Brendan Maiorana: Peter, it’s Brendan. So first, what I would say is while the dispositions that we did so far this year are dilutive to FFO, I think to your first question, they are accretive to our cash flow. So I think we would expect comparable dynamics in terms of any future dispositions that we may do this year or on a go-forward basis. Where the cap rates shake out, it depends. Every deal is unique. So it depends on the particular circumstances for that particular deal. I think it’s — we’ll see where they, where cap rates shake out. I would say the bias is maybe a little bit higher than the cap rates that we transacted at early this year, but we’ll see. But I think in general, the capital recycling activity that we do, what you ought to see is an improved cash flow outlook for the company and improved portfolio quality and therefore, a lower risk overall for us as an enterprise.
Peter Abramowitz: That’s helpful. Thanks, Brendan. Thank you, Team.
Operator: We now have Ronald Kamdem of Morgan Stanley. You may proceed with your question.
Ronald Kamdem: Hey. Good afternoon, guys. Just the first question, you guys talked about some of the expirations through the year and how that might be a headwind to occupancy. Maybe just give us a picture of what retention would look like in ’24 if we were to exclude those move-outs. So just the retention on everything else outside of the known move-outs?
Brendan Maiorana: Yes. Hey, Ron, it’s Brendan. I’ll take that. So retention, we always struggle with this answer and question that we get often because we do so much early renewals that it depends on the date that you start kind of counting retention. So prior to coming into this year, we had already renewed 1 million square feet of original 2024 expirations that are pushed out into future years. So when you look at what’s left over, as you kind of come into the year, you have adverse selection bias there. And clearly, like that’s where the retention level on the remainder is low. So that number probably for kind of what we had left in the year, including the known move-outs, was probably, call it, in round numbers, around 40%.
We talked about some of the large known expirations that are there. So that number would be a little bit — would be 10 plus percentage points higher if you excluded those from kind of the numerator and denominator. But that gives you a sense of kind of where we are.
Ronald Kamdem: Got it. And the second one on McKinney & Olive. You guys talked about paying down that loan potentially. I guess, what the sales you guys have executed on and potential additional $150 million to come. Should we take that to mean you’re just going to use existing corporate liquidity or could we potentially see you guys tap the unsecured market to get here?
Brendan Maiorana: Yes. No, no plans to — for capital raising for this year. So I mean I think as we sit here right now, we have almost nothing drawn on the line. So have that full $750 million that’s available, certainly have construction loans in place for the two Dallas development projects. So that would satisfy the bulk of the remainder of spend there. So we really have plenty of liquidity. And I think to your point, with potential dispositions that are on the horizon. I think it’s more of a challenge in terms of deciding what capital we want to pay off with any disposition proceeds that come in the door rather than thinking about capital raising.
Ronald Kamdem: Got it. And then I think you guys talked about Pittsburgh and Bass, Berry. Maybe just an update on Novelis as well would be helpful.
Ted Klinck: Yes. So on Novelis, again, we like the prospect activity. As you all know, we went direct with one of the sublease customers and we’ve got over 200,000 square feet of prospects to backfill the remaining, call it, 100 or so thousand feet, maybe a little more than 100. So we feel pretty good about the prospect activity, a lot of tours.
Ronald Kamdem: Got it. Thank you, guys.
Ted Klinck: Thank you.
Operator: Thank you. We now have Dylan Burzinski from Green Street.
Dylan Burzinski: Hi, guys. Most of my questions have been asked. But I guess, Brian, going back to your comments on focusing on occupancy over rental growth. I mean, is it your expectation that we’ll continue to see some degradation in net effective rents across the portfolio? Or how should we be thinking about that?
Brian Leary: Dylan, I’m accused among the three around this table to be the eternal optimist. So I’ll lean into that a little bit. Now look, obviously, headwinds, I think tenants feel like it’s a tenant’s market and it is. But I do feel constructive on our ability to hold kind of where we’re at based on the quality of the assets, based on the seven different things Ted highlighted why maybe our leasing momentum is maybe more than previous averages with regard to flight to quality, flight to capital. I don’t see it greatly improving anytime soon, maybe as costs come down to fit up. But in general I feel like. I feel pretty optimistic about where we’re at. Brendan?
