Wendy Seher: No. I think if you look at — it’s just timing is number one and number 2 is our pipeline still remains strong. And when I look at where we are specifically in small shop leasing, I do feel like there we have a runway there, probably another 100 basis points to grow off of. And also some of the timing is also attributed to several of the deals that we’re doing are on spaces that are already occupied. So there’s some overlap there.
Donald Wood: Yes, let me — Dan go ahead on resi if you want, but my comment, Greg, would be. We have a couple of markets that are very seasonal, primarily out here in California and New England. So we do try and ramp up occupancy, going into the slower winter season. So we can ride through first quarter of a little bit slower leasing in those seasonal markets and be in a position where we’re not giving up a lot when the leasing season heats up again, so some of that strategic in the way we build occupancy up in the prior quarter. But Dan, if you got more to add, please do so.
Dan Guglielmone: Yes. That’s exactly right. On the residential portfolio seasonality is really what’s driving that move. We’re up year-over-year from an occupancy perspective and we fully expect occupancy to pull back in the fourth quarter relative to due to that exact reason. And we have a small portfolio. I think that it only takes a handful of units to kind of move things a little bit. So I would not read anything into that at all.
Operator: Thank you. And our next question today comes from Craig Mailman with Citi. Please go ahead.
Craig Mailman: Thank you. Just want to go back to the question about acquisitions and it sounded like maybe there could be some OP unit deals in there, but could you just give us a sense of magnitude at this point of view at the level where we need to cap some of the equity and some of your trophy mixed use projects or can you guys fund this with kind of current liquidity?
Donald Wood: That’s a good question, Craig. The funding with the — funding with the trophy assets at some point, it’s something for the future. It’s not something for today, given where the market stand and the appetite and got still the uncertainty on that stuff overseas in particular. With respect to boosting the acquisition portfolio now. That’s what that aligns for. So there is — there is short-term financing and then it will be long-term financing. But there is — there is a reason that powder is dry and we’d like to use it.
Operator: Thank you. And our next question comes from Ki Bin Kim with Truist. Please go ahead.
Ki Bin Kim: Thank you. Don, can you just go back to some of the comments you made about the office leasing demand you’re seeing at Santana West and 915 Meeting. Just curious as there’s been any kind of commonalities for why somebody says, I’m guessing it’s relocations, moving to these centers and for 915 Meeting the NOI contribution, is it reasonable to expect that 50% contribution to be back end weighted or more per rentable.
Dan Guglielmone: Go ahead, Don.
Donald Wood: Yeah. On the pro-rata, I would say, effectively in terms of the contribution of the course of the year.
Dan Guglielmone: And I’m going to take a mandate, the common thread through all of this is either — it’s funny, either relocations from Downtown to these mixed use properties in both of them basically in that first ring suburbs or out further and coming in looking for the full amenities that is true, these properties provide. And that’s been so darn consistent over the past 3, 3.5, 4 years with respect to what’s happening there. I don’t see that stopping. It’s — the demands of these tenants who are generally taking less space than they had, wherever they were West Coast, some kind of campus. The East Coast, the East Coast, same type of thing potentially. But they were — they are taking less space but they demand more in terms of the amenity base and that is so consistent in basically the three places, the three big projects, whether it’s – same in Boston, with respect to assembly. So, that’s the common thread.
Operator: Thank you. And our next question today comes from Mike Mueller with JPMorgan. Please go ahead.
Mike Mueller: Yeah, Hi. I just have two quick development questions. I guess, first for Bala Cynwyd. Is there any meaningful NOI that’s coming out of the run rate, your 4Q NOI run rate. And then do you have a ballpark estimate of timing for the Santana office rent commencements?
Donald Wood: Can you…
Dan Guglielmone: Yeah, on Bala, I don’t think there’s any material —
Donald Wood: It’s an empty Lord & Taylor which is…
Dan Guglielmone: So no impact.
Donald Wood: And then the timing, we’ll let you know on the timing. We’ll start on Acrisure recognized some revenue this year, 2024. And we’ll let you know when we sign the leases of the timing of the leases that we have in the pipeline, kind of when those will look to come online.
Operator: Thank you. And our next question comes from Floris van Dijkum with Compass Point. Please go ahead.
Floris van Dijkum: Hey. Good evening, guys. Thanks for taking my question. Following up a little bit on the office activity, obviously congrats on — obviously you haven’t gotten over the line yet, but certainly got the first leases going there, both Santana West as well as in Pike & Rose. Are those leases in your guidance. And maybe you can talk about what is happening to the negotiations in terms of the rents there. And Jeff, maybe I’d looked at your — because you’re on the grounds at Santana West. Are you getting pushback from office tenants on rents or other things or is it just — talk a little bit about the competitive situation of and the balance between landlord and tenant because clearly different in office than it is in retail.
Dan Guglielmone: Go ahead, Jeff.
Jeff Berkes: Yeah. I’m actually going to pass it Jan. Floris, Jan handles all of our large office leasing. So, let me turn it over to him.
Jan Sweetnam: Hey, Floris. I think — just in terms of the rent side I would say two things, one of which is, both at Pike & Rose and at Santana West here and also at assembly, really the tenants are looking for something as don said, they’re looking for the amenity, they’re looking for a better building, they are looking to upgrade their location. And so, they have tended to be less price sensitive on rent. So rents feel like they’re holding pretty well, but the tenant improvement packages have in fact gone up. So that’s really the change that we’ve seen, and that’s where the competitive piece comes in, but the rents have been really rock solid
Dan Guglielmone: And just, Floris, to remind you and I think we’ve talked about this before, and Don alluded to it in his earlier comments. Most of the tenants that are moving into that — are state of our buildings in those three locations are coming from inferior buildings where they take more space and they’re downsizing. So while they may be paying a higher rent per foot in our buildings than they were paying because they’re taking less square footage their overall occupancy costs are less which again goes to them not being as sensitive about rent. I think that’s important to understand.
Operator: Thank you. And our next question today comes from Dori Kesten with Wells Fargo. Please go ahead.
Dori Kesten: Thanks. Good evening . Can you walk through your thought process behind the mortgage on Bethesda Row on just addressing the size, maybe loan to value, why Bethesda, specifically.
Donald Wood: Look, I think the debt markets have been extremely volatile. And interest rates have lacked direction, to say the least, I think back in October when we committed to doing that transaction, the 10 year was at 5%, the — our stock was at $85 and we saw this as a unique opportunity for us to lock in a spread on a secured loan on one of our best properties and gets attractive financing. The leverage is lower than we typically would, it’s a little bit structured. But today, mortgage rates on retail product today at normalized leverage levels are probably 200 basis points over the Treasury, probably 175 basis points to 200 basis points on a floating rate basis above SOFR, we were able to get 95 basis points through the structuring that we did with our lender.
We felt like that was a really, really attractive credit spreads, it was certainly more attractive than the 150 basis points to 160 basis points we’re looking at back in October. And to do a five year loan and so it was just a — I think a unique opportunistic financing that really demonstrates Federal’s historic ability to access different parts of the capital markets at more difficult times in the cycle. And I think that in — our access of the convertible market, it’s another example of that. Don, did you want to add anything?
Donald Wood: No, I wanted to ask you, Dan, I mean from a tax perspective, tax basis perspective, putting $200 million on Bethesda Row frees up some flexibility with respect to the —
Dan Guglielmone: For tax planning. And so, I think having the leverage on there and having debt on Bethesda, where we’ve created significant value over our ownership created a ton of value above where if we do want to bring in a joint venture partner, this brings and gives us that optionality and that flexibility from a tax efficient.
