Ladies and gentlemen, thank you for standing by, and welcome to the Duke Realty Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Ron Hubbard. Please go ahead.

Thank you, Don. Good afternoon, everyone, and welcome to our first quarter earnings call. Joining me today are Jim Connor, Chairman and CEO; Mark Denien, Chief Financial Officer; Steve Schnur, Chief Operating Officer; and Nick Anthony, Chief Investment Officer. Before we make our prepared remarks, let me remind you that certain statements made during this conference call may be forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations. These risks and other factors could adversely affect our business and future results. For more information about those risk factors, we would refer you to our 10-K or 10-Q that we have on file with the SEC and the company's other SEC filings. All forward-looking statements speak only as of today, April 29, 2021, and we assume no obligation to update or revise any forward-looking statements. A reconciliation to GAAP of the non-GAAP financial measures that we provide on this call is included in our earnings release. Our earnings release and supplemental package were distributed last night after the market closed. If you did not receive a copy, these documents are available in the Investor Relations section of our website at dukerealty.com. You can also find our earnings release, supplemental package, SEC reports and an audio webcast of this call in the Investor Relations section of our website as well. Now for our prepared statement, I'll turn it over to Jim Connor.

Thanks, Ron, and good afternoon, everyone. I will open by saying as always, we hope you and your families are safe and healthy, and that you have the opportunity to be vaccinated. The fundamentals of our business continue to be as good as ever. We've now had 2 successive quarters of demand breaking all-time records. Our development platform had a record first quarter of starts, and our core portfolio continues to perform at the top of the class. Our liquidity position and sources of capital are very attractively priced to capture opportunities, including our execution of 2 green debt transactions. All of these drivers result in us raising key components of our 2021 guidance that roll up to double-digit growth in expected core FFO and AFFO with the midpoints. Now let me turn it over to Steve to cover our operations.

Thanks, Jim. I'll first cover overall market fundamentals, then review our operational results. Industrial net absorption in the first quarter according to CBRE registered an impressive 100 million square feet, marking the first time that demand has exceeded 100 million square feet in consecutive quarters. This was more than enough to offset new supply as completions dipped to 57 million square feet from about 70 million square feet in the fourth quarter of 2020. This positive net absorption over deliveries for the quarter reduced vacancy down to 4.4%, which is back down near the record levels we saw throughout most of 2019. The strong mix and fundamentals increased asking rents by over 7% compared to the previous year. CBRE now projects demand for the full year to surpass 300 million square feet, perhaps even breaking the 2016 record of 327 million square feet. They project deliveries to be about 300 million square feet as well. The overall sector continues to remain very much in balance, which will produce another year of growth in asking rents of high single digits nationally. On the macroeconomic front, the increasing pace of vaccinations, the stimulus being pumped into the U.S. economy and the arrival of spring weather has generated some significant recent data points indicative of a very strong year in our business. The recent March consumer confidence rating is back near the range of 2018 and 2019, and the GDP growth is projected to be in the 6% to 7% range. This bodes very well for demand in logistics real estate. And in addition, we have the secular drivers in our business that remain firmly intact and stronger than prepandemic. To that point, the growth in retail sales and e-commerce sales across the 2-month February and March period were up 12% and 28%,…

Thanks, Steve. For the quarter, we sold $94 million of assets comprised of 2 facilities in Houston as well as 2 facilities in Indianapolis owned in a 50-50 joint venture. In turn, we used part of these proceeds to acquire 3 buildings totaling 680,000 square feet for $51 million, including 1 asset in Southern California's IE West submarket and 1 in Northern New Jersey's Meadowlands submarket. The third facility acquired was in the Indianapolis Airport submarket and was part of a joint venture liquidation and asset swap. These buildings were all 100% leased within markets where we expect strong market rent growth that will contribute to long-term IRRs well in excess of the assets we sold. From a strategic positioning standpoint, the net effect of our development, disposition and acquisition activity this quarter moves our coastal Tier 1 exposure to over 42% of GAV. We've begun marketing a few Midwestern assets leased to Amazon for outright sale, while certain assets leased to Amazon in other noncoastal Tier 1 markets may either be sold outright or contributed to a joint venture. In addition, the more recent news on disposition in last night's press release, that we are now marketing for sale our entire 5.2 million-square-foot St. Louis portfolio. The rationale on the sale is threefold. One, we are taking advantage of increased investor demand for logistics assets; two, the portfolio accelerates our strategic objective to increase our exposure to coastal Tier 1 markets; and three, it will provide a source of funds for our increasing development pipeline. As a result, we have raised the midpoint of our full year expected dispositions by $400 million. Altogether, we expect our planned 2021 disposition activity to be weighted toward the middle of the year. I will now turn our call over to Mark to discuss our financial results and guidance update.

Thanks, Nick. Good afternoon, everyone. Core FFO for the quarter was $0.39 per share, which represents 18% growth over the first quarter of 2020. We've been saying for the last few quarters that we expected our core FFO growth rates to accelerate and begin to approach our already strong AFFO growth rates. The results from the current quarter and our revised guidance certainly reflect this. AFFO totaled $140 million for the quarter. Our best-in-class low level of capital expenditures, along with the strong NOI growth, continues to generate significant AFFO growth to reinvest into our business. Our best-in-sector rent collections continued in the first quarter of 2021 with more than 99.9% of rents collected. We have also collected more than 99.9% of April rents. And we now only have $52,000 under deferral arrangements remaining to be collected and had effectively no bad debt expense in the first quarter. Same-property NOI growth on a cash basis for the first quarter of 2021 compared to the first quarter of 2020 was 6.3%. The growth in same-property NOI was due to increased occupancy and rent growth as well as the burn-off of free rent compared to the first quarter of 2020. We do expect this growth to moderate for the remainder of the year based on tougher occupancy comps and less free rent burn-off, but to remain strong nonetheless. We finished the quarter with no outstanding borrowings on our own secured line of credit, which we renewed in March and extended through March of 2026, including our extension options. We reduced our borrowing rate by 10 basis points compared to the previous facility. As part of our commitment to corporate responsibility, the credit facility also includes an incremental reduction in borrowing costs as certain sustainability-linked metrics are achieved each year. Our future debt…

Thank you, Mark. In closing, a strong economic recovery is unfolding, and numerous secular drivers are continuing to create unparalleled opportunities for our platform to capture growth from rising rental rates, high-margin development opportunities and from raising capital at a very low cost. We're very pleased with our team's execution in the first quarter and now with our expected double-digit growth in core FFO and AFFO. As long as these multiple tailwinds can sustain and as long as the economy continues to recover, we're optimistic we can achieve similar levels of growth for the foreseeable future, that are hopeful it should lead to corresponding increases in our annual quarterly dividend. Thank you for your interest and your support, and we will now open it up for questions. [Operator Instructions]. Don, you can open up the lines, and we'll now take questions.

[Operator Instructions]. First, we go on to the line of Blaine Heck.

I'll start with Nick. As you mentioned, you guys raised disposition guidance pretty significantly this quarter. Outside of St. Louis, are you guys selling any other portfolios? Or will the rest be more kind of one-off and the sale of the Amazon facilities? And then can you give us any sense of how much pricing has actually changed this year, especially in those kind of secondary markets where I'm assuming most of the dispositions will be?

Yes, Blaine. So most of the other assets are sort of one-offs, a couple of Class B, but mostly long-term credit deals, a lot of them leased to Amazon. So that makes up the rest of it. There's really no portfolios in that guidance number outside of the St. Louis portfolio. As far as pricing goes, we continue to see cap rate compression. It's - the secondary markets have compressed more recently than the coastal markets. But especially some of these Amazon assets, we've been very pleased with the pricing that we're seeing on those transactions as well. So I'd say, over the last 90 days, there's probably been another 25 bps on compression.

Great. That's really helpful. And then maybe for Jim. Several of your competitors have talked about the rising cost of construction now, not just from increasing land cost, but also the raw materials. Can you just talk about how you guys are dealing with that increase in cost and whether you think rents are rising fast enough to keep yields steady? Or maybe should we expect a temporary dip in yields as the material costs are temporarily elevated?

Yes. Thanks, Blaine. I'll start and then Steve can give you a little color. We've been dealing with land prices escalating for a number of years now. So that's not anything out of the ordinary. Steel is the latest one, and a lot of people are talking about that. One of the advantages of being a national developer is, a, the number of relationships that we have, the leverage that we have and our team's ability to go out and accelerate some of the design and procurement. So sitting here today, we can comfortably tell you that we have the steel we need to finish everything that's in the development pipeline for the balance of the year. And I think Steve can give a little more color on what some of the local teams are doing.

Sure, Blaine. I would just tell you, steel is gaining a lot of headlines, lumber is another one. Land has - obviously, as Jim indicated, has been up significantly for a number of years. Rents are certainly keeping pace. Cap rates are helping. I think the bigger concern, I guess, or cautious thing that we pay attention to is the time frames. Steel is pushed from 10 to 12 weeks to probably 24 to 26 weeks. So more upfront cooperation with architects and tenants to get projects started to make sure you can deliver on time.

And next, we go on to the line of John Kim.

On your spec developments, are you sensing that there's also increasing spec in your markets from public and private developers? And are there any markets where you're concerned that the spec development is escalating quickly?

Sure. John Kim, I'll tell you, I think we're - there's competition everywhere. I do think the private players, particularly the larger private players, have been active on the merchant development front. Our focus and where we've got our landholdings in the high-barrier markets, I think we indicated in our release that 88% of our land is now in the coastal Tier 1 markets. The competition there, the vacancy rates there many times are less than 2%. So I think we're comfortable with that. I would tell you, in terms of markets we're concerned about our monitoring supply, there's always going to be a handful of submarkets scattered around. But Houston is the one that we - we have no intentions of starting any projects in Houston, but that market needs to shore itself up a bit.

I know you gave your excuses on why you're exiting St. Louis, but why not go the joint venture routes in that market since that seems to be the strategy with some of the other markets?

This is Nick. The question was, why not JV the St. Louis assets? Generally, we have kept them work. We tried to keep our model more simplistic. And we don't think, strategically, a joint venture there would make as much sense and maybe in some other instances where you could grow it. I just don't know how you - what you would do with it going forward.

And next, we go on to the line of Manny Korchman.

Maybe this one for Mark. Just thinking about using dispositions for capital funding for the developments versus issuing common stock here. What's sort of more attractive about selling the assets and exiting those markets than just growing through an equity raise?

Well, I guess we're using a little bit of everything, Manny. I mean, we did issue a little bit on our ATM in the first quarter. I guess what I would say, and Nick can follow up on this, the St. Louis exit has sort of been on a list for a while. It's really more of an acceleration, something we were probably going to do down the road anyway. And as our development pipeline opportunities ramped up, we just kind of pulled forward some things that we're going to do anyway. But we'll continue to use a little bit of everything as long as our capital is attractively priced.

Yes. What I would add is this was an opportunity to basically improve our geography going forward and also improve our growth profile going forward just to make - to help improve performance in the future.

And Nick, I don't know if we've talked about this in a little while, but just can you talk about the pricing differential between single assets or larger single assets and portfolios? Is there a pricing difference? And if so, are you looking at one more than the other?

Well, they're certainly - it's sort of a mixed bag. It's not as black and white as you might think. Obviously, the long-term credit deals are garnering very low cap rates. A lot of them are brand-new, new development. A lot of the portfolio deals that you see out there are a blend of Class A and Class B assets, and a lot of it depends on where the rents are in relation to market. So they generally trade at higher cap rates. And the buyer pool is not necessarily as deep on those because they're a little harder to underwrite and get your hands around. But it is sort of comparing apples and oranges there on those 2 different types.

So - and then the second part of the question, are you more interested right now in buying some single assets in varied markets versus picking up a portfolio?

We - yes. Typically, on the acquisition side, we focused on 1 to 3 assets at a time because we want to focus on buying what we want, where we want it. So it complements our strategy. Typically, when we've done larger portfolios, we got lucky with the Bridge transaction several years ago because it's all where we wanted it. But typically, what happens on some of these portfolios is you get a lot of assets and locations that you wouldn't normally want to be in, and it creates a lot of friction and noise trying to reposition those portfolios after you get them.

And next, we're going to the line of Jamie Feldman.

Great. I think you had mentioned in your earlier comments about sales into a JV, if I heard that right. Can you talk more about the plans there? And is this something that you would keep as kind of a perpetual structure and continue to sell, kind of grow it? Or is this more one-off?

Yes. I mean, we're looking at all the different levers as far as monetizing assets. One of the things that we've talked about is managing our - being prudent about managing our Amazon exposure going forward because we continue to do a significant amount of business with them. And I think their exposure at the end of this quarter is right around 9%. And we'd probably rather be in the 4% to 7% range going forward on that. So there are some assets that maybe we don't want to sell outright because of where they are or what type of asset they are. And we may take advantage of a JV structure in that case. And then that might be something that we can use to monetize future assets similar to that going forward.

Okay. Any thoughts on like structure in terms of your stake versus a partner's stake and potential magnitude?

No. I think we're evaluating all that stuff. Obviously, we need to do something - a decent amount of monetization to make sense to manage the Amazon exposure. But we don't have any hard numbers in mind.

Okay. Have you started talking to partners?

Yes. We have - we had discussions, but we've always had discussions with partners over the time. We talked to a lot of our existing partners about this whole concept on a regular basis.

Okay. Will you consider more of like a fund structure? Or this is...

No. I mean - no. I think historically, we've used more of the JV structure. Could it be a JV with multiple partners? Maybe. But not necessarily a fund structure.

Okay. And then just as - here we are at kind of a unique time in the economy where things are picking up. Any anecdotes about kind of new types of tenants leasing space? Anything that kind of stands out from the quarter that might be different than what you've talked about in the past?

No, Jamie, this is Steve. I don't think so. I think 3PLs continue to be very, very active. And I think that's centered around e-commerce. It's also centered around the theme you've been hearing about for a while with inventory redundancy. So that's probably the most active. 3PLs have always been active, but I think right now is they've sort of taken over the lead by a wide margin over anyone else.

And next, we go on to the line of Nick Yulico.

Just a question on kind of your pricing strategy right now. Because it looks like your tenant retention has picked up this year versus last year. It's obviously a good thing for occupancy, raise that guidance. But I guess I'm just wondering how you're kind of approaching pricing discussions with renewals, whether you're willing to deal with a little bit more frictional vacancy there to push pricing in your portfolio.

Sure, Nick. This is Steve. Yes. We're - it's a case-by-case basis, but we are certainly pushing the envelope. I think this quarter, we did not have very much role on the coasts. So our results, which we were happy with on the rent growth side, I think there's some upward trajectory to what we'll do the rest of the year. We're continuing to push rents. We're having some difficult conversations. They aren't easy conversations, but we're willing to take some space back if we need to.

Okay. Just second question is on the development land, where I know you have - give a book basis, but 88% of that is your listing here as being in coastal Tier 1 markets. Maybe you could just give us some sort of perspective on how much - I know we keep hearing land prices are going up substantially. You have a very big Southern California land bank. Maybe just a little bit of perspective on where you think the land is really worth on a market basis for all of your land held for development.

Yes. We just looked at that. It's in the low 40s mark-to-market. So we have quite a bit of upside in our landholdings.

You said, sorry, it's about 40% higher than the book value?

The market value is, yes, over our book value. Correct.

And next, we go on to the line of Caitlin Burrows.

So you're obviously very active in development now. You started $800 million in 2020, and 2021 guidance is for over $1 billion at the midpoint. So I was just wondering, do you believe there is runway for the '21 volumes to continue and that's from both a demand perspective and also your ability to get land and complete projects in the target markets?

Yes, Caitlin, I would tell you, as I kind of tried to reference in my closing remarks, if the economy continues to recover, as it certainly is indicating it has, and we're able to achieve the kind of GDP growth in the second half of the year that most of the leading banks are projecting, yes, we think next year is going to be a very, very good year. And we should have ample opportunity to do a comparable level of volume.

Okay. Great. And then I think just following up on one of the recent questions on the key assumptions that you guys have at the end of the supplement. It does mention that you're willing to push rents at the expense of some occupancy, which I think makes sense given high occupancy. But we haven't yet seen that play out in the leasing spread. So obviously, they're high, but versus last quarter or even a year ago, not as high. So just wondering, do you think we should expect to see the leasing spreads rise in the near future? Or would that take a little bit longer to play out?

Let me start that, Caitlin. This is Mark. One thing we've been talking a lot about where the leases we have that are rolling where they're located, over 40% of our NOI now are in the coastal markets. This quarter, it just so happened that only about 10% of our roll was in the coastal markets. So I think that we're still very happy with 12% plus or minus cash and almost 30 gap when 90% of that roll were in noncoastal markets. You won't see us get to the 40% roll that our portfolio looks like for a few years down the road. But I think you will see us pushing closer to 20% to 25% of our roll. For the next year, 1.5 years, we'll start to be more in those coastal markets. So that does give us the opportunity to get those rates up even higher than what they were this quarter. I don't know if Steve wants to add anything to that. But just a little point on where the - I think it's important to know where the roll was. And when 90% of our noncoastal markets we still achieve those numbers, we're pretty happy with that.

And next, we're going to the line of Vince Tibone.

Could you discuss how your market rent growth expectations this year differ between coastal market, Tier 1, noncoastal markets and the remainder of your portfolio?

Sure. Vince, I'll take a stab. I'll tell you, I think there's - clearly, the numbers that get published are on a macro basis. You really need to dig into the individual submarkets. I think some of the high-barrier infill coastal markets are pushing high single-digit rent growth, if not double digit. I think in the center part of the country, where you have less barriers to supply, you're probably in the lower single digits. That probably averages out to that 6% to 7% rent growth that we've been seeing from CBRE. So I don't know if that - hopefully, that answers your question. There is obviously discrepancy by availability of supply.

That's really helpful. And just any difference between some of the coastal markets like New Jersey versus SoCal, anyone standing out? Or are they kind of similar in this high single-digit range?

I think the two markets you indicated are extremely active, very low vacancy rates, very little new supply being added that's not being absorbed quickly. And so those two markets are doing really well. I think Seattle continues to perform well. There was - I'd say Northern California had a bit of a slowdown. I think it was more affected, COVID-related, but seems to be coming back pretty strong with what we have there.

Got it. I think that's really helpful. If I could squeeze one more in. Can you just provide a little color on the pricing and marketing process on the Houston dispositions? Just curious, given some of the challenges in that market, how does that differ from some of the other dispositions you're marketing?

Vic, this is Nick. You said Houston dispositions?

Yes. Just curious if that - we've seen weaker demand there, weaker pricing compared to some of the other regions.

Fortunately for us, they were long-term leases with Amazon, so it was a great experience. The buyer pools were very deep, and the pricing was very good, like we're seeing across the country. So that was obviously the reason why those went well for us.

Got it. And is Houston a long-term hold for you? Or is that something you could potentially consider exiting as well similar to St. Louis?

No. I think we're cognizant of our exposure there, but we have no plans to exit Houston in the future. So we just keep an eye on it and manage it.

And next, we go on to the line of Mike Mueller.

Two quick ones here. First, what's the difference between the Amazon assets that you're looking to sell outright versus what you would consider to put in the JV? And then second, when you're thinking about your in-process development pipeline, is there a max level or some sort of cap that you want to stay under?

Mike, this is Nick. I'll take the first part, and I'm sure Steve will take the second part. In terms of what we're looking to sell outright versus joint venture, it's primarily location-driven for the most part. Generally, it's the growth profile of the asset. So if it's an asset that has a good embedded rent growth and a market that has good prospective rent growth going forward, we're probably more likely to put it in the JV versus sell it outright. So that's generally how we've looked at it. And then the second part of your question...

Yes. The second part of your question on the development opportunities, obviously, developing at the margins we are, the more we can do, the better. I think we pay attention to what our exposure is relative to the overall size of our company, and we're at roughly 9% now. I think we'd start to get nervous if we were 12%, 13%, something like that.

And next, we go on to the line of Dave Rodgers.

Steve, maybe a question on lease rate growth. You talked about it by geography, but maybe just some color on the size and what you're seeing in terms of the rate growth across core portfolio in the last quarter or so.

Yes, Dave, this is Steve. You're a little broken up, but I think you asked about lease rates by size and maybe location. I would tell you, for us, again, the portfolio that we operate, our best-performing size segment this past quarter was 100 million to 250 million. I think historically, going back the last, call it, 6 or 8 quarters, it'd be - I would tell you, it's tended to be better on larger size. So I would expect that to be the case this year based on the demand we're seeing. It's hard with 1 quarter into the year to read much into that. But for us, the large-size segment continues to be the most active.

Great. And then I think coming into - and sorry, I do have a bad connection, but I think coming into the year, you guys have talked about losing some tenants early on that would roll out. Obviously, you had a little bit of that. But did that all hit in the first quarter? Do we expect to see any of that moving into the second quarter? Or were you guys just successful at kind of stepping in and backfilling a lot of those leases fairly quickly to start the year?

Yes, Dave, this is Mark. Yes, at the end of last year on the January call, I guess, we talked about 4 or 5 tenants. And I guess, first off, I'd say these were not significant tenants, but there were 4 or 5, we were basically in the process of trying to get evicted and re-tenant that space. So the good news is all of that space has been backfilled. In fact, a couple of those tenants actually got current on their rent and went through some M&A transactions themselves. Got current, they're going to stay in the space after all. Another couple of them, the other half, I would say, we've now got out of the space. We've got leases signed to backfill it. There probably will be some downtime in rent here in the second quarter, but the leases are all signed, and we should be back up full running with better rents and better credit obviously come Q3.

And next, we go on to the line of Rich Anderson.

So I wanted to ask about the Amazon commentary, obviously, selling to get your percentage down. What is - what's scary about 12% Amazon? I mean, I could think of a lot worse tenants to be - have a 12% exposure, too. I mean, is that coming - kind of who's driving that decision? Is it just intuitive about your part or participants in Duke Realty outside of you that want to - whether the rating agencies, I don't know who it could be, are sort of driving a decision to lose some of that concentration? Or is it just a natural observation on your part?

Well, Rich, it's Jim. I'll start out and give you my perspective. Nick can chime in. I sleep very well at night with the amount of Amazon exposure we have, given their credit profile and their growth. But part of it is input from the rating agencies and managing that. Part of it is, as Steve alluded to earlier, we have a very active development and leasing pipeline with Amazon. So left unfettered, that number is just going to continue to grow at a very, very rapid pace. And what Nick's guys are able to do, as he detailed to one of the earlier questions, is pull out the assets that have probably the lowest escalations, are in the markets where we have the least amount of upside, so to speak, and select those for outright sales and some for the joint venture. And some are in the infill markets that we work really, really hard to get a hold of. And those are incredibly valuable assets, and we want to hold those for the long term. So Nick, you can add [indiscernible].

Yes, I think that's right. And we're just - we're trying to be prudent in our diversification of our overall portfolio in terms of assets, geography and tenant exposure. So we're just trying to maintain a good balance.

Yes, I understand. I'm just being [indiscernible].

Yes. We're not afraid of it.

Yes. Okay. And then second question is perhaps a little somber one with the events in Indianapolis at the FedEx facility. I just wonder if there was any response from the community of industrial real estate owners about enhanced security or anything. I don't know what you could have really done, but I'm just curious if there was any necessary reaction on the part of not just you, but your peers.

Yes, Rich, I'll make a couple of high-level comments. I will tell you that the amount of interaction that our local operating teams have had with our tenants, starting well over a year ago in helping them manage COVID protocols and enhancing the environment for the safety of their associates. Second, the work that we've done with our own people in the development of our buildings because the number of people that we have on site when we're building a building. So those increased protocols and safety in general. So I won't say that any of it is in reaction to horrible events like what we saw at the FedEx facility. But I will tell you, the amount of interaction on all of those subjects with our tenants is probably double today from what it was 18 months ago.

[Operator Instructions]. Next, we go on to the line of Brent Dilts.

Great. In the prepared remarks, you made some comments on inventory to sales levels. So could you talk about how large a safety stock buffer might ultimately get built in? 5% to 10% is frequently thrown about. So I'm just curious what you guys think.

Yes. I think - well, I would tell you, we read the same research reports that you guys do, and I think 5% to 10% seems to be what everyone talks about, which translates somewhere in the neighborhood of 0.5 billion square feet of demand. We see cases of it every day now, where we're talking to - whether it's retailers, e-commerce groups, a lot of the 3PL activity. Transportation costs are going to rise significantly with the new administration and a lot of things going on. And I think you're going to see more distribution to offset transportation costs, more distribution points around the country to offset transportation costs. We're seeing some of the production start to move back to North America and Central America, which I think will lead to more suppliers needing space here. So as Jim indicated, a lot of tailwinds in our back right now.

Yes, Brent, I would just add just one other point. Even the impact of the incident at the Suez Canal, and while that doesn't necessarily impact logistics and shipping to the U.S., it just reinforces the need for these major companies to have additional safety stock because of the vulnerability we all have, given incidents that can happen anywhere in the globe. So this is not a passing trend. This is something that we're going to deal with, obviously, very positive for our sector, but for the next 2 to 3 years.

Yes. Okay. And then just one other one on dispositions. I know you already talked about pricing, but could you talk about buyer types in the market? Are you seeing anything interesting as far as like a shift in domestic versus international or investment firms versus peers, things like that?

Yes. This is Nick. We have seen a change there. Obviously, a lot of the normal usual suspects we see in the bidder pools. But we've also seen a lot of new names pop up. Some of them are high net worth family offices. Some of them are sovereign-based, Spanish, Latin America, what have you. Some of them are rotating - or a lot of these are rotating out of other asset classes into our asset class. So there is an increased investor base that's looking for these assets in these bidder pools, for sure.

And next, we go on to the line of Jason Idoine.

Just touching on one of the points that you just brought up. So you talked about some of the repatriation that could happen with manufacturing and production and people bringing some of that back to the United States, I guess. Is that activity picking up significantly? Or how has that been trending more recently?

Yes. Jason, this is Steve. There's - I think we're starting to see some of that. Obviously, that takes a long time when you're talking about changing production from China to other locations. But you're starting to see some headlines. I know Walmart had a recent announcement about some of the production they're trying to bring back. And it may not be manufacture of goods, but the way goods are assembled, the way they're packaged, coming back, reshoring. So I know Northern Mexico, we don't operate there. But obviously, our Texas folks and California folks deal with goods coming in from there. That activity has been pretty significant. You talked to some of the folks in those markets, and that activity is starting to hit in Northern Mexico right now.

[Operator Instructions]. And there are no more questions in queue.

Thanks, Don. I'd like to thank everyone for joining the call today. We look forward to engaging with many of you throughout the rest of the year. Don, you may disconnect the line.

Thank you. And that does conclude our conference for today. Thank you for your participation and for using AT&T Conferencing Service. You may now disconnect.