that has come down maybe 10 to 12%. Because people are so hungry for projects given just the lack of outside of data centers. No other sectors are really going as quickly. And I guess thinking of data centers, we do getting transformers and the electrical equipment is challenging. So we can get those, but there is a lot of demand and a long lead time. So the land we acquired this quarter, we will usually underwrite it on today's rents. Not forecasting any growth I hope it grows, but we are not forecasting that. And today's construction pricing And everything is still kind of penciling out into the seven or low sevens. It is not easy to find the land, the permitting and zoning on these infill sites gets harder and harder, but we are pleasantly pleased with how that is going. It is not construction costs that have slowed us down. So much as demand, which was really strong in the fourth quarter a year ago, and first quarter slowing in the second quarter. It picked up in the third quarter, we got more leases and more square footage than we did in second quarter or third quarter last year, so we are pleased with that. We just need to keep that momentum and get our look at our potential revenue get leased up what we have already spent the capital on, and we will look, it is more fun to go as fast as the market tells you to go. But this year, we are trying to go as slow as the market tells us to go as well. Great. Thank you, Marshall. You are welcome.

Next question will be from Craig Allen Mailman at Citi. Please go ahead.

Hey, guys. Not to dwell on the development pipeline, but the incremental leasing there was pretty muted quarter over quarter. I saw you did get some leasing done at Dominguez, but you also kind of pushed out the stabilization date there. But I guess my bigger question here is, you know, you talked about sending leases out but not hearing back. I mean, if you look at the availability and the development pipeline, how how much of that availability has active prospects on it? Versus, you know, just quieter from a tours and interest perspective. And you know, is there a is it rent related where you can toggle that up or down or can concessions, or is it just if people do not want to make a decision because of concerns, they are just it other pricing stuff does not matter as much.

Yeah. Hey, Craig. Good morning. I would say during the quarter, kind of since the last call, we ended up with about total, I wish it was a bigger number, about $6,215,000 roughly 215,000 square feet. What is I guess, being more specific, at least on Dominguez, we oddly enough, we sent out five leases on that space and the fifth one is the one that came back. And so as we threw out a bigger net, we said we would subdivide the building, or even consider a cell, which we are we have not ruled out that, although we have gotten part of it at least. And in subdividing the building, we are adding an office component on the other end of the building. So that is what we decided, again, trying to rather than lease it as one two sixty that we would break the building up, so it is delayed the delivery adding more a few thousand more feet. Of office in LA. And then kind of broadly speaking, you know, the other thing within our development numbers, and I do not remember us doing this, we got a 97,000 foot development lease signed for full building in Texas and within a week, and they had a broker, an attorney, they reached back out to us to tell us they have changed their mind. So it has been a little bit of a maddening year and terms of leases sent out that did not come back or this case a signed lease that someone and we are working through the termination and some things like that, but and that is not in our account. So I am leaving that lease even though it was a signed lease, we pulled that one back out. Now I do not think they are going to occupy. So that is odd or atypical for most years. And in terms of kind of looking at our development schedule, I would say about everything has some degree of activity. You know, we need to get it signed. I am trying to think, and some of these are are odd, where to me, it hits me like I am looking at the list. Horizon West 5, where it is probably our seventh building in a park, same architect, same broker, but that building is a little bit slower than we would like. Although we have got activity and Orlando is a good market, that is just it tells me where the market is, where where it is the seventh, eighth building in a park, which usually goes faster than the first buildings in a park, but they are taking a little bit longer. So we have activity. You know, the other thing I will say, and I will say it carefully, we have in the last thirty days, more large tenant more kind of prelease. Again, given that lack of supply, activity, what, 92% of our revenue is from tenants under 200,000 feet, and we have several deals. They will take a few quarters that we are working on with tenants or and or prospects that would materially move that number where we would be building up a non-shallow bay building that they are out, that they like our land or their existing tenants who need to expand. So that is promising, and I am hopeful, but I would rather show you those. But the good news is there is more in the pipeline and about every building has a certain amount of activity. It is just where things shook out, you know, between third quarter through today's call. So we just we know we have got our officer meeting next week. We are all getting together, and we know our task at hand, which is to get you know, sign space, collect rent.

Next question will be from Nicholas Patrick Thillman at Baird. Please go ahead.

Marshall, you kind of commented on the overall operating portfolio and the leasing volume you have there. As you are looking at the expiration schedule for next year, rents are a little bit lower here as we look at the mix, it is pretty much in line with your exposures. Could we see another kind of just overall strong year in spreads here in the mid-30s for a gap just looking at the mix and what you guys have been seeing on that activity level.

Yeah. Good morning, Nick. Yes. I believe we will and if a couple of things. Third quarter was a little lower. One difference and again, maybe offline, welcome for feedback. We are a little bit of an oddity in the industrial REITs in that we report releasing spreads on leases that got signed during the quarter where most of our peers report on what commenced. So our numbers we like I think invest trying to be investor friendly. It is a little more real time than what may have gotten signed a few quarters ago that commenced in third quarter. But I guess that and then really focusing on your question, yes, I think we could kind of maintain those third quarter levels. Certainly, next year, end of next year, where I keep waiting, and I know one of our peers made the comment, this is the best setup they have seen in forty years. I have not I have not done this forty years. I have done it a long time. I am not that level, but I really like the low supply. I saw the deliveries in third quarter nationally were the lowest level since 2018. So it is hard to get inventory built and becoming harder and there is not much of it out there in the shallow bay. So look, I think our we have embedded growth. I think it will level out. And then I think when demand turns, it will not take much because there is about 4% vacancy in our markets in shallow bay and there will be a flight to quality as people expand too. So I think we will have another leg up in rents. I think if things stayed where they were, we could keep at that level. But I am hopeful between, you know, maybe now and the end of next year that there is, you know, in a midterm election year, maybe the headlines will be a little bit less that people will when things turn, they surprise me how quickly they turned at the end of last year. And in the first quarter. It has gotten to where the headline risk has more impact than probably I thought it would, looking back the last the headline in the fourth quarter, the headlines in April, and maybe next year if we can avoid some headlines I think you could have a kind of a rent squeeze. Someone used the quote. There is a cost to waiting on leases. And things like that in our peer group. I am not sure we are there exactly yet, but I could easily see that coming. And I again, I would rather I am better at calling things in hindsight than forecasting, I will admit.

Very helpful. Thank you.

Next question will be from Connor Mitchell at Piper Sandler. Please go ahead.

Appreciate all the commentary so far. And Marshall, you have given a couple of specific examples on some of your markets, but just wondering if you can kind of provide a bigger picture or even drill down a little bit on just kind of what you are seeing for the regional breakouts, whether it is Texas, Florida, California, some of the other markets, where where you are seeing some more of the strength in those markets or weaknesses in those markets for you know, the retention rate that you mentioned, but then also, adding some new tenants into the pipeline as well. Just kind of get a feel for how you are thinking about each of the markets and almost like a ranking of them in a sense.

Sure. I guess hey, Connor. Good morning. I would say the Eastern Region, you know, with a broad brush has been strongest region or had the strength kind of from mid year on. Florida has been broadly speaking, a good, really strong market there. I wish we were bigger in Nashville, but that is a really good market. And you have seen us growing in Raleigh. We like that market a lot. Texas, generally, you know, we are we like that. You saw us acquiring more land there. At the moment, we have got too many buildings and too many tenants, but I will thank our Texas team. We are 100% leased in Dallas. So we need expansion space that land for tenants to expand. So we are happy there. The other market, I will complement our team in Arizona, there is a lot of vacancy in the Arizona market. There was a lot of supply that came in, but we are 100% in Phoenix, 100% in Tucson, and been able have been able to push rents and our development leasing is there. So those would be on the good side. On the a little bit of a beat the same drum. I will The California markets are still slower than our other markets really with LA, The Inland Empire had positive net absorption but LA has had I think it is 11 consecutive quarters of negative. So I would love to have just a flat quarter in the city of LA a little over a million square feet negative in third quarter. I thought they would turn. I am glad we got the activity we did. On Dominguez and got that signed. And then Denver is another market that has been a little bit slower for us. We are not all that big in Denver, but those, if you said, what are the markets where you are kind of thinking a little more, Denver has been a little bit slower for us on our development leasing there than we would like. And California has been a tough market for eighteen months or longer.

Appreciate all the color. Thank you.

You are welcome. Next question will be from Richard Anderson at Cantor Fitzgerald. Please go ahead.

Thanks, and good morning. So back to the releasing spreads, the 22% cash-based number for the third quarter, let us just say hypothetically that this deliberate tenant thing continues, for whatever reason. And, you know, it is two years from now, and we are still sort of on a treadmill-ish type of thing. How how much time do you have for that 22% to sort of close in on a fairly pedestrian single-digit type number? I mean, how much more bites of the apple do you have? Do you think, before you need to start to see activity really start to ramp so that starts to revert the direction starts to reverse? Again.

Hey, Rich. Good morning. I will take a stab at it and let Brent add color. I think the one I think I have kidded. I do not remember much about econ 101, but when I just look at supply and it would not take much demand to kind of tilt the rents. But but hearing your question, if we stayed steady state, we typically, you know, next year, I think we have got 14% doing this from memory from our supplement, rolling. And so it would take several years before we could address those leases. Again, the later you got into that, what, that would be seven years, but some of those there is a number of leases pending term of that lease that just got signed in the last couple. So there is probably not maybe 20% rent growth in there. But it would take a while just I guess when the market is good, it takes us a while to get to that embedded growth. And as the air goes out of the balloon, which may be kind of your it will take a while for the air go out of the balloon with kind of most of our leases are somewhere between three to ten years. It would take a while for us to move all those to market. And and and I cannot yes. So if that happened, that is how it would play out. I cannot imagine the market seems to net for better or worse, never stays flat like that.

Yeah, I would agree, Rich. Hey, this is Brent. Yeah, I mean, when you are rolling 15% to 20%, of course, you can do the math and figure out when when you start having flat and how long in terms of rental rates could say four to five years and how far are you into that already. But and again, know that is a hypothetical, but it feels much stronger than that with supply. Supply really in my career and time, seeing supply get this tight really excites me because it would not take much shift in sentiment and some execution for, I think, the markets development starts and those type things to turn very quickly, much quickly, more quickly than I think people are thinking. And kind of along those lines, the question of rents and does that impact construction starts. I think the good news there when you kind of think of this as a four-legged stool and the cost side as Marshall said decreasing generally Rents have been very sticky because talking about the third leg supply is very tight. It really comes down to that last leg being demand. As we have talked about, there is interested parties there, there is demand there. We are getting leases signed and certainly getting very acceptable yields. It is not a function of cutting rates or trying to increase activity that way. It is just strictly confidence gaining to the point where they are pulling the trigger and then we can move that conveyor belt of new starts along a little more quickly. But yeah, back to your question, how long would it take I think we would still be a number of years out. But I do not feel like the table is set for that to play out. Certainly hope we are not on that treadmill you referred to there, Rich.

Yep. Okay. Agreed. Second question, while you guys are kind of a consumption-oriented story, not so much a supplier manufacturer story. Do you agree though that with everything that has happened during the pandemic in terms of simplifying supply chains, and now with tariffs, you know, with one, you know, result possibly being more in the way of manufacturing, onshoring. Is that the leading sort of dynamic to help industrial overall get out of this like the current sort of, you know, sort of lackluster, situation? Manufacturing leads it followed by consumption? Is that your way of thinking about it? Or do we have that, you know, kind of completely wrong?

You it is hey, Richard. It is Marshall again. You may be right, and one, the consumer is certainly our strategy has been to always be how close can we get to a growing number of kind of higher disposable income consumers. But that said, the consumers carried the economy a long time. I do not know how much upside there is. Hopefully, the economy gets better and they continue to push the economy. You are right though, that new source of demand is, I think, through our portfolio and especially kind of our markets we are seeing the manufacturing companies and the relocations a lot into Texas, and we do not you are right, that could, that will be a driver in that we do not have we have a number of Tesla suppliers in Austin, and in San Antonio. The new chip plant with Intel's building in Phoenix. We have we actually have Intel related to construction there, a supplier to Intel. Same thing with the Texas Instruments plan as I am kind of thinking out loud and Northeast Dallas. We have a supplier there. So we do pick up a lot of suppliers. And as those plants get built, it is I guess my hesitancy in putting consumer ahead of or manufacturing ahead of consumer, I think it I think you said, and maybe our children's children, really get the benefit of that, but we are certainly seeing onshoring and nearshoring, we are having those type conversations in Arizona as well of we need more man light manufacturing space. We have got relocations from California type discussions going on. And things like that. So it I would like to think of kind of like ecommerce. It was a new additional tenant within our portfolio. We were already pretty full, but we have seen a pick with e-commerce. It was one more demand source. And I think now we are you are right, we are seeing it for supplier source for these big plants. And a lot of them are getting built in the Carolinas, and in Texas and Arizona and markets like that. They probably have an outsized market share.

Great color. Thanks, Marshall. Thanks, Brent.

You are welcome.

Next question will be from Jon Petersen at Jefferies. Please go ahead.

Oh, great. Thank you. Good morning, guys. So, actually, I wanted to ask you. Is there any change, or can you give us the level of bad debt in the quarter and then related any change in the tenant watch list?

Yes. Good morning, John. The bad debt continues to be thankfully a non-factor. We are still in that 30% range or something like that. And really the last two quarters have been at a run rate about half of the prior five quarters. Again, it tends to be contained amongst just a small number of tenants. Our watch list has been very consistent this year. In terms of the number of tenants, nothing really growing there. So that has felt good and testament to portfolio and the credit and the groups, the tenants we have in place. But yes, we are still seeing that 30% or so, 30%, thirty-five basis points relative to total revenue. As being pretty consistent here over the last couple of quarters.

Okay. Alright. That is helpful. And then you know, as we are seeing interest rates come down to ten years, just a touch below 4% right now, you guys have allowed your debt levels to come down. You have leaned more on equity. I guess, what is the right interest rate where we would expect your leverage levels to kind of start to tick back up to your long-term target?

Well, think that is a component of a few things. I mean, it would be the interest rate, but relative to say what is our equity opportunity and what are other opportunities. So we are constantly weighing those out. And yeah, in the guidance we showed bumping some capital proceeds, which was, and I think I said in my prepared remarks, we are looking here in the fourth quarter doing $200,000,000 to $250,000,000 maybe in the way of unsecured term loan. Think that could price in the low $3.04, $4 type range, which we view as very attractive. I would just backing up for a moment, the two and a half to three years we are into these higher interest rates now, take a lot of pride that we have not not that we would be anything wrong with it, but we have not issued debt even with a five handle at this point. And yet, we have continued to fund our growth and we have, as you point out, delevered the balance sheet now to a 2.9 times debt to EBITDA. So very, very low. We have a lot of dry powder there. So I think you are going to see us in the fourth quarter begin to dip into that. We continually are monitoring public bonds, the public debt markets. Certainly, at some point in the future, whether it is near term, long term, whatever it is, we will be there. But you weigh all that, you weigh your equity, the cost of equity, and the balance of that and where you are. And so it is all kind of a fluid moving situation. But the other thing I would point out, John, is that our over time, the revolver balance or the revolver rate now, though it is variable, it is much more tied, a little more to how the Fed fund rate moves. And that is now moved into like a 4.7-ish sort of range. So we will probably begin to keep a little bit of balance on our $675,000,000 revolver there. And that gives us time and availability to be patient and look for our different opportunities there. So we feel real good about our capital position, our ability to tap into that debt. And thankfully, team, three good acquisitions this quarter, continue to to make a way through our development pipeline. And so they continue to we continue to have a need for capital because they are finding good way to put it to work and accretive for the shareholders. But we are in a good spot and feel like things are turning the right way and giving us more options. We are excited about that.

Alright. Thank you very much. Appreciate it.

Yep.

Next question will be from John P. Kim at BMO Capital Markets. Please go ahead.

Hey. Good morning. I was wondering if you could provide the average rent per square foot signed year to date and how we should compare that to the 2026 expiring rents which at the beginning of the year were at $8.42. I know there might be a mix or timing discrepancy between the two, but just trying to see some of the building blocks for the gap same-store NOI next year.

Yes. Good question. We can dive into that. I could go off line and see if we can get some numbers for that. I would give you the standard answer that across all of our markets, the average rent per square foot can move around quite a bit. California is certainly very high rates relative to some other areas of the country even though there has been softness there. But looking at our average role next year in of where that square footage is rolling, What I would say, John, maybe give you some color backing up for a moment is, even though we have seen rental rates come down off their peak or highs, they still, as I alluded to earlier, they are still very sticky and certainly they have moderated a little bit from the highs, but getting rental rate out of deals has not been the big part of the equation. It has just been more the sentiment and the demand pace more than anything else. But we are not sensing a lot of headwind to still having, as Marshall alluded to earlier in the call, having strong rental rate growth numbers. So I guess what I am trying to say there is we do not see anything there that is going to change that in a material manner. But in terms of numbers on an average per square foot, we could circle offline and give you some color there. We would have to run a few numbers there.

Then maybe as a follow-up, can you comment on the acceleration you saw the gap same-store NOI this quarter and whether or not that is a good run rate going forward?

The gap yeah. We are having really think, of an untold story here is we are having a terrific operating year in our existing portfolio. I mean, obviously, there has been a little more slowness in the pace at which we have moved our development leasing than we would like. But I would point out that our same-store guide up into the approaching 7% and you could do the math and work backwards, but to get to our midpoint cash same-store growth for the year guide, we are looking at like 8.2% fourth quarter cash same-store number. And that is based off of, as I said in my comments, a 97% exactly ninety-seven percent same-store occupancy number. So the operating portfolio, when you look back, we really hit the low point in fourth quarter last year, at 95.6% in our same-store occupancy then that moved in first quarter to 96% and to 96.3% and then the third quarter 96.6%. We are projecting 97% for the fourth quarter. So a very good steady stable growth story in the operating portfolio at an 80% retention. So all of that feels very good. That momentum feels very good going into next year and hats off and compliments to our team for putting that together. But yeah, in terms of your run rate, we feel good about where we are, where the numbers are trending, throughout this year has been pretty consistent stabilization in operating portfolio as we lead into next year.

Thank you.

Yep.

Thank you. Ladies and gentlemen, a reminder to please limit your yourself to one question and get back in the queue, please, if you should have any follow-up. Thank you. Next question will be from Brendan James Lynch at Barclays. Please go ahead.

Great. Thank you for taking my question. Historically, I think you focused more on stabilized acquisitions and you had a few this quarter as well. When you think of the rationale was that you want to limit lease-up risk to the development pipeline. As you kind of bring down the development pipeline now, does that change your perspective on acquiring vacancy going forward?

Good morning. A good question and this is Marshall. I would say the way we think about it is try to at the end of the day, we want to own well-located kind of shallow bay near consumer buildings. And at different points in the cycle, the risk-reward shifts. There for a while, I thought that the tariffs cap rates might go up. But they really those have been sticky. And so what we have bought has been pretty strategic. And usually, what we have liked is it and we have got a couple of things we are working on. They are in submarkets. Where we are strong and have we have been for years, and they are immediately accretive is another way we look at them, probably. And they have all been one-off. The portfolio deals get more expensive, but broad brush, we are usually about we have been around up six or just north of a 6% net effective return, new buildings, and so I would put them in the top third of our portfolio. So maybe in a kind of a flatter market where we have been a little bit acquisitions, you are right, are more attractive. I think what we will turn, you will see us be a more active developer. And then in that and it has been maybe another interesting trend that I think is a good sign, we have had more inbound calls to us looking for us to to be the equity partner or get involved with a local regional developer. I am not sure the market is quite there yet. You are seeing it in our own development numbers, but it is telling me there is not a lot of capital for development starts. But as the market kind of heats up, we did a number of that or the leasing where we bought vacant buildings or partnered with people to help them build buildings. So we will you know, we will try to step on the gas and that is why we like having a safe balance sheet. When things are good to create that value and sometimes you are better off, you know, again, trying to be patient and find the right quality and kind of build our cluster our buildings that we try to do in the right parts of the markets we like. But that is and again, I think the trick is being nimble enough to turn the dial, kind of figuring out where the market is. And it is usually based on inbound calls of where the best risk return is right now.

Great. Thank you.

You are welcome.

Next question will be from Todd Thomas at KeyBanc Capital Markets. Please go ahead.

Hi. Thanks. Good morning. I wanted to follow-up on some of that commentary a little bit. And also around the pace of development leasing and how you are seeing conditions thaw out a little bit. It sounded like some of your peers may be leaning in a little bit to development. Your comments were constructive around the broader environment for starts, which was, you mentioned that a low dating back to 2018. And I am just curious if some of the delays on your side push into '26 and you ramp back up with a higher amount of starts? Or if you think the slower pace could sort of persist a little bit further and put a little more pressure on starts in the near term as you think about 2026?

Hey, Todd. Good morning. I guess it is hard to look, I have been calling the recovery. I have missed it by several quarters. I keep thinking we are about there. It feels like you are at the starter's block. And it keeps getting delayed. I am hopeful next year, and it would not take a lot, you know, when I look at our development pipeline or our transfers, it is not a huge amount of square footage that is not, you know the if I take out what is under construction, you know, we do not need a lot of quantity of leases. And like the one where the lease as I think about it, where it flipped, where we had a signed lease, which meant we were out of inventory, we were getting ready to break ground on the next building and the tenant changed their mind on it. So it can kind of just flip that quickly. I would like to think next year, I would to think we will be north of $200,000,000 in STAR that may be back depends on when things pick up. But if the market is not there, I think we should we owe it to our investors to come down from $200,000,000. But if the market picks up, the beauty of having the parks and the team we do and the sheet is our team will say part of their job is to have the permit at hand. And we can build the building and call it eight to ten months. So as things turn, and we feel pretty confident about the last project leasing up or running out of space, or tenants needing expansion, we will go ahead and break ground. So it will be fun when we reach that point, and we are just trying to be patient and see the demand maybe rather than call the demand on it. Because I think do not think that we really will get punished too badly in any market for being I would rather be a slightly late than too early. And right now, we are seeing the activity. We just need some signed leases, and that will pull that next that next round of starts.

Thank you. Next question will be from Omotayo Tejumade Okusanya at Deutsche Bank.

Sorry to beat a dead horse about the mark to market this quarter, but I just wanted to understand or clarify the deceleration this quarter was that mainly a mix related issue, or was there also some pricing pressure?

I think this is Brent. I think it is more just a mix. Like I say, certainly if you look back a few quarters and look at our peak and high, we are certainly off that a little bit. But it is within reason and modestly. And as Marshall alluded to, we report leases signed which we think obviously gives you direct information about what we did this quarter. If you were to look at just leases commenced for the third quarter, as opposed to a 35% GAAP number, which is what we reported, we would have been 45%. So look, but that being said, can be a different mix, but again, as we talked about that mid-thirty, 30 range of GAAP leasing increases feels very sticky. Like I say, the vacancy continues to be tight. When you look at vacancy in the less than 100 square foot space range, which is where we live, work and play, I mean, that is looking at like 4.5%. So again, part of our challenge that potential prospects compare us to eight other options in the market and you are to figure out a way to whittle your rate down to make the deal, it is it is more so just having someone that is really committed to moving their business into and occupy a new space. And once you do that, you have pretty good leverage on the rent side because there are not many options. So certainly from a quarter to quarter, it could move five percent one way or the other just based on the mix. But by and large, it feels like that area that we are in, that 30% gap sort of range is, as I keep saying, pretty sticky.

Thank you.

Yes. Thank you. Next question will be from Michael William Mueller at JPMorgan. Please go ahead.

Yeah. Hi. You kind of touched on this before, but going going to development, you started the project in Dallas. But out of curiosity, when you look at the overall pipeline at kind of 9% pre-leasing, based on what is under construction and recently completed. Does that come into play at all? Like when you are thinking about what to start or not? Is there is there some sort of a cap on spec development lease up space that you want to have? Or is it really the opportunity you are looking at is going to dictate whether or not you put a shovel in the ground?

Yeah, I guess hey, Mike. Good morning. It is Marshall. And I am trying to be cute. From your answer, it is probably yes. I think it is a little of both. And that we do look at kind of call it risk at the entity level. Yes, there is a level we should have I am not sure we have got a calculation. We have usually looked at it as a percent of assets, kind of valuing it. It may have ended up doing it like maybe 6%. Things like that, and we have not been close to that. And that could be a combination of land value add, meaning unleased build and what is under development. So we do track that on a quarterly basis. We have thankfully been below that. And then really more day to day, it is you know, part by part, submarket by submarket of what is the activity do we have there, and you try to stay ahead of it, but maybe only a little bit ahead of it of you know, it would be Brent and I calling you saying, hey. We are 50% leased. I have got good activity on the balance, and a couple of tenants say they want more space. So that is when we will break ground and build the next building or two. So it is I have always said, what I what I like about our model versus a lot of the traditional developer model, it is not us pushing supply into the market. It is really getting pulled by our teams in the field saying, I need more inventory. And so that is where you know, look, we have we have pulled back and slowed the manufacturing line where we said, okay, you have got the inventory. You do not need anymore. Let us get that accounted for. And then we will try to keep the factory going as fast or as slow as the market tells us it wants it. But right now, again, it is yep. I am happy, as Brent mentioned earlier, happy where the portfolio is. It is exceeding our expectations this year. I like our same-store numbers. I would like to think our occupancy has more upside. We were coming off record highs, and so we have been battling occupancy declines on same store for several quarters that that have a chance to pick it up on rent and occupancy. And then development is really look, the capital has been spent. The office space has been built out. And a large amount of these spaces that we have either transferred over and lease up, and so we just need to kind of get those prospects to convert next. And that is what we need to show you. Sure. Got it.

Thank you. Next question will be from Ronald Kamdem at Morgan Stanley. Please go ahead.

Hey, just, I guess, a quick one. Just on the the death starts, coming down, just can you talk through just which markets did you think could pencil or did you want to stuff at the beginning of the year that you maybe have pulled back on currently is part one. And then just if I could just ask a quick follow-up on I think you talked about next year maybe getting a chance occupancy gains and, you know, you have the rent escalators and so forth. So is the spreads really going to be the big sort of delta for you guys as you are thinking about same-store for next year? Thanks.

Well, I will maybe touch on hey, Ron, good morning. And I will touch on developments and maybe Brent or between us will on the on the same store. Look. I we always have kind of a list of starts that that you feel comfortable about and then potential starts based on if a leasing falls one way or the other. So it is not any one market, although I will say one of the Texas markets where we had the signed lease we were out of space in the park and we were starting the next building. That was probably $2,025,000,000 dollar swing. That we you And, again, it is it is okay. We will work our way through it long term. It is not an issue. It just you know, based on what we knew at one point in time, we thought we needed to build another building and today, we have got inventory we need to backfill. So that is probably the swing there. And again, there is still I think there is only a couple of three starts this quarter that we have got programmed in. Feel pretty good about those. But but, again, that is some of that is based on leases that are out for signature that would pull that next ticket. And so, yeah. And in terms Ron, good morning. In terms of the same store certainly on the rent side, as I mentioned earlier, it still feels although off the highs, it is still from the cash standpoint that 20% range still feels sticky. So if you figure you are rolling 20% of your portfolio in any given year, maybe you have got 4% to 5% there in terms of potential growth then as I mentioned earlier, began this year '25 at about a 96% same-store occupancy and we are projecting to finish the year closer to 97%. So as you flip the calendar, if we can maintain that or even incrementally build on that, then for the first few quarters of early next year, ideally that should stack up favorably. Now we obviously have not looked at specific numbers or looked in specific on that. But certainly, we feel like the ingredients are there for a solid same-store run rate going into next year. Kind of tag along with what Marshall says, it excites me that we have been in in the top of our peer group, really in the top one or two in FFO growth Last year, we grew our earnings at about 7.9%. This year, we are four forecasted about 7.3%. So 15% combined. And we have done that despite slower development leasing, which can be at times a really big catalyst to our growth. And so to have this space poised and ready to go, as Marshall said, money spent office space ready to go, just an incremental increase in activity and signings and confidence and then that would be an entire cylinder that could fire more strongly than it has been that could even give us more lift. So again, feeling that could be a lift to us going into next year.

Helpful. Thank you.

Thank you. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation.