Brendan Maiorana: Hey, Georgi, it’s Brendan. I’ll start, and then maybe I’ll hand it over to Ted or Brian for some color on the large expirations coming up. So as is typical kind of seasonally for us, and we’ve talked about this in years past, we usually have kind of a seasonal dip in the first quarter. So no single large users, but there’s a handful of expirations that happened at the beginning of January that our single floor users. So we expect occupancy to kind of dip a little bit in the first quarter and then sort of hold steady, maybe migrate up a little bit as you kind of migrate into second and third quarters. And then we’ve got the expiration with Novelis late in the third quarter. And then in the beginning of the fourth quarter with EQT.
So I think you’ll see occupancy kind of low at the end of this year with that average kind of in the range of 87% to 89% as we discussed. But that doesn’t — I just — I’ll mention this. We have — and I think Brian talked about this on the call, but we’ve got about 320,000 square feet of signed, not yet commenced leases just between CoolSprings 5 2,500 Century Center and Tampa Bay Park. There’s only about 100 of that that we expect to kind of move into occupancy by year-end 2024. So even when you kind of go into 2025, there’s still a fair amount of leasing that we’ve done that will come into occupancy in 2025. So I think — and then we’ll — we expect to continue to lease space on existing or future vacancy as we kind of go forward throughout 2024, which we don’t expect to be in occupancy in 2024, but will contribute to future years.
Ted Klinck: And then this is Ted. Why do I jump in, I sort of went through a few of the known move-outs. I’ll go through quickly one more time. Novelis, we backfilled 50,000 feet. So Novelis is 168,000 feet, September 2024. We’ve backfilled 50. We have good prospects for 350 of the remaining 100 or so, 120,000. So we feel really good there the activity. EQT is October 2024, and 17,000 feet. We’ve backfilled 16,000 square feet. Basically, I said backfill. We went direct with a subtenant of EQT. So we’re happy to do that. We’ve got pretty good activity on some additional space. So we’ll see there. It’s still early. Then Department of revenue, we have not talked about that one. They’re like some — I think, 255,000 feet that expire at the very end of the year 2024.
So they’re vacating, but we’re — we’ve retained them. As we mentioned, the in our prepared remarks, removing them. They’re downsizing. We’re moving within that same park to about 110,000 square feet in a different building, and we would have loved to keep them in the building they’re in. They just — is just very difficult from a layout perspective. So we’ve got that. And then on that building, we’re actually looking at various scenarios, what the strategy is for the building the DORs vacating, including a potential residential conversion. So more on that, we’ll know more in the next 90 to 120 days, probably with respect to the DOR. We do have a 150 Fayetteville, our headquarter building here in Raleigh that we’re sitting in, Wells Fargo is vacating 78,000 square feet at the end of October of this year.
And we knew that. We bought this building back in 2021. And it was a known vacate at that point. So we’re actually excited to get that 78,000 square feet includes about 16,000 square feet of a branch location that’s on the first floor of the building that we’re going to turn into state-of-the-art amenities for the building, which has been our plan since 2021. So we’re excited to get that back, total of about 60,000 square feet to re-lease there, and we’ve got some really neat plans for that. So that’s one we’ll get taken care of. And then the vast, Barry [ph], which I mentioned on a prior question that we’ve got several multi-tenant floors interest in those. Again, early prospects just to our activity, but we feel good given we’re still a year away.
Georgi Dinkov: Thank you. That’s very helpful. And just a last one for me. With all the news about tech layoffs, how do you think that translates to your markets?
Ted Klinck: Yeah. We’re not a big tech market. Our — as you know, Raleigh, more than probably anybody. But in general, we’re pretty diversified customer base, don’t have a lot of exposure to tech. I think several years ago, maybe we wish we did when tech was gobbling up the space. But we don’t have a lot of exposure in our markets to tech.
Operator: Our next question comes from Dylan Burzinski from Green Street. Dylan, your line is now open.
Dylan Burzinski: Thanks for taking the question guys. And just one for me. So I guess just as we think about occupancy dipping throughout 2024 into early 2025, if I sort of pair that up with some of the comments you just made, Brendan, and the comments around sort of good activity on near-term move-outs. I guess, it seems to us that the lease percentage, the drop-off in lease percentage moving forward should be a lot less than the drop-off in occupancy and therefore, as we think about occupancy into 2025 and beyond, you should recover what is lost relatively quickly. Is that fair to say?
Brendan Maiorana: Yeah, Dylan, it’s a good question. I certainly think that if the activity that we’re seeing in terms of prospect activity translates into leases as we’re hopeful that it will, that your outlook would prove correct. Now there’s execution that needs to get done. So it’s not to say that this is — that’s a foregone conclusion. But I think if activity levels hold up and we’re able to translate what we think are the good prospect activity into leases, then I do think that, that is — that your outlook would prove correct.
Dylan Burzinski: Great. Thanks guys.
Operator: Our next question comes from Peter Abramowitz from Jefferies. Peter, your line is now open.
Peter Abramowitz: Thank you. Yes. Most of my questions have been answered, but just one here. Have you noticed any change in the last, call it, sort of 60, 90 days as the macro backdrop and the rate backdrop has sort of shifted here? Have you noticed any change in the environment and demand for office buildings in your market in general? I guess just from a general perspective and then also as it relates to the assets that that you’re out in the market with. I guess, has there been any change in appetite for office transaction.
Ted Klinck: No, I don’t think so. I think the assets we’re in the market with have sort of already been tied up. So, we don’t have a whole lot of real-time data points with respect to that. I do think what we’re hearing is you’re going to see some more stuff coming to the market from the brokers. I do think after the year turned, rates came down brokers are a little bit more confident. There’s a lot of dry powder sitting on the sidelines. So, I would fully expect once buyers have a clear understanding of what their cost of capital is going to be and the availability of capital it’s still tough to get on office alone today. I think virtually all the capital sources is very difficult. But I do think it may loosen up in the next six to nine months. So, I think transaction activity is going to pick up, but I think it’s going to be in the back half of the year likely before we see a whole lot of that. But there’s a lot of money that still wants to invest.
Peter Abramowitz: Got it. Thanks Ted.
Operator: Our next question comes from Omotayo Okusanya from Deutsche Bank. Omotayo, your line is now open.
Omotayo Okusanya: Yes, good afternoon everyone. Just in regards to the tenant that was moved to cash accounting, which again, I’m assuming is the same tenant taken the [indiscernible]. Curious again, since you have to move them to cash accounting. How do you kind of get comfortable with the renegotiated lease that, again, 12 months down the line, you’re not kind of back in the same situation?
Brendan Maiorana: Yes, Tayo. It’s a good question overall. Yes, I mean, I think — so first of all, the standard to kind of put somebody on GAAP accounting is that you have — you’re more than probable in terms of collecting that rent throughout the duration of the term. So, this is a very long-term lease that we have and the business cycle is a little bit uncertain. And I think we’re comfortable with kind of where we are because there’s not a lot of capital that we will incrementally invest into the space. And there is a meaningful amount of rent that we expect over the life of the term. But I think just due to being conservative in terms of how we would like to account for this I think we felt it was prudent, and we talked to our auditors about this to put them on a cash basis.
So, it’s not to suggest that we don’t think that there is collection that’s likely or collect a significant amount of rent, but I think just out of an abundance of caution, we move them on a cash basis accounting. And I will say that, that’s not dissimilar from things that we do other industries that we tend to view as a little bit more volatile than maybe our core customer base. So, as an example, most of the retailers that we have within our portfolio, we just move them on a cash basis. That’s just standard practice for us. So, I think we feel very good about the modifying lease that’s there. I think we feel very optimistic about the long-term outlook for that building in particular, but just out of an abundance of caution, we didn’t want to start to record GAAP revenue in 2024, given the long-term nature of that lease.
