Tony Paolone: Okay. And if I could just sneak one more in. Just on Neuhoff. I think in the past, you talked about that being product that once completed, can maybe drive a bit more traffic because it’s just the nature of it, how unique it is. Just wondering if you can comment on what that looks like now and just if anything shifted either on the demand side in that market or just if there’s any competitive supply that’s getting in the way?
Colin Connolly: No. It is the most unique property certainly in Nashville, the adaptive reuse component of it and then the mix of uses with the office, the multifamily and what will be really some compelling retail and food hall right along the banks of the Cumberland River. So we think that, that will continue to drive strong demand, and we’re seeing that demand broad-based across all industry types, from professional services, marketing and advertising to legal, financial services. We’ve seen very broad-based interest. And our — I’d say, really, our goal is to drive 25,000 to 50,000 square feet of leasing a quarter and ultimately have a really attractive multi-tenant diversified rent roll at Neuhoff to complement the apartments and retail.
Operator: Next question comes from John Kim from BMO Capital Markets. Your line is now open.
John Kim: Colin, on your opening remarks, discussing older commodity assets being repurposed. What are you seeing in your markets as far as what they’re being repurposed into? Is it another type of office like medical or lifestyle? Or is it other asset types? And is there any opportunities for Cousins to participate in this?
Colin Connolly: Yes. John, we are starting to see that actively play out. And it’s — gosh, it’s probably every week, you see a media headline about a building that is being either turn down or repurpose. We could cite some very specific examples across our markets. I’d say if I had to characterize it today, you’re seeing — you’re seeing more suburban office, commodity office product, be purchased at a very low basis and that product ultimately being torn down to be replaced with multifamily residential and mixed-use type properties. And I’d say the larger, older towers. In some cases, the cost to bring those buildings down is prohibitively expensive. And so there, you’re seeing some of those assets trade at very low basis where developers are looking at converting that into either multifamily, some hospitality and combination of both of those, I think from our perspective, we have looked at some.
We’ll continue to look at some of those and study. But again, I think our focus more broadly speaking, is going to be an asset that we feel have a great deal of conviction that either already are or can be converted into lifestyle office.
John Kim: Okay. That’s helpful. My second question is just a clarification on Domain 4. Is your plan to place this asset into redevelopment once accruent leaves? Or are you looking to execute short-term leases? I think that was mentioned as an option and keep it as is until you form development plans?
Colin Connolly: Yes. I think we’re at a point where we’re not ready to make that decision. As Richard mentioned, that accruent lease does expire later this year. There is one other customer in the building that’s got an exploration, a year or so later. And so our intention is to definitely not sign any long-term leases in the short term. If we can find customers who want space for a very short specific period, we’re absolutely open to that and if we can drive some NOI that way, we’ll consider it. But I think we’ll kind of continue to wait and see and make a decision on specifically what we do with that asset at a later date.
Operator: Your next question comes from Upal Rana from KeyBanc Capital Markets. Your line is now open.
Upal Rana: Just on the three leases with WeWork, that you anticipate to reduce or cancel. What are your plans associated to that going forward? Yes, I’d be curious on any color there.
Colin Connolly: What are our plans on the three WeWork leases?
Upal Rana: Yes, with the ones that are going to be reduced and potentially canceled?
Colin Connolly: Well, again, I think with WeWork, again, there’s three of the leases that — well, one in Charlotte that we don’t believe will be modified. It’s a very strong performer for them. Two, we are going to modify and those will shrink in space and have you reduced rent. And our hope and our view is those are in — those two stores are in really strong buildings that we own today. Our customers view them as a nice amenity to have in the building. And our hope is on the other side of the bankruptcy that WeWork emerges as a much stronger company with little to no debt and will be a terrific partner for us in those buildings. In the case of 725, Richard mentioned this earlier, from our perspective, there was just too much demand from traditional office users that were interested in that space to move forward with economics, restructured economics. So we’ve chosen to pass.
Upal Rana: Okay. Got it. That was helpful. And then just on Neuhoff coming online in June, where are rents and concessions there today? And where is the current development yield relative to when you originally started construction?
Colin Connolly: Yes. The — Neuhoff continues to perform very well. As we look at the net effect of rents without being specific, I would say that the TIs are higher than we originally expected, but so are the rents. And so the net effect of rents have been effectively flat to date. We’ll as we move forward to finalize the project, we’ll kind of continue to monitor that and if we have to give more TIs to stabilize that in a faster time line, that’s certainly something that we’ll consider. But to date, the net effective rents have been effectively flat. The overall development yield, I’d say we certainly have had a — would be lower than we started the project, and I’d attribute it solely to higher cost of our interest expense. That’s a floating rate loan. And obviously, that SOFR has moved. And so the interest expense on that project has been higher than we originally anticipated.
Upal Rana: Okay. Great. And if I can squeeze one more in. Richard, you mentioned Austin has been doing — had some seeing some decent momentum here. Can you elaborate more on that? What’s going on in the ground there? And what’s really driving some of that momentum?
Richard Hickson: Well, I guess to clarify that I think I’d call Austin still less active than our other markets at this point. We are seeing positive dynamics as in, I’d say, the sublease listings have stabilized, and that’s been a big dynamic in Austin for a little while now. So that, to me, is a nice leading indicator of things starting to potentially stabilize in turn, but it is still more quiet, let’s say, than our other markets.
Operator: Your next question comes from Dylan Burzinski from Green Street. Your line is now open.
Dylan Burzinski: Most of my questions have been asked, but I guess just going back to sort of as you guys are looking at acquisition opportunities, are there certain markets across your footprint that are currently more attractive than others? Whether it’d be because of just a better outlook for supply and demand? Or whether it because pricing has sort of degraded a little bit more?
Colin Connolly: Dylan, it — I’d say we’ll certainly would pursue opportunities in any of our markets. We’ve got great confidence in all of them. They’re perhaps summer today have more strength than others. Most of that really driven by supply and the time it will take to absorb some of the new supply in certain markets. But I’d say, generally speaking, as a company over time, we would like to see our investment grow in some of the cities beyond — or to a greater percentage beyond Atlanta and Austin. And so, we certainly have a lot of interest in markets like Charlotte and Nashville and Dallas and Tampa because we’d like to enhance that geographic diversification over time. But that doesn’t mean that’s a really compelling opportunity emerges in Atlanta or Austin, where we’ve got great expertise and great platforms. We’ll absolutely pursue those. But I’d say over a longer period of time, I would like to see the geographic diversification enhanced just a bit.
Operator: Your next question comes from Peter Abramowitz from Jefferies. Your line is now open.
Peter Abramowitz: Yes. One of the themes that’s been emerging this quarter is either lenders or partners that are pretty willing to take on unfavorable terms just to get out of office and trim their exposure there. So just curious, if you’ve seen any signs of that in your markets, and what’s the role of distress overall in the transaction market right now?
