I think that would be a market where we compare backfill of the exposure, as well as we have continued discussions on just mature assets, inbound, some of it in the Sunbelt, but most of it in the northern markets and we’ll continue to look to redeploy that. If you wanted me to put a percentage on what portion of the portfolio is core today, I’d probably put it in the 80%, 85% range. We’ve got a little bit of work to do and we acknowledge that in the north. And when the markets come back, will be effective at continuing to redeploy into the Sunbelt.
Nicholas Thillman: Very helpful. Thanks for the time.
Operator: Thank you. [Operator Instructions] Our next question is coming from Dylan Burzinski with Green Street. Your line is live.
Dylan Burzinski: Hey guys. Thanks for taking the question. I guess, just going on portfolio percentage leased today versus how you guys think about it moving into 2024, I think you guys alluded to only 10 percentage points of rent expiring over the next 18 months. And given the strong leasing activity thus far, I guess, do you think it’s safe to say that leasing percentage has maybe bottomed here? Or I guess, given the US bank news in the suburban location that there should — there may be some pressure here as we look out to 2024?
Brent Smith: Great question, Dylan. I think that’s always a difficult thing with office companies is the ins and outs, the tenants is complicated and of course, when they come in, they don’t necessarily always start cash paying. I think if we focus on occupancy, as you pointed out, we do have Cargill vacate beginning of next year and then middle of next year, the US bank vacate. We’ve got a great backlog of leases that are about 0.5 million square feet of yet to come in, another 0.5 million square feet that’s not cash paying, but has commenced, so that will flow in and kind of, if you will, backfill some of from an FFO perspective. And depending on what assets we put in the redevelopment pool, that would obviously impact lease percentage.
But let’s assume for now that everything stays in the current portfolio operation pool, I would expect you see occupancy reach its bottom middle of ’24 and we’ll continue to fight that with great leasing that we continue to have and the pipeline that George and the team have talked about. But I would anticipate that’s probably where the trough lies for the portfolio.
Dylan Burzinski: That’s helpful. I really appreciate that. And then I guess just going back to the comment on the Houston transactions and the buyers not really being able to get comfortable with the capital structure, but were there any discussions of possibly offering seller financing to them?
Brent Smith: A good question as well. And I think in this market, we’ve continued to see the very limited transaction activity that can occur often requires that type of financing. To your point, we did provide seller financing up to about 50% LTV at a market rate. We were not in a position we felt to go higher than that, and frankly, didn’t make economic sense in our mind. The buyer, obviously, is not able to come up with the equity given that amount of debt proceeds. So we parted ways, but we are going to continue to canvass the market and offer seller financing on the asset. This go around at roughly 50%, call it, 55% LTV again at market rates. And we’ll evaluate the receptivity hopefully here is positive over the next few quarters.
Dylan Burzinski: And are you able to share sort of what that market rate was for that Houston asset?
Brent Smith: Interest rates, typically, we’ve seen from, I’d say, more gateway markets for seller financing in the 5% to 6% ZIP code. We were more in the 7% to 8% SIPCO given the tenure of the asset and, frankly, the suburban nature in Houston on the quality of the asset. Great buildings, great tenancy and long-term wall, but we felt like that was a reasonable leverage profile, and that was not — they were not able to close it at that level.
