Operator: Thank you. Our next question comes from Peter Abramowitz from Jefferies. Your line is now open. Please go ahead.
Peter Abramowitz: I was wondering if you could just talk a little bit about the supply outlook in your markets for ’24 kind of near to medium term and how we should think about the impact just to your occupancy and to market rents.
Ted Klinck: And that’s on new deliveries?
Peter Abramowitz: Yes, yes.
Ted Klinck: Yes. That’s one of the silver linings, I think, as you’re seeing construction starts go way down. For several of our markets is really very little, if any, new construction, Orlando. There’s not Tampa. We’re the only spec building under construction. Raleigh and Nashville, I mentioned about Raleigh, there’s more under construction. They will be delivering in the next really 12 to 18 months. Nashville is really only in downtown. There new supply coming on Midtown Atlanta, where we don’t have any presence, you’ve still got some supply coming. So in general, I think there’s a lot less supply coming on than there has been in the last several years. Nothing is new is going to get out of the ground, very difficult to finance new construction today.
So, I think anything that’s delivering between now and the next 18 months is going to have a window to really lease up when the demand starts coming back. So in general, demand is not as big an issue it has been for the last several years in our markets, maybe save Raleigh and Downtown Nashville.
Peter Abramowitz: Got it. And then in terms of the secured deal at Midtown, can you just talk a little bit about the other avenues of financing that were on the table that you consider? And then I guess just relative attractiveness of what’s available in the capital markets right now, kind of what ultimately drove that decision to go that route?
Brendan Maiorana: Yes, Peter. So at Midtown West, that is a JV property, right? So that’s not a decision that is kind of sold to Highwoods. So we’ve got to work with our partner in terms of the capital that is appropriate for the venture. So for the venture to term out the construction loan, I mean, it’s either kind of going to the secured route or it’s — for the partners. So, I think in that regard, the financing at Midtown West we felt like was an attractive option and our partner felt like that was an attractive option. So that was the decision there. I think with respect to kind of the prepared remarks that I made in terms of thinking about securing additional liquidity as we go forward and looking at those avenues, yes, the options that we have and that we’ve used over the past several years, if you go back a few years, we’ve been in the bond market, if you go back a few years.
We’ve gone to the bank term loan market, and we’ve gone the secured route. So each of those kind of is still available, but they all present sort of certain benefits and challenges that are there. So I think we will kind of evaluate, but we do believe that we’ve got access to capital across a number of different sources and we’ll see what we think makes the most sense for us in the long term. And I should also mention, we also — as I think Ted mentioned and I mentioned, disposition proceeds are another sort of capital that’s out there as well. So that’s another option that’s there, too, in addition to just kind of raising additional debt capital.
Operator: Thank you. Our next question comes from Ronald Kamdem of Morgan Stanley. Your line is now open. Please go ahead.
Unknown Analyst: This is [Timmy Martin] for Ron Kamdem. Can you guys talk a little bit in the prepared remarks about — from some of the asset sales? Maybe just give us a sense for what the incremental dilution might be relative to whatever you guys use on the line of credit, just a sense of cap rates and what not?
Brendan Maiorana: It’s Brendan. It’s hard — I mean the — I’ll maybe let Ted give a little more color in terms of the capital markets. But obviously, they’re challenged as it stands right now. We were successful selling a little over $50 million in the first half of the year. I think those carried an average cap rate of 7%. So, I mean, depending on where deals get done going forward, you’d see kind of that cap rate relative to the debt that we would be paying off, which is largely at what would be our line balance or maybe one of the term loans, which is a SOFR plus, call it, in rough numbers, 100 basis points, so you could do the math there. It will be much more impactful kind of on an FFO basis. What we’ve seen over the past several years is a lot of the dispositions that we’ve done have actually been accretive on a cash flow basis. So we’ll see. You’d never count anything until a deal gets over the finish line, and we’ll see where those deal metrics shake out.
Unknown Analyst: Makes sense. And then just the year-around occupancy guidance, I understand it’s tough to kind of pinpoint it — to point time at the end of the quarter. But just how are you guys thinking about the wide range there? That was maintained. Just any moving pieces or just what’s driving that the high and the low end of the range there?
Brendan Maiorana: Yes. I mean there. It’s — yes, it’s a good question. And I know we talked about this last quarter as well. It is hard because you move a commencement from January to December or vice versa, and it can move the numbers pretty meaningfully because we’re talking about a point estimate on the last day of the year. So there’s some stuff that we moved out last quarter, and I think Ted alluded to it, but there were a couple of deals that we felt like were close to the finish line, which then we don’t feel as confident in getting those deals done. So, some of that stuff caused some of the conservatism with respect to kind of the comments and the year-end outlook. But we always keep a fairly wide range there because — like I said, it’s just trying to pinpoint a number on the last day of the year is always a little bit challenging.
Operator: Thank you. At this time, we currently have no further questions. So I hand back to Ted Klinck for any further remarks.
Ted Klinck: Thanks, everybody, for joining the call today. Thanks for your interest in Highwoods. And we look forward to seeing many of you out in L.A. for NAREIT in a couple of weeks. Thanks again.
Operator: Thank you for joining today’s call. You may now disconnect your lines. Now disconnect your lines.
