PS Business Parks, Inc.
Q3 2021 Earnings Call Transcript

Published: 29 Oct 2021

[Operator:]

Good afternoon, and welcome to the PS Business Parks Third Quarter 2021 Earnings Results Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. It is now my pleasure to turn the floor over to Jeff Hedges, PSB’s Chief Financial Officer. Sir, you may begin.

[Jeff Hedges:]

Good morning, everyone. And thank you for joining us for the third quarter 2021 PS Business Parks investor conference call. This is Jeff Hedges, Chief Financial Officer. With me today is our President and Chief Executive Officer, Mac Chandler; and our Chief Accounting Officer, Trent Groves. Before we begin, let me remind everyone that all statements, other than statements of historical fact included in this conference call, are forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond PS Business Parks' control, which could cause actual results to differ materially from those set forth in or implied by such forward-looking statements. All forward-looking statements speak only as of the date of this conference call. PS Business Parks undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. For additional information about risks and uncertainties that could adversely affect PS Business Parks' forward-looking statements, please refer to the reports filed by the company with the Securities and Exchange Commission, including our annual report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K. We will also provide certain non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to GAAP is included in our press release and earnings supplement, which can be found on our website at psbusinessparks.com. I will now turn the call over to Mac.

[Mac Chandler:]

Thank you, Jeff. Good morning and good afternoon to those in the East. Welcome to PS Business Parks third quarter 2021 investor call. On today's call, I will highlight our third quarter accomplishments, provide a rundown of recent investment activity and provide an update on our markets. Jeff will present additional detail on our financial results, balance sheet and capital allocation. To begin, we are thrilled with the third quarter results, highlighted by Same Park Cash NOI, which increased by 10.7% this quarter, compared to the same period last year. Robust occupancy gains and rent growth were the primary driver of our NOI growth. Our quarter-end occupancy of 95.5%, increased 270 basis points year-over-year. Our industrial portfolio continues to flourish with an average occupancy of 96.3% for the quarter and year-to-date, Same Park Cash NOI growth of 13.3% compared to last year. Moving to production, we leased 2 million square feet in Q3, a sequential increase of 7.5%. Cash and net effective rent this quarter increased 5% and 15.4% respectively. Again, our industrial assets led the way with healthy cash and net effective rent growth of 9% and 22.4% respectively. Leasing transaction costs were $4.38 per square foot for the quarter. The increase as compared to Q2 is mainly attributable to a handful of larger strategic space reconfigurations supported by higher rental rates. Now turning to our investment activity. On September 1, we acquired Port America, a 718,000 square foot multi-Tenant industrial park, adjacent to DFW in Dallas for $123 million. The park is currently 97.1% occupied and continues to meet our high expectations in all aspects, particularly rent growth and renewables. We are forecasting a stabilized yield of approximately 4.5%. Subsequent to quarter-end, we announced the disposition of Lusk Business Park in San Diego, California. We couldn't be happier with this transaction that realized $315 million of gross sale proceeds. To put this in perspective, the sale price represents greater than 60 times, our 2021 estimated NOI for the property. Approximately $50 million of the net proceeds has been exchanged into Port America. As previously communicated, a special dividend will likely be paid by year-end to the extent the remainder of the sale proceeds are not exchanged, which Jeff will touch on a little later. We've previously announced that we are marketing for sale. Our Royal Tech Flex Park in Las Colinas, Texas, the process is advancing as expected and we've received very positive feedback from the market, which you may have seen. We moved this property to held-for-sale and our three financials, we plan to provide an update early next year. We are in the market for acquisitions that meet our standards, particularly multi-tenant industrial parks that allow us to add value through our best-in-class leasing and operating platform. Moving to our development projects. Freeport, our 83,000 corporate industrial development of Dallas is tracking well. The building is 63% leased with another lease executed this week. Due to our strong interest in the remainder of the building and a tracking have it fully committed by year-end. Our 212 development in Seattle and Boca development in Florida are due to break ground in November. Construction of Brentford at The Mile are 411-unit multi-tenant multi-family development in Tyson's Virginia is on schedule for aiming as proceedings planned and drywall starts next month. We plan to deliver the first units in summer 2022. Now let's turn to our markets. In Seattle, we are pleased to announce that we have leased our 48,000 square foot vacancy, a 212 Business Park to a regional technology company. Our industrial assets in Seattle are performing well and average occupancy increased to 95.6% for the third quarter, a 110 basis point sequential expansion. We have strong demand from logistics, fulfillment and building materials companies. In Northern California, momentum continues to build. Logistics and distribution are the leading demand drivers, but we also increase – see increased demand from life science firms in the East Bay and construction related industries throughout the market. Industrial rent growth in Northern California was 9.9% for the quarter with an average occupancy of 95.9%. We recently signed a letter of intent for our 140,000 square foot vacancy in Hayward and lease negotiations are just beginning. For Southern California, we see increased diversity in demand, from logistics and smaller last mile users to small business services. We are delighted with the performance of our industrial assets, which maintain an average occupancy of 98% for the quarter. Third quarter cash rent growth was strong at 9.5%. Retention was 85%. Our Mid County's industrial portfolio remains exceptional with less than 2% vacancy. In Texas, industrial demand is strong. In Austin, average occupancy for the third quarter dropped to 94.2%, primarily due to the expected move out of a 67,000 square foot tenant in a Flex building in North Austin. We are evaluating several options for releasing the space. However, we do expect it to remain down for a few quarters. In Dallas, we ended the quarter at 92.8% occupancy, and we are bullish in the market as it continues to peak in for employment growth and population migration. In Washington Metro, our industrial portfolio continues to perform well, with Q3 occupancy coming in at 95.6%, which is in line with the all-time low market vacancy rates for Northern Virginia and Suburban Maryland as reported by JLL. Our office portfolio was 87.5% occupied and there’s momentum with Transwestern reporting tours are up 35% from a year ago. Our leasing production between Q2 2020 and Q1 2021 average 90,000 square feet per quarter. Since then production has increased to 175,000 square feet per quarter. We are still not back to pre-pandemic levels, but we are pleased with the increase in activity. The investment we made in our make ready suite has positioned us well. As in many cases, we can deliver space faster and cheaper than our competitors. Finally, South Florida continues to lead all of our markets due to strong wholesale distribution, e-commerce and logistics demand. Occupancy in our Florida division increased in Q3 to 98.2% from 96.9% last quarter. Our MICC Park on Miami continues to outperform the local market due to small tenant demand and expansions, both of which are helping drive rental rates to all time highs. I will now turn the call over to Jeff.

[Jeff Hedges:]

Thank you, Mac. I’ll begin with an overview of our financial results for the three and nine months ended September 30, 2021. Net income allocable to common stockholders for the three months ended September 30 was $52.2 million or $1.89 per diluted share, while core FFO was $60.3 million or $1.72 per share, representing an 6.8% increase from the same period in the prior year. For the nine months ended September 30, net income per diluted share was $4.55 and core FFO was $5.16 per share, a 5.1% increase from the prior year. During the quarter, cash net operating income attributable to our Same Park portfolio was $70.7 million, a 10.7% from year ago. The increase in Same Park cash NOI was driven by cash rental income growth of 8.4%, which was primarily attributable to gains in occupancy and rental rate growth. Same Park weighted average occupancy for the quarter was 94.8%, up from 92.6% in the prior year. For the nine months ended September 30, Same Park cash NOI increased 8.6%, again driven by a 7.3% growth in cash rental income resulting from increased occupancy and rental rate growth. Funds Available for Distribution or FAD was $51.6 million for the three months into September 30 bringing FAD year-to-date to $156.3 million representing a 10% increase from the prior year. In addition to the previously mentioned cash NOI growth FAD continues to benefit from well-managed recurring capital expenditures, which for our Same Park portfolio registered at 11% of NOI. Turning now to the balance sheet. We ended the quarter with $46.6 million of unrestricted cash and our credit facility remained undrawn. As previously announced, we recently called for redemption all Series W preferred shares. And those shares will be redeemed on November 3. At this time, there is no plan to issue a new series of preferred equity. As we intend to fund a Series W redemption with cash on hand and a portion of the Lusk sale proceeds. Speaking to the last disposition, approximately $51 million of the $311 million of net sale proceeds will qualify for a 10/31 exchange against the Port America acquisition, which also served as an exchange asset for the two parks in Northern Virginia, Monroe Business Center and Park East business park that we sold earlier in the year. We will retain the ability to exchange some of the remaining sale proceeds for a period of time. But as previously disclosed, if we do not find additional exchange opportunities, we will likely pay a special dividend by yearend. We’ll provide an update with all relevant details of this potential special dividend on or around December 1. Lastly, I’ll point out that we paid a quarterly dividend of $1.05 per share to common stockholders in the third quarter. And our Board recently declared an ordinary dividend of $1.05 per share to be paid in the fourth quarter of 2021 on December 30 to stockholders of record on December 15. With that, I’ll now turn the call back to Mac.

[Mac Chandler:]

Thanks, Jeff. Earlier this month, we announced that Adeel Khan will be joining us as our new EVP and Chief Financial Officer effective January 10, 2022. Adeel, Jeff, Trenton, and I have developed an orderly transition plan, which will mitigate any potential disruption and allow us to continue to accomplish our strategic goals, to grow net cash flow and source accretive investment opportunities. Today is Jeff’s last investor call with PSB. And while it’s too soon to give – to say goodbye, I’d like to take a moment to acknowledge Jeff’s many contributions and to say thank you. This concludes our prepared remarks. And with that, we’ll open it up for questions.

[Operator:]

We will take our first question from Emmanuel Korchman with Citi.

[Emmanuel Korchman:]

Hi and good morning, guys. Mac, given the success of Lusk sale, how much more time are you spending, looking for assets that have higher and better uses and maybe the second part to that same question, are there sort of limits that you think about, whether it be things like a need for a special dividend or use of proceeds or is it just the matter of getting the portfolio for the best value creation opportunities?

[Mac Chandler:]

Thanks, Manny. Good morning. We – over the years, we’ve identified, many, many such assets and we’re partly brought on, it supported the need for someone to focus directly on that. And that was our Head of Development who’s based up in Seattle who is going to primarily work on creating value through entitlements and whether that entitled value something that we use for ourselves through reinvestment or we sell to someone else remains to be seen. But we’re spending a lot of time. And I would say more time than before. And in part, I would say, the emergence of life science as you know, incredibly strong sector is somewhat new in the scheme of things. And their ability to pay what they can afford to pay is somewhat unprecedented. So we are looking for more opportunities that might fit there. And many of the markets that, where we own a assets, our markets that meet their needs to as well. So I would say we’ve increased our time on it. It’s obviously, we’ve enjoyed the success of that and it’s raised our attention to other potential opportunities. So only that answers your question, but certainly more time, we’re spending more time on it.

[Emmanuel Korchman:]

Thanks. And if we just think about the types of tenants leasing from you, have you seen any shifts in tenant industries or types I know in the past, do you please two experiential users go carts and the like, in some of your flex parks, have you seen less of those more those, more e-commerce just a flavor of who’s leasing your parks right now?

[Mac Chandler:]

Yes. I think definitely we’re – I’m not sure there’s too many care – too many times we call experiential in our whole portfolio, maybe a small handful. That’s really not a growing segment. I’d say if anything the shift is more to traditional, logistics related companies, whether that be tenants who are assembling or manufacturing goods to be sold through e-commerce or distribution. So I think we’re – I think our portfolio is certainly shifting that direction with industrials always been that way. But shifting more all the time and flex is continuing to go that way too, as well. As vacancy dries up in most markets. So we’ve seen more of a pure industrial tenant look at our flex product as an interesting alternative. And so there are some cases where we may reduce the amount of office build out, because that’s what the markets looking for and make it more of a pure play industrial.

[Emmanuel Korchman:]

Thanks very much.

[Operator:]

We’ll take the next question from Craig Mailman with KeyBanc Capital.

[Craig Mailman:]

Hey guys, just want to follow-up on the potential acquisition pipeline, just kind of curious the – kind of the robustness of that, and your willingness to maybe stretch a little bit, given the fact that you have essentially very low cost proceeds from Lusk that you can kind of redeploy here.

[Mac Chandler:]

Yes. Hi, Craig. Part of that, there’s a limiting factor with our 10/31, which is now has nothing to do with appetite. It’s just a timing factor, because we’re – we really the shot collect that we have really expires, really roughly December 1. So if we don’t exchange by then anything we don’t exchange, we’re in a special dividend mode. So there’s a couple assets that we are pursuing, one that we’re under contract for, one that we’re pursuing that would meet that timing. But I – but those at this stage, given how close we are to 12/1, I would say less than half of the net sales proceeds will be – have the ability to be redeployed through a 10/31.

[Craig Mailman:]

Right. So you – so that’s about let’s see a less in our acquisition.

[Mac Chandler:]

Yes, less than a $100 million.

[Craig Mailman:]

Okay.

[Mac Chandler:]

So there’s a couple assets that we’re pursuing that. But we do understand the attractiveness of the cost of capital, and obviously we want assets that meet our standards, not just for yield, but for the long-term. And the extent that we can close on a couple that we’re pursuing, we certainly intend to do so.

[Craig Mailman:]

Okay. So that would that one that’s under contract be a little bit less than $100 million, or would you need another one after that to close to kind of get to the 50% mark?

[Mac Chandler:]

No, that – really less the aggregate of the two is under a $100 million.

[Craig Mailman:]

Okay.

[Jeff Hedges:]

And hey Craig, this is Jeff. Just to remind you as I said about a little over $50 million of the proceeds has already been applied against the Port America acquisition. So that portion has been exchanged.

[Craig Mailman:]

Right. This would be an incremental kind of $100 million to get you to the half of the 3/11.

[Mac Chandler:]

That’s right. Yes. And also looking, it’s not quite a new investment, but the redemption of the Series W is in a sense at investment at a higher yield in which you’d find in the marketplace today.

[Craig Mailman:]

Okay. So probability wage…

[Mac Chandler:]

So cash applied for that is certainly an accretive use of funds.

[Craig Mailman:]

Right. I’m just getting that probability wage probably a 100% on $150 million special dividend and somewhere 50/50 on another kind of $50 million on top of that.

[Mac Chandler:]

I – Craig, I think you’re directionally thinking about it the right way. And as I said, we’re going to provide more details on this on or around December 1, when we have more clarity on our opportunity to exchange the remainder of those proceeds.

[Craig Mailman:]

Okay. And then just quickly on Port America, I know you said 4.5% stabilized yield as we’re modeling that kind of what’s a good gap yield to put that in that initially.

[Jeff Hedges:]

Hey Craig, it’s Jeff again. For the interim period of time, we’d say probably 3 and 3.25 to 4 picking up closer to that 4 next year.

[Craig Mailman:]

Okay. On a gap basis.

[Jeff Hedges:]

Yes. Between now to be clear, between now and when we reach stabilization in three-year about two to three years.

[Craig Mailman:]

Okay. Then another one on the signed LOI at Hayward, can you give us a sense of the potential mark to market there?

[Mac Chandler:]

We’re not quite ready to communicate too many details on that, because we’ve just started, we’ve us entered into that. And we – there’s some confidentiality that we have between us and the tenant. Who’s a – I will tell you, the tenant is a, it’s a building materials tenant that uses a lot of technology in their application and manufacturer of building materials. We’ve just started that. But as we get further and we’re ready to proceed, but it’s – we’re very pleased with the transaction should it make, and it’s in line with our expectations of what we’ve been pursuing over the last couple quarters – it’s…

[Craig Mailman:]

Okay. Could you remind me of your expectations?

[Mac Chandler:]

Well, I will tell you, it’s not going to qualify as rent growth, because it’s been vacant for but presuming this lease sign, it will have been vacant for more than a year.

[Craig Mailman:]

So you guys are wiggling out of reporting it, because it’s not 12-month vacant.

[Mac Chandler:]

Well, we’re not – it’s – I can’t – it’s a little premature. I mean literally we just started turning a lease. And obviously, we got very close once before. So maybe we’re a little cautious here. We don’t want to jeopardize this deal for making.

[Craig Mailman:]

That’s fair. And then just one last quick one. I didn’t hear it Austin vacancy, you said should be down how big is that and how much of a earnings drag would that be if it’s going to be down for the full year or a few quarters?

[Mac Chandler:]

It’s about 67,000 square feet. This was planned some time ago. They gave us notice it was the state of Texas. And that’ll be down for a few quarters.

[Craig Mailman:]

What was the impact on the quarter basis?

[Mac Chandler:]

Craig, I don’t have a precise figure to give you on that. I would say you could probably look at what we’ve experienced from an NOI perspective in the awesome market and on a prorated basis. That’s a pretty good proxy for what we would expect the drag to be.

[Craig Mailman:]

Perfect. Thanks guys.

[Mac Chandler:]

Thanks Craig.

[Operator:]

We’ll go next Anthony Paolone with JPMorgan.

[Anthony Paolone:]

Yes, thanks. So, you all talked about 95 – getting the 95% occupancy, like for a few quarters now, and it seems like you’re more or less there and you just talked about Hayward in Austin. So, where should we think about kind of the next talk is on your occupancy side as we kind of look ahead?

[Mac Chandler:]

Yes, Tony, I mean, it’s – we like where we’re at. And at this point, we’re pushing rent growth, and we think we’re really in a sweet spot being in that 95% maybe over and we think pushing rent growth, pushing embedded rent bumps, puts us in the best position to grow in a way over the long term. So certainly in certain markets you can see from what we reported, we’re a healthy clip above 95% in certain markets. So it doesn’t mean on a per market basis, you could exceed it. But, keep in mind, our least terms are generally shorter. They’re less than four years. So, we have a little bit more natural role, which helps us mark-to-market quicker. We can get to spaces faster. But we like – we like this occupancy and can we clip up a little bit more a hair more? But we like the spot that we’re in. We’re really – we think, we’ve got some really good leverage and we’re applying that through rent growth through retention, we don’t have to, we’re renewing tenants where it makes sense. But we’re under no pressure to do that, and we’re having good success with this.

[Anthony Paolone:]

Okay. And then just in terms of thinking about inflation, you have smaller tenants in the portfolio and perhaps more, maybe gross leasing. So, do you feel like you have any more exposure on the inflation side as we think about costs that you can’t pass through?

[Mac Chandler:]

I don’t think any more than, disproportionately more than any other landlord out there. I mean, our parks, if you think about how we operate them, it’s pretty basic. There isn’t a lot of fluff to it, and I don’t think inflation is really, they’re pretty utilitarian and it – that allows our expenses to be really pretty modest. So, I don’t think we’re – for the most part, our portfolio is obviously in industrial flex and our expenses are pretty reasonable. So, I don’t think inflation is going to have a tremendous push on us as it might in other sectors, for example. We haven’t seen a big push back from our tenants on that, and we haven’t experienced a big change in tone from our tenants as it comes to renewing leases and signing new leases. Really, I think that the overriding theme is really just the lack of vacancy in the market and within our portfolio. I think that’s overriding any inflationary, any concerns, which is, there’s just so little space out there. And most of our tenants don’t have the opportunity to go to other parks in the market.

[Anthony Paolone:]

Got it. And then just last question for me talked about the couple of deals you might have to use up some of the proceeds from loss, but just thinking beyond that, because you have a lot of balance sheet capacity beyond sort of the sales proceeds, what does the deal flow look like? Your buybacks rate are you seeing a lot of product that fits into what you would want?

[Mac Chandler:]

The deal flow that’s out there, is really pretty good. Pricing’s a little bit better in Texas than say the coast. There’s – pretty meaningful difference in that. There’s a lot of product that we’d like that’s out there, and we will likely, we’ve signaled that Royal Tech may very well sell next year. That’s going to provide additional 1031 exchange opportunities presuming that closes. So, we’re in the market, not just for between here and December, but very much active pursuing deals that would close next year as well. So, we’re seeing a lot of what we like, pricing has gotten more aggressive over the last quarter. It’s getting awfully expensive out there. And I think the parks are a little bit larger, like a Port America. I think those are ones that we certainly like, but I think we also compete a little bit better, because there aren’t as many operators who want to take on a 100 plus tenant park like that, and that really fits us well, because we’re built that way. We’re built to take that on.

[Anthony Paolone:]

Okay. Thank you.

[Mac Chandler:]

The larger portfolio opportunity by the way, would suit us really well. And we’re pursuing those as well.

[Anthony Paolone:]

All right, sounds good. Thank you.

[Operator:]

We’ll go next to Blaine Heck with Wells Fargo.

[Blaine Heck:]

Great. Thanks. Good morning. Can you talk about your development projects and program a little bit more? It sounds like you guys are on track to execute well at your Freeport and Seattle projects, I guess, just with demand for industrial product, as robust as we’ve ever seen it. Are you more inclined to start spec industrial development? And maybe, can you give us any sense of how much capacity your current land holdings might have heard you on that side?

[Mac Chandler:]

I can’t point to a long-term pipeline of surplus land. It’s pretty fit, there aren’t a ton of these opportunities. But we’re certainly mining them. And I think, I certainly think our expertise in this is, is proven and what our ability from a capital standpoint and is certainly there we would love to do more. I think really the next evolution is trying to acquire adjacent land that we don’t already owned and bring that into our parks. What we experienced at Freeport was pretty interesting in that nobody would – nobody is really building ground up, Class A industrial for small tenants. These are 10,000 square foot base, and the tenants have come to us and said, boy, nobody has this product in a newly building with all the modern amenities. And that’s why our rents were well in excess of what we underwrote. It was actually pretty difficult for us to we – to underwrite that and well, well, exceeded those. I mean, our return on that, is roughly 10% stabilized yield on that excluding land. Now, we already own land. So to me, I think the next level evolution is pursuing adjacent land to existing parks. And it might be land that doesn't necessarily have to be vacant, but land where we could scrape and rebuild. And we're going to start to pursue those more because those really meet, our expectations is provide a great creative yield for us.

[Blaine Heck:]

Yes. Okay. That makes sense. And then just with respect to Brentford at The Mile, it sounds like everything's schedule there, which is great. Are you running into any cost pressures given the supply chain disruption we've seen and the related increase in pricing for materials?

[Mac Chandler:]

Yes. We're fortunate in the sense that when we bought that job out we got ahead of some of this. So we're 99% bought out. So we're monitoring that very closely. Just because we're bought out doesn't mean we have all materials, under roof, but it looks like we're going to be just fine. But we're in fact, pushing things where normally we'd want to be ordering things a month out, we're ordering three months out and we're really trying to get out ahead of any potential disruptions, whether or not they're there today or not. And I think we're confident we're going to be just fine. But I think starting when we did and focusing a lot of time and effort on it has really helped us.

[Blaine Heck:]

Okay. That's helpful. And then last one for me Mac, I think it's pretty clear you guys are working on decreasing your exposure to office and increasing industrial and maybe even flex on the margin. But I wanted to ask whether there are any geographic targets or market targets that you have that might involve a sale out of the market or investment in any specific market over the year?

[Mac Chandler:]

When we – we like all of the markets that we're in. I mean, what's interesting, is we're performing almost equally well in all of our markets, our industrialists is performing. Yes, that's partly because 80% of our product is on the coast. But I don't see as, having a heavy bias towards leaning into one or leaning out of any of them. There really – it's really more opportunity driven. But I do echo your observations just now that we are continuing to lighten up our office and reinvest industrial. I think that, that theme makes sense for us and when it's opportunistic, we'll continue to do that. And certainly the pricing's a little bit better in Texas. Texas is sort of an interesting take compared to the coast. A little better yield going into it and you might say, well, it's markets in Texas for example, may be more susceptible to new supply than the coast. That's a – it's a conventional wisdom. But I will say the multi-tenant product almost no matter where you are just generally isn't being built. And even with vacant land and even with more lax entitlements, it's just not being built. And so, supply really isn't increasing as opposed to bulk warehouse. So we're not as concerned about that. So we're, we like all of our markets and really one additional set that we haven't really got to yet is alright, green lighting new markets. And so nothing to reveal here today, but I would tell you, our markets were very bullish in all of them right now. They're all performing very well.

[Blaine Heck:]

Great. That's helpful. Thanks.

[Mac Chandler:]

Thanks Mike.

[Operator:]

We'll go next to Vince Tibone with Green Street.

[Vince Tibone:]

Hi, good morning. I wanted to follow up on an earlier question on the transactions market. Are you seeing the same level of investor competition for Business Parks as more traditional industrial properties? And then obviously Business Parks are more operationally intensive. So just wondering how the, type of bid or investor differs between the two segments.

[Mac Chandler:]

Hi, Vince I'd say it's probably overall, probably less. There are less bidders going after it than, traditional bulk, large warehouse industrial, which probably has more foreign capital behind local sponsors. I would say in the multi-tenant, it tends to be some of our REIT peers but also more local operators who know their local markets and they're used to operating it and that are expanding their footprint. But even with less players, it doesn't really mean there's less demand. It's just my, whether you have 10 people going after and after an asset or 25 even with 10, there's still plenty of competition there. So we're saying, there's still real robust demand for our product, it's helping to drive the value of our existing multi-tenant.

[Vince Tibone:]

No, thank you. That's really helpful. And then one follow-up I mean, what do you think the current cap rate spread is, in the same market for a business park versus more, a bulk product in that, in the same place?

[Mac Chandler:]

Well, I certainly think it's compressed versus a year ago. And it probably continues to compress because, I think there is demand for product that as a shorter walt where you can mark-to-market quicker and that's what, that's traditionally and what Business Parks provide. So I think it's continuing to compress, I mean, it's, I think it's in, call it 50 basis points in cases it's less at one point it was, over a year ago it was over a hundred. So that it's certainly compressed. I think 50 plus or minus, probably inside in cases is a reasonable spread.

[Vince Tibone:]

Perfect. Thank you.

[Mac Chandler:]

Sure. Thanks.

[Operator:]

There are no further questions. I will turn the floor back over to Mac Chandler.

[Mac Chandler:]

Thank you everyone for your time and for your continued interest in PSB. I hope you enjoy the rest of your Friday and I hope everyone has a safe Halloween. Thank you again.

[Operator:]

This does conclude today's conference. Please disconnect your line at this time and have a wonderful day.