William Crooker: Yes, we’re certainly open to taking on immediate leasing risk. If you look at the acquisition and 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 of weeks of acquiring the deal, we leased it up at a 7.5% cap rate, right? So it was a great return, one where we took a little bit more risk, but we’ve got a much bigger return. So those are opportunities we’ll certainly evaluate. But if we’re going to take leasing risk, we want to really understand the leasing environment, understand how that building fits that submarket 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 in the first quarter. Mike, I don’t know if you have anything else to add?
Michael Chase: Yes. I mean I think if there was any it tilt, it’s tilting 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.
Unidentified Company Representative: Yes. I mean the first quarter certainly felt like the market was opening up with the stability of interest rates. I mean we saw in a market that we’re very active with a strong portfolio was $234 million that traded. You weren’t seeing that at the back half of last year. So it was 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, it could be a longer pause.
Operator: Our next question comes from Eric Borden from BMO Capital Markets.
Eric Borden: Just sticking with the acquisition theme. I 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 what is the strategy in terms of external growth? Are you looking for 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?
William Crooker: Yes. We just look for the best risk-adjusted returns, Eric, and sometimes that’s a vacant asset, as I just mentioned with Vince or it could be a longer stabilized asset that produces really strong cash flow with great escalators in the building fits a submarket. With respect to the acquisitions that were acquired subsequent to quarter end, it was one large one. We acquired a 590,000 square foot facility in Louisville, Kentucky, a market that we know really well, but that’s skewed those three acquisitions. The other two acquisitions was 150,000 square foot facility and a 100,000 square foot facility. So on average, it looks a little higher, but it was just skewed by one, but it was a larger building with a market that we’re very comfortable with. We own it. We just did some leasing activity in that market and an asset that we think is a strong long-term fit for the portfolio.
Eric Borden: Is that a single tenant user? Or is that more multi-tenant?
William Crooker: That was a single tenant user.
Eric Borden: Okay. That’s helpful. And then my follow-up, Matt, just to clarify, do you said that there was 9 basis points of credit loss in the first quarter?
Matts Pinard: Eric, that’s correct. 9 basis points of credit loss in the quarter. Our guidance is 50 basis points for the year, and we’re maintaining that guidance. I know, obviously, if you want to annualized 9 basis points, it looks like it’s less than the 50. But just given where we are in the calendar, given some of the uncertainty that you’ve seen in the headlines, 50 basis points is the right number for us, and we’ll continue to update the market as we progress through the year.
Operator: Our next question comes from Nick Thillman from Baird.
Nicholas Thillman: 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 in Dallas, but just curious on some market commentary there?
William Crooker: Yes. The market rent growth, we’ve guidance we affirmed as you noted. With respect to markets — weaker markets, still seeing some weakness in Indi and Columbus seeing weakness in Phoenix, seeing some weakness in some of the more historical higher-growth markets, Southern California, some parts of New Jersey. But on the other end, there’s a lot of strong markets out there that we operate in that are seeing vacancy rates some 5%, some 4%, some 3%. Tampa is a market that’s right around 3%. Sacramento is 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 well, operating in are really 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 — is really steady right now.
Nicholas Thillman: That’s helpful. And then maybe, Matt, touching a little bit on credit. Maybe any changes to your sort of tenant watch list? And are there any industries you’re kind of watching out for? Do you feel there might be a little bit of softness there and you’re kind of monitoring a little bit more?
Matts Pinard: Nick, thanks for the question. Simply put a watch list is almost identical, very similar to the last time we were on the phone in February. We’re not seeing anything dramatic in terms of distress across the portfolio and tendency. [indiscernible] asked the question, there’s nothing specific to a sector or geography. It really is kind of just unique situations. The 9 basis points is great. 50 basis points, again, we believe, is the right guidance in April for 2024.
Operator: Our next question comes from Jason Belcher from Wells Fargo.
Jason Belcher: Just wondering if you all could talk about any pockets of strength or weakness you’re seeing across your different tenant industries. Are there groups that are being more aggressive than others in taking space and the flip side or some pulling back more than others?
