Brandywine Realty Trust (NYSE:BDN) Q4 2023 Earnings Call Transcript

Brandywine Realty Trust (NYSE:BDN) Q4 2023 Earnings Call Transcript February 1, 2024

Brandywine Realty Trust isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and thank you for standing by. Welcome to the Brandywine Realty Trust Fourth Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Jerry Sweeney, President and CEO. Please go ahead.

Jerry Sweeney: Michelle, thank you very much. Good morning, everyone, and thank you for participating in our fourth quarter 2023 earnings call. On today’s call with me are, George Johnstone our Executive Vice President of Operations; Dan Palazzo, our Senior Vice President and Chief Accounting Officer; and Tom Wirth, our Executive Vice President and Chief Financial Officer. Prior to beginning, certain information that will be discussed during our call may constitute forward-looking statements within the meaning of the federal securities law. Although, we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. For further information on factors that could impact our anticipated results, please reference our press release, as well as our most recent annual and quarterly reports that we filed with the SEC.

First and foremost, we hope that you and yours are well and are looking forward to a successful and ever-improving 2024. During our prepared comments, we’ll briefly review our fourth quarter results and then spend time to outline the key assumptions of our 2024 business plan. After that Dan, Tom, George and I will be available to answer any questions. And looking at 2023, we posted fourth quarter FFO of $0.27 per share and full year FFO of $1.15 per share. Our combined leasing activity for the quarter totaled 550,000 square feet. During the quarter we exited 240,000 square feet of leases, including 66,000 square feet of new leases in our wholly-owned portfolio. In our joint venture portfolios, we achieved 312,000 square feet of lease executions, including 140,000 square feet of new leasing activity.

Our quarterly rental rate mark-to-market was 13.4% on a GAAP basis and 7.5% on a cash basis. Our full year mark-to-market was 13.5% on a GAAP basis, which outperformed our business plan and our full year cash mark-to-market was at 4.8% within our range. We ended the quarter 88% occupied and 89.6% leased, a 100 basis points below our previously announced targets. That occupancy and lease percentage was lower due to two things. We anticipated December move-ins that slid until January. That was about 50 basis points of that change. And the anticipated portfolio sale that we had under agreement did not come to fruition. That was on an underleased portfolio and that impacted our occupancy by 50 basis points. On the other hand, occupancy in our core markets of Philadelphia, CBD, University City, the Pennsylvania suburbs and Austin, which comprised 93% of our NOI or 89% occupied and 91% leased.

In looking just at our PA urban and suburban operations, we are 93% leased. As we highlighted in our supplemental package on page 4, eight of our wholly-owned properties comprise over 50% of our overall vacancy, impacting our occupancy numbers by almost 500 basis points. Plans are well underway to address each of these projects, ranging from accelerated leasing and capital investment programs as well as continuing to explore sale and conversion opportunities. Our 2023 spec revenue was $17.1 million in — at the bottom end of our range. The metric was at the lower end of this range due solely to lower leasing volumes in our Austin Texas operation. The operating portfolio does remain in solid shape. Our forward rollover exposure through 2024 is now an average of 6.4% and through 2026, an average of 6.2%.

Several points to amplify in — green shoots if you will. The increase in physical tours has been very encouraging. Fourth quarter physical tours exceeded third quarter towards by 54%, exceeding our trailing fourth quarter average by 55% or over 200,000 square feet per quarter. And also, our tour activity remains above pre-pandemic levels by 42%. On a wholly-owned basis, 55% of our new leasing activity was a result of a flight to quality. Tenant expansions continue to outweigh tenant contractions and our total leasing pipeline is up for the third consecutive quarter and stands at 4.2 million square feet. That pipeline is broken down between two million square feet in our wholly-owned portfolio, which is up 300,000 square feet from last quarter.

Then we have 2.2 million square feet on our development projects, which is up 150,000 square feet from last quarter. The two million square feet in our existing portfolio pipeline, includes approximately 250,000 square feet in advanced stages of lease negotiations and also about 41% of our operating portfolio and new deal pipeline are prospects looking to move up the quality curve. So while the timeline for lease execution remains more protracted than we would like, tour velocity and the composition of those tours, which as you know is the starting point for the leasing cycle continues to improve. In terms of staging through the portfolio, proposals that we have outstanding are up 200,000 square feet quarter-over-quarter and leases and negotiations were up 170,000 square feet from last quarter.

Turning to the balance sheet. Our year-end net debt-to-EBITDA was 7.5 times, which is up by 0.1 point from the third quarter, primarily due to our delay in anticipated reduction in debt attribution from our unconsolidated joint ventures, asset sales being below our 2023 target and a slight increase in our development and redevelopment spend. As a counterbalance to that, our core EBITDA metric, which excludes joint venture debt attribution and development and redevelopment spend ended the year at 6.3 times within our targeted range. Looking at liquidity. On the liquidity front, controlled capital spending and our refinancing efforts have enabled us to maintain excellent liquidity as we closed out 2023 and look forward to 2024. For 2023, we achieved our goal of having full availability on our $600 million unsecured line of credit.

We also closed the year with approximately $58 million of unrestricted cash on hand. More importantly as noted on page 13 of our SIP based on our 2024 business plan, we expect to have full availability on our line of credit at year-end 2024. During the quarter, we also bought back $10 million of our 2024 unsecured bonds at a slight discount. We did complete $25 million of sales during the quarter. We did end the year about $78 million of sales, which was below our business plan range. While we received good investor interest, the lack of attractive lender financing resulted in pricing levels below our expectations. And given our strong liquidity position, we decided to postpone several sales until market conditions improve. As Tom will touch on our consolidated debt is 96% fixed at a 5.1% rate.

We do continue to assess our options to refinance our 2024 bond maturities. We’re evaluating a secured mortgage financing on several of our properties or an unsecured offering. We expect to finalize that plan in the next 90 days and our 2024 business plan does assume this refinancing occurs by 6/30 2024 at a mid-8% interest rate. As noted on page 38 of our SIP, we do have four operating joint ventures with loan maturities during the first half of 2024. Our ownership stake in those ventures ranges between 15% to 50%. All of these loans are secured solely by the real estate and are non-recourse with no obligation for either our partner or Brandywine to fund any additional money. That being said, we do believe these ventures present a valuable opportunity as the debt and real estate markets recover.

As such along with our partners, we are engaged in productive conversations with each lender. And while these discussions are progressing slower than we originally anticipated, we do expect the full resolution on each of these ventures within the next 90 to 120 days. And given the nature of those discussions, we still do anticipate our overall joint venture debt attribution will be reduced by over $100 million. Looking at our dividend we closed out the 2023 with full year FFO and CAD payout ratios well covered at 63% and 80% respectively. As we noted in our supplemental package, we did record impairment charges totaling $151 million during the fourth quarter. That wholly-owned impairment charge is really based on several assets located in our D.C. operation, really representing shorter-hold periods which is evidence of our intention to sell those assets as soon as permitted by market conditions.

And then given certainly the unresolved loan renegotiation status on several of our unconsolidated operating joint ventures, we are recognized the impairment on several of those ventures on assets located in Virginia, Maryland and suburban Pennsylvania. Looking at our 2024 business plan. We are providing 2024 guidance with an FFO range of $0.90 to $1 per share with a midpoint of $0.95 per share. The primary drivers of this guidance is additional interest expense equal to $0.15 per share, represents the full impact of refinancing done in 2023 both on our consolidated and our joint ventures and the anticipated refinancing of our $350 million 2024 bonds. We will also with our — two of our residential projects entering the lease-up phase, we will recognize charges against earnings of $0.05 a share during 2024.

That’s really based on as you know as once residential projects are delivered capitalization ceases and we’ll be recognizing those operating carry losses during the lease-up. There were several other items including onetime items in 2023 we don’t expect to occur in 2024, slightly higher G&A expenses offset by additional land sales and other items that comprised the remaining $0.01. And looking at the operating metrics, our 2024 GAAP NOI will approximate 2023 levels. The — our core portfolio year-end occupancy is expected to remain flat year-over-year. We do have several known move-outs during the year. So our average occupancy during 2024 will be slightly below our average occupancy in 2023. Our cash mark-to-market range will be between 0% and 2%.

GAAP market — mark-to-market range will be between 11% and 13%. While the cash range is lower than our 2023 levels, it is driven purely by the regional composition of our projected 2024 leasing activity. Our mark-to-market in CBD and University City and the Pennsylvania suburbs will perform above our business plan range, while Austin will be below that targeted range. We do expect spec revenue will range between $24 million and $25 million which is up 43% from 2023 levels. We are currently $19 million or 79% at the midpoint achieved. That midpoint level is above our historical averages and we believe that puts our operating plan in excellent shape looking at the current year. Occupancy levels of between 87% and 88%. Lease levels will be between 88% and 89%.

Retention will be impacted by a couple of move-outs during the year and we targeted a range — an improvement over 2023, but still in the 51% to 53% range. Same-store cash NOI growth will be 1% to 3%. We anticipate it being between negative 1% and 1% on a GAAP basis. Capital control will remain a key focus point and we anticipate that our capital spend as a percentage of lease revenues will be about 12%, slightly above our 2023 result. Based on increased 2024 leasing activity, the continued development and redevelopment spend, we do project our net debt-to-EBITDA to be in the 7.5x to 7.8x range. We do — the $0.60 per share dividend will represent a 63% payout ratio and a 92% CAD payout ratio at the business plan midpoint. Our business plan does project $80 million to $100 million of sales activities to occur in Q4 with minimal dilution.

And while that CAD ratio is slightly above the 2023 levels, it is well covered particularly as additional development revenue comes online. Looking at some financing, certainly with a more favorable tone to the interest rate financing climate, we do expect investment sales market to improve as the year progresses. As such we do plan to have a number of assets in the market for price discovery and have built $80 million to $100 million of sales into our capital plan, with again as I just mentioned, those sales occurring primarily in the fourth quarter. We are targeting sales in the Met D.C. and Pennsylvania suburban markets. We also anticipate continuing to sell non-core land parcels. In looking at our developments, as noted earlier, our development leasing pipeline stands at 2.2 million square feet.

That’s up 5% from last quarter. While we only executed several leases during the quarter, we did see the pipeline of that — I’m sorry, we did see the status of that pipeline advance. As of now, we have about 120,000 square feet of leasing under early negotiations 800,000 square feet of proposals outstanding, and 240,000 square feet of space undergoing test fits. Tour velocity does continue to pick up. Our objective is certainly to get our prospects across the finish line, while continuing to build that pipeline. We opened 2024 with the commercial components of One Uptown and 3025 JFK delivered. So we do anticipate activity levels to continue to increase. However, given the length of time to complete space plans, obtain permits and then construct the space, our 2024 financial plan does not include any spec revenue coming from these two projects.

To accelerate revenue recognition, we are building one to two floors of spec suites in each building that will be completed by midyear. When we take a look at our total development pipeline from a cost standpoint that pipeline is 31% residential, 41% life science and 28% office. As we noted in the supplemental package, our remaining funding obligation on this entire pipeline is only $11 million. And looking at specific projects 3025 JFK, which is our residential office life science tower, as I mentioned delivered late Q4 2023 on the commercial component we’re currently 15% leased with an active pipeline totaling 770,000 square feet, which is up 88,000 square feet from last quarter, the delivery of the additional residential units continues with a balanced phasing in over the next quarter.

Activity levels remain good, tours are occurring daily, and we currently have 83 leases executed for about 25% of the project, and 73% of those leases have taken occupancy. We do project the residential component of that project will be between 80% and 85% leased by year-end 2024. And looking at 3151 Market our 440,000 square foot life science building. That is again on schedule and on budget. The building is scheduled for delivery in very late Q2 2024. We have a pipeline totaling 357,000 square feet with about 120,000 square feet in early lease negotiations and 90,000 square feet at the proposal stage, so a good advancement of that pipeline in the last quarter. We do continue to seek a construction loan in the 55% loan-to-cost range and expect that to close sometime by mid-year.

Looking at our Texas projects. Uptown ATX Block A construction is also on time and on budget. Our leasing pipeline there includes a mix of prospects ranging from 5,000 to 200,000 square feet. We did commence a floor of spec suites and during the quarter executed a 12,000 square foot lease. We are also proceeding on building out an additional four spec suites. The multifamily component of 341 units will begin phasing in during the third quarter of 2024 and we anticipate that residential component will be 50% leased by the end of 2024. Our next phase of B+labs expansion on the ninth floor is now complete. That is also 100% occupied. We have now shifted focus and commenced construction on the 8th floor of 27,000 square feet and we have three active prospects in the very advanced stages of lease negotiation there as well.

So with that, I’ll now turn the presentation over to Tom to provide an overview of our financial results.

Tom Wirth: Thank you, Jerry, and good morning. Our fourth quarter net loss was $157 million, or $0.91 a share, and our results were impacted by several non-cash impairment charges totaling about $153 million or $0.89, a share. Our fourth quarter FFO totaled $47.2 million or $0.27 per diluted share and our full year FFO totaled $198.3 million or $1.15 per share and was within our range of — $1.15 to $1.17 guidance range. Some general observations regarding the fourth quarter. During the quarter, we had several moving pieces and several variances to highlight. The contribution from our joint ventures was $2.2 million, below we forecast primarily, due to increased costs to commence the lease-up of our multifamily project at Schuylkill Yards, and a onetime charge at one of our joint venture properties that’s nonrecurring.

Interest expense was $600,000 below, we forecast primarily due to some higher capitalized interest. We also forecasted two vacant land parcel sales to generate $1 million of earnings of — one of those land parcels has been delayed to 2024 close. On impairments, as Jerry mentioned, we recorded impairments on both our wholly-owned properties and joint ventures. The wholly-owned impairments were based on short and anticipated hold periods in the DC Metro area — primarily DC Metro area, and the joint venture impairments were based on the uncertain outcome related to the recapitalization of those partnerships. However, we do believe the ultimate success and recoverability of those investments. Our fourth quarter debt service and interest coverage ratios were 2.5 and 2.6 respectively, and net debt to GAV was 43.4%.

Our fourth quarter annualized core net EBITDA was 6.3 times and was within our range that we had given. And our combined net debt to EBITDA was 7.5 2 times above our 7.1 to 7.3 high end of our range. Our leverage was within our targeted range. We didn’t achieve that due to 2023 business plan sales targets, the debt attribution we had anticipated being reduced, due to some of the recapitalization events that we hope to take place in the first half of 2024 and continued capital spend on the development projects. During the quarter, 2340 Dulles was stabilized and added to our core portfolio. On the financing side, we remain focused on the 2024 bonds and continue to evaluate funding on both a secured and unsecured financing market, with an objective of completing the financing in the first half of the year.

We’re exploring some property level secured financing options including, another wholly-owned CMBS transaction. We anticipate our ongoing sales and joint venture liquidation strategy will also generate additional capacity. As we’ve discussed in the past, we prefer to remain an unsecured borrower and we’ll continue to monitor the unsecured market as well. Given the above, we have seen improved pricing for both secured and secured financings since our first call. We will continue to seek the most efficient capital source, with a bias towards the unsecured market. Regarding the upcoming joint venture maturities, as Jerry mentioned, we are working with our partners on the 2024 maturities, to potentially extend those current maturity dates with our existing lenders and commence marketing efforts, with some new lenders on certain properties for sale to help lower JV leverage.

Going to 2024 guidance. At the midpoint, our net loss of $0.31 per diluted share and FFO will be $0.95 per diluted share. Based on our 2024 guidance range, this is a decrease of $0.20 per share. It’s primarily driven by our interest expense going down — going up and there — on both the wholly owned and JV side. Our 2024 range is built on some general assumptions. Overall, portfolio operations remained very stable, with property level GAAP NOI totaling roughly $305 million or an increase of around $5 million compared to the prior year. Full year impact of 2340 Dulles and 405 Colorado will benefit us about $6 million. We continue to see the lease-up of 250 King of Prussia generating several million dollars. 155 King of Prussia will commence operations in the fourth quarter and generate about $1 million.

Offsetting that is about $4 million of reductions due to the 2023 sales activity including losing the state of Texas. So that $4 million is income that was in 2023 that will not be in 2024. There will also be a modest increase in the same-store portfolio. FFO contribution from joint ventures will total a negative $8 million to $10 million. This loss is primarily driven by our multifamily lease-up on stabilization – up to stabilization and will total about $9 million. Also higher interest costs on the operating portfolio in 2023 that are anticipated to occur in 2024. G&A expense will be between $35.5 million and $36.5 million. Total interest expense including $4.5 million of deferred financing costs will approximate $122.5 million due to the refinancing of the bonds, which Jerry outlined will increase quarterly interest expense by roughly $4 million.

Forecasted higher use of our line of credit to fund development until our speculative second half asset sales takes place and forecasted higher interest rates compared to 2023. Capitalized interest will total about $6 million – will decrease about $6 million to $10 million as current development redevelopment projects are completed and become operational. Land sales and tax provisions we estimate between $4 million and $6 million, as we anticipate further progress on selling non-core asset parcels. Termination and other fee income will be between $10 million and $12 million, which is slightly below our 2023 levels, due to some onetime activities in the 2023 results. Net management leasing and development fees will be between $11 million and $12 million, a slight decrease due to lower forecasted third-party fees.

Expected property sales $80 million to $100 million will take place primarily in the second half of the year with no material dilution anticipated. We anticipate no property acquisitions. We anticipate no use of the ATM or buyback activity and we believe our share count will be roughly 174 million shares. Looking at first quarter guidance. Property level operating income will total approximately $74 million. We’ll be below the fourth quarter operating number by $2 million, primarily due to some of the fourth quarter asset sales and higher operating costs in some of our portfolios. FFO contribution from our joint ventures will total a negative $1 million for the first quarter. That’s again primarily due to the ramp-up of leasing at our multifamily project here at Schuylkill Yards.

G&A expense for the first quarter will total about $10 million. That sequential increase is consistent with prior years and is primarily due to the timing of deferred compensation expense recognition. Total interest expense will approximate $26 million. Capitalized interest will be about $3 million. Termination fees and other income will total about $2.5 million. Net management fee and development fees will be about $1.5 million. And we have no land gain sales projected for the first quarter to be material. Turning to our capital plan. It’s pretty straightforward. It’s about $660 million. Our 2024 CAD range will be between 90% and 95%. The main contributors to the higher range is primarily higher interest rates and expense and interest on the loss – and losses on our joint ventures.

Looking at the larger uses, we saw about $110 million of development spend, which includes spend on 155 King of Prussia Road. We have $105 million of common dividends, $35 million of revenue-maintaining capital, $30 million of revenue-creating capital, $40 million of equity contributions to our joint venture partners. That’s both for capital but also for some recapitalization of the joint ventures that we expect to occur in the first half of the year. And then $340 million bond redemption. The sources for those are going to be $145 million of cash flow after interest payments, $343 million of net loan proceeds, either secured or unsecured, that will decrease our cash by about $50 million. As mentioned at the midpoint, $90 million of proceeds coming from land and other sales and $32 million of construction loan proceeds to offset the spend at 155 King of Prussia.

Based on the capital plan above, our line of credit is expected to end the year undrawn leaving full availability. We also project that our net debt to EBITDA will range between 7.5 and 7.8, with the increase primarily due to the incremental capital spend on our development projects with minimal project income forecasted by the end of the year. Our debt to GAV will approximate 45%. Additional metric of core net debt to EBITDA should be 6.5 times to 6.8 times. As of 12/31, it will primarily exclude our joint ventures as all of our active development projects will be forecasted to be complete. We believe the core leverage metric better reflects the leverage of our core portfolio and eliminates our more highly levered joint ventures and our unstabilized development and redevelopment projects.

We believe these ratios will be elevated due to the development pipeline. And we believe that once these developments begin to stabilize, our leverage will decrease back towards the core leverage. We anticipate our fixed charge and interest coverage ratios will be roughly 2.2, which represents a sequential decrease from this year, again due to some higher interest costs. We continue to see stabilization within our joint venture developments this year. And we hope that the leverage will then begin to improve, as we go into next year. I will now turn the call back over to Jerry.

Jerry Sweeney: Thanks, Tom. So look, the key takeaways are operating portfolio is in solid shape. Again we have very manageable rollover exposure through ’26. We will continue to have a relatively strong mark-to-markets, good control of our capital spend. And certainly, we’re very pleased with the level of leasing activity through the pipeline that we are seeing. We recognize that we are executing a baseline business plan, that will continue to improve our liquidity. It will keep our operating portfolio in very solid footing, with real clear focus on leasing up our development projects to generate forward earnings growth. So as usual, we’ll end where we started which is that we really do wish you and your families well. And Michelle, with that, we are delighted to open the floor for questions. [Operator Instructions] Thank you.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from Anthony Paolone with JPMorgan. Your line is open.

Anthony Paolone: Great. Thanks. I guess maybe for Tom. I think you quantified the drag from the apartments being about a nickel. And so I’m just wondering, if you can give us a sense like when those are fully stabilized, does that nickel drag? Does it become a few pennies positive? Or like what sort of the bounce off of I guess what seems like maybe the ’24 is perhaps like the worst impact of bringing those things online.

Tom Wirth: Tony, I do think it will turn into a positive a couple of cents once it’s stabilized. I think, there’s two sets of timing. I think that we will have some of those hits for Schuylkill Yards taking place in the first and second quarter, since they opened up end of the third quarter. So, we’ll begin to see positive NOI as we look at Schuylkill Yards, as we get into the second half of the year. But first half of the year, we will see a majority of those charges that we talked about. And then separately, we expect to be fully open on the project One Uptown. So, again second — probably third quarter, you’ll see some charges starting to hit there for that project, while it leases up. And I think, as you get towards the end of the year though, and go into next year, we see — you should see a couple of cents of positive momentum moving into the beginning of ’25.

Anthony Paolone: Okay. So I mean, we should think about almost like, I don’t know $0.07 of swing from ’24 into ’25 from those? Is that like order of magnitude?

Tom Wirth: Yes. I think that’s the order of magnitude, because right now, the NOI that’s coming online is being offset by our preferred equity and interest expense. And until that NOI — and so the NOI is just not high enough in the beginning to offset that, but yes I think it’s probably going to be about $0.07 swing as you go into ’25.

Anthony Paolone: Okay. And then just second one, maybe for Jerry, the 4.2 million square foot leasing pipeline that you talked about, can you maybe give us a little more color as to the nature of the tenants driving that maybe their industries, type of space they’re looking for and such?

Jerry Sweeney: Yes. Tony. George and I will tag team it, but we really haven’t seen any perceptible change in the composition of the tenancies quarter-over-quarter. Our primary pipeline here in Philadelphia remains life science institutional requirements as well as law firms, accounting firms, engineering firms, et cetera. Down in Austin the pipeline there is actually less tech reliant and more service related whether it be insurance companies — financial service firms, insurance companies along those lines. So, we’ve seen a fairly large drop-off in the larger tech requirements in Austin. But certainly even as we saw 405, the downtown building that was leased up primarily to non-tech tenants. We’re actually — given the dearth of new tech requirements and frankly the managed sublease space in that market currently controlled by tech tenants, we’ve really shifted our focus as we mentioned a couple of quarters ago to smaller-sized tenants that are very much service-based versus technology driven.

Hence the reason we’re building out a couple of floors. But George maybe you can add some additional color to that.

George Johnstone: Yes, I think you hit the nail on the head. I mean professional services seems to be the predominant industry leaders whether that’s financial services law firms. And then obviously as Jerry mentioned life science almost exclusively at 3151 but professional service pretty much everywhere else around the company.

Jerry Sweeney: And just one other point of color on that. I mean we continue to see a lot of these traditional service firms looking for a better corporate home. So, that quality thesis we do continue to see. We think that the quality of the space we’re presenting as well as the relative stability of our company from a financial standpoint compared to a lot of private firms is definitely narrowing the competitive set, which is I think one of the reasons why we’re seeing the pipeline build at such a rapid rate. The challenge we have is to get that pipeline across the finish line. And I think we’ve — we’re very clearly focused on that and want to make sure that we meet all of our leasing objectives.

Anthony Paolone: Okay, great. Thank you.

Jerry Sweeney: Thank you.

Operator: Thank you. Our next question comes from Michael Griffin with Citi. Your line is open.

Michael Griffin: Great. Thanks. Jerry in your opening remarks you talked about how tour activity is notably above recent quarters. How quickly could we see that actually translate into demand and leasing for space?

Jerry Sweeney: Not quick enough for me Michael. It’s — we’re putting a full-court press. We are responding to a lot of RFPs, RFIs where the level of tour activity has picked up. Like even in Austin, Texas I mean the amount of tour activity we’ve seen just thus far this year and it’s only really one month under the belt is equal to about two-thirds of what we saw last year. So, we are beginning to see a number of, as I termed, green shoots and the major chance of just getting them across the finish line. I mean a data point that’s helpful I think is our spec revenue target this year is well above what the spec revenue target was last year. We are entering this year close to 80% done on that spec revenue target. That provides a very solid basis for us to try and generate some additional leasing revenue coming in in the second half of the year.