Boohoo Lease Impact
Q: What's the status of the Boohoo lease and its impact?
A: Boohoo is winding down operations and plans to sublet their entire building. They are current on rent, and if they continue paying, it will contribute to NOI and FFO. If they stop, the company has a security deposit in the form of a letter of credit covering about one year's worth of rent. Boohoo intends to honor their lease obligations and expects success in subletting.

Occupancy Guidance Drivers
Q: What are the main drivers affecting occupancy guidance?
A: The occupancy drop is half from the development portfolio and half from the core portfolio. Development leasing is key, with 400,000 square feet built into Q4 guidance, representing about 60 basis points. Achieving more than that could push occupancy above the midpoint of guidance between 95% and 97% at year-end.

Tenant Watch List
Q: Any updates on the tenant watch list and move-outs?
A: Other than Boohoo, there's nothing material on the watch list. A 780,000 square foot building previously occupied by Federal-Mogul is up for lease. The lease expires at the end of March, the tenant is already out, and there's interest due to limited options for that size in Central Pennsylvania.

Market Rent Growth Outlook
Q: What's the outlook for market rent growth?
A: Overall, rents are flattish to up slightly. Excluding Southern California, rents are probably up 2% to 3% year-over-year. Recovery in rent growth depends on factors like net absorption and reduction in new supply.

California Legislation AB 98 Impact
Q: How does AB 98 affect your California properties and supply?
A: AB 98 imposes constraints on industrial development near sensitive receptors. All of our land under entitlement is exempt, as the law affects projects starting permitting after October 1, 2024. This legislation will constrain development, increasing the value of existing sites and likely leading to rent growth.

Acquisition and Disposition Strategy
Q: What's your current acquisition vs. disposition strategy?
A: We're choosy about acquisitions, focusing on the right location and functionality. Recent deals, like the Houston property, were off-market with limited competition. Dispositions will be lower going forward, selling lower-growth assets to reinvest in higher-growth opportunities.

Development and Capital Plans for 2025
Q: What are your development and capital deployment plans heading into 2025?
A: We continue to monitor submarkets for development opportunities. Factors like macroeconomic conditions are causing tenants to delay decisions. Markets expected to be encouraging for new starts in 2025 include Pennsylvania, Texas, South Florida, and Nashville.

Transaction Market and Cap Rates
Q: How is the transaction market and cap rates evolving?
A: There's significant capital chasing opportunities, with increased bidder interest on marketed transactions. Cap rates have come in about 25 basis points over the last three months. The market is becoming more competitive as buyers adjust yield expectations.

Election Impact on Tenants
Q: How is the upcoming election impacting tenant decisions?
A: Tenants are holding off on new growth investments due to uncertainties related to the election outcome, affecting economic stability and potential regulatory changes. Renewals remain strong, but new investments are being delayed until there's clarity.

Land Pipeline and Pricing
Q: Are you adding to your land pipeline, and how is land pricing?
A: We'll continue to look for land sites, but pricing hasn't declined significantly. There's a bid-ask gap between buyers and sellers as landowners expect a return to 2022 pricing, which we don't anticipate. There's more buyer interest, but transactions are slow.

Weather Impact on Decision-Making
Q: How is weather affecting tenant decision-making?
A: The frequency of disruptive weather patterns is a factor in tenant decisions. These events cause economic damage and impact consumption, adding to the uncertainties weighing on investment decisions.

Accelerated Tenant Improvement Reimbursement
Q: Was the accelerated tenant improvement reimbursement from Boohoo expected?
A: No, it was unexpected. The accelerated recognition of the tenant improvement reimbursement liability was about $4.5 million, offset by a $5.5 million write-off of straight-line rent receivable. Both were not included in prior guidance.

Competition with Boohoo Sublease
Q: Is the Boohoo sublease space competing with your lease-up efforts?
A: No, the Boohoo space isn't competitive with ours. They're subletting the entire building, while our second building at First Logistics Center is 350,000 square feet. We have activity but are disappointed with the pace of decision-making.

Market Rent Growth Acceleration
Q: How quickly can market rent growth accelerate if conditions improve?
A: It's difficult to put a timeframe on it, but factors like reduced completions and a lower construction pipeline can lead to rent growth if demand improves. Net absorption needs to increase for significant change.

2025 Same-Store NOI Guidance
Q: Do you have guidance on 2025 same-store NOI growth?
A: We're not providing 2025 guidance yet. However, we've signed 37% of the 2025 expirations at a 33% increase in cash rental rates, indicating potential for a good year.

Development Leasing Included in Guidance
Q: How does the 400,000 sq ft development leasing in guidance look?
A: The 400,000 square feet of development leasing is baked into our Q4 guidance. Prospects are decent, but there's work to be done with two months left in the year.

Impact of Boohoo Rent on Guidance
Q: Does Boohoo paying rent impact fourth-quarter guidance?
A: We have Boohoo paying rent in our guidance. If they stop, we can use the letter of credit to cover rent for about a year, allowing us to continue recognizing revenue.

Utilization Rates and Leasing Market
Q: How are utilization rates impacting the leasing market?
A: Space utilization among tenants is generally high, with sublet space not material except for Boohoo. There's demand and activity, but decision-making remains deliberate.

Space Utilization and Sublet Space
Q: Any changes in space utilization or significant sublet space?
A: Other than Boohoo, sublet space isn't material, and space utilization remains high among tenants.

Clarification on Market Rent Growth Data
Q: Was the market rent growth you mentioned year-over-year in Q3?
A: Yes, the rent growth figures are year-over-year comparisons.

Entitlement Requests Before AB 98 Deadline
Q: Did you submit entitlement requests before AB 98 to avoid its impact?
A: No, we didn't. All our sites were already in entitlement or entitled, so none were submitted as a reaction to AB 98.

Potential Changes to AB 98
Q: Might AB 98 be adjusted in the future?
A: The bill could benefit from more clarification, and municipalities aren't in favor of it. It may be litigated, so changes are possible, but it's hard to forecast.