Good morning, and welcome to the Highwoods Properties earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded today, Wednesday, February eighth, 2023. I would now like to turn the conference over to Hannah True. Please go ahead. Thank you, operator. Good morning, everyone. Joining me on the call this morning are Ted Klinck, our Chief Executive Officer, Brian Leary, our Chief Operating Officer, and Brendan Maiorana, our Chief Financial Officer. For your convenience, today's prepared remarks have been posted on the web. If you have not received yesterday's earnings release or supplemental, they're both available on the Investors section of our website at highwoods.com. On today's call, our review will include non-GAAP measures such as FFO, NOI, and EBITDAre. The release and supplemental include a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures. Forward-looking statements made during today's call are subject to risk and uncertainties. These risks and uncertainties are discussed at length in our press releases as well as our SEC filings. As you know, actual events and results can differ materially from these forward-looking statements. The company does not undertake a duty to update any forward-looking statements. With that, I'll turn the call over to Ted. Thanks, Hannah. Good morning, everyone. We had a strong end to a strong year for Highwoods. In the fourth quarter, we enjoyed solid leasing in terms of both volume and economics, acquired a best-in-class property in uptown Dallas, placed in service our highly successful Midtown West development in Tampa, announced Midtown East, our second development in Midtown in Tampa, and delivered strong FFO of $0.96 per share. Our healthy leasing during the fourth quarter is somewhat contradictory to the broader macro environment, with interest rates up sharply, limited capital availability, and widespread concerns of a pending recession. We continue to believe that to be resilient, our portfolio must be diversified and not be overly reliant on any single customer, market, sub-market, industry, or lease size. This diversification is a core component to our long-stated, simple, and straightforward goal to generate attractive and sustainable returns over the long term. Our largest market, Raleigh, is less than 22% of revenues. Our largest customer, Bank of America, is less than 4%. Our top 20 customers account for less than 30%. Our largest industry, the highly diversified professional, scientific, and technical services category, is less than 30%. Our average lease size is under 15,000 sq ft. We believe this purposeful diversification, our high-quality portfolio, and continued strong population and job growth across our markets has driven our strong leasing since the onset of the pandemic, including throughout last year. In 2022, we signed 1.5 million sq ft of new leases, the most in any year since 2014. We ended the year on a positive note with 337,000 sq ft of new leasing and 924,000 sq ft of total second -gen leasing. In the fourth quarter, we signed 28 expansions, nearly half of our renewal count, with expansions outpacing contractions by a ratio of 3.5 to 1, equating to 81,000 sq ft of net expansions. In addition, we signed a 312,000 sq ft renewal at a 50/50 JV property in Richmond. This renewal was for 100% of the customer's prior space with a roll-up in cash rents and limited TIs. As a reminder, JV leasing is not included in our overall leasing statistics. As we move into 2023, our occupancy and same property cash NOI will be negatively impacted by the 263,000 sq ft move-out by Tivity in the Cool Springs BBD of Nashville at the end of this month, a space that we have already substantially backfilled. The backfill customer's lease isn't scheduled to commence until early 2024. As is our practice, we do not remove in-service buildings from our same property pool. In addition to our solid leasing efforts in 2022, we were also pleased with our investment activity during the year. We acquired $400 million of best-in-class assets in Charlotte and Dallas, both with meaningful long-term growth potential. We placed in service roughly $100 million of 99% leased development. We announced over $400 million of development in Dallas, Atlanta, Tampa, and Charlotte, and we sold $133 million of non-core land and buildings. This volume of work, combined with our high-quality office portfolio in the strongest BBDs throughout the Sun Belt, gives us the building blocks we need to generate additional long-term growth. Turning to our results, we delivered FFO of $0.96 per share in the fourth quarter. Our full-year FFO was $4.03 per share, including $0.13 of net land sale gains. Excluding land sale gains, our full-year FFO was $3.90 per share, $0.06 above the midpoint of our initial 2022 outlook, even with the unanticipated sharp rise in interest rates. Turning to investments. In the fourth quarter, we expanded our presence in the dynamic Dallas market by once again partnering with local sharpshooter Granite Properties. This time to acquire McKinney & Olive in Uptown Dallas in a 50/50 JV for a total investment of $197 million at our share. McKinney & Olive is a trophy mixed-use building with approximately 500,000 sq ft of office and 50,000 sq ft of retail. The building is well leased with growing customers and average rents estimated to be 35% below market. This investment, priced below replacement cost, provides a unique combination of an attractive going in cash flow yield with the opportunity to earn development-like returns as we roll rents up to market. This building is only four blocks from our Twenty-Three Springs development, providing ample opportunity for leasing and operating synergies with what we believe will be the two of the best buildings in Uptown. During the quarter, we also announced the Midtown East development in a 50/50 JV. This project will encompass 143,000 sq ft in the highly successful Midtown Tampa mixed-use development. The total cost is estimated at $83 million, with our share being half of that. This announcement follows our first office development in Midtown Tampa, Midtown West, which we placed in service during the fourth quarter as originally scheduled at 97% leased. We started Midtown West on a fully spec basis in late 2019. Despite the pandemic, the project leased up successfully at rents at or above our original pro forma. Our 1.6 million sq ft development pipeline now represents a total investment of $518 million at our share. Across five different markets, it is a combined 21% pre-leased. Three of those developments, representing nearly 800,000 sq ft and $234 million of total investment at our share, are scheduled to deliver in 2023, but are not projected to stabilize until 1Q25-1Q26. With rising interest rates and reduced debt availability, the investment sales market has slowed meaningfully over the past few quarters. Fortunately, our balance sheet is in excellent shape, which allows us to be patient with our disposition efforts. Over the long run, we will continue our strategy of monetizing properties we believe have below average growth prospects, limited upside, or are CapEx -intensive. We'll use the proceeds to replenish our dry powder and ultimately recycle into higher growth properties. As illustrated in our 2023 outlook, we expect to be a net seller this year. Although the volume of dispositions will depend upon the stabilization of the office investment sales market. Our plan is to sell up to $400 million of non-core assets this year, while we believe acquisitions are unlikely. Our initial 2023 FFO outlook is $3.66- $3.82 per share. At the midpoint, interest expense will be significantly higher due to rising rates, and we also project higher same -property operating expenses. Same property cash NOI growth is projected to be flat at the midpoint, below our historical average due to higher CapEx and lower average occupancy, largely as a result of the Tivity move out. While our 2023 FFO outlook is below 2022 actual results, as a reminder, we have grown normalized FFO per share each year for 12 consecutive years at a 4% compound average rate. Since the onset of COVID at the beginning of 2020, we have acquired $3.2 million sq ft of best-in-class office assets for a total investment of $1.2 billion, delivered $1.2 million sq ft of highly leased office development for a total investment of nearly $500 million. Sold $6.4 million sq ft of non-core properties for $1 billion, all the while growing normalized FFO per share 11% and continuing to strengthen our cash flows. With our ever-improving portfolio quality, we're now even more resilient and better poised for long-term growth. In conclusion, while our high growth BBDs and high quality portfolio receive most of the attention from our shareholders, our humble, hardworking, and talented teammates are the ones who drive our success. I would like to thank our entire Highwoods team for their continued commitment and tireless dedication to our company during the past year. It is their effort that has positioned us for continued success for many years to come. Brian. Thanks, Ted. Good morning, everyone. As Ted mentioned, a strong fourth quarter capped off a strong 2022 and a strong 3-year run through the pandemic that saw the team and portfolio meet every challenge and produce compelling results. We've leaned into our BBD strategy to upgrade markets and assets by taking a deliberate approach to diversify geographic reach across the Sun Belt's high -growth markets, which include six of the top 10 and five of the top six U.S. markets to watch for the most recent PwC Urban Land Institute Emerging Trends in Real Estate report. Within these markets, our BBDs are both urban and suburban and have proved successful in meeting our customers where they prefer to be. Suburban workplaces have proven to be competitive options when weighing an individual's and organization's flight to quality of life calculus, as evidenced by the highest physical occupancy and leasing activity across our portfolio and the Sun Belt. It is our belief that the greatest determining factor of a workplace being commute -worthy is the magnitude of the commute burden the worthiness has to overcome. Our urban and suburban BBD portfolio provides a variety of options and amenities with regard to commute worthiness and has attracted a customer base across a broad spectrum of industries and sizes. Small and medium -sized customers, our bread and butter, with an average customer size less than 15,000 sq ft, are disproportionately back in the office and expanding. This customer mix has allowed our portfolio to weather the ebbs and flows of previous cycles, a pandemic, and evolutions in the so-called future of work. While concrete, steel, and glass may not be the most flexible of materials, we are formalizing the variety of flexible work options we offer under our Highwoods Commons banner based on the success we've had to date. Whether it is convening a town hall in our Spark conferencing hubs, taking occupancy on one of our dedicated full -floor spec suite collections, or booking one of our ultimate Zoom rooms, We call the CoLab, the Commons platform provides our customers scalable flexibility with regard to space and duration and can be tailored to their specific needs. It includes both formal and informal spaces, all conceived around collaboration, and the platform enters 2023 having delivered over 100 such spaces with healthy net new rental income associated with it. This deliberate diversification across a variety of factors makes our portfolio more resilient. Coupled with our approach to creating compelling and competitive workplace making experiences, we are confident that the Highwoods portfolio will continue to serve as a location of choice for the best and brightest individuals and organizations. To that end, our team finished the year with solid financial and operating results for the fourth quarter, signing 924,000 sq ft, including 28 expansions, the most net expansions we have signed since the beginning of 2018. As Ted mentioned, this does not include the 100% renewal of our 312,000 sq ft JV owned property in Richmond through 2034. Net effective rents for the quarter were higher than our five quarter average, and our net effective rents for the year represent a record high. While there is often much focus on cash or GAAP rent spreads, we have long stated that our leasing focus is securing the best overall economics. For example, we may trade lower face rents for lower TIs or free rent if the overall net effective rents are attractive. Our all-time high for net effective rents during the year is a strong endorsement of our Sun Belt BBD and diversified portfolio strategy. Drilling down on our market activity, in Raleigh we signed 263,000 sq ft at end of the quarter 92% occupied and where market rents grew 5.1% year-over-year per CBRE. Our local team is seeing healthy activity so far this year and we expect this to continue led by job growth in professional and financial service companies. In terms of volume for the quarter, Nashville signed 225,000 sq ft and is nearing the finish line on Highwoodtizing almost 1 million sq ft of assets in Brentwood and Cool Springs, the two BBDs that garnered the majority of leasing activity for the entire Nashville market in 2022. Our signature reimagining and repositioning of these assets have been well received leading to the substantial backfill of our portfolio's largest 2023 lease roll in Tivity five months prior to expiration. According to Cushman & Wakefield, the Nashville market posted positive net absorption for the quarter and a 4.7% year-over-year increase in market rent. As Ted mentioned previously, occupancy will be lower in our Nashville portfolio in 2023 as Tivity vacates and our replacement customer's lease doesn't commence until the beginning of 2024. Moving further south to Tampa, which leads the state of Florida for net New York City resident relocations, we placed in service our 97% leased Midtown West joint venture development in the quarter and announced Midtown East, a 143,000 sq ft mixed -use development which will offer the highest views in the West Shore BBD. Midtown has established itself as an address of choice for blue -chip organizations who have placed a priority on recruiting, retaining, and returning talent. Via the wide and deep relationships we've built over time. With the off-market acquisition of 650 South Tryon in Charlotte, the Queen City now stands as Highwoods 4th largest contributor to NOI. The December acquisition of McKinney & Olive, a 550,000 sq ft, 99% leased tower in the heart of Dallas's Uptown CBD, which was tops in the market for annual absorption and rental growth for 2022. We're on track for Dallas to contribute 6% of pro forma NOI to our bottom line following the completion and stabilization of our two development projects. In conclusion, each and every Highwoods teammate remains focused on making our diverse portfolio the most talent supportive and commute worthy it can be. We believe this approach will enable our customers and their teams to achieve together what they cannot apart. When we do this, we will create value for our customers and in turn, our shareholders. I'll now turn the call over to Brendan. Thanks, Brian. In the fourth quarter, we delivered net income of $27.6 million or $0.26 a share, and FFO of $103.1 million or $0.96 a share. There were no significant unusual items in the quarter. For the year, our FFO was four or three per share, came in at the midpoint of the upwardly revised outlook we provided in October. This was $0.19 above our original 2022 FFO outlook. Excluding $0.13 per share of land sale gains, net of impairments, core FFO in 2022 was $3.90 a share, or $0.06 above the midpoint of our original outlook. The upside in core FFO in 2022 compared to the midpoint of our initial outlook was due to the following. $0.08 of higher NOI, largely driven by lower than forecast OpEx and higher parking revenues, $0.02 from less disposition activity than originally planned, and $0.01 from acquisitions. These items combined for $0.11 of upside and were partially offset by $0.05 of higher interest expense attributable to higher than forecasted rates on our variable rate debt. In addition to strong FFO during the year, our cash flows continue to strengthen. Even with what we believe is an attractive current dividend yield of over 6.5%, we had strong coverage in 2022 with a CAD payout ratio under 75%, providing us meaningful retained cash flow to reinvest. We have been purposeful with our focus on strengthening cash flows. We've sold assets that were capital inefficient and recycled into acquisitions and development projects with higher long term cash flow yields. To quantify this, since 2019, our cash NOI is higher by 16% or $75 million, and our capital spend, leasing and maintenance CapEx, is down 8% or $12 million, resulting in $87 million more in cash generated from our portfolio and a ratio of CapEx to NOI that has improved by 15% without any meaningful increase in our equity base. CapEx spend is often lumpy quarter to quarter or year to year. Regardless of the short term fluctuations, the trend is clear. Our portfolio has become more efficient, and our cash flows have continued to strengthen. Our balance sheet is in excellent shape. We ended the year with debt to EBITDA of 5.9 x, up from the third quarter due to the acquisition of McKinney & Olive, and continued investment on our development pipeline, but still low overall. We have ample liquidity, over $550 million between our line of credit and undrawn amounts on the construction loans at our Dallas development JVs, which provide us plenty of room to fund the remaining $359 million to complete our development pipeline. We have purposely set up the balance sheet with ample flexibility as we have over $900 million of debt that is prepayable without penalty and no consolidated debt maturities until the end of 2025. This fits well with our investment plan for the year, where we expect to be a net seller. We expect to reduce our floating rate exposure as we move throughout the year with planned disposition proceeds. We also have a solid pool of unencumbered assets and the financial flexibility to obtain longer term fixed rate debt. As Ted mentioned, our FFO outlook for 2023 is $3.66 to $3.82 per share. As you know, the largest headwind for 2023 is higher interest rates. Based on the current SOFR curve, we expect to incur $0.25-$0.30 per share of higher interest expense in 2023 compared to what the forward curve implied just 12 months ago. As I mentioned earlier, we purposely structured our balance sheet to provide us optionality to be able to repay debt without penalty. While this means we expect higher projected interest expense in the short term, given the forecasted peak in SOFR during 2023 and with no fixed rate debt maturities until 2027, we are positioned to benefit from a downward trend in the interest rate curve after this year. In our release last night, we stated an anticipated headwind of $0.08 per share at the midpoint from higher OpEx, net of anticipated recoveries. The higher projected OpEx, combined with lower average occupancy, principally related to the Tivity move out, has negatively impacted our same property cash NOI outlook in 2023. Year-over-year same-property comparisons are often helpful, but 2023 is somewhat distorted by the unusually low OpEx from the first half of 2022. Using our more normalized second half of 2022 as a comparison point, we expect positive cash NOI growth in our same-property pool in 2023. Finally, as you may have noticed, we made some routine SEC filings yesterday and this morning. Under SEC rules, S-3 shelf registration statements sunset every three years. It has been three years since our last shelf filing. As a result, last evening, we filed a new S-3 with the SEC. This is a joint shelf filing by the REIT and the operating partnership that registers an indeterminate number of debt securities, preferred stock, and common stock for future capital market transactions. With this new shelf in place, we also needed to refresh our long-standing ATM program, which we filed via Form 424B this morning. As you know, keeping an ATM program in place is one of the many arrows we like to keep in our capital raising quiver. To be clear, the FFO per share outlook that we provided in last night's release assumes no ATM issuances during 2023. Operator, we are now ready for questions. Thank you. To queue up for a question, please press one four on your telephone keypad. You will hear a pre-tone prompt acknowledging your request. If your question has been answered and you would like to withdraw your registration, please press one three. One moment, please for the first question. Once again, to queue up for a question, please press one four on your telephone keypad. Our first question is from the line of Camille Bonnel with Bank of America. Please go ahead. Good morning. Just a few questions on the same-store NOI outlook you provided. When we think about your occupancy guidance, excluding the impact of the large move-out in Q1, what sort of retention ratio is embedded in your outlook? Hey, Camille. It's Brendan. Thanks for the question. Our retention when we look at 2023 in terms of what's remaining at year-end 2022 is below average. With the Tivity move out, overall, including that, we're probably around 40% of the 2023 expiration. If we back that number out, that goes back up to, we're probably a little bit under 50% overall. I'd need to kind of just grab that right in front of me. That's probably about about where that number would be, which is roughly in line with average when we're at this point in the year where you have just the forward four quarters. Over time, we do a lot of early renewals, so that number tends to be higher. 50% as we roll into a new year for the forward 4 quarters is about average for us. Thank you. Really solid leasing last year. Looking forward, though, and understand it's a very challenging time, but can you also talk to your expectations for new leasing volume this year? Sure, Camille. It's Ted. Look, obviously, last year we had a really good year. We, you know, signed 3.3 million sq ft of leases, 1.5 million sq ft of new leasing. New customers coming to Highwoods is, you know, roughly 180 new customers that came into our portfolio, which was a great number. I think that was, you know, the most new leasing we had since 2014. I think 3 of the 4 quarters, we had over 300,000 sq ft of new leasing. We've been very pleased with leasing, and obviously it's quarter to quarter. You know, we're off to a good start in first quarter. You know, our leasing pipeline is active in all of our markets. I will say as we look at the pipeline, it's a lot of smaller deals. You know, I think we've all seen that, and you've heard it from others, and that was the case for us really in 2022 as well. You know, leasing activity, the large users, sort of hit the pause button late in the year. Just, you know, the demand we're seeing right now plays to what our core portfolio is, the smaller and medium-sized customers where we've continued to see demand. First quarter, it's continuing, but it is a lot of small customers. The volume and tour activity is, you know, pretty good. Maybe a little bit slower than, you know, the second half of last year, but still pretty decent. Camille, Brian Leary here. I might just add on for a little additional complexion into that momentum that Ted talked about, the smaller mid-size. Who are they? Law firms. What's interesting, I know there's a theory that law firms just move around. What we're seeing in our markets are a number of law firms that are coming in from out of market, planting a flag, and then growing. We've seen that, say, in Charlotte, where we landed an inbound law firm from New York, opened an office in one of our spec suites, grew into the space next door and is now looking at growing further. Financial services, engineering, we're seeing the engineering firms, I think, start to get the momentum with the infrastructure bill, starting to find its way down into the local markets as well. just a little extra color. Appreciate the detail there. Thank you for taking my questions. Thank you. Next question from the line of Michael Griffin with Citi. Please go ahead. Good morning. This is Avery Tiras. I'm from Michael Griffin. My first question is on return to office. How are you seeing return to office faring across your Sun Belt markets? Are there any markets or tenant types that are coming back stronger than others from a utilization perspective? Hey, Avery, it's Ted. Look, as you know, the Sun Belt markets have probably come back quicker than a lot of the larger gateway markets. I think not necessarily, types of tenants, really size of tenants. You know, our return to the office has really been, the smaller customers, suburban customers as well, have been the first ones back. They've been back for a really long time. It's the larger companies, the large public companies as well, that have been a little slower in terms of their return. I think it's more customer size than it has been, type of customer, type of industry. Hey, Brian Leary. To clip on there, the three days of the week, Tuesday, Wednesday, Thursday, is absolutely when we're seeing our occupancy. Financial services in Charlotte, you know, the buildings are full. Top level of the parking garage is getting parked on. We're even seeing the larger ones have implemented their, you know, hybrid work week. You know, 3-2 is what we hear a lot of. Tuesday, Wednesday, Thursday is when we're seeing the majority of folks in our buildings driving restaurant sales, you know, sundry sales, things like that. Helpful. Thank you. My follow-up question is on the activity backfill. Wondering if you can comment on what the backfill rent is in 2024 relative to what Tivity was paying? Avery, it's Brendan. We had a modest roll-up from a cash basis versus where Tivity was. A more, you know, more normalized kinda GAAP roll-up in the double-digit range. We found that that was. We were very pleased with that execution given that Tivity was a build to suit done in 2007, 2008 and had healthy bumps that compounded over 15 years. I think we were pleased with the execution from a leasing standpoint to be able to roll that up on a cash and GAAP basis for the new customer. Great. Thanks for the time. Our next question is from the line of Blaine Heck with Wells Fargo. Please go ahead. Great. Thanks. Good morning. You guys talked about the flexible work options you guys are providing within the portfolio. Can you just expand a little bit on that? Are there specific buildings or markets that those suites or flexible spaces work best in? How much of your office space do you think could eventually be converted to more of a flexible use? Hey, Blaine. Brian Leary. Good morning. Thanks for the question. How much time does everyone have? 'Cause I'm obviously pretty passionate about this. I'll be honest with you, it started with the momentum that we garnered a few years ago with rolling out our spec suite program. We started to realize that not all spec suites are the same, or customers are the same, or BBDs are the same, or buildings are the same, we started to flesh out a matrix that can be applied across markets and BBDs to custom tailor. For instance, in Brentwood, we've been very successful in Nashville rolling out floor by floor of our common spec suites where there's a certain different complexion of the user that goes in there, what the rents are, and that carries a certain amount of amenity base, where you look at a Buckhead collection, the type of customer that's there will be able to demand and pay for something different. What we're doing is we're also realizing that folks wanna collaborate and kind of get out of their own office. It's not even just a potential of going to 110% occupancy, if you will. It's just giving them a diversity of spaces. I don't think I could give you an idea of what% could be transformed over time. I think this is just now going to be embedded in the offerings that we provide. Yes, we've been fairly opportunistic, when vacancy's presented itself to do this, and it's been successful. We really see this rolling up as kind of our flexible option that you get by having a kind of long-term relationship with Highwoods and not necessarily have to engage at the more typical kind of co-working environments. Great. Thanks, Brian. That's helpful. For my second question, can you just talk a little bit more about your capital needs this year? I know, Brendan, you mentioned no ATM issuance was included in guidance, but should we expect you to issue any additional debt this year? How should we expect leverage to trend as we progress throughout 2023? Yeah, Blaine. It's a good question. We do have a lot of flexibility within the capital stack. You know, as I mentioned in prepared remarks, no scheduled debt maturities until really the end of 2025. We have no need to be in the capital markets. However, we do have a lot of freely prepayable debt that is outstanding. The two options there are, one, I mean, we would like to have some of the non-core disposition proceeds come in the door. As Ted mentioned, that's highly dependent on the investment sales market in terms of how much proceeds we get in the door there. That would be used to help pay down some of that debt. Then I think we also have options with respect to longer term financing to reduce the floating rate exposure that we have. On that, we would be opportunistic. I do think it's probably reasonable to assume that at some point, it, I would say it's more likely than not that we'll do some form of financing to term out some of the floating rate exposure that we have during this year. It's just we'll be opportunistic as to when and what form that takes. Great. Thank you. Next question from the line of Georgi Dinkov with Mizuho. Please go ahead. Hi. Thank you for taking my questions. Could you please walk us through the occupancy trajectory through the year, and what gets you to the low versus the high end of the guidance? Hey, Georgi, this is Brendan. I'll start with that, maybe Ted and Brian will add in some color. Yeah, I mean, as we talked about, we obviously have the headwind from Tivity, the 263,000 sq ft that's in the first quarter, that's 100 basis points. We ended the year at 91%, they expect that number to go down in Q1 with Tivity. The backfill customer is not scheduled to commence until the beginning of 2024. We have some other expirations that are some move-outs that will occur as well. We had a government user that was in soft term that gave us back a sizable amount of square footage, so that also is impacting us. We have some leases that are queued up to commence into occupancy later in the year. With all of that's where we think, you know, when we mix all that stuff together, we think we'll end 2023 about 100 basis points lower than where we ended 2022. Keep in mind, we'll also have then, as we start 2024, we will have the backfill customer for Tivity that will be in a sizable amount of that space. They do leg into that space over time, but they'll take the majority of their space at the beginning of 2024. Okay, great. What was the size of the space that was given back to you? This is Ted. Really, we had a couple that Brendan alluded to. One is the government customer. Again, just to reiterate, they're in a soft term, so they had the ability to terminate their lease on reasonably short notice. I think it was a 90-day notice. It was 116,000 sq ft in Atlanta. Then they gave that back. I think they vacated mid-January, so that's another big one for majority of the year. Then I'll just mention one other one. Those are the only two above Tivity and the government tenant above 100,000 feet. We had about 120,000 square foot customer that, we went through a merger here in Raleigh, and they downsized to 46,000 feet. They gave us back early as part of the renewal, long-term renewal, they gave us back about 77,000 sq ft, effective January 1 of 2023. That's a, that's a hit on the occupancy as well. The good part of that story is we've already re-leased 55 of the 75,000 sq ft and with customers that will be starting, you know, throughout this year. Really, those are the three big ones. Great. That was very helpful. Thank you. Just my last question. Can you talk about the sublet market? How is that trending in your markets and specifically in your portfolio? Hey, Georgi. Brian Leary here to take that question. So we've kind of talked about this before, and we are very much focused on the sublet activity, the growth of it, the complexion of it. It looks different in certain cases, not all of it's the same. So where we see it growing, Raleigh is probably a market with the greatest amount of sublet space as a proportion of available space. That's kind of the headline. As you dig into that, you realize that almost 60% of all the sublease space in a market like Raleigh is in one single area called the Research Triangle Park, which we don't have any exposure to and have none in our market. Then, the big thing is who's leasing? Who's the sublessor? What are their motivations to write a check to move someone in there? How much term do they have left? Kind of if you look within our portfolio from a sublet standpoint, the average wealth of our sublessor is north of 6 years. If you even take out one user who's got, you know, 14+ years, it's over 4 years. We feel pretty good about the visibility and exposure that's within the Highwoods portfolio. If you look at the general markets, you know, Nashville is actually going down, and we are part of that with folks kind of backfilling. It's out there. When it gets, the ratio of available sublet space gets over 25%, we have seen that that starts to impact rents. You know, Raleigh's the place where that shows up. Other than that, most of the sublet amount is kind of stable quarter-to-quarter. It's definitely up year-over-year, I mean, nationally and within our markets. Quarter-to-quarter, we haven't seen a lot move. Great. Appreciate the call. Thank you so much for the time. Next question from the line of Rob Stevenson with Janney. Please go ahead. Good morning, guys. Brian, you guys had north of $135 million of combined building improvements and second gen expenses in 2022 and just shy of $120 in 2021. What are you expecting in 2023 at this point, given Tivity retenanting and other known spending? Hey, Rob. Yeah, that number is. I mean, it's bounces around a lot. What I would say is, I think the leasing that we did is probably. I mean, that's the hardest one to figure out. I would say that we probably think leasing is likely to be reasonably stable. Depends a little bit on the volume of leasing and the nature of that leasing and things like that. We committed a little bit more in terms of dollars to leases in 2022 than what we spent. I think our expectation is those things probably normalize, and we probably will be pretty steady on the leasing CapEx. Then usually the maintenance CapEx numbers are fairly steady as well. I would guess this is what we project, that it will be pretty consistent, 2023 versus 2022, but that is a hard number to gauge. Okay. Given Ted's commentary about the continued dislocation in the acquisition market, are dispositions in 2023 likely to be back-end loaded? Do you have stuff teed up that could close in the first half of the year? How are you guys sort of positioning that at this point? No, I think you're dead on. Obviously we put a pretty wide range of 0 to $400 million for our dispo range. It's highly dependent on getting back to a stabilized, fully functioning investment sales market. I think we're starting to see some green shoots that some encouraging signs, at least for other property types. I think office is gonna trail that a little bit. It's got a little bit more headwinds, but we're starting to see, you know, some positive things thawing maybe on the debt side. Which is good. Yeah, any dispos we do likely gonna be back-end loaded. We've got a couple buildings and a couple land transactions that are in the market now that I'd say so far they're going well. We may have a couple things late, you know, late this quarter or late this first half of the year. Then, anything else we do will likely be heavily weighted towards the back half of the year. Okay. Ted, I mean, any updated thoughts on the Pittsburgh portfolio and the potential sale now? Is that tabled for now? Is that more likely to be a 2024 transaction, or are you still thinking that that might wind up going to market this year? Yeah, look, I think we can afford to be patient with Pittsburgh. There's no real rush. Again, until we get a fully functioning, you know, debt market, and fully functioning investment sales market, I think it's probably put on hold. You know, we've hired the broker, we're preparing it to market. We do wanna sell. In the meantime, again, while we're being patient, we're seeing some really good leasing activity in Pittsburgh, so we're gonna try and take advantage of the holes we have there and button that up. Anyway, we'll wait and see, but likely not gonna be, you know, for a while. Okay. Last one for me. Brian, you were talking about utilization before. Have you seen any change, an uptick, since the beginning of the year with, more companies having a definitive plan with a date of January 1 coming back, or has it not been really noticeable in your markets? No, I think it has, Rob. That's a great point and question. I think the big firms, while they're not necessarily making decisions about moving or expanding. You know, some are putting stuff on the sublet market if they're contracting. They have a plan to get their people back in the office. They have their rhythm for the hybrid. I think, you know, you all have seen a number of leaders, CEOs be pretty definitive on this. You know, we're a work from work company. It's hard to manage by Hollywood Squares, things like that. If you look at the, again, the makeup of our customer base, if you go ahead and capture the small and medium customers, as I mentioned, our bread and butter, which makes up a great majority, they have been back and they are back. You look at the bigger users, the corporates, the publicly traded, the folks in the financial services or what have you, they have their plan, and we absolutely have seen it. I mean, so much so as we're working on how to, you know, exit the garages faster, you know. Because now, what we've done is we've been deliberately engaged with our customers. How do we help them? You know, the Jerry Maguire scene, help me help you. How do we help them with their return to work policy? They are committed that they're better together. They want to see their productivity increase. Their productivity increases when they're in the building. That's kind of what we're doing. We have kind of a campaign where we're literally partnering with them specifically on recruiting and bringing their teammates back to the office. Where is utilization midweek for you across the portfolio these days? Where has it been weak? I mean, I, you know, I think those places that have the You've heard the term commute worthiness that we talk about. Those places that might have the higher commute burden to overcome, right? Interesting enough, while it's, you know, considers itself the heart of the Sun Belt, even though Atlanta, because of its greater commute times and distances, is probably, you know, trailing the likes of Nashville. Pittsburgh, for sure, is, you know, a more traditional hub and spoke kind of commute model. I would say just, you know, just Atlanta to some extent, you know, has kind of plateaued, you know, between 50% and 75%. Again, Monday Tuesday, Wednesday, Thursday, we've absolutely noticed it. We look at the restaurant sales, the deli sales, the cafes. They're much busier, you know, back to kind of pre-pandemic levels in terms of that activity. Okay. Thanks, guys. Appreciate the time. Next question from the line of Dave Rodgers with Baird. Please go ahead. Good morning, everybody. Brian, wanted to talk about rent a little bit, and you talked about economic or effective rents earlier. Maybe they're not where you'd love them to be, but they haven't been terrible. Your average deal size has been about 10,000 sq ft. As you roll forward, is there any good evidence that you have now or that you're starting to have negotiations on where these bigger deals say, you know, 50-100 or north of 100,000 sq ft are getting done where you're seeing a substantially greater amount of pressure on rents or effective rents. It just feels like that comp could start to come out and maybe surprise us. I'd love to know what you're seeing on that front. Dave, haven't really seen that yet. You know, I know it just sounds like I'm just talking my book, but I mean, our customers, even the bigger ones, are, to a person telling us that they wanna get their people back. They see the workplace experience as part of that. Right now, the rents are holding up, you know. The free rent is absolutely there. I think they'd like to finance their TI through higher rents. Not to go back like two years, and those that have been listening to me for a while will think I'm sounding a little bit like a broken record, but a lot of these organizations, while they are cost-focused for sure, you know, 1% of what they spend every year is on utilities, 9% is on real estate, 90% is on people, and they're pretty focused on that 90%. It obviously does have a connection to the 9%. No, nothing yet to connect those, Dave. Sorry for the long answer for a fairly short yes or no. Ted, maybe a thought? Yeah. The only thing I'd add is, you know, Landmark, we did that, what, third quarter of last year, you know, over 200,000 sq ft, and the rent was, you know, pretty high on that space as well. What's been interesting just looking at our portfolio, and this sort of goes with the question, last year we only did nine leases greater than 50,000 sq ft, which I thought was an interesting stat. It's, it's just a lot of the small and medium-sized users, which again, plays right to our portfolio. That's out of 425 deals, right? Yeah. It gives you an idea. Some of the larger deals you know, you have talked about the backfill activity or the deal that you did in Richmond, the larger transactions seemingly have focused on suburban markets. Is that not enough data to make that conclusion or leap, or are you seeing that definitely happening where the larger tenants aren't gravitating to Buckhead but maybe are gravitating toward Riverwood or something similar across your markets? I don't think there's really been, you know, enough data points to know. Some of it is, you know, on renewals, right. You can only renew the ones you have, and it's where the holes you have as well in your portfolio. Obviously, Tivity, we had a hole, so we're able to go aggressively try and backfill it, and then some of the other ones. It sort of just depends. I will say a blanket statement, I think we've said this before, that during the pandemic, we have seen a disproportion of leasing out in the suburbs, versus urban, but I don't think there's enough data points to say if there's any trend one way or the other. I think just to clip on, this is, you know, decades in the making. The, you know, where people live is where they'd like to work, there's a great continued migration of homeownership and home buying by the millennials to the suburbs. I think the concept. You know, commodity suburbs is not something that we think just because it's in the suburbs is competitive by any stretch. If you think about what we've talked about, the repositioning of our assets in Brentwood and Cool Springs. Cool Springs, which said repositioning landed the backfill of that building. It's about amenitizing walkable, mixed use, a place to get a cup of coffee, a place to walk and grab lunch, a place to work out outside and within a fitness center and have collaborative workspace. It's. You just can't drop it down someplace in the suburbs or even in town and expect that to solve your problems. That's what we've seen. Thanks for that. Then last for me on the dispositions, Ted, you mentioned in your last comment maybe some land and maybe not Pittsburgh as kind of a full exit this year. What do you anticipate being able to sell this year? I guess maybe the point of the question really is if you're selling $400 million, how diluted is that relative to the debt costs, you know, as you think about late 2023 into 2024? Sure. I'll take maybe the first part and Brendan can jump in. The, you know, the mix of assets, it is. It's a couple land deals, and then we've got a couple single-tenant transactions in the market. It's gonna be a mix of typically what we've done the last two or three, you know, large transactions where we go out and buy an asset like we did in McKinney & Olive, flex up a little bit, and then pay off, bring the balance sheet back down over time. It's gonna be a mix of single tenant, some land, some multi-tenant assets. Again, assets that maybe have a lower growth profile going forward. It's not unlike other stuff we've seen. Pittsburgh, you know, it may be in there. We'll see, but it is a large transaction, and larger deals are harder to get done these days. In terms of dilution, Brendan, you wanna take that? Sure, Dave. What I would say is, I mean, I think the marginal cost of borrowing on what we would pay off if you look at our forecast for 2023, you're probably in the mid- to kinda upper 5s. You can kinda apply the CapEx rates that you think versus those numbers. What I would say is from a cash flow perspective, which is where we have focused, clearly, you know, there's ongoing CapEx associated with the assets that we plan to sell. When we pay down the debt, all of that, you know, interest savings falls to the bottom line. There's no CapEx associated with that, obviously. From a, from a cash flow perspective, it's much less dilutive. Then, when we staple onto that the development deliveries that come online, that's where we do think, you know, over time, our cash flows will continue to get better, even with the planned dispositions that we have. All right, great. Thank you. You're welcome. Have a good one. Our next question comes from the line of Dylan Burzinski with Green Street. Please go ahead. Hi, guys. Thanks for taking the question. Just curious, sort of if you can kind of touch on the development leasing pipeline and where it stands today. Sure, Dylan. Good morning. Yeah, let me just walk through each of them, you know, maybe I'll start in order of when they deliver. 2827 Peachtree, just a reminder, that's now topped out. It delivers third quarter of this year. It's come together nicely. We do have a stabilization date of first quarter 2025. That at the end of the year, we were 75% leased, we've got a couple, I'd say, very strong prospects to get us somewhere in the mid-80s prior to delivery. We feel good about that one. GlenLake III, here in Raleigh also delivers third quarter of this year. Stabilization is first quarter 2025. If you remember, we started that one 15% pre-leased. We have not signed anyone else throughout so far. I will say in the last, call it, even 60 days, late last year rolling into this year, activity prospect, as we've topped off the building, you can now see the shell of the retail that we're adding as an amenity, come together, that our activity has picked up pretty good. We're encouraged by that. The third one that delivers this year is the Granite Park Six. That's as a reminder in the Plano-Frisco submarkets, 50/50 joint venture with Granite Properties, a local sharpshooter that we're thrilled to be partners with. That delivers in the fourth quarter, so sort of towards the end of the year. 12% pre-leased. That one's been interesting in that, you know, I'd say mid last year, the activity was just off the charts. A lot of larger users we were chasing, and we were moving down, you know, making progress with or some sort of progress. All of a sudden, late last year or the third quarter, the big users, like we've all heard, they sort of just pressed the pause button. There's still smaller activity, but again, incredibly well located building, and we're encouraged by again, by what's how the building's coming together. The other two are Twenty Three Springs, also with Granite. That doesn't get completed till first quarter 2025, stabilizes in 2028. Activity has been very, very strong there, even though the delivery is a couple of years out. We feel great about that. Then the fifth one, just Midtown East. Obviously, we put the silt fence around it, and we'll be breaking ground in the next week or two with that one. Doesn't deliver till 2025. We've actually had Since we've had the fence go up, we've had some inquiries on that, which I didn't really expect. Tampa's really not a pre-lease market, we'll see. Those are very early and haven't even responded to some of the RFPs, but we're getting some activity there. Again, we feel good. Got a couple of years until we get that one done. Did that answer your question? Yeah, that was perfect. Appreciate the color on that. I guess just you mentioned Granite Park. Just a follow-up on Granite Park Six. Have you guys underwritten or underwriting expectations changed given sort of the drop-off in leasing activity, or just kind of how should we be thinking about that? Not at all. Not at all. I think we feel very good about the underwriting. Again, we don't stabilize that one till, I think, first quarter 2026. Again, we got plenty of time. There's no rush here. We didn't have a lot of pre-leasing coming in before the building was done. We, you know, we think we're pretty conservative. The proposals we're putting out are well in line with our underwriting. No, we still feel very good about it. Thanks. Thank you. Next question from the line of Peter Abramowitz with Jefferies. Please go ahead. Yes, thank you. I just want to ask, what's kind of built into your guidance in terms of the mark-to-market that you're expecting for the year? Hey, Peter, it's Brendan. I would say, I mean, it's on a cash basis. We've been, you know, roughly kind of around flat for the past, really almost since the onset of COVID. That's probably a good, a good marker. And in the low double digits on a GAAP basis. Those are probably good markers. Again, a little bit difficult to forecast just given, you know, the mix of expirations and new lease signings and things like that. I think if you use those guideposts, that probably gets you to kind of where. That probably ought to be in line with what we've got included in our outlook. Okay, got it. I guess a slightly different way of asking something that was asked earlier, but a lot of your coastal competitors have talked about a pickup in activity pretty meaningfully since the new year. Are you seeing any signs of that in your markets and or generally kind of any signs of an inflection in terms of business confidence and business leaders being more willing to make decisions? Or is it, you know, still kind of the same that they've been for the past year or so? Hey, Peter. Brian here. A couple of things to that kind of comparison. Our markets, our submarkets, our BBDs, our buildings, we're already ahead of that curve. That's kind of the first thing. Again, our smaller and medium-sized, again, particularly suburban, were first back. Then they came back kind of across the board. The start of this year, I do think the bigger corporates, the ones that you've read about, their CEOs saying that they wanna get their folks back, we have absolutely seen that. Now, you know, what the great thing I think, and we hope that this is the case, the issues around the pandemic, which still were hovering a year ago, just as a potential flag, those are really have kind of abated in terms of the reason why folks are not coming back. I think that's a good thing. Hopefully, that's in the rear view mirror, you know. We have been a fairly consistent, you know, ahead of the curve. That curves continue to go up. You know, peak occupancy is Tuesday, Wednesday, Thursday, for sure. Fridays are quiet. You're seeing more on Mondays than you did at the end of last year. I do believe that to a company, there is a plan now that folks are back in the office, three days a week. All right. That's it for me. Thank you. We have a follow-up from Camille Bonnel, Bank of America. Please go ahead. Hi. Just have one follow-up. Given the big debate on whether the weakness of CBD urban office is temporary or not, can you remind us of the breakdown of the urban versus suburban in your portfolio? Within that, are you seeing any clear distinction between the operating performance between the two, whether it be leasing activity, occupancy, or rents? Hey, Camille, it's Brendan. I mean, I would say, I mean, from a CBD, we kinda classify it in 3 different ways, CBD, infill, and suburban. Suburban, they're not quite evenly distributed. You might have a little bit. Maybe suburban is about a quarter infill, is and then evenly split between infill and CBD. That's kind of the portfolio breakdown in terms of. Maybe in terms of performance, I'll flip that over to Brian or Ted to answer that. Camille, just to add on, our CBDs are fundamentally different from a CBD of the gateways. Our customers and their teammates who are commuting to our CBDs on the whole are not spending 1 hour on the train each way. Our CBDs have a different kind of complexion. I keep using that term. Now, as I mentioned earlier, those regions that do look more like a gateway in terms of longer commutes and kind of that hub and spoke from the burbs in and then back out again, they are looking more like kind of the coastal gateways in terms of the return. To Brendan's point, the CBD infill and suburban kind of nature of how we break out our markets, infill, that's basically a Buckhead in Atlanta, if you know that. It has a solid residential base with incredible incomes and educational attainment. What happened is they added the shops and restaurants for that high net worth population to service. Because they already lived there and they played there, they wanted to work there. That's Buckhead, that's South Park, Charlotte, that's, you know, North Hills here in Raleigh. That is a little bit of a nuance between the CBD within the Highwoods Sunbelt portfolio and a CBD analog to the gateways of the coastals. Thank you. Thank you. We have no further questions on the phone line. Well, thanks everybody for joining the call today. We appreciate your interest in Highwoods, and we look forward to talking to you all again soon. Thank you. That concludes today's call. We thank you for your participation and ask you to please disconnect your lines.