Rodney Diehl: Yes. So that’s right. The space that you’re referring to is in the low-rise of that building and it’s the former Zillow/Trulia space. So we’ve had some activity on it. We’ve had better activity on a couple of floors up top. In fact, we just completed a full floor of spec suites up on the 11th floor, which is getting excellent response from the market. So we expect to get that leased up quickly. The balance of the portfolio, I mean earlier on the call, the 680 Folsom availability was mentioned, that’s the 200,000 square feet. We just got that space back. Technically today is the first day we have it as a vacant space. However, we’ve been marketing it for some time and we’ve had activity on that. We’ve been trading paper with various groups.
There’s another tenant that we’re chasing right now. So that — so we’re getting good looks. We’re getting our shots at seeing these deals. I would say that we’ve had more activity on the North market. So I’d say our Embarcadero Center property, frankly is getting a little bit more attention than some of the South market stuff is. Just I think that’s just the nature of where the demand is coming from, more the traditional companies tended to be attracted to Embarcadero Center, whereas tech is still focused more south of the market. And there is some space that is on the sublease market at Salesforce Tower that Salesforce has and they’ve been marketing it and it’s getting good looks as well. So I mean, there are groups out there. So I’m very confident that we’re going to keep that space leased up.
Operator: Thank you. And I show our next question comes from the line of Vikram Malholtra from Mizuho. Please go ahead.
Vikram Malhotra: Thanks for taking the question. Just two quick ones. One, just, I guess, Mike, I just wanted to clarify in the — what you outlined for the guidance adjustments, do you mean just sort of where the curve has shifted overall? Or were you actually baking in sort of some sort of rate cuts in your — in your guidance? And then secondly, I guess, just in terms of achieving that occupancy uptick in the second half, is sort of the 1Q leasing run rate, do you also anticipate that to move up just given where expirations are? Thanks.
Michael LaBelle: So on the interest-rate expectation, we have included an additional, a rate cut in our expectations late in the year. And I think if that rate cut does not occur, it won’t have a meaningful impact on what our guidance range is because of when it is within the year. So we’ll just have to see what happens with the inflation numbers on the Fed as we kind of think about where rates might be going both later this year and next year. But I don’t think if there’s no cuts this year, it’s going to have a significant impact to our guidance. What was the other question was on leasing?
Rodney Diehl: Occupancy.
Michael LaBelle: I didn’t — can you restate the question?
Vikram Malhotra: Q1 run rate assumption?
Michael LaBelle: So the occupancy for Q1 was down a little bit and for Q2, it’s going to be down a little bit again because of the two expirations that Doug talked about, which is the expiration at 680 Folsom and Times Square Tower. And then we don’t have significant expirations of individual size in the back half of the year. And that’s when many of the signed leases that we already have done, which Doug talked about, which is, I think it’s 815,000 square feet for the company, of which over 650,000 square feet is in 2024, plus the LOIs that we have will start to take hold. And so that’s what gives us confidence that the occupancy will stabilize after the second quarter and hopefully start to move northward after that. That’s our expectation.
Operator: Thank you. And our next question comes from the line of Omotayo Okusanya from Deutsche Bank. Please go ahead.
Omotayo Okusanya: Hi, yes. Good morning everyone. I just wanted to go back to the guidance for the year. So if we take first quarter, we take the midpoint of the second quarter, you’re about at 344, midpoint of guidance, the 704. We’re talking about rates higher for longer, occupancy probably picking up in fourth quarter or so of the year. So could you just help us walk us through the acceleration of earnings in the back half? What the drivers of that will be?
Michael LaBelle: So, there’s really three, I think impacts that are going to help us in the third and fourth quarter. The first is we expect NOI from the portfolio to be up, and we expect that to occur because the occupancy improvement that we have talked about. So I would expect that both third and fourth quarter will show higher portfolio NOI than what we have in the first and second quarter. The other is G&A. So G&A is seasonally high in the first and second quarter because of just the timing of the vesting schedules as well as taxes that are paid on payroll. So that’s a pretty meaningful move between quarters, it could be between $0.05 and $0.07 lower in the third quarter and the fourth quarter from where it is today. And then the last piece is we do expect to have interest income be lower than it is today as we fund our development pipeline.
And that is offset a little bit by capitalized interest. But I see our interest expense as being slightly lower next quarter and then stable and our interest income will drop a little bit sequentially by quarter as we spend on our development pipeline. So those are really the three things that are driving the improvement in our FFO in the third and fourth quarter to achieve the midpoint of the guidance range.
Operator: Thank you. And I show our next question comes from the line of Michael Griffin from Citi. Please go ahead.
Michael Griffin: Great, thanks. Just maybe on the debt side, Owen, I’d be curious to get your thoughts. I mean, are banks willing to lend on new office development projects yet. And if so, what kind of interest rate you think today would lend at? And what kind of yield would you need to have to justify undertaking the development?
