Thank you all for joining. I would like to welcome you all to the Highwoods Properties Q1 2024 earnings call. My name is Brika, and I will be your moderator for today. All lines are on mute for the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question and you have dialed in today, please press star one on your touch phone keypad. If you change your mind anytime, please press star then two. Thank you. And now I would like to pass the conference over to your host, Hannah True, Manager of Corporate Finance and Strategy, to begin. So, Hannah, 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 earning 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 EBITDA. 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 statements. With that, I'll turn the call over to Ted. Thanks, Hannah. Good morning, everyone. We had an excellent quarter executing on our key priorities and delivering solid financial results. First, we signed 922,000 sq ft of second gen leases, including over 400,000 sq ft of new leases and 36,000 sq ft of net expansions. This volume of work will benefit us in future periods as the new leases commence. Second, we signed 157,000 sq ft of first gen leases in our development pipeline. We continue to see solid interest in these best-in-class projects, which will provide approximately $40 million of incremental NOI upon stabilization and be a significant growth driver for our cash flows. Third, we delivered Four Moorcroft, an 18,000 sq ft, $12 million build-to-suit that we developed at our Moorcroft property in the South Park BBD of Charlotte. As you may recall, this creative office development is situated on a surface parking lot with zero basis. While Four Moorcroft is one of our smaller developments, it demonstrates our resourcefulness in cultivating and generating attractive risk-adjusted returns for our shareholders. Finally, we sold nearly $80 million of non-core properties in Raleigh, including over $60 million that closed early in the second quarter. These sales improve our portfolio quality, increase our long-term cash flow growth, and further strengthen our liquidity and already strong balance sheet. We expect our solid leasing momentum to continue as our markets generate outsized population and job growth, given their high quality of life and business-friendly environments. Simply put, our markets and our BBDs are where people and companies want to live, work, and play. This is why our portfolios outperform the national average, our markets, and our submarkets. All because customers and prospects are attracted to our commute-worthy buildings. Plus, being a long-term landlord with a strong balance sheet that can fund tenant improvements and leasing commissions and care for our best-in-class properties is proving to be a clear competitive advantage for us. Contrary to popular opinion, we're seeing strong demand across our portfolio, whether they be brand new trophy assets or well-located second gen properties, and whether they be suburban or urban. We believe financially capable landlords who provide value to customers and prospects will see healthy demand across a wide variety of price points. Turning to our quarterly results, we delivered FFO of $0.89 per share and same-property cash NOI growth of +0.3%. As expected, our occupancy dipped modestly to 88.5%. Our 2024 FFO outlook is $0.015 lower at the midpoint due to higher-than-expected interest rates and the dilutive impact of non-core asset sales already completed, neither of which were factored into our initial outlook. These items are partially offset by higher projected NOI. The strong leasing start to the year modestly helps 2024, but most of the new leasing will drive upside in 2025 and beyond. We've also had a successful start to the year with non-core asset sales, and we're prepping additional properties for potential disposition. We now expect to sell up to an additional $150 million during the remainder of the year. The volume and timing of dispositions will depend on how conditions are in the investment sales market, but we've been encouraged by the response we've seen in recent quarters to our marketing efforts and the modest improvement in the capital markets for prospective buyers. While we don't have any acquisitions included in our 2024 outlook, we continue to build the foundation for future investment opportunities. Similar to the first few years coming out of the global financial crisis, we believe compelling investment opportunities will arise, but these will take time to play out. We're comfortable being patient as we continue to have conversations with owners and lenders of wish list properties in our markets. Our development pipeline is now $506 million, following the delivery of the 100% leased Four Moorcroft building in Charlotte. With 157,000 sq ft of first gen leases signed during the quarter, our pipeline is now 41% leased. A big chunk of the activity was at our 642,000 sq ft, $460 million 23Springs project in Uptown Dallas, that we're developing in a 50/50 joint venture with Granite. 23Springs is now 54% pre-leased a year prior to scheduled completion and four years before the estimated stabilization. The largest lease signed was a current law firm customer at our 98% occupied McKinney & Olive property, just a couple blocks away, who needs to expand by nearly 50%. Given we couldn't accommodate their growth at McKinney & Olive, we were able to accommodate their growth at 23Springs. We already have excellent activity to backfill their space at McKinney & Olive more than two years before their scheduled move to 23Springs. We made modest leasing progress at Granite Park 6 in Dallas and GlenLake III in Raleigh. Both of these developments delivered late last year and are projected to stabilize in 2026. These buildings are best in class in their respective BBDs, and prospect activity is accelerating. We're confident in the long-term outlook and expect these developments to drive solid cash flow growth for us in future years. Midtown East in Tampa, our 143,000 sq ft, $83 million project that we're developing in a 50/50 joint venture with Bromley in the Westshore BBD, is seeing strong interest from prospects, given we're the only office project currently under construction in the entire market. We're 16% pre-leased and are very encouraged by the strong interest more than two years before scheduled stabilization. We don't expect to announce any new development projects during the year. Obviously, this isn't unique to Highwoods. It's very difficult for new starts to pencil in the current environment. We're not seeing meaningful reductions in hard costs, and interest rates continue to be elevated. Plus, for other developers who are capital constrained, securing capital for new office construction is very challenging. As a result, new starts have plummeted, and with the current development pipelines that will largely be delivered across our markets over the next few quarters, the lack of new supply in future periods will play to our advantage as users seek high quality properties from landlords with strong financial resources. In conclusion, as we have for the past few years, we acknowledge the headwinds in the office sector, yet we're bullish about the future for Highwoods. First, our portfolio has never been better, and it will continue to improve as we sell additional non-core properties and deliver our $500 million development pipeline. Second, we have significant organic growth potential within our operating portfolio, where we've already leased some of our existing vacancy and have solid interest on expected future vacancy. Third, our balance sheet is in excellent shape and will enable us to capitalize on future growth opportunities. And finally, even with higher interest rates, our underlying cash flows remain strong, which allows us to keep investing high utilizing capital to generate higher returns on our existing portfolio. Brian? Thank you, Ted, and good morning all. As we mentioned on last quarter's call, our leasing teams got off to a strong start in 2024. We maintained our positive momentum through the end of the first quarter, signed 97 deals, and exceeded our five-quarter average with 922,000 sq ft signed. New leasing volume of 422,000 sq ft was the second highest quarterly total since 2014. Average term was also strong at nearly seven years, one year longer than our prior five-quarter average. Tampa, Atlanta, and Raleigh signed nearly 3/4 of this quarter's total volume, with average terms of seven point five years. Expansions outpaced contractions two to one, and while leased economics reflect a highly competitive market, we will prioritize occupancy as needed over pushing rental rates to lean on our strengths as a long-term owner while strengthening our long-term cash flows. In addition, we are seeing strong activity across our $500 million development pipeline. As Ted mentioned, we signed 150,000 sq ft of first-generation leases, including 129,000 sq ft at 23Springs, our JV development in Uptown Dallas. The 129,000 sq ft lease we announced last quarter. 23Springs is now 54% pre-leased, one year before completion and four years before our estimated stabilization in the first quarter of 2028. The quality of our portfolio, our sponsorship, and the commute-worthy lifestyle office experience we provide our customers is giving us a clear edge in today's leasing environment. We're seeing strong demand at various price points across our portfolio. As demonstrated by strong leasing volume in our development pipeline, the top of the market is doing well. But we continue to see the most demand for our well-located second-gen assets. This is because a large segment of customers and prospects prioritize premier office experience at rents that are more affordable than a trophy price point. Moving to our markets, Tampa recorded the most volume in the quarter with 267,000 sq ft signed. Our 16% pre-leased Midtown East development is the only Class A office development under construction in Tampa, and is on time and on budget for our Q1 2025 delivery. Solid inbound interest continues as the building advances toward completion. According to Cushman & Wakefield, Midtown East Westshore BBD was the most active submarket in Tampa during the quarter, capturing nearly one-third of all leasing activity. Further, CBRE is currently tracking several large users in the market and over 2.6 million sq ft of demand. We leased a lot of our vacancy earlier this year at Tampa Bay Park, and we're now working to fill pockets of vacancy at Meridian, where we have solid traction. Moving to Atlanta, the MSA recently passed Philadelphia and Washington, D.C., as the nation's sixth-largest and the second-largest metropolitan area on the East Coast, per the latest population estimates from the U.S. Census Bureau. Our Atlanta team signed 199,000 sq ft for the quarter, of which 160,000 was new. This represents the greatest share of new leasing across the portfolio. Further north in Raleigh, which was recently ranked number two in the Milken Institute's annual Best Performing Cities report, our team signed 201,000 sq ft in the quarter. We averaged close to eight years of lease term, and over half of this leasing activity was new. Raleigh is joined by Nashville, Dallas, and Charlotte in Milken's top 10 Best Performing Cities list. In summary, our leasing pipeline is healthy, and we are pleased by the flow of inbound proposal and tour requests across our portfolio. We believe this is emblematic of our simple and straightforward strategy of creating commute-worthy experiences in the Sun Belt's best business districts. Brendan? Thanks, Brian. In the fourth quarter, we delivered net income of $26.1 million, or $0.25 per share, and FFO of $96 million, or $0.89 per share. There were no unusual items in the quarter. We are pleased with the quarterly results, which demonstrate the resiliency of our operations and continued strong cash flows. Rolling forward from the fourth quarter and excluding the $0.08 per share of unusual items in Q4, FFO per share was $0.02 lower in the first quarter. Higher G&A, which we incur every year during the first quarter due to the expensing of equity grants for certain employees, and the full quarter impact of November's bond issuance reduced FFO by $0.04 per share. These headwinds were partially offset by $0.02 per share of higher NOI, which nets to the $0.02 sequential reduction. Our balance sheet remains in excellent shape. At March 31st, we had $850 million of available liquidity, which has increased to $915 million following the non-core dispositions we closed in early April. We have a little over $200 million left to fund on our development pipeline and no consolidated debt maturities until May 2026. We do have one mortgage that matures in the third quarter of this year at our unconsolidated McKinney & Olive joint venture. This is a low-leverage loan, and we're reviewing financing options with Granite Properties, our partner. We may ultimately decide to jointly repay this loan upon maturity and seek longer-term financing when the lending environment is more attractive. Given our ample liquidity, we have many options available. This also demonstrates the strategic value of having such a financially capable joint venture partner in Granite. As Ted mentioned, we have updated our 2024 FFO outlook to $3.46-$3.61 per share, which implies a $0.015 reduction at the midpoint. The reduction is driven by the $0.03 dilutive impact from the asset sales completed since our outlook was provided in February, and higher than anticipated interest rates for the remainder of 2024, partially offset by $0.015 of higher anticipated NOI. It's still early in the year, and therefore our range remains wide with several variables, most around projected property tax savings, which aren't assured yet. We're pleased with the noncore property sales completed thus far. While modestly dilutive to near-term FFO, as we have long stated, our capital recycling program has been accretive to our cash flows while also improving our long-term growth rate. We've increased the midpoint of our same-property cash NOI outlook and moved the high end of our total dispositions to $230 million, including the $80 million we've closed so far. All other items in our outlook remain unchanged. As Ted and Brian mentioned, we had a strong leasing quarter, especially new leasing volume. Many of the new leases signed in the quarter won't commence until late this year or next year, and therefore will not have a meaningful financial impact on 2024 results. This volume of work will obviously bolster our results in future years. As you know, we try to be as open and transparent as possible with our stakeholders, and we've stated for quite some time that we expect occupancy will trough in the first half of next year. We still expect this to be the case, but if we can continue to post strong leasing volumes, we believe our trough occupancy level will be higher than our original expectations and our recovery will be faster. You may have seen in our supplemental package that we have made some adjustments to how we present property-level operational information. Starting this quarter and going forward, we are now including in-service properties owned by consolidated and unconsolidated joint ventures at our share. We are doing the same thing with respect to the presentation of our same property operational results in the supplemental. For those of you who would rather see same property results on a consolidated basis only, all of the ingredients are itemized in the same property reconciliation table in the back of the earnings release. These changes have a relatively modest impact on our property level metrics this quarter, as JVs today comprise less than 3% of our business, but will increase to around 8% as our development properties are placed in service. To wrap up, we're very encouraged about the future for Highwoods. Our high-quality Sun Belt portfolio is located in the BBDs, where talent wants to be, which is clearly demonstrated by our performance this quarter. We have strong embedded growth potential within our operating portfolio and approximately $40 million of future NOI as our development pipeline stabilizes. Our balance sheet is in excellent shape, and our cash flows continue to be resilient. Operator, we are now ready for questions. Thank you. If you would like to ask a question, please press Star followed by one on your telephone keypads now. If you change your mind anytime, please press Star, then two. We have our first question from the phone line from Camille Bonnel of Bank of America. Your line is open. Good morning. Great to see the pickup in leasing this quarter. I'd like to start with some questions around guidance. As you clearly laid out the puts and takes for bringing the top end of FFO down, can you explain the drivers behind raising the low end of your same-store guide? And how confident are you in the bottom range here if there's a pullback in decision making? Camille, hi, it's Brendan. I'll start. So I think, in terms of the components of the driver of the higher NOI outlook, that we talked about, both in terms of the same property growth, and what we said is just overall better NOI with respect to the FFO outlook. I would say that it's roughly evenly split between better revenue and some expense savings. So that better revenue is driven by probably what I would characterize as modestly higher average occupancy. We didn't change the average occupancy range, but it is modestly higher overall. So it's a combination of top line and expense savings. And then in terms of how much spec leasing is in the forecast, we still have spec leasing that is there. I think if things really slow down in the for the remainder of the year, it probably doesn't have a very large impact in terms of the financial performance for 2024, as most of the spec leasing that we have slated to come in this year would be later in the year and therefore not have a big impact on 2024 results. But obviously, that's going to carry, you know, more impactful to 2025 and future years. But I think we feel good about kind of where leasing activity has been through the first almost four months of the year and are optimistic that that will continue as we go forward. To clarify, is the spec leasing the same as new leasing activity per your report? We have within our spec outlook for the business plan for the year, there's a combination of that between both new and renewal. So it's in with both. Got it. Okay. Well, if we look back, it seems like you were able to improve your occupancy when new leasing volumes were above 1 million sq ft. So are you able to expand a bit more on that specific, assumption baked into guidance this year? And do you think you can sustain the pace of new leasing throughout the year, or was first quarter? How did that track, compared to your budget? Yeah, maybe I'll start, and then I'll let Ted and Brian provide more color on specifics. But I think certainly the new leasing volume of 423,000 sq ft, we don't expect that to continue. That was, I think, the second highest quarter that we've had over the past 10 years, so that's certainly above expectations. And the volumes are going to bounce from quarter to quarter.... But I think if we could average around 300,000 sq ft of new per quarter for the year, so call it 1.2 million sq ft of new during the year, I think that would place us in a good position to kind of build occupancy as we get through some of the large known expirations. What I mentioned in the prepared remarks, we certainly expect to trough occupancy early in 2025 and then build from there. But I think if we're able to sustain good new leasing volume and manage reasonable levels of renewals, then I think that puts us in position to build kind of from the base, and as we stated earlier, trough at a higher level than what we previously expected, and then recover faster. Thank you. Oh, sorry. Just one, one final question. If we were to dive deeper into your portfolio, are you seeing any areas where vacancy has been concentrated, whether that be in by location, like suburban, urban, infill, or lease size? Thank you. Hi, Camille, it's Ted. You know, I don't think so. I think we've seen pretty good demand across the portfolio. Our biggest vacancies as a company are the well-known Tivity move-out. That building is still largely vacant, so that's 260 or so thousand sq ft. And then, the CDC vacated a building in Atlanta, and that is. It's leased, but it's vacant right now. So combine those two, that's about a hundred and, if I remember right, it's about 130 basis points of occupancy. But other than those two big holes, it's really not concentrated anywhere. Thanks for taking my question. Your next question comes from Vikram Malhotra from Mizuho. Hey, this is Georgi Dinkov on for Vikram. Can you just walk us through any known move-outs and, the occupancy trajectory in 2024? Yeah, maybe I'll take the first part, and Brendan can jump in on the trajectory and the occupancy. So look, the known move-outs, you know, we've talked about these for several quarters. I'm going to hit it just at a high level. You know, we're seeing some good activity on the Novelis space in Atlanta, so 168,000 sq ft. And so we're seeing really good activity there. We're seeing good activity actually in Pittsburgh. Now, as we're getting closer to the EQT expiration later this fall, as you know, we've, I think last quarter, we indicated we went direct with one customer, and we've got strong prospects for another 50,000 sq ft and over 100,000 sq ft of proposals that are out. So we feel, you know, good about the activity we're getting there. We'll see where that goes. In Nashville, you know, Bass Berry moves out next February, and still a little bit early there, but we're well on our way on the Highwoodtizing plans for the project that will be getting underway really the day they move out. So we're excited about our plans there. Activity is a little slower there just because we're still 10 months away from them vacating. And then really the other big one is the Department of Revenue at the end of this year, 1,800 Century Center. They're the ones consolidating and downsizing to another one of our buildings in that same park. We're still evaluating our plans for that building, whether it be a office lease up or a potential residential conversion. So we're well under way. We've been analyzing that for a while, and hopefully, we'll know more in the next couple of months with respect to what our plans are with that. Georgie, it's Brendan. Just in terms of the trajectory as we move throughout the year or so, we'll probably dip a little bit in Q2 and Q3, so maybe, you know, around that average for the year, around 88% or so. There's just a little bit of movement within the portfolio. There are some spaces that we're proactively taking back early in the second quarter that we have then backfilled and expect to move the new users in by year-end. And then, as we've stated, we think year-end will be the low point for us for this year, given what Ted talked about, which is principally the EQT expiration in the fourth quarter. We do think that we're going to end the year at a higher level than what we had previously expected, when we provided our original outlook in February. We think we're tracking well, but certainly, the year-end should expect to have the low point in terms of occupancy for the year. Just a second question for me. We've noticed occupancy decline in Tampa and Orlando quarter over quarter. Can you just comment on what was the driver? And is this a sign of challenges in these specific markets? And I guess, can you just comment on your markets, which one are performing better and which one are kind of like lagging behind? Georgie, this is Brian. I'll take it. A couple of things. First, you mentioned Orlando and Tampa, specifically. Last quarter, Orlando really hit a high water mark in terms of their occupancy over a great period of time. They're doing a fantastic job. Nothing's under construction in Orlando. They have the best buildings in downtown, so they're doing a good job there. We feel good about the long-term maintenance of occupancy within a bandwidth of the high water mark last quarter and where they are this year. So I think nothing to really expound upon more with regard to Orlando. Tampa is a dynamic market. We have multiple parks kind of within the Westshore BBD, and so you're seeing ebbs and flows across there. Nothing to highlight anything specifically. We're very happy with the movement in Tampa. The folks continuing to grow.... there. Now, globally, in terms of the other markets, you know, they're all our favorite children, so there's none that are favored. But look, Nashville continues to be a place people wanna be. It posted as a overall market, positive quarterly absorption last quarter, which stood out nationally for the year of 2023. It was, you know, four in the country for positive absorption. Some of you may have noticed just yesterday, Larry Ellison was getting interviewed by Bill Frist in Nashville, and referenced that Nashville will become Oracle's global headquarters at some point in the future, which supports the story that CBRE put out there that Nashville is top five in the country for new headquarters. So, Nashville is in a good place. Charlotte, well, in some ways, it's a tale of two cities. In some cases, there's a clear delineation and separation between location, lineage, and landlord in terms of who's winning and who's not in Charlotte. We're sitting here at 96.2% occupied. Feel really good about our assets. Charlotte continues to grow, and lots of interesting, interesting things going on there. Dallas, you know, Dallas will soon, you know, they say in the next five years, pass Chicago in terms of population. It's the fourth largest metro right now, led the U.S. in 2023 population growth. We couldn't be happier with our partnership there in Granite. Happy with the existing McKinney & Olive asset in Uptown, the leasing momentum at 23Springs, and the leasing that's picking up, and interest in inbounds and tours at GP6. So I think that sort of kind of gives you a little bit of color of the spectrum of markets. I don't know if Ted has anything else to add. Yeah. Great. Thank you for taking my questions. Thank you. We now have Blaine Heck from Wells Fargo on the line. Ted, you mentioned this in your prepared remarks, but recently we've been hearing a lot about the flight to capital or tenants looking for landlords that are willing and able to fund TIs on new leases. I guess, can you just give a little bit more color on that trend broadly? And then maybe comment on how much of the market vacancy might be attributable to space that's owned by a landlord that's unwilling to fund TIs. And then lastly, you know, I'm just wondering whether there are any specific instances you can cite where you think you've won out on a deal because of that ability that you guys have to fund TIs. Sure. A lot to unpack there. Remind me if I don't hit all parts of that. So in general, it's exactly what you said. We're seeing a, you know, there's a bifurcation of assets and ownership that, you know, there are some cases we've heard that landlords or brokers aren't showing the space if they understand the capital stack, the capital stack's upside down, or there's just risk of the building just effectively becoming a zombie-type building. So there's many instances out there. One in particular, here in Raleigh, we've got a full floor user from a building that was in distress, and it was really from a cold call. And this is very similar to what all of our leasing reps are doing. It's, you know, all the buildings that have got maturing debt that we're targeting those buildings because of the capital that we can invest and the TIs and commissions that we can pay. So this was a direct result of a cold call that we got. We got a full floor user. The user didn't want to stay in the building because they couldn't get enough money to recap, to redo their space. So it was a great win for our team, and it shows that, you know, just the resourcefulness of our team, and we're seeing that in other markets as well. In terms of the number, the amount of vacancy, it's concentrated. It's really, the vacancy is concentrated in B and C buildings in general. It's concentrated in less desirable submarkets, and then it's concentrated in the buildings that have been in really in distress for the last, call it two or three years. As we all know, the lenders have been kicking the can. Lenders don't want to take a lot of these assets back. A lot of the owners don't have the money or the ability, or in some cases, even the desire, to keep remaining the ownership. So those buildings are gonna be starved for capital. Occupancy is gonna be under pressure. So, and those occupancies are declining. So I think it's those three areas. Did I did I hit all parts of your question? Yeah, I think so. That's really helpful color. I really appreciate that. Just switching gears for the second question, I guess, how are you thinking about the Pittsburgh portfolio in the near to midterm? Do you think dispositions are still likely off the table in the near term? Are you seeing any kind of signs that the market might be returning there? I guess, are there any of those properties in the potential $150 million of dispositions that you're forecasting for the rest of the year? And then just, you know, generally, maybe how do you think about the balance between waiting for a decent price to exit versus, you know, maybe selling sooner, wherever market pricing is, but likely saving some capital needed for lease up and any renovation or refreshing projects that you might have? Sure. So with regard to Pittsburgh, it's gonna be a tough sell. My gut is, and we don't have our next wave totally identified yet. Clearly, when we announced we were exiting Pittsburgh in the fall of 2022, it's not unlike what we did getting out of Memphis and Greensboro. It took us about three years to get out. I think the timing, the capital markets still aren't back, in my view. I think they're, you know, they're... And we've had a lot of success selling small and medium-sized assets, sort of bite-sized transactions that are easier to finance. But, to sell a big transaction like a PPG, it's a very difficult debt market today. So my gut is we're gonna just keep focused on blocking and tackling, leasing space... and, wait for the capital markets to recover. So I wouldn't expect Pittsburgh to be in that next $150, but certainly it's our desire to get out when the timing is right. And we are trying to balance, you know, do you sell it now versus waiting? But I don't think there's a market for that asset today. So in terms of what we do want to sell, the next $150, I think it's going to be a lot like what we've sold the last couple of years. It's going to be smaller assets that we think have liquidity in the market, and we've been successful selling both value add and core assets over the last couple of years. And there, there's local banks, there's high-net-worth individuals, got relationships that can finance these type of assets. So my gut is the next $150 is going to be multiple buildings. They're going to look a lot like what we sold the last year or two. Then we can use those proceeds, plow that back into, you know, the renovation capital and, you know, to use throughout the portfolio. Great. Thanks so much, Ted. Thanks, Blaine. Thank you. Your next question comes from Michael Griffin of Citi. Great, thanks. Just curious on the renewal leasing, what are you seeing in terms of retention rates and whether or not most firms are upsizing, downsizing, or keeping the same space? And has the average lease signed, you know, by size changed at all? Hey, Michael, I'll start out, and if Brendan or Brian has anything to add. Look, our retention ratio the last couple of years has in fact gone down, right? But it's not atypical of what we see in any economic downturn. Certainly, there's been some, obviously, work from home, so that's hurt, but then just the, the cyclical downturn as well. Companies are closing up regional shops or combining local offices or what have you. So our retention has, has in fact gone down. But if you look at our overall portfolio, you know, we've had, many, many quarters where our expansions are outweighing contractions. I think this quarter we had 10 expansions, 5 contractions for a net positive 36,000 sq ft. Expansions were 63,000, less 26,000 sq ft of contractions. That's, if you look back just since the beginning of 2023, we've had 55 customers expand, 21 contract over the last five quarters. So it's a lot of the smallest. The larger customers are the ones contracting. Thankfully, our average-sized customer is about 13,000 ft or 14,000 ft. Those are the customers that, A, they're making the decisions, B, they're the ones that are still growing. So we're seeing a lot of expansions, and these expansions are maybe 2,000 ft, 3,000 ft. And the contractions, again, of the contractions we've had have been a little bit bigger. It might be a floor or half a floor, but, it's been slow and steady for us, you know, of, expansions outweighing contractions. In terms of lease size, again, our bread and butter is 5-15,000 sq ft, and that's again most of our activity this quarter. We had a couple, you know, larger deals, but in general, our normal is 5-15, and we're signing a lot of them. I think we did almost 100 again this quarter. So, in and out, we're signing about 100 a quarter. Great. And then I was curious if you could just give some color on the development leasing in Dallas. Seems like Sidley Austin is moving from M&O to 23 Springs. Was that always the plan when you bought the property and then, you know, announced when you started the developments, or did that come about relatively recently? And, you know, what are you tracking in terms of demand on that space? Is it going to be a single user? Could it be? Could you multi-tenant that, that space that they have there? Just maybe some more color around that would be helpful. Sure. Certainly, when we bought M&O, that was not the business plan. You know, Sidley Austin, I think their lease was going till 2028 or so. But as we got into it, their growth needs, you know, we were just thrilled that we were able to accommodate their growth needs. They loved McKinney and Olive and would love to stay, but we couldn't accommodate them. That building's full and everybody seems pleased with the building. So we just - we weren't able to accommodate their growth. So it just is very fortunate that we have the space down the street. In terms of the other activity in the building, just our development pipeline in general, you know, obviously, we signed 157,000 sq ft in the first quarter. You know, we've got another, I'd call it 125,000 sq ft of prospects, strong prospects that, we've either, you know, agreed, and we're papering or we're close to agreeing to. It's throughout our development pipeline. Of that 125,000, virtually every one of our development projects has a prospect, a strong prospect. So, we're looking forward to moving the needle a little bit more there. And then we've got over 800,000 sq ft of recent tour activity. That's on top of the 125,000 sq ft of strong prospects. So activity seems to be picking up. We have a lot of work to do to get those over the goal line and get done, but, we couldn't be more thrilled with really the activity. Certainly, we're getting a lot of deals signed at 23Springs, but across our development pipeline, the activity seems to be picking up. Thank you. We have the next question from Rob Stevenson of Janney. ... Good morning, guys. Ted, how much of that up to an additional $150 million of dispositions is somewhat dependent on redeployment opportunities? I mean, would you sell $225 million and just either pay down debt or sit on the cash and fund the development pipeline as needed? Yeah, Peter, I think we would. It's not, it's not dependent on redeploying into acquisitions or development. This is just doing our normal cadence and selling like we have. I'm sorry, yeah, Rob. So we really it's not. It's just identifying assets to create some liquidity to get our dry powder ready to take advantage of opportunities at the time, but it's not going to be dependent on us buying something. Okay. And then your commentary about lack of acquisitions, is that due to assets, the assets available right now aren't of the right quality or location, or is it mostly the pricing is still too high or some combination? What's the thing that's sort of making the acquisition environment not advantageous to you right now? I think it's a combination of all three of those, right? So the assets that have sold don't meet the quality. There are, you know, several out there now, I'd say a handful of assets that are sort of going through a pricing exercise. And, well, so we're going to be patient. We're doing a lot of practice underwriting and all that, but it's certainly got to be the quality. Most importantly, it's got to be the location, and certainly pricing as well. So we continue to monitor, we're hanging around the hoop and, you know, we'll see where it plays out, but certainly there's nothing imminent by any stretch. Okay. And then if a Dallas acquisition or development opportunity came up over the next year, would that still likely be in a JV, or are you comfortable at this point, able to go solo on a deal in that market? Yeah. Well, first, I'd tell you, our entry into Dallas could not have gone better. I think we picked the right partner, and it's in and out every day. In fact, we had our board meeting in Dallas last week, and the Granite guys joined us for dinner and tours and just as like-minded of a JV partner as Highwoods has probably ever have. So we're thrilled with our partnership. Now, having said that, you know, our goal is to continue to grow Dallas, and if it's with Granite, great. But you know, I could certainly see an opportunity that they may not be interested in, that we would go ahead and do on our own. We feel very comfortable- Okay. in that market now. All right. And then last one for me. Brendan, when do you expect to know the outcome of the bulk of the property tax savings, potentially? And what's the magnitude of the swing there in that range? How much are we talking about? How material is that? Yeah, Rob, it's a good question. It's meaningful, there's no doubt about that. I would say that I think we will have more clarity in Q2, and then even more clarity as we get into Q3. But I mean, there's certainly possibility in terms of challenging some of the assessments that these could drag on beyond 2024. So we will see where that is. But it could certainly swing us, you know, a few pennies in either direction, depending on what the ultimate resolution of these assessments are. Where did you- are you just in the middle in terms of the guidance? How has that impacted into the guidance? Yeah, we have, we have assumed savings within the guidance. We haven't assumed at the top end of what is possible. So I think that it is roughly in the middle in terms of kind of the high end and the low end in terms of what we have factored in, or I would say, more than what's in the middle. I think it's really where we think the most likely outcome is going to be. Okay. That's helpful. Thanks, guys. Appreciate the time. Thank you, Rob. We now have Michael Lewis from Truist. Great. Thank you. You talked about kind of the characteristics of some of the potential noncore dispositions. As far as the ones you've already done, right, I'm looking at $79 million, with $6 million of NOI, that's about a mid-seven cap rate. Is it fair to look at this and say, you know, Highwoods is selling some of their assets that are noncore, that are not their best assets at a mid-seven, and the stock, even though it's been a big outperformer recently, we still have it at, like, a 10 implied cap rate. Am I comparing apples and oranges, or is it fair to kind of look at, you know, you closed some sales, you proved out some pricing and, you know, we could read through into the rest of your portfolio a little? Maybe I can start, and if anybody else wants to jump in. Look, I think if you look at the assets we did sell, we're thrilled with the mid-7% cap rate. Now, look, they were incredible location, which very similar to most of our assets in our portfolio. They do have some medical component, right? And I think there's a very liquid market on the MOB stuff. But certainly, you know, we're pleased with the mid-7% cap rate, and I think it was certainly by selling them, it enhanced our overall portfolio quality as well. So I think the rest of our portfolio is, you know, it's a higher quality or vast majority of it than these assets. So certainly trading at a 10% cap rate, we think is way too high. I think we've proven out over the last two or three years, we've had multiple sales that have been well below those cap rates over the last two or three years. So, you know, I think it's just indicative of the assets we own. ... Good answer. Thanks. You know, second, you talked a lot on this call about the timing of the trough occupancy, and Brendan kind of laid out how 2024 might go in terms of cadence. Could you just remind us, or have you said, you know, what you think that trough occupancy will be in early next year? And how much better now are you? You know, you talked about trending better than that. So maybe you could answer both parts of that or one part of it. Just trying to figure out kind of where this bottoms and how much better you might be doing than you first expected. Yeah. Hey, Mike, it's Brendan. So we're obviously not in position to kind of give 25 guidance and outlook on this call. But what I can do is maybe provide some ingredients that will help you think through that question, which is a good one. So for year-end 2024, which we switched to give average guidance, which we think is a more meaningful metric, I think we're probably originally embedded sort of within that outlook, was probably ending the year at around, call it, between 86% and 87%. I think we are trending towards the high end of that range and potentially, you know, could be even a little bit above the upper end of that range. So that's better, call it 50 basis points better by year-end than previously what we thought. And then we've talked about some of the big expirations that we have kind of in early 2025, principally in Nashville. But some of the leasing activity that we have done so far this year and some other prospect activity that we have are leases that will commence in 2025. So that will offset some of that. So I think that that just puts us in better position. And then the longer that we go on with having additional quarters of good leasing volume, that really builds the base to kind of get the recovery post the trough number. I think as we go on and what we're paying attention to and what I think, you know, you and others will pay attention to in terms of our performance, is if we continue to lease well as we go progress throughout 2024, that's really going to inure to our benefit in 2025 and thereafter. Okay. That's a perfect lead into my last question, which, you know, do we know why the pickup in leasing over the last, you know, four, five or six months? And, you know, I'm asking the why because maybe that's important to understanding whether this is sustainable or not. You know, or has this just been surprising to you as well? I don't know. Yeah, good question, Michael. Look, I think it might be a few things. You know, a couple of years ago, there were a lot of companies that were sort of kicking the can and doing short-term renewals, and I don't think landlords and companies are doing that anymore. Landlords don't want them to, and companies are getting closer to making their return-to-work decisions and seeing how their layouts are going to be. So I just think there was a wall of lease maturities that got pushed out, they're now having to be dealt with. And then I'd also think... Look, I do think the distress is also increasing from the last couple of years, and some of those customers are also having to make those decisions if they're going to stay in that building or move. I do think the other thing I do think is from in-migration. It's starting to pick up a little bit in our markets. I mean, we've been chasing a couple of customers. We just Raleigh just won one from Dallas. You know, we were chasing them both in Raleigh and Dallas, a corporate relocation, which is sort of fun to see those. If you talk to the economic development folks, you know, for the last couple of years, it's largely been manufacturing and industrial users. We're now starting to see there's more office-using customers come in. Just this quarter, we did 10 leases for to new-to-market customers. Now, they were largely small regional offices. The largest was 27,000 sq ft, and then about a 17,000 sq ft footer, and that goes down to, you know, 2,000 or 3,000 sq ft. But it's over 60,000 sq ft of in-migration. Companies that are moving and opening up new offices, largely just opening up new offices in our market. So I just think, you know, we're starting to just see it open up a little bit. Great. Thank you. Thank you. We now have Tayo Okusanya from Deutsche Bank. Hi. Yes, good morning. Just a quick one from me. In terms of just overall demand, could you talk a little bit about demand for some of the recently vacated space, like the Tivity space and the CDC space? I think you already gave color about some of the upcoming vacancies. We're curious about those two spaces in particular, and if any of the new leasing this particular quarter was related to backfilling any of, any kind of recent vacancies. Yeah, Tayo, I think specifically on the Tivity, as you know, we redid the landmark lease earlier this quarter. I think it was earlier last quarter. We took back about 110,000 sq ft. We have really good activity, multiple prospects on it. So we did a big highway tiling project a couple of years ago or a year or so ago, and it finished, and it's really generated demand. It's been very well received in the market. So that's about 110,000 sq ft, and we've got, you know, prospects, you know, I'd say prospects either agreed to or strong prospects that we're trading paper with for about 80,000 sq ft or so. I don't know if we'll make all those, but, but we feel pretty good about a lot of those. So we feel really good about that. I don't think much of the leasing activity this quarter was really backfilling anything other than maybe one or two of the Tivity spaces that we've signed. Great. Thank you. Thank you. We now have Peter Abramowitz of Jefferies. Hi, thank you. Yeah, so just kind of wanna dive into some of the comments around potential kind of future growth opportunities, some of the underwriting you're doing. I guess we have a decent sense from, whether it be non-core asset sales or the unsecured bond deal that you did last year, where your cost of capital might be today. So I was just wondering if you could talk about, from a pricing perspective, whether initial yields or IRR relative to that cost of capital, kind of, you know, what you're hopeful for, what's realistic, when deals do finally kind of start to come back to market and start to pencil, like, where are your expectations for where those would be from an underwriting perspective? Sure. You know, Peter, as you know, we're—I mean, look, we're interested in growing the business and improving the quality of the portfolio, both core and value-add acquisitions. Coming out of the GFC, we primarily did value-add acquisitions. You know, we want to own quality assets in the best business districts of our markets, and we're looking to create, you know, where we can improve our cash flow growth over time as well. I think coming out of GFC, we were able to do that very successfully. So where are we now in terms of the underwriting? You know, I think, you know, obviously, we look for a discount to replacement costs, a lot of different metrics. IRR, you know, we're sort of underwriting to a double digit, low double digit, unlevered IRR, Peter, is sort of what we're doing today. Again, there's a handful of deals out there that we're seeing where they're gonna price, but we'll see. But it's, you know, those type of metrics, if we can get a stabilized cap rates in the high single digit, low double digit within 11% or low double digit unlevered IRR, those feel pretty good for us. If we... And And then we can improve the quality of the portfolio, if we can get acquisitions under our belt that are like that. That's helpful. Thank you, Ted. And then one on the leasing market. Could you just comment on sort of the length of deal cycles? I know that was both for you guys and for, you know, office overall, became more of a challenge last year, that tenant decision-making was just a little bit slower. Could you talk about kind of that dynamic and where that's at in the first couple of months to start the year? Yeah, certainly that's been the frustrating part. It's definitely taking longer to get deals done. Bigger is really taking longer. I mean, some are—you know, we think we're gonna get it done, it may get pushed a quarter, two quarters, and in some cases, even three quarters. It's taking a long time. So the bigger the deal, the longer it takes in general, just whether it has to go up through the corporate real estate department, up to the CEO. And a lot of it's based on the CEO's confidence level in the economy as well. I think interest rates plays into that as well. So, longer, bigger deal takes longer. Smaller deals, our bread and butter, we're still getting a lot of those done. Those are even taking longer, but not nearly as long as, you know, call it the 100,000 sq ft users and above. The nice thing we've seen in the last, I'd say, quarter or two, is we've seen full floor, more full floor users, more two floor users. So that sort of mid-size type user, we're seeing a lot more of those, and some of the decisions getting made with those size customers. Does that make sense? Peter, hey, it's Brian- That does. Thank you. does. Thank you. I might add real quick. Other, other thing that's taking a little while, people are continuing to price and price work. We don't have a punchline yet on that, but the- it seems like escalations have, have stopped or leveled out or plateaued on build-outs, and so there is potential visibility into, maybe getting a better price. So people kind of are holding on to see some of that TI, that build-out, that cost of moving into new space come down. That's helpful. Thank you. And one last one, if I could. Just trying to think through from a modeling aspect, the earnings impact of any potential dispositions through the rest of the year. I mean, are the deals that you've done so far in Raleigh, is that kind of a good barometer of what we should expect pricing-wise? Peter, it's Brendan. So first, what I would say is, while the dispositions that we did so far this year are dilutive to FFO, I think to your first question, they are accretive to our cash flow. So I think we would expect comparable dynamics in terms of any future dispositions that we may do this year or on a go-forward basis. You know, where the cap rates shake out, it depends. Every deal is unique, so it depends on the particular circumstances for that particular deal. You know, I think we'll see where cap rates shake out. I would say, you know, the bias is maybe a little bit higher than the cap rates that we transacted at early this year, but we'll see. But I think in general, the capital recycling activity that we do, what you ought to see is an improved cash flow outlook for the company, an improved portfolio quality, and therefore, you know, a lower risk overall for us as an enterprise. ... That's helpful. Thanks, Brendan. Thank you, team. We now have Ronald Kamdem of Morgan Stanley. You may proceed with your question. Hey, good afternoon, guys. Just the first question, you guys talked about, you know, some of the expirations through the year, and, you know, how that might be a headwind to occupancy. Maybe just give us a picture of what retention would look like, you know, in 2024, if we were to exclude those move-outs, so just the, you know, retention on everything else outside of the known move-outs. Yeah. Hey, Ron, it's Brendan. I'll take that. So, you know, retention, we always struggle with this answer and question that we get often because we do so much early renewals, that it depends on the date that you start kind of counting retention. So prior to coming into this year, we had already renewed 1 million sq ft of original 2024 expirations that are pushed out into future years. So when you look at what's left over as you kind of come into the year, you have adverse selection bias there, and clearly, like, that's where, you know, the retention level on the remainder is low. So that number, probably for kind of what we had left in the year, including the known move-outs, was probably, call it, you know, in round numbers, around 40%. We talked about some of the large known expirations that are there. So that number would be a little bit 10+ percentage points higher if you excluded those from kind of the numerator and denominator. But that gives you a sense of kind of where we are. Got it. And then the, yeah, the second one on McKinney & Olive. You know, you guys talked about paying down that loan potentially. You know, I guess, you, with, with the sales you guys have executed on and, you know, potential additional $150 million to come, should we take that to mean, you know, you're, you're just gonna use existing corporate liquidity, or could we potentially see you guys, you know, tap the unsecured markets again here? Yeah. No, no plans to, for capital raising for this year or so. I mean, I think as we sit here right now, we have almost nothing drawn on the line, so have that full $750 million that's available. Certainly have, construction loans, in place for the two, Dallas development projects, so that would satisfy the, the bulk of the remainder of spend there. So we really have plenty of, of liquidity. And I think to your point, with potential dispositions that are on the horizon, I think it's, you know, more of a challenge in terms of deciding what capital we want to pay off with any disposition proceeds that come in the door, rather than thinking about capital raising. Got it. And then, yeah, yeah, I think you guys talked ab out Pittsburgh and [Bass Pro]. Maybe just an update on Novelis as well would be helpful. Yeah. So on Novelis, again, we like the prospect activity. As you all know, we went direct, with one of the sublease customers, and we've got over 200,000 sq ft of prospects, to backfill the remaining, you know, call it 100 or so thousand sq ft, maybe a little more than 100. So feel pretty good about the prospect activity. A lot of tours. Got it. Thank you, guys. Thank you. Thank you. We now have Dylan Burzinski from Green Street. Hi, guys. Most of my questions have been asked, but I guess, Brian, going back to your comments on focusing on occupancy over rental fee growth, I mean, is it your expectation that we'll continue to see some degradation in net effect of rents across the portfolio, or how should we be thinking about that? Dylan, I'm accused among the three around this table to be the eternal optimist, so I'll lean into that a little bit. Now, look, obviously, headwinds, I think, tenants feel like it's a tenant's market, and it is. But I do feel constructive on our ability to hold kind of where we're at based on the quality of the assets, based on the seven different things Ted highlighted, why, maybe our leasing momentum is maybe more than previous averages with regard to flight to quality, flight to capital. I don't see it greatly improving, anytime soon, maybe as costs come down to fit up. But in general, I feel like it... I feel pretty optimistic about where we're at. Brendan? Dylan, what I would just add to that is, I think, given the kind of competitive dynamics that are in the leasing environment as it stands now, our ability to fund TIs is a benefit to us. But what we're looking for in terms of customers and prospects to get in consideration for that is higher face rates and longer term. So I think what that's gonna do is gonna keep net effectives holding up reasonably well, which is what we've seen generally happen. Now, that might mean that there's a little bit more upfront capital, but that secures longer lease term at attractive rates. So I don't think you're likely to see significant degradation in terms of net effectives, but it might mean there's a little bit more upfront capital. Great. Thanks, guys. Thank you. We have no further questions on the line, so I'd like to hand it back to Ted Klinck for some final remarks. Thank you for everybody for joining us on the call today, 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. Thank you for joining the Highwoods Properties Q1 2024 earnings call. You may now disconnect your lines, and please enjoy the rest of your day.