Omotayo Okusanya: Hi. Yes, good morning. Just a quick one from me. In terms of just overall demand, could you talk a little bit about demand for some of the recently vacated space like activity space in the CDC space? I think you already gave color about some of the upcoming vacancies. We’re curious about those two spaces, in particular, and if any of the new leasing this particular quarter was related to backfilling any kind of recent vacancies?
Ted Klinck: Yes, Tayo, I think specifically on the Tivity, as you know, we redid the landmark lease earlier this quarter. I think earlier last quarter, the — we took back about 110,000 feet. We have really good activity, multiple prospects on it. So we did a big Highwoodtizing project a couple of years ago or a year or so ago and it finished and it’s really generated demand. It’s been very well received in the market. So that’s about 110,000 feet and we’ve got prospects, I’d say, prospects either agreed to or strong prospects that we’re trading paper with for about 80,000 feet or so. I don’t know if we’ll make all those, but we feel pretty good about a lot of those. So we feel really good about that. I don’t think much of the leasing activity this quarter was really backfilling anything other than maybe one or two of the Tivity spaces that we’ve signed.
Omotayo Okusanya: Great. Thank you.
Operator: Thank you. We now have Peter Abramowitz of Jefferies.
Peter Abramowitz: Hi. Thank you. Yes. So just kind of want to dive into some of the comments around potential kind of future growth opportunities some of the underwriting you’re doing. I guess we have a decent sense from whether it be noncore asset sales or the unsecured bond deal that you did last year where your cost of capital might be today. So I was just wondering if you could talk about from a pricing perspective, whether initial yields or IRR relative to that cost of capital kind of what you’re hopeful for? What’s realistic when deals do finally kind of6 start to come back to market and start to pencil like where are your expectations for where those would be from an underwriting perspective?
Ted Klinck: Sure. Peter, as you know, I mean, look, we’re interested in growing the business and improving the quality of the portfolio, both core and value-add acquisitions. Coming out of the GFC, we primarily did value-add acquisitions. We want to own quality assets, the best business districts of our markets. And we’re looking to create where we can improve our cash flow growth over time as well. And I think coming out of GFC, we were able to do that very successfully. So where are we now in terms of the underwriting? I think, obviously, we look for a discount to replacement cost and a lot of different metrics. IRR, we’re sort of underwriting to a double-digit, low double-digit unlevered IRR, Peter, is sort of what we’re doing today.
And again, there’s a handful of deals out there that we’re seeing where they’re going to price, but we’ll see. But it’s those type of metrics, if we can get a stabilized cap rates in the high-single-digit, low-double-digit with an 11% or low-double-digit unlevered IRR, those feel pretty good for us that we can improve the quality of the portfolio. If we can get acquisitions under our belt that are like that.
Peter Abramowitz: That’s helpful. Thank you, Ted. And then one on the leasing market. Could you just comment on sort of the length of deal cycles? I know that was both for you guys and for office overall became more of a challenge last year that tenant decision-making was just a little bit slower. Could you talk about kind of that dynamic and where that’s at in the first couple of months to start the year?
Ted Klinck: Yes. Certainly, that’s been the frustrating part. It’s definitely taking longer to get deals done. Bigger was really taking longer. I mean some are — we think we’re going to get it done. It may get pushed a quarter, two quarters, in some cases, even three quarters. It’s taken a long time. So the bigger the deal, the longer it takes, in general, just whether it has to go up through the corporate real estate department up to the CEO. And a lot of it is based on the CEO’s confidence level in the economy as well. I think interest rates plays into that as well. So longer — bigger deal takes longer. Smaller deals, our bread and butter, we’re still getting a lot of those done. Those are even taking longer, but not nearly as long as, call it, the 100,000 square foot users and above.
The nice thing we’ve seen in the last, I’d say, quarter or two, is we’ve seen full floor, more full floor users, more two-floor users. So that’s sort of mid-size type user, we’re seeing a lot more of those and some of the decisions getting made with those sized customers. Does that make sense?
Peter Abramowitz: That does. Thank you.
Brian Leary: Peter, hey, it’s Brian. I’ll add to that real quick. Other thing that’s taken a little while, people are continuing to price and price work. We don’t have a punchline yet on that, but the — it seems like escalations have stopped or leveled out or plateaued on build-outs. And so there is potential visibility into maybe getting a better price. So people kind of are holding on to see some of that TI that build out that cost of moving into new space come down.
Peter Abramowitz: That’s helpful. Thank you. And one last one, if I could. Just trying to think through from a modeling aspect, the earnings impact of any potential disposition through the rest of the year? I mean, are the deals that you’ve done so far in Raleigh is that kind of a good barometer of what we should expect pricing-wise?
