Ted Klinck: Yeah, Michael, it’s Ted. Look, on Pittsburgh, as you all know, we announced in the third quarter 2022 that our intention was to exit Pittsburgh. We didn’t put a time line on it. And just as a reminder, we announced back in 2019 that we’re going to get out of Memphis and Greensboro. It ultimately took us about three years to get out of those markets. So our intention is still to exit Pittsburgh, but just given a very difficult capital market environment for office and then you layer on a very big office transactions. It’s just — it’s not an opportune time. So we are focused on leasing up the vacancies, the upcoming vacancies and just running the assets like we normally would.
Brendan Maiorana: And Nick, this is Brendan. Just in terms of the capital plan for the year, there really isn’t anything that we don’t need any of those proceeds. I mean, we have over $900 million of existing liquidity and we’ll spend some money on the development pipeline. But even if we didn’t sell anything during the year, I think from a sources and uses standpoint, we’ve got ample liquidity for several years.
Michael Griffin: Thank you very much.
Operator: Our next question comes from Rob Stevenson from Janney. Rob, your line is now open.
Rob Stevenson: Good morning guys. Ted, given your comments about brokers not touring assets with debt issues, are these just turning into zombie buildings that can’t fund TIs and no longer competitive. Is there something else that’s going on there?
Ted Klinck: Well, I think some of those are — it’s exactly right. And you also got a — anybody who’s got a loan coming up with a secured loan, they’re having discussions with their lender right now. So it’s — the lender wants to pay down, the borrower may not be willing to do a pay down. So you’ve just got those — tension in the room, I think, between a lot of lenders and borrowers. So right now, yeah, who’s going to fund the TIs of the lender going to do it if they haven’t worked out an extension with the borrower. So I think they are difficult conversations that are going on with a lot of loans that are — have near-term maturities.
Rob Stevenson: And have you guys seen lenders taking good quality assets back in your core markets? Or is it just the lower-tier assets that we’re seeing as the headlines and they’re just kicking the can down the road on the better quality assets.
Ted Klinck: Yes. I think that’s generally it. Lower quality typically is the prior cycles, lower quality is what goes back first. So we’re starting to see it, but there have been a — I’d say, maybe a handful of high-quality assets that have, in fact, gone back to lenders over the past 12 to 15 months. I think there’s going to be some more. So it’s just — you just got to be patient. But coming out of the GFC, we didn’t [ph] buy-in high-quality assets until 2012 and 2013, GFC started 8 or 9. So it takes a few years just to cycle through the quality of the assets we want. So we’ve got several on our radar on our — what we call our wish list. But again, it’s just going to — we have to be patient.
Rob Stevenson : Okay. And then just to ask the leasing question in a different way. How rational are your markets today? Are you seeing other landlords overpaying for occupancy out there and driving cost up? Or are people remaining fairly reasonable at this point given market conditions and length of lease, et cetera?
Ted Klinck: Yes. Look, I think this environment, it’s similar to what the office market experience is during any economic downturn, right? It becomes a tenant’s market. So you got not knowing what each intention is, and what the situation is with each building landlord, there’s — landlords are getting very aggressive. Vacancy is increasing. You got to increased sublease space. Capital costs are increasing. So look, there’s — I would argue there’s some irrational deals going on, but we’re highly competitive as well. We’re going to compete for all the leases, but it’s just a — it’s a tenant’s market and it’s an environment that we saw, we see every 10 or 15 years.
Rob Stevenson : Okay. And then, Brendan, just to follow-up on that, tenant improvements that you mentioned in your comments, up almost $20 million year-over-year, like 23%, like $94 million and change. Given the amount of rollover in leasing, that you guys are slated to do in 2024 and 2025. What are you guys budgeting there? Is it likely to remain elevated at these levels over the next year or two until you get the occupancy up?
Brendan Maiorana : Yes, Rob, that’s a good question. We think it’s probably more likely to kind of migrate down during 2024 at least that’s what we kind of have baked into the outlook. So I expect a lot of 2023 was all of the leasing volume, particularly the new leasing volume that was done in 2022, a lot of those dollars got spent in 2023 [ph] was an above-average amount. I think 2024 is likely to look more like a normalized year. So our expectations are we’ll see those numbers come down and will look more like probably prior years that you saw before prior to 2023 in terms of that spend. So might be in the kind of $15 million to $20 million reduction range would be our expectation. But again, that — it’s that is based on kind of the current business plan.
I think it would be a nice result if leasing volume remains very high, the way that it has for the first month of the year here, and we spend a lot of capital. If that’s the case, I think we’d be happy with that result. But I think our expectation and what’s in the business plan now is it’s going to look much more, spend is going to much look much more like it did prior to 2023, but we’ll see kind of how that goes.
Rob Stevenson : Okay. That’s helpful. Thanks guys. Appreciate the time.
Operator: Our next question comes from Nick Thillman from Baird. Nick, your line is now open.
Nick Thillman: Hey, good morning, guys. Maybe starting with some comments from Ted or Brian on kind of the lease term dynamics you guys are — you commented on earlier. Some of your West Coast peers mentioned that tenants are kind of seeking like shorter-term deals, but that doesn’t really seem to be the case for like your guys’ markets based on lease duration increased quarter-over-quarter for the last four to five quarters. I guess what’s driving that? Is that just the type of tenants in your markets or the size of your tenants?
Brian Leary: Hey Nick, it’s Brian. I think it’s probably just the conviction of the folks who are opting to make the workplace a priority. So, the return to work is — return of the office has got team here in our markets. And I think folks have kicked the can and done the shorter term deals previously. So, that’s where we’re getting conviction and a little larger size. I don’t know if it’s anything other than that. I don’t think it’s some weird stat that popped out, but that’s what we’re seeing.
Nick Thillman: And maybe following up on that, Brian. Just on Orlando and specific. You didn’t call it out in your commentary, but rate change there was over 22%. So, anything to call out in that specific market, what you’re seeing, whether it be like tenant type or the type of deals you’re doing that?
Brian Leary: Well, I think what’s interesting about Orlando, right, there’s so many macro delays trends that are heading to Orlando in Central Florida and Florida. And so there’s zero new development underway. There is zero new development that’s been added as competitive. And so we have well-positioned assets. We’ve been able to invest in them kind of through this period. So, some of the earlier questions about Zombie buildings, not only did that talk about funding TI and commissions, that also is difficult to fund kind of repositionings or what we call hybridizing where we kind of upgrade the experience. So, we’ve done that kind of right through the pandemic in terms of our workplace make. And I think the Orlando portfolio has been the beneficiary of that. We’ve leaned into our spec suites. So, Orlando has kind of caught up to the rest of her partners across the markets, and that’s why we’re seeing such great results there.
Nick Thillman: That’s helpful. And then maybe last one for me. On the dispositions, maybe can we break out the difference between just land sales and regulated property sales? And then kind of — are we going to assume more of these bite sizes deal similar to the one you did in Nashville in 4Q, like $25 million to $30 million transaction?
