Scott Musil: Yes. So we have a 2.8 million square feet budgeted in our guidance related to development lease-up. I would say half of that relates to developments completed in 2023 that are scheduled to lease up in 2024. And the other half of that are not fully lease developments we placed in service in 2023. As far as timing is concerned, 1.4 million square feet is scheduled to lease up in the second quarter with the remaining 1.4 million square feet scheduled to lease up in the back end of 2024.
Todd Thomas: Okay. That’s helpful. And what’s the timing of the commencements at both 400 and 500 Old Post Road with those leased to sign? And at 500 Old Post Road, I was just wondering, I know it was a lengthy process there, but did anything change with regard to rent or the roughly, I think, 25% mark-to-market? Was that consistent with everything that you originally anticipated or were there any changes?
Peter Schultz: Todd, it’s Peter Schultz. So the commencement date for the lease at 500 Old Post Road was in December of 2023. The commencement date for the half of 400 Old Post is scheduled to be in the first quarter of 2024. In terms of the economics for 500 Old Post Road, we did better than the mark-to-market that we described in earlier calls. So we were pleased with that result. And yes, it certainly took a long time and torturous path dealing with the government and all that. But we did not reduce any of our terms or economics through that process. The mark-to-market on the smaller space was better yet again than we did on 500 Old Post Road.
Todd Thomas: Okay, great. And just lastly, just one question, I guess, back to the accelerated expense for the non-cash comp is also all of that’s expected to be realized in the first quarter. Is that right? And then I think you said that the expense will be reversed in the future. Can you just explain real quick the accounting treatment for that expense and the corresponding shares, you know, how that will work?
Scott Musil: So the $3 million that we spoke about in the script, that’s going to be ratably expense over the four quarters. Okay? Now we have other tenured employees that were tenured last year and are tenured this year that are getting expensed as well in the first quarter of 2024. And that’s what’s causing we think G&A in the first quarter of 2024 to be about $3 million higher than what it’s going to be per quarter for the remaining quarters. As far as the reversal is concerned, coming in 2025, we really don’t have any folks that are reaching this tenure, so we’re really not going to have any additional expense. But when you work through the math through the vesting process, the vast majority of the $3 million that we talked about is basically not going to be incurred next year. So it’ll cause a reduction in our G&A. Does that clarify Todd?
Todd Thomas: I think so. So all else equal if G&A outside of the comp plan is unchanged, G&A in 2025 would be lower by roughly $3 million year-over-year.
Scott Musil: That’s correct, plus whatever increases and costs are in 2025, so that’s correct, yes.
Todd Thomas: Sure. Okay, got it. All right. Thank you.
Operator: Next question comes from Craig Mailman with Citi. Please go ahead.
Craig Mailman: Hey, guys. Just looking at the development pipeline, it looked like the expected yields picked up a little bit quarter-over-quarter. At the same time, kind of rents in the EIE [ph] are softening up and free rent concessions are rising. I’m just trying to get a sense of how you guys are looking at kind of underwritten rents and maybe walk us through kind of how those underwritten rents or when the time period of those rents were. And maybe that’s why yields aren’t moving or just kind of how you guys are thinking about that?
Scott Musil: Jojo?
Jojo Yap: Yes, Craig, this is Jojo. First of all, there’s a change of mix, number one. Second of all, these are all adjusted for what we think we can get in the market today. So we always adjust them every quarter. And in terms of we didn’t change the market cap rates, although we think that Q1 to Q2 this year will be better than second half of last year, so no change in that.
Craig Mailman: Okay. I mean, you guys, what’s the competition like it sounds like you do have good activity on stuff in the EIE, but kind of what is pricing looking like in the competition from other developers out there who also have to lease space kind of how’s that trailing?
Scott Musil: So, you know, when you look at our developments, so for example, right now, development complete and done in service in Fontana, we have an 83,000 footer there. That’s kind of a unique asset. It’s about 25% FAR. So we’re not really competing with anybody there. What we need to look at to get there is a tenant that’s going to use that facility. And, you know, in Redlands, we have a 460,000 square footer. If there’s a 460,000 footer user out there who looked in the market for a cross-stop with this kind of functionality in Clear Height, there’s really nothing there. So it’s hard to kind of compare. We’ve got a really great asset there. But we have three buildings are going to be finishing off in Paris. It’s still under construction.
At that point, the market, I would say we would have about two to three buildings compared with each of the buildings there. So there’s a lot of talk about rents generally have come down, you know, 5% to 10% in Q4 last year, but the costs are not supporting it. But the tenants are shopping [ph].
Craig Mailman: Okay. And I think, Peter, I’ve asked you this in the past, just going forward from our risk mitigation standpoint, you guys have the spec cap, but just how do you think about an optimal mix of maybe, you know, adding in a higher level of built-to-suit to complement kind of some of the bigger spec that you guys do give?
Peter Schultz: Yes, we are in the market for built-in suits on a pretty regular basis. We’re looking to deploy the land that we have at the highest risk adjusted returns and sometimes that’ll mean built-to-suits, and sometimes it won’t. I think, while we expect to do more built-to-suits, the mix between built-to-suits and spec is probably not going to change meaningfully, correct, going forward. And, you know, our holdings are in, let’s just say, very high barrier coastal locations. So the spec business in those markets is obviously much, much better than it would be, say, in the inland sites in the country.
Craig Mailman: Okay, that’s helpful. And maybe if I could sneak one more in. Scott, can you just walk through kind of the difference between the kind of the 8% to 9% same-store and how that translates into kind of 7% FFO there?
Scott Musil: Sure. So we gave a midpoint of 8.5% on same-store. What’s happening, though, in 2024, Craig, is on the interest expense side, we’re incurring more interest expense. Two reasons there. Our average indebtedness is scheduled to be higher in 2024 compared to 2023. And then two, the weighted average interest rate in ’24 is going to be slightly higher than what it was in 2023. So that’s the main driver of the offset to that same-store.
Craig Mailman: Great. Thanks.
Operator: The next question comes from Nick Thillman with Baird. Please go ahead.
Nick Thillman: Hey, guys. Maybe want to touch a little bit on the investment sales market and kind of what you’re seeing there, like who are the buyers? And then, are you seeing any differentiation between portfolio deals and just single asset deals?
Peter Baccile: Jojo, do you want to talk about that?
Jojo Yap: Yes. Hi, this is Jojo. So in terms of the investment market, Q4 obviously in 2023 was very slow, actually in Q3 and Q4. But today, in terms of investment markets, there’s continued demand for every kind of buyer that we’ve seen in 2022 or 2023. Institutional, private users, the investment market, their users are buying investors and private and institutional. So what we’re hearing from a capital market today is that since the interest rates have been starting to become more stable, more funding now, there’s more interest. Capital markets people, when I say that the major brokers are getting more offers today on the product they put in the market, significantly actually more players than the second half of 2023. So the market seems to be in terms of investment appetite for investors have increased quite a bit.
Nick Thillman: That’s helpful. And then maybe just, you guys seem a little bit more optimistic on the outlook here for 2024, but maybe get some more commentary on big box demand and maybe appetite for multi-tenanting some of these developments that are vacant that have been placed in service. You guys mentioned like some of the sweet spots are in the small to mid-size areas in Nashville and Denver, but just wanted to get some commentary there?
Peter Baccile: Peter, do you want to cover off the Denver multi-tenant?
Peter Schultz: Sure. So I would say, again, the demand for the largest spaces, so a million up in most markets has been softer. As I said earlier, smaller mid-size, better, my comment was South Florida and Denver, 50,000 feet and under Nashville and central Pennsylvania, kind of 300,000 to 500,000 square feet. As I think we’ve talked about on prior calls, most of our, if not all of our buildings are designed to be multi-tenanted. And that flexibility is something we focus on. It’s likely in Denver that both buildings we have there will be least the multiple tenants, as opposed to single tenants that we’ve seen over the last several years. We see that similar dynamic in Florida. As you know, our building in Pennsylvania that’s 700,000 feet, we’ve already leased half of that. So I think it’ll be a mix, but definitely we’re seeing and the market is seeing more activity for multi-tenants or smaller mid-size spaces. Jojo, anything you want to add to that?
