Howard Schwimmer : Hi, Craig. It’s Howard. While I’d love to tell you all about it because it’s really an amazing transaction that our team was able to negotiate off-market and without, frankly, much of any other competition, I think we’re going to wait until we close, and then we’ll be happy to provide full details.
Craig Mailman : Okay. And just one last one. You guys bought the Tireco building in the sale leaseback with them back in 1Q, it’s your largest tenant now in the 2025 expiration. Could you guys just talk about the prospects of that tenant staying? Are they definitely out? And where the mark-to-market expectation is today on that versus maybe when you bought it closer to the beginning of the year.
Laura Clark : Hi, Craig. In terms of Tireco specifically, we are in communication with our tenants and Tireco specifically. And at this time, and based on those conversations, they currently have no intentions vacating in 2025.
Craig Mailman : Okay. And they have options to stay?
Laura Clark : They do, they have options. And those options are — they have fixed options to stay.
Craig Mailman : And they led to 4% annually, just in perpetuity?
Laura Clark : 3%.
Craig Mailman : 3%? Okay. Great. Thank you.
Operator: Our next question comes from the line of Greg McGinniss with Scotiabank.
Greg McGinniss: Laura, I have another question on clarifying that mark-to-market disclosure. We’re hoping to dig into that 2% quarter-to-quarter impact from portfolio vacates or moving to repositioning/redevelopment. Is that just a lack of comparable rent on a new vacant asset, so you can’t provide the upside? And if thinking about that potential mark-to-market was previously greater than 56%, which is why it came down before, why would those properties need to be repositioned to redevelop anyways?
Laura Clark : Well, it’s that — those can be two separate things. So to your point, yes, on the vacate side to a comparable, there’s not obviously a comparable rent. But on the repositioning, redevelopment, that this can be a different set of properties. So as we are able to get properties back and execute on the repositioning and redevelopment plan, then they move out of the mark to market.
Greg McGinniss: Right. But I’m saying so is the rent growth, the mark-to-market assumed on those properties. Is that contingent on repositioning?
Laura Clark : For those properties that are moving into the repositioning. The repo on repositioning pipeline, is that your question specifically?
Greg McGinniss: Yes. I’m just trying to like basically CapEx requirement on achieving the 56% mark-to-market.
Laura Clark : No, that is not — they are not.
Greg McGinniss: Okay. And then is there beyond like typical second-generation TIs, is there any additional spend that we should be thinking about for achieving the mark-to-market?
Laura Clark : No. If a property is in the mark-to-market pool in that calculation in the 56%, it’s not in our repositioning. It probably is in that pool. It would just be your typical TI leasing commission, capital — recurring capital spend.
Greg McGinniss: Okay. Great. And then my apologies for what might be an ignorant question here, but we are new to the coverage. How does the 100 basis points of positive net absorption impact reported occupancy?
Laura Clark : In terms of the overall portfolio or the same property pool? What specifically…
Greg McGinniss: The overall portfolio. So if you have occupancy changing 10 basis points quarter-over-quarter, but it’s 100 basis points of positive net absorption. Just trying to figure out where the delta is there and how it’s actually impacting occupancy to have the positive absorption.
Laura Clark : Yes. Greg, maybe it’d be better offline. I can take that with you and walk you through the components of that.
Operator: Our next question comes from the line of Nick Thillman with Robert W. Baird.
Nick Thillman : I just wanted to touch a little bit on economics. It does seem like shorter lease duration. Just curious if you’re seeing any more like free rent being given or is this more TI associated with your leasing?
