STAG Industrial, Inc. (NYSE:STAG) Q3 2022 Earnings Conference Call October 28, 2022 10:00 AM ET
Company Participants
Steve Xiarhos – Associate Capital Markets & IR
William Crooker – CEO, President & Director
Matts Pinard – EVP, CFO, Treasurer & SVP, Capital Markets and IR
Conference Call Participants
Craig Mailman – Citigroup
Blaine Heck – Wells Fargo Securities
David Rodgers – Robert W. Baird & Co.
Michael Mueller – JPMorgan Chase & Co.
Michael Carroll – RBC Capital Markets
Wendy Ma – Evercore ISI
Vince Tibone – Green Street Advisors
James Villard – Ladenburg Thalmann & Co.
Operator
Greetings, and welcome to STAG Industrial’s Third Quarter 2022 Earnings Conference Call. [Operator Instructions].
As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Xiarhos, Associate, Capital Markets & Investor Relations. Thank you, sir. You may begin.
Steve Xiarhos
Thank you. Welcome to STAG Industrial’s conference call covering the third quarter 2022 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 forecast 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 of our 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 will hear from Bill Crooker, our Chief Executive Officer; and Matts Pinard, our Chief Financial Officer. Also here with us today is Steve Mecke, our Chief Operating Officer; and Mike Chase, our Chief Investment Officer, who are available to answer questions specific to their area of focus.
I’ll now turn the call over to Bill.
William Crooker
Thank you, Steve. Good morning, everybody, and welcome to the third quarter earnings call for STAG Industrial. We are pleased to have you join us and look forward to telling you about this quarter’s results. STAG continues to have an extremely strong year operationally. These results are flowing to our bottom line core FFO and cash available for distribution. Recent headlines have pointed to declining industrial fundamentals. Robust construction pipelines and building deliveries are applying upward pressure to availability rates. Despite these trends, the industrial sector continues to benefit from extremely low vacancy relative to history.
As a result, we are still forecasting strong market rent growth for both our portfolio and for the market generally. The ongoing capital market volatility continues to weigh on the asset transaction market as sellers continue to seek price stability. Those sellers who are not forced to transact have taken a wait-and-see approach. Potential acquirers have reset return expectations to reflect current market conditions, a fairly wide bid-out spread has been the result. We expect attractive opportunities to develop as sellers become motivated by capital needs and upcoming debt maturities. These market dynamics have resulted in a more tempered acquisition and disposition guidance range for the remainder of the year. We now expect to acquire between $460 million and $525 million this year, with acquisition cash cap rates ranging between 5.2% and 5.4%.
We expect disposition volume to range between $135 million and $150 million this year. The reduction in disposition guidance was also impacted by the ongoing price discovery. For the year, we expect an aggregate disposition cash cap rate range of approximately 5.4%. STAG was successful in closing attractive opportunities in the third quarter. These opportunities were sourced earlier in the year. We acquired these assets at a 5.4% cash cap rate and expect to stabilize them at a 6.6% cash cap rate within the next few years. Over the past several years, we have purposefully transitioned the platform to generate greater and more sustainable cash flow from our in-place portfolio. Same-store growth has meaningfully accelerated, including increasing our 2022 guidance each quarter this year.
We also generated a material amount of retained earnings, which further supplements our cash flow growth profile. We are in a position to take advantage of investment opportunities with less reliance on the debt and equity capital markets. We are also seeing great opportunities to grow our cash flows next year. We have addressed 45% of next year’s expected leasing, approximately 6 million square feet, achieving 27% cash re-leasing spreads.
This is a material acceleration of our leasing spreads achieved this year. There’s also upward pressure on our weighted average annual contractual rental escalators as we are signing leases with 3% to 4% annual escalators today.
With that, I will turn it over to Matts who will cover our remaining results for the quarter and provide an update to our 2022 guidance.
Matts Pinard
Thank you, Bill, and good morning, everyone. Core FFO per share was $0.57 for the quarter, an increase of 7.5% as compared to the third quarter of last year. Included in core FFO is a $1.3 million settlement payment associated with the previous tenant, which was received this quarter. Cash available for distribution totaled $87 million for the quarter, an increase of 20.2% as compared to the prior period. Year-to-date through September 30, we have retained approximately $57 million of free cash flow after dividends paid. These dollars are available for incremental investment opportunities, debt repayment and other general corporate purposes. Leverage remains at the low end of our range with net debt to run rate adjusted EBITDA equal to 5x.
During the quarter, we commenced 23 leases totaling 2.8 million square feet, which generated cash and straight-line leasing spreads of 13.6% and 25.1%, respectively. Retention was 63% for the quarter and 86.1% when adjusted for instances of minimal downtime and immediate backfills. Cash same-store NOI grew 5.6% for the quarter and 5% year-to-date. Same-store growth continues to be driven by higher cash leasing spreads, shorter downtimes and increases in same-store occupancy. On July 26, we refinanced our $150 million Term Loan D, which was scheduled to mature in January 2023 and our $175 million Term Loan E, which was scheduled to mature in January 2024, with new term loans totaling $375 million. These new term loans mature in January 2028 and bear a fixed interest rate, inclusive of interest rate swaps at 3.32%.
As a result of this transaction, we have minimal debt maturities through 2024. In addition to the term loan refinance, we upsized our revolving credit facility to a notional amount of $1 billion, which improved our liquidity profile. This represents an increase in revolver capacity of $250 million. On September 1, we fully repaid our legacy CMBS loan, the last material secured debt but instrument on our balance sheet. We have made the following updates to our 2022 guidance.
Due to the current uncertain macro environment, we’ve reduced our expectation for acquisition and disposition volume for the remainder of the year. We have narrowed the range of expected acquisition volume from a range of $700 million to $1.1 billion to a range of $460 million to $525 million. Acquisition cap rates for the year are now expected to range between 5.2% and 5.4%. This range is driven by the material reduction in additional acquisition volume this year and largely reflective of acquisitions made year-to-date. Disposition volume decreased from a range of $200 million to $300 million to a range of $135 million to $150 million. Given the strength of our portfolio, we have once again raised our cash same-store guidance to another historical high watermark. We’ve increased our cash same-store guidance from a range of 4.25% to 4.75% to a range of 5% to 5.25%.
This increase is driven by the robust demand we’re experiencing for our buildings and leasing results have exceeded our initial expectations. We have reduced our 2022 G&A guidance from a range of $48 million to $50 million to a range of $47 million to $48 million. We have narrowed and decreased our leverage guidance to a new range of 5 to 5.25x net debt to annualized run rate adjusted EBITDA. As a result of these revised guidance ranges, we now project core FFO per share to be between $2.19 and $2.21, an increase to the midpoint of $0.02.
I will now turn it back over to Bill.
William Crooker
Thank you, Matts. Across the STAG platform, our employees are performing at a high level. This includes our leasing and other business operations as well as execution of our ESG initiatives. We recently received an A on our ESG public disclosures from GRESB the leading evaluator of ESG efforts in the real estate industry. This A is an improvement from our earlier score and reflects our commitment to appropriate sustainability strategies in our operations. I am enormously proud of our entire team and the determination to deliver best-in-class results on a variety of fronts. We will now turn it back to the operator for questions.
Question-and-Answer Session
Operator
[Operator Instructions]. Our first question is from Craig Mailman from Citi.
Craig Mailman
Matts, maybe on guidance. I know you pointed out the $1.3 million settlement that seems like about $0.01 of the beat in 3Q, that’s maybe nonrecurring. But could you just walk through the decel from 3Q to 4Q that’s implied in guidance?
Matts Pinard
Yes, absolutely. You’re right, we benefited from a $1.3 million settlement payment this quarter, which had a $0.01 impact. I’m going to point you to the G&A. The midpoint of our G&A guidance is $47.5 million. That implies an increase in G&A in Q4. This is driven by seasonality. Finally, we also have a modest amount of credit loss budget in Q4 to be prudent. Although it’s worth noting we’ve not experienced any credit loss this year through today.
Craig Mailman
On a per share basis, how much of that credit loss?
Matts Pinard
It’s roughly $500,000.
Craig Mailman
Okay. So there’s a bit of conservative…
Matts Pinard
I do want to reiterate, we haven’t experienced any credit loss. It’s not associated with any individual tenant. If you recall at the beginning of the year, we had 40 basis points of credit loss taken on our preliminary budget. We just think as we sit here today with the volatility, removing all credit loss from our guidance didn’t make sense.
Craig Mailman
Okay. No, that’s helpful. And then just maybe moving on to the transaction market. I know you guys are slowing things down a bit, and you highlighted some of the moving and fundamentals, which are strongly clear, there’s a little bit of moving the underlying fundamentals. I’m just kind of curious, as you guys have looked back at kind of cycles in your markets and your asset types. It just seems like kind of As and Bs this cycle have really compressed from a cap rate perspective.
And I’m just curious, do you think that, that puts your assets at more risk for kind of spreads to blow out here, maybe more than people have thought? Or do you feel like the rent growth that you have baked in maybe insulates you a bit, just kind of big picture thoughts?
William Crooker
Yes. Thanks, Craig. I mean, I think the rent growth certainly insulates us a bit. When we think about our portfolio, we are in a lot of markets, not some — some primary markets, some secondary markets. When we think about how our assets fit within those submarkets. We’re really happy with how we constructed the portfolio and our assets generally in the markets they operate in, outperform those particular markets. So we really like our portfolio. We’re seeing strong fundamentals. We think the rent growth, as I said, will insulate us from some of that. And it’s not just what we’re seeing today in the portfolio in terms of what we delivered this quarter. But as we mentioned in the prepared remarks, I mean, leasing 45% of our projected leasing 6 million square feet out of approximately $13 million for next year at 27% cash rollover leasing spreads, I mean that’s pretty strong fundamentals. So we’re really excited where the portfolio is today.
Craig Mailman
And it seems like when the gateway markets really got sub-4, sub-3 in some markets, some of that capital kind of migrated to some of the secondary markets where there’s better opportunity. Are you guys still seeing that in the kind of the competitive landscape there? Or some of that capital kind of pulled back a bit?
William Crooker
Yes. Similar to last quarter, the transaction market is pretty quiet right now. So it’s hard for me to say whether it’s pulled back a bit or not. I mean there’s just — the market in general is in a price discovery mode here. We continue to evaluate transactions and bid on transactions, but at pricing that we view as extremely attractive and on a positive leverage basis. And so for those — for a number of reasons, the transaction market overall is quiet. So it’s hard for me to answer that question directly.
Craig Mailman
I guess maybe you guys are still a little bit active in the disposition market. Are you seeing less NDA signed, less people kind of just showing up to put final bids in, what’s your experience been in the last 6 months relative to maybe a year ago?
William Crooker
Yes. I mean that market is also price discovery. We are executing some transactions. But we’re not like a lot of investors in today’s market. We’re not a distressed seller. So because the market is in price discovery, we did reduce our disposition volume this year because of the market fundamentals today.
Operator
Our next question comes from Blaine Heck with Wells Fargo.
Blaine Heck
Bill, just following up on the transaction market. Just wanted to ask how much you think pricing has changed since the beginning of the year in general? And then more specifically, have you seen any markets or building types or even lease durations that have changed significantly more than others?
William Crooker
Yes. From the beginning of the year, cap rates have certainly expanded. Last quarter, we mentioned cap rates, we’re seeing 25 to 75 basis points increase in cap rates, depending on the characteristics of the transaction, including lease term mark-to-market, geographies, et cetera. I would say today, we’re seeing 50 to 100 basis points of cap rate expansion from that time period. And that’s — I mean, the primary driver of that is increased cost of capital for buyers. 10 years at — or a little bit north of 4%. And as I said, transaction characteristics really drive some of that cap rate expansion.
Blaine Heck
Okay. That’s helpful. Thanks for the additional disclosure on 2023 leasing. I guess, how should we think about that in the context of same-store growth for next year? Is the cash rent spreads, as you pointed out, seem to be almost double what you guys have done this year. I guess if occupancy holds up and lease spreads are consistent, is it feasible that you guys could see an acceleration in same-store growth for next year, not asking for guidance, but just directionally?
William Crooker
Yes. There’s a lot of factors and components of same-store. One is average occupancy. We had some average occupancy increases in our same-store pool this year. Another component is credit loss. As Matts said, we have not experienced any credit loss this year. As we budget at the beginning of the year, we always bake in some credit loss. And then lastly, the big driver is the leasing spread. So as you know, the leasing spreads are almost double what they are this year. That’s going to be a key driver, and we’re not giving same-store guidance today for next year. But when you look at all those components, you can pencil out some pretty strong same-store growth for next year.
Blaine Heck
Okay. That’s helpful. Last one for me. Are there any markets that you guys have a presence in? I know you guys are very geographically diversified, but any markets that are or could be challenged due to oversupply?
William Crooker
I mean there are — there’s one market that we’re seeing some additional supply come online, and that’s Kansas City market. We have a small amount of exposure to that market. No material near-term lease rolls. But generally, the portfolio is holding up quite well. So if I was to point to any one market, that’s probably what I’d point to, but we feel really good about where the portfolio is today.
Operator
Our next question comes from Dave Rodgers with Baird.
David Rodgers
Matt, I wanted to follow up on that line of questioning about 2023. I think that’s new and renewal leasing, so kind of the total leasing plan. I think as a third quarter, you had spreads of 19% and 9% for new and renewal next year’s kind of 27% blended. Do you have that on a breakout basis, so we could kind of even do apples-to-apples on new versus renewal and see how those are trending?
Matts Pinard
Yes, absolutely. And you’re referencing the 6 million square feet associated 2023 at the 27% cash leasing spreads. As you’d expect, about 90% of that leasing is renewal leasing. Given the strength of the industrial market, tenants continue to engage the convenience space well in advance at least maturity. In terms of leasing spreads, the 90% is roughly 20% on renewal, but the remaining 10%, the new leasing, we have a handful of leases there. Those spreads are in and around 70% to the positive.
David Rodgers
Appreciate the added detail there. And then maybe on the acquisitions, Bill, maybe this is for you. You still have a pretty large pipeline, I think it was like $2.7 billion that you’re underwriting looking at. It looked like in the third quarter, you had a little bit more of a value-add bent that allowed you to get those returns. You’re talking about stabilized about 200 basis points better or so or 150 better than going in depending. But I guess maybe the question is, do you have a more targeted value-add strategy? Is that pipeline full of assets where you can do shorter-term lease roll get the returns faster, still deploy capital, but kind of goose those returns a bit more?
William Crooker
We certainly like the value-add transactions. As you noted, it went from 5.4 in place and we’re going to stabilize that at what we’re looking at today at the 6.6, and generally, our market rent growth assumptions have been — we’ve been outperforming those over the years. We look across all these terms, look at value add. We’ve just been a little bit more successful in the value-add lately, and you certainly like those assets. The $2.7 billion pipeline a fair amount of assets. That pipeline, I think, got up to around $4 billion at one point. Historically, we closed about 10% of that pipeline, and it’s a dynamic pipeline. Obviously, those numbers are a lot lower today.
And given the uncertainty with the debt capital markets, our underwriting is a little bit more conservative, and we’re trying to find the most attractive opportunities of that pipeline.
Operator
Our next question comes from Vince Tibone with Green Street.
Vince Tibone
On the occupancy side, are there any material no move-outs in ’23, we should be aware of? And just how long do you think occupancy could remain in this remarkable 98%, 99% range?
William Crooker
No large move-outs that we should note. When we’ve had those move-outs in the past, we’ve communicated to the market well in advance of lease rolls. So if there is anything material, we will make sure to communicate it to the market. How long occupancy levels can stay where they are? It’s a really good question. Demand continues to be there for industrial. There is a fair amount of supply coming online, circa 3.5%, 4%. Where that supply is coming online is — it’s focused on some key markets but really spread across the U.S.
When we think about our portfolio and where our buildings fit in their respective submarkets, we like how those — how our buildings and our portfolio matches up against the new supply. So new supply will obviously impact occupancy. But then after that, there’s not a lot of new supply starting now. So when you think about absorbing that new supply and then the next stage, we feel like the fundamentals are going to be continue to be really strong. And there’s incremental demand drivers above just GDP for industrial.
E-commerce continues to be a demand driver. We’re starting to see and hear from tenants near-shoring is a demand driver as well as where inventory levels are. So net-net, occupancy level is high, we think it can remain pretty high for the — for at least the near to medium term.
Vince Tibone
No. That’s all really helpful color. And then just with releasing spreads accelerating, are you having profitability with some of your tenants or more pushback around these much higher cash rents, especially in this environment, I’m curious to see how those conversations are trending? Or you think potentially retention could tick down here as you’re pushing rate more successfully?
William Crooker
Yes. Retention has ticked down this year, but those are — part of the reason is rate, and we’ve been backfilling those spaces pretty quickly. Our relationships with our tenants, and we refer to them as customers internally is strong. The buildings that are coming to market or the buildings that are coming up for lease renewal, those buildings are in markets where both sides have a pretty good understanding of where market rent is. So it’s not an adverse or contagious — or a tough negotiation between us and our customers.
Operator
Our next question comes from Mike Mueller with JPMorgan.
Michael Mueller
Two questions here. First, on the ’23 leasing spreads, Matts, do you have the GAAP equivalent for that 27%? And the second question is, where do you see your 10-year debt cost today? And then just over a multiyear period, do you think that industrial cap rates can be below your debt cost?
Matts Pinard
Mike, thanks for the question. I don’t have the GAAP equivalent on hand. What I can say is the rental escalators associated with that 6 million square feet that we’ve done for 2023 in and around the 3% range, just to kind of give you a sense. In terms of — if we were to originate 10-year debt today, it’s in the 6% area. I’d note that we did fund our private placement notes, which were the last time that we originated long-term debt as a 175 basis points cheaper. So there’s been a pretty material move in the cost of long-term debt.
But with that being said, I do want to point us back to the July debt transaction that we did, part of the rationale a strategic reason for that debt transaction was to take care of near-term maturities. We don’t have any material maturities year-end 2024, and we have minimal balances on the revolver. So our need for long-term debt as we look at 2023 is effectively zero as we sit here today.
William Crooker
And Mike, I’ll take the last one in terms of our thoughts where cap rates can stabilize as it relates to stabilized 10-year debt rates. Over a long period of time, if you’re thinking about a lease with a 10-year lease as compared to 10-year debt rates, you’re going to need positive leverage in that situation. And a lot of the discussions of negative leverage come with shorter-term leases or leases that have a strong mark-to-market opportunity, so effectively stabilize above the cost of debt.
Operator
Our next question comes from Wendy Ma with Evercore.
Wendy Ma
So given your updated guidance, for . We know that 4Q acquisition could be minimal. But given that you still have a big acquisition plan for different pipelines. So should we assume like given the current market uncertainty, should we assume you put acquisitions currently on hold? Should we assume that this will continue through like early 2023? And also, and also what circumstance will you like consider to revise your external growth plan?
William Crooker
I would just — I’ll pass it over to Matts to kind of walk through how we’re positioned to take advantage of some opportunities in the future. But before I do that, as I said, we are in a price discovery phase that’s continued through the summer. And so with bid-ask spreads being so wide, it’s tough to forecast when the acquisition market is going to open up, which is why we dropped our acquisition volume with the low end of that range being effectively what we’ve acquired to date. And maybe, Matts, you can walk through kind of what we have from a capacity and cash flow standpoint.
Matts Pinard
Absolutely. We’re really well positioned to grow cash flow without incremental capital. The balance sheet is defensively positioned, leverage is where we want it at the low end of our range. Going back to that debt transaction, again, minimal debt maturities and significant amount of liquidity. We don’t have to raise long-term debt, and we’re not interested in issuing equity in this market. Cash for growth is expected to sustain at these levels.
We’re retaining between $75 million to $80 million of free cash flow after dividends every year, and we have the ability to recycle capital opportunistically. So long story short, we’re very well capitalized to take advantage of investment opportunities that make sense. We anticipate attractive investment opportunities next year, and we aren’t necessarily relying on incremental capital.
Wendy Ma
Okay. Great. And my second question is, do you have any specific tenants that on the watch list or you have concerns about?
Matts Pinard
I’ll take this one as well. We read the same headlines, but the headlines are not consistent with what we’re experiencing called boots on the ground across our portfolio. No material increase in our watch list at all. And again, I just want to reiterate, we have not experienced any credit loss through today for this year.
Operator
Our next question comes from James Allen Villard with Ladenburg Thalmann.
James Villard
Yes. Just to kind of follow up on previous questions. Is the 5% same-store NOI, the new normal kind of — in kind of what you’re seeing in place rents versus the market? And is that number sustainable kind of on the long run? Or do you — or could it possibly go up even more, just kind of as in the world we live in today?
William Crooker
Yes. Thanks for the question. I would say we’re really happy where same-store is coming in this year. There’s a lot of components with respect to same-store including average downtimes, average occupancy, rollover rents, which we’ve noted and talked about on the call today being — taken care of 45% of our rents next year at 27% rollover as well as tenant credit and credit loss. We haven’t incurred any credit loss this year.
Next year, as we budget, we typically budget for some sort of credit loss. So as you think about all those components, I mean we’re really happy where things stand today, and we’ll give formal same-store guidance in our February call.
Operator
[Operator Instructions]. Our next question comes from Michael Carroll with RBC Capital Markets.
Michael Carroll
I wanted to touch on the leasing spreads. I mean with renewal spreads at about 20%, and I believe if I heard you correctly saying that the new spreads was about 70%. Can you provide some color on why the new leasing spreads are so high? I guess, what’s going on with that number?
William Crooker
Yes, it was — I mean, there’s 5 leases that represented the 70% for next year. Obviously, the weighting of the leasing spreads next year so far are more highly weighted, 90% weighted to renewals. And that’s normal if you’re leasing so far in advance. It’s going to be more renewal leasing than new leasing. It’s just really a mix of what’s rolling in the markets where they’re rolling.
Michael Carroll
So with the new spreads at 70%, is there something unique with those buildings? Or I guess, what markets are they in? I mean were there is a lot of downtime, so the prior rent was not representative of what the new rent is? It just seems like a fairly sizable number.
William Crooker
Yes. There’s not — it’s not a lot of downtime. I think they ranged from 70%. It was one that was 30%, 70% and a couple in the 80s. It was just strong demand for the warehouses. We had one lease that was expected to roll next year. I think in May and we leased it 2 months earlier for a 70% roll up, and that was a big chunk of the space in the new leasing. It really is just strong demand for those buildings.
Michael Carroll
And is there certain markets that those buildings were in? I mean, were they in like kind of some of those coastal California type markets?
William Crooker
One was in Longmont, one was in Portland and one was in Burlington, 2 are in Portland, and one was in Burlington.
Michael Carroll
Okay. And I think last quarter, Bill, I think in the Q&A, you mentioned that the mark-to-market within your entire portfolio was about 15%. And do you have an updated number now? I mean, is it closer to 20% kind of reflecting your current renewal spreads? I guess, where is that number standing at today?
William Crooker
I did say that, and I tried to correct it later on in the call, we don’t give the mark-to-market on the entire portfolio. I think there’s a mix with our peers of who gives it and who does not. We personally — I personally view the mark-to-market as a number that’s helpful and indicative but not as informative as what’s rolling in this year and next year. And if you think about where the trend is and what we’re experiencing today, the renewal rents are doubling so far for next year. New rents are much higher than they are next year. So it’s certainly an acceleration of what — where we can mark our leases to market from this year to next year, what we’re experiencing right now.
Michael Carroll
Okay. Great. And then just last one for me. I mean how long do you think we’ll be in this price discovery mode. I mean do we need to see interest rates kind of stabilize before cap rates for industrial append start to kind of stabilize? I guess, how long does that typically take?
William Crooker
Yes, it’s a really good question. If you ask me in July, I thought things were going to stabilize in the fourth quarter and then we saw that CPI print in September and then the Fed lifted the rates I think more than what the market expected. So typically, there’s a 6- to 9-month lag with a material increase in rates to where it starts to impact cap rates. Part of the lag is you’ve got 1031 buyers that are in the market that hold the pricing up for a period of time. And then it takes a little bit of time for seller expectations to change. this market, it’s a little different from now because a lot of the 1031 buyers are gone. They’re already through their capital. And I think sellers are understanding where the market has changed.
So what I think is going to open up the market is the Fed saying where they’re going to stop raising rates, and then that will help the banks lend a little bit more and then that should up the market. So I can’t give you a timeframe of that, but that’s what we’re looking for.
Operator
[Operator Instructions]. Our next question comes from [indiscernible] with Bank of America.
Unidentified Analyst
Following up on the leasing side, have the spreads you have been achieving, are they relatively even across your more core versus secondary market locations?
William Crooker
We — so for this year, there’s a large number of square feet. We’ve got about 9 million square feet — so it’s pretty representative across the portfolio in next year, so far, it’s 6 million. So I think it’s fair to say it’s pretty representative on a portfolio basis.
Unidentified Analyst
Okay. And I just wanted to ask you about your G&A. For several years, you’ve been able to improve this and while you scale the business. This year, in particular, there’s been big improvement, whether you’re looking at it based on NOI or revenues. Can you talk about how you’ve managed to control these costs as your business moves away from that single tenant exposure and becomes more operationally intensive?
William Crooker
Yes. We’ve messaged for years, the platform is scalable, and we’ve continued to make improvements there. We also continue to invest in the business and invest in initiatives that are going to pay dividends in the future. We believe G&A scalability, we can scale it even further as we grow the business and grow the portfolio.
Operator
There are no further questions at this time. I would now like to turn the floor back over to Bill for closing comments.
William Crooker
I just want to say thank you all for joining the call today. We look forward to seeing you all soon at some of the upcoming conferences, and have a great weekend. Thank you, everyone.
Operator
This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
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