Clearly, inflationary pressures on not just labor but food as well is — hurt our ability to drive profit early on in this opening. But rightsizing the labor, rightsizing the recipes, rightsizing each of the experiences within the Tin Building, we think can allow us to turn the corner pretty quickly because the revenue that we’re generating there, the foot traffic that we’re generating there has been nothing short of exceptional. And with that much volume going through that building every day, we’re going to be able to turn that corner and push towards a much better results for our shareholders this year.
Operator: The next question is from Hamed Khorsand with BWS Financial.
Hamed Khorsand: So first question I had was, could you just define your — given that you’re saying you’re a self-funding business, what that would entail this year given the smaller financial footprint you’re expected to have with EBTs this year?
Carlos Olea: Hamed, thank you for the question. Well, as we also talked about our Capital Allocation Committee. So we are always looking and matching our sources for cash flow with our development pipeline. So what we might see is not a change in the model. It’s that we will continue to match the free cash flows that we harvest from NOI, land sales and the few condominium sales that we will have this year and take that and look at our pipeline and match out the inflows with the outflows.
Hamed Khorsand: I understand that. But are you going to be having a smaller amount of projects this year because you’re going to have less cash flow? Or are you going to be into debt to keep the flywheel going as far as projects are concerned?
David O’Reilly: No. Yes, I mean, we’re not going to see as much new development this year than we have in past years because we’re not closing the condo this year, and therefore the free cash flow is lower. Our job is to match fund that net free cash flow that comes in into the uses on the other side, whether that’s share buybacks or new developments. In years that we have outsized free cash flow, we can start more projects. The years that we have less free cash flow, we’re going to start less projects. And — but there are years where there’s free cash flow that doesn’t not necessarily get used entirely because there’s just not enough great projects or we just can’t get them out of the — off the planning stages and into the dirt fast enough.
Look, we look at our unfunded cost of our existing development pipeline and the cash that we have on the books that can more than fund that and leave us an adequate cushion today. And then as that free cash flow comes in, we’ll be able to start a handful of new projects this year. We think we have the opportunity to do some great projects that will not just create value on the projects alone but will be incredibly additive to the overall Master Planned Communities that they’re built in. And those are the unique opportunities that we’ll execute on the share
Hamed Khorsand: Okay. And my other question was, could you just talk about the competitive landscape with these tenant losses? I think it’s the first time you’ve talked about tenant losses since COVID. What’s driving that? And how are you staying competitive in your MPCs?
David O’Reilly: Well, I would tell you that our buildings, and we own the majority of the buildings within our MPCs, continue to outperform the regions. And I think they do that because we offer the quality of life at so many employees and employers are looking for, that those out-of-state migrations that I talked about that have come into The Woodlands and Columbia and Summerlin are leasing up that space. We saw good leasing momentum this year. I quoted earlier the number of square feet that we leased in each of our markets. Those were, I think, very strong results given the macro environment and the shift of more folks hybrid and more work from home. I feel great that our communities and our assets will continue to outperform as they have for the past decade.
