Michael Lewis: Great. Thank you. My first question is about Jerry, you talk about the dividend cut or maybe the question is really about cash flow, right? The new dividend payment looks to me it’s about 60% of your third quarter CAD. Even at the old payment, it only would have been 76%. So your stocks traded at a 15% yield with 60% coverage just spot at 3Q. So the question is the market with a yield that high and coverage that appears comfortable, the market’s not really buying this. And so is the dividend cut — is it as simple as you save $28 million and you have good uses for that on development and delevering? Or is this an expectation that cash flow is still going down and you got ahead of this coverage getting really tight to be?
Jerry Sweeney: Hey, Michael, now let me be real clear. Our cash flow is strong. The coverage is that we’ve talked about are in very good shape. This was a deliberate review that the Board and management went through and taking a look at really the — as I touched on in my comments, really the volatility and unpredictability of the capital markets. The fundamental reality is there’s a lot of economic uncertainty out there. There’s a lot of geopolitical risk. No one’s sure where interest rates are going to go. No one’s sure what the state of the labor market is. So I think the Board took a hard look at our forward projections and in thinking about a reset dividend wanted to set it at a level that provided bulletproof coverages for us, sent a strong signal that we recognized the volatility, the uncontrollability in those capital markets, but also set a firm foundation point where that revised dividend covered our taxable income, distribution requirements, and really set a firm foundation point for that dividend to hopefully grow as the capital market showed more sign of stability or predictability and our cash flows continued to increase.
So if anything, it was a signal that recognized the realities of the current capital markets, not a harbinger that it was concerned about where our cash flows were going. So I want to be very clear on that.
Michael Lewis: Okay. Great. And then second for me, these eight properties with high vacancy on Page 40 of supplemental 300 Delaware stands out. But is there any detail — specific detail on the plan for that asset or for anything else on that list that you think might be helpful to know in terms of addressing these properties, which are driving a large part of the vacancy in the portfolio?
Jerry Sweeney: Yes, great question. Thanks, Michael. Look, we laid out those eight properties and as you know, three of them — actually four of them really there two is really kind of properties in Austin. So I think in Austin the real focus for us is accelerating leasing. So we have a number of really talented leasing folks down there, great top executives. They’ve all gotten involved very even more so than the past in really sourcing deals. We’ve reached out to brokers for incentive programs. And in one of those properties, frankly, that’s very, very well located. We are taking a look at whether there’s a residential conversion opportunity on a couple of those — couple of the buildings in that complex, but Austin is primarily pedal to the metal.
Let’s get through this moment of disequilibrium in the marketplace as tenants return to the marketplace for space. Let’s make sure these buildings look great. They’re positioned well. They’re well-staffed, great talent at the ground level, and let’s get them leased up. So that’s really the focus there. We take a look at a 1676 International. As you know, that building has been a great redevelopment for us. The market has not performed as well as we hoped it would, and that property along with some of our other assets in the Northern Virginia market, we view as sale candidates in the near-term. 401 Plymouth, George touched on in one of the other questions, which is we just had a tenant give us space back there that’s top of the market. The game plan there is to release that space.
Cira Center that’s on there because of the give back this quarter, but that space is all part of our converting this building from purely office to the lower nine floors being life science. So, as you can see there, we’ve even pre-leased 22,000 square feet of that space. 300 Delaware is an interesting dilemma for us. It’s a property in Downtown Wilmington. We really haven’t leased any space in that building for a number of years because the lease terms just aren’t economic. The floor plate sizes are around 15,000 square feet plus or minus. The existing zoning provides for residential and office use. So that is a building we’re looking at a potential residential conversion and a tenant move-out plan over the next several years. That would be a project either Brandywine could undertake or simply sell it based upon the conversion plan that we put in place.
But that’s a project we do not anticipate investing any significant additional capital into. Was that helpful? Did I answer your question?
Michael Lewis: Yes, no, that’s helpful. I appreciate it. Thank you.
Operator: Our next question comes from the line of Dylan Burzinski with Green Street Advisors.
Dylan Burzinski: Good morning, guys. Thanks for taking the question. Just curious, you mentioned several times bridge financing or seller financing or whatever you want to call it, but just curious, what would be the LTV that you guys would be willing to offer in this sort of structure?
Jerry Sweeney: Yes. I think in that framework, anywhere kind of between 50% and 75% depending upon the project, the quality of the buyer, and our convertibility capacity to the extent the loan doesn’t perform, so. But that seems to be the pretty safe range, Dylan, somewhere in that 50% to 75% range.
Dylan Burzinski: Okay. That’s helpful. And then I guess, just touching on the expense side of things, you mentioned lower expenses in the quarter. I guess just how should we be thinking about that looking into 2024, should we expect to continue to receive relief on this front or should there we return to a more normalized environment heading into 2024?
George Johnstone: Yes, Dylan, it’s George. I mean I think probably a little bit of a continuation. We continue to aggressively appeal and challenge real estate tax assessments. So I do think we maybe have some opportunities still there. Utilities, our teams have just done a good job at kind of managing that that consumption load. And some of our negotiated contracts on forward purchase agreements have benefited the portfolio. We’ve got a little bit of seasonality coming up for the fourth quarter, so we’ll start to get into the potential for snow removal that hasn’t existed thus far, but year-over-year, I would think there’s certainly a lot of focus on our property management teams to maintain if not reduce expenses across the Board.
Jerry Sweeney: Yes. Dylan, just to add on, I mean we’re doing the same thing on the construction side. I mean the reality is, if you think about it, overall leasing velocity is down not just in Brandywine, but in the market. A lot of general contractors are looking for work, so we’re able to kind of get better buying power given the size of our asset base here particularly in Philadelphia, to drive better GC fees, better general conditions, do some forward procurement programs. So really one of the real green shoots this year has been our ability to really maintain very strong control over our capital spend, which I think really helps drive those net effective rents up. So I think combination of the really great work our operating teams do every day to make sure that we ever improve our margins in a challenging environment, that we expect to be a continual trend line.
