Hello everyone, and welcome to the Highwoods Properties Fourth Quarter 2023 Earnings Call. My name is Bruno, and I'll be operating your call today. During the presentation, you can register to ask a question by pressing Star followed by One on your telephone keypad. I will now hand over to your host, Hannah True. Please go ahead. Thank you, operator, and 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 risks 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, and the company does not undertake a duty to update any forward-looking statement. With that, I'll turn the call over to Ted. Thanks, Hannah, and good morning, everyone. Before I talk about our solid financial and operating results for 2023, let me start by first outlining our strategic priorities for the next several years. First, we will continue to improve the quality of our portfolio. We are laser-focused on owning a portfolio that is resilient throughout all business cycles, well-positioned to attract, retain, and return our customers' most valuable resource, their employees, to their workplaces. We do this by developing best-in-class properties, acquiring high-quality assets with attractive risk-adjusted returns, redeveloping and repositioning well-located properties where substantial upside exists, and selling buildings that no longer meet our criteria. Second, we are focused on solidifying our rent roll and driving future occupancy. This means proactively renewing customers as early and prudently as possible and backfilling pockets of vacancy within the portfolio. We continue to be bullish on the long-term demographics of the Sun Belt. Simply put, we are in the best markets and best business districts to create long-term value for our shareholders. Third, we are laying the groundwork for future investment opportunities. We believe this cycle will present us with opportunities to create shareholder value by acquiring high-quality assets in the BBDs of high-growth markets. We will be patient, and we will be ready. And fourth, we will continue to maintain a best-in-class balance sheet. As demonstrated over the past 90 days, having ample liquidity and access to multiple sources of capital throughout the cycle is an important differentiator for us. We made meaningful progress on all of these strategic priorities during 2023. We sold over $100 million of non-core properties, including land, and made solid progress on our development pipeline with the completions of 2827 Peachtree, Granite Park Six, and Glenlake Three. We expect these developments will provide meaningful growth in future years as they stabilize. Further, we completed significant Highwoodtizing projects on existing buildings in Nashville and Raleigh, where we're already generating higher rental rates and increased leasing activity. We also made progress solidifying our future rent roll. We remain focused on our larger, near-term expirations, and Brian will provide more details shortly. We're pleased with the traction we've had in Atlanta, Nashville, and Tampa. Given the known move-outs that we've discussed for some time, occupancy is likely to dip in late 2024 and early 2025, but we're encouraged by the activity we've seen throughout the portfolio, which has already translated into significant lease signings since the start of 2024. It's early, and while we don't expect a lot of transaction activity in the near term, we are setting the stage for future investments through exploratory discussions with owners and lenders of attractive properties in our markets. This is similar to the playbook we deployed in the years following the GFC. We further strengthened our balance sheet by raising nearly $600 million of debt capital during 2023. Plus, just a few weeks ago, we extended the term of our $750 million credit facility into 2029, with no change to the size or the borrowing spread. We now have over $900 million of current liquidity and no consolidated debt maturities until May 2026. We are confident in the long-term outlook for our markets and BBDs based on the limited new supply expected to be added over the next few years. The current supply pipeline in our markets is half of what it was just a few years ago, with most of these developments projected to deliver over the next four quarters. By this time next year, minimal new product is expected to be under construction. This tightening supply picture further adds to our confidence as we focus on leasing up high-quality blocks that are or will become available in our buildings that are well located in high-quality portfolio, reputation as a best-in-class operator, and strong financial sponsorship, positions us to continue to gain market share. Turning to our results, we delivered FFO of $0.99 per share in the fourth quarter, with full year 2023 at $3.83 per share. Both the quarter and full year results included unusual items that net out to $0.08 of higher FFO. Excluding these items, our core 2023 FFO was $3.75 per share, a penny above the midpoint of our initial outlook. We are pleased with these financial results, given asset sales and the unanticipated rise in interest rates during the year, neither of which were factored into our initial outlook. We expect to be a net seller again in 2024, with $75 million-$200 million of non-core dispositions. Similar to 2023, the volume and timing of dispositions will depend on how conditions in the investment sales market play out. We do have about $75 million of properties under contract, and expect those sales to close in the first half of the year. While we're actively building the foundation for future investment opportunities, we don't have any acquisitions included in our 2024 outlook. Our initial 2024 FFO outlook is $3.46-$3.64 per share, and same-property cash NOI growth is projected to be +1% at the midpoint. In addition, we have backfilled a significant amount of larger known move-outs that impacted 2023 NOI and occupancy. While these backfills won't meaningfully contribute to 2024, they will drive the NOI in future years. We're also seeing good activity on backfilling some of the larger known move-outs later in 2024 and early 2025. While there is obviously continues to be headwinds in the office sector, we're optimistic about the future. First, we have significant organic growth potential within our current operating portfolio, with high-quality pockets of vacancy, where we're seeing solid interest from prospects. Second, our $518 million development pipeline will provide meaningful upside as it delivers and stabilizes in the next few years. Third, our balance sheet is in excellent shape, with ample liquidity and no need to raise capital for the next couple of years. And finally, our cash flows remain strong, even as we absorb headwinds from higher interest rates and investing Highwoodtizing capital to generate higher returns on our existing portfolio. To wrap up, we're not only optimistic because of our markets and our portfolio, but also because of our engaged, hardworking, and talented teammates who drive our success day after day. We'd like to thank the entire Highwoods team for their commitment and tireless dedication. It's their effort that has positioned us for success for many years to come. Brian? Thanks, Ted, and good morning, everyone. I'd like to briefly hit our fourth quarter performance, macro trends, and then drill down on our markets, where we're off to a strong start for 2024, and where we are making progress towards backfilling our upcoming vacancies. In Q4 of 2023, our leasing team signed 698,000 sq ft, with an average lease term of 6.6 years. Atlanta, Nashville, and Raleigh led the way with two-thirds of the quarter's volume. Charlotte and Orlando had the highest occupancies at 95.6% and 93.5%, respectively. In addition, we signed a 105,000 sq ft first-generation lease at 23 Springs, our JV development in Uptown Dallas. While many of our leasing metrics reflect the downward pressure of the current market, we're encouraged by our portfolio's occupancy outperformance in comparison to our BBDs by over 640 basis points. With the fourth quarter's average rent bumps at 2.7%, we believe we have meaningful rent growth embedded in the quarter's results. The quality of our portfolio, our sponsorship, and the commute-worthy lifestyle office experience we provide our customers, gives us a clear edge in today's leasing environment. We're off to a strong start to 2024, having already signed over 500,000 sq ft of second-generation leases, including 150,000 sq ft of new leases and 52,000 sq ft of expansions since January 1. We continue to see return-to-work programs and mandates raise the tide on physical occupancy, with the recognition that Fridays will be the lightest days in the office, just as they were before the pandemic. This also goes with the fact that our customers are telling us one-on-one and via their leasing activity, that they value the physical workplace, where their best and brightest can collaborate and solve problems, where talent can be onboarded and mentored, and where a company's culture can thrive. This flight to quality is a flight of quality. Quality companies with quality jobs, not easily exported to the couch today or to artificial intelligence tomorrow. From a market perspective, let's start in Atlanta, where we had the most leasing activity in the fourth quarter with 172,000 sq ft signed. While the overall market saw another quarter of negative absorption, Cushman & Wakefield noted Buckhead broke from this trend with 240,000 sq ft of positive absorption. With no new development underway, and our four-building, 2 million sq ft Buckhead collection of lifestyle office buildings being the beneficiaries of our upcoming Highwoodtizing project there, the team has backfilled 50,000 sq ft and has more than 350,000 sq ft of active prospects for the remainder of Novelis' Q3 2024 expiration. Staying in Atlanta, the Georgia Department of Revenue, as expected, will downsize, and we are successfully relocating them within the portfolio in 110,000 sq ft at the beginning of 2025. To Music City, where we own 5.1 million sq ft in Nashville's four BBDs, our team signed 148,000 sq ft in the quarter. Over the same period, Cushman noted that Nashville posted 170,000 sq ft of positive absorption, one of five markets in the nation to post greater than 150,000 sq ft of absorption for the quarter. Last year, we Highwoodtized roughly 1 million sq ft in our Brentwood and Franklin BBDs, where we signed more than half of Nashville's deals for the quarter and where these commute-worthy workplaces are attracting customers. This supports our thesis that all things being equal, an exceptional experience trumps a trophy tower, and that a lifestyle office building is more about the lifestyle than the building. You may recall that we shared an update last quarter on the five-story, 264,000 sq ft Cool Springs V building, formerly occupied by Tivity, and the substantial backfill of that space. We have modified the lease signed in the third quarter of 2022 from 223,000 sq ft to 110,000 sq ft. Under the modified terms of the lease, 55,000 sq ft will commence in the fourth quarter of 2024, and the remaining 55,000 sq ft in the fourth quarter of 2025. Free rent periods have been eliminated. Highwoods' tenant improvement commitment has been reduced, and the per sq ft rental rate has been increased. With the aforementioned Highwoodtizing of these assets, we have significant interest in the property and our other adjacent Cool Springs assets. In downtown Nashville, we will begin the Highwoodtizing of our 520,000 sq ft Pinnacle Tower later this year, in anticipation of Bass, Berry & Sims' known move-out in January 2025. In the heart of Nashville, this well-located asset is next door to the newly opened Four Seasons Hotel and Residences, and is directly connected to the only pedestrian bridge spanning the Cumberland River, joining the new $2 billion enclosed NFL stadium, starting construction later this year. We already have several multi-floor prospects a year in advance of Bass, Berry & Sims's expiration. A quick update on our non-core Pittsburgh assets, where we expect a 317,000 sq ft customer at EQT Plaza to downsize in the fourth quarter of 2024. We've backfilled a full floor and have prospects for additional space. I'd like to finish in the Sunshine State, where Cushman noted Tampa ended 2023, number 3 in the nation for leasing as a percentage of inventory. Our Tampa team has been busy at Tampa Bay Park. Our approximately 1 million sq ft collection of assets in Westshore, by addressing prior move-outs, 120,000 sq ft in aggregate across the park, with 95,000 sq ft of backfill leasing that is yet to commence. In conclusion, while we expect 2024 to bring many of the same challenges we faced over the past several years, we are encouraged by the level of activity we are seeing throughout our BBDs. Competitive development pipelines are at record lows, and we believe our resilient portfolio, ongoing Highwoodtizing efforts, strong balance sheet, and sizable land bank will enable us to capitalize on opportunities in our markets as they arise. Brendan? Thanks, Brian. In the fourth quarter, we delivered net income of $38 million, or $0.36 per share, and FFO of $106.7 million, or $0.99 per share. As Ted mentioned, there were unusual items in the quarter that netted to $0.08 per share. None of these items were included in our updated FFO outlook provided in October. Excluding these items, FFO per share was $0.91 in the fourth quarter and $3.75 for the year, $0.01 above our initial 2023 FFO outlook provided last February. We are pleased with these full year results as $0.04 of upside, mostly from higher NOI, overcame the $0.03 we lost from the combination of higher interest rates, asset sales, and the earlier than expected repayment of our preferred investment in M&O. Just a few details on the unusual items. The pre-development costs written off in the fourth quarter were $3.6 million. $2.6 million of this shows up in G&A, while $1 million shows up in the form of reduced income from unconsolidated affiliates, as it was attributable to a JV. The remaining unusual items, land sale gains, debt extinguishment costs, and the write-off of straight-line rents due to moving a customer to cash basis accounting, are reflected, as you would expect, on the income statement. During 2023, we further strengthened our balance sheet by pushing out our maturity ladder, which puts us in excellent shape for the next several years. During the fourth quarter, we raised $350 million of ten-year bonds with strong support from a broad group of fixed income investors. We also obtained a $45 million, five-year secured loan at Midtown West, a consolidated JV property in Tampa, where we own an 80% interest. We also obtained a $200 million secured loan in March. In total, we raised almost $600 million of debt capital during the year. After year-end, we recast our $750 million credit facility with no change to our borrowing capacity or credit spread. In the past 12 months, we've accessed the bond market, the mortgage market, and the bank market for over $1.3 billion of total capital. We now have no consolidated debt maturities until May 2026 and over $900 million of available liquidity, having less than $250 million of capital left to complete our development pipeline. Our strong balance sheet with ample liquidity, combined with our high-quality portfolio in the BBDs of high-growth Sun Belt markets, is a large reason why Moody's affirmed our Baa2 credit rating with a stable outlook just last week. I'd like to spend some time highlighting our cash flow trajectory. In 2023, we once again had healthy cash flows, demonstrating the resiliency of our portfolio and platform. Digging a little deeper, an even clearer picture emerges. First, as you know from prior calls, we had two sizable properties in 2023 that were vacant nearly the entire year, Cool Springs V and 2500 Century Center. These have now been substantially re-leased with additional solid interest in the balance of the space, but they generated negative NOI during 2023. Because our practice has long been not to take in-service properties available for lease out of our operating or same-store portfolio, regardless of occupancy, these two empty buildings negatively impacted FFO and cash flow. Second, we had above-average TI spend during 2023 as we funded committed capital on the high volume of new leases signed in 2022. Third, we invested heavily in renovation and repositioning capital to Highwoodtize existing properties during the year. Even with these three factors, we still generated healthy cash flows that provided positive dividend coverage. We believe the resiliency of our cash flows should give our shareholders confidence in our long-term outlook. As Ted mentioned, our FFO outlook for 2024 is $3.46-$3.64 per share. You'll also note that we are now providing our full-year outlook for average occupancy rather than a single-date year-end projection, as we have done in prior years. We think average occupancy should provide better insight into our overall outlook for the year. Same-property cash NOI growth is projected to be flat to up 2%. This includes the full headwinds of the Cool Springs, Century Center, and Tampa Bay Park vacancies we've detailed, as the backfill customers do not begin to take occupancy until later this year or early 2025, as well as the known pending vacancies at Two Alliance Center in Atlanta and EQT Plaza in Pittsburgh in the second half of the year. While 2024 per share FFO is projected to be down compared to the core results in 2023, the decline is primarily attributable to higher financing costs associated with our capital raising activities in the fourth quarter of 2023 and the modification of the lease and accounting treatment related to our backfill customer at Cool Springs V in Nashville. These items have a combined diluted impact of approximately $0.15 per share, split roughly evenly between the two. We expect Cool Springs V will generate negative NOI in 2024. However, based on the modified lease we've discussed and the solid interest we're seeing from prospects, we believe Cool Springs V will be a significant driver of growth in future years. This is also the case in Tampa and Atlanta, based on signed but not yet commenced leases. In addition, we have meaningful future growth potential from our development pipeline. We delivered three properties in late 2023: 2827 Peachtree, Granite Park Six, and Glenlake Three. On a combined basis, these properties are projected to be roughly neutral to 2024 FFO, as we will stop capitalizing interest later this year. However, we have healthy prospect activity for these properties, which should provide growth to NOI, FFO, and cash flow in future years. In summary, our balance sheet is in excellent shape. Our high-quality Sun Belt portfolio is located in the BBDs, where talent wants to be, and our team is cycle-tested and optimistic about future value creation. Operator, we are now ready for questions. Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad. To withdraw your question, star followed by two, and please do also remember to unmute your microphone when it's your turn to speak. We do have our first question registered. It It comes from Blaine Heck from Wells Fargo. Blaine, your line is now open. Okay, great. Good morning. So it sounds like leasing has picked up, but some context would be great. So I guess, can you talk about the overall leasing pipeline that you guys are working on right now, how the size of that pipeline or activity levels compares with what you saw last year, maybe what the mix is between new and renewal leases, and whether the composition has changed at all from a tenant size or industry perspective? Good morning, Blaine. Sure, it's Ted. I'll start, and maybe Brian can add to it. Look, obviously, we are pleased with our leasing in the fourth quarter, just shy of 700,000 sq ft. We did 100 deals, which is sort of right on par with our historical average. 44 of those were new leases. We also had seven new-to-market customers, primarily companies that were opening up small regional offices, 2,000 or 3,000 sq ft. So no big inbound relocations. But look, it's been small, the same trend we've seen the last few years, and smaller companies, but a couple of trends we're seeing. And the activity is pretty evenly divided among our markets. But a couple of the trends we're seeing is there's really been a gap that's widening between the haves and have-nots for office owners. You know, we're hearing from brokers that some companies won't even tour buildings, buildings that have debt and certainly near-term maturities, sort of a binary qualifier for some buildings. And I think the brokers, as I think I've talked about on prior calls, they're doing a really good job this cycle of understanding the capital stack for office buildings. So I think, just given the amount of debt maturities that are coming up, this really plays to our strength, and we're out talking to brokers. We've got a highly unencumbered portfolio. We don't have a lot of single-asset secured loans, so we're taking advantage of the situation, and I think we're capturing, we're trying to capture more than our fair share always, but I think we've been able to do that in the last, certainly last couple of quarters. As you know, as we stated in our prepared remarks, we're off to a great start this quarter. Another trend, look, we are seeing larger deals are starting to come back, while it's been the last year or so, smaller deals, the 25 to 50s, we're seeing a lot more of those. Another trend probably is the smaller companies are the ones that are growing and the larger companies are the ones that are shrinking, so we're starting to see more of that. We had, I think, 13 expansions, as I mentioned earlier. Companies are also willing to do longer terms. They don't want to come out of pocket for TI, so they'll give term to get additional TI. You know, the, the... I guess the final trend, we always talk about the flight to quality. Certainly, that's real. It's quality buildings, quality amenities, and, and certainly the quality ownership. So I hope that answered your question. Yeah, that's a very, very helpful color there, Ted. I appreciate that. So, just switching gears for my second question, can you just talk about your appetite for investment at this point? Are you guys actively pursuing any opportunities on the acquisition side, or would you say you're currently, you know, more focused on the development lease-up and leasing in the operating portfolio, making sure some of the backfill activity gets done? Yeah, look, as you know, Blaine, we're always. We look at everything that's out there. We certainly answer the phone when we get inbound calls from folks as well. We also stay close to lenders. So, you know, as we said, we're, you know, actively watching the market, trying to see where the data points are for trades, and I'll talk about one in a second. But so we're not. There's nothing, you know. We have a lot on our radar, on our wish list that we're just monitoring right now. I'd say early discussions, but there's nothing, nothing imminent without a doubt. But at the same time, look, we're laser-focused on filling our backfills. We, as we all know, we've got several coming up late, starting in the fourth quarter of this year, leaking over in the first quarter next year. So our leasing teams are highly focused on that. Again, we like the inbound activity we're seeing on these backfills early. So, so sort of we're not just laser-focused on one, we're sort of doing both. And I will talk about one trade that's happened as we look at the comps, and there's a couple of others we think are coming, but there's a high-quality building that traded here in Raleigh, just, I don't know, a month or two ago, it closed. It was a high-quality asset. It actually sold for a higher price than what it did in 2018. It did have some seller better-than-market seller financing, but it was basically a 6.5 cap rate. If you adjust for the better-than-market seller financing, you know, maybe it ticked up to just shy of a seven, something like that. But from our understanding is, you know, there's 100 CAs signed, double-digit bids, and so a pretty, pretty good market for that type of asset. And again, we're watching a few others. Great. And just to follow up on that, I guess, you know, in this interest rate environment and given where office fundamentals are today, I guess what pricing metrics would you get you guys excited about an opportunity? In other words, you know, where's your, your target at going in? Cap rate threshold or IRR threshold or even, you know, price per square foot threshold. Yeah, look, obviously, discount to replacement cost is, is one bar for us in this environment. Again, it's... I mentioned it's a playbook we used coming out of the GFC. We bought a lot of partially leased assets with a lot of upside. So cap rate's, you know, pretty irrelevant. For us, we look at a stabilized cap rate, and we would love to take some leasing risk, if we can get the asset at the right price and then lease it up ourselves. And so obviously, we're looking at-- We think we're going to be able to get some acquisitions at pretty attractive yields, and what those are, I guess we'll have to, we'll have to see. But I think acquisitions are going to pencil better than development, I think, for the next couple of years. Again, we'll just have to see what the risk-adjusted return is. Great. Thanks a lot, Ted. Great, thanks a lot, Ted. Thank you. Our next question comes from Michael Griffin from Citi. Michael, you may proceed with your question. Great, thanks. Maybe just sticking back on, on the leasing front, are you noticing tenants, are they quicker to make decisions about leasing space? Are the times still elongated in making decisions? Any color around that would be helpful. Yeah, Michael, it's unfortunately, it's still elongated. It's been slow on the decision making. I mean, deals we thought might close one quarter are getting pushed a quarter, sometimes two quarters. So decision making is still taking time. I do think that we are seeing some of the larger users that have been kicking the can, they're now starting to make decisions. They understand what the return-to-work policies are of the companies. So while the decisions are going to take longer to get done, they are going to make those decisions instead of delaying them, you know, for a year, year and a half, whatever. So, more deals are going to get done over time, but it's still taking more time. Michael, I might add. This is Brian. Just one little footnote to what Ted said is that, and we're guilty of this, a lot of tenants or customers in the market have gotten engaged, maybe farther out from expiration than they might have in the past. So they actually have a little bit of free board to take longer, while at the same time, when you look at the kind of the national portfolio or the portfolio in our submarkets, there's a natural roll, and that's coming due, and that forces decisions. And so we're starting to see that. I think there was some kind of kick the can, one year, two year, that definitely happened during the pandemic. But now, as you start to get that cross lines of debt maturities and assets we're competing against and roll, you are starting to see some folks have to make decisions. Thanks. That's helpful. This is Nick Joseph with Michael. Just on the potential Pittsburgh asset sales, can you provide an update on where those stand? You know, how that plays into the capital plan for 2024, then kind of the timing around it, just given some of the lease expirations later this year? Yeah, Michael, it's Ted. Look, on Pittsburgh, as you all know, we announced in the third quarter of 2022 that our intention was to exit Pittsburgh. We didn't put a timeline on it, and it's just as a reminder, we announced back in 2019 that we were going to get out of Memphis and Greensboro. You know, it ultimately took us about three years to get out of those markets. So, you know, our intention still to exit Pittsburgh, but just given the very difficult capital market environment for office, and then you layer on very big office, big office transactions, it's just, it's not an opportune time. So we are focused on leasing up the vacancies, the upcoming vacancies, and, just, you know, running the assets like we normally would. And Nick, this is Brendan. Just, you know, in terms of the capital plan for the year, there really isn't anything that... We don't need any of those proceeds. I mean, we have over $900 million of existing liquidity. We'll spend some money on the development pipeline, but even if we didn't sell anything during the year, I think from a sources and uses standpoint, we've got ample liquidity for several years. Thank you very much. Our next question comes from Rob Stevenson, from Janney. Rob, your line is now open. Good morning, guys. Ted, given your comments about brokers not touring assets with debt issues, are these just turning into zombie buildings that can't fund TIs and no longer competitive? Is there something else that's going on there? Look, I think some of those are. It's exactly right. And you also got a, you know, a, yeah, anybody that's got a loan coming up with a secured loan, they're having discussions with their lender right now. Right? So it's, the lender wants a pay down, the borrower may not be willing to do a pay down. So you've just got those, the tension in the room, I think, between a lot of lenders and borrowers. So right now, yeah, who's going to fund the TIs? Is the lender going to do it if they haven't worked out an extension with the borrower? So I think there are difficult conversations that are going on with a lot of loans that have near term maturities. Have you guys seen lenders taking good quality assets back in your core markets? Or is it just, you know, those sort of, you know, lower-tier assets that we're seeing as the headlines, and they're just kicking the can down the road on the better quality assets? Yeah, I think that's generally it. Lower quality, typically, is the prior cycles; lower quality is what goes back first. So we're starting to see it, but there have been, I'd say, maybe a handful of high-quality assets that have, in fact, gone back to lenders over the past 12-15 months. I think there's going to be some more. So it's just, again, you just got to be patient. But, you know, coming out of the GFC, we didn't start buying high-quality assets until 2012 and 2013. GFC started in, you know, 2008 or 2009. So it takes a few years just to cycle through for the quality of the assets we want. So we've got several on our radar, on our, what we call our wish list. But again, it's just gonna. We have to be patient. Okay. And then just to ask the leasing question a different way, how rational are your markets today? Are you seeing, you know, other landlords overpaying for occupancy out there, and driving costs up? Or are people remaining fairly reasonable at this point, given market conditions and length of lease, et cetera? Yeah, look, I think, you know, this environment, it's similar to what the office market experiences during any economic downturn, right? It becomes a tenant's market. So you got, not knowing what each intention is and what the situation is with each building landlord. There's landlords are getting very aggressive. You know, vacancy is increasing, you got increased sublease space, you know, capital costs are increasing. So, look, there's, you know, I would argue there's some irrational deals going on, but we're highly competitive as well. You know, we're gonna compete for all the, all the leases, but it's just a—it's a tenant's market, and it's a environment that we saw, you know, we see every 10 or 15 years. Okay. And then, Brendan, just to follow up on that, tenant improvements that you mentioned in your comments, up almost $20 million year-over-year, like 23%, like $94 million and change. Given the amount of rollover and leasing that's you guys are slated to do in 2024 and 2025, what are you guys budgeting there? Is it likely to remain elevated at these levels over the next year or two until you get the occupancy up? Yeah, Rob, that's a good question. I, we think it's probably more likely to kinda migrate down, during 2024. At least that's what we kinda have baked into the outlook. So I, I expect a lot of 2023 was, all of the leasing volume, particularly the new leasing volume that was done in 2022. A lot of those dollars got spent in 2023, it was an above average amount. I think 2024 is likely to look more like a normalized year. So our expectations are we'll see those numbers come down and will look more like probably prior years, you know, that you saw before, prior to 2023 in terms of that spend. So, you know, might be in the kind of $15-$20 million reduction range would be, our expectation. But again, that, you know, it's—that is based on kind of the current business plan. I think it would be a nice result if leasing volume remains very high the way that it has for the first month of the year here, and we spend a lot of capital. If that's the case, I think we'd be happy with that result. But I think our expectation and what's in the business plan now is it's gonna look much more—spend is gonna much—look much more like it did prior to 2023, but, but we'll see kinda how that goes. Okay, that's helpful. Thanks, guys. Appreciate the time. Our next question comes from Nick Thillman from Baird. Nick, your line is now open. Hey, good morning, guys. Maybe starting with some comments from Ted or Brian on kind of the lease term dynamics you commented on earlier. Some of your West Coast peers had mentioned that tenants are kinda seeking like shorter-term deals, but that doesn't really seem to be the case for like your guys's markets based on lease durations increased quarter-over-quarter for the last 4-5 quarters. I guess, what's driving that? Is that just the type of tenants in your markets or the size of your tenants? Hey, Nick, it's Brian. I think it's partly just the conviction of the folks who are opting to make their workplace a priority. You know, sort of the return to work is and return to the office is got steam here in our markets, and I think folks have kicked the can and done the shorter term deals previously. So that's where we're getting conviction and a little larger size. I don't know if it's anything other than that. I don't think it's some weird, you know, stat that popped out, but that's what we're seeing. Maybe following up on that, Brian, just on, on Orlando and specific, you didn't call it out in your commentary, but rate change there was over 22%. Anything to call out in that specific market, what you're seeing, whether it be like tenant type, or the type of deals you're doing there? Well, I think what's interesting about Orlando, right, there's so many macro glacial trends that are heading to Orlando and Central Florida and Florida, and so there's zero new development underway. There's zero new development that's been added as competitive, and so we have well-positioned assets. We've been able to invest in them kind of through this period. So some of the earlier questions about zombie buildings, not only does that talk about funding TI and commissions, that also is difficult to fund kind of repositionings or what we call hybridizing, where we kind of upgrade the experience. So we've done that kind of right through the pandemic, you know, in terms of our workplace making. I think the Orlando portfolio has been the beneficiary of that. We've leaned into our spec suites. Orlando has kind of caught up to the rest of our partners across the markets, and that's why we're seeing such great results there. That's helpful. Then maybe last one for me. On the dispositions, maybe can we break out the difference between just land sales and regular property sales? And then kind of are we gonna assume more of these bite-sized deals similar to the one you did in Nashville and 4Q, like $25-$30 million transactions? Sure. So just let me summarize what we did for dispositions in 2023. We closed roughly $104 million of dispositions. That included both land and buildings. It was four buildings, totaling $83 million, and then $21 million of land in, in two separate parcels. It's sort of a mix between single customer buildings and multi-customer buildings, and then the land. You know, we sold them throughout the year. The cap rates range from really high fives for a single customer long-term lease to low nines for the multi-customer with sort of a low WALT. So most recently, it was Rampart in the fourth quarter. It was 97% leased building, 3.5-year WALT, and that was sort of a low nine cap rate. So I think that mix is sort of what you'll see this year as well. It's gonna be probably a mix of land and multi-tenant buildings. May not have any single tenant, I need to think about that, but, you know, we do have about $79 million under contract and due diligence. And we think that'll close somewhere in the first half of the year, and that's sort of multi-tenant, similar to what we sold last year on the multi-tenant side. Smaller assets, those are the ones that are easier to get done. As smaller is easier, larger is harder, and so it's a very similar mix, probably what you'll see this year. That's it for me. Thanks, guys. Thank you. Our next question comes from Camille Bonnel from Bank of America. Camille, your line is now open. Hi, everyone. Good to see the progress on backfilling some of your larger expiries. Given your strategic priorities of renewing tenants as early as possible, how are the early renewal discussions tracking in your leasing pipeline? Hey, Camille, Brian here. They're tracking well, and well, you know, one of the earlier questions, too, is why we're maybe seeing more term in our portfolio. We're also able to lean in on the TI. As Ted mentioned earlier, customers would trade that TI for term, and we have that ability being unencumbered by property-level debt in most cases. So I think that's kind of helped. The other thing, too, is we have that kind of captured audience, so... And we have that relationships. We lease our own buildings, we operate our own buildings, we manage our own buildings, and so we have that, those relationships with our customers, so it's a little more of a natural conversation to start thinking about how to upgrade their space to make it as competitive to recruit, retain, and return their talent back to the office. So are you seeing that activity start to pick up compared to a year ago? 'Cause we've been hearing, like, tenants just continue to kick the can down the road. So, yeah, let me jump in and try. So, thinking about just some of our upcoming maturities, I mean, Brian talked about it in our, his prepared remarks on, you know, in Buckhead, the 168,000 sq ft. In end of September, we've already backfilled 50,000 of that, and we have over 350,000 sq ft of tour activity, and some interest, a lot of interest in the asset. So we feel good about backfilling that specific space. And you go up to EQT Plaza, Brian mentioned we've already backfilled one floor there, and we have interest. You know, we have proposals out on several other floors. So again, the activity's really picked up, I think, from mid-last year at EQT Plaza. You go to Bass Berry, you know, we're getting ready to start implement our Highwoodtizing plan there. We're still a year out from Bass Berry leaving in February of 2025, but we've got several multi-floor users that we've got proposals, and they're touring on. Nothing, you know, nothing's etched by any stretch, but just the activity, seeing the tour activity pick up is pretty encouraging from our standpoint. Got it. And you've placed a big emphasis on securing additional liquidity in the past year and have been very successful at raising capital. So given you've pretty much covered your capital needs, how much more liquidity are you seeking to raise? Hey, Camille, it's Brendan. I would say that there's not capital that we feel that we need to raise, but I do think, if you go back to just, Ted's comments at the beginning of the year, so at the beginning of the script, just talking about, you know, continual portfolio improvement, I do think we feel like there are asset sales that we likely will get done. So I think the capital raising that will get done during this year is likely to be done via asset sales, as opposed to, going out to the debt markets, whether it's, you know... I don't think we envision raising debt capital this year, but I do think we'll get capital in the door through disposition proceeds. Finally, then, looking at your cash flows for this next year, has there been discussions with the board on whether this could, the dividend could be a source of capital, just given the high yield, or is the view to continue paying it as long as it's covered? Sure. Let me start off, and maybe Brendan may wanna supplement the answer. But look, it's something we talk about virtually every quarter with the board. You know, as we look at our dividend, it is covered by our cash flow, and we think the dividend is an important part of total return for us. And, you know, we've been pretty proactive the last few years with respect to our CapEx spend, and our cash flows have been improving. So, you know, based on the outlook that we see for the business, we feel very comfortable with the dividend at this time. Thank you for taking my questions. Thank you. Our next question comes from Ronald Kamdem from Morgan Stanley. Ronald, your line is now open. Hey, just a couple quick ones. Staying with the dispositions, you talked about 75 in the market, maybe more to come. Any sort of sense on the cap rates on those, and how are you guys thinking about, you know, the quality of those assets, seller financing? Just, any more color on those would be helpful. Sure. With respect to what we have in the market, again, they haven't closed, so I'm hesitant to talk about cap rates. Hopefully, we'll have something to talk about maybe next call, Ron. Seller financing, there is one building of what we have out there that we're providing a short-term, I think it's a 12-month short-term financing, very similar to, I guess, earlier last year, we did six-month financing on one. So one small asset of that $79 million will have a seller financing for one year. But other than that, it's now all equity purchase. Ron, I would, I'll just say, in terms of cap rates, I think it's fair if you kinda looked at the cap rates and the average sort of blended for 2023. If you thought of something kinda comparable to that, you know, in broad strokes, I would say, you know, not, not with the, the 75 that we expect in the first half of the year, but just kinda as you think about that over the course of 2024, 2025, I think that's a reasonable gauge to kinda use if, if you're trying to model that. Helpful. And then my second one is just going back to the questions on sort of the cash flows, situation and so forth. So as you think about, you know, the lease expirations starting at the back half of this year into 2025, potential Pittsburgh sales, have you guys sort of looked at an analysis of where leverage could potentially go in those scenarios? And, you know, how you think about preserving cash flows under those scenarios and so forth. So the question really is just, with the lease expirations, potential Pittsburgh sale, how does the balance sheet leverage sort of trend under those? Thanks. Yeah, Ron, it's a good question. So I think we are pretty comfortable with kinda where we are now. Of course, we're gonna be spending dollars on the development pipeline as we migrate throughout 2024 and even into 2025, without really a corresponding increase, certainly in 2024, on EBITDA or NOI. So I think you'll see a little bit of upward movement in the debt-to-EBITDA ratio as you kinda go throughout the year. But that is gonna be then will come down as those development properties deliver and stabilize and generate significant amounts of NOI. So with all of that, I think we're very comfortable kind of when we forecast, even, you know, when we get to peak levels of debt to EBITDA, where we'll be within the embedded growth, that that number will come down. All the while, I think we're very comfortable also with where our cash flows are with respect to the dividend. So, I think we feel like we've got a lot of, a lot of good growth drivers, and we're coming at this from a position of strength if you think about dividend coverage in 2023 going forward. So I think not only do we have a lot of growth drivers with respect to kind of cash flow going forward, we're also coming at it from a position of strength from thinking about it from 2023 levels. Helpful. Thanks so much. Our next question comes from Vikram Malhotra from Mizuho. Vikram, your line's now open. Hey, good morning. This is Georgi on for Vikram. Can you just walk us through the occupancy trajectory in 2024, and can you provide more color on known move-outs over the next two years? Hey, Georgi, it's Brendan. I'll start, and then maybe I'll hand it over to Ted or Brian for the, you know, some color on the, on the large expirations coming up. So, as is typical, you know, kinda seasonally for us, and we've talked about this in years past, we usually have kind of a seasonal dip in the first quarter. So no single large users, but there's a handful of expirations that happened at the beginning of January that are single floor users. So we expect occupancy to kinda dip a little bit in the first quarter, and then sort of hold steady, maybe migrate up a little bit as you kinda migrate into second and third quarters. And then we've got the expiration with Novelis late in the third quarter, and then in the beginning of the fourth quarter with EQT. So I think you'll see occupancy kinda low at the end of this year, with that average kind of in the range of 87%-89%, as we discussed. But that doesn't—I just—I'll mention this: we have, and I think Brian talked about this on the call, but we've got about 320,000 sq ft of signed, not yet commenced leases, just between Cool Springs V, 2500 Century Center, and Tampa Bay Park. There's only about 100 of that that we expect to kinda move into occupancy by year-end 2024. So even when you kinda go into 2025, there's still a fair amount of leasing that we've done that will come into occupancy in 2025. So I think, you know... And then we'll, we expect to continue to lease space on existing or future vacancy as we kinda go forward throughout 2024, which we don't expect to be in occupancy in 2024, but will contribute to future years. And then this is Ted. Why don't I jump in? Sort of went through a few of the known move-outs, so I'll go through quickly one more time. You know, Novelis, we backfilled 50,000 sq ft. So Novelis is 168,000 sq ft, September 2024. We backfilled 50. We have good prospects for 350 of the remaining 100 or so, 120,000 sq ft. So we feel really good there. The activity, EQT, is October 2024, 317,000 sq ft. We've backfilled 16,000 sq ft. Basically, I said backfill. We went direct with a subtenant of EQT, so we're happy to do that. We've got, you know, pretty good activity on some additional space, so we'll see there. It's still early. Then the Department of Revenue, we have not talked about that one. They're in, like, some, I think, 255,000 sq ft. They expire at the very end of the year, 2024. So they're vacating, but we've retained them, as we mentioned in our prepared remarks. We're moving them. They're downsizing. We're moving within that same park to about 110,000 sq ft in a different building. We would have loved to keep them in the building they're in. They just, it's just very difficult from a layout perspective. So we've got that. And then on that building, we're actually looking at various scenarios, what the strategy is for the building that DOR is vacating, including a potential residential conversion. So more on that, you know, we'll know more in the next 90-120 days, probably, with respect to the DOR. We do have a 150 Fayetteville, our headquarters building here in Raleigh that we're sitting in. Wells Fargo is vacating 78,000 sq ft at the end of October of this year. And we knew that. We bought this building back in 2021, and it was a known vacate at that point. So we're actually excited to get that 78,000 sq ft includes about 16,000 sq ft of a branch location that's on the first floor of the building that we're gonna turn into state-of-the-art amenities for the building, which has been our plan since 2021. So we're excited to get that back. So we'll have about 60,000 sq ft to release there, and we've got some really neat plans for that. So that's one we'll get taken care of. And then the Bass, Berry & Sims, which I mentioned on a prior question, that we've got several multi-tenant floors interest in those. Again, early prospects, just tour activity, but we feel good given we're still a year away. Thank you. That's very helpful. And just a last one for me. With all the news about tech layoffs, how do you think that translates to your market? Yeah, you know, we're not a big tech market. You know, as you know, Raleigh more than probably anybody, but in general, we're a pretty diversified customer base. Don't have a lot of exposure to tech. I think several years ago, maybe we wish we did when tech was gobbling up the space, but we don't have a lot of, you know, exposure in our markets to tech. Our next question comes from Dylan Burzinski from Green Street. Dylan, your line is now open. Thanks for taking the question, guys, and, and just one from me. So I guess just as we think about occupancy dipping throughout 2024 into early 2025, if I sort of pair that up with some of the comments you just made, Brendan, and the comments around sort of good activity on near-term move-out, I guess it seems to us that the lease percentage, the drop-off and lease percentage moving forward, should be a lot less than the drop-off in occupancy. And therefore, as we think about occupancy in the 2025 and, and beyond, you should recover what is lost relatively quickly. Is that fair to say? Yeah, Dylan, it's a good question. I certainly think that if the activity that we're seeing in terms of prospect activity translates into leases, as, you know, we're hopeful that it will, that your outlook would prove correct. Now, you know, there's execution that needs to get done. So it's not to say that this is, you know, that that's a foregone conclusion. But I think if activity levels hold up and we're able to translate what we think are, you know, the good prospect activity into leases, then I do think that your outlook would prove correct. Great. Thanks, guys. Great. Thanks, Dylan. Our next question comes from Peter Abramowitz from Jefferies. Peter, your line is now open. Thank you. Yes, most of my questions have been answered, but just one here. Have you noticed any change in the last, call it, sort of 60, 90 days as the macro backdrop and the rate backdrop has sort of shifted here? Have you noticed any change in the environment and demand for office buildings in your market in general? I guess, is there been any change in appetite for office transactions? No, I don't think so. I think, you know, the assets we're in the market with have sort of already been tied up, so we don't have a whole lot of real-time data points with respect to that. I do think from what we're hearing is you're gonna see some more stuff coming to the market from the brokers. I do think after the year turned, rates came down, you know, brokers are a little more confident. There's a lot of dry powder sitting on the sidelines. So I would fully expect once buyers have a clear understanding of what their cost of capital is gonna be and the availability of capital, it's still tough to get an office loan today. I think, virtually all the capital sources, it's very difficult, but I do think it may loosen up in the next six to nine months. So I think transaction activity is gonna pick up, but I think it's gonna be in the back half of the year, likely before we see a whole lot of that. But there's a lot of money that still wants to invest. Got it. Thanks, Ted. Got it. Thanks, Ted. Our next question comes from Omotayo Okusanya from Deutsche Bank. Omotayo, your line is now open. Yes, good afternoon, everyone. Just in regards to the tenant that was moved to cash accounting, which again, I'm assuming is the same tenant, taking the Tivity space. Curious again, then, since you have to move them to cash accounting, how do you kind of get comfortable with the renegotiated lease that, again, 12 months down the line, you're not kind of back in the same situation? Yeah, Tayo, it's a good question overall. Yeah, I mean, I think, you know, so first of all, the standard to kinda put somebody on GAAP accounting is that you have, you're more than probable in terms of collecting that rent throughout the duration of the term. So this is a very long-term lease that we have, and, you know, the business cycle is a little bit uncertain. And I think we're comfortable with kind of where we are because there's not a lot of capital that we will incrementally invest into the space. And there is, you know, a meaningful amount of rent that we expect over the life of the term. But I think just due to, you know, being conservative in terms of how we would like to account for this, I think we felt it was prudent, and we talked to our auditors about this, to put them on cash basis. So it's not to suggest that we don't think that there is collection that's likely or collect a significant amount of rent, but I think just out of an abundance of caution, we moved them on a cash basis accounting. And I will say that that's not dissimilar from things that we do with other, industries that we tend to view as a little bit more volatile than maybe our core customer base. So as an example, most of the retailers that we have within our portfolio, we just move them on a cash basis. That's just standard practice for us. So, I think we feel very good about the modified lease that's there. I think we feel very optimistic about the long-term outlook for that building in particular, but just out of an abundance of caution, we didn't want to start to record GAAP revenue in 2024, given the long-term nature of that lease. Great. Thank you. Great to see all the leasing in the BBD portfolio as well. Thanks, Tayo. We currently have no further questions, so I'd like to hand back to the management team for closing remarks. Over to you. Well, thanks, everybody, for joining the call today. Thanks for your great questions, and thank you for your interest in Highwoods, and we look forward to talking to you next quarter, if not before. Have a great day. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your line.