Cousins Properties Incorporated (NYSE:CUZ) Q4 2023 Earnings Call Transcript

Cousins Properties Incorporated (NYSE:CUZ) Q4 2023 Earnings Call Transcript February 8, 2024

Cousins Properties Incorporated 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 morning, ladies and gentlemen, and welcome to the Cousins Properties Fourth Quarter Conference Call. At this time, all lines are in a listen-only mode. Following presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded on Thursday, February 8, 2024. I would now like to turn the conference over to Roper. Please go ahead.

Pamela Roper: Thank you. Good morning, and welcome to Cousins Properties fourth quarter earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer; Richard Hickson, our Executive Vice President of Operations; and Gregg Adzema, our Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon as well as furnished on Form 8-K. In the supplemental package, the Company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with the Reg G requirements. If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website, cousins.com.

Please be aware that certain matters discussed today may constitute forward-looking statements within the meaning of federal securities laws, and actual results may differ materially from these statements due to risks and uncertainties and other factors including the risk factors set forth in our annual report on Form 10-K and our other SEC filings. The Company does not undertake any duty to update any forward-looking statements, whether as a result of new information, future events or otherwise. The full declaration regarding forward-looking statements is available in the supplemental package posted yesterday, and a detailed discussion of potential risks is contained in our filings with the SEC. With that, I’ll turn the call over to Colin Connolly.

Colin Connolly: Thank you, Pam, and good morning, everyone. We had a strong fourth quarter at Cousins. On the earnings front, the team delivered $0.65 per share in FFO and same-property net operating income increased 3.5% on a cash basis. We leased 453,000 square feet during the quarter with a positive cash rent roll up. For the year, we leased approximately 1.7 million square feet with a 5.8% cash rent rollout. New and expansion leases accounted for 52% of our overall leasing activity during the year. Our weighted average in-place gross rent at year-end 2023 was $46.95 per square foot, which is a 25% increase over year-end 2019. These are terrific results. I will start with a few observations on market fundamentals. First, the return to work in lifestyle office properties is accelerating.

Our properties are full of professionals whose lifestyle is centered around collaborating in the office with their teams, at least most of the time. As a result, our parking garages are filling up and demand for our space is increasing despite higher professional layoffs. Second, there is little to no customer or capital demand for old and tall CBD towers or suburban commodity properties. Many of these buildings will stagnate until they are repurposed or torn down. The process has already begun. Third, new supply is shutting in. The math for new development just does not work in today’s higher interest rate environment. Thus, the supply of office properties across the United States is likely to contract just as demand begins to improve. The same process played out not that long ago in the retail sector.

Remember when retail was dead, until it wasn’t, market forces are now rebalancing the office market in a similar manner. In our view, a shortage of lifestyle office properties in the Sun Belt is not far off. Turning to the capital markets, asset level debt and equity for office is far less available and significantly more expensive today. The investment sales market has temporarily frozen as private players adjust to higher cap rates. Conversely, the public markets show signs of improvement. Coupons in the unsecured debt market, along with implied cap rates and discounts to NAVs for office REITs have all tightened in recent months. Valuations in the public and private market for office now appear to be converging. A similar dynamic occurred after the global financial crisis and proved to be an attractive investment environment for REITs. In the short term, the narrative for the office sector is likely to get worse before it gets better.

Media will focus on high vacancy rates and accelerating loan defaults, and this reporting will not be wrong. However, as I said last quarter, it will be an overgeneralization that conflates commodity office with lifestyle office. At Cousins, our priority is to drive long-term earnings growth while maintaining a strong balance sheet. We have pursued that goal over the last 12 years by aggressively executing an intentional strategy to build the leading Sun Belt lifestyle office REIT, which will benefit from ongoing regional migration and flight to quality trends. And we remain extremely well positioned for an eventual turn in this cycle. Today, we own the premier lifestyle office portfolio in the Sun Belt. Our lease expirations through 2025 are among the lowest in the sector.

Our balance sheet is undoubtedly the best-in-class. Net debt-to-EBITDA of 5.1x is the lowest in the office sector. To be clear, the disruptions from the COVID pandemic and the impact of higher interest rates have been setbacks. However, our strategy has proved resilient. Surprising to many, our property net operating income was 23% higher in 2023 compared to 2019. Our 2024 guidance includes FFO that is flat year-over-year. We hope to outperform this and return to growth in the coming years. Let me highlight the building blocks. First, we intend to drive occupancy back over 90% in the intermediate term from 87.6% at year-end 2023. As you know, the office business can be lumpy, so this metric will bounce around from quarter-to-quarter due to a large move-out or a large commencement.

However, on a multiyear basis, we are optimistic that we can return occupancy in our portfolio back to normalized levels. The return to office, Sun Belt migration, flight to quality, in the flight of capital are all trends that will support our efforts. We have multiple competitive advantages, and we plan to grow market share. Second, we intend to allocate capital thoughtfully and accretively on a stabilized basis. We have a track record of identifying creative investment opportunities and funding them with the most efficient source of capital debt, equity, property sales and JVs. As I mentioned earlier, valuations in the private and public markets appear to be converging. Several owners and lenders. Medium and longer term, the development of market-leading lifestyle office and mixed-use projects will remain a key part of our growth strategy.

Our current development and redevelopment projects will be meaningful contributors over the next few years and highlight the value of our development platform. Lastly, a decrease in interest rates would enhance our growth profile. While we obviously can’t count on or control this, hopefully, rates have peaked and begin to trend downwards sometime later this year. Any such movement would positively support asset values, transaction activity and our development efforts. In closing, we are realistic about the many competing forces in the market. However, we built cousins to thrive during all market conditions. And today, we are in an advantageous position relative to other office companies. We are in the right Sun Belt markets. We own a trophy lifestyle portfolio with modest near-term lease expirations.

We have a fortress balance sheet with minimal near-term debt maturities, and we have a well-covered dividend. I believe we have a unique opportunity and optionality in front of us. Before turning the call over to Richard, I want to thank our employees at Cousins, who provide excellent service to our customers. Their dedication, resilience and hard work continue to propel us forward. Thank you. Richard?

Richard Hickson: Thanks, Colin. Good morning, everyone. Our operations team closed out 2023 with another solid quarter. This past year was marked by unprecedented economic uncertainty, so I’m very proud of our team for finishing the year strong. To start, I have an update on WeWork. As a reminder, we have four WeWork locations totaling 169,000 square feet in Atlanta and Charlotte, and they represent 1.1% of our annualized rent at share. While WeWork has not formally rejected any of our leases, we are in active negotiations to modify our leases at Terminus and 120 West Trinity in Atlanta. As of today, we expect the size of both of those locations to be reduced by one-third or about 26,000 square feet at share and for rent to be reduced.

Regarding 725 Ponce in Atlanta, due to strong demand from multiple traditional office users, we have decided not to negotiate with WeWork at this location and expect the lease to be rejected. Lastly, we expect WeWork to accept the rail yard lease in Charlotte without modification. As a reminder, we are a 20% owner of 120 West Trinity and we have meaningful letters of credit supporting the leases at both 120 West Trinity and 725 Ponce. I would note our negotiations with WeWork are ongoing and have been very fluid today. On to results. For the fourth quarter, our total office portfolio weighted average occupancy and end-of-period lease percentages were 87.6% and 90.9%, respectively. Both metrics were down modestly sequentially and finished the year at or above where we stood in the first quarter.

Our fourth quarter numbers exclude Hayden Ferry I from the operating portfolio as it is now under a full building redevelopment. Hayden Ferry I was previously 100% leased and occupied by Silicon Valley Bank, so its removal was a partial driver of the sequential occupancy and lease decline. In the fourth quarter, our team completed 39 office leases totaling 453,000 square feet with a weighted average lease term of 7.2 years. This was our second highest quarterly square footage volume of 2023, and our total signed activity for the year was just under 1.7 million square feet, another fantastic year of leasing activity for Cousins. 20 of our completed leases this quarter were new and expansion leases, representing just over 50% of our activity.

Notably, in Nashville, our new office mixed-use development, we completed 49,000 square feet of new office leasing this quarter. This brings the office portion of the adaptive reuse building to 88% and the overall project to 22% lease. We also remain encouraged by the pipeline, which includes approximately 150,000 square feet of office and retail prospects. We will also begin leasing the residential component of the project this spring. Our completed activity this quarter also included two important renewals with Wells Fargo at both Terminus and North Park in Atlanta, combining for 105,000 square feet of renewed space. We also added a full floor to Apache’s long-term headquarters lease at BriarLake Plaza. Overall, I’m very pleased with the diversity of our leasing activity, both from a market and industry perspective.

Regarding lease economics, our average net rent this quarter came in at $33.53 and $35.15 for the full year. This quarter, average leasing concessions, defined as the sum of free rent and tenant improvements were $8.42, which is within 5% of our third quarter run rate. As a result, average net effective rent this quarter came in at $22.46 and was $24.56 for the full year. For some perspective, our average net effective rent in 2023 was the highest in our history with the exception of only 2021, which included the full building lease for Domain 9 in Austin. Finally, second-generation cash rents increased again in the fourth quarter at just under 1%. Some of our lease metrics this quarter were softer compared to recent quarters, and we attribute this to the geographic mix of completed leasing activity.

In short, our leasing this quarter was in buildings where net rents are generally lower than our average. For example excluding our activity with Apache of BriarLake and Wells Fargo at North Park second-generation cash rents increased 5.3%. With regard to our leasing pipeline, I am pleased report that we have already completed at about 200,000 square feet of leasing in the first quarter, of which about 70% are new and expansion leases. Our overall leasing pipeline is healthy, and we are encouraged by the trends we are seeing to begin the year, especially in the early stage pipeline and our tour activity. For instance, over the last couple of months, we have toured eight prospects representing over 400,000 square feet of aggregate demand at Hayden Ferry I in Phoenix.

As always, early stage demand can take multiple quarters to translate into signed leasing activity. I also want to note that because we have so few expirations through 2026 and therefore, likely lower renewal volume to complete, this could translate into lower total volume. As I just mentioned, our overall operating portfolio continues to enjoy some of the lowest near-term expirations in the entire office sector. As of the end of 2023, we only had 19.4% of our annual contractual rent expiring through 2026, including a very low 4.3% in 2024. However, as is always the case, we do have some expirations that we expect to be move-outs that are worth noting. As discussed on our last call, at the end of August of this year, we expect accruent to vacate 104,000 square feet at Domain 4 in Austin.

This also happens to be our only expiration greater than 100,000 square feet in 2024. As a reminder, Domain 4 is a 157,000 square foot single-story office building on prime developable land adjacent to the main retail and entertainment corridor of the domain. As a result, we will almost certainly limit future leasing in this building to short term as those deals in order to maintain our optionality on this land. Looking to 2025, we only have two customers expiring that are greater than 100,000 square feet. The first I will discuss is Bank of America at Fifth Third Center in Charlotte currently leasing 317,000 square feet through the end of July 2025. We have begun to discuss this expiration with Bank of America and have shared that they would prefer to locate Charlotte corporate employees and properties owned by the bank where possible.

Based on those discussions, we view the bank as a probable move out upon expiration, though that date is still about 18 months from now. Fifth Third Center has timeless architecture, a great presence directly on Tryon Street in Uptown Charlotte and excellent access and parking. Given its good bones, we are already working to finalize plans to reenergize this property with amenities and upgrades similar to those we have successfully completed at projects across our Sun Belt portfolio. The other 2025 expiration of size is a 112,000 square foot customer in the domain expiring in September of 2025 nearly two years from now. Our Austin team has begun to engage with this customer. And while very early, the team is encouraged. Finally, looking into 2026, we have even lower overall expirations than in 2025 and only two customers, a little over 100,000 square feet each set to expire.

We are already in discussions to potentially renew one of those customers early. In sum, even with the one larger than usual probable move out in 2025, which is about 1.5% of total portfolio occupancy and our expectations around WeWork, the tailwinds of current leasing demand, a low near-term lease expiration profile and over 730,000 square feet of new and expansion leases signed but not yet commenced that represent true absorption. We expect to maintain our occupancy level through the end of 2024 and then hopefully begin to build occupancy by the end of 2025 and into 2026. Turning to some market-level dynamics. The U.S. continued to show some stabilization of office fundamentals, especially in the high-quality segment and the return to office is accelerating by most metrics.

Leasing activity also accelerated in the fourth quarter as larger lease deals began to return to the market. According to JLL, total volume in 2023 in the Atlanta metro area totaled almost 8.8 million square feet, above levels from 2019, ’20 and ’21. According to Cushman & Wakefield, demand remains strong for the highest quality and best located space in Midtown, which is up 19.2% quarter-over-quarter. Further, sublease activity — or sublease availability in Atlanta dipped in the final three months of 2023, down by 5% from the third quarter. Our Atlanta team signed a solid 217,000 square feet of leases in the fourth quarter spanning all of our submarkets. In Austin, the office market concluded the year with positive momentum surrounding leasing activity seeing the strongest quarterly level since Q2 2022 at 1.3 million square feet per JLL.

Additionally, diverging from its upward trend since early 2022, sublease availability remained stable quarter-over-quarter in Austin. At the end of the fourth quarter, our Austin portfolio was 94.4% leased, with relatively little immediate availability. As always, I want to thank our talented operations team whose hard work made 2023 a successful year. We look forward to a productive 2024 together. Gregg?

Gregg Adzema: Thanks, Richard. Good morning, everyone. I’ll begin my remarks by providing a brief overview of our results as well as some details on our same property performance. Then I’ll move on to our development pipeline, followed by a quick discussion of our balance sheet before closing my remarks by providing some color around our initial ’24 earnings guidance. As Colin stated upfront, our fourth quarter earnings were solid, and the operating metrics behind them remain strong. Second-generation cash leasing spreads were positive for the 39th straight quarter. That’s almost 10 uninterrupted years of rent growth. Leasing velocity remained consistent with pre-COVID levels and same property year-over-year cash NOI increased.

It was a very clean quarter. There were no unusual or non-recurring items of note. Subsequent to quarter end, we entered into a floating to fixed interest rate swap on the remaining $200 million of our $400 million term loan maturing in March of 25. The swap fixes so for a 4.67% through the initial maturity date. For the full year, we reported FFO of $2.62 per share. This is up from our original ’23 guidance with a midpoint of $2.58 per share, despite a $0.01 per share negative impact from the SVB bankruptcy earlier in the year. This outperformance versus our original forecast was primarily driven at the properties. Full year same property NOI was a solid 4.2% on a cash basis, which was our best performance since 2019. Digging a little deeper into our same-property performance during the fourth quarter, cash NOI increased 3.5% compared to last year.

Cash revenues increased 60 basis points, while expenses decreased 4.6%. Consistent with last quarter, these numbers were impacted by property taxes. In addition to our regular appeals of tax assessments, our portfolio also benefited during the second half of the year from the well-publicized tax cuts that were recently approved by Texas voters. The majority of our tax savings was in Austin, which is largely a triple net market and therefore, lower property taxes reduced both revenues and expenses during the quarter. Before moving on, I also wanted to point out the continued positive trend in parking revenues we saw during the fourth quarter. Overall, total parking revenues increased another 3% over the prior quarter and were up 15% for all of ’24 compared to ’23.

Turning to our development efforts. The current development pipeline is comprised of 50% interest in Neuhoff in Nashville and 100% of Domain 9 in Austin. Our share of the remaining estimated development costs for these two projects is $70 million, which will be funded by a combination of our Neuhoff construction loan and our operating cash flow. Looking at our balance sheet. Net debt-to-EBITDA is an industry-leading 5.1x. We have no significant debt maturities until July of 25. Our liquidity position remains strong with only $185 million outstanding on our $1 billion credit facility and our dividend remains well covered, with an FAD payout ratio of 72% in 2023. As a quick reminder, our current common dividend is over 10% higher than it was pre-COVID.

We are in a very small number of office REITs that have actually increased their dividend since 2019. I’ll close by providing our initial 2024 guidance. We currently anticipate full year ’24 FFO between $2.57 a share and $2.67 a share with a midpoint of $2.62. Our guidance is very clean. There are no significant one-time non-recurring items, including unusual term fees. There are no property acquisitions, property dispositions development starts or capital market transactions. If any of these do take place, we’ll update our earnings guidance accordingly. As Richard discussed earlier, we’re in active negotiations with WeWork while nothing is finalized, our guidance is consistent with the expectations Richard outlined. We have conservatively assumed a February 1 effective date for all of these potential outcomes.

Our guidance does not include any payments of our unsecured claim in the SVB bankruptcy case, which we currently estimate will be approximately $10 million. The exact amount and timing of recovery against this claim is not yet known, but unsecured SVB bonds are currently trading around $0.55 to $0.60 on the dollar. So, we do anticipate there will eventually be significant value in this claim. There’s no impact on our ’24 guidance from the potential Bank of America lease expiration at Fifth Third Center that Richard discussed earlier in the call. And while we’re not providing guidance beyond ’24 at this time, we anticipate the negative impact of this probable expiration on ’25 and ’26 numbers will be more than offset by the stabilization of several developments and redevelopments during that period.

Bottom line, our fourth quarter results were solid, driven by strong same property performance. Our best-in-class leverage and liquidity position remains intact, and our dividend remains well covered. Our ’24 earnings guidance is flat with 23 numbers as anticipated higher interest expense and WeWork losses are offset by forecasted increase in NOI from our existing properties as well as our new developments and redevelopment deliveries. With that, let me turn the call back over to the operator.

Operator: [Operator Instructions] Your first question comes from Jay Poskitt from Evercore ISI. Your line is now open.

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Q&A Session

Jay Poskitt: I was wondering if you could just be a little more specific on the timing for getting back to that occupancy to 90%. I know you kind of defined it as the intermediate term, but any more color there would be great.

Colin Connolly: Yes. As we don’t provide forward earnings guidance, we’re not going to provide forward occupancy, specific forward occupancy guidance. But I think Richard walked through the building blocks of kind of the ins and the outs there. And as I said, we do feel very comfortable over a multiyear process that will drive earnings back up over 90%.

Jay Poskitt: That’s helpful. And then just on a more broader view. I was wondering if you could just provide any commentary on your markets, which ones you’re most excited about and which ones you’re more cautious as we head into ’24?

Colin Connolly: Yes. It — again, I’d say broadly speaking, the Sun Belt continues to perform very well, specifically looking at our markets and I think where we’ve seen the strongest leasing activity to date has certainly been here in Atlanta, which benefits from a very diversified customer base. And so we have a lot of great space here, and we’ve had a lot of success leasing it up. And so a couple of other of our markets of note that have been, I’d say highly active has been the Tampa market continues to perform very well. It’s probably the lowest vacancy rate market within our footprint today. And then out in Phoenix, we’ve got a lot of activity looking at Phoenix today, and I’d attribute some of that to the overall market, but also very specifically to I think what’s a really exciting repositioning project we’re doing out at Hayden Ferry.

Operator: Your next question comes from Blaine Heck from Wells Fargo. Your line is now open.

Blaine Heck: The commentary on quarter-to-date leasing activity was helpful, but just thinking about your overall leasing pipeline. Can you just talk about how much of the activity you guys are engaged in today is driven by tenants that have lease expirations and are either renewing or relocating at the same square footage or downsizing versus tenants that are either adding demand that’s new to the market or expanding within the market and maybe how those proportions might be trending?

Richard Hickson: Yes, this is Richard. Yes, I’d say if we look back to 2023 as a bit of a proxy, we’re still showing that of the customers we renew, they’re net expanding rather than contracting, but there’s certainly a dynamic that’s generally based on industry, maybe tech, a little bit of financial services where there is generally some reduction in space on average when a customer is renewing. But we feel like — again, overall, we’re in an optimistic position in stance when looking at our pipeline and looking at the product we have to lease and that we’re actually seeing as well some interesting inbound activity or new to market activity in certain markets. I wouldn’t call it robust, full-blown major primary headquarters leasing, though there’s a little bit of that brewing, but we are seeing some interesting regional headquarters that are moving into particular markets, whether they be Tampa and Phoenix, as Colin mentioned, also here in Atlanta for certain.

But we feel like they’re good, good optimistic things happening in the early-stage pipeline.

Blaine Heck: Very helpful, Richard. And then just my second question. You guys are sitting just above 5x on a debt-to-EBITDA basis right around your kind of targeted long-term leverage goal. Can you just talk about how much dry powder you think you have for opportunistic investments? Where you’d be comfortable bringing that leverage up to you for the right opportunity? And just how much investment capacity that affords you? And also how you think about using equity or OP units in a deal to keep leverage levels down?

Colin Connolly: Yes, Blaine, it’s — we’ve got significant capacity. And it — that leverage, low leverage profile, I think oftentimes is painted with a kind of a defensive posture, and it is defensive and certainly been provided a lot of support over the last several years. But we really do think about our balance sheet and that low leverage from an offensive perspective. And in years past, we’ve done some of our, I’d say, most interesting transactions in times of dislocation and have moved leverage up, I think, in the past as high as 5.5x or even in the high 5s, but then made it a priority to bring that leverage back down as we could. So today, if the right opportunities come along, we’ll certainly take advantage of those.

But really, our willingness to do so is going to be a function of opportunities that have got product that fit with our lifestyle office characteristics and are we able to do a transaction that will drive earnings and provide accretion. And so we look at that in totality, and we look at that in terms of what our sources of funding might be, whether that is debt or equity or property sales and think about that holistically, but it’s focused on investing in high-quality lifestyle office and doing it in such a way that will provide accretion to our shareholders when stabilized.

Operator: Your next question comes from Camille Bonnel from Bank of America. Your line is now open.

Camille Bonnel: Your portfolio has such a wide healthy spread between leased and occupied space. Can you quantify how much of this is commencing in 2024? And from a timing perspective, are the commencements pretty even throughout the year or back half weighted?

Richard Hickson: Camille, it’s Richard. So — of that $730,000 that I had in my prepared remarks, about 650, a little over that 1,000 or in ’24, and that is weighted kind of early 2Q.

Camille Bonnel: Appreciate the details. And the color also on the lower leasing spreads in the fourth quarter. As we look forward, can you provide any details around the mark-to-market across leases rolling over the year?

Colin Connolly: Camille, it’s Colin. The — as Richard mentioned, the mix this past quarter impacted those leasing spreads. As we look forward over the course of the year. And I guess I’d narrow our focus to the late-stage pipeline that we’ve got and where we’ve got very specific visibility and our hope is that we’ll continue to drive positive rent rollouts.

Camille Bonnel: Okay. And if I can sneak one more in. Just more broadly in the submarkets where you’re seeing positive net absorption. Can you talk to the type of pricing power landlords or yourself have? Is there a possibility for office rents in your market to continue to grow even with the challenges for the industry?

Colin Connolly: Well, I think today, it is still — I think the market generally still favors the tenant. But I think when you really narrow your focus down into lifestyle office properties today, as I mentioned, there are a lot of market forces at play. We do see the overall supply of office in the United States coming down in real time and without any meaningful new construction and demand beginning to return, we can see that pendulum swing in the not-too-distant future for the best quality product. And so over — while today, I think rents are generally flat over the course of the next 12, 24 months. I think that, as I said, I think the market could shift and bring back pricing power to owners of lifestyle office like Cousins.

Operator: Your next question comes from Tony Paolone from JPMorgan. Your line is now open

Tony Paolone: Okay. First one, just for Richard, I just want to clarify, make sure I caught your comments right. So you think occupancy at the end of 2024 in your guidance is better apples-to-apples than where you ended ’23. Is that right?

Richard Hickson: Generally in line.

Tony Paolone: Okay. All right. And then, Colin, you talked about just playing offense and you have the balance sheet capacity. Can you maybe talk to what you think deals that start to emerge look like economically in terms of where you think maybe either cap rates or IRRs or whether you’re going in as a debt investment, like what this might look like as it unfolds?

Colin Connolly: Yes. Tony, great question. I — as I’ve mentioned, we do think the — we are seeing an increasing amount of interesting opportunities that we think are increasingly becoming more actionable. We’ve been — we’ve been very patient over the last 12, 24 months, and I think will ultimately be rewarded for that patient because I think, ultimately, as we invest the cap rates will be higher and the IRRs will be higher than they were 24 months ago. I think ultimately, how those pencil out, as I said, it’s less of a function of a specific cap rate as it is holistically as we look at, again, investing in lifestyle office properties and funding it with the most efficient source of capital that’s ultimately going to drive accretion of stabilization for our shareholders. So those metrics, it’s hard to specify a specific cap rate that’s not really ultimately what’s driving — will drive our investment.