Recall the sequestration imposed mandatory cuts across the board and defense spending went down materially. Even if we are in a flat line at this year’s level or last year’s level, I think there’s absolutely needs that will emerge and opportunities that we’ll be able to fill. Within the defense budget, the line item that funds rental of lease spaces is called the O&M operations and maintenance budget, and this year’s increase in net budget was actually closer to 9%. It increased 8.7%. So, certainly, there’s going to be some cutting coming, and it’s going to be awfully interesting, but I think we’re pretty comfortable with the magnitudes that have accumulated that our demand will continue because of the priority missions that we serve.
Tom Catherwood: Really helpful. Appreciate all those thoughts, Steve. And then maybe pivoting over to your comments around the self-funding of development. But just do some quick back of the envelope, it seems like depending on where your yields fall for every $100 million that you deliver, you open up another maybe $40 million to $50 million worth of debt capacity still stay leverage neutral. And then you’d have to solve for that, call it, $50 million to $60 million of equity through your cash flow. The questions then are kind of, one, is that kind of back the envelope roughly correct? And then two, are there certain potential impacts to your retained cash flow that could upend that? For example, if leasing costs continue to escalate across the board, if there are additional cost within the regional office portfolio, where you have to put more capital into some of these buildings.
Are there any kind of things on your radar that could upend that cash flow for you and cause you to have to look elsewhere for some of that developments funding?
Anthony Mifsud: So Tom, when you look at the math, I think your math is roughly accurate. I think the one piece to add into that equation is the ongoing increase in EBITDA of the operating portfolio that helps, sort of that’s the leverage metric that we’re really managing to, is debt-to-EBITDA. So as we look at the benefit of the EBITDA that comes in from the development projects, which is the math that you articulated, plus the continued increase in EBITDA from the operating portfolio, it’s really the balance of those two things that allow us to fund the equity component of the development project on a leverage-neutral basis. With respect to upending that math, surely, there’s incremental capital that could be required for the items that you mentioned.
But to give you some context, in order for debt-to-EBITDA to increase 1 tick, so 0.1x, that’s about $35 million to $40 million in incremental debt, all other things being equal. So, it would need to be a significant increase in the capital requirements to lease up either parts of the portfolio or building capital that we’re not anticipating that’s not already built into our model. So, we think the plan as it exists right now has demonstrates that we can self-fund the development pipeline after this year, and it has a modest amount of cushion built into that given just how we put that math together.
Steve Budorick: And then one last comment about risk from the regional office portfolio. We have been actively investing capital already in those assets to make them very current and reposition them where we have need for leasing to be leased. So that capital on any kind of repositioning risk, we’ve already spent it. The incremental capital they’ll need is tenant improvements where we have vacancy, and that’s built into our model.
Tom Catherwood: Got it. That’s very, very helpful. And then, kind of last one for me, maybe sticking with that regional office thought and then comments. It looks like there was some recent activity on 100 Light Street. Todd, can you maybe update on the status of that in 2100 L Street as well?
