STAG Industrial - Q1 2024
May 1, 2024
Transcript
Operator (participant)
Greetings, and welcome to the STAG Industrial Inc First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Xiarhos. Thank you, Mr. Xiarhos. You may begin.
Steve Xiarhos (VP of Capital Markets and Investor Relations)
Thank you. Welcome to STAG Industrial's conference call covering the first quarter 2024 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company's website at www.stagindustrial.com, under the Investor Relations section. On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include forecasts of Core FFO, same-store NOI, G&A, acquisition and disposition volumes, retention rates, and other guidance, leasing prospects, rent collections, industry and economic trends, and other matters.
We encourage all listeners to review the more detailed discussion related to these forward-looking statements contained in the company's filings with the SEC and the definitions and reconciliations of non-GAAP measures contained in the supplemental information package available on the company's website. As a reminder, forward-looking statements represent management's estimates as of today. STAG Industrial assumes no obligation to update any forward-looking statements. On today's call, you'll hear from Bill Crooker, our Chief Executive Officer, and Matts Pinard, our Chief Financial Officer. Also here with us today is Mike Chase, our Chief Investment Officer, and Steve Kimball, EVP of Real Estate Operations, who are available to answer questions specific to their areas of focus. I'll now turn the call over to Bill.
Bill Crooker (CEO)
Thank you, Steve. Good morning, everybody, and welcome to the first quarter earnings call for STAG Industrial. We are pleased to have you join us and look forward to telling you about the first quarter of 2024 results. The first quarter reflects the continuation of our strong operating results achieved last year. Our view on the business remains consistent with our fourth quarter call. As anticipated, there are pockets of softness in certain markets, which is driven by increased supply coming online. Additionally, tenants are taking longer to make leasing decisions, which is impacting market occupancy. These dynamics were incorporated in our initial view for the year. We continue to expect market rent growth in the mid-single digits for our portfolio.
Primarily driven by the volatile interest rate environment, forecasted deliveries for 2024 and 2025 are expected to decrease to just 2.1% and 1.6% of stock, respectively. This is a decrease as compared to the forecast 90 days ago. Interest rate volatility has reemerged today after stability in the first three months of the year. This will likely pressure the transaction market, which saw increased activity earlier in the year. In the first quarter, we closed on a 700,000 sq ft, Class A cross-docked warehouse for $50.1 million. This building was acquired at cash and straight line cap rates of 6.1% and 6.8%, respectively. Located in the West Chester submarket of Northern Cincinnati, the building benefits from its multiple access points and proximity to I-75.
The building is leased to a tenant with an internal credit rating of Double B. The lease has 6.8 years of remaining term and weighted average rent escalators of 4.1%, providing stable NOI growth throughout the term. These rents were also 13% below market at acquisition. Subsequent to quarter end, we acquired three buildings for $85 million at a 6.4% cash cap rate. On the development front, we have over 1.2 million sq ft of activity across three projects located in the southeastern US. Two projects are in the Greenville-Spartanburg, South Carolina market. The first is our two building, 715,000 sq ft development project in Greer, located next to the airport, BMW manufacturing facility, inland port, and I-85. The remaining construction, including four offices for multi-tenant use, was completed in February 2024.
Stabilization is projected to occur in Q2 2025. The second project is a 233,000 sq ft development in Spartanburg. The building was purchased during construction in Q4 2023, with a Q2 2024 estimated delivery date. Stabilization is projected to occur in Q2 2025. The third development project is our two-building, 298,000 sq ft project in Tampa, Florida. These buildings are under construction with a Q4 2024 estimated delivery date and stabilization in late 2025. The suite sizes of approximately 50,000 sq ft align well with demand in this high barrier to entry, low vacancy market. With that, I will turn it over to Matt, who will cover our remaining results and updates to guidance.
Matts Pinard (CFO)
Thank you, Bill, and good morning, everyone. Core FFO per share was $0.59 for the quarter, an increase of 7.3% as compared to last year. Cash available for distribution totaled $98.1 million, an increase of 8.9% as compared to the prior period. We retained approximately $29.5 million of cash flow after dividends paid through March 31. These dollars are available for incremental investment opportunities, debt repayment, and other general corporate purposes.
Leverage remains low, with net debt to annualized run rate adjusted EBITDA equal to 4.9 times. Liquidity stood at $1.1 billion at quarter end, inclusive of available forward ATM proceeds and committed private placement debt proceeds. During the quarter, we commenced 29 leases totaling 4.3 million sq ft, which generated cash and straight line leasing spreads of 30.5% and 43.6% respectively. Retention was 84.2%. Q2 same-store cash NOI growth is 7.1% for the quarter.
The two primary drivers include the impact of substantial leasing spreads achieved at two Burlington, New Jersey assets in the second half of 2023. This contributed to same-store growth in the beginning of 2024 versus the comparison period. We also benefited this quarter from free rent provided in the first quarter of 2023. Moving to capital market activity. Year to date, we've issued 794,000 shares on a forward basis under our ATM program, at gross average share price of $38.94, resulting in gross proceeds of $31 million. As of today, we have approximately $72 million of forward equity proceeds available to fund at our discretion. Equity will be used to pay down the revolver and match under acquisition and development pipeline.
On March 13, the company entered into a note purchase agreement to issue $450 million of fixed-rate senior unsecured notes in a private placement offering. The notes consisted of five, seven, and ten-year tenors, with a weighted average fixed interest rate of 6.17%. The notes will be funded on May 28. On March 25th, the company refinanced a $200 million Term Loan F, which was scheduled to mature in January 2025. The term loan now matures March 25th, 2027, with two one-year extension options.
The term loan bears an aggregate fixed interest rate, inclusive of interest rate swaps of 2.94% until January 15th, 2025, and will bear an aggregate fixed interest rate, inclusive of interest rate swaps of 4.83% from January 15th, 2025, through maturity of March 25th, 2027. We experienced 9 basis points of credit loss in the first quarter, which is in line with our initial guidance of 50 basis points. Given the relative health of our portfolio, as described by Bill and reflecting our quarterly results, we are maintaining guidance at this time. I will now turn it back over to Bill.
Bill Crooker (CEO)
Thank you, Matt. I want to thank our team for the continued hard work and achievement towards our 2024 goals. Our team continues to drive value in all macro environments. We are well positioned for sustained growth through our operating and acquisition platform. We'll now turn it back to the operator for questions.
Operator (participant)
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. At this time, we are limiting participants to one question and one follow-up question. One moment please, while we poll for questions. Our first question comes from Craig Mailman from Citi. Please proceed.
Craig Mailman (Director and Equity Research Analyst of Real Estate and Lodging Team)
Good morning, guys. Bill, just want to go back to your commentary that, you know, you guys maintained guidance. Basically, you had what you thought was more prudent outlook here, you know, pockets of softness from new supply, longer decision-making timeframe embedded. As you guys saw the first quarter play out, were there any surprises across individual markets or size or, you know, perceived A versus B in a given market that would, you know, maybe have pushed you towards things trending a little bit better? Or is everything kind of just on budget at this point?
Bill Crooker (CEO)
Seeing our initial guidance, everything is tracking in line with that. In terms of surprises to the upside or downside for this year, none, none to date. I mean, we've maintained all of our guidance, so everything is pretty steady. Just, you know, macro trends, the only thing that we're starting to see across some markets, doesn't really impact us as much, is just a little bit more of that big box supply is starting to get leased, which is, I think, a good sign for the, you know, the overall economy, and the industrial market as a whole. But that's just the early beginnings there.
Craig Mailman (Director and Equity Research Analyst of Real Estate and Lodging Team)
Okay. Then from a rent spread perspective, kind of the spreads on new leases commenced this quarter were a little bit below average versus prior quarters. And if we look at, you know, the incremental 12% of the kind of the target you guys achieved this quarter, it looked like kind of low double digit spreads versus, you know, closer to 29.5 for the [audio distortion] you know, closer to 65%. Can you just talk a little about what you're seeing on those two things?
Bill Crooker (CEO)
Yeah, a couple things there. The new leasing activity was pretty light in the first quarter, as expected. We've signed 5 leases for 700,000 sq ft. So when we look at the full year, which is what our guidance is related to, those leasing spreads for new leases and renewal leases should be pretty consistent, all in the, you know, the high 20s. I would think our guidance right now is 25%-30% cash leasing spreads. We'll probably be on the higher end of that range.
With respect to the incremental leasing from our last update to this quarterly report, we had a number of fixed-rate renewal options that just hit in this quarter. We fully expected that. That's, you know, that happened. That is incorporated in our leasing spread guidance for the year. So everything is in line with initial expectations, and I would say no takeaways from, you know, some of the smaller leasing spreads, incremental leasing spreads in the back half of the first quarter.
Craig Mailman (Director and Equity Research Analyst of Real Estate and Lodging Team)
If I could slip a third one in. I know I'm cheating. Your investment pipeline looks pretty robust and kind of picked up sequentially. I know there's been a little bit of volatility in the macro side of things. Should we expect that that's kind of a sustainable pickup here? Or, you know, what's your view on kind of deploying more capital in this kind of higher rate environment?
Bill Crooker (CEO)
Yeah. I mean, the pipeline picked up primarily because of some of the activity in the first quarter. I'll let Mike Chase talk a little bit more to pipeline, and then I can come back and answer some of, you know, our expectations for acquisitions and return thresholds.
Mike Chase (CIO)
Yeah, thanks, Bill. So the pipeline grew immediately out of the gate in the beginning of the first quarter, and it accelerated and gained momentum throughout the quarter. Anecdotally, we underwrote four times the number of deals in Q1 of 2024 than we did in Q1 of 2023. So there was plenty of momentum during the quarter. That was indicative of the increase in the pipeline. At the end of the quarter and in April, when the 10-year spiked, interest rates rose, volatility crept back into the market. We don't know if that's going to be permanent or whether that's going to be short term. We don't know what the effect will be on the pipeline going forward, but that's where the increase in the pipeline came from.
Bill Crooker (CEO)
Yeah, typically, when you see a spike like this, either deals sit on the pipeline for longer, maybe they get retraded, maybe it just takes a little bit longer to close the deal, and sometimes deals get pulled off the market. So it's too early to tell whether this is entering into a new, you know, price discovery phase. We're pretty nimble when it comes to this. We've shown that over the past several years, so we'll continue to be nimble. At this point, you know, our underwriting thresholds, especially for going in, you know, cash cap rates have increased, due to, you know, the cost of capital increasing. So, we'll continue to evaluate that and see the impacts.
With respect to our guidance, the guidance was a wider range than in a normal year. We expect to be within that guidance this year. And if this, you know, higher for longer rate environment continues and seller expectations don't change, then I would expect in that situation that we might be at the lower end of our acquisition guidance. I just do want to remind everybody that our acquisition guidance is, you know, heavily back-end weighted in the year so there's not a lot of NOI impact from acquisitions in our 2024 guidance.
Mike Chase (CIO)
Perfect. Thank you.
Bill Crooker (CEO)
Thank you.
Operator (participant)
Our next question comes from Vince Tibone from Green Street. Please proceed.
Vince Tibone (Managing Director and Head of US Industrial & Mall Research)
Hi, good morning. Just wanted to follow up again a little bit more on kind of the private transaction market since, you know, rates have moved higher. Just to maybe ask directly, like, are you seeing and hearing, you know, a lot of retrading activity in the market today? And do you get a sense, like, you know, bids are going to need, you know, adjusted lower in real time just due to a higher cost of debt? Or, you know, as you alluded to, is it, you know, kind of still a little early to see those signs?
Bill Crooker (CEO)
Yeah, you just, you just nailed it. It's a little early.
Vince Tibone (Managing Director and Head of US Industrial & Mall Research)
Okay.
Bill Crooker (CEO)
We'll probably get a little bit, you know, more feedback and data on that in the next four to six weeks. I mean, it's, you know, spiked 20-30 basis points in the 10 years. So some sellers, some buyers will just absorb that if they really like the transactions, and, you know, some may look for to retrade price a little bit, so we'll see how that shakes out.
Vince Tibone (Managing Director and Head of US Industrial & Mall Research)
Got it. And then, are you seeing any more products come to market that's like vacant merchant builds, you know, speculative projects? And I'm just curious, like, is that an area where you would potentially, you know, move to on the acquisition side, you know, a little more on the value add, taking on some leasing risks? Just kind of curious how you guys would think about, you know, the right spread to take on leasing risk versus, you know, a stabilized acquisition like you did in the first quarter. It sounds like the deals you know, subsequent to quarter end.
Bill Crooker (CEO)
Yeah, we're certainly open to taking on immediate leasing risk. If you look at the acquisition in one of the acquisitions in the fourth quarter, we acquired the one vacant building in Wellford, South Carolina, that we underwrote a 12-month downtime, and at that point, we're underwriting a 7% cash cap rate. Within a couple weeks of acquiring the deal, we leased it up at a 7.5 cap rate, right? So that was a great return, one where we took a little bit more risk, but we got a much bigger return.
So those are opportunities we'll certainly evaluate, but if we're going to take leasing risks, we want to really understand the leasing environment, understand how that building fits that sub-market, and require additional return. With respect to the pipeline, Mike, I don't know if you have any additional comments, but the pipeline today, as it compares to the fourth quarter, in my understanding, the amount of vacant assets, value-add assets, is pretty consistent. I think the growth in the pipeline is primarily due to just more transactions coming to market, as the market opened up in the first quarter. Mike, I don't know if you have anything else to add.
Mike Chase (CIO)
Yeah, I mean, I think if there was any tilt, it tilted a little bit towards stabilized transactions, and there were a few mid-small to medium-sized portfolios that came out on the market, which we hadn't seen at the end of 2023. But in general, it's pretty consistent with the makeup of the pipelines in the past.
Bill Crooker (CEO)
Yeah, I mean, the first quarter certainly felt like the market was opening up with the stability of interest rates. I mean, we saw, you know, in a market that we're very active with, a strong portfolio, it was $234 million that traded. You weren't seeing that at the back half of last year. So it felt like a pretty healthy environment, and I don't know if it's just a quick pause here with this spike. We'll certainly hear more this afternoon with the Fed, but if the Fed comments skew negative, you know, it could be a longer pause.
Vince Tibone (Managing Director and Head of US Industrial & Mall Research)
Makes sense. Thanks for the time.
Bill Crooker (CEO)
Thank you.
Operator (participant)
Our next question comes from Eric Borden from BMO Capital Markets. Please proceed.
Eric Borden (VP)
Hey, good morning, everyone. Just sticking with the acquisition theme, just noticed the acquisitions closed post the first quarter. Those boxes, they just appeared to be a little bit on the larger side versus your in-place portfolio. Just curious about, you know, what is the strategy in terms of external growth. Are you looking for, you know, more larger-sized boxes, or was that just in relation to what was available in the transaction market at that time that you saw attractive? Thank you.
Bill Crooker (CEO)
Yeah, we're just looking for the best risk-adjusted returns, Eric, and sometimes that's a vacant asset, as I just mentioned with Vince, or it could be, you know, a longer stabilized asset that produces, you know, really strong cash flow with great escalators, and the building fits the submarket. With respect to the acquisitions that were acquired subsequent to quarter end, it was one large one. We acquired a 590,000 sq ft facility in Louisville, Kentucky, a market that we know really well, but that skewed those three acquisitions.
The other two acquisitions was a 150,000 sq ft facility and a 100,000 sq ft facility. So, on average, it looks a little higher, but it was just skewed by one. But it was in a larger building in a market that we're very comfortable with. We own in. We just did some leasing activity in that market, and an asset that we think is a long-term, strong long-term fit for the portfolio.
Eric Borden (VP)
Is that a single tenant user, or is that more multi-tenant?
Bill Crooker (CEO)
That was a single tenant user.
Eric Borden (VP)
Okay. That's helpful. And then my follow-up, Matt, just to clarify, do you said that there's, there was 9 basis points of credit loss in the first quarter?
Matts Pinard (CFO)
Eric, that's correct. 9 basis points of credit loss in the quarter. Our guidance is 50 basis points for the year, and, you know, we've maintaining that guidance. I know, obviously, if you, if you want to annualize the 9 basis points, it looks like it's less than the 50. But, you know, just given where we are in the calendar, given, you know, some of the uncertainty that you're seeing in the headlines, you know, 50 basis points is the right number for us. We'll continue to update the market, you know, as we progress through the year.
Eric Borden (VP)
All right. That's helpful. Thanks, everyone.
Operator (participant)
Our next question comes from Nick Thillman from Baird. Please proceed.
Nick Tillman (Senior Research Analyst)
Hey, good morning, guys. You guys reaffirmed kind of that market rent growth forecast in mid-single digits, but maybe just a little curious on kind of the markets where you're seeing, like, the most weakness. I know last quarter you kind of called out Columbus, Indianapolis, and select areas of Dallas, but just curious on some market commentary there.
Bill Crooker (CEO)
Yeah, the market rent growth, we've guidance we affirmed, as you noted. With respect to markets, weaker markets, you know, still seeing some weakness in Indy and Columbus, seeing weakness in Phoenix, seeing some weakness in some of the more historical, you know, higher growth markets, Southern California, some parts of New Jersey. But then the other end, there's a lot of strong markets out there, that we operate in, that are seeing, you know, vacancy rates, you know, sub 5%, some 4%, some 3%. Tampa is a market, that's right around 3%.
Sacramento's doing really well. Chicago is right around 5%, I think a little bit sub 5% vacancy. Milwaukee, strong. Detroit, Nashville, Reno, El Paso, all these markets that we're operating in are, you know, really, you know, strong fundamentals and balanced supply and demand. They didn't have that excess supply coming online. There's still strong demand drivers there, and those markets are just really steady right now.
Nick Tillman (Senior Research Analyst)
That's helpful. And then, and then maybe, Matt, touching a little bit on, on credit, maybe any changes to your sort of tenant watch list? And are there any industries you're kind of watching out for, or you feel there might be a little bit of softness there, and you're kind of monitoring a little bit more?
Matts Pinard (CFO)
Yeah, Nick, thanks for the question. You know, simply put, our watch list is almost identical, very similar to the last time we were on the phone in February. We're not seeing anything thematic, you know, in terms of distress across the portfolio or tenancy. You know, if we ask the questions, there's nothing, you know, specific to a sector or geography. It really is, you know, kind of just unique situations, you know, the 9 basis points is great. 50 basis points, again, we believe is the right guidance, in April for 2024.
Nick Tillman (Senior Research Analyst)
Thank you.
Operator (participant)
Our next question comes from Jason Belcher from Wells Fargo. Please proceed.
Jason Belcher (VP and Equity Research Associate Analyst)
Yeah, hi. I was just wondering if you all could talk about any pockets of strength or weakness you're seeing across your different tenant industries. You know, are there groups that are being, you know, more aggressive than others and taking space, and, you know, flip side is, you know, are some pulling back more than others?
Bill Crooker (CEO)
I would say there's no, you know, themes we're seeing this year with respect to industries. We're still seeing demand from logistics companies. 3PL demand is still holding up. So no, you know, no major themes. Let's say, if you want to an answer for some theme, it's just what I said earlier on the call. We're seeing a little bit more, you know, big box leasing in some of those big box markets. South Dallas had some leasing. We saw some leasing in Phoenix and some in Atlanta, some of the bigger boxes. But that's it feels like that's a little early, so I don't want, you know, folks to extrapolate too much on that. But that's if you're gonna have one theme, that's kind of the small theme that we're seeing right now.
Jason Belcher (VP and Equity Research Associate Analyst)
Got it. Thanks. And then, secondly, can you just talk a little bit about your, your contractual rent increases or rent bumps and, what you're incorporating into newly signed leases there? And, you know, what kind of push back, if any, you're getting on, that part of the lease agreement? And maybe if you could just remind us what your average escalator is across the portfolio, that'd be helpful.
Bill Crooker (CEO)
Yeah, I'll start off with what we're seeing in new leasing. Rental rates are staying up, holding up, and escalators are holding up. So we're seeing, you know, average escalators being signed in the 3.5 range. You know, we signed one this last quarter that had a four on it. So we're still seeing some strong escalators and strong, you know, cash rental rates. Matt, do you want to talk on the average for the portfolio?
Matts Pinard (CFO)
Absolutely. Hey, Jason. The weighted average escalator across the portfolio continues to increase. You know, there is upward pressure. It's really just math, as, as Bill explained. Our weighted average escalator right now is a tick above 2.7%, but again, as Bill mentioned, you continue to sign those leases with the 3, 3.5, 4% escalators. That number will increase mathematically. You know, and that's the biggest, I would say, building block to our sustainable same-store growth.
Jason Belcher (VP and Equity Research Associate Analyst)
Got it. Thanks, guys. Really helpful.
Operator (participant)
Our next question comes from Samir Khanal from Evercore ISI. Please proceed.
Samir Khanal (Equity Research)
Hey, Bill, just one for me here. I mean, you made the comment about tenants taking longer to make decisions. Well, that's been playing out for a while now, but, you know, just trying to understand, was there sort of a sudden shift in timelines that you saw maybe at the end of March or even April?
Bill Crooker (CEO)
No, I wouldn't say a sudden shift. It continues to be. And this is a theme that kind of started at the end of last year, middle, middle to end of last year, where the decision-making capabilities were pushed to corporates, right? Into the C-suites. So instead of the local teams being able to make a decision, it's being pushed to corporates, and it's just taking a little bit more time to make sure that, you know. And this is, it depends on the market, right? So if you've got a market that has a little bit more supply, then tenants aren't pushed to make a decision quicker, right? Because there's more options available to them.
As I mentioned, as I went through, you know, some of the markets that we're in, there's a lot of, you know, steadiness in those markets and balanced supply and demand. So in those markets, you're seeing tenants make decisions, you know, probably in line with what they have been. And some of these markets have oversupply, and their big box decisions are taking a little bit longer. When you compare decision-making timelines to, you know, 2021, 2022, yeah, they're, they're definitely pushed out, you know, one to one to three months. And, you know, when you compare it to last year, you know, depending on the market, maybe they're pushed out, you know, a couple, few weeks, depending on the market. Some markets might be a little bit longer, and some markets, there's no change at all.
Samir Khanal (Equity Research)
So it doesn't look like given the rate spike we had sort of at the end of March or April, we've seen there's been any sort of significant change that's what-
Bill Crooker (CEO)
Yeah, I don't think it was a reaction to a 30 basis point increase in the 10-year.
Samir Khanal (Equity Research)
Yeah, yeah. No, got it. Okay, just making sure. All right. Thank you.
Bill Crooker (CEO)
Yep. Thanks.
Operator (participant)
Our next question comes from Michael Carroll from RBC. Please proceed.
Michael Carroll (Managing Director)
Yeah, thanks. Bill, you highlighted a number of development projects in your prepared remarks that the company is committed to. Sorry if I missed this, but did you mention how much capital STAG has committed to build those projects, and what's the target initial yield on those projects also?
Bill Crooker (CEO)
Yeah, in terms of... Yeah, I'll walk through, you know, quickly the yields and Steve Kimball can walk through kind of the progress and, you know, the remaining capital committed. I mean, the first project is the one in Greer that I mentioned. That started back in April, May—March or April of 2022. Those buildings, great, well located. They have excess power. One of the buildings has 2,500 amps, the other one is 5,000 amps. So they cater both to logistics tenants, light manufacturing tenants... and that's the demand in that market. It's, you know, these buildings, as I mentioned, the prepared remarks, close to the BMW plant, that's increasing capacity, especially for EV vehicles, close to the inland port that's growing in Greer, I-85.
A lot of demand drivers and a lot of light manufacturing there. So, those assets, we expect to stabilize in the mid-five range. You know, part of that is, you know, when you put these projects under contract back in, you know, March and April of 2022. The asset in Spartanburg, if you recall, that's the one we acquired, partially developed in Q4 of last year. Really acquired one that was just recently completed, called the Sister Building. That's the one we leased almost immediately. We underwrote a seven, seven yield, at least for a seven and a half, about 11 months ahead of schedule. So that building is coming online. We anticipate a seven cap for that. We're underwriting a 12-month downtime.
You know, hopefully, we, we have a similar outcome as the Sister Building, but again, we're, we're prudent with terms of how we underwrite these assets. So that's a seven cap. And then with respect to the Tampa market, I, I touched on the suite sizes there. Tampa market, sub 3% vacancy rate, a really strong market. You know, that one is probably gonna stabilize in the mid-6s. It all depends. You know, that's at the current market rent, so we'll see if, you know, what market rent does there, but the fundamentals in the market are really strong. And Steve, I mean, generally, do you want to just touch on kind of where we are on a total basis on committed capital and what's remaining?
Steve Kimball (EVP of Real Estate Operations)
Yeah, in committed capital, we're at about $118 million, and I think that makes sense, Michael, because the Greenville-Spartanburg market, where we talked about the two projects we have going, those are generally completed for construction. So the majority of the money's been spent, and we're switching to the lease-up period for those. At Tampa, we're about 50% done with that project. So in the Greenville-Spartanburg, those projects are around 92% funded, and we're about 50% for Tampa. So overall, committed is about $118 million has been spent of a little over $150 million of projected capital for those projects.
Bill Crooker (CEO)
Yeah, so another $30 million or so, Mike, to be spent.
Michael Carroll (Managing Director)
Okay, great. No, that, that's helpful. And then, I guess, how do you think about pursuing new starts? I mean, does this recent slowdown, does that make you wanna slow down in making these decisions and waiting for these assets to get leased up? I guess, how do you kind of underwrite those new projects?
Bill Crooker (CEO)
Yeah, I mean, it's market-by-market specific and return specific. So if there's a market that we see, you know, really healthy supply-demand, and we like the return profile, we're certainly. We'll certainly start a project in one of those markets. What I like about us phasing into this development platform is that, you know, we're not buying the raw land and going through all the entitlement work and having, call it, a three-year horizon between, you know, day one and finishing the project. So our time horizons are, you know, much shorter, usually, you know, 12 months or a little bit longer. So the outlook is clearer, I think. The returns, expected returns are a little lower because there's less risk.
So if the market is strong and the returns are adequate, for what we expect for developments, which are obviously much higher than a stabilized acquisition, then we'd be, we'd be fine, entering to more projects. As you said, we only have another $30 million left to spend on these projects. The Greenville project, you know, the vacant asset leased immediately, and that sister building, you know, should do really well. So, I think we're balanced with our approach here. I think we're probably a little bit conservative, and to the extent we see a good opportunity, we'll execute on it.
Michael Carroll (Managing Director)
Okay, great. Thank you.
Bill Crooker (CEO)
Thank you.
Operator (participant)
Our next question comes from Mike Miller, from JPMorgan. Please proceed.
Mike Miller (VP of Strategy & Transformation)
Yeah, hi. Just a quick one on cap rates and guidance. And Bill, I know you talked a little bit about acquisition volumes being wider range and back-end loaded. Just if we're in this world, where the 10-year is, you know, in the 4.6s, you know, 4.7 or so, for some period of time, do you, do you think your cap rate guidance holds?
Bill Crooker (CEO)
Well, if-- where our cap rate guidance holds, if, you know, considering what we've already closed and put under contract, that kind of weighs it down. It was a different interest rate period. But in terms of new acquisitions, putting in under contract, those are going to be higher yields, you know, at the high end of the range and maybe even a little bit higher.
Mike Miller (VP of Strategy & Transformation)
Got it. Okay. That was it. I appreciate it. Thank you.
Bill Crooker (CEO)
Thanks.
Operator (participant)
Our next question comes from Bill Crow, from Raymond James. Please proceed.
Bill Crow (Managing Director)
Yeah, good morning. Most of my questions have been answered, but you alluded to stronger leasing in some big box space. I'm wondering if that's e-commerce tenants or whether there's any common theme in the demand that you're seeing there.
Bill Crooker (CEO)
Yeah, I mean, there's a you know one you know very large e-commerce tenant that we're all you know household name that's leased some of the space. Some big retailers took some space, and I think another one was a large e-commerce tenant, too, right? Yeah, so I was just looking over at Steve, and he was shaking his head yes, so I got that one right. But I just want to you know caution those comments in that you know this is the start of it, right? So I don't want it to—I don't want my comments to be extrapolated, like you know big box is back or everything's healthy there. But it's starting. We're seeing some positive signs there, which is great. I just don't want to oversell that.
Bill Crow (Managing Director)
Yeah, fair enough. All right. That was it for me. Thank you.
Bill Crooker (CEO)
All right. Thanks, Bill.
Operator (participant)
Our next question comes from Camille Bonnell from Bank of America. Please proceed.
Andrew Berger (Equity Research Analyst)
Hi, good morning. This is Andrew Berger on for Camille. Appreciate your outlook on market rent growth. Just curious if you have a view on when we'll see peak vacancy?
Bill Crooker (CEO)
It's market-by-market specific. The markets that have, you know, oversupplied right now, you could see, you know, peak vacancy at the end of this year, you know, it could take all of next year to kind of wind that down to, you know, more normalized levels, and then steadier markets, I think they're gonna continue to be steady. So, you know, maybe you see a little bit of a spike in vacancy as you move through the year, but it won't be as material as some of those other markets. But, it really is a market-by-market answer, and so it's hard to generalize it.
Andrew Berger (Equity Research Analyst)
Okay, that makes sense. And just circling back to the earlier comments around slower decision-making and, you know, the decision shifting maybe from a real estate manager to C-suite. Just curious, what do you think it'll take to shift that decision back to the real estate manager? Is it really a matter of supply, interest rates, or something else?
Bill Crooker (CEO)
It could be one or both of those. You know, as tenants are required to make quicker decisions, and that's kind of on the supply side of it, they have to push that decision-making, you know, those decision-making capabilities, you know, down to the regional teams. Otherwise, deals won't get done, and they'll miss space. I think if you've got interest rates coming down, and there's more confidence with some of the, you know, the C-suites, in these companies, then they may just say, "Let's take down space. We're projecting, you know, more demand, higher revenues. Let's build out our supply chain and to get ahead of that." So I think it could be one, or both, or some combination.
Andrew Berger (Equity Research Analyst)
Okay, great. Thank you.
Bill Crooker (CEO)
Thank you.
Operator (participant)
This concludes our question-and-answer session. I would like to turn the floor back over to Bill Crooker for closing comments.
Bill Crooker (CEO)
Thanks, everyone, for participating in the call this morning. As always, we appreciate the thoughtful questions, and we look forward to seeing many of you at the upcoming conferences. Thank you.
Operator (participant)
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.