Welcome to the Brandywine Realty Trust Q2 2022 earnings conference call. My name is Hilda, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press zero one on your touchtone phone. I will now turn the call over to Mr. Gerard H. Sweeney, President and CEO. Mr. Sweeney, you may begin. Hilda, thank you very much. Good morning, everyone, and thank you for participating in our Q2 2022 earnings call. On today's call with me as usual are George Johnstone, our Executive Vice President of Operations, Dan Palazzo, our Vice President and Chief Accounting Officer, and Tom Wirth, our Executive Vice President and Chief Financial Officer. Prior to beginning, certain information discussed during our call may constitute forward-looking statements within the meaning of the federal securities law. Although we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurances that the anticipated results will be achieved. For further information on factors that could impact our anticipated results, please reference our press release as well as our most recent annual and quarterly reports that we file with the SEC. Well, since our last call, our economy has seen record inflation, continued global supply chain disruption, and a dramatic increase in baseline interest rates. These conditions have created significant cost increases and uncertainty in the equity and debt financing markets, at least in the near term. Our portfolio stability, evidenced by our low forward rollover, provides protection from operating expenses, expense increases on 81% of our leases, and that positions us as best as possible for this changing environment. Our operating and development business plan remains strong and very much on target. While overall return to work has been slower than we would like, we are benefiting from a decided tenant focus on quality. We continue to experience higher physical occupancy across our portfolio, with the highest level of density being in our Pennsylvania suburbs and D.C. operations. Tenant interest in high-quality work environments is accelerating. We see that every day in our tour levels, lease negotiations, and deal execution. In fact, 32% of the new deals in our operating portfolio pipeline are tenants looking to upgrade from lower quality, less amenitized buildings. During the call this morning, Tom and I will review Q2 results, provide an update on our 2022 business plan and our guidance. After that, Dan, George, Tom, and I are available to answer any questions. During the Q2, we executed 686,000 sq ft of leases, including 423,000 sq ft of new leasing activity. We also posted rental rate mark-to-market of 18.4% on a GAAP basis and 7.8% on a cash basis. Our full year mark-to-market range remains at 16%-18% on a GAAP basis and 8%-10% on a cash basis. Absorption for the quarter was positive, and tenant retention was 70%. Q2 capital costs were in line with our business plan range. Core occupancy and leasing targets were also within forecasted ranges, and we ended the quarter 92.1% leased and 89.6% occupied. It's further worth noting that our Philadelphia CBD, University City, Pennsylvania suburbs, and Austin portfolios, which comprise 93% of our NOI, are a combined 93.8% leased and 91.9% occupied. Our spec revenue target remains in the range of $34 -$36 million, with $33.7 million or 96% at the midpoint achieved. This speculative revenue range represents approximately 1.8 million sq ft, of which 1.6 million sq ft has already been leased, so 89% done on that metric. The portfolio is stable, and our forward rollover exposure through 2024 averages 7.2%, which ranks at six out of 17 office REITs. Further, our annual rollover through 2026 is below 10%, ranking at seven out of 17 office REITs. From an FFO standpoint, we posted Q1 results of $0.35 per share, which was $0.01 above consensus estimates. Looking at our 2022 guidance, Tom will articulate in greater detail, but the bottom line is our original 2022 business plan projected interest expense between $70 million and $72 million. We have met that assumption for the first half of the year. However, looking to the H2, due to the rapid increase in short-term rates, our interest expense, including our share of joint ventures, will increase by about $0.03 per share. While our operating plan remains fully on track, based on the rise in interest rates, we are narrowing and adjusting our FFO range from $1.37-$1.45 per share to $1.36-$1.40 per share. As I mentioned, Tom will articulate more detail on that in a few moments. Based on our 2022 leasing activity and development spend, we continue to project our debt to EBITDA range will be between 6.6x and 6.9x. That leverage increase, the majority is transitional, coming through debt attribution, particularly on the development side. To amplify that point, our core EBITDA range remains between 6.0x and 6.3x by eliminating our joint venture and active development and redevelopment projects. As we mentioned on the last call, we believe this is a more accurate measure of how we manage our core stabilized portfolio. Looking a bit ahead, you know, despite the ongoing skepticism on forward office demand drivers, our leasing velocity actually remains fairly encouraging. During the Q2, physical tour volume equaled Q1 levels, with overall volume up over 30% from our previous year. Virtual tour volume was up 27% from the Q1, and our total leasing pipeline is 4.8 million sq ft, broken down between 1.4 million sq ft on our operating portfolio and 3.4 million sq ft on our development project. The 1.4 million sq ft leasing pipeline on the existing portfolio is up 100,000 sq ft from last quarter, with approximately 130,000 sq ft in advanced stages of lease negotiations. I should note that as an example of building velocity, out of last quarter's pipeline, we executed 430,000 sq ft of leases, while during the quarter, adding over 500,000 sq ft of new prospects to the current pipeline. Also, 32% of our new deal pipeline are prospects looking to move up the quality curve. We did experience this trend in terms of leases executed during the Q2, where 67% of the new leasing activity we executed were flight to quality tenants. The leasing pipeline on our development projects is at 3.4 million sq ft, and that did increase over half a million sq ft or 28% during the Q2. Deal conversion rates in the Q2 was up to 38% from 33% the last quarter. Another good sign is that tenants continued to accelerate their decision timeline. This past quarter, the median deal cycle time improved by an additional week and is now within five days of our pre-pandemic levels. From a liquidity standpoint, even with our targeted development spend and absent any other financing or sales sources, we anticipate having $300 million availability under our line of credit. Along those lines, during the quarter, we did renew both our $600 million line of credit and our $250 million term loan on very similar terms to those that were previously existing. Our $0.76 per share annual dividend is well covered. It's a very attractive yield on our current stock price and is accompanied by a 54% FFO payout ratio. In looking at capital allocation, we made progress on several fronts. We continued during the quarter and will continue to sell non-core land parcels. During the last quarter, we sold our land parcel in the Riverfront district of D.C., generating a $3.4 million gain. We also sold some non-core buildings and land in New Jersey, generating an incremental $800,000 gain. In looking at our development opportunity set, our remaining Brandywine net funding obligation on all of our active development projects is just about $110 million. Our equity requirements on Schuylkill Yards West and Uptown ATX Block A is fully funded. We have $24 million to fund on our new start at 3,151 Market. The balance of that remaining funding requirement really ties directly to leasing activity. During the quarter, we did commence the redevelopment of 2340 Dulles Corner. That property is 85% leased under an 11-year lease, and we anticipate completing that project by the Q4 of 2023. 405 Colorado made incremental progress during the quarter. We're now 91% leased based upon the 22,000 sq ft of leases that we signed during the quarter. We have two leases out for final execution that will completely fill the building. We're happy to deliver that project at our original anticipated yield. The 250 King of Prussia Road, which is our first life science delivery in the Radnor sub-market, is now over 36% leased. Current pipeline totals 237,000 sq ft, and we're making great progress as that building approaches final delivery. In looking at our development of Schuylkill Yards and Uptown ATX, Schuylkill Yards West, which is our life science office residential tower, on time, on budget for a Q3 2023 delivery. The project will continue to deliver a 7% blended yield. As I mentioned a moment ago, our entire equity commitment is fully funded. Our partner's equity investment is also fully funded, and the first funding of the construction loan recently commenced. You may recall in Schuylkill Yards, we can develop out 3 million sq ft of life science space. As another step towards realizing that vision, we are excited to announce the start of our 3151 Market Street project, a 440,000 sq ft dedicated life science building. The building has an estimated cost of $308 million. We'll deliver a yield of 7.5%, and we are targeting a Q2 2024 completion. Our leasing pipeline on that project right now is over 400,000 sq ft. We have obtained an equity commitment from our existing institutional partner at Schuylkill Yards, and the 3151 structure is consistent with our existing Schuylkill Yards West project, with Brandywine having a 55% ownership stake and our partner having a 45% ownership position. Looking at Uptown ATX Block A, the first phase of our 66-acre development is underway. Construction there is also on time and on budget. We certainly anticipate that that project will continue to generate additional leasing activity as we go through the development pipeline. In fact, even this early in the process, our leasing pipeline stands at 1.6 million sq ft. In addition to those ongoing developments, we have seen an increase in tenant interest in several of our build-to-suit projects, and we are exploring several opportunities in both the Pennsylvania and Austin regions. Two key points just to close out our development discussion is our focus on our forward pipeline, is our low land basis per FAR and our product diversity. Of the 14.2 million sq ft that we can build, only about 25% is office, with the ability to do between 3-4 million sq ft of life science space and over 4,000 apartment units. Furthermore, the overlay approvals we have on both of those master planned communities gives us the degree of flexibility to further adjust that mix to meet market demand drivers. Our key takeaways on the development pipeline is a very quantifiable forward funding basis, a low land basis, low carrying costs, demand driver flexibility, and product diversity. In terms of generating additional liquidity, while our 2022 business plan does not incorporate any additional disposition, we do anticipate being active on these fronts. We anticipate continuing to sell select non-core land parcels. Even with the recent volatility in the debt markets in particular, we believe that we have ongoing opportunities to harvest profits from the sale of several properties. As such, we are currently testing the investment market with several assets for sale. Obviously, volatility in the debt markets over the last 45 days has slowed that process, but we remain confident of being able to generate additional liquidity over the next several quarters. We also anticipate the sale to select properties out of some of our existing joint ventures over the next four quarters. Dollars generated from these activities will be used to fund our development pipeline, reduce leverage, and redeploy into higher growth opportunities. Tom will now provide an overview of our financial results. Thank you, Jerry. Our Q2 net income totaled $44.5 million or $0.03 per diluted share, and FFO totaled $60.5 million or $0.35 per diluted share, and $0.01 above consensus estimates. Some general observations regarding our Q2 results. While our Q2 results were above consensus, we had some moving pieces and several variances to the Q1 guidance. On G&A, it's $1.7 million below that forecast, primarily due to the timing of expenses, and we have not changed our range for the full year. Portfolio operating income totaled approximately $69.2 million and was slightly below our Q1 guidance of $70 million. Land gains were above forecast by $600,000 due to a higher gain on the sale of our New Jersey portfolio. Our Q2 fixed charge interest coverage ratios were 3.7 and 4.0 respectively, and sequentially below the Q1 results but in line with forecasted results. Our Q1 annualized net debt-to-EBITDA was 7.4, above the high end of our range. However, we are not changing that range at this time. As looking at our guidance for the rest of 2022, as Jerry mentioned, we narrowed our guidance ranges for both net income and FFO by $0.04 per share. In addition to that narrowing our guidance, we also reduced the midpoint of the guidance by $0.03 per share. The reduction is due to higher interest expense based on, you know, we issued guidance. The interest rate curve forecasted at that time for the third and the Q4 were 71 basis points and 92 basis points respectively. Current curve is higher by approximately 175 basis points in the Q3 and 240 basis points in the Q4. Through that, we have anticipated floating rate debt averaging $500 million in the Q3 and $695 million in the Q4, which includes about $148 million of JV floating rate debt in the Q3 and $125 million in the Q4. Our Q4 increase in floating rate debt is primarily due to the $250 million term loan, which is fixed through mid-October 2022 and floating thereafter, and partially offset by some in-place caps in our joint venture properties. We believe there will be opportunities to mitigate some of the floating rate interest through hedging and potentially asset sales that will lower our line of credit balance. Looking to the Q3 of 2022, we have the following assumptions. Our portfolio operating income will approximate $71 million and will be above the Q2 as we anticipate net absorption to continue through the balance of the year. FFO contribution from our unconsolidated joint ventures will be $6.5 million for the Q3. G&A will remain unchanged roughly at $8 million. Total interest expense will increase to $19 million, primarily due to the anticipated higher rate, and capitalized interest will approximate $2 million. Term fee and other income will approximate $2 million. Net management fee and development income will be $3.5 million. We do have a land gain sale and tax provision that will net around $1.5 million. Refinancing activity, as Jerry mentioned, we did recently refinance a $600 million credit through June of 2026, and our $250 million term loan through June of 2027, on very similar terms to the current facility. Looking at our capital plan, fairly straightforward and totals $200 million. Our 2022 CAD payout ratio will continue to be 84%-95% and likely be at the higher end of that range. The 2022 range is above our historical run rate, primarily due to the higher capital costs associated with higher leasing activity in our wholly-owned and joint venture portfolio. The uses for this remainder of the year is $74 million of development and redevelopment projects, $65 million of common dividends, $30 million of revenue maintenance, and $20 million of revenue create CapEx, and $10 million of net equity contributions to our joint ventures. Primary sources are $90 million of cash flow after interest, $81 million of use of the line of credit, and $29 million cash on hand. Based on the capital planned outline above, our line of credit balance will approximate $300 million at the end of the year, leaving $300 available. This needs to be adjusted in our SIP where we have $330 million. We'll be adjusting and reposting that SIP this morning. We also presented our net debt to EBITDA range of 6.6-6.9, but the main variable will be timing and scope of our development activities. With regards to liquidity, we have ample capacity through our line of credit. We do expect to invest an incremental $96 million in our active development projects after 2022. Our plan is to complete targeted asset sales later this year and into 2023 to lower that line of credit balance. We anticipate our fixed charge ratio to be approximately 3.5 and our interest to be 3.8, a slight decrease from the prior quarter, and our net debt to GAV will be between 40% and 41%. We believe these ratios are elevated due to our growing development and redevelopment pipeline, and we believe they are transitory. Once these developments are stabilized, they will decrease. To further highlight how the investment in future development is impacting our current leverage metric, as outlined in our development page, we currently have $397 million invested in development projects that are providing none or minimal 2022 earnings. That $397 million investment has a 1.4 times increase to our leverage at the end of the quarter. We anticipate those projects generating $57 million of cash NOI over time and are confident on reaching those stated investment yields. Once these active projects are stabilized, we forecast that leverage will go back down into the low six range. As mentioned above, we plan to partially offset the current development leverage with some targeted sales in 2022 and 2023. While the above development activity takes place, we included an additional metric of core net debt to EBITDA, which was 6.6 at the end of the quarter, which excludes our joint ventures and active fully owned development projects. I'll turn the call back over to Gerard. Great, Tom. Thank you very much. Just to wrap up, key takeaways are, look, we're very mindful of the tone on the office market and the impact of return to work and hybrid work schedules. We're all working on that battle every day. I do think we are seeing some very encouraging signs that evidence this real flight to quality, and I think the real bias on a lot of large and small employers on making sure that they provide the right physical platform to execute their business plan. Our portfolio is in solid shape. We have excellent visibility for forward growth. As I mentioned earlier, our average rollover is very low through 2024, actually through 2026, with strong mark-to-market, very manageable and demonstrable capital spend and accelerating leasing velocity. Our four growth drivers remain, you know, increasing NOI out of our existing portfolio and executing our development pipeline. As usual, we'll end where we start in that we really do wish all of you and your families are doing well and having a chance to enjoy the summer. With that, we are delighted to open up the floor for questions. As we always do, we ask that in the interest of time, you limit yourself to one question and a follow-up. Thank you very much. Hilda? Thank you. We will now begin the question and answer session. If you have a question, please press zero one on your touch-tone phone. If you wish to be removed from the question queue, please press zero two. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press zero one on your touch-tone phone. We have a question from Anthony Paolone from J.P. Morgan. Please go ahead. Thanks. Good morning. Good morning. My first question is, relates to Jerry. You mentioned 32%, I think, in the pipeline looking for, you know, I guess, improved space or highly monetized space. Can you talk a bit more about specifically what they're looking for and maybe perhaps the type of space they're coming out of and whether, you know, they're keeping the same footprint, shrinking? You know, what exactly is changing there? Yeah, George, you want to pick up on that? Yeah, Tony, glad to. I mean, you know, we're seeing the predominance of that, like the quality, you know, coming more from, you know, the B inventory, so in downtown Philadelphia, kind of taking the jump from B inventory up to Trophy. Even in the suburbs, we're starting to see, you know, tenants taking advantage of space opportunities that we have in Radnor, Conshohocken, even Plymouth Meeting coming out of some of the second-tier submarkets in the suburb. I think it's not only the management of the buildings, but it's the building systems, the elevator systems, HVAC systems, technology within the buildings. Overall, I think the majority of those tenants are probably dialing back space a little bit, but nothing significant, I would say, you know, maybe 5%-10% reduction in footprint. The typical buildouts, you know, our Q2 kind of spatial analysis on pretty much the same. You know, we had been trending kind of 65% workstation, 35% offices. You know, during the Q2, we kind of saw that trend to 60-40, so not a dramatic shift between workstation and office. A little bit more space planning focused on, you know, pathways and turning radius and things along those lines. Again, nothing of significance to the general footprint. Yeah, I think just to add on to that, Tony, you know, certainly quality of landlord, location of building, are key. Also, you know, a demonstrated track record of capital reinvestment in the project. I mean, some of the highlighted items, in addition to what George mentioned, with the real keen focus on, you know, HVAC vertical transportation systems are, you know, really a very crisper focus on, you know, more interior daylighting, which typically comes from higher ceilings, more glass. Some level of indoor-outdoor component, we're certainly seeing that in our new development projects, where, you know, a full-service amenity program is very attractive to both office, life science, and residential tenants. Structured parking's becoming a key issue now, the ability to have covered parking. I think all those things are, you know, more prevalent in portfolios like ours, are key parts of every one of our development projects. I think that, those items, as well as I think the reputations that respective landlords have, are key decision points as tenants make their final determination. Got it. Thanks for all that. Then just for Tom, you laid out the pieces of the floating rate debt and the cost impact to guidance. Just thinking bigger picture, like, where do you think you should be over time in terms of the amount of your debt floating? Also thinking about it as we start to look into next year, 'cause I think you have some bonds, you know, coming due earlier in the year as well. Yeah. So sorry, on the floating rate debt piece, I do think that we will look at least on the term loan is a good example. I think that is something we will look to fix, whether it be now or in the future, as we take a look at the curve, which has been moving pretty rapid, you know, pretty volatile. But I do think we should be above 90% on our fixed-rate debt, and we'll get back up into that level, which is where we historically have been. I think the combination of the on the wholly owned portfolio. On the JV portfolio, I do think we will continue to float, as we do development and as we have some of these joint ventures. That one will probably stay in the same range that it's in now, but we have mitigated a little bit of that with some caps and hedging, that we've already put in place. Got it. I think on the bonds, Tony, we will probably look to refinance those. I'm not sure if we're going to refinance them with 10-year bonds, but we're monitoring the market and we'll probably look to refinance those with public bonds early next year. Okay. Thanks for the call. Thanks, Tony. Thank you. Our next question comes from Jamie Feldman from Bank of America. Please go ahead. Great. Thanks, and good morning. Good morning. Can you talk more about the development and redevelopment start? Just kind of what gives you conviction here? I know that you've got pretty good leasing on the redevelopment, but just kind of what gives you conviction on starting projects here in terms of the leasing outlook and maybe even more importantly, the cost outlook, and what have you done in these projects to kind of hedge against inflation risk? Yeah. A great question, Jamie. A couple things. First on the cost side, I think as we've talked on previous calls, we don't start anything unless we're fully locked and loaded on the cost. For example, Jamie, on 3151 we have executed, you know, a guaranteed maximum price contract with a general contractor who we know very well. We're close to 89% bought out at the subtrade level. We do build in contingencies, both within the GC contract as well as at the owner level, to make sure that we can account for any kind of last-minute changes that take place. We're very focused on running all of our projects, including kind of the prospective development pipeline, you know, all the way through the entire design development process. We're pricing two to three times before we kind of put pencils down. Even in that number that Tom had outlined, that close to $400 million number on the, you know, development investment, some of that money is basically for design development work on projects that are next in the queue to make sure that we're fully locked down the cost equation. Happy to add any additional color to you on that point. On the conviction for the starts, I think they really come from a couple different vantage points. One, we know the markets very well. We have great recon and visibility into what we think that both the current and prospective pipeline is. In the case of our redevelopment at 2340, that obviously was conditioned upon getting that 85% lease done. We'll complete that over the next couple quarters, deliver that building, and that creates it. That will create a good capital event opportunity for us with that building. Certainly having that building, which had been previously vacant, now 85% leased, with just the two top floors to lease, we think that puts us in a very good position to generate either a great NOI stream over the next eleven years or a great capital event sometime in 2023. In terms of 3151, you know, the combined pipeline we have for both Schuylkill Yards West and in the 3151 start is very strong. It's very diverse in terms of size of tenant, type of sponsorship, be that institutional, public company, established company. When we take a look at where we think the timing requirements for these prospects are, they're very keen on delivery timelines, which our starting the project gives us the ability to meet. The other thing is, as you know, we take into account is to take a look at the forward supply pipeline. Certainly, one of the opportunities we have here at Schuylkill Yards is to be able to kind of preempt maybe some future development starts by competitors by starting our project, given the existing pipeline. We kind of assess all those risk factors as we go through the equation to actually make the decision to start the project. Uptown ATX, look, certainly there's always a lot of construction in Austin, Texas, in every product type. But I think from our perspective, knowing the full range of development capacity we have at Uptown ATX, starting that office residential component of Block A, you know, we have already got over a million-plus sq ft of prospects in tow for the 350,000 sq ft of office components there. Right now, we're frankly evaluating, you know, do we break the building down for single floor tenants or hold off for a larger scale tenant, which tends to take a little bit more time to go through the gestation evaluation process. Hopefully that answers your question. Yeah. Thank you very much. Just, it sounds like you're considering some additional asset sales. You know, how should we think about the potential impact on earnings for the back half of the year or maybe even into 2023? Do you think it would, you know, can you mitigate the dilution, or do you think that's actually a downside to numbers? No, our hope as we go into all these things is to minimize the dilution. We do think we have a couple of assets that we're test marketing for price discovery. Now they're fairly low cap rate sales. A couple may go to users. We may have other joint ventures we can sell out of. The game plan there, Tony, is to kind of sequence those sales and to manage the dilution as much as we can, but then also balance that against optimal pricing as well as liquidity generation. Okay. All right. Thank you. Thank you. Thank you. The next question comes from Michael Griffin from Citi. Please go ahead. Hey, it's Michael Bilerman here with Michael Griffin. Gerard, I wanted just to sort of step back and just think about sort of the enterprise as a whole. You talked a little bit about the sort of lease rollover and how that's, you know, more or less than peers, and you've talked a little bit about the development adding accretion. But when you look at the right-hand side of your balance sheet, you have not only the exposure on the floating rate side, which you've addressed in this year's guidance, but you have $1.8 billion gross of debt rolling over the next two and a half years, of which your share is $1.1 billion, right? You got $1.1 billion in the JVs, and you got $700 million of the two bonds that come due, one early next year and one in 2024. When you look at that, right, you know, 55% of your debt book, and you are more highly leveraged than your peers, 44% on a net effective basis, it would appear as though, you know, everybody was issuing debt in the last few years to refinance upcoming maturities, and you guys sort of sat still. I'm just trying to better understand sort of risk mitigation on the balance sheet side because it would appear, you know, this could have a significant impact on earnings as you refinance. I know you're going to get development accretion, but it will largely be offset by the dilution from refinancing on top of the dilution from potential asset sales. How should investors think about the risk that this has posed to the enterprise today? Hey, Michael, it's Tom. Just to start off, I think on the maturities we do have, we do have two bonds coming due, $350 each. We're going to look at how the markets play out. The rates have gone up significantly. Spreads have not moved. In fact, they've gone out further. So we are going to have to monitor where that is. Those bonds are coming off just below 4%, and we're probably, you know, looking at financing somewhere in the 5% area, depending where the market is and what tenor we do those bonds at. I assume we will refinance both of those bonds with new public debt. At current levels, there will be some dilution. You're right. On the other things that are maturing, for example, like Commerce Square, which is $200 million, you know, that one is well underlevered. We've already been out in the market looking at debt for that, and we feel we can refinance that at a not too dissimilar number at the same level, or actually put in some good news capital. A couple of the other ones, like at Cira Square, we deliberately put some short-term debt on it based on where the markets were when we bought that property. We feel very confident with the IRS in there that we can refinance that property as well. There's some others that are there. I don't want to go into each one of them. I can certainly do that at another point. Like a 2019 is this internal loan that two partners have made, that can easily be extended. Hopefully, Michael, we are going to do some asset sales. Our line of credit, as you know in the past, has been minimal to actually having cash on the balance sheet. We haven't done sales in a bit of time. I think that that's something we will look to do to bring that line balance down now that it's extended. To the extent we didn't do some financing in the prior years, listen, we did look at those financings. We were watching the bond market. You know, hindsight, maybe we should have done something earlier, but we were looking at all, a lot of, you know, make-wholes that had to be made on those bonds, and people were paying a lot of money to do that. At that time, we didn't think it was worth spending all the extra cash to prepay bonds and thought there was something that we could, you know, mitigate that and look at doing them in 2022. Unfortunately, the markets have gone out quite a bit. We can look back and say, maybe we should have done some of those bonds earlier. I think we can still refinance them, and we will look to minimize the dilution from those as well, just by being very proactive on timing et cetera. It would just seem that from a balance sheet management perspective, how do you leave yourselves exposed with 55% of your total company debt rolling in two and a half years at a time when interest rates were at their all-time lows? Like I understand all the things on an operating basis, and you're excited about the developments, but if you're going to give it all back from interest and take the risk on debt, I just don't know when do earnings ever come out? It just feels like every year there's just something else coming about that takes numbers down. I'm trying to understand why the company put itself in this position to have their backs against the wall with such dramatic amount of debt coming due at extraordinarily low rates. Well, listen, I mean, we've got for some of that debt going into 2024, we do have 24 months. I don't know that I would say we got our back against the wall. If you go back to the beginning of the year, Michael, we looked at where those interest rates were. They ran up dramatically. You know, I'm not going to forecast where interest rates are going, but we do have 24 months to refinance them. Our coverage ratios are in great shape, so we're going to be able to refinance them. Where those rates are, we'll find out. But they did move a lot quicker than we thought, but I don't think I would characterize it as our backs up against the wall with some of these facilities and what we're going to be able to refinance to. I think it more so from the fact that, I mean, you just talked about how your line was more drawn than you'd like it to be. Most companies run a zero balance on their line and use it during the quarter. You obviously, your equity is constrained, so you can't issue equity. You're talking a little bit more land sales, but all you've done this year is take on more capital commitments and raise leverage rather than the other side. I guess it is what it is, and I guess as we progress into 2023 and 2024, we'll have to better understand as you refinance $1.1 billion of your pro rata share of debt that's under 4%, how much of an impact that will take away from all the good leasing and development project leasing that's coming about. Thank you. Thank you. We will take the next question. It comes from Steve Sakwa from Evercore ISI. Please go ahead. Hey, thank you. Jerry, you talked about physical occupancies, and I think you mentioned the highest utilization levels in Philadelphia suburbs and D.C. But as you talk to tenants, what are your expectations for utilization levels into the back half of the year? Do you think this number is kind of topped off given hybrid work adoption? No, I mean, George and I will tag team, right? I think we can take it. Like it's interesting. Actually, the more conversations we have directly with tenants, the more encouraging the news seems to be in terms of them bringing people back, you know, three or four days a week. We really haven't, as we've talked on previous calls, had anyone focus on a hoteling concept. There's clearly a desire for more efficient space layouts, which George kind of framed out how we see some of the space planning working. We are continuing to see kind of an incremental uptick in people coming back into the offices. Actually, one of the slowest markets we have in people coming back to the office really is down in Austin, Texas, where, you know, a high concentration of tech companies, and they seem to be slower than the financial services and the professional services companies in terms of bringing people back into the office. Certainly, the healthcare-related companies have been back. We actually. It's something that we, myself, and some of the other senior folks here, and there seems to be this general bias to continue accelerating, bringing people back to the office. I do think it'll be somewhere in that three to four days a week, for the most part. I think to some degree, that'll be a function of labor market conditions, specific industry exposure. Even within companies, we're seeing different ground rules for different functional areas. Those functions that are in very high demand like IT, we're certainly seeing more flexibility for our tenants to have their IT folks work remotely. George, any other color on that? Yeah, I think, you know, the one thing we're seeing and you know, part of it is probably also influenced by the summer. You know, Tuesday, Wednesday, Thursday right now is kind of the highest occupancy days, you know, with lower amounts Monday and Friday as you know, one would imagine and expect. You know, even those companies that have, you know, rolled out voluntary return to work. We're starting to see increased, you know, in terms of the work environment they have. Sometimes they do just want to get back to collaborate. I think, you know, we kinda keep moving the goalpost a little bit, but I do think end of summer will really be kind of the next, you know, what happens after Labor Day. I do think it just requires, you know, a couple of, you know, CEOs to kinda just put the gauntlet down and say, "Hey, it's time to come back." I think you'll start to see, you know, each industry sector, you know, kind of follow the lead. Okay, thanks. Just on the incubator, Jerry, can you remind us? I think, you know, there were a couple floors that you had planned to expand there, and is that still on track? I guess, you know, what are you hearing from these tenants, and how are you monitoring the health of these tenants and their appetite to expand, just given the pullback in funding that we've seen? We're monitoring them daily, and they all seem to be doing pretty well, but certainly we're mindful of the fact that with the index, you know, the public company index down 27% and some of the venture capital pullbacks, that there's certainly a higher risk to some of these tenants. We're seeing, you know, some near-term expansion requirements by some of those tenants. You know, as you know, the B Labs is 50,000 sq ft. We've got 12 companies in there. We're 98% leased. We do anticipate based on feedback from those tenants, somewhere between, you know, 8-150,000 sq ft of future demand drivers there over the next 12-24 months. Certainly the point you raised is a fair one. It's top of mind for us as well, which is, you know, with some of this pullback and, you know, kind of more negative macroeconomic overtones, we're very closely tracking how these tenants are doing, how their trials are going, how their capital base is going, their burn rate. That's really where our partnership with PA Biotech has been helpful as well. They know the science, they know these companies, so we can assess them through the window that we know, real estate. They can help us assess the future viability and growth expectations of these tenants from a scientific and talent standpoint. It's been a very effective partnership on that front. The last piece of your question, we do plan on expanding the incubator. Contrary to some of the negative overtones, we're actually trying to work with trying to move some office tenants into other buildings where their leases don't expire until the mid part of 2023. To some degree, our timing of delivering that additional square footage is going to be a function of how we can relocate those tenants. We do have some work taking place on one of the floors within Cira to facilitate some known tenants, and would expect that to take place over the next several quarters. All right. Thank you very much. Thank you. Thank you. The next question comes from Omotayo Okusanya from Credit Suisse. Please go ahead. Hi. Yes, good morning, everyone. Could you just talk a little bit about, you know, build to suit? You mentioned that you may actually start something on that front. A little bit about where that demand is coming for build to suit. Specifically interested in maybe if it's coming from the lab biotech side. Also just how big that opportunity could be in the near term and how that would potentially be funded. Certainly happy to answer that. The build to suits I alluded to are primarily in some of our production assets. They're kind of in the 100,000-150,000 sq ft range. They would be potentially full building users on, you know, 10- to 15-year leases. That's, you know, development is really an elective decision. I think as we look at the landscape today, certainly having those smaller buildings locked away from a full tenancy standpoint would be attractive. One key prospect we're talking to is a life science company who is looking for significant expansion opportunity. The other was a larger regional relocation and consolidation of some existing older space. They're looking to kind of create a newer corporate image, and to do that in a newer building that has all the amenities that it'd be top of mind for all key tenants now. Great. Thank you. Those projects from a capital standpoint are kind of in the $75 million plus range. We can deliver those within typically four quarters, could be four or five quarters, depending upon the complexity of the fit-out. The delivery cycle between the investment of the money and the recovery of the NOIs is much less protracted than we're seeing on these larger scale developments. Gotcha. Thanks. Thank you. Thank you. The next question comes from Bill Crow from Raymond James. Please go ahead. Yeah, good morning. Thanks. Jerry, can you just highlight the pipeline for life science buildings in Philly and what the risk is that we may see some overbuilding given some of the challenges in VC funding smaller companies financing? Yeah, sure, Bill. You know, as we're looking at the pipeline we have, there are a number of properties that are, excuse me, currently under development. There have been several that have been announced. We're not sure that some of the ones that have been announced will actually get the financing or the tenancies to actually get the project started. Right now there's probably four or five, you know, core competitive projects between University City Science Center down to Philadelphia Navy Yard, which tend to be lower rise projects. They tend to be more manufacturing versus lab space. Then there's a number of other properties that are kind of between the Navy Yard, the Northern Pennsylvania suburbs, and the CBD Philadelphia that are either being talked about, Bill, as life science conversions pending getting a tenancy in place or starting the design development process. Look, we're very mindful of the fact that, you know, life science it seems to have more clarity to the demand drivers than traditional office. A number of office developers or holders of land that was deemed to be office are looking at life science opportunities. You know, as we kind of assess our risk, you know, we do think that Schuylkill Yards, given our location, next to the train station, adjacent to the major institutions, next to the, you know, two interstate highways, our location, tends to be top-tier. Based upon the feedback we've gotten from the prospects that we are talking to today, we know that that locational driver is very important. In addition to that, when we took a look at a design level on a project like 3151, we'll be introducing some technical components to that building in terms of riser, HVAC capacity, vibration, dynamic glazing, oversized elevators with a higher speed, things the Philadelphia market really hasn't seen before. We think that those design elements and the efficiency of the footprint, in addition to the locational advantage, will put us in a very good position to attract more than our fair share of tenants to fill these buildings up. Yeah, I appreciate that comment. If I could just add on a question on the return to office rate. I used the Kastle Systems data, and you may disagree with the data itself, but it shows Philadelphia at 38%. It showed Philadelphia at 38.1% on December first, which would imply no real improvement. I'm wondering, A, you disagree with the data, or B, maybe you could tell us what's going on with parking revenue, and maybe how far below it is from 2019. Yeah, sure. Bill, this is George. I'd be happy to. Yeah, I mean, look, the Kastle report, you know, it's hit or miss kind of mark-to-market. I mean, we monitor our own, you know, turnstile data. Q4 2021, we were about 25%, and we're currently at about 40% right now. We are kind of you know at that Kastle number. We actually were a little bit lower than their number. We have seen some improvement. Parking is a good segue because we are seeing, you know, those people that are coming in, the predominance of them are using the garages that we have in both Commerce Square over at Logan Square and a couple of other ancillary garages within the city. I mean, our garage occupancies are, you know, about 92%, and we're just about all the way back to kind of pre-pandemic parking revenue numbers. Great. Thanks. Appreciate the time. Thanks, Don. Thank you. We have a question from Michael Griffin from Citi. Please go ahead. Hey, thanks for taking the follow-up, and excited to be on the call. Just curious, on the $2,340 redevelopment, you know, why does that make sense to own as opposed to, you know, exiting the greater D.C. market entirely and focusing on Austin or Philly? Yeah, no, look, I think that's a question I alluded to. I thought in one of my answers where. Look, the building for us was. Had a major tenant move out. It sat vacant for a period of time. We were successful in attracting a major tenant, was actually the largest lease done in Northern Virginia this year. The game plan is to essentially complete that renovation with the high probability of creating a capital event there. I think as you may know from looking at the company, we have sold a significant portion of our D.C. portfolio over the years, and it's now down to a fairly small percentage of our revenue stream. I think with the 2340, we're definitely saying that is an opportunity to harvest some significant liquidity on a on a building that for all intents and purposes, you need to look at it as almost a land play right now. It's really not it's actually generating negative net NOI for us through the carrying costs. Us selling that building would actually generate, you know, a significant liquidity event for the company. You know, to even go back to kind of the debt refinancing question, that gives us the ability to generate a fairly significant amount of money with no earnings dilution and at a cost of capital that layers very well into a refinancing program that we lay out over the next several years. We think we frankly have a couple of those opportunities within the company, where we have properties that are, frankly, ripe for sale, they could be in joint ventures or wholly owned, that we can generate fairly low, fairly high proceeds off a fairly low cap rate. The buildings are generating fairly low returns to us right now, and they're good value add acquisitions for other companies that can actually layer into the financing strategy we're going to lay out over the next 12-24 months. Gotcha. I appreciate the color on that. I also noted that the sublease space in your portfolio picked up slightly sequentially to 3.3%. Kinda how should we expect this to be trending sorta going forward and sorta what led to the, you know, slight increase quarter-over-quarter? Yeah. I mean, this is George. I'll take that one. I mean, you know, I think it's probably going to continue in that low single digit. You know, obviously, sublease space, you know, requires a little bit of term to it to really attract somebody. I think, you know, we've got a number of tenants who, you know, would desire to sublet their space, but again, I think given the term and the like, just have not been successful to date. But again, I think based on our historic run rate, you know, I still think it's low single digit proposition for us. Okay. That's it for me. Thanks for the time. Thank you. Thank you. At this moment, we show no further questions. I would like to hand the call over to Mr. Sweeney for final remarks. Great, Hilda. Thank you very much and thank you all for participating on the call. We look forward to making continued progress in our business plan and updating you on that at our Q3 conference call. Enjoy the rest of the summer. Thank you. Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect. Speakers, please stand by for you debrief.