Michael Lewis: Great. Thank you. You talked about kind of the characteristics of some of the potential noncore dispositions. As far as the ones you’ve already done, right, I’m looking at $79 million with $6 million of NOI. That’s about a mid-7 cap rate. Is it fair to look at this and say, Highwoods is selling some of their assets that are noncore that are not their best assets at a mid-7 in the stock, even though it’s been a big outperformer recently, we still have it at like a 10 implied cap rate. Am I comparing apples and oranges? Or is it fair to kind of look at — you closed some sales, you proved out some pricing and we can read through into the rest of your portfolio a little.
Ted Klinck: Maybe I can start and if anybody else wants to jump in. Look, I think if you look at the assets we did sell, we’re thrilled with the mid-7 cap rate. Now look, they were incredible location, which very similar to most of our assets in our portfolio. They are — they do have some medical components, right? And I think there’s a very liquid market on the MOB stuff. But certainly, we’re pleased with the mid-7 cap rate. And I think it was certainly by selling them enhanced our overall portfolio quality as well. So I think the rest of our portfolio is higher quality or a vast majority of these assets. So certainly trading at a 10% cap rate, we think, is way too high. And I think we’ve proven out over the last two or three years, we’ve had multiple sales that have been well below those cap rates over the last two or three years. So I think it’s just indicative of the assets we own.
Michael Lewis: Okay. Good answer. Thanks. Second, you talked a lot on this call about the timing of the trough occupancy and Brendan kind of laid out how 2024 might go in terms of cadence. Could you just remind us or have you said what you think that trough occupancy will be in early next year? And how much is better now or you talked about trending better than that. So maybe you could answer both parts of that or one part of it. Just trying to figure out kind of where this bottoms and how much better you might be doing than you first expected?
Brendan Maiorana: Yes. Hey, Mike, it’s Brendan. So we’re obviously not in a position to kind of give ’25 guidance and outlook on this call. But what I can do is maybe provide some ingredients that will help you think through that question, which is a good one. So for year-end ’24, which we switched to give average guidance, which we think is a more meaningful metric, I think we’re probably, originally embedded sort of within that outlook was probably ending the year at around, call it, between 86% and 87%. I think we are trending towards the high end of that range and potentially could be even a little bit above the upper end of that range. So that’s better call it, 50 basis points better by year-end than previously what we thought.
And then we’ve talked about some of the big expirations that we have kind of in early ’25 principally in Nashville, but some of the leasing activity that we have done so far this year and some other prospect activity that we have are leases that will commence in ’25. So that will offset some of that. So I think that, that just puts us in better position. And then the longer that we go on with having additional quarters of good leasing volume, that really builds the base to kind of get the recovery post the trough number. So I think as we go on and what we’re paying attention to and what I think you and others will pay attention to in terms of our performance is if we continue to lease well as we go progress throughout ’24, that’s really going to a nerve to our benefit in ’25 and thereafter.
Michael Lewis: Okay. That’s a perfect lead into my last question, which do we know why the pickup in leasing over the last four, five or six months? And I’m asking the why because maybe that’s important to understanding whether this is sustainable or not. Or has this just been surprising to you as well, I don’t know?
Ted Klinck: Yes. Good question, Michael. Look, I think it might be a few things. A couple of years ago, there were a lot of companies that were sort of kicking the can and doing short-term renewals. And I don’t think landlords and companies are doing that anymore. Landlords don’t want them to and companies are getting closer to making their return to work decisions and seeing how their layouts are going to be. So I just think there was a wall of maturities that got lease maturities that got pushed out, they’re now having to be dealt with. And then I also think, look, I do think the distress is also increasing from the last couple of years. And some of those customers are also having to make those decisions that they’re going to stay in that — in a building or move.
I do think the other thing I do think is from in-migration is starting to pick up a little bit in our markets. I mean we’ve been chasing a couple of customers. We just — Raleigh just won one from Dallas. We were chasing them both in Raleigh and Dallas our corporate relocation, which is sort of fun to see those. If you talk to the economic development folks for the last couple of years has largely been manufacturing and industrial users. We’re now starting to see there’s more office using customers come in. Just this quarter, we did 10 leases to new-to-market customers. Now they are largely small regional offices. The largest was 27,000 feet and then about a 17,000 footer and that goes down to 2,000 or 3,000 feet is over 60,000 feet of in-migration companies that are moving and open up new offices, largely just opening up new offices in our market.
So I just think the things just we’re starting to just see it open up a little bit.
Michael Lewis: Great. Thank you.
Operator: Thank you. We now have Tayo Okusanya from Deutsche Bank.
