We have also started to take a more aggressive approach on pre-building some of our spaces, not necessarily spec suites, but doing whatever we can within our buildings to get as much done as possible so that we can compress the time from lease execution to occupancy. We’ve expanded our internal space planning team, which is extraordinary. So, they’re able to turn space plans very quickly. Based upon those preliminary space plans we’re able to drive any long lead order times for tenants. So, the name of the game is I think the theme that you hit on which is how do we compress tour proposal to occupancy. And that’s a whole company initiative from our leasing teams to our legal teams our space planning folks and our construction development teams.
So, we recognize the urgency of getting additional revenue into our portfolio. So, every building has been examined to make sure that we’ve got every vacant space in great shape. We are tracking tour volumes. We’re following up at a senior executive level with all of our key prospects. So as I mentioned a full-court press, at every level of the company to continue to build that pipeline to our social media and marketing outreach programs, and then capture more than our fair share of transactions that come through the door.
Michael Griffin: But you haven’t seen tenants — they’re still taking a while to make these decisions, right? They haven’t shortened their timeframe in terms of leasing decisions. You’re just seeing more inbounds in the format that’s correct.
Jerry Sweeney: Yeah. I hate to give you a generalization, because it really is so anecdotal. We’ve had some companies that make decisions very quickly and move very quickly. We’ve had other ones, particularly the larger ones that tend to be a little more over-deliberative in kind of thinking through their space. But George, do you have any color on that?
George Johnstone: Yeah. I mean, I think the cycle times have remained relatively unchanged. I do think as Jerry mentioned that, the larger the tenant oftentimes that decision has taken a little bit longer because they’re sometimes going through the analysis of combining several locations into one. And we’ve seen that with a number of tenants kind of taking that flight to quality and “Okay, we’re going to move out of two different buildings into this one.” And then going through their demographic studies of commuting times and things like that. But the one thing we’re encouraged by is, in terms of converting tours into proposals we’re running at about a 40% success rate. And then, once we’ve got somebody at the proposal we’re running at about a 30% — low-30% conversion to an executed lease.
So we do kind of feel that once we get somebody into the building, get them comfortable with the space we’ve got a great opportunity to convert it. But again as we’ve discussed the entire decision isn’t solely ours.
Michael Griffin: Got you. That’s helpful. And then maybe just one on the debt stuff for, Tom. For the JV debt coming due or that’s already past due you talked about kind of conversations that you’re having with your lenders right now. Does it make sense to put additional financing on it? Or would you almost be better off kind of handing back the fees on some of those properties?
Tom Wirth: Yeah. I think that we would probably not want to put additional financing on. I do couch that by, if there was a potential for us to put in capital that would be at a level that we would recover that ahead of the debt or ahead of a portion of the debt. That may be something we would consider. But I think for most of them to put on additional debt or — that would not be a preference. Although, I will say one of the financings that we will look to do this year we probably will look to lower the balance of that refinancing debt and that may come in the way of contributions from the partners to refinance that property. So there is one situation where I think when we do refinance it we will — you will see us to add capital. And we do have that on our liquidity plan. The others, no, it would not be a situation where we put more debt on those.
Michael Griffin: All right. That’s it for me. Thank you, Tom.
Tom Wirth: Okay. Thank you.
Operator: Thank you. Our next question comes from Dylan Burzinski with Green Street. Your line is open.
Dylan Burzinski: Hi guys. Thanks for taking my question. Just wanted to go back to some of the occupancy comments that you had talked about in your prepared remarks, So we’re talking — you guys came in 150 basis points below where you guys have targeted coming into the quarter. You mentioned 100 basis points, 50 of that being occupancy sliding into January and 50 basis points from a portfolio sale that didn’t come to fruition. So I guess just curious what was the other 50 basis points drag on occupancy that you guys thought you had when you guys provided guidance last quarter?
George Johnstone: Yeah, Dylan, it’s George. Yes so the third component really was just not getting pipeline conversion on a number of new deals that have kind of carried into 2024 that we kind of thought we were going to get those kind of executed and into the leased number.
Dylan Burzinski: And then I guess just on that portfolio sale, can you kind of talk about — was it clearly — was it just a reason that they could not get debt and that sort of why the transaction never happened? Or could you just give us additional color on sort of what happened with that particular portfolio sale.
George Johnstone: Sure. I’d be happy to. It was a — call it an under leased portfolio, which remains in our — in the wholly-owned stack, right, at this point. It was really to a non-institutional-grade buyer who was fairly thinly capitalized and was looking for third-party financing. When that didn’t prove out to be the case, they proposed that we take back a significant piece of seller financing, which as we talked on the previous call, we were willing to do, but I think the terms of that seller financing were such that we felt holding that portfolio for a short term, get some near-term lease renewals done, wait for better capital market, presented a better opportunity for us to recover value. It did impact the year-end numbers. Obviously, that portfolio does impact our 2024 numbers, but we felt from a financial and a return standpoint, it was the right decision not to proceed with that sale.
Dylan Burzinski: All right. Thanks, guys.
Jerry Sweeney: Thanks, Dylan.
Operator: Thank you. Our next question comes from Steve Sakwa with Evercore ISI.
Steve Sakwa: Yeah. Thanks. Good morning. I guess, just following up on Dylan’s question. Jerry, just help us like think through what’s the confidence level that you have in the 88% to 89% on the percent leased and the occupancy for this year, given the things you just outlined, slower time to get things over the finish line, like what conservatism or buffers have you put into this year’s plan maybe versus last year?
Jerry Sweeney: Well, I think we have a high degree of confidence in the numbers we’ve put out. And I think, it’s evidenced by the high percentage of execution we already have in place as well as a thorough review of the status of our entire pipeline. So, bottom line confidence level, very high. I think, if we look at sensitivity, we do have some revenue coming in from our Austin, Texas operation, which is always precious given the slow velocity in that marketplace. Now again, as I mentioned, we’ve seen an up-tick in activity. We again have a good portfolio to market. But certainly, we would expect that even, if that were to be slower, we would make up for that as we have in many past years, by increased velocity in our Pennsylvania suburban, University City and CBD portfolios. But George, maybe you have some additional thoughts.
