Q4 2024 Highwoods Properties Inc Earnings Call
Good morning. Thank you for attending today's high once properties Q4, 'twenty 'twenty four earnings call. My name is to me and I will be your moderator for today's call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end if you would like to ask a question. Please press star.
Speaker Change: One on your telephone keypad I would now like to pass the conference over to your host Brendon Maiorana Chief Financial Officer, You May proceed.
Brendon Maiorana: Thank you operator, and good morning, everyone. Joining me on the call. This morning are Ted Klink, our Chief Executive Officer, and Brian Leary, Our Chief operating officer for your convenience today's prepared remarks have been posted on the web. If you have not received yesterday's earnings release or supplemental.
Speaker Change: They are both available on the investors section of our website at <unk> Dot com.
Speaker Change: On today's call. Our review will include non-GAAP measures such as F. F O N O Y and EBIT there the release and supplemental include a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures forward looking statements made during today's call are subject to risks and then.
Speaker Change: Certainties. These risks and uncertainties are discussed at length in our press releases as well as our SEC filings as you know actual events and results can differ materially from these forward looking statements and the company does not undertake a duty to update any forward looking statements with that I'll turn the call over.
Speaker Change: Ted.
Ted Klink: Thanks, Brendan and good morning, everyone.
Ted Klink: Before I talk about our exceptional fourth quarter and full year of leasing I'd like to start by outlining the significant growth potential we have over the next few years.
Ted Klink: First we have significant upside potential in our core operating portfolio.
Ted Klink: For several years, we've been transparent about large customer move outs that we knew would be occurring in late 2024 and early 2025.
Ted Klink: These are now upon us, which has as anticipated driven occupancy well below stabilized levels and resulted in temporarily low NOI.
Ted Klink: <unk> and cash flow.
Ted Klink: Importantly, the bulk of this vacancy is concentrated in four core buildings, some of which have already been back filled but where occupancy hasnt, yet commenced and others, where we have good prospect activity.
Ted Klink: Compared to our 2025 outlook. These four buildings have over $25 million of stabilized annual NOI upside and even more meaningful growth in annual cash flow.
Ted Klink: Second we have significant upside potential as our development pipeline continues to deliver and stabilize.
We have two development properties that have delivered but haven't yet stabilized.
Lynn Lake three in Raleigh, and granted parks six in Dallas.
Ted Klink: But where leasing activity is robust with 142000 square feet signed in the last quarter alone and strong prospects for additional space.
Ted Klink: The annual NOI upside upon stabilization of these two high quality development projects compared to our 2025 outlook is nearly $10 million.
Importantly, because we're no longer capitalizing any costs on these projects all NOI growth will drop to the Bottomline SFO and cash flow.
Ted Klink: Plus we have two additional developments twenty-three springs in Uptown, Dallas and Midtown East in Tampa is west shore Bvd that will deliver this year and are projected to generate over $20 million of annual NOI upon stabilization.
Ted Klink: Third we have significant upside potential from future investments.
Ted Klink: We believe there will be compelling acquisition opportunities during 2025.
Ted Klink: As you know from last Monday's press release in late 2024, and early 2025, we proactively raised $215 million with noncore dispositions and equity issued through our ATM program to bolster our dry powder.
We expect to deploy this capital during the year by acquiring high quality assets with strong cash flows and meaningful long term upside.
Ted Klink: None of this potential future growth is included in our initial 2025 <unk> outlook.
Ted Klink: Given the embedded upside within our operating portfolio and development pipeline combined with meaningful dry powder, we couldn't be more excited about the next few years.
Ted Klink: Now turning to our fourth quarter and full year 2020 for performance.
Ted Klink: The fourth quarter was a repeat of the first three quarters of 2024.
Ted Klink: Solid financial results, coupled with very strong leasing activity.
Ted Klink: Which sets the foundation for growth in late 2025 and beyond.
Ted Klink: In the fourth quarter, we delivered <unk> 85 per share.
In line with our outlook, including a penny of noncash write offs that were not in our outlook.
Ted Klink: For the full year <unk> was $3 61 per share.
Ted Klink: Almost 2% higher than the midpoint of our original outlook provided last February despite selling over $100 million of noncore properties and interest rates that remained higher than expected.
Ted Klink: Neither of which were included in our original outlook.
Ted Klink: Our robust leasing volume and economics, where the stand out of the fourth quarter and full year.
Ted Klink: During the quarter, we leased one 3 million square feet of second Gen space.
Ted Klink: Including 370000 square feet of new leases, plus nearly 100000 square feet of net expansions.
Ted Klink: For the year, our second Gen New leasing volume was one 6 million square feet.
Ted Klink: Our highest volume in 10 years.
Ted Klink: Our total second Gen leasing volume for the year was 4 million square feet and our weighted average lease term was seven five years.
Ted Klink: The highest in our history.
Ted Klink: This strong volume.
Ted Klink: Combined with lengthy terms demonstrates the businesses are willing to commit to their in office workplace strategy. If they can secure commute worthy buildings and bvd locations with financially strong landlords.
Ted Klink: To this end during the year, we signed second Gen leases that equate to total cash rent.
Ted Klink: $1 billion.
Ted Klink: Which is another record for high Woods.
Ted Klink: And we signed an additional $140 million of total rents through first Gen deals.
Ted Klink: During the fourth quarter, we renewed our two largest remaining 2026 explorations both in Raleigh for over 200000 square feet combined.
Ted Klink: Securing these two renewals leaves us with limited large roll in 2026.
Ted Klink: Starting with the second half of 2025 extending over the next several years, our rollover exposure is very manageable with very few known move outs.
Ted Klink: This optimistic outlook, coupled with the significant volume of signed leases in 2024.
Not yet commenced.
Ted Klink: It gives us confidence that we'll see meaningful growth in occupancy NOI and cash flow as we get into late 2025 and beyond.
Ted Klink: Turning to investments.
Ted Klink: Last week, we announced the sale of $166 million of noncore properties in Tampa and Raleigh.
Ted Klink: These include 170000 square foot Noncore office building in North Raleigh for $21 4 million in the fourth quarter and three noncore buildings, comprising 616000 square feet in Tampa for $145 million in early February.
Ted Klink: These properties, which were 88% occupied and 36 years old on average sold for a combined cash cap rate of seven 8% on projected 2025 NOI.
Ted Klink: These disposition proceeds are an attractive source of capital as we look to recycle into new investments over time.
Ted Klink: We're targeting up to $150 million of additional non core dispositions this year.
Ted Klink: Any future sales arent likely to close until after mid year.
Ted Klink: Not included in our <unk> outlook.
Ted Klink: In December we acquired fee simple title to the land underneath our century center assets in Atlanta.
Ted Klink: Which consist of one 7 million square feet of office and 13 acres of developable land.
Ted Klink: Fee simple ownership provides us long term flexibility and certainty.
Ted Klink: We believe there will be attractive acquisition opportunities over the next few years for well capitalized owners such as highways.
Ted Klink: As always we'll be disciplined allocators of shareholder capital.
Ted Klink: You can expect any new investments will improve our overall portfolio quality.
Ted Klink: Enhance our long term growth rate and.
Ted Klink: And strengthen our cash flows.
Ted Klink: Our development pipeline is now 59% leased.
Ted Klink: Up from 49% last quarter as we signed 161000 square feet of first Gen leases.
Ted Klink: We're seeing the most activity at our two completed but not yet stabilized properties within like three in Raleigh, and granted park six in Dallas.
Ted Klink: These properties, which are still one year away from projected stabilization or a combined 52% leased with healthy prospect activity.
Ted Klink: Our initial 2025 F. F O outlook is $3 26 to $3 44 per share.
Ted Klink: The outlook includes the approximate 10 cents per share short term dilutive effect from the $166 million of recent asset sales.
Ted Klink: The $52 million of equity raised in late 2024.
Ted Klink: And the purchase of the ground at century Center.
Ted Klink: Our same property cash NOI growth outlook is negative 2% to negative 4%.
Ted Klink: We believe 2025 will be a temporary trough before resuming our trajectory of consistent same store growth.
Speaker Change: Before I turn the call over to Brian I want to further highlight why we're so optimistic about the next few years at <unk>.
Speaker Change: First the long term outlook for our markets and Bvd is as strong as you know there is limited new supply expected to be added over the next few years and high quality blocks of space are being absorbed.
Speaker Change: Our well located high quality portfolio.
Speaker Change: Our reputation as a best in class, operator, and strong financial sponsorship positions us to gain market share.
Speaker Change: Second the volume of leasing completed over the last several quarters combined with limited rollover in late 2025 through 2027.
Speaker Change: Has us positioned to grow occupancy NOI and cash flow as we move into late 2025 and thereafter.
Speaker Change: Third we have several.
Speaker Change: Core assets with significant NOI growth potential, where we have signed leases that don't that won't contribute meaningfully to 2025 or prospect activity is strong.
Speaker Change: Fourth our development pipeline will deliver and stabilize over the next few years, which we project will result in 30 plus million dollars of NOI above our 2025 outlook.
Speaker Change: And finally, our balance sheet is well positioned to take advantage of attractive acquisition opportunities. We believe will materialize this year.
Speaker Change: To wrap up we're not only up optimistic because of our markets portfolio and balance sheet, but also because of our engaged hard working and talented teammates who drive our consistent success.
Speaker Change: I would like to thank our entire hi, Wood's team for their commitment and tireless dedication.
Speaker Change: It is their effort that has positioned us so well for the future Brian.
Speaker Change: Thank you Ted and good morning, everyone.
Speaker Change: Office market fundamentals continue to strengthen with office employment, reaching an all time high and the return to office movement in full swing.
Speaker Change: Nationally CBRE reported improvement in the U S office market in the fourth quarter.
Speaker Change: The first decline in the overall vacancy rate in three years.
Speaker Change: For the second consecutive quarter net absorption outpace that construction completions with.
Speaker Change: With demand for high quality space in prime locations remaining strong.
Speaker Change: Notably sublease availability also decreased as space was either reoccupied by sub lessors.
Speaker Change: Or absorbed directly in the broader market.
Speaker Change: CBRE also highlighted a 24% quarter over quarter, and 23% year over year increase in national leasing activity.
Speaker Change: And the highest quarterly net absorption total in three years.
Speaker Change: Leasing momentum remained strong across high woods markets.
Speaker Change: For the first time since the pandemic.
Speaker Change: Positive net absorption for the year surpassed 1 million square feet.
Speaker Change: The under construction development pipeline has significantly diminished with few anticipated starts in 2025.
Speaker Change: The current construction pipeline represents approximately 1% of existing inventory and is 63% pre leased on average while the inventory continues to shrink due to conversions and redevelopments.
Speaker Change: Within our own portfolio and for the full year, we signed 4 million square feet of second generation leases.
Speaker Change: Including one 6 million square feet of new deals and.
Speaker Change: And 302000 square feet of expansions.
Speaker Change: The weighted average lease term reached a record high seven and a half years.
Speaker Change: We ended the year at 87, 1% occupancy over 700 basis points higher than our markets and including signed but not yet commenced leases on vacant space. We ended the year, 89.9% lease.
Speaker Change: As expected year end occupancy dip due to known fourth quarter explorations. However, the strong leasing activity throughout 2024 positions us for occupancy growth following our long telegraph trough in the first half of 2025.
Ted Klink: As Ted noted previously.
Ted Klink: Total rental revenue from second generation leases signed was the highest in our history.
Ted Klink: Which combined with signed first generation leases represents over $1.1 billion and is 140% of our current annualized lease revenue.
This robust leasing activity provides a strong foundation for the future.
Ted Klink: Focusing on the quarter, we signed 106 second generation leases totaling one 3 million square feet.
Ted Klink: <unk> 370000 square feet of new leases.
Ted Klink: This body of work represented nearly $300 million in contracted revenue.
Ted Klink: 58% of the fourth quarter's deal volume were either new leases or expansions.
Ted Klink: Being proactive with regard to our forward lease role proved successful in the fourth quarter with major renewals of our largest remaining 2025 and 2026 explorations totaling approximately 300000 square feet in Nashville and Raleigh.
Ted Klink: Following our long communicated occupancy low ahead in 2025, we have only one exploration larger than 100000 square feet through year end 2027.
Ted Klink: On the lease economics front.
Ted Klink: We achieved net effective rents, which include all leasing costs and concessions that were three 6% higher than the previous five quarter average.
Ted Klink: Raleigh lateral leasing volume in the fourth quarter with 285000 square feet of second generation leases.
Ted Klink: Signed in an average nine year term and 17, 6% GAAP rent growth.
Ted Klink: Additionally, first generation leasing at our Glen Lake three development drove the assets lease rate from 34% to 56%.
Speaker Change: Well Ted highlighted our one 6 million square feet development pipelines positive leasing momentum.
Speaker Change: Core to our portfolios commute worthy success.
Speaker Change: As our commitment to being a redevelopment as well.
Speaker Change: The significant redevelopment are high <unk> of our core portfolio is yielding attractive returns.
Speaker Change: And we are highly focused on deploying this playbook, when and where needed.
Speaker Change: To this end.
Speaker Change: The highway Tyson, we completed in Atlanta, and Nashville at two alliance and the former activity building, respectively has driven a substantial relapse of those buildings.
Speaker Change: Our planned Highwood Tyzine, if symphony place in downtown Nashville is being well received by the market.
Speaker Change: Symphony place remains an iconic tower on the Nashville Skyline is.
Speaker Change: It is built to the highest architectural standards and is the beneficiary of a location with unparalleled regional access and connectivity to all of that makes Nashville, such a compelling destination for talented organizations and individuals.
Speaker Change: When our redevelopment is completed in the next year, Stephanie place will feature a collection of curated and talent supportive amenities unmatched in the market. We are encouraged by the early interest in the building and prospect tours to date.
From an operation standpoint, 2025 will be a year of unyielding focus on organic growth within the portfolio by leaning in to gain market share in occupancy via our competitive capital advantage.
Speaker Change: Both in lease economics, and the ability to reinvest and redevelop our BBB portfolio.
Speaker Change: Increased occupancy is the clearest pathway for organically growing NOI and driving meaningful <unk> growth.
Speaker Change: We closed the year with strong leasing momentum.
Speaker Change: Record setting lease revenue.
Speaker Change: And a solid foundation for growth.
Speaker Change: Our strategic investments in our redevelopment and proactive leasing initiatives continue to differentiate <unk> as a leading office owner and operator in our markets.
Speaker Change: With competitive development pipelines at historic lows and market vacancy, peaking.
Speaker Change: We're well positioned to capitalize on market opportunities through our resilient portfolio.
Speaker Change: Ongoing redevelopment efforts strong balance sheet.
Speaker Change: And our owner operator advantage.
Speaker Change: For all of these reasons, we believe the outlook for high which is bright as we drive long term value for our stakeholders.
Brendan: I will now turn the call over to Brendan.
Speaker Change: Thanks, Brian in the fourth quarter, we posted a net loss of $3 $7 million or <unk> <unk> per share, which included a $24 $6 million impairment charge for $6 25, Liberty Avenue, formerly known as EQT Plaza in Pittsburgh.
Speaker Change: <unk> was $92 $2 million or <unk> 85 per share, which does not include the impairment, but does include a $1 million noncash write off of pre development costs. Excluding this write off which was not factored into our F. O outlook provided in October our <unk> would have been 86.
Speaker Change: Per share at the high end of our range.
Speaker Change: Our balance sheet is in excellent shape, we have no debt maturities until a $200 million floating rate term loan matures in the second quarter of 2026, and we have no other maturities until 2027.
Speaker Change: During the quarter, we proactively raised just over $50 million of equity through our ATM program at an average gross price of $32 71 per share. In addition, we sold $166 million of noncore properties in late 2024, and early 2025, including 140 <unk>.
Speaker Change: $5 million that closed after year end.
Speaker Change: We also invested a little over $50 million to consolidate fee simple ownership of the ground underneath our century center properties in Atlanta.
Speaker Change: Each of these items create dry powder for the future with the $145 million of proceeds received from our noncore asset sales in Tampa last week today, we have no balance outstanding on our $750 million revolving line of credit, giving us ample liquidity for future investment and reducing <unk>.
Speaker Change: Our pro forma debt to EBITDA ratio to six one times from six three times at year end.
Speaker Change: A few items of note about our recent noncore dispositions the $166 million combined sale price equates to a cash cap rate of seven 8% on projected 2025, NOI and a GAAP cap rates slightly above 8%. The immediate use of proceeds was to reduce the balance on our revolving line.
Speaker Change: Of credit, which is temporarily dilutive to near term <unk> pending redeployment into new investments.
Speaker Change: Fight the short term <unk> drag we view these proceeds as an efficient source of capital as the asset sold or older vintage capital intensive properties and non bvd locations. Following these dispositions, we expect our cash flows and long term growth rates to be higher while improving the long term resiliency.
Speaker Change: And the quality of our portfolio.
Speaker Change: Now onto our 2025 outlook, our same property cash NOI outlook is minus 2% to minus 4% included in our same property pool or for buildings that are projected to be significantly under occupied with a sharp decline in NOI during 2025.
Speaker Change: Our historical practice is to keep buildings in the same property pool, unless there is a change of use or redevelopment that is so extensive that we moved the building to our development page and the stop.
Speaker Change: The effect of keeping these four properties in our same store pool and the sale of the Tampa assets has reduced our 2025 same property growth projection by approximately 500 basis points. As a reminder, we have grown same property cash NOI for 13 consecutive years without taking office buildings out of service.
And we believe 2025 will be a temporary trough before resuming our trajectory of consistent same store growth.
Speaker Change: Our average occupancy outlook is 85% to 86, 5%.
Speaker Change: To NOI, we expect occupancy will dip during the first half of the year given the well telegraphed move outs. Ted mentioned occupancy is projected to decrease around 200 basis points from <unk> 24 to <unk>.
Speaker Change: <unk> 25, and then grow later in the year.
Speaker Change: While we don't provide a year end occupancy range and our outlook somewhere between 86% to 87% by year end as a likely landing spot for our portfolio. Excluding the recently sold properties in Tampa and the four significantly under occupied buildings I just mentioned our average occupancy for 2020.
Speaker Change: Five would be approximately 350 basis points higher.
Speaker Change: As Ted mentioned, our <unk> range is $3 26 to $3 44 per share.
Speaker Change: I'll start with Q4 'twenty four as a base for modeling 2025, we reported <unk> 85 per share of <unk> or <unk> 86 per share excluding the noncash pre development write offs.
Speaker Change: Annualized in Q4, and adjusting for traditionally higher G&A in the first quarter due to the expensing of annual equity grants that Q4 run rate would imply <unk> per share for 2025 to be in the low three forties as noted in the release the recent dispositions century center ground.
Speaker Change: <unk> acquisition and equity issuances are expected to have an approximate <unk> 10 dilutive impact on our 2025 <unk>.
Speaker Change: The vast majority of the announced dispositions occurred subsequent to year end only a modest amount of the dilution was baked into the fourth quarter of 2024 to say it. Another way. These items will reduce the annualized fourth quarter run rate by approximately seven to eight per share.
Speaker Change: NOI is expected to be lower particularly in the first half of the year due to the occupancy projected I mentioned earlier, but this should be offset by some other income items projected to occur at various points throughout the year, putting all of those items together would get us to the midpoint of our 2025 outlook.
Speaker Change: To be clear, we expect occupancy NOI and <unk> to start low and improve later in 2025, which would place us on a strong trajectory as we exit the year and move on to 2026.
Speaker Change: In summary, as Ted mentioned at the beginning of his remarks, we have significant growth potential from three primary areas first we have significant organic growth potential through the lease up of high quality core operating properties in strong bvd locations.
Speaker Change: Our development pipeline is projected to drive meaningful NOI and <unk> growth with limited highway funding left before completion.
Speaker Change: Third and finally, our balance sheet is in excellent shape, and well positioned to deploy capital and that doesn't account for the strong fundamental backdrop, we see across our core Bebe DS for all of these reasons, we're optimistic about the next several years for Highwood <unk>.
Speaker Change: Operator, we are now ready for questions.
Speaker Change: Thank you we will now begin the Q&A session. If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason at all you would like to move that question. Please press star followed by two again to ask a question. Please press star one.
Speaker Change: Winder, if youre using a speakerphone. Please remember to pick up your handset before asking your question. The first comes from Michael Griffin, Let's see you May proceed.
Speaker Change: Great. Thanks appreciate the color on the leasing outlook seems like its pretty optimistic.
Speaker Change: Heading into 2025, just wanted to get maybe some more color and context on kind of those larger vacancies whether its at EQT alliance to properties in Nashville.
Speaker Change: Does your leasing expectations for twenty-five assume any of those properties have leases executed there and then would you really need to see that to continue to push the positive net absorption within the portfolio.
Speaker Change: Yeah.
Speaker Change: Michael Hey, it's Brendan I'll start and then I'll turn it over to Ted and Brian to fill in in terms of color.
Speaker Change: So really there's really not any leasing that is included in the occupancy outlook in the what we call kind of the four core assets that have significant vacancies. So that's alliance Center Symphony place Westwood, South and Cool Springs, five so theres nothing really in there there is.
Speaker Change: There is some there are some leases that have completed already that will come in late in the year, but the largest of those.
Speaker Change: The large law firm deal that we did down at Alliance center that isn't scheduled to commence until 2026.
Speaker Change: Yeah. Thanks, Brendan let me just add a little color it's Ted.
Speaker Change: So on each of these core for US we are recalling it down.
Speaker Change: Down in Buckhead, Brendan alluded to it it's the former novella space and as you all know we backfill the vast majority of that.
Speaker Change: But it doesn't commence until 2026, so that's sort of you know.
Speaker Change: It's sort of largely buttoned up.
Speaker Change: But it doesn't again, we're not going to see it come through our financials until 2026. The next one would be the former activity building cool Springs five.
Speaker Change: So on that building, we signed 35% of the building, we got strong prospects for another 30% or so and then we've got enough tire kickers that are out there for the remaining space. So we think we're making really good progress on that one as well and a lot of that won't be some of it will come through this year, but a lot of that is next year as well.
Speaker Change: <unk> south.
Speaker Change: 128000 square foot building.
Speaker Change: Customer just moved out a few weeks ago early January I guess spaces in great condition that building shows incredibly well, we've got one sizeable prospect as well as multiple other small ones. So if you add them all up it's well more than the entire building. So while it's still early we've got really good prospect <unk>.
Speaker Change: <unk> there and then the final one is symphony place it's our.
Speaker Change: Building down downtown Nashville, bass Berry moved out early February so just a couple of weeks ago, It's 214000 square feet.
And then as you know Pinnacle bank will be moving out in the third quarter of this year.
Speaker Change: <unk> plans are done now.
Speaker Change: Now the best berries moved out we're gonna start swinging hammers in the next month or so.
Speaker Change: When we're done and Brian alluded to it in some of his prepared remarks, it's going to be one of the most of the <unk> buildings and all the Nashville, We've got a great.
Speaker Change: Our basis in the assets, we can be a great value proposition for customers tour activity is picking up so were encouraged there as well.
Speaker Change: Yeah.
Ted Klink: Thanks, Ted appreciate all the color there.
Brendon Maiorana: I think it's encouraging you guys are looking to pivot to offense in Andes acquisition opportunity set that you highlighted can you give us a sense of the type of buildings that you are targeting for potential acquisitions or are they more stabilized you know could there be a value add component. If you use your highway type thing secret sauce, and then as it relates to.
Speaker Change: Two kind of proceeds to fund these acquisitions, obviously, you've got the the disbursed proceeds in the equity I guess my my question, there and it's probably better for Brendan, but why not maybe execute on more non core sales as opposed to issuing equity just given where you all are trading relative to.
Brendon Maiorana: Anybody.
Speaker Change: Hey, Michael I'll start off and then turn it over to Brendan on the funding and so on the acquisition side. I think you are you're probably aware we look at everything that's out there from core to opportunistic.
Speaker Change: We always just looked at the risk adjusted returns and how comfortable are we on where whatever wherever on the spectrum.
Speaker Change: Acquisition may be so we've seen some high quality buildings trade in the last few months. We've also seen some have gotten pulled because.
Speaker Change: Sellers haven't.
Speaker Change: <unk> the pricing expectations, but we think.
Speaker Change: We think theres going to be opportunities out there, whether it be core or opportunistic that meet our expectations on that so we're pretty excited about it.
Speaker Change: Is gonna be similar playbook, we use coming out of the GSC, where we bought a lot of stabilized assets as well as some opportunistic assets, we're looking to improve the quality of the portfolio improve our growth rate and improve our cash flows.
Michael Griffin: And then Michael just.
Speaker Change: In terms of the.
Michael Griffin: Capital that we'd be comfortable investing in.
Michael Griffin: And why not disposition proceeds versus versus equity.
Michael Griffin: We looked at it from a balanced approach I think we had good visibility in terms of the sale that closed that we announced last week. So that's good proceeds, but then I think we also felt like given the opportunity set that was in front of us it made sense to create a little bit more dry powder late in the year and so we went ahead and did that and I think.
Michael Griffin: We think there'll be likely opportunities as we said and we think that source of capital will be attractive relative to the use of those proceeds hopefully later in the year.
Michael Griffin: Great. That's it for me thanks for the time.
Speaker Change: Thank you the following comes from Ronald Camden with Morgan Stanley You May proceed.
Ronald Camden: Hey, just a couple quick ones. So on the just the impairment charge.
Ronald Camden: Take it all at 625, just sort of curious any updated thinking of a sale for that asset at what the business plan is going to be.
Ronald Camden: For the next.
Ronald Camden: Couple of years. Thanks.
Ronald Camden: Hey, Ron I really no update.
You know, we announced we're bringing out of Pittsburgh few.
Ronald Camden: Few years ago and capital right about the same time capital market sort of locked up and then so.
Ronald Camden: EQT is a noncore asset for us and our long term desire is to get out of Pittsburgh.
Ronald Camden: But as you know financing for big assets in secondary markets is still very difficult. So it's still on our disposal list at the right time, but we're going to be patient.
Great and then just my second one I know the focus is on leasing this year both on the core four as well as some of the development asset I'm just wondering if any sort of changes in strategy. This year, whether it's more T. I's are going after smaller users like any sort of big picture changes to the leasing.
Ronald Camden: To do this year versus last year. Thanks.
Speaker Change: No not really I mean, I think we're going to take what we can get out there obviously, we've got a very robust spec.
Speaker Change: Spec suite program, that's been very successful for us for many years that chases the small customers that want to cut down the time. It is the time to get in their space. So that's been a great.
Speaker Change: Program for us, but our sweet spot continues to be that $5 to 15000 square foot user or the last couple of years last couple of quarters. We have seen the return of larger prospects companies that are ready to make their decisions. If they can get a really good buildings. So we've had a lot of success. The last five quarters, we've had robust leasing.
Speaker Change: And we're just hoping thats going to continue and certainly don't think there's any reason why it won't I think.
Speaker Change: At the end of the day, we did have towards the end of last year, we had a couple of big ones because it got done right before the end of the year, which maybe brought up our stance a little bit but our pipeline remains robust tour activity is good and we expect this year to be similar to the last few years.
Speaker Change: Great. That's it for me thank you.
Speaker Change: Thank you. Our next question comes from Rob Stevenson with Janney Montgomery You May proceed.
Rob Stevenson: Hey, good morning, guys.
Rob Stevenson: The federal governments, 2.5% of your revenue can you just talk about what the biggest leases are there.
Rob Stevenson: If any of that stuff is in the departments that are on the Trump musket list at this point.
Ted Klink: Hey, Rob it's Ted.
Rob Stevenson: So.
Speaker Change: It's pretty diverse exposure, we have it's two 5% to 6% I think youll see in the Sop, it's pretty diverse in that its 20 different agencies over 30 leases.
Speaker Change: The largest is the CDC and I don't know if thats on the list or not but.
Speaker Change: We're actually encouraged by we think it's primarily essential agencies and Theres a lot of primary you know a lot of firm term as well. So we don't have a ton of exposure from our perspective, those 30, plus leases are spread out across five different markets. So it's just not a lot of exposure overall.
Speaker Change: Okay. That's helpful. And then can you talk about the core markets, where you're expecting the best relative operating performance in 'twenty, five and which markets are likely to be a little bit more challenged at least relatively in 'twenty five in your view.
Speaker Change: And specifically regarding leasing is that what you're talking about.
Speaker Change: Operating fundamentals.
Speaker Change: Pricing.
Speaker Change: <unk> et cetera, However, you want to count the operating fundamentals just what's what's having the likely to have the best traction in 'twenty, five and which.
Speaker Change: More stuck in neutral and 25 in your view.
Speaker Change: Sure I think as we look at our markets I think all of them are on a recovery phase I think there will be different trajectories of the recovery, but you know Nashville, if you look at suburban Nashville in particular has been a really good market for us.
Speaker Change: Downtown I think supplied finally.
Speaker Change: Finally caught up.
Speaker Change: Supplied finally caught up with demand if you will so downtown has been a little softer although with what we talked about with Symphony place, we're starting to see more activity.
Speaker Change: <unk> has been a really good market for us it just stays for not a lot of construction going on.
Speaker Change: And then you Gotta go drill down to <unk>.
Speaker Change: Specific submarkets I think as well as important Dallas, if you look at Dallas. The headlines are Dallas is pretty soft, but if you drill down to the Uptown submarket and even the activity we're seeing.
Speaker Change: Up in Plano and Frisco, it's very very robust I think you saw the movement. The activity. We had granted park six in the last quarter, we've really materially moved the needle on occupancy on that development project. So Dallas is actually hanging in there as well we're seeing good at good activity in Tampa made a lot of leasing and tap.
Speaker Change: Which enabled us to sell the bay care portfolio.
Speaker Change: At a great time orlando's hanging in there I think Raleigh has been a little bit on the softer side, but that's turning around a little bit the last couple of months.
Speaker Change: So in general I think again all of our markets are seeing the recovery is just going to be different trajectories.
Speaker Change: Alright, that's extremely helpful. And then last one for me can you talk about what drove the land purchase decision at century Center was that an option that you needed to exercise and.
Speaker Change: What does this purchase allow you to do going forward development wise that you wouldn't have been able to do otherwise.
Speaker Change: Sure. So the century center really enables.
Speaker Change: It enables us to consolidate our ownership of the land and the buildings Rob. It wasn't we didn't have an option we had to exercise. This is something we we went to the landowner and proactively.
Speaker Change: <unk> was able to effectuate. It just gives us a lot of long term flexibility and also create some liquidity for those assets. We've done a lot of great leasing there in the last year or so so we create a lot of value and we think buying the land enables us to unlock.
Speaker Change: Some of that value. We've created it also got there's 13 acres of undeveloped undeveloped land that can be monetized. So we just thought with the leasing we've done the value. We've created this was a good time to do that.
Speaker Change: Okay. That's helpful. Thanks, guys I appreciate the time.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question comes from Michael Lewis The Truest Securities You May proceed.
Michael Lewis: Thank you so Ted might have already answered. This I apologize if you did but to get from 97% at the end of the year occupancy.
Michael Lewis: 200 basis points to 85.
Michael Lewis: By my math, that's very soon he was about 90 bps.
Michael Lewis: That remaining 110 bps are there any large.
Let's face it in that or is it just kind of a.
Michael Lewis: Confluence of smaller move outs.
Brendan Maiorana: There are so Michael Yeah, it's Brendan there are some so there's the building.
Brendan Maiorana: Full building user in Nashville at the Westwood South building. So that's about 125000 square feet. So that's sizable you've got Pinnacle bank that we mentioned so.
Brendan Maiorana: That one is a sizable.
Brendan Maiorana: Exploration as well and then there's a handful that are.
Brendan Maiorana: A little bit more modest in size, but are there. So overall I think what we've got out of the remaining $2 7 million square feet of expirations.
Brendan Maiorana: Cumulatively theres about $2 million of that that will vague.
Brendan Maiorana: Vacate we have roughly $1 1 million square feet of leases that are signed.
Brendan Maiorana: That will commence.
Brendan Maiorana: But some of which are on currently occupied space that will move out some of which is on the vacant space that will move in.
Brendan Maiorana: And then we've got the remainder is a combination of some spec leasing that we have in the forecast.
Brendan Maiorana: And then you also have about 100000 square feet of net drag from the sale of the Tampa assets that hit after year end. So all of that kind of gets you to a point where by the end of the year. We do think that at year end occupancy will be higher than the average for the year, but we'll probably be somewhere.
Brendan Maiorana: Between kind of call it probably somewhere between 86%, 87% by year end, if things go well.
Brendan Maiorana: Yeah.
Brendan Maiorana: Gotcha.
Brendan Maiorana: And then this question is I guess, a capex question at its core but the dividend wasn't covered by this quarter.
Brendan Maiorana: I realize when you do a lot of leasing you have elevated capex and I see that I see the growth path too.
Brendan Maiorana: Cover that dividend between now and then.
Brendan Maiorana: Is the capex going to be choppy, so we see bumpy quarters like <unk> like.
Brendan Maiorana: This quarter was a little elevated or how's the capex spend.
Trend.
Brendan Maiorana: Yeah, It's a good question.
Brendan Maiorana: Capex is likely to be elevated and to be clear. It was elevated in 2024 as well just from all of the leasing that we did and for the year still had good positive dividend coverage and I would say over the past.
Brendan Maiorana: Four years really since the onset of the pandemic I think our cumulative dividend coverage has been north of $200 million. So that is going to bounce around but I think as you get to a point, where you're building occupancy and you're signing leases you get the capital spend before you get the corresponding increase in rents and NOI and that just takes time to.
Brendan Maiorana: Play through so I think to your point the coverage is going to be kind of lumpy from quarter to quarter and even for a year or two but that's a good problem to have is thats going to bring us to stabilization and drive significantly higher NOI and cash flow as we reach those stabilized levels.
Brendan Maiorana: Okay. Thanks, and then just one more for me the press release.
Brendan Maiorana: Development start is unlikely this year could you just maybe talk about how far above market. The rest of it has to be just started development.
Brendan Maiorana: Give us kind of a sense I assume it's fair that if you can't.
Brendan Maiorana: Nathan off work almost nobody probably can so how far away are we from the math working out.
Brendan Maiorana: Development.
Brendan Maiorana: Yeah look I do think it varies depending on the product you want high rise product versus maybe a suburban with surface parked its going to vary but it's you know is a 20% to 30% ish, probably depending and we are we are going through those exercises right now with a few different.
Brendan Maiorana: Proposals, we have Michael I'd actually did scare off a couple of the last several months that we chase they didn't like the numbers.
Brendan Maiorana: But that we are presenting so but at the same time, it's encouraging to see we still do have inquiries and we're working on a few build to suits, but it is clearly a top of the market type rent and that's really not weigh different even the last several years, probably seven or eight years ago, any new building youre going to deliver top of the market rents that spread just maybe a little.
Brendan Maiorana: A bit wider today than.
Brendan Maiorana: Than it had been the last several years.
Brendan Maiorana: Okay. Thank you.
Brendan Maiorana: Thank you.
Brendan Maiorana: Yeah.
Speaker Change: The next question comes from Nick Tell me with Baird You May proceed.
Speaker Change: Hey, good morning, maybe starting off with either Brian or Ted in the first half of last year, you guys are a little bit more positive on the amount of leasing you're doing but he thought I was going to kind of taper off into year end, obviously kind of outperformed that today I guess looking at your pipeline today is it.
Speaker Change: Is it logical or do you guys have confidence that you can continue to sort of trend on the new leasing front I like the 400000 square feet of new leasing per quarter.
Speaker Change: You have the right sort of vacancies or where the tenant is today to kind of.
Speaker Change: It's tailored towards that demand.
Speaker Change: Well just in general I mean look I'm I'm optimistic about 2025, I mean, if you think about the confluence of return to work is continuing which is going to help leasing we got a favorable economic backdrop.
Continuing job and population growth and migration continues in our markets.
Speaker Change: Little new construction there.
Speaker Change: Sublease space.
Speaker Change: Is it starting to come down vacancy rates are up and Theres still a bifurcation in the market between the haves and have nots and we've been able to gain market share against some of the have not buildings that are still being sort of stuck in the mud there.
Speaker Change: I think when you put all that together I'm still optimistic that we're going to.
Speaker Change: See very positive leasing we've got some big holes, we got to fill so we still got a lot of work to do but.
Speaker Change: Talking to our leasing agents the tour activity is good.
Speaker Change: Our space was show well and so I think you know I'm very optimistic for 2025.
Speaker Change: That's helpful. Nick Hey, Brendan I just wanted to.
Nick: Yes, sorry, I just wanted to add onto that.
Speaker Change: Just to be clear I mean, we don't have 400000 square feet of new are one 6 million square feet of new in our business plan. So if we were able to achieve replicate kind of 'twenty 'twenty four levels into 2025, that's going to drive occupancy significantly higher than kind of what we were talking about for a year end and likely would translate into it.
Speaker Change: Faster trajectory in 2026, then what we've got contemplated so we assumed in our business plan is a moderation of the leasing but I think to Ted's point I think we're cautiously optimistic that things could go.
Speaker Change: That things could go well in 2025 similar to what they did last year.
Speaker Change: Yeah.
No that's very helpful and maybe following up I guess kind of a two parter on just kind of a historic demand or retention with that you guys kind of outlined note only one tenant over 100000 square feet expiring here through 2006 now it.
Speaker Change: It looks like the historic retention rate you have on kind of the smaller tenants and then also of the $1 1 million square feet that side, yet to commence do you have like kind of a rough weighted average of windows leases are expected to commence.
Speaker Change: Yeah.
Speaker Change: Yeah, Nick So it's our if you look over kind of time.
Speaker Change: The rough renewal percentage doesn't.
Speaker Change: <unk> doesn't change too much between large medium and small users were at around somewhere between $60 to 65% now obviously the closer you get to exploration and you haven't renewed them. Early then the likelihood of renewal goes down.
Speaker Change: As we mentioned we signed our two largest remaining 2026 explorations. This quarter. Those are now out of the 26 numbers, but those have been renewed.
Speaker Change: So that kind of gives you some color I do think 2025 happens to be a particularly low retention year for us and we think 2026, well happened to be a particularly high retention year for us just given the uniqueness of the rent roll in those two particular years.
Speaker Change: So I think we're optimistic that we'll see that occupancy build kind of late this year and then into 2026 that will continue.
Speaker Change: And then in terms of the $1 1 million square feet when that moves in it is more back half weighted than it is in the front half of the year, which is why we think that the occupancy will be low in the beginning part of the year and then build back kind of late in the year.
Speaker Change: That's it for me thank you.
Thank you.
Speaker Change: The next question comes from Tom Catherwood with <unk> you May proceed.
Speaker Change: Thanks, and good morning, everybody maybe following up on an earlier question on acquisitions.
Speaker Change: Obviously, it's impossible to handicap timing, but can you touch on either the markets or Submarkets, where you see the most potential and any chance we could see you do a discounted note purchase to get access to target properties.
Ted Klink: Hey, Tom it's Ted.
Ted Klink: Yeah look obviously, we're looking at opportunities in all of our markets.
Ted Klink: In particular, I think we're starting to see a few more opportunities and maybe Dallas.
Ted Klink: Charlotte Nashville their stuff.
Ted Klink: And then really we're seeing stuff in several of our markets.
So we're optimistic not everything that comes out it's been sell and that's why I sort of.
Ted Klink: I'm hesitating, a little bit we've had a few deals that are sold in the last several months that you all have seen but there's also been several that have been pulled because the seller hasn't met expectations. Every time, a seller sees a low cap rate deal trade. They immediately think their asset is going to trade at that same low cap rate, so, but there's still so there's still a bit.
Ted Klink: <unk> spread to a certain degree on a lot of assets. So we will see I think that's going to just continue to get better over the next over the next couple of quarters. So look we strongly prefer to acquire assets.
Ted Klink: Versus the debt, but if we can see a clear pathway to acquiring the assets then we would absolutely do that but just to acquire note.
Ted Klink: For short term, it's not really not something we wanted to do.
Ted Klink: Understood.
Speaker Change: Second question for me, maybe Brian you had mentioned in your prepared remarks targeting improved lease economics and this showed up in higher net effective rents in <unk>, where you having the most success on the negotiation front is it pulling back on free rent and T is or are you also able to push face rents and.
Ted Klink: Markets.
Speaker Change: Hey, Tom Thanks for the question I think to your last point, we are seeing the ability to push face rents are customers that are committed to being back in the office are kind of using that calculus of what the rent is compared to having their people back into the productivity, they're getting so I think they are.
Ted Klink: <unk>.
Ted Klink: Underwriting those rents, but I do believe kind of the concession curve is flattening as vacancy has kind of peaked across the markets now we're not here to spike the football or anything like that yet because every deal is takes longer every deal is getting negotiated details that we hadn't thought of before.
Ted Klink: But I do think as Ted mentioned, there's kind of the core markets.
Ted Klink: Suburban and urban Nashville, Tampa, Dallas, Charlotte, we've seen the ability to grow those even Atlanta is in Buckhead is being able to push rents.
Ted Klink: But it's all different customers have different levels of knobs that theyre more focused on some.
Ted Klink: Need to finance their ti and fit up more so through the lease others have cash and don't want to necessarily do that.
Ted Klink: Great I appreciate the answers thanks, everyone.
Ted Klink: Thank you.
Ted Klink: Our phone question comes from Dalian Brzezinski with Green Street, you May proceed.
Dalian Brzezinski: Hi, guys. Thanks for taking the question.
Just wanted to sort of appreciate you guys, providing where you think you'll end this year in terms of the occupancy obviously not trying to get too much into 2026, but as you sort of think about the trajectory of that recovery and occupancy pairing that with your comment Brendan about having are likely having a strong amount of retention next year.
Dalian Brzezinski: There are no pairing that with continuation of strong new leasing activity.
Dalian Brzezinski: Area, where you can sort of get back to the high <unk> low 90 sometime in 2026 or just how should we be sort of thinking about how quickly you guys are able to recoup some of the lost occupancy this year given the known move outs.
Dalian Brzezinski: Yeah.
Dalian Brzezinski: Yes.
Dalian Brzezinski: It's a good question and I don't want to get like you said I don't want to get pinned down and provide 2026 guidance, but I do think that that 26, I think the back half of 'twenty, five and 26 setup and even really twenty-seven look favorable for US now that's all dependent on kind of the economic back.
Dalian Brzezinski: Drop in assuming leasing activity holds up well across our markets, which we don't have any indication to think that it wouldn't but certainly a couple of years is a long time period, but I think if that's the case I think we ought to see or I think we're well positioned to drive occupancy pretty steadily higher as we go forward.
Dalian Brzezinski: The next two two and a half years.
Speaker Change: Great I appreciate that detail and then I guess.
Dalian Brzezinski: If you go over to the disposition.
Speaker Change: Typically the Tampa, one obviously great execution there.
Speaker Change: Given your comments around sort of being older assets with.
Speaker Change: Deferred capex call. It I mean can you kind of talk about that the buyers of those assets.
Speaker Change: The case and that things are sort of tightening or you guys sort of see this as more one off.
Speaker Change: Maybe I know with money that like the going in yield and without sort of pain, what is optically a tighter cap rate than one might expect given the characteristics of these assets.
Speaker Change: Sure. So on specifically with respect to the Tampa assets that was actually sold to a user Dylan.
Speaker Change: And it's a user that own some.
Their main campus is immediately adjacent to this was an expansion really for them for growth for the next multiple years, but in general for the last couple of years as we've probably talked about the buyer pool for a lot of what we're selling is largely non institutional high net worth or other private syndicator type buyers buyers that.
Speaker Change: They've got great banking relationships or can close all cash, but I will tell you everything we're here and talking to brokers and seeing out in the market a little bit there is a lot of institutional capital sitting on the sidelines today and we're starting to see and hear that theyre starting to chase some of the higher quality office buildings. So I would expect as we.
Speaker Change: We move through 2025, there'll be more institutional capital.
Speaker Change: Chasing opportunities.
Speaker Change: Perfect.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Yep.
Speaker Change: Thank you.
Speaker Change: Our following question comes from the young Coupe with Westleigh, though you May proceed.
Speaker Change: Yeah.
Speaker Change: Yes.
Brendan Maiorana: Great. Thank you just a couple quick ones from me Brendan.
Speaker Change: Brendan or are there any termination fees or landfill gains baked into guidance.
Speaker Change: Young yeah. Thanks for the question there is always a little bit of term fee stuff that we have in there. So I would say nothing thats.
Speaker Change: Particularly unusual there arent any land sale gains included in the in the guidance, but there are some what I would call miscellaneous items that are in there again, we tend to have that stuff kind of every year, so there'll be a little bit episodic by quarter, and maybe a little lumpy, but those are.
Speaker Change: We're all kind of those are all in there, but I would say, it's nothing that is uncommon for us on a full year basis.
Speaker Change: Gotcha, Okay. Thank you for that and just in terms of same store guidance.
Speaker Change: I appreciate the kind of the progression that you've provided on occupancy or what kind of growth in opex, it's baked into the same store outlook.
Speaker Change: Opex on same store is pretty inflationary. So I wouldn't think that there's there's nothing I would say, particularly unusual in the same store outlook with respect to.
Speaker Change: With respect to Opex.
Speaker Change: Tends to track I think obviously the the downdraft in terms of the same store outlook is largely driven by occupancy and the other thing that I'll mention is we guide to cash same store NOI.
Speaker Change: And in that number is low for the reasons that we talked about for this for this year. The positive indicator is it is very rare to have GAAP and our GAAP same property NOI to be higher than cash same property. NOI. You just have a structural disadvantage with first generation leases that are there through development.
Speaker Change: Or acquisition, because those leases don't provide any year over year growth on a GAAP basis, but grow on average for us call. It about two 5% on a cash basis year over year and that's about a third of our portfolio for this year, we actually expect that GAAP same property NOI will be higher than cash same property NOI, which is a good forward.
Speaker Change: Indicator of what future same property NOI growth should be.
Speaker Change: Okay got it okay, and what what's the built in escalator portfolio wide.
Speaker Change: It's around two 5%.
Speaker Change: Got it Okay got it great. Thanks.
Speaker Change: Thank you.
Speaker Change: The following question comes from Vikram Malhotra with Mizuho you May proceed.
Vikram Malhotra: Good morning, Thanks for taking the question.
Speaker Change: I just wanted to go back to sort of the gone for them.
Speaker Change: And the recovery in the second half both for <unk>, but also just the markets you reference activity picking up.
Speaker Change: Can you share, perhaps any large requirements they are perhaps by sector.
Speaker Change: Any public tenants EMEA and I asked because I know there've been a couple of big requirement, that's going to be the economic Association.
Speaker Change: I know you're in touch with it so I just wanted to get a sense of like how.
Speaker Change: How deep is this.
Speaker Change: And large is the pipeline not just for <unk>, but broadly in the market.
Brian Leary: Hey, Vikram, it's Brian I'll take a shot at this one.
Speaker Change: At the end of the year Big Inbounds kind of code named.
Speaker Change: They kind of got quiet I think people are waiting to see what happens with the election, but I think we're seeing now first quarter Nashville Charlotte.
Speaker Change: Particularly you have a number of corporate reload headquarter locations that are looking both urban and suburban so we're receiving inquiries filling out the potential RFP kind of information. So we take that as a positive one.
Speaker Change: And I mean, those are relocations and from outside of the markets maybe from gateway coastal into our markets.
Speaker Change: So we do see that as.
Speaker Change: As a positive move.
Speaker Change: Thanks for the color and then just I guess specifically.
Speaker Change: The underlying I guess NOI in that trajectory.
Speaker Change: You know Brandon I think you will get things, but I just wanted to be clear. So I can move the occupancy I'm, assuming there's margin pressure, especially on the NOI growth through the first half and then you'll be you'll be you were saying you would trough in the second half and then ultimately given the losing the cash flow will pick up in 'twenty six is that correct.
Vikram Malhotra: Yeah, Vikram, that's roughly correct I would say I mean, I think trough from an occupancy standpoint, and that probably flows into <unk> as well is kind of in first half of the year and then I think some some build back as you kind of get later into the year.
Vikram Malhotra: And then from a underlying cash flow perspective that does tend to lag I would say, what's your <unk> trajectory is just given the the spend and then commencement of cash rent. So I think your your view on 26 is correct.
Vikram Malhotra: And then just lastly application.
Vikram Malhotra: Obviously, you've telegraphed all of the known move outs last year did see.
Vikram Malhotra: Anything in 2006, that's maybe sizable even like 50000, plus stats on defense that may be a needle mover due to slight recovery into 2006. Thanks.
Vikram Malhotra: Thanks.
Ted Klink: So vikram as Ted I'll try to take that one.
Speaker Change: No. We've got above 50000, we've really only got.
Speaker Change: For over 50000 in 2026, so really it's it's it's not a lot there and our largest one is a little over 100002 thousand 27, and that's the only one we've got greater than 100000. So really the next two years. When you look at both the size, but also our projection on renewal.
Speaker Change: Versus vacate we think retention is going to be a little bit higher on those larger ones. The next couple of years at least based on everything we know.
Speaker Change: No no today.
Speaker Change: Thank you.
Speaker Change: Our final question comes from Tayo Okusanya.
Speaker Change: Thank you you May proceed.
Hi, yes, good afternoon, everyone.
As you look through all your bvd market curious anything from a regulatory perspective that could potentially impact the bad supply fundamentals.
Speaker Change: Ankles or leasing economics.
Speaker Change: Hey, Tayo, Brian here, let me take a shot at it.
Speaker Change: Thank you for asking that question, that's actually one of the things that we think make our markets and our bvd. So compelling is kind of open for business government friendly low cost right to work markets.
So no if anything.
Speaker Change: Maybe they're even more.
Speaker Change: For business or focused on public private partnerships.
Speaker Change: To drive results economic development than we've seen in the past everything from Nashville the hole.
Speaker Change: The ballot initiative they passed for the first time, a major transportation initiative, that's funded through the taxpayers. That's the first time that happens so youre seeing people leaning in and spending on infrastructure and Nashville are spending billions of dollars in new civic improvements.
Speaker Change: Two other areas like Atlanta, and Charlotte, where the business improvement districts, which yourself testing districts have come together with the support of.
Speaker Change: Their cities.
Speaker Change: Make big public private partnerships happen so.
Speaker Change: We're very very pleased with the work that they're doing and we think it's actually another marker for a differentiating factor for these markets in the <unk>.
Speaker Change: Thank you.
Speaker Change: Thank you there are currently no more questions at this time I will pass it back over to the team for closing remarks.
Speaker Change: Well I want to thank everybody for joining on our call today and thank you for your interest in Hi, Woods and look forward to next quarter, if not if not senior all beforehand. Thank you.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect your line.
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