William Crooker: I would say there’s no 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 major themes. Let’s say, if you want an answer for some theme, it’s just what I said earlier on the call, we’re seeing a little bit more 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 folks to extrapolate too much on that, but that’s — if you’re going to have one theme that’s kind of the small theme that we’re seeing right now.
Jason Belcher: Got it. And then secondly, can you just talk a little bit about your contractual rent increases or rent bumps and what you’re incorporating into newly signed leases there? And what kind of pushback, 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 would be helpful.
William Crooker: Yes. I’ll start off with what we’re seeing in new leasing. Rental rates are staying — are holding up and escalators are holding up. So we’re seeing average escalators being signed in the 3.5% range. We signed one this last quarter at had a 4% on it. So we’re still seeing some strong escalators and strong face rental rates. Matt, do you want to talk on the average for the portfolio?
Matts Pinard: Absolutely. Jason, the weighted average escalator across the portfolio continues to increase. There is upward pressure. It’s really just math, 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, and that’s the biggest, I would say, building block to our sustainable same-store growth.
Operator: Our next question comes from Samir Khanal from Evercore ISI.
Samir Khanal: Just one for me here. I mean you made the comment about tenants taking longer to make decisions. I mean that’s been playing out for a while now. But just trying to understand what was there sort of a sudden shift in time lines that you saw maybe at the end of March or even April?
William Crooker: 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 to last year, where the decision-making capabilities were pushed to corporates, right, into the C-suite. 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 — and this is — it depends on the market, right? So if you’ve got a market that has a little bit more supply and 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 some of the markets that we’re in, there’s a lot of steady in those markets and balance supply and demand.
So in those markets, you’re seeing tenants make decisions probably in line with what they have been in some of these markets that have oversupply and their bigger box decisions are taking a little bit longer. When you compare decision-making time lines to ’21, ’22, yes, they’re definitely pushed out 1 to 3 months. And when you compare it to last year, depending on the market, maybe they’re pushed out a couple of 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: 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…
William Crooker: Yes. I don’t think it was a reaction to a 30 basis point increase in 10-year.
Operator: Our next question comes from Michael Carroll from RBC.
Michael Carroll: 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?
William Crooker: Yes. In terms of — yes, I’ll walk through quickly the yields and Steve Kimball can walk through kind of the progress and the remaining capital committed. I mean the first project is the one in Greer that I mentioned. That started back in April — March or April of 2022. Those buildings are 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 — these buildings, as I mentioned in 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 and so a lot of demand drivers and a lot of light manufacturing there.
So those assets, we expect to stabilize in the mid-5 range. Part of that is when you put these projects under contract back in 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 we acquired one that was just recently completed, call it, the sister building, that’s the one we leased almost immediately. We underwrote a 7% yield, at least for 7.5%, about 11 months ahead of schedule. So that building is coming online. We anticipate a 7% cap for that. We’re underwriting a 12-month downtime. Hopefully, we have a similar outcome as a sister building. But again, we’re prudent with terms of how we underwrite these assets. So that’s 7% cap. And then with respect to the Tampa market, I touched on the suite sizes there, tampa market sub-3% vacancy rate, a really strong market.
That one is probably going to stabilize in the mid-6s. It all depends. That’s at the current market rent, so we’ll see 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?
Steven Kimball: Yes, and 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 has been spent or 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 a little over $150 million of projected capital for those projects.
