HIGHWOODS PROPERTIES, INC. — Call Transcript 2025

Good morning. Thank you for attending the Highwoods Properties Q2 2025 earnings call. My name is Matt, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call for an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I'm about to pass the conference over to our host, Brendan Maiorana. Brendan, please go ahead. Thank you, operator, and good morning, everyone. Joining me on the call this morning are Ted Klinck, our Chief Executive Officer, and Brian Leary, our Chief Operating 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 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 now turn the call over to Ted. Thanks, Brendan, and good morning, everyone. We had another strong quarter with robust second-gen leasing and excellent financial results. We entered 2025 with two key priorities. First, continue to upgrade our portfolio quality by rotating out of slower growth, more CapEx intensive properties, and rotating into higher growth assets that are more capital efficient. Second, make significant strides towards capturing the substantial NOI growth potential we have in our operating portfolio and development pipeline, which will drive meaningful organic growth in future years. We continue to make progress towards both of these priorities. In the second quarter, our leasing volumes were strong, including signing several second-gen new leases on spaces that are currently vacant, and we continue to make progress on the remaining availability at our development properties. While we didn't close any acquisitions or dispositions during the period, we're actively underwriting potential new investments and have numerous assets in the market for sale. We will continue to deliver on our proven strategy of rotating out of older, slower growth properties that are more CapEx intensive into better located higher growth assets that are more capital efficient. We continued our healthy leasing volume in the quarter with 920,000 sq ft of second-gen leasing, including 370,000 sq ft of new leasing. The consistent level of elevated leasing volumes for the past several quarters increases our confidence that our occupancy will steadily improve late in 2025 and escalate thereafter. We have also further unlocked the NOI growth potential in our core four assets with meaningful upside potential. As a reminder, our core four are Alliance Center in Buckhead and three assets in Nashville, Symphony Place in the CBD, Westwood South in Brentwood, and Park West in Franklin. We have forecasted $25 million of annual NOI upside just from stabilizing these core four. After our leasing performance this quarter, we now have 50% of this upside scotched with signed leases, and we will have strong prospects for another 20%. Turning to our development pipeline, while we only signed 19,000 sq ft during the quarter, we have advanced a number of prospects through the leasing process and remain confident we'll increase our lease rate by the end of the year. We have over $10 million of NOI growth potential at GlenLake III in Raleigh and Granite Park Six in Dallas, two development properties that delivered in 2023 that are not yet stabilized. We have over $6 million of this NOI potential already signed, but where occupancy hasn't yet commenced. In addition, we have over $20 million of NOI growth potential at the two developments that delivered earlier this year, 23Springs in Dallas and Midtown East in Tampa. Our first customers at these developments recently moved in, and additional customers will take occupancy late in 2025 and in 2026. Combined, these two properties are 59% leased, and we have strong prospects for another roughly 15%. Given the combination of high construction costs, elevated vacancy levels, limited financing availability, and risk-adjusted yield requirements, starting a new spec development continues to be difficult for anyone in this environment. However, the absence of new deliveries and the dwindling availability over the next few years creates an opportunity for meaningful rent growth at high-quality second-gen product. We're already seeing the benefits of limited supply as large blocks of high-quality space across many of our markets are being absorbed, which is driving rent growth in the best locations across the Sunbelt. The powerful combination of signed leases moving into occupancy in our operating portfolio, ongoing stabilization of our development pipeline, and continuous portfolio improvement should drive significant growth in earnings and cash flows in the foreseeable future. You may have seen some press recently about Ovation, our future mixed-use development in Franklin outside of Nashville. We recently submitted our development plan to the city. We remain confident Ovation represents one of the best mixed-use ground-up development sites in the entire country and will be a significant opportunity to create sizable value for Highwoods shareholders. We are working with our partner in the city of Franklin to finalize development plans and do not expect any development announcements until late next year at the earliest. Turning to our performance, we delivered excellent financial results in the quarter, including cash flows that continue to be resilient even with elevated leasing CapEx due to future occupancy build. We delivered FFO of $0.89 per share in the quarter. Our occupancy was roughly flat from Q1 at 85.6%, while our lease rate increased 80 basis points to 88.9%. Leasing is off to another strong start early in Q3 with over 300,000 sq ft of second-gen leases signed, including over 100,000 sq ft of new leases. We remain optimistic we'll see the lease rate and occupancy levels increase by the end of the year. With our strong financial performance in Q2 and upbeat outlook for the balance of the year, we have once again raised the midpoint of our 2025 FFO outlook up $0.02 to a range of $3.37-$3.45 per share. Since the beginning of the year, we've increased our FFO outlook by $0.06 at the midpoint, or nearly 2%. In conclusion, we're extremely excited about the next few years for Highwoods Properties. We're operating in the strongest BBDs in the Sunbelt that continually have proven to be the places where talent and companies want to be. We have a clear pathway to meaningful growth, growth in earnings, growth in cash flow, and growth in NAV from our existing portfolio and development pipeline. Plus, we believe the next 12 months represents an excellent opportunity to deploy capital in new investments with strong returns and recycle out of older non-strategic properties where risk-adjusted returns don't meet our objectives. With a strong balance sheet, including limited near-term debt maturities and ample liquidity, we are well positioned to execute on the opportunities ahead of us. Brian. Thank you, Ted, and good morning, everyone. Kudos to our tremendous team for the results they delivered in the second quarter, with 923,000 sq ft of quarterly leasing, of which 371,000 sq ft was new, signaling future occupancy gains as those leases commence. Our Sunbelt states are repeat best for business winners. Our markets are outpacing the nation with higher population gains and lower unemployment rates, and our BBD portfolio is outperforming as the beneficiary of our customers' preference for in-office occupancy and, in turn, their continued flight to quality, capital, and owners. With corporate and now federal conviction behind the in-office value proposition, we believe equilibrium has been reached as it relates to remote work and no longer see it as an acute headwind to our portfolio. With greater numbers returning to the office, there's not only less commute-worthy options available at the top of the market, the bottom is shrinking as well, with CBRE reporting that over 23 million sq ft of U.S. office space is on track for demolition or conversion to other uses this year, far outpacing the almost 13 million sq ft of new office space being completed in 2025, which figure in itself is far below the 10-year annual average of 44 million sq ft of annual deliveries. Coupled with a record low construction pipeline and with the development period of an office building being measured in years, this slow squeeze play has started to move the market in an owner's favor in certain instances, such as new trophy development and in high barrier-to-entry BBDs, with the potential for a meaningful and extended shortage of Class A space in the not-too-distant future. Our Sunbelt BBD strategy, which is both urban and suburban in nature, is serving us well. All of our markets are in states that are repeatedly rated by CNBC as the best for business, with North Carolina, Texas, Florida, and Virginia taking the top four spots this year. With regard to the Tar Heel State, between Charlotte and Raleigh, North Carolina is home to 33% of our revenue and 36% of our NOI. Georgia and Tennessee aren't far behind, rounding out the top eight of CNBC's rankings. Bloomberg Economics brings this to bear, highlighting that the Southeast accounted for more than two-thirds of all job growth across the U.S. since early 2020. These three forces: improving in-office utilization, declining competitive supply, and strong demographics, all combined with a resilient economy, are bearing fruit in our leasing activity and make us optimistic our strong performance will continue. To that end, we signed 102 leases in the second quarter, with expansions outpacing contractions almost three to one. Net effective rents averaging $19.30 a sq ft, with an average payback of 17.2%. Of the 102 leases we signed, 42 were new, with almost 20% of those new to market. Cash and GAAP rent growth were strong at 3.6% and 17.6% respectively. Above all, we are most enthusiastic about the progress we've made and continue to make on our occupancy upside across four core assets in Atlanta and Nashville. Three of these four have completed or are in the midst of completing our Hywatizing redevelopment program, essentially positioning them to directly compete with new construction. The fourth in Westwood South is in the highest of barrier-to-entry BBDs of Brentwood in suburban Nashville, and it has a leasing prospect pipeline that would fill the building two times over. Symphony Place in downtown Nashville started the quarter strong. The seven-floor lease with Nashville mainstay and global law firm Holland & Knight was proof positive that the environment and experience we are curating there is what Nashville's best and brightest are looking for, and there are leasing prospects for over 80% of the building. While you never buy 1,000, with these prospects and inbound activity picking up in Nashville, Symphony Place is poised to deliver meaningful organic growth. The backfill update from Nashville is a good segue into Music City's broader market performance with the nation's lowest large metro unemployment rate. Cushman & Wakefield reported Nashville having the nation's third highest positive net absorption, and the market's robust demand generated almost 1 million sq ft of leasing for the quarter, the highest for Nashville since the second quarter of 2021. JLL added that there are almost 2 million sq ft of active requirements in the market, and with a decade-low construction pipeline delivering at 79% pre-lease and with no new starts in the foreseeable future, vacancies should decline, rents should increase, and momentum should continue. The second quarter leasing we did in Nashville led our markets for both total and new volume, had our highest dollar-weighted average lease term at nine years, and was tops with GAAP rent growth of 23.8% and cash rent spreads of 12.4%. Southeast of Nashville, Charlotte continues to be a talent magnet with new data showing that the area's daily net migration count is up from 117 a day to 157, according to the Charlotte Regional Business Alliance, and where Cushman highlighted the region as one of the nation's top quarterly job generators with a 2.2% growth rate. Cushman also noted Charlotte's fourth consecutive quarter with leasing activity over 500,000 sq ft, where over 80% occurred in the submarkets Uptown, Midtown, and South Park. Our 2 million sq ft Charlotte portfolio, which is entirely located in the Uptown and South Park BBDs, leads the way at 96.6% occupied. Our 1.2 million sq ft Legacy Union Uptown portfolio sits squarely at the geographic center of Charlotte's Class AA demand and is 95% occupied, while our sixth building, 800,000 sq ft portfolio in South Park, is 98% occupied. With Charlotte's construction pipeline empty and with multiple large inbounds cited by the Charlotte Alliance, not including Citigroup or AssetMark's recent significant job announcements, market vacancy and rental rates should continue to move in opposite directions. Of all of our markets, Dallas continues to be an economic juggernaut with continued job and population growth and positive net absorption. JLL noted that 60% of Dallas's office pipeline is build-to-suit construction for Goldman Sachs and Wells Fargo, and that there are an additional 7.6 million sq ft of requirements in the market. Our Dallas development pipeline is benefiting from this demand with prospect activity at both our 422,000 sq ft Plano BBD Granite Park Six development, which is currently 59% pre-lease, and our 642,000 sq ft 23Springs development in Dallas's Uptown BBD, which itself is 63% pre-lease. Also in Uptown and down the street from 23Springs is our 557,000 sq ft in-service asset McKinney & Olive, which is over 99% leased. I would be remiss if I didn't share highlights from Tampa, both as a market and from our portfolio's perspective. CBRE led this quarter's Tampa market report with a headline that reads, "A positive path ahead as the office market builds on Q1 surge." The report noted that Tampa posted its fifth consecutive quarter of positive net absorption, and the pipeline for continued positive absorption is healthy, with 1.3 million sq ft of future tenant move-ins tied to already executed leases. With an additional 1.4 million sq ft of active prospects and one of the lowest market-wide vacancies in the nation per CBRE, we are very pleased with our market activity and where we ended the quarter at 86.1% occupied, but more than 92% leased. Our Midtown East development recently delivered 40% pre-leased and has strong prospects for another 40% of the building. Underwritten to stabilize in the second quarter of 2026, Midtown East was the only building under construction the better part of two years and is the tallest building in the West Shore BBD and in the heart of Midtown Tampa's thriving mixed-use district, anchored by Whole Foods, two hotels, and luxury apartments. With a commute-worthy portfolio and a trophy asset team, Highwoods is creating compelling environments and experiences that are giving our customers a competitive advantage in recruiting and retaining the very best. This advantage is recognized in our activity and economics, and we are steadfast in our conviction that great value is created when the best and brightest are better together. Brendan. Thanks, Brian. In the second quarter, we delivered net income of $18.3 million or $0.17 per share and FFO of $97.7 million or $0.89 per share. The quarter included three atypical items. First, we received $3 million from the Florida Department of Transportation for the impact of roadway improvements adjacent to a non-core property in Tampa. This payment, which is reflected in other income, was expected and has been included in our FFO outlook since the beginning of the year. Second, we received $1 million of term fees. The largest was attributable to a customer where we proactively took back space early and have subsequently re-let this space to a new user with a long-term lease. This term fee temporarily boosted Q2 earnings but will be offset by downtime at the property. Third, we wrote off nearly $1 million of pre-development costs at sites where we no longer believe office to be the highest and best use. Otherwise, this was a very straightforward quarter. We are pleased with our results, which demonstrate the resiliency of our operations and cash flows. Our balance sheet remains in excellent shape. Our debt-to-EBITDA ratio was 6.3 times at quarter end. We only have $106 million left to fund on our development pipeline and are currently maintaining over $700 million of available liquidity. Our only debt maturity over the next 18 months is a $200 million variable-rate term loan that is scheduled to mature in May 2026. Discussions with our bank group have been very positive, and we remain comfortable in our ability to extend this loan. As Ted mentioned, we have updated our 2025 FFO outlook to $3.37-$3.45 per share, which equates to a $0.02 increase at the midpoint. The underlying picture is actually stronger than the headline implies. As I mentioned earlier, the second quarter included $0.01 of higher G&A due to the expensing of pre-development costs that were not included in our prior outlook. Plus, we pushed $0.02 of interest income out of the 2025 forecast and into future years. These items have been partially offset by a $0.01 increase to prior-year property tax refunds expected during 2025. Overall, this equates to $0.02 of net headwinds that were not included in our April outlook, but these have been more than offset by $0.04 of higher anticipated NOI, resulting in the increase of $0.02 per share at the midpoint. Turning to leasing and our occupancy outlook, we expect to be towards the low end of our year-end 2025 occupancy outlook of 86%-87%, largely driven by proactively taking space back early from users where we've subsequently re-let these spaces to new users with leases that don't commence until after year-end. This activity, while reducing near-term occupancy, secures additional long-term tenancy across our portfolio and reduces our rollover risk in future years. We also proactively took back 35,000 sq ft early from a user to secure a long-term lease extension on their remaining 70,000 sq ft on an as-is basis. Finally, we have one user that we originally expected would be able to take occupancy of their 50,000 sq ft in the fourth quarter, but we now expect this lease to commence in the first quarter of 2026. These timing issues have moved 130,000 sq ft of previously projected occupancy at year-end 2025 into the future. Lastly, I want to review in more detail the performance of the core four operating properties with meaningful occupancy upside that Ted highlighted, as well as our development properties. At the beginning of the year, we called attention to $25 million of embedded annual NOI growth potential upon stabilization of the core four. At that point, we had locked in $5 million of this future upside with signed leases. Today, this number is now up to over $12 million, and we have strong prospects for another $5 million-$6 million. Our two 2023 development deliveries, Granite Park Six and GlenLake III, have over $10 million of annual NOI growth potential upon stabilization, over $6 million of which has been secured with signed leases, up from $4 million at the beginning of the year. The two developments that delivered earlier this year, 23Springs and Midtown East, have over $20 million of annual NOI growth potential upon stabilization. We have secured $14 million of this upside with leases that will commence in the future, up from $11 million at the beginning of the year, plus we have strong prospects for another $3 million. In total, these eight properties have over $55 million of annual NOI growth potential above our 2025 outlook. We have locked in over 60% or more than $33 million of this upside with leases that have been signed but are not contributing to 2025, plus we have strong prospects for another $9 million. To be clear, it will take time for these signed leases to come online. We are also still capitalizing interest and operating expenses at 23Springs and Midtown East as these two development projects delivered earlier this year, so not all of the NOI from those two assets will be realized in future FFO or operating cash flow. However, the leasing activity is encouraging, and we expect all of the leases signed to date to commence by late 2026, which gives us confidence about the trajectory of earnings and cash flow as we move into 2026 and even into 2027. To wrap up, we're ahead of our expectations in terms of executing on our embedded growth drivers with the potential to secure even more of this upside over the next few quarters. We're also encouraged at the potential to recycle additional capital and thereby further improve our long-term growth profile. Given our strong markets, BBD locations, proven operating and asset recycling strategies, and well-positioned balance sheet, we are encouraged about the next few years for Highwoods Properties. Operator, we are now ready for questions. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We'll pause here briefly as questions register. First question is from the line of Peter Abramowitz with Jefferies. Speaker line's now open. Yes, thank you for taking the question. I just wanted to kind of dig into the guidance a little bit. You had a kind of significant beat in the second quarter here, and you had a kind of big other income item. Just wondering, you know, what else went into the guidance that it didn't necessarily flow through to a slightly larger raise? Is there a degree of kind of conservatism still in there and your expectations for the backup? Hey, Peter, it's Brendan. I'll try to take that. I would say that, as I kind of mentioned in the script, we had some other items that went against us, right? There was $0.03 of kind of headwind, I would say, in the updated outlook, that is not through the property level, not at the NOI level. G&A is higher. We did incur that in the quarter, so that's part of the Q2 beat, I guess, relative to at least certainly street expectations. There were some other income or interest income that we had forecast for late in the year that we now have pushed out of that. That $0.03 of headwinds has been more than offset by, call it, $0.05 of NOI upside if you include a little bit more in terms of prior year property tax refunds. I think you're getting $0.04 of higher kind of NOI in those numbers that's split between development NOI and the same property pool. I think that's all pretty good. I would maybe caution you and others to extrapolate a quarter or two to a full-year outlook. I think what I would encourage everyone to do is kind of think about the totality of the year and then think about all of the building blocks of NOI growth that we laid out as you think about future periods going forward. There's always some seasonality in numbers. There's moving of expenses that can move from one quarter to another. I think if you extrapolate one quarter to another, it can kind of lead to a false positive or a false negative. All right. That's helpful. Thanks, Brendan. Could you talk about the opportunity set for acquisitions in your markets right now? What you'd be targeting potentially from a return perspective, whether going in yields or longer-term IRRs? Does it seem like activity has picked up since maybe it slowed down, post-Liberation Day announcements? Hey, Peter. It's Ted. I'll take that one. Look, I think you nailed it. Capital markets are definitely starting to open up a little bit. We're starting to see more high-quality assets come to market. I think the bid-ask spread is narrowing. You know, debt capital markets are opening up, so the availability of debt for office acquisitions is better today than what it was earlier in the year and certainly last year. Equity capital is coming off the sidelines. I think they're actually underwriting office again, and they're being more constructive on the underwriting. I think sellers have been waiting for this, and they're starting to bring assets to market, some of which are our wishlist assets. There is a lot more in the market, a lot of higher-quality assets. Some of those are core, some are value-add, some are core plus. We look at everything, and we're going to price it based on our evaluation of risk. Certainly, from a return standpoint, it'll be based on the risk-adjusted yield. We look at everything, and we are starting to see some attractive opportunities that we've been sort of waiting for. All right, thank you. Thank you for your question. Next question is from the line of Seth Berge with Citi. Your line's now open. Hi. Can you talk a little bit about your expectations for just concessions and TIs for some of the leasing that you've done in the quarter? Yes, Seth. It's Ted. From a leasing perspective, as you know, we had another really strong leasing quarter. Our tour activity remains strong. It's the same trends we've seen for a while, continuing to see a flight to quality, flight to capital, flight to amenities, flight to location. Same thing we've seen now for several years. Our leasing CapEx, I think we're leveling off. I think we certainly peaked. Our net effective rents were incredibly strong this quarter. Our concessions, while it varies by submarket and market, we've got some very strong submarkets where we're seeing concession packages come down. In addition to rates going up, it's still high in submarkets. Overall, I think if you have a mix, it's going to jump around a little bit quarter to quarter. In general, I think it's fair to say concessions have generally peaked, and market rents are going up. It should bode well for net effective rents. Great. Thanks. Thank you. Thank you for your question. Next question is from the line of Rob Stevenson with Janney Montgomery. Your line's now open. Good morning, guys. Just to ask the last question in a different way, given all the leasing, when you take a look at the building improvements, second-gen tenant improvements, and leasing commissions, is there a spike that we should be expecting in a couple of the upcoming quarters given when this stuff hits, or is that sort of low $40 million a quarter that you've been averaging for the last few years about where it's going to wind up being on a sort of smoothed-out basis? Hey, Rob. It's Brendan. I'll take that one or at least start. I think what I would say is, you've probably seen the commission levels, I think, have been high because of the volume, and those get paid more quickly than the TIs get dispersed. You've probably seen it kind of show up in commissions, I would say last year when leasing volumes were very high, particularly new, and in the first half of this year as well. For TI dollars, I would say that I think your question is a good one. I think we're going to remain at elevated levels. In 2023 we were there last year. I think it's probably likely to be a little bit higher in 2025, and probably a little higher than where we were in the first half of the year. We think in all likelihood it will remain there in 2026 as well as we kind of keep this occupancy build going for the next several quarters. We do think it's going to be elevated, I would say not dramatically higher than where we were over the past year or so, but I would say that I do think it's going to be high for the remainder of this year and in all likelihood next year as well. Okay. That's incredibly helpful. Thank you. I guess, Brendan, at this point in the year with a bunch of line items more or less locked in, what's the biggest swing factors between you guys hitting the sort of $3.37 versus the $3.35? What's the biggest unknown for you at this point to keep the guidance range that wide? Yeah, it's probably so there's probably a couple of expense items, timing-related things that are in there. I would say that there's a little bit of that variability within the guide, so that's in there. To the extent that we do anything that's meaningful, that we have done a little bit of this year, which is proactively kind of take space back early for long-term benefits, we've done that a few times. I think I highlighted some of that in the prepared remarks that we've done. There's some of that which could happen as well, with some conversations that are out there. We've got a little bit of what I would say are probably a little bit of variability in terms of lease, spec lease that's out there. There's some renewals that could happen or could not. There's a little bit of positive and negative on the lease side, but for the most part, I would say it's probably around expense timing, but, you know, probably not a huge amount of variability in terms of where we are now, as you point out, where we sit in the year. Is it safe to say that given the timing that any acquisitions or dispositions at this point of any material amount would probably wind up being sort of mid to late fourth quarter, in terms of being able to be closed at that point in time and so not really impacting numbers at this point very much? Yeah. Is there still an opportunity for you guys to do stuff of materiality? Yeah. Just to be clear, any acquisitions or dispositions are not included in the range. That would be outside of the range. To the extent of where we sit in the year, the likelihood of an acquisition or a disposition having a meaningful impact on numbers is probably fairly low. I think that's fair. Okay. You talked about the term loan, that you thought that you'd be able to extend that. Is that the most attractive/cheapest form of debt capital for you guys at this point in time? I don't know that I would characterize it as the most attractive, cheapest form of capital that's available, but we like to have diversity in the debt stack that's there. That's a good source of capital for us given that it's variable. If we do have a lot of disposition proceeds at any point in time, that becomes freely prepayable. We like to have a little bit of variable rate in the stack because you always just want to kind of diversify the risks in there in terms of your interest rate exposure. I think for all those reasons, it's an efficient source of capital. I don't know if I would necessarily characterize it as the cheapest form of capital. Okay, thanks, guys. Appreciate the time this morning. Thank you for your question. Next question is from the line of Nick Thillman with Baird. Your line's now open. Hey, good morning, guys. Maybe, Ted, we'll start off with this. Obviously, COVID and the pandemic transferred a lot of conversations on flight to quality and the type of assets. Kind of curious, have you taken a look at potential impacts of AI on demand? That impacts longer-term the type of assets you guys want to own, whether it be individual submarkets or size of buildings, and how you guys are evaluating that as it's still early days, but just longer-term sort of view? Yeah. Look, it's definitely early days, right? I mean, obviously, the demand side, the West Coast is seeing a lot of demand for AI companies, so that's been great for them. In terms of us, look, very early on, I think every company in America is probably looking at how AI may impact their business going forward. We've been through this before, whether it be on densification. I remember 20 years ago, law firms were going to be reducing their space by a significant percentage because of the law libraries and all the other things they didn't need. We've been through different challenges, I think, as an office industry for several years, and we've been able to manage through it and get, as the markets continue to grow. AI, don't know what the answer is right now, but I will take those at least a little early. Okay. Just a question on you guys are kind of through a lot of the large expirations you had within the portfolio. I guess, what do you guys kind of view as a normalized run rate when it comes to retention as we look at expirations into the next 18-24 months? Hey, Nick. It's Brendan. I'll take that. We always struggle a little bit answering this question. I think when you look at early renewals that get done and you kind of think about a full cycle, our retention level tends to be, call it, kind of 60 to 65%. I think if you're looking at expirations that are going to occur kind of over the next 12-18 months, those numbers go down because you've got, you know, adverse selection bias that's in the rent roll because you obviously don't early renew customers that are ultimately going to move out. I would say if you think about the next 18 months, so from where we are now through the end of 2026, we really, as you point out, have kind of worked through those large known move-outs. I think the retention level that we have from here through the end of next year is probably in that 45%-50% range if I had to give you a number on a range. That's probably a little bit higher than where we've been historically and certainly much higher than where we were over a 12 or 18-month period if you look at the preceding 12-24 months. I think that gives us confidence that we're well set up to build occupancy as we go forward over the next 18 months or so. Very helpful. That's it for me. Thanks. Thank you for your question. Next question is from the line of Dylan Burzinski with Green Street. Your line's now open. Morning, guys. Thanks for taking the question. I appreciate the comments on sort of the demand backdrop and how things are improving. Are you able to talk about how that demand backdrop differs across your guys' market footprint? Are there any markets in which you guys have a portfolio concentration that are experiencing outsized demand versus others? Look, Dylan, I'd say certainly Charlotte, Dallas, and Nashville. If you had to rank our markets, it'd be 1A, 1B, and 1C. All three of those markets are outperforming. You know, we're very well leased in Charlotte, so we're not able to move occupancy. If you just think about the core four that we've talked about now for the last couple of quarters, three of the four of those are in Nashville, and we're making significant progress, certainly well ahead of our business plan on what we thought. The demand in Nashville continues to be really strong. What we're seeing in Dallas, on our development projects and just the inbound and net migration to Dallas, has been extremely strong, specifically to the submarkets we're in. We love the demand in those three markets in particular. At the same time, Tampa's performing very, very well. Brian talked about it on our prepared remarks. We're seeing a lot of great demand there. I'd say it's pretty broad-based, and certainly concentrated in those four markets, but broad-based in general. Hey, Dylan. Brian here. I might just add, Charlotte, I think I mentioned it in the remarks, you know, Citigroup and AssetMark announced in aggregate over 700 new jobs. That's, you know, financial services, and that's pretty well expected for Charlotte. I think they've done a great job of kind of capturing that. The Charlotte Regional Alliance, which is sort of the evolution of the chamber, recently highlighted there's six inbounds that Charlotte's looking at. Only one of those inbounds currently has a U.S. headquarters. This is not just inbound domestically, even inbound internationally. Those six represent about 5,000 office-using jobs. I also sort of mentioned this net migration, daily net migration. This is, you know, sort of maybe silly math if you think about it, but adding almost another 50 people a day over a year, it's close to 14,000 new people. You can just figure out what the impact is in terms of the demand there. I think that's a good one. Dallas, Ted mentioned, there's over 7.5 million sq ft of requirements in the market. Dallas is a huge market, but where we're focused, we're getting great demand there. Nashville's got almost 2 million sq ft of active requirements in the market. Many are kind of code-named multi-market. The CBD was the most active submarket this last quarter. Ted highlighted Tampa has over a million of active prospects in Tampa as well. We're really happy with the inbounds we've seen at our development. There are some really kind of blue-chip names looking at investing in the best space in Tampa. Appreciate that comment, guys. Ted, I think you mentioned, obviously, development pipelines across your markets are shrinking significantly, and no new ground-up construction is likely to start given how pressured development economics are today. Could you sort of help frame that in terms of where you think replacement rents would need to be versus where market rents are today? I think it certainly varies by market, right? The differential, the closest market we are to new development is probably Dallas, right? I think Dallas is proving out whether it be in Uptown and the Knox-Henderson area, Preston Center, those three submarkets in Dallas are probably at or approaching cost-justified rents. Outside of that, most of our markets is probably 20%-40% off. That's new development today where rates they're getting versus what you'd need to build something more. The last few years when the starts haven't been all that high, the construction costs have continued to go up. You'd think they'd level off, but they have continued to go up. The rents you need, and that's whether it be hard costs, financing costs, what have you, the rents you need are quite a bit higher than what they are in the existing development pipelines. Again, varies by market, but it's a pretty big delta. Great. Thanks for the comment, guys. Appreciate it. Thank you for your question. Next question is from the line of Vikram Malhotra with Mizuho. Your line's now open. Thanks for the questions. I wanted to go back, I guess, Brendan, to something you mentioned about sort of 2026, given the signed but not yet commenced leases, or the lease rate and the benefit of that going into 2026. You just mind just walking us, I'm not looking for a number, but just like what are the other kind of moving pieces that make probably 2026 visibility either much better than you've had in the past years, or is there some other swing factor? Just how much de-risked is 2026 growth from here on? Yeah. Hey, Vikram. It's a good question. We've obviously built a lot of embedded growth through the leasing that we've done to date. I think if you look at the lease rate versus the occupied rate, a 330 basis point spread is the highest that I can remember that we've had. Certainly, within the past several years, that's the highest spread and is more than double what the average is. Our normal lease-to-occupied spread is, call it, 100-200 basis points, so 150 at the midpoint. To be more than double that is a good indicator that occupancy is likely to grow as we go forward. A lot of those leases are signed, as you point out. Now, clearly, we're assuming that the economy and the leasing market are going to hold up from here and go forward at roughly where we've been to, I think, drive and realize kind of the growth potential as we go out into next year and beyond. There's a little bit of, we need things to kind of continue to hold up, but we've certainly done a lot of the good legwork that's there and are well positioned to deliver on that growth. I think the way that I would think about this, and again, I know you know this, but we're not in position to sort of talk about with any specifics in terms of numbers for next year or thereafter. We do think we have a good opportunity to grow occupancy as we migrate late in this year and then throughout 2026. I think we've talked in the past where we would say year-end occupancy kind of 2025 through 2026. I think we have the opportunity to grow that 100-200 basis points in a fairly steady manner throughout the year. Unlike in years past where we often have a seasonal dip early in the year and then build back, I think we're likely to see a more steady cadence of occupancy build as we go forward. Beyond that, we've got some of the development deliveries that are there. I think I talked about in the prepared remarks where we are with Granite Park Six and GlenLake III. Neither of those assets are we capitalizing any costs associated with those. As those leases commence and come online, all of that falls to the bottom line. We have the two development deliveries that were earlier this year. Those should also be additive, but we are capitalizing costs, operating, and interest on those two assets. That NOI will come online and will be additive, but will be somewhat offset by some expensing of interest and operating expenses compared to 2025. All of that gives good growth potential and gives some good growth drivers over the next several quarters. Outside of that, I would say it's more just the things that are kind of unknown. Don't expect to do a lot of financing over the next 18 months. The balance sheet's in pretty good shape, and then it would come down to what we may do on the acquisition or disposition side. That's helpful. Just one more. I think the team talked a lot about these big RFPs, and I think you've mentioned like four or five non-foreign firms looking for headquarter space. Just how competitive do you think this process is? What sort of competition is there from landlords to kind of win these deals? Do you mind giving us a little bit more color? What type of industries is this demand coming from, especially the foreign entities you mentioned? Thanks. Hey, Vikram. Brian here. I'll take a shot. A couple of things. They're all generally code-named. What's interesting is because of the markets we're in, we will sometimes see them pop up in multiple markets, whether it's Charlotte and Atlanta, Nashville and Charlotte, or Atlanta and Raleigh. It's interesting there. You know, in the Charlotte area, yes, there's a financial services bent, but at the same time, there are some kind of headquarter or U.S. headquarter locations for international firms that manufacture things that are bringing their manufacturing, the products they build, stateside to sell kind of a domestic product made here. I'm not sure you can necessarily connect that to the change in international trade. This is stuff that's been working for a while. One thing I will say is almost all of these, those same states that I mentioned are getting ranked for the best for business by CNBC. They're all at the table. The states have incentive plans. They have partnerships. They're open for business. They are working with these companies and these site selectors. It's very much a public-private partnership in every place. They're looking at the BBDs that we're in because that's when they bring an external sensitivity in terms of talent. They are very much focused on exceptional experience. That's where we're seeing a lot of them. Unfortunately, in Charlotte, we don't have any room at the inn, but because of that, we're getting a good look and understanding who's coming in. Thank you for your question. Next question is from the line of Ronald Kamdem with Morgan Stanley. Your line's now open. Hey, just two quick ones. Going back to the comments on the acquisition front, just digging in a little bit there, any curiosity in terms of markets, in terms of situations, are these distressed? Are these funds? Also, you may have mentioned the cap rate before, but if you could remind us what the cap rate and IR ranges are. Thanks. Sure, Ron. Markets, look, there's opportunities out there in multiple markets. I think sellers, again, have been waiting for this time for the office capital markets to open up. We're seeing some high-quality assets really across our footprint, right? The cap rates, I'd tell you for a high-quality trophy core asset well leased with a decent wallet, it's plus or minus 7% or so. That varies by market a little bit, by the weighted average lease term, the credit, whether there's below or above market rent. There's just a lot of variables that go into it that may cause the cap rate to be a little bit higher or a little bit lower. IRRs are in the probably high single-digit to low double-digit type of range, again, depending on the market and the specific profile of the acquisition-specific deal. Great. My second question, commentary about maybe the capital markets feeling a little bit better. Does this mean you guys are sort of closer to bringing Pittsburgh back online for a sale, potentially maybe the end of this year, even next year? How are you guys thinking about that market exit? Thanks. Yeah, certainly. I do think we're closer today than what we were three months ago, six months ago, two years ago. We're still waiting. We're having a lot of leasing success in Pittsburgh. We're going to be patient and bring it out at the right time. It still might be a little bit early, but we've got, if you look at our dispo guidance, it's another $150 million this year. We've got a number of buildings that are out in the market right now, and others that we're prepping to bring to market. We have a different profile. It's a lot like what we've sold the last couple of years or last several years. It's a mix of single-tenant, longer-term lease buildings together with some older, higher CapEx, lower growth assets as well. We've got a number of those out in the market that we're marketing in multiple markets. Pittsburgh would be in that mix at the right time. Great. That's it for me. Thank you. Thank you for your question. Next question is from the line of Omotayo Okusanya with Deutsche Bank. Your line's now open. Hi, yes. Good morning. I just wanted to follow up on Ron's question. As you guys kind of take a look at different markets and what's happening with demand, supply fundamentals, as you kind of look at what's happening with capital markets, just wondering if there's any scenario where we could see you enter new markets or possibly also exit additional markets apart from Pittsburgh that's earmarked for exit. Yeah, this is Ted. I'll take that. Look, I think, as you know, we've entered two markets in the last six years. We went into Charlotte in 2019 and Dallas in 2021. I would, and then we've exited three markets during that same period. We're always looking at new markets. I'd tell you right now, we're sort of pleased with our footprint. We've announced, obviously, the exit out of Pittsburgh over time, but we're pleased with our market selection at this time. Okay. That's helpful. Also, following up on Vikram's last question, Brendan, I appreciate all the color in regards to how occupancy could kind of shape up over the next 18 months or so. Just kind of curious, within that, while there are no big kind of 100,000 sq ft move-outs that are kind of known, could you just talk a little bit about the next level below that, like the 50,000 sq ft-100,000 sq ft leases, and if there could be a couple of those that could kind of hinder occupancy growth? Yeah, let me start. If Brian or Brendan want to jump in, look, demand we're seeing across our markets, clearly a trend we've seen the last couple of quarters is starting to see some larger users out there. I would tell you, our bread and butter is still that 5,000 sq ft-15,000 sq ft user. You know, we're going to pick off a floor or two here and there, but our bread and butter is still going to be that 5,000 sq ft-15,000 sq ft. You know, when you look, and we're seeing that in most of our markets, when you look at who's doing it, it continues to be professional service firms, the law firms, the banks, the accounting firms, engineering firms. Healthcare has been pretty good. That's continuing to be a good demand driver for us. The other thing that has been slow and steady the last several quarters we've talked about is our expansions, our net expansion activity. In the last four quarters, we've had 53 companies expand, 21 contract, for a net of over 200,000 sq ft of net absorption. A fourth demand driver is the in-migration that Brian talked about earlier. This quarter, we had eight companies that are new to our markets. All of them weren't relocations, but they're companies that are coming to our markets, adding offices. That was another 27,000 sq ft across four different markets. It's been pretty diversified, both larger tenants as well as just our bread and butter. Yeah, Tio, what I would just add to Ted's comments are just rather than kind of go space by space, getting into the weeds on things, there's always going to be customers that move out. There's always going to be customers that move in. I think, I forget who asked the question, but over the next 18 months or so, if we're in that kind of 45%-50% retention level of those remaining leases, that's 3.1 million sq ft that we've got between now and year-end, and year-end 2026. If we continue at 300,000 sq ft a quarter of new, that's going to replace, more than replace, what the likely kind of move-outs would be, to the positive by probably 200,000 sq ft-300,000 sq ft. What I think is likely is you're going to see that least occupied spread narrow, and that's going to add more in terms of occupancy. That creates the environment to drive occupancy higher. I think that sets us up well. We've got to continue to lease space, and we feel confident about that given the pipeline that's out there. Certainly, there's a long way between now and the next six quarters. Gotcha. Thank you. Thank you for your question. Next question is from the line of Young Ku with Wells Fargo. Your line's now open. Yes. Great. Thank you. Brendan, just wanted some clarification on the other income. Thank you for that detail on the $3 million payment from Florida. How should we think about that other income line item for the rest of the year? Are there similar types of opportunities in 2026? Yeah, Young, that's a good question. Yeah, we've kind of been running at that, call it, you know, on a normalized basis, $1.5 million a quarter. And then obviously this quarter, I think you saw that number spike up to, you know, $4.5 million or a little more than that in the quarter, which was driven, as you point out, by the FDOT payment. I would expect that that other income line would be more consistent with that $1.5 million or so a quarter going forward. We tend to get some unusual items that happen, you know, once a year, kind of give or take, right? Last year, we had a large repayment on tax from Nashville. That's why if you look at the year-over-year comparison to Q2 2024, it's actually down in that line item. I would say that in all likelihood, there's probably something that happens sometime between now and, you know, over the next few quarters or happens next year, but it's always a little bit difficult to forecast, and we don't have visibility into that level yet. We'll kind of see where that stuff shakes out. Wouldn't be surprising to me if there's some, you know, one-timers or whatever like that for 2026. I think your question is good that there could be a little bit less of that next year than what we have this year. Got it. Thank you, Brendan. Just one last from me. It looks like the year-end occupancy target might be a little bit lower than previously expected. Does that impact your same-store NOI outlook by any chance? Yeah, good question. Not really. I think the average occupancy we didn't change. We are probably a little bit higher in terms of average occupancy in the first half of the year than what we thought coming into the year. We're, because of a few of those leases that I mentioned that we took back some of the space earlier, we've got one customer that we moved from late in 2025 occupancy to early in 2026 occupancy. That year-end number is coming in a little bit lower than where we thought, but those are generally all for pretty good reasons. It didn't have a huge impact in terms of the same-store NOI outlook, even though it does have less occupancy on one day of the year at the end of the year. That's a timing issue more than anything else. Gotcha. Perfect. Thank you. Thank you. Thank you for your question. There are no additional questions waiting at this time, so I'll pass the call back to the management team for any closing remarks. Just want to thank everybody for joining the call today, and thank you for your interest in Highwoods Properties. We look forward to seeing everybody soon. Take care. That concludes the conference call. Thank you for your participation. You may now disconnect your line.

Speaker 7: Good morning. Thank you for attending the Highwoods Properties Q2 2025 earnings call. My name is Matt, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call for an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I'm about to pass the conference over to our host, Brendan Maiorana. Brendan, please go ahead. Good morning. good morning Thank you for attending the Highwoods Properties Q2 2025 earnings call. thank you for attending the highwoods properties q2 2025 earnings call My name is Matt, and I'll be the moderator for today's call. my name is matt and i'll be the moderator for today's call All lines will be muted during the presentation portion of the call for an opportunity for questions and answers at the end. all lines will be muted during the presentation portion of the call for an opportunity for questions and answers at the end If you would like to ask a question, please press star one on your telephone keypad. if you would like to ask a question please press star one on your telephone keypad I'm about to pass the conference over to our host, Brendan Maiorana. i'm about to pass the conference over to our host brendan maiorana Brendan, please go ahead. brendan please go ahead

Speaker 5: Thank you, operator, and good morning, everyone. Joining me on the call this morning are Ted Klinck, our Chief Executive Officer, and Brian Leary, our Chief Operating 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 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. Thank you, operator, and good morning, everyone. thank you operator and good morning everyone Joining me on the call this morning are Ted Klinck, our Chief Executive Officer, and Brian Leary, our Chief Operating Officer. joining me on the call this morning are ted klinck our chief executive officer and brian leary our chief operating officer For your convenience, today's prepared remarks have been posted on the web. 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. 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 EBITDA. 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. 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. 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. 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 now turn the call over to Ted. 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. 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 now turn the call over to Ted. with that i'll now turn the call over to ted

Speaker 8: Thanks, Brendan, and good morning, everyone. We had another strong quarter with robust second-gen leasing and excellent financial results. We entered 2025 with two key priorities. First, continue to upgrade our portfolio quality by rotating out of slower growth, more CapEx intensive properties, and rotating into higher growth assets that are more capital efficient. Second, make significant strides towards capturing the substantial NOI growth potential we have in our operating portfolio and development pipeline, which will drive meaningful organic growth in future years. We continue to make progress towards both of these priorities. In the second quarter, our leasing volumes were strong, including signing several second-gen new leases on spaces that are currently vacant, and we continue to make progress on the remaining availability at our development properties. Thanks, Brendan, and good morning, everyone. thanks brendan and good morning everyone We had another strong quarter with robust second-gen leasing and excellent financial results. we had another strong quarter with robust second-gen leasing and excellent financial results We entered 2025 with two key priorities. we entered 2025 with two key priorities First, continue to upgrade our portfolio quality by rotating out of slower growth, more CapEx intensive properties, and rotating into higher growth assets that are more capital efficient. first continue to upgrade our portfolio quality by rotating out of slower growth more capex intensive properties and rotating into higher growth assets that are more capital efficient Second, make significant strides towards capturing the substantial NOI growth potential we have in our operating portfolio and development pipeline, which will drive meaningful organic growth in future years. second make significant strides towards capturing the substantial noi growth potential we have in our operating portfolio and development pipeline which will drive meaningful organic growth in future years We continue to make progress towards both of these priorities. we continue to make progress towards both of these priorities In the second quarter, our leasing volumes were strong, including signing several second-gen new leases on spaces that are currently vacant, and we continue to make progress on the remaining availability at our development properties. in the second quarter our leasing volumes were strong including signing several second-gen new leases on spaces that are currently vacant and we continue to make progress on the remaining availability at our development properties While we didn't close any acquisitions or dispositions during the period, we're actively underwriting potential new investments and have numerous assets in the market for sale. We will continue to deliver on our proven strategy of rotating out of older, slower growth properties that are more CapEx intensive into better located higher growth assets that are more capital efficient. We continued our healthy leasing volume in the quarter with 920,000 sq ft of second-gen leasing, including 370,000 sq ft of new leasing. The consistent level of elevated leasing volumes for the past several quarters increases our confidence that our occupancy will steadily improve late in 2025 and escalate thereafter. We have also further unlocked the NOI growth potential in our core four assets with meaningful upside potential. While we didn't close any acquisitions or dispositions during the period, we're actively underwriting potential new investments and have numerous assets in the market for sale. while we didn't close any acquisitions or dispositions during the period we're actively underwriting potential new investments and have numerous assets in the market for sale We will continue to deliver on our proven strategy of rotating out of older, slower growth properties that are more CapEx intensive into better located higher growth assets that are more capital efficient. we will continue to deliver on our proven strategy of rotating out of older slower growth properties that are more capex intensive into better located higher growth assets that are more capital efficient We continued our healthy leasing volume in the quarter with 920,000 sq ft of second-gen leasing, including 370,000 sq ft of new leasing. we continued our healthy leasing volume in the quarter with 920,000 sq ft of second-gen leasing including 370,000 sq ft of new leasing The consistent level of elevated leasing volumes for the past several quarters increases our confidence that our occupancy will steadily improve late in 2025 and escalate thereafter. the consistent level of elevated leasing volumes for the past several quarters increases our confidence that our occupancy will steadily improve late in 2025 and escalate thereafter We have also further unlocked the NOI growth potential in our core four assets with meaningful upside potential. we have also further unlocked the noi growth potential in our core four assets with meaningful upside potential As a reminder, our core four are Alliance Center in Buckhead and three assets in Nashville, Symphony Place in the CBD, Westwood South in Brentwood, and Park West in Franklin. We have forecasted $25 million of annual NOI upside just from stabilizing these core four. After our leasing performance this quarter, we now have 50% of this upside scotched with signed leases, and we will have strong prospects for another 20%. Turning to our development pipeline, while we only signed 19,000 sq ft during the quarter, we have advanced a number of prospects through the leasing process and remain confident we'll increase our lease rate by the end of the year. We have over $10 million of NOI growth potential at GlenLake III in Raleigh and Granite Park Six in Dallas, two development properties that delivered in 2023 that are not yet stabilized. As a reminder, our core four are Alliance Center in Buckhead and three assets in Nashville, Symphony Place in the CBD, Westwood South in Brentwood, and Park West in Franklin. as a reminder our core four are alliance center in buckhead and three assets in nashville symphony place in the cbd westwood south in brentwood and park west in franklin We have forecasted $25 million of annual NOI upside just from stabilizing these core four. we have forecasted $25 million of annual noi upside just from stabilizing these core four After our leasing performance this quarter, we now have 50% of this upside scotched with signed leases, and we will have strong prospects for another 20%. after our leasing performance this quarter we now have 50% of this upside scotched with signed leases and we will have strong prospects for another 20% Turning to our development pipeline, while we only signed 19,000 sq ft during the quarter, we have advanced a number of prospects through the leasing process and remain confident we'll increase our lease rate by the end of the year. turning to our development pipeline while we only signed 19,000 sq ft during the quarter we have advanced a number of prospects through the leasing process and remain confident we'll increase our lease rate by the end of the year We have over $10 million of NOI growth potential at GlenLake III in Raleigh and Granite Park Six in Dallas, two development properties that delivered in 2023 that are not yet stabilized. we have over $10 million of noi growth potential at glenlake iii in raleigh and granite park six in dallas two development properties that delivered in 2023 that are not yet stabilized We have over $6 million of this NOI potential already signed, but where occupancy hasn't yet commenced. In addition, we have over $20 million of NOI growth potential at the two developments that delivered earlier this year, 23Springs in Dallas and Midtown East in Tampa. Our first customers at these developments recently moved in, and additional customers will take occupancy late in 2025 and in 2026. Combined, these two properties are 59% leased, and we have strong prospects for another roughly 15%. Given the combination of high construction costs, elevated vacancy levels, limited financing availability, and risk-adjusted yield requirements, starting a new spec development continues to be difficult for anyone in this environment. However, the absence of new deliveries and the dwindling availability over the next few years creates an opportunity for meaningful rent growth at high-quality second-gen product. We have over $6 million of this NOI potential already signed, but where occupancy hasn't yet commenced. we have over $6 million of this noi potential already signed but where occupancy hasn't yet commenced In addition, we have over $20 million of NOI growth potential at the two developments that delivered earlier this year, 23Springs in Dallas and Midtown East in Tampa. in addition we have over $20 million of noi growth potential at the two developments that delivered earlier this year 23springs in dallas and midtown east in tampa Our first customers at these developments recently moved in, and additional customers will take occupancy late in 2025 and in 2026. our first customers at these developments recently moved in and additional customers will take occupancy late in 2025 and in 2026 Combined, these two properties are 59% leased, and we have strong prospects for another roughly 15%. combined these two properties are 59% leased and we have strong prospects for another roughly 15% Given the combination of high construction costs, elevated vacancy levels, limited financing availability, and risk-adjusted yield requirements, starting a new spec development continues to be difficult for anyone in this environment. given the combination of high construction costs elevated vacancy levels limited financing availability and risk-adjusted yield requirements starting a new spec development continues to be difficult for anyone in this environment However, the absence of new deliveries and the dwindling availability over the next few years creates an opportunity for meaningful rent growth at high-quality second-gen product. however the absence of new deliveries and the dwindling availability over the next few years creates an opportunity for meaningful rent growth at high-quality second-gen product We're already seeing the benefits of limited supply as large blocks of high-quality space across many of our markets are being absorbed, which is driving rent growth in the best locations across the Sunbelt. The powerful combination of signed leases moving into occupancy in our operating portfolio, ongoing stabilization of our development pipeline, and continuous portfolio improvement should drive significant growth in earnings and cash flows in the foreseeable future. You may have seen some press recently about Ovation, our future mixed-use development in Franklin outside of Nashville. We recently submitted our development plan to the city. We remain confident Ovation represents one of the best mixed-use ground-up development sites in the entire country and will be a significant opportunity to create sizable value for Highwoods shareholders. We're already seeing the benefits of limited supply as large blocks of high-quality space across many of our markets are being absorbed, which is driving rent growth in the best locations across the Sunbelt. we're already seeing the benefits of limited supply as large blocks of high-quality space across many of our markets are being absorbed which is driving rent growth in the best locations across the sunbelt The powerful combination of signed leases moving into occupancy in our operating portfolio, ongoing stabilization of our development pipeline, and continuous portfolio improvement should drive significant growth in earnings and cash flows in the foreseeable future. the powerful combination of signed leases moving into occupancy in our operating portfolio ongoing stabilization of our development pipeline and continuous portfolio improvement should drive significant growth in earnings and cash flows in the foreseeable future You may have seen some press recently about Ovation, our future mixed-use development in Franklin outside of Nashville. you may have seen some press recently about ovation our future mixed-use development in franklin outside of nashville We recently submitted our development plan to the city. we recently submitted our development plan to the city We remain confident Ovation represents one of the best mixed-use ground-up development sites in the entire country and will be a significant opportunity to create sizable value for Highwoods shareholders. we remain confident ovation represents one of the best mixed-use ground-up development sites in the entire country and will be a significant opportunity to create sizable value for highwoods shareholders We are working with our partner in the city of Franklin to finalize development plans and do not expect any development announcements until late next year at the earliest. Turning to our performance, we delivered excellent financial results in the quarter, including cash flows that continue to be resilient even with elevated leasing CapEx due to future occupancy build. We delivered FFO of $0.89 per share in the quarter. Our occupancy was roughly flat from Q1 at 85.6%, while our lease rate increased 80 basis points to 88.9%. Leasing is off to another strong start early in Q3 with over 300,000 sq ft of second-gen leases signed, including over 100,000 sq ft of new leases. We remain optimistic we'll see the lease rate and occupancy levels increase by the end of the year. We are working with our partner in the city of Franklin to finalize development plans and do not expect any development announcements until late next year at the earliest. we are working with our partner in the city of franklin to finalize development plans and do not expect any development announcements until late next year at the earliest Turning to our performance, we delivered excellent financial results in the quarter, including cash flows that continue to be resilient even with elevated leasing CapEx due to future occupancy build. turning to our performance we delivered excellent financial results in the quarter including cash flows that continue to be resilient even with elevated leasing capex due to future occupancy build We delivered FFO of $0.89 per share in the quarter. we delivered ffo of $0.89 per share in the quarter Our occupancy was roughly flat from Q1 at 85.6%, while our lease rate increased 80 basis points to 88.9%. our occupancy was roughly flat from q1 at 85.6% while our lease rate increased 80 basis points to 88.9% Leasing is off to another strong start early in Q3 with over 300,000 sq ft of second-gen leases signed, including over 100,000 sq ft of new leases. leasing is off to another strong start early in q3 with over 300,000 sq ft of second-gen leases signed including over 100,000 sq ft of new leases We remain optimistic we'll see the lease rate and occupancy levels increase by the end of the year. we remain optimistic we'll see the lease rate and occupancy levels increase by the end of the year With our strong financial performance in Q2 and upbeat outlook for the balance of the year, we have once again raised the midpoint of our 2025 FFO outlook up $0.02 to a range of $3.37-$3.45 per share. Since the beginning of the year, we've increased our FFO outlook by $0.06 at the midpoint, or nearly 2%. In conclusion, we're extremely excited about the next few years for Highwoods Properties. We're operating in the strongest BBDs in the Sunbelt that continually have proven to be the places where talent and companies want to be. We have a clear pathway to meaningful growth, growth in earnings, growth in cash flow, and growth in NAV from our existing portfolio and development pipeline. With our strong financial performance in Q2 and upbeat outlook for the balance of the year, we have once again raised the midpoint of our 2025 FFO outlook up $0.02 to a range of $3.37- $3.45 per share. with our strong financial performance in q2 and upbeat outlook for the balance of the year we have once again raised the midpoint of our 2025 ffo outlook up $0.02 to a range of $3.37- $3.45 per share Since the beginning of the year, we've increased our FFO outlook by $0.06 at the midpoint, or nearly 2%. since the beginning of the year we've increased our ffo outlook by $0.06 at the midpoint or nearly 2% In conclusion, we're extremely excited about the next few years for Highwoods Properties. in conclusion we're extremely excited about the next few years for highwoods properties We're operating in the strongest BBDs in the Sunbelt that continually have proven to be the places where talent and companies want to be. we're operating in the strongest bbds in the sunbelt that continually have proven to be the places where talent and companies want to be We have a clear pathway to meaningful growth, growth in earnings, growth in cash flow, and growth in NAV from our existing portfolio and development pipeline. we have a clear pathway to meaningful growth growth in earnings growth in cash flow and growth in nav from our existing portfolio and development pipeline Plus, we believe the next 12 months represents an excellent opportunity to deploy capital in new investments with strong returns and recycle out of older non-strategic properties where risk-adjusted returns don't meet our objectives. With a strong balance sheet, including limited near-term debt maturities and ample liquidity, we are well positioned to execute on the opportunities ahead of us. Brian. Plus, we believe the next 12 months represents an excellent opportunity to deploy capital in new investments with strong returns and recycle out of older non-strategic properties where risk-adjusted returns don't meet our objectives. plus we believe the next 12 months represents an excellent opportunity to deploy capital in new investments with strong returns and recycle out of older non-strategic properties where risk-adjusted returns don't meet our objectives With a strong balance sheet, including limited near-term debt maturities and ample liquidity, we are well positioned to execute on the opportunities ahead of us. with a strong balance sheet including limited near-term debt maturities and ample liquidity we are well positioned to execute on the opportunities ahead of us Brian. brian

Speaker 6: Thank you, Ted, and good morning, everyone. Kudos to our tremendous team for the results they delivered in the second quarter, with 923,000 sq ft of quarterly leasing, of which 371,000 sq ft was new, signaling future occupancy gains as those leases commence. Our Sunbelt states are repeat best for business winners. Our markets are outpacing the nation with higher population gains and lower unemployment rates, and our BBD portfolio is outperforming as the beneficiary of our customers' preference for in-office occupancy and, in turn, their continued flight to quality, capital, and owners. With corporate and now federal conviction behind the in-office value proposition, we believe equilibrium has been reached as it relates to remote work and no longer see it as an acute headwind to our portfolio. Thank you, Ted, and good morning, everyone. thank you ted and good morning everyone Kudos to our tremendous team for the results they delivered in the second quarter, with 923,000 sq ft of quarterly leasing, of which 371,000 sq ft was new, signaling future occupancy gains as those leases commence. kudos to our tremendous team for the results they delivered in the second quarter with 923,000 sq ft of quarterly leasing of which 371,000 sq ft was new signaling future occupancy gains as those leases commence Our Sunbelt states are repeat best for business winners. our sunbelt states are repeat best for business winners Our markets are outpacing the nation with higher population gains and lower unemployment rates, and our BBD portfolio is outperforming as the beneficiary of our customers' preference for in-office occupancy and, in turn, their continued flight to quality, capital, and owners. our markets are outpacing the nation with higher population gains and lower unemployment rates and our bbd portfolio is outperforming as the beneficiary of our customers' preference for in-office occupancy and in turn their continued flight to quality capital and owners With corporate and now federal conviction behind the in-office value proposition, we believe equilibrium has been reached as it relates to remote work and no longer see it as an acute headwind to our portfolio. with corporate and now federal conviction behind the in-office value proposition we believe equilibrium has been reached as it relates to remote work and no longer see it as an acute headwind to our portfolio With greater numbers returning to the office, there's not only less commute-worthy options available at the top of the market, the bottom is shrinking as well, with CBRE reporting that over 23 million sq ft of U.S. office space is on track for demolition or conversion to other uses this year, far outpacing the almost 13 million sq ft of new office space being completed in 2025, which figure in itself is far below the 10-year annual average of 44 million sq ft of annual deliveries. Coupled with a record low construction pipeline and with the development period of an office building being measured in years, this slow squeeze play has started to move the market in an owner's favor in certain instances, such as new trophy development and in high barrier-to-entry BBDs, with the potential for a meaningful and extended shortage of Class A space in the not-too-distant future. With greater numbers returning to the office, there's not only less commute-worthy options available at the top of the market, the bottom is shrinking as well, with CBRE reporting that over 23 million sq ft of U.S. office space is on track for demolition or conversion to other uses this year, far outpacing the almost 13 million sq ft of new office space being completed in 2025, which figure in itself is far below the 10-year annual average of 44 million sq ft of annual deliveries. with greater numbers returning to the office there's not only less commute-worthy options available at the top of the market the bottom is shrinking as well with cbre reporting that over 23 million sq ft of u.s office space is on track for demolition or conversion to other uses this year far outpacing the almost 13 million sq ft of new office space being completed in 2025 which figure in itself is far below the 10-year annual average of 44 million sq ft of annual deliveries Coupled with a record low construction pipeline and with the development period of an office building being measured in years, this slow squeeze play has started to move the market in an owner's favor in certain instances, such as new trophy development and in high barrier-to-entry BBDs, with the potential for a meaningful and extended shortage of Class A space in the not-too-distant future. coupled with a record low construction pipeline and with the development period of an office building being measured in years this slow squeeze play has started to move the market in an owner's favor in certain instances such as new trophy development and in high barrier-to-entry bbds with the potential for a meaningful and extended shortage of class a space in the not-too-distant future Our Sunbelt BBD strategy, which is both urban and suburban in nature, is serving us well. All of our markets are in states that are repeatedly rated by CNBC as the best for business, with North Carolina, Texas, Florida, and Virginia taking the top four spots this year. With regard to the Tar Heel State, between Charlotte and Raleigh, North Carolina is home to 33% of our revenue and 36% of our NOI. Georgia and Tennessee aren't far behind, rounding out the top eight of CNBC's rankings. Bloomberg Economics brings this to bear, highlighting that the Southeast accounted for more than two-thirds of all job growth across the U.S. since early 2020. These three forces: improving in-office utilization, declining competitive supply, and strong demographics, all combined with a resilient economy, are bearing fruit in our leasing activity and make us optimistic our strong performance will continue. Our Sunbelt BBD strategy, which is both urban and suburban in nature, is serving us well. our sunbelt bbd strategy which is both urban and suburban in nature is serving us well All of our markets are in states that are repeatedly rated by CNBC as the best for business, with North Carolina, Texas, Florida, and Virginia taking the top four spots this year. all of our markets are in states that are repeatedly rated by cnbc as the best for business with north carolina texas florida and virginia taking the top four spots this year With regard to the Tar Heel State, between Charlotte and Raleigh, North Carolina is home to 33% of our revenue and 36% of our NOI. with regard to the tar heel state between charlotte and raleigh north carolina is home to 33% of our revenue and 36% of our noi Georgia and Tennessee aren't far behind, rounding out the top eight of CNBC's rankings. georgia and tennessee aren't far behind rounding out the top eight of cnbc's rankings Bloomberg Economics brings this to bear, highlighting that the Southeast accounted for more than two-thirds of all job growth across the U.S. since early 2020. bloomberg economics brings this to bear highlighting that the southeast accounted for more than two-thirds of all job growth across the u.s since early 2020 These three forces: improving in-office utilization, declining competitive supply, and strong demographics, all combined with a resilient economy, are bearing fruit in our leasing activity and make us optimistic our strong performance will continue. these three forces improving in-office utilization declining competitive supply and strong demographics all combined with a resilient economy are bearing fruit in our leasing activity and make us optimistic our strong performance will continue To that end, we signed 102 leases in the second quarter, with expansions outpacing contractions almost three to one. Net effective rents averaging $19.30 a sq ft, with an average payback of 17.2%. Of the 102 leases we signed, 42 were new, with almost 20% of those new to market. Cash and GAAP rent growth were strong at 3.6% and 17.6% respectively. Above all, we are most enthusiastic about the progress we've made and continue to make on our occupancy upside across four core assets in Atlanta and Nashville. Three of these four have completed or are in the midst of completing our Hywatizing redevelopment program, essentially positioning them to directly compete with new construction. The fourth in Westwood South is in the highest of barrier-to-entry BBDs of Brentwood in suburban Nashville, and it has a leasing prospect pipeline that would fill the building two times over. To that end, we signed 102 leases in the second quarter, with expansions outpacing contractions almost three to one. to that end we signed 102 leases in the second quarter with expansions outpacing contractions almost three to one Net effective rents averaging $19.30 a sq ft, with an average payback of 17.2%. net effective rents averaging $19.30 a sq ft with an average payback of 17.2% Of the 102 leases we signed, 42 were new, with almost 20% of those new to market. of the 102 leases we signed 42 were new with almost 20% of those new to market Cash and GAAP rent growth were strong at 3.6% and 17.6% respectively. cash and gaap rent growth were strong at 3.6% and 17.6% respectively Above all, we are most enthusiastic about the progress we've made and continue to make on our occupancy upside across four core assets in Atlanta and Nashville. above all we are most enthusiastic about the progress we've made and continue to make on our occupancy upside across four core assets in atlanta and nashville Three of these four have completed or are in the midst of completing our Hywatizing redevelopment program, essentially positioning them to directly compete with new construction. three of these four have completed or are in the midst of completing our hywatizing redevelopment program essentially positioning them to directly compete with new construction The fourth in Westwood South is in the highest of barrier-to-entry BBDs of Brentwood in suburban Nashville, and it has a leasing prospect pipeline that would fill the building two times over. the fourth in westwood south is in the highest of barrier-to-entry bbds of brentwood in suburban nashville and it has a leasing prospect pipeline that would fill the building two times over Symphony Place in downtown Nashville started the quarter strong. The seven-floor lease with Nashville mainstay and global law firm Holland & Knight was proof positive that the environment and experience we are curating there is what Nashville's best and brightest are looking for, and there are leasing prospects for over 80% of the building. While you never buy 1,000, with these prospects and inbound activity picking up in Nashville, Symphony Place is poised to deliver meaningful organic growth. The backfill update from Nashville is a good segue into Music City's broader market performance with the nation's lowest large metro unemployment rate. Cushman & Wakefield reported Nashville having the nation's third highest positive net absorption, and the market's robust demand generated almost 1 million sq ft of leasing for the quarter, the highest for Nashville since the second quarter of 2021. Symphony Place in downtown Nashville started the quarter strong. symphony place in downtown nashville started the quarter strong The seven-floor lease with Nashville mainstay and global law firm Holland & Knight was proof positive that the environment and experience we are curating there is what Nashville's best and brightest are looking for, and there are leasing prospects for over 80% of the building. the seven-floor lease with nashville mainstay and global law firm holland & knight was proof positive that the environment and experience we are curating there is what nashville's best and brightest are looking for and there are leasing prospects for over 80% of the building While you never buy 1,000, with these prospects and inbound activity picking up in Nashville, Symphony Place is poised to deliver meaningful organic growth. while you never buy 1,000 with these prospects and inbound activity picking up in nashville symphony place is poised to deliver meaningful organic growth The backfill update from Nashville is a good segue into Music City's broader market performance with the nation's lowest large metro unemployment rate. the backfill update from nashville is a good segue into music city's broader market performance with the nation's lowest large metro unemployment rate Cushman & Wakefield reported Nashville having the nation's third highest positive net absorption, and the market's robust demand generated almost 1 million sq ft of leasing for the quarter, the highest for Nashville since the second quarter of 2021. cushman & wakefield reported nashville having the nation's third highest positive net absorption and the market's robust demand generated almost 1 million sq ft of leasing for the quarter the highest for nashville since the second quarter of 2021 JLL added that there are almost 2 million sq ft of active requirements in the market, and with a decade-low construction pipeline delivering at 79% pre-lease and with no new starts in the foreseeable future, vacancies should decline, rents should increase, and momentum should continue. The second quarter leasing we did in Nashville led our markets for both total and new volume, had our highest dollar-weighted average lease term at nine years, and was tops with GAAP rent growth of 23.8% and cash rent spreads of 12.4%. Southeast of Nashville, Charlotte continues to be a talent magnet with new data showing that the area's daily net migration count is up from 117 a day to 157, according to the Charlotte Regional Business Alliance, and where Cushman highlighted the region as one of the nation's top quarterly job generators with a 2.2% growth rate. JLL added that there are almost 2 million sq ft of active requirements in the market, and with a decade-low construction pipeline delivering at 79% pre-lease and with no new starts in the foreseeable future, vacancies should decline, rents should increase, and momentum should continue. jll added that there are almost 2 million sq ft of active requirements in the market and with a decade-low construction pipeline delivering at 79% pre-lease and with no new starts in the foreseeable future vacancies should decline rents should increase and momentum should continue The second quarter leasing we did in Nashville led our markets for both total and new volume, had our highest dollar-weighted average lease term at nine years, and was tops with GAAP rent growth of 23.8% and cash rent spreads of 12.4%. the second quarter leasing we did in nashville led our markets for both total and new volume had our highest dollar-weighted average lease term at nine years and was tops with gaap rent growth of 23.8% and cash rent spreads of 12.4% Southeast of Nashville, Charlotte continues to be a talent magnet with new data showing that the area's daily net migration count is up from 117 a day to 157, according to the Charlotte Regional Business Alliance, and where Cushman highlighted the region as one of the nation's top quarterly job generators with a 2.2% growth rate. southeast of nashville charlotte continues to be a talent magnet with new data showing that the area's daily net migration count is up from 117 a day to 157 according to the charlotte regional business alliance and where cushman highlighted the region as one of the nation's top quarterly job generators with a 2.2% growth rate Cushman also noted Charlotte's fourth consecutive quarter with leasing activity over 500,000 sq ft, where over 80% occurred in the submarkets Uptown, Midtown, and South Park. Our 2 million sq ft Charlotte portfolio, which is entirely located in the Uptown and South Park BBDs, leads the way at 96.6% occupied. Our 1.2 million sq ft Legacy Union Uptown portfolio sits squarely at the geographic center of Charlotte's Class AA demand and is 95% occupied, while our sixth building, 800,000 sq ft portfolio in South Park, is 98% occupied. With Charlotte's construction pipeline empty and with multiple large inbounds cited by the Charlotte Alliance, not including Citigroup or AssetMark's recent significant job announcements, market vacancy and rental rates should continue to move in opposite directions. Of all of our markets, Dallas continues to be an economic juggernaut with continued job and population growth and positive net absorption. Cushman also noted Charlotte's fourth consecutive quarter with leasing activity over 500,000 sq ft, where over 80% occurred in the submarkets Uptown, Midtown, and South Park. cushman also noted charlotte's fourth consecutive quarter with leasing activity over 500,000 sq ft where over 80% occurred in the submarkets uptown midtown and south park Our 2 million sq ft Charlotte portfolio, which is entirely located in the Uptown and South Park BBDs, leads the way at 96.6% occupied. our 2 million sq ft charlotte portfolio which is entirely located in the uptown and south park bbds leads the way at 96.6% occupied Our 1.2 million sq ft Legacy Union Uptown portfolio sits squarely at the geographic center of Charlotte's Class AA demand and is 95% occupied, while our sixth building, 800,000 sq ft portfolio in South Park, is 98% occupied. our 1.2 million sq ft legacy union uptown portfolio sits squarely at the geographic center of charlotte's class aa demand and is 95% occupied while our sixth building 800,000 sq ft portfolio in south park is 98% occupied With Charlotte's construction pipeline empty and with multiple large inbounds cited by the Charlotte Alliance, not including Citigroup or AssetMark's recent significant job announcements, market vacancy and rental rates should continue to move in opposite directions. with charlotte's construction pipeline empty and with multiple large inbounds cited by the charlotte alliance not including citigroup or assetmark's recent significant job announcements market vacancy and rental rates should continue to move in opposite directions Of all of our markets, Dallas continues to be an economic juggernaut with continued job and population growth and positive net absorption. of all of our markets dallas continues to be an economic juggernaut with continued job and population growth and positive net absorption JLL noted that 60% of Dallas's office pipeline is build-to-suit construction for Goldman Sachs and Wells Fargo, and that there are an additional 7.6 million sq ft of requirements in the market. Our Dallas development pipeline is benefiting from this demand with prospect activity at both our 422,000 sq ft Plano BBD Granite Park Six development, which is currently 59% pre-lease, and our 642,000 sq ft 23Springs development in Dallas's Uptown BBD, which itself is 63% pre-lease. Also in Uptown and down the street from 23Springs is our 557,000 sq ft in-service asset McKinney & Olive, which is over 99% leased. I would be remiss if I didn't share highlights from Tampa, both as a market and from our portfolio's perspective. JLL noted that 60% of Dallas's office pipeline is build-to-suit construction for Goldman Sachs and Wells Fargo, and that there are an additional 7.6 million sq ft of requirements in the market. jll noted that 60% of dallas's office pipeline is build-to-suit construction for goldman sachs and wells fargo and that there are an additional 7.6 million sq ft of requirements in the market Our Dallas development pipeline is benefiting from this demand with prospect activity at both our 422,000 sq ft Plano BBD Granite Park Six development, which is currently 59% pre-lease, and our 642,000 sq ft 23Springs development in Dallas's Uptown BBD, which itself is 63% pre-lease. our dallas development pipeline is benefiting from this demand with prospect activity at both our 422,000 sq ft plano bbd granite park six development which is currently 59% pre-lease and our 642,000 sq ft 23springs development in dallas's uptown bbd which itself is 63% pre-lease Also in Uptown and down the street from 23Springs is our 557,000 sq ft in-service asset McKinney & Olive, which is over 99% leased. also in uptown and down the street from 23springs is our 557,000 sq ft in-service asset mckinney & olive which is over 99% leased I would be remiss if I didn't share highlights from Tampa, both as a market and from our portfolio's perspective. i would be remiss if i didn't share highlights from tampa both as a market and from our portfolio's perspective CBRE led this quarter's Tampa market report with a headline that reads, "A positive path ahead as the office market builds on Q1 surge." The report noted that Tampa posted its fifth consecutive quarter of positive net absorption, and the pipeline for continued positive absorption is healthy, with 1.3 million sq ft of future tenant move-ins tied to already executed leases. With an additional 1.4 million sq ft of active prospects and one of the lowest market-wide vacancies in the nation per CBRE, we are very pleased with our market activity and where we ended the quarter at 86.1% occupied, but more than 92% leased. Our Midtown East development recently delivered 40% pre-leased and has strong prospects for another 40% of the building. CBRE led this quarter's Tampa market report with a headline that reads, "A positive path ahead as the office market builds on Q1 surge." The report noted that Tampa posted its fifth consecutive quarter of positive net absorption, and the pipeline for continued positive absorption is healthy, with 1.3 million sq ft of future tenant move-ins tied to already executed leases. cbre led this quarter's tampa market report with a headline that reads "a positive path ahead as the office market builds on q1 surge." the report noted that tampa posted its fifth consecutive quarter of positive net absorption and the pipeline for continued positive absorption is healthy with 1.3 million sq ft of future tenant move-ins tied to already executed leases With an additional 1.4 million sq ft of active prospects and one of the lowest market-wide vacancies in the nation per CBRE, we are very pleased with our market activity and where we ended the quarter at 86.1% occupied, but more than 92% leased. with an additional 1.4 million sq ft of active prospects and one of the lowest market-wide vacancies in the nation per cbre we are very pleased with our market activity and where we ended the quarter at 86.1% occupied but more than 92% leased Our Midtown East development recently delivered 40% pre-leased and has strong prospects for another 40% of the building. our midtown east development recently delivered 40% pre-leased and has strong prospects for another 40% of the building Underwritten to stabilize in the second quarter of 2026, Midtown East was the only building under construction the better part of two years and is the tallest building in the West Shore BBD and in the heart of Midtown Tampa's thriving mixed-use district, anchored by Whole Foods, two hotels, and luxury apartments. With a commute-worthy portfolio and a trophy asset team, Highwoods is creating compelling environments and experiences that are giving our customers a competitive advantage in recruiting and retaining the very best. This advantage is recognized in our activity and economics, and we are steadfast in our conviction that great value is created when the best and brightest are better together. Brendan. Underwritten to stabilize in the second quarter of 2026, Midtown East was the only building under construction the better part of two years and is the tallest building in the West Shore BBD and in the heart of Midtown Tampa's thriving mixed-use district, anchored by Whole Foods, two hotels, and luxury apartments. underwritten to stabilize in the second quarter of 2026 midtown east was the only building under construction the better part of two years and is the tallest building in the west shore bbd and in the heart of midtown tampa's thriving mixed-use district anchored by whole foods two hotels and luxury apartments With a commute-worthy portfolio and a trophy asset team, Highwoods is creating compelling environments and experiences that are giving our customers a competitive advantage in recruiting and retaining the very best. with a commute-worthy portfolio and a trophy asset team highwoods is creating compelling environments and experiences that are giving our customers a competitive advantage in recruiting and retaining the very best This advantage is recognized in our activity and economics, and we are steadfast in our conviction that great value is created when the best and brightest are better together. this advantage is recognized in our activity and economics and we are steadfast in our conviction that great value is created when the best and brightest are better together Brendan. brendan

Speaker 5: Thanks, Brian. In the second quarter, we delivered net income of $18.3 million or $0.17 per share and FFO of $97.7 million or $0.89 per share. The quarter included three atypical items. Thanks, Brian. thanks brian In the second quarter, we delivered net income of $18.3 million or $0.17 per share and FFO of $97.7 million or $0.89 per share. in the second quarter we delivered net income of $18.3 million or $0.17 per share and ffo of $97.7 million or $0.89 per share The quarter included three atypical items. the quarter included three atypical items First, we received $3 million from the Florida Department of Transportation for the impact of roadway improvements adjacent to a non-core property in Tampa. This payment, which is reflected in other income, was expected and has been included in our FFO outlook since the beginning of the year. Second, we received $1 million of term fees. The largest was attributable to a customer where we proactively took back space early and have subsequently re-let this space to a new user with a long-term lease. This term fee temporarily boosted Q2 earnings but will be offset by downtime at the property. Third, we wrote off nearly $1 million of pre-development costs at sites where we no longer believe office to be the highest and best use. Otherwise, this was a very straightforward quarter. We are pleased with our results, which demonstrate the resiliency of our operations and cash flows. First, we received $3 million from the Florida Department of Transportation for the impact of roadway improvements adjacent to a non-core property in Tampa. first we received $3 million from the florida department of transportation for the impact of roadway improvements adjacent to a non-core property in tampa This payment, which is reflected in other income, was expected and has been included in our FFO outlook since the beginning of the year. this payment which is reflected in other income was expected and has been included in our ffo outlook since the beginning of the year Second, we received $1 million of term fees. second we received $1 million of term fees The largest was attributable to a customer where we proactively took back space early and have subsequently re-let this space to a new user with a long-term lease. the largest was attributable to a customer where we proactively took back space early and have subsequently re-let this space to a new user with a long-term lease This term fee temporarily boosted Q2 earnings but will be offset by downtime at the property. this term fee temporarily boosted q2 earnings but will be offset by downtime at the property Third, we wrote off nearly $1 million of pre-development costs at sites where we no longer believe office to be the highest and best use. third we wrote off nearly $1 million of pre-development costs at sites where we no longer believe office to be the highest and best use Otherwise, this was a very straightforward quarter. otherwise this was a very straightforward quarter We are pleased with our results, which demonstrate the resiliency of our operations and cash flows. we are pleased with our results which demonstrate the resiliency of our operations and cash flows Our balance sheet remains in excellent shape. Our debt-to-EBITDA ratio was 6.3 times at quarter end. We only have $106 million left to fund on our development pipeline and are currently maintaining over $700 million of available liquidity. Our only debt maturity over the next 18 months is a $200 million variable-rate term loan that is scheduled to mature in May 2026. Discussions with our bank group have been very positive, and we remain comfortable in our ability to extend this loan. As Ted mentioned, we have updated our 2025 FFO outlook to $3.37-$3.45 per share, which equates to a $0.02 increase at the midpoint. The underlying picture is actually stronger than the headline implies. As I mentioned earlier, the second quarter included $0.01 of higher G&A due to the expensing of pre-development costs that were not included in our prior outlook. Our balance sheet remains in excellent shape. our balance sheet remains in excellent shape Our debt-to-EBITDA ratio was 6.3 times at quarter end. our debt-to-ebitda ratio was 6.3 times at quarter end We only have $106 million left to fund on our development pipeline and are currently maintaining over $700 million of available liquidity. we only have $106 million left to fund on our development pipeline and are currently maintaining over $700 million of available liquidity Our only debt maturity over the next 18 months is a $200 million variable-rate term loan that is scheduled to mature in May 2026. our only debt maturity over the next 18 months is a $200 million variable-rate term loan that is scheduled to mature in may 2026 Discussions with our bank group have been very positive, and we remain comfortable in our ability to extend this loan. discussions with our bank group have been very positive and we remain comfortable in our ability to extend this loan As Ted mentioned, we have updated our 2025 FFO outlook to $3.37 - $3.45 per share, which equates to a $0.02 increase at the midpoint. as ted mentioned we have updated our 2025 ffo outlook to $3.37 - $3.45 per share which equates to a $0.02 increase at the midpoint The underlying picture is actually stronger than the headline implies. the underlying picture is actually stronger than the headline implies As I mentioned earlier, the second quarter included $0.01 of higher G&A due to the expensing of pre-development costs that were not included in our prior outlook. as i mentioned earlier the second quarter included $0.01 of higher g&a due to the expensing of pre-development costs that were not included in our prior outlook Plus, we pushed $0.02 of interest income out of the 2025 forecast and into future years. These items have been partially offset by a $0.01 increase to prior-year property tax refunds expected during 2025. Overall, this equates to $0.02 of net headwinds that were not included in our April outlook, but these have been more than offset by $0.04 of higher anticipated NOI, resulting in the increase of $0.02 per share at the midpoint. Turning to leasing and our occupancy outlook, we expect to be towards the low end of our year-end 2025 occupancy outlook of 86%-87%, largely driven by proactively taking space back early from users where we've subsequently re-let these spaces to new users with leases that don't commence until after year-end. This activity, while reducing near-term occupancy, secures additional long-term tenancy across our portfolio and reduces our rollover risk in future years. Plus, we pushed $0.02 of interest income out of the 2025 forecast and into future years. plus we pushed $0.02 of interest income out of the 2025 forecast and into future years These items have been partially offset by a $0.01 increase to prior-year property tax refunds expected during 2025. these items have been partially offset by a $0.01 increase to prior-year property tax refunds expected during 2025 Overall, this equates to $0.02 of net headwinds that were not included in our April outlook, but these have been more than offset by $0.04 of higher anticipated NOI, resulting in the increase of $0.02 per share at the midpoint. overall this equates to $0.02 of net headwinds that were not included in our april outlook but these have been more than offset by $0.04 of higher anticipated noi resulting in the increase of $0.02 per share at the midpoint Turning to leasing and our occupancy outlook, we expect to be towards the low end of our year-end 2025 occupancy outlook of 86% - 87%, largely driven by proactively taking space back early from users where we've subsequently re-let these spaces to new users with leases that don't commence until after year-end. turning to leasing and our occupancy outlook we expect to be towards the low end of our year-end 2025 occupancy outlook of 86% - 87% largely driven by proactively taking space back early from users where we've subsequently re-let these spaces to new users with leases that don't commence until after year-end This activity, while reducing near-term occupancy, secures additional long-term tenancy across our portfolio and reduces our rollover risk in future years. this activity while reducing near-term occupancy secures additional long-term tenancy across our portfolio and reduces our rollover risk in future years We also proactively took back 35,000 sq ft early from a user to secure a long-term lease extension on their remaining 70,000 sq ft on an as-is basis. Finally, we have one user that we originally expected would be able to take occupancy of their 50,000 sq ft in the fourth quarter, but we now expect this lease to commence in the first quarter of 2026. These timing issues have moved 130,000 sq ft of previously projected occupancy at year-end 2025 into the future. Lastly, I want to review in more detail the performance of the core four operating properties with meaningful occupancy upside that Ted highlighted, as well as our development properties. At the beginning of the year, we called attention to $25 million of embedded annual NOI growth potential upon stabilization of the core four. We also proactively took back 35,000 sq ft early from a user to secure a long-term lease extension on their remaining 70,000 sq ft on an as-is basis. we also proactively took back 35,000 sq ft early from a user to secure a long-term lease extension on their remaining 70,000 sq ft on an as-is basis Finally, we have one user that we originally expected would be able to take occupancy of their 50,000 sq ft in the fourth quarter, but we now expect this lease to commence in the first quarter of 2026. finally we have one user that we originally expected would be able to take occupancy of their 50,000 sq ft in the fourth quarter but we now expect this lease to commence in the first quarter of 2026 These timing issues have moved 130,000 sq ft of previously projected occupancy at year-end 2025 into the future. these timing issues have moved 130,000 sq ft of previously projected occupancy at year-end 2025 into the future Lastly, I want to review in more detail the performance of the core four operating properties with meaningful occupancy upside that Ted highlighted, as well as our development properties. lastly i want to review in more detail the performance of the core four operating properties with meaningful occupancy upside that ted highlighted as well as our development properties At the beginning of the year, we called attention to $25 million of embedded annual NOI growth potential upon stabilization of the core four. at the beginning of the year we called attention to $25 million of embedded annual noi growth potential upon stabilization of the core four At that point, we had locked in $5 million of this future upside with signed leases. Today, this number is now up to over $12 million, and we have strong prospects for another $5 million-$6 million. Our two 2023 development deliveries, Granite Park Six and GlenLake III, have over $10 million of annual NOI growth potential upon stabilization, over $6 million of which has been secured with signed leases, up from $4 million at the beginning of the year. The two developments that delivered earlier this year, 23Springs and Midtown East, have over $20 million of annual NOI growth potential upon stabilization. We have secured $14 million of this upside with leases that will commence in the future, up from $11 million at the beginning of the year, plus we have strong prospects for another $3 million. At that point, we had locked in $5 million of this future upside with signed leases. at that point we had locked in $5 million of this future upside with signed leases Today, this number is now up to over $12 million, and we have strong prospects for another $5 million- $6 million. today this number is now up to over $12 million and we have strong prospects for another $5 million- $6 million Our two 2023 development deliveries, Granite Park Six and GlenLake III, have over $10 million of annual NOI growth potential upon stabilization, over $6 million of which has been secured with signed leases, up from $4 million at the beginning of the year. our two 2023 development deliveries granite park six and glenlake iii have over $10 million of annual noi growth potential upon stabilization over $6 million of which has been secured with signed leases up from $4 million at the beginning of the year The two developments that delivered earlier this year, 23Springs and Midtown East, have over $20 million of annual NOI growth potential upon stabilization. the two developments that delivered earlier this year 23springs and midtown east have over $20 million of annual noi growth potential upon stabilization We have secured $14 million of this upside with leases that will commence in the future, up from $11 million at the beginning of the year, plus we have strong prospects for another $3 million. we have secured $14 million of this upside with leases that will commence in the future up from $11 million at the beginning of the year plus we have strong prospects for another $3 million In total, these eight properties have over $55 million of annual NOI growth potential above our 2025 outlook. We have locked in over 60% or more than $33 million of this upside with leases that have been signed but are not contributing to 2025, plus we have strong prospects for another $9 million. To be clear, it will take time for these signed leases to come online. We are also still capitalizing interest and operating expenses at 23Springs and Midtown East as these two development projects delivered earlier this year, so not all of the NOI from those two assets will be realized in future FFO or operating cash flow. In total, these eight properties have over $55 million of annual NOI growth potential above our 2025 outlook. in total these eight properties have over $55 million of annual noi growth potential above our 2025 outlook We have locked in over 60% or more than $33 million of this upside with leases that have been signed but are not contributing to 2025, plus we have strong prospects for another $9 million. we have locked in over 60% or more than $33 million of this upside with leases that have been signed but are not contributing to 2025 plus we have strong prospects for another $9 million To be clear, it will take time for these signed leases to come online. to be clear it will take time for these signed leases to come online We are also still capitalizing interest and operating expenses at 23Springs and Midtown East as these two development projects delivered earlier this year, so not all of the NOI from those two assets will be realized in future FFO or operating cash flow. we are also still capitalizing interest and operating expenses at 23springs and midtown east as these two development projects delivered earlier this year so not all of the noi from those two assets will be realized in future ffo or operating cash flow However, the leasing activity is encouraging, and we expect all of the leases signed to date to commence by late 2026, which gives us confidence about the trajectory of earnings and cash flow as we move into 2026 and even into 2027. To wrap up, we're ahead of our expectations in terms of executing on our embedded growth drivers with the potential to secure even more of this upside over the next few quarters. We're also encouraged at the potential to recycle additional capital and thereby further improve our long-term growth profile. Given our strong markets, BBD locations, proven operating and asset recycling strategies, and well-positioned balance sheet, we are encouraged about the next few years for Highwoods Properties. Operator, we are now ready for questions. However, the leasing activity is encouraging, and we expect all of the leases signed to date to commence by late 2026, which gives us confidence about the trajectory of earnings and cash flow as we move into 2026 and even into 2027. however the leasing activity is encouraging and we expect all of the leases signed to date to commence by late 2026 which gives us confidence about the trajectory of earnings and cash flow as we move into 2026 and even into 2027 To wrap up, we're ahead of our expectations in terms of executing on our embedded growth drivers with the potential to secure even more of this upside over the next few quarters. to wrap up we're ahead of our expectations in terms of executing on our embedded growth drivers with the potential to secure even more of this upside over the next few quarters We're also encouraged at the potential to recycle additional capital and thereby further improve our long-term growth profile. we're also encouraged at the potential to recycle additional capital and thereby further improve our long-term growth profile Given our strong markets, BBD locations, proven operating and asset recycling strategies, and well-positioned balance sheet, we are encouraged about the next few years for Highwoods Properties. given our strong markets bbd locations proven operating and asset recycling strategies and well-positioned balance sheet we are encouraged about the next few years for highwoods properties Operator, we are now ready for questions. operator we are now ready for questions

Speaker 7: If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We'll pause here briefly as questions register. First question is from the line of Peter Abramowitz with Jefferies. Speaker line's now open. If you would like to ask a question, please press star followed by one on your telephone keypad. if you would like to ask a question please press star followed by one on your telephone keypad If for any reason you would like to remove that question, please press star followed by two. if for any reason you would like to remove that question please press star followed by two Again, to ask a question, press star one. again to ask a question press star one As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. as a reminder if you're using a speakerphone please remember to pick up your handset before asking your question We'll pause here briefly as questions register. we'll pause here briefly as questions register First question is from the line of Peter Abramowitz with Jefferies. first question is from the line of peter abramowitz with jefferies Speaker line's now open. speaker line's now open

Speaker 11: Yes, thank you for taking the question. I just wanted to kind of dig into the guidance a little bit. You had a kind of significant beat in the second quarter here, and you had a kind of big other income item. Just wondering, you know, what else went into the guidance that it didn't necessarily flow through to a slightly larger raise? Is there a degree of kind of conservatism still in there and your expectations for the backup? Yes, thank you for taking the question. yes thank you for taking the question I just wanted to kind of dig into the guidance a little bit. i just wanted to kind of dig into the guidance a little bit You had a kind of significant beat in the second quarter here, and you had a kind of big other income item. you had a kind of significant beat in the second quarter here and you had a kind of big other income item Just wondering, you know, what else went into the guidance that it didn't necessarily flow through to a slightly larger raise? just wondering you know what else went into the guidance that it didn't necessarily flow through to a slightly larger raise Is there a degree of kind of conservatism still in there and your expectations for the backup? is there a degree of kind of conservatism still in there and your expectations for the backup

Speaker 5: Hey, Peter, it's Brendan. I'll try to take that. I would say that, as I kind of mentioned in the script, we had some other items that went against us, right? There was $0.03 of kind of headwind, I would say, in the updated outlook, that is not through the property level, not at the NOI level. G&A is higher. We did incur that in the quarter, so that's part of the Q2 beat, I guess, relative to at least certainly street expectations. There were some other income or interest income that we had forecast for late in the year that we now have pushed out of that. That $0.03 of headwinds has been more than offset by, call it, $0.05 of NOI upside if you include a little bit more in terms of prior year property tax refunds. Hey, Peter, it's Brendan. hey peter it's brendan I'll try to take that. i'll try to take that I would say that, as I kind of mentioned in the script, we had some other items that went against us, right? i would say that as i kind of mentioned in the script we had some other items that went against us right There was $0.03 of kind of headwind, I would say, in the updated outlook, that is not through the property level, not at the NOI level. there was $0.03 of kind of headwind i would say in the updated outlook that is not through the property level not at the noi level G&A is higher. g&a is higher We did incur that in the quarter, so that's part of the Q2 beat, I guess, relative to at least certainly street expectations. we did incur that in the quarter so that's part of the q2 beat i guess relative to at least certainly street expectations There were some other income or interest income that we had forecast for late in the year that we now have pushed out of that. there were some other income or interest income that we had forecast for late in the year that we now have pushed out of that That $0.03 of headwinds has been more than offset by, call it, $0.05 of NOI upside if you include a little bit more in terms of prior year property tax refunds. that $0.03 of headwinds has been more than offset by call it $0.05 of noi upside if you include a little bit more in terms of prior year property tax refunds I think you're getting $0.04 of higher kind of NOI in those numbers that's split between development NOI and the same property pool. I think that's all pretty good. I would maybe caution you and others to extrapolate a quarter or two to a full-year outlook. I think what I would encourage everyone to do is kind of think about the totality of the year and then think about all of the building blocks of NOI growth that we laid out as you think about future periods going forward. There's always some seasonality in numbers. There's moving of expenses that can move from one quarter to another. I think if you extrapolate one quarter to another, it can kind of lead to a false positive or a false negative. I think you're getting $0.04 of higher kind of NOI in those numbers that's split between development NOI and the same property pool. i think you're getting $0.04 of higher kind of noi in those numbers that's split between development noi and the same property pool I think that's all pretty good. i think that's all pretty good I would maybe caution you and others to extrapolate a quarter or two to a full-year outlook. i would maybe caution you and others to extrapolate a quarter or two to a full-year outlook I think what I would encourage everyone to do is kind of think about the totality of the year and then think about all of the building blocks of NOI growth that we laid out as you think about future periods going forward. i think what i would encourage everyone to do is kind of think about the totality of the year and then think about all of the building blocks of noi growth that we laid out as you think about future periods going forward There's always some seasonality in numbers. there's always some seasonality in numbers There's moving of expenses that can move from one quarter to another. there's moving of expenses that can move from one quarter to another I think if you extrapolate one quarter to another, it can kind of lead to a false positive or a false negative. i think if you extrapolate one quarter to another it can kind of lead to a false positive or a false negative

Speaker 11: All right. That's helpful. Thanks, Brendan. Could you talk about the opportunity set for acquisitions in your markets right now? What you'd be targeting potentially from a return perspective, whether going in yields or longer-term IRRs? Does it seem like activity has picked up since maybe it slowed down, post-Liberation Day announcements? All right. all right That's helpful. that's helpful Thanks, Brendan. thanks brendan Could you talk about the opportunity set for acquisitions in your markets right now? could you talk about the opportunity set for acquisitions in your markets right now What you'd be targeting potentially from a return perspective, whether going in yields or longer-term IRRs? what you'd be targeting potentially from a return perspective whether going in yields or longer-term irrs Does it seem like activity has picked up since maybe it slowed down, post-Liberation Day announcements? does it seem like activity has picked up since maybe it slowed down post-liberation day announcements

Speaker 8: Hey, Peter. It's Ted. I'll take that one. Look, I think you nailed it. Capital markets are definitely starting to open up a little bit. We're starting to see more high-quality assets come to market. I think the bid-ask spread is narrowing. You know, debt capital markets are opening up, so the availability of debt for office acquisitions is better today than what it was earlier in the year and certainly last year. Equity capital is coming off the sidelines. I think they're actually underwriting office again, and they're being more constructive on the underwriting. I think sellers have been waiting for this, and they're starting to bring assets to market, some of which are our wishlist assets. There is a lot more in the market, a lot of higher-quality assets. Some of those are core, some are value-add, some are core plus. Hey, Peter. hey peter It's Ted. it's ted I'll take that one. i'll take that one Look, I think you nailed it. look i think you nailed it Capital markets are definitely starting to open up a little bit. capital markets are definitely starting to open up a little bit We're starting to see more high-quality assets come to market. we're starting to see more high-quality assets come to market I think the bid-ask spread is narrowing. i think the bid-ask spread is narrowing You know, debt capital markets are opening up, so the availability of debt for office acquisitions is better today than what it was earlier in the year and certainly last year. you know debt capital markets are opening up so the availability of debt for office acquisitions is better today than what it was earlier in the year and certainly last year Equity capital is coming off the sidelines. equity capital is coming off the sidelines I think they're actually underwriting office again, and they're being more constructive on the underwriting. i think they're actually underwriting office again and they're being more constructive on the underwriting I think sellers have been waiting for this, and they're starting to bring assets to market, some of which are our wishlist assets. There is a lot more in the market, a lot of higher-quality assets. i think sellers have been waiting for this and they're starting to bring assets to market some of which are our wishlist assets. there is a lot more in the market a lot of higher-quality assets Some of those are core, some are value-add, some are core plus. some of those are core some are value-add some are core plus We look at everything, and we're going to price it based on our evaluation of risk. Certainly, from a return standpoint, it'll be based on the risk-adjusted yield. We look at everything, and we are starting to see some attractive opportunities that we've been sort of waiting for. We look at everything, and we're going to price it based on our evaluation of risk. we look at everything and we're going to price it based on our evaluation of risk Certainly, from a return standpoint, it'll be based on the risk-adjusted yield. certainly from a return standpoint it'll be based on the risk-adjusted yield We look at everything, and we are starting to see some attractive opportunities that we've been sort of waiting for. we look at everything and we are starting to see some attractive opportunities that we've been sort of waiting for

Speaker 11: All right, thank you. All right, thank you. all right thank you

Speaker 7: Thank you for your question. Next question is from the line of Seth Berge with Citi. Your line's now open. Thank you for your question. thank you for your question Next question is from the line of Seth Berge with Citi. next question is from the line of seth berge with citi Your line's now open. your line's now open

Speaker 2: Hi. Can you talk a little bit about your expectations for just concessions and TIs for some of the leasing that you've done in the quarter? Hi. hi Can you talk a little bit about your expectations for just concessions and TIs for some of the leasing that you've done in the quarter? can you talk a little bit about your expectations for just concessions and tis for some of the leasing that you've done in the quarter

Speaker 8: Yes, Seth. It's Ted. From a leasing perspective, as you know, we had another really strong leasing quarter. Our tour activity remains strong. It's the same trends we've seen for a while, continuing to see a flight to quality, flight to capital, flight to amenities, flight to location. Same thing we've seen now for several years. Our leasing CapEx, I think we're leveling off. I think we certainly peaked. Our net effective rents were incredibly strong this quarter. Our concessions, while it varies by submarket and market, we've got some very strong submarkets where we're seeing concession packages come down. In addition to rates going up, it's still high in submarkets. Overall, I think if you have a mix, it's going to jump around a little bit quarter to quarter. In general, I think it's fair to say concessions have generally peaked, and market rents are going up. Yes, Seth. yes seth It's Ted. it's ted From a leasing perspective, as you know, we had another really strong leasing quarter. from a leasing perspective as you know we had another really strong leasing quarter Our tour activity remains strong. our tour activity remains strong It's the same trends we've seen for a while, continuing to see a flight to quality, flight to capital, flight to amenities, flight to location. it's the same trends we've seen for a while continuing to see a flight to quality flight to capital flight to amenities flight to location Same thing we've seen now for several years. same thing we've seen now for several years Our leasing CapEx, I think we're leveling off. our leasing capex i think we're leveling off I think we certainly peaked. i think we certainly peaked Our net effective rents were incredibly strong this quarter. our net effective rents were incredibly strong this quarter Our concessions, while it varies by submarket and market, we've got some very strong submarkets where we're seeing concession packages come down. our concessions while it varies by submarket and market we've got some very strong submarkets where we're seeing concession packages come down In addition to rates going up, it's still high in submarkets. in addition to rates going up it's still high in submarkets Overall, I think if you have a mix, it's going to jump around a little bit quarter to quarter. overall i think if you have a mix it's going to jump around a little bit quarter to quarter In general, I think it's fair to say concessions have generally peaked, and market rents are going up. in general i think it's fair to say concessions have generally peaked and market rents are going up It should bode well for net effective rents. It should bode well for net effective rents. it should bode well for net effective rents

Speaker 2: Great. Thanks. Great. great Thanks. thanks

Speaker 8: Thank you. Thank you. thank you

Speaker 7: Thank you for your question. Next question is from the line of Rob Stevenson with Janney Montgomery. Your line's now open. Thank you for your question. thank you for your question Next question is from the line of Rob Stevenson with Janney Montgomery. next question is from the line of rob stevenson with janney montgomery Your line's now open. your line's now open

Speaker 4: Good morning, guys. Just to ask the last question in a different way, given all the leasing, when you take a look at the building improvements, second-gen tenant improvements, and leasing commissions, is there a spike that we should be expecting in a couple of the upcoming quarters given when this stuff hits, or is that sort of low $40 million a quarter that you've been averaging for the last few years about where it's going to wind up being on a sort of smoothed-out basis? Good morning, guys. good morning guys Just to ask the last question in a different way, given all the leasing, when you take a look at the building improvements, second-gen tenant improvements, and leasing commissions, is there a spike that we should be expecting in a couple of the upcoming quarters given when this stuff hits, or is that sort of low $40 million a quarter that you've been averaging for the last few years about where it's going to wind up being on a sort of smoothed-out basis? just to ask the last question in a different way given all the leasing when you take a look at the building improvements second-gen tenant improvements and leasing commissions is there a spike that we should be expecting in a couple of the upcoming quarters given when this stuff hits or is that sort of low $40 million a quarter that you've been averaging for the last few years about where it's going to wind up being on a sort of smoothed-out basis

Speaker 5: Hey, Rob. It's Brendan. I'll take that one or at least start. I think what I would say is, you've probably seen the commission levels, I think, have been high because of the volume, and those get paid more quickly than the TIs get dispersed. You've probably seen it kind of show up in commissions, I would say last year when leasing volumes were very high, particularly new, and in the first half of this year as well. For TI dollars, I would say that I think your question is a good one. I think we're going to remain at elevated levels. In 2023 we were there last year. I think it's probably likely to be a little bit higher in 2025, and probably a little higher than where we were in the first half of the year. Hey, Rob. hey rob It's Brendan. it's brendan I'll take that one or at least start. i'll take that one or at least start I think what I would say is, you've probably seen the commission levels, I think, have been high because of the volume, and those get paid more quickly than the TIs get dispersed. i think what i would say is you've probably seen the commission levels i think have been high because of the volume and those get paid more quickly than the tis get dispersed You've probably seen it kind of show up in commissions, I would say last year when leasing volumes were very high, particularly new, and in the first half of this year as well. you've probably seen it kind of show up in commissions i would say last year when leasing volumes were very high particularly new and in the first half of this year as well For TI dollars, I would say that I think your question is a good one. for ti dollars i would say that i think your question is a good one I think we're going to remain at elevated levels. i think we're going to remain at elevated levels In 2023 we were there last year. in 2023 we were there last year I think it's probably likely to be a little bit higher in 2025, and probably a little higher than where we were in the first half of the year. i think it's probably likely to be a little bit higher in 2025 and probably a little higher than where we were in the first half of the year We think in all likelihood it will remain there in 2026 as well as we kind of keep this occupancy build going for the next several quarters. We do think it's going to be elevated, I would say not dramatically higher than where we were over the past year or so, but I would say that I do think it's going to be high for the remainder of this year and in all likelihood next year as well. We think in all likelihood it will remain there in 2026 as well as we kind of keep this occupancy build going for the next several quarters. we think in all likelihood it will remain there in 2026 as well as we kind of keep this occupancy build going for the next several quarters We do think it's going to be elevated, I would say not dramatically higher than where we were over the past year or so, but I would say that I do think it's going to be high for the remainder of this year and in all likelihood next year as well. we do think it's going to be elevated i would say not dramatically higher than where we were over the past year or so but i would say that i do think it's going to be high for the remainder of this year and in all likelihood next year as well

Speaker 4: Okay. That's incredibly helpful. Thank you. I guess, Brendan, at this point in the year with a bunch of line items more or less locked in, what's the biggest swing factors between you guys hitting the sort of $3.37 versus the $3.35? What's the biggest unknown for you at this point to keep the guidance range that wide? Okay. okay That's incredibly helpful. that's incredibly helpful Thank you. thank you I guess, Brendan, at this point in the year with a bunch of line items more or less locked in, what's the biggest swing factors between you guys hitting the sort of $3.37 versus the $3.35? i guess brendan at this point in the year with a bunch of line items more or less locked in what's the biggest swing factors between you guys hitting the sort of $3.37 versus the $3.35 What's the biggest unknown for you at this point to keep the guidance range that wide? what's the biggest unknown for you at this point to keep the guidance range that wide

Speaker 5: Yeah, it's probably so there's probably a couple of expense items, timing-related things that are in there. I would say that there's a little bit of that variability within the guide, so that's in there. To the extent that we do anything that's meaningful, that we have done a little bit of this year, which is proactively kind of take space back early for long-term benefits, we've done that a few times. I think I highlighted some of that in the prepared remarks that we've done. There's some of that which could happen as well, with some conversations that are out there. We've got a little bit of what I would say are probably a little bit of variability in terms of lease, spec lease that's out there. There's some renewals that could happen or could not. Yeah, it's probably so there's probably a couple of expense items, timing-related things that are in there. yeah it's probably so there's probably a couple of expense items timing-related things that are in there I would say that there's a little bit of that variability within the guide, so that's in there. i would say that there's a little bit of that variability within the guide so that's in there To the extent that we do anything that's meaningful, that we have done a little bit of this year, which is proactively kind of take space back early for long-term benefits, we've done that a few times. to the extent that we do anything that's meaningful that we have done a little bit of this year which is proactively kind of take space back early for long-term benefits we've done that a few times I think I highlighted some of that in the prepared remarks that we've done. i think i highlighted some of that in the prepared remarks that we've done There's some of that which could happen as well, with some conversations that are out there. there's some of that which could happen as well with some conversations that are out there We've got a little bit of what I would say are probably a little bit of variability in terms of lease, spec lease that's out there. we've got a little bit of what i would say are probably a little bit of variability in terms of lease spec lease that's out there There's some renewals that could happen or could not. there's some renewals that could happen or could not There's a little bit of positive and negative on the lease side, but for the most part, I would say it's probably around expense timing, but, you know, probably not a huge amount of variability in terms of where we are now, as you point out, where we sit in the year. There's a little bit of positive and negative on the lease side, but for the most part, I would say it's probably around expense timing, but, you know, probably not a huge amount of variability in terms of where we are now, as you point out, where we sit in the year. there's a little bit of positive and negative on the lease side but for the most part i would say it's probably around expense timing but you know probably not a huge amount of variability in terms of where we are now as you point out where we sit in the year

Speaker 4: Is it safe to say that given the timing that any acquisitions or dispositions at this point of any material amount would probably wind up being sort of mid to late fourth quarter, in terms of being able to be closed at that point in time and so not really impacting numbers at this point very much? Is it safe to say that given the timing that any acquisitions or dispositions at this point of any material amount would probably wind up being sort of mid to late fourth quarter, in terms of being able to be closed at that point in time and so not really impacting numbers at this point very much? is it safe to say that given the timing that any acquisitions or dispositions at this point of any material amount would probably wind up being sort of mid to late fourth quarter in terms of being able to be closed at that point in time and so not really impacting numbers at this point very much

Speaker 5: Yeah. Yeah. yeah

Speaker 4: Is there still an opportunity for you guys to do stuff of materiality? Is there still an opportunity for you guys to do stuff of materiality? is there still an opportunity for you guys to do stuff of materiality

Speaker 5: Yeah. Just to be clear, any acquisitions or dispositions are not included in the range. That would be outside of the range. To the extent of where we sit in the year, the likelihood of an acquisition or a disposition having a meaningful impact on numbers is probably fairly low. I think that's fair. Yeah. yeah Just to be clear, any acquisitions or dispositions are not included in the range. just to be clear any acquisitions or dispositions are not included in the range That would be outside of the range. that would be outside of the range To the extent of where we sit in the year, the likelihood of an acquisition or a disposition having a meaningful impact on numbers is probably fairly low. to the extent of where we sit in the year the likelihood of an acquisition or a disposition having a meaningful impact on numbers is probably fairly low I think that's fair. i think that's fair

Speaker 4: Okay. You talked about the term loan, that you thought that you'd be able to extend that. Is that the most attractive/cheapest form of debt capital for you guys at this point in time? Okay. okay You talked about the term loan, that you thought that you'd be able to extend that. you talked about the term loan that you thought that you'd be able to extend that Is that the most attractive/cheapest form of debt capital for you guys at this point in time? is that the most attractive/cheapest form of debt capital for you guys at this point in time

Speaker 5: I don't know that I would characterize it as the most attractive, cheapest form of capital that's available, but we like to have diversity in the debt stack that's there. That's a good source of capital for us given that it's variable. If we do have a lot of disposition proceeds at any point in time, that becomes freely prepayable. We like to have a little bit of variable rate in the stack because you always just want to kind of diversify the risks in there in terms of your interest rate exposure. I think for all those reasons, it's an efficient source of capital. I don't know if I would necessarily characterize it as the cheapest form of capital. I don't know that I would characterize it as the most attractive, cheapest form of capital that's available, but we like to have diversity in the debt stack that's there. i don't know that i would characterize it as the most attractive cheapest form of capital that's available but we like to have diversity in the debt stack that's there That's a good source of capital for us given that it's variable. that's a good source of capital for us given that it's variable If we do have a lot of disposition proceeds at any point in time, that becomes freely prepayable. if we do have a lot of disposition proceeds at any point in time that becomes freely prepayable We like to have a little bit of variable rate in the stack because you always just want to kind of diversify the risks in there in terms of your interest rate exposure. we like to have a little bit of variable rate in the stack because you always just want to kind of diversify the risks in there in terms of your interest rate exposure I think for all those reasons, it's an efficient source of capital. i think for all those reasons it's an efficient source of capital I don't know if I would necessarily characterize it as the cheapest form of capital. i don't know if i would necessarily characterize it as the cheapest form of capital

Speaker 4: Okay, thanks, guys. Appreciate the time this morning. Okay, thanks, guys. okay thanks guys Appreciate the time this morning. appreciate the time this morning

Speaker 7: Thank you for your question. Next question is from the line of Nick Thillman with Baird. Your line's now open. Thank you for your question. thank you for your question Next question is from the line of Nick Thillman with Baird. next question is from the line of nick thillman with baird Your line's now open. your line's now open

Speaker 13: Hey, good morning, guys. Maybe, Ted, we'll start off with this. Obviously, COVID and the pandemic transferred a lot of conversations on flight to quality and the type of assets. Kind of curious, have you taken a look at potential impacts of AI on demand? That impacts longer-term the type of assets you guys want to own, whether it be individual submarkets or size of buildings, and how you guys are evaluating that as it's still early days, but just longer-term sort of view? Hey, good morning, guys. hey good morning guys Maybe, Ted, we'll start off with this. maybe ted we'll start off with this Obviously, COVID and the pandemic transferred a lot of conversations on flight to quality and the type of assets. obviously covid and the pandemic transferred a lot of conversations on flight to quality and the type of assets Kind of curious, have you taken a look at potential impacts of AI on demand? kind of curious have you taken a look at potential impacts of ai on demand That impacts longer-term the type of assets you guys want to own, whether it be individual submarkets or size of buildings, and how you guys are evaluating that as it's still early days, but just longer-term sort of view? that impacts longer-term the type of assets you guys want to own whether it be individual submarkets or size of buildings and how you guys are evaluating that as it's still early days but just longer-term sort of view

Speaker 8: Yeah. Look, it's definitely early days, right? I mean, obviously, the demand side, the West Coast is seeing a lot of demand for AI companies, so that's been great for them. In terms of us, look, very early on, I think every company in America is probably looking at how AI may impact their business going forward. We've been through this before, whether it be on densification. I remember 20 years ago, law firms were going to be reducing their space by a significant percentage because of the law libraries and all the other things they didn't need. We've been through different challenges, I think, as an office industry for several years, and we've been able to manage through it and get, as the markets continue to grow. AI, don't know what the answer is right now, but I will take those at least a little early. Yeah. yeah Look, it's definitely early days, right? look it's definitely early days right I mean, obviously, the demand side, the West Coast is seeing a lot of demand for AI companies, so that's been great for them. i mean obviously the demand side the west coast is seeing a lot of demand for ai companies so that's been great for them In terms of us, look, very early on, I think every company in America is probably looking at how AI may impact their business going forward. in terms of us look very early on i think every company in america is probably looking at how ai may impact their business going forward We've been through this before, whether it be on densification. we've been through this before whether it be on densification I remember 20 years ago, law firms were going to be reducing their space by a significant percentage because of the law libraries and all the other things they didn't need. i remember 20 years ago law firms were going to be reducing their space by a significant percentage because of the law libraries and all the other things they didn't need We've been through different challenges, I think, as an office industry for several years, and we've been able to manage through it and get, as the markets continue to grow. we've been through different challenges i think as an office industry for several years and we've been able to manage through it and get as the markets continue to grow AI, don't know what the answer is right now, but I will take those at least a little early. ai don't know what the answer is right now but i will take those at least a little early

Speaker 13: Okay. Just a question on you guys are kind of through a lot of the large expirations you had within the portfolio. I guess, what do you guys kind of view as a normalized run rate when it comes to retention as we look at expirations into the next 18-24 months? Okay. okay Just a question on you guys are kind of through a lot of the large expirations you had within the portfolio. just a question on you guys are kind of through a lot of the large expirations you had within the portfolio I guess, what do you guys kind of view as a normalized run rate when it comes to retention as we look at expirations into the next 18 - 24 months? i guess what do you guys kind of view as a normalized run rate when it comes to retention as we look at expirations into the next 18 - 24 months

Speaker 5: Hey, Nick. It's Brendan. I'll take that. We always struggle a little bit answering this question. I think when you look at early renewals that get done and you kind of think about a full cycle, our retention level tends to be, call it, kind of 60 to 65%. I think if you're looking at expirations that are going to occur kind of over the next 12-18 months, those numbers go down because you've got, you know, adverse selection bias that's in the rent roll because you obviously don't early renew customers that are ultimately going to move out. I would say if you think about the next 18 months, so from where we are now through the end of 2026, we really, as you point out, have kind of worked through those large known move-outs. Hey, Nick. hey nick It's Brendan. it's brendan I'll take that. i'll take that We always struggle a little bit answering this question. we always struggle a little bit answering this question I think when you look at early renewals that get done and you kind of think about a full cycle, our retention level tends to be, call it, kind of 60 to 65%. i think when you look at early renewals that get done and you kind of think about a full cycle our retention level tends to be call it kind of 60 to 65% I think if you're looking at expirations that are going to occur kind of over the next 12 - 18 months, those numbers go down because you've got, you know, adverse selection bias that's in the rent roll because you obviously don't early renew customers that are ultimately going to move out. i think if you're looking at expirations that are going to occur kind of over the next 12 - 18 months those numbers go down because you've got you know adverse selection bias that's in the rent roll because you obviously don't early renew customers that are ultimately going to move out I would say if you think about the next 18 months, so from where we are now through the end of 2026, we really, as you point out, have kind of worked through those large known move-outs. i would say if you think about the next 18 months so from where we are now through the end of 2026 we really as you point out have kind of worked through those large known move-outs I think the retention level that we have from here through the end of next year is probably in that 45%-50% range if I had to give you a number on a range. That's probably a little bit higher than where we've been historically and certainly much higher than where we were over a 12 or 18-month period if you look at the preceding 12-24 months. I think that gives us confidence that we're well set up to build occupancy as we go forward over the next 18 months or so. I think the retention level that we have from here through the end of next year is probably in that 45 %- 50% range if I had to give you a number on a range. i think the retention level that we have from here through the end of next year is probably in that 45 %- 50% range if i had to give you a number on a range That's probably a little bit higher than where we've been historically and certainly much higher than where we were over a 12 or 18-month period if you look at the preceding 12 - 24 months. that's probably a little bit higher than where we've been historically and certainly much higher than where we were over a 12 or 18-month period if you look at the preceding 12 - 24 months I think that gives us confidence that we're well set up to build occupancy as we go forward over the next 18 months or so. i think that gives us confidence that we're well set up to build occupancy as we go forward over the next 18 months or so

Speaker 13: Very helpful. That's it for me. Thanks. Very helpful. very helpful That's it for me. that's it for me Thanks. thanks

Speaker 7: Thank you for your question. Next question is from the line of Dylan Burzinski with Green Street. Your line's now open. Thank you for your question. thank you for your question Next question is from the line of Dylan Burzinski with Green Street. next question is from the line of dylan burzinski with green street Your line's now open. your line's now open

Speaker 1: Morning, guys. Thanks for taking the question. I appreciate the comments on sort of the demand backdrop and how things are improving. Are you able to talk about how that demand backdrop differs across your guys' market footprint? Are there any markets in which you guys have a portfolio concentration that are experiencing outsized demand versus others? Morning, guys. morning guys Thanks for taking the question. I appreciate the comments on sort of the demand backdrop and how things are improving. thanks for taking the question. i appreciate the comments on sort of the demand backdrop and how things are improving Are you able to talk about how that demand backdrop differs across your guys' market footprint? are you able to talk about how that demand backdrop differs across your guys' market footprint Are there any markets in which you guys have a portfolio concentration that are experiencing outsized demand versus others? are there any markets in which you guys have a portfolio concentration that are experiencing outsized demand versus others

Speaker 8: Look, Dylan, I'd say certainly Charlotte, Dallas, and Nashville. If you had to rank our markets, it'd be 1A, 1B, and 1C. All three of those markets are outperforming. You know, we're very well leased in Charlotte, so we're not able to move occupancy. If you just think about the core four that we've talked about now for the last couple of quarters, three of the four of those are in Nashville, and we're making significant progress, certainly well ahead of our business plan on what we thought. The demand in Nashville continues to be really strong. What we're seeing in Dallas, on our development projects and just the inbound and net migration to Dallas, has been extremely strong, specifically to the submarkets we're in. We love the demand in those three markets in particular. At the same time, Tampa's performing very, very well. Look, Dylan, I'd say certainly Charlotte, Dallas, and Nashville. look dylan i'd say certainly charlotte dallas and nashville If you had to rank our markets, it'd be 1A, 1B, and 1C. if you had to rank our markets it'd be 1a 1b and 1c All three of those markets are outperforming. all three of those markets are outperforming You know, we're very well leased in Charlotte, so we're not able to move occupancy. you know we're very well leased in charlotte so we're not able to move occupancy If you just think about the core four that we've talked about now for the last couple of quarters, three of the four of those are in Nashville, and we're making significant progress, certainly well ahead of our business plan on what we thought. if you just think about the core four that we've talked about now for the last couple of quarters three of the four of those are in nashville and we're making significant progress certainly well ahead of our business plan on what we thought The demand in Nashville continues to be really strong. the demand in nashville continues to be really strong What we're seeing in Dallas, on our development projects and just the inbound and net migration to Dallas, has been extremely strong, specifically to the submarkets we're in. what we're seeing in dallas on our development projects and just the inbound and net migration to dallas has been extremely strong specifically to the submarkets we're in We love the demand in those three markets in particular. we love the demand in those three markets in particular At the same time, Tampa's performing very, very well. at the same time tampa's performing very very well Brian talked about it on our prepared remarks. We're seeing a lot of great demand there. I'd say it's pretty broad-based, and certainly concentrated in those four markets, but broad-based in general. Brian talked about it on our prepared remarks. brian talked about it on our prepared remarks We're seeing a lot of great demand there. we're seeing a lot of great demand there I'd say it's pretty broad-based, and certainly concentrated in those four markets, but broad-based in general. i'd say it's pretty broad-based and certainly concentrated in those four markets but broad-based in general

Speaker 6: Hey, Dylan. Brian here. I might just add, Charlotte, I think I mentioned it in the remarks, you know, Citigroup and AssetMark announced in aggregate over 700 new jobs. That's, you know, financial services, and that's pretty well expected for Charlotte. I think they've done a great job of kind of capturing that. The Charlotte Regional Alliance, which is sort of the evolution of the chamber, recently highlighted there's six inbounds that Charlotte's looking at. Only one of those inbounds currently has a U.S. headquarters. This is not just inbound domestically, even inbound internationally. Those six represent about 5,000 office-using jobs. I also sort of mentioned this net migration, daily net migration. This is, you know, sort of maybe silly math if you think about it, but adding almost another 50 people a day over a year, it's close to 14,000 new people. Hey, Dylan. hey dylan Brian here. brian here I might just add, Charlotte, I think I mentioned it in the remarks, you know, Citigroup and AssetMark announced in aggregate over 700 new jobs. i might just add charlotte i think i mentioned it in the remarks you know citigroup and assetmark announced in aggregate over 700 new jobs That's, you know, financial services, and that's pretty well expected for Charlotte. that's you know financial services and that's pretty well expected for charlotte I think they've done a great job of kind of capturing that. i think they've done a great job of kind of capturing that The Charlotte Regional Alliance, which is sort of the evolution of the chamber, recently highlighted there's six inbounds that Charlotte's looking at. the charlotte regional alliance which is sort of the evolution of the chamber recently highlighted there's six inbounds that charlotte's looking at Only one of those inbounds currently has a U.S. headquarters. only one of those inbounds currently has a u.s headquarters This is not just inbound domestically, even inbound internationally. this is not just inbound domestically even inbound internationally Those six represent about 5,000 office-using jobs. those six represent about 5,000 office-using jobs I also sort of mentioned this net migration, daily net migration. i also sort of mentioned this net migration daily net migration This is, you know, sort of maybe silly math if you think about it, but adding almost another 50 people a day over a year, it's close to 14,000 new people. this is you know sort of maybe silly math if you think about it but adding almost another 50 people a day over a year it's close to 14,000 new people You can just figure out what the impact is in terms of the demand there. I think that's a good one. Dallas, Ted mentioned, there's over 7.5 million sq ft of requirements in the market. Dallas is a huge market, but where we're focused, we're getting great demand there. Nashville's got almost 2 million sq ft of active requirements in the market. Many are kind of code-named multi-market. The CBD was the most active submarket this last quarter. Ted highlighted Tampa has over a million of active prospects in Tampa as well. We're really happy with the inbounds we've seen at our development. There are some really kind of blue-chip names looking at investing in the best space in Tampa. You can just figure out what the impact is in terms of the demand there. you can just figure out what the impact is in terms of the demand there I think that's a good one. i think that's a good one Dallas, Ted mentioned, there's over 7.5 million sq ft of requirements in the market. dallas ted mentioned there's over 7.5 million sq ft of requirements in the market Dallas is a huge market, but where we're focused, we're getting great demand there. dallas is a huge market but where we're focused we're getting great demand there Nashville's got almost 2 million sq ft of active requirements in the market. nashville's got almost 2 million sq ft of active requirements in the market Many are kind of code-named multi-market. many are kind of code-named multi-market The CBD was the most active submarket this last quarter. the cbd was the most active submarket this last quarter Ted highlighted Tampa has over a million of active prospects in Tampa as well. ted highlighted tampa has over a million of active prospects in tampa as well We're really happy with the inbounds we've seen at our development. we're really happy with the inbounds we've seen at our development There are some really kind of blue-chip names looking at investing in the best space in Tampa. there are some really kind of blue-chip names looking at investing in the best space in tampa

Speaker 1: Appreciate that comment, guys. Ted, I think you mentioned, obviously, development pipelines across your markets are shrinking significantly, and no new ground-up construction is likely to start given how pressured development economics are today. Could you sort of help frame that in terms of where you think replacement rents would need to be versus where market rents are today? Appreciate that comment, guys. appreciate that comment guys Ted, I think you mentioned, obviously, development pipelines across your markets are shrinking significantly, and no new ground-up construction is likely to start given how pressured development economics are today. ted i think you mentioned obviously development pipelines across your markets are shrinking significantly and no new ground-up construction is likely to start given how pressured development economics are today Could you sort of help frame that in terms of where you think replacement rents would need to be versus where market rents are today? could you sort of help frame that in terms of where you think replacement rents would need to be versus where market rents are today

Speaker 8: I think it certainly varies by market, right? The differential, the closest market we are to new development is probably Dallas, right? I think Dallas is proving out whether it be in Uptown and the Knox-Henderson area, Preston Center, those three submarkets in Dallas are probably at or approaching cost-justified rents. Outside of that, most of our markets is probably 20%-40% off. That's new development today where rates they're getting versus what you'd need to build something more. The last few years when the starts haven't been all that high, the construction costs have continued to go up. You'd think they'd level off, but they have continued to go up. The rents you need, and that's whether it be hard costs, financing costs, what have you, the rents you need are quite a bit higher than what they are in the existing development pipelines. I think it certainly varies by market, right? i think it certainly varies by market right The differential, the closest market we are to new development is probably Dallas, right? the differential the closest market we are to new development is probably dallas right I think Dallas is proving out whether it be in Uptown and the Knox-Henderson area, Preston Center, those three submarkets in Dallas are probably at or approaching cost-justified rents. i think dallas is proving out whether it be in uptown and the knox-henderson area preston center those three submarkets in dallas are probably at or approaching cost-justified rents Outside of that, most of our markets is probably 20% - 40% off. outside of that most of our markets is probably 20% - 40% off That's new development today where rates they're getting versus what you'd need to build something more. that's new development today where rates they're getting versus what you'd need to build something more The last few years when the starts haven't been all that high, the construction costs have continued to go up. the last few years when the starts haven't been all that high the construction costs have continued to go up You'd think they'd level off, but they have continued to go up. you'd think they'd level off but they have continued to go up The rents you need, and that's whether it be hard costs, financing costs, what have you, the rents you need are quite a bit higher than what they are in the existing development pipelines. the rents you need and that's whether it be hard costs financing costs what have you the rents you need are quite a bit higher than what they are in the existing development pipelines Again, varies by market, but it's a pretty big delta. Again, varies by market, but it's a pretty big delta. again varies by market but it's a pretty big delta

Speaker 1: Great. Thanks for the comment, guys. Appreciate it. Great. great Thanks for the comment, guys. thanks for the comment guys Appreciate it. appreciate it

Speaker 7: Thank you for your question. Next question is from the line of Vikram Malhotra with Mizuho. Your line's now open. Thank you for your question. thank you for your question Next question is from the line of Vikram Malhotra with Mizuho. next question is from the line of vikram malhotra with mizuho Your line's now open. your line's now open

Speaker 3: Thanks for the questions. I wanted to go back, I guess, Brendan, to something you mentioned about sort of 2026, given the signed but not yet commenced leases, or the lease rate and the benefit of that going into 2026. You just mind just walking us, I'm not looking for a number, but just like what are the other kind of moving pieces that make probably 2026 visibility either much better than you've had in the past years, or is there some other swing factor? Just how much de-risked is 2026 growth from here on? Thanks for the questions. thanks for the questions I wanted to go back, I guess, Brendan, to something you mentioned about sort of 2026, given the signed but not yet commenced leases, or the lease rate and the benefit of that going into 2026. i wanted to go back i guess brendan to something you mentioned about sort of 2026 given the signed but not yet commenced leases or the lease rate and the benefit of that going into 2026 You just mind just walking us, I'm not looking for a number, but just like what are the other kind of moving pieces that make probably 2026 visibility either much better than you've had in the past years, or is there some other swing factor? you just mind just walking us i'm not looking for a number but just like what are the other kind of moving pieces that make probably 2026 visibility either much better than you've had in the past years or is there some other swing factor Just how much de-risked is 2026 growth from here on? just how much de-risked is 2026 growth from here on

Speaker 5: Yeah. Hey, Vikram. It's a good question. We've obviously built a lot of embedded growth through the leasing that we've done to date. I think if you look at the lease rate versus the occupied rate, a 330 basis point spread is the highest that I can remember that we've had. Certainly, within the past several years, that's the highest spread and is more than double what the average is. Our normal lease-to-occupied spread is, call it, 100-200 basis points, so 150 at the midpoint. To be more than double that is a good indicator that occupancy is likely to grow as we go forward. A lot of those leases are signed, as you point out. Yeah. yeah Hey, Vikram. hey vikram It's a good question. it's a good question We've obviously built a lot of embedded growth through the leasing that we've done to date. we've obviously built a lot of embedded growth through the leasing that we've done to date I think if you look at the lease rate versus the occupied rate, a 330 basis point spread is the highest that I can remember that we've had. i think if you look at the lease rate versus the occupied rate a 330 basis point spread is the highest that i can remember that we've had Certainly, within the past several years, that's the highest spread and is more than double what the average is. certainly within the past several years that's the highest spread and is more than double what the average is Our normal lease-to-occupied spread is, call it, 100 - 200 basis points, so 150 at the midpoint. our normal lease-to-occupied spread is call it 100 - 200 basis points so 150 at the midpoint To be more than double that is a good indicator that occupancy is likely to grow as we go forward. to be more than double that is a good indicator that occupancy is likely to grow as we go forward A lot of those leases are signed, as you point out. a lot of those leases are signed as you point out Now, clearly, we're assuming that the economy and the leasing market are going to hold up from here and go forward at roughly where we've been to, I think, drive and realize kind of the growth potential as we go out into next year and beyond. There's a little bit of, we need things to kind of continue to hold up, but we've certainly done a lot of the good legwork that's there and are well positioned to deliver on that growth. I think the way that I would think about this, and again, I know you know this, but we're not in position to sort of talk about with any specifics in terms of numbers for next year or thereafter. We do think we have a good opportunity to grow occupancy as we migrate late in this year and then throughout 2026. Now, clearly, we're assuming that the economy and the leasing market are going to hold up from here and go forward at roughly where we've been to, I think, drive and realize kind of the growth potential as we go out into next year and beyond. now clearly we're assuming that the economy and the leasing market are going to hold up from here and go forward at roughly where we've been to i think drive and realize kind of the growth potential as we go out into next year and beyond There's a little bit of, we need things to kind of continue to hold up, but we've certainly done a lot of the good legwork that's there and are well positioned to deliver on that growth. there's a little bit of we need things to kind of continue to hold up but we've certainly done a lot of the good legwork that's there and are well positioned to deliver on that growth I think the way that I would think about this, and again, I know you know this, but we're not in position to sort of talk about with any specifics in terms of numbers for next year or thereafter. i think the way that i would think about this and again i know you know this but we're not in position to sort of talk about with any specifics in terms of numbers for next year or thereafter We do think we have a good opportunity to grow occupancy as we migrate late in this year and then throughout 2026. we do think we have a good opportunity to grow occupancy as we migrate late in this year and then throughout 2026 I think we've talked in the past where we would say year-end occupancy kind of 2025 through 2026. I think we have the opportunity to grow that 100-200 basis points in a fairly steady manner throughout the year. Unlike in years past where we often have a seasonal dip early in the year and then build back, I think we're likely to see a more steady cadence of occupancy build as we go forward. Beyond that, we've got some of the development deliveries that are there. I think I talked about in the prepared remarks where we are with Granite Park Six and GlenLake III. Neither of those assets are we capitalizing any costs associated with those. As those leases commence and come online, all of that falls to the bottom line. We have the two development deliveries that were earlier this year. I think we've talked in the past where we would say year-end occupancy kind of 2025 through 2026. i think we've talked in the past where we would say year-end occupancy kind of 2025 through 2026 I think we have the opportunity to grow that 100 - 200 basis points in a fairly steady manner throughout the year. i think we have the opportunity to grow that 100 - 200 basis points in a fairly steady manner throughout the year Unlike in years past where we often have a seasonal dip early in the year and then build back, I think we're likely to see a more steady cadence of occupancy build as we go forward. unlike in years past where we often have a seasonal dip early in the year and then build back i think we're likely to see a more steady cadence of occupancy build as we go forward Beyond that, we've got some of the development deliveries that are there. beyond that we've got some of the development deliveries that are there I think I talked about in the prepared remarks where we are with Granite Park Six and GlenLake III. i think i talked about in the prepared remarks where we are with granite park six and glenlake iii Neither of those assets are we capitalizing any costs associated with those. neither of those assets are we capitalizing any costs associated with those As those leases commence and come online, all of that falls to the bottom line. as those leases commence and come online all of that falls to the bottom line We have the two development deliveries that were earlier this year. we have the two development deliveries that were earlier this year Those should also be additive, but we are capitalizing costs, operating, and interest on those two assets. That NOI will come online and will be additive, but will be somewhat offset by some expensing of interest and operating expenses compared to 2025. All of that gives good growth potential and gives some good growth drivers over the next several quarters. Outside of that, I would say it's more just the things that are kind of unknown. Don't expect to do a lot of financing over the next 18 months. The balance sheet's in pretty good shape, and then it would come down to what we may do on the acquisition or disposition side. Those should also be additive, but we are capitalizing costs, operating, and interest on those two assets. those should also be additive but we are capitalizing costs operating and interest on those two assets That NOI will come online and will be additive, but will be somewhat offset by some expensing of interest and operating expenses compared to 2025. that noi will come online and will be additive but will be somewhat offset by some expensing of interest and operating expenses compared to 2025 All of that gives good growth potential and gives some good growth drivers over the next several quarters. all of that gives good growth potential and gives some good growth drivers over the next several quarters Outside of that, I would say it's more just the things that are kind of unknown. outside of that i would say it's more just the things that are kind of unknown Don't expect to do a lot of financing over the next 18 months. don't expect to do a lot of financing over the next 18 months The balance sheet's in pretty good shape, and then it would come down to what we may do on the acquisition or disposition side. the balance sheet's in pretty good shape and then it would come down to what we may do on the acquisition or disposition side

Speaker 3: That's helpful. Just one more. I think the team talked a lot about these big RFPs, and I think you've mentioned like four or five non-foreign firms looking for headquarter space. Just how competitive do you think this process is? What sort of competition is there from landlords to kind of win these deals? Do you mind giving us a little bit more color? What type of industries is this demand coming from, especially the foreign entities you mentioned? Thanks. That's helpful. that's helpful Just one more. just one more I think the team talked a lot about these big RFPs, and I think you've mentioned like four or five non-foreign firms looking for headquarter space. i think the team talked a lot about these big rfps and i think you've mentioned like four or five non-foreign firms looking for headquarter space Just how competitive do you think this process is? just how competitive do you think this process is What sort of competition is there from landlords to kind of win these deals? what sort of competition is there from landlords to kind of win these deals Do you mind giving us a little bit more color? do you mind giving us a little bit more color What type of industries is this demand coming from, especially the foreign entities you mentioned? what type of industries is this demand coming from especially the foreign entities you mentioned Thanks. thanks

Speaker 6: Hey, Vikram. Brian here. I'll take a shot. A couple of things. They're all generally code-named. What's interesting is because of the markets we're in, we will sometimes see them pop up in multiple markets, whether it's Charlotte and Atlanta, Nashville and Charlotte, or Atlanta and Raleigh. It's interesting there. You know, in the Charlotte area, yes, there's a financial services bent, but at the same time, there are some kind of headquarter or U.S. headquarter locations for international firms that manufacture things that are bringing their manufacturing, the products they build, stateside to sell kind of a domestic product made here. I'm not sure you can necessarily connect that to the change in international trade. This is stuff that's been working for a while. Hey, Vikram. hey vikram Brian here. brian here I'll take a shot. i'll take a shot A couple of things. a couple of things They're all generally code-named. they're all generally code-named What's interesting is because of the markets we're in, we will sometimes see them pop up in multiple markets, whether it's Charlotte and Atlanta, Nashville and Charlotte, or Atlanta and Raleigh. what's interesting is because of the markets we're in we will sometimes see them pop up in multiple markets whether it's charlotte and atlanta nashville and charlotte or atlanta and raleigh It's interesting there. it's interesting there You know, in the Charlotte area, yes, there's a financial services bent, but at the same time, there are some kind of headquarter or U.S. headquarter locations for international firms that manufacture things that are bringing their manufacturing, the products they build, stateside to sell kind of a domestic product made here. you know in the charlotte area yes there's a financial services bent but at the same time there are some kind of headquarter or u.s headquarter locations for international firms that manufacture things that are bringing their manufacturing the products they build stateside to sell kind of a domestic product made here I'm not sure you can necessarily connect that to the change in international trade. i'm not sure you can necessarily connect that to the change in international trade This is stuff that's been working for a while. this is stuff that's been working for a while One thing I will say is almost all of these, those same states that I mentioned are getting ranked for the best for business by CNBC. They're all at the table. The states have incentive plans. They have partnerships. They're open for business. They are working with these companies and these site selectors. It's very much a public-private partnership in every place. They're looking at the BBDs that we're in because that's when they bring an external sensitivity in terms of talent. They are very much focused on exceptional experience. That's where we're seeing a lot of them. Unfortunately, in Charlotte, we don't have any room at the inn, but because of that, we're getting a good look and understanding who's coming in. One thing I will say is almost all of these, those same states that I mentioned are getting ranked for the best for business by CNBC. one thing i will say is almost all of these those same states that i mentioned are getting ranked for the best for business by cnbc They're all at the table. they're all at the table The states have incentive plans. the states have incentive plans They have partnerships. they have partnerships They're open for business. they're open for business They are working with these companies and these site selectors. they are working with these companies and these site selectors It's very much a public-private partnership in every place. it's very much a public-private partnership in every place They're looking at the BBDs that we're in because that's when they bring an external sensitivity in terms of talent. they're looking at the bbds that we're in because that's when they bring an external sensitivity in terms of talent They are very much focused on exceptional experience. they are very much focused on exceptional experience That's where we're seeing a lot of them. that's where we're seeing a lot of them Unfortunately, in Charlotte, we don't have any room at the inn, but because of that, we're getting a good look and understanding who's coming in. unfortunately in charlotte we don't have any room at the inn but because of that we're getting a good look and understanding who's coming in

Speaker 7: Thank you for your question. Next question is from the line of Ronald Kamdem with Morgan Stanley. Your line's now open. Thank you for your question. thank you for your question Next question is from the line of Ronald Kamdem with Morgan Stanley. next question is from the line of ronald kamdem with morgan stanley Your line's now open. your line's now open

Speaker 10: Hey, just two quick ones. Going back to the comments on the acquisition front, just digging in a little bit there, any curiosity in terms of markets, in terms of situations, are these distressed? Are these funds? Also, you may have mentioned the cap rate before, but if you could remind us what the cap rate and IR ranges are. Thanks. Hey, just two quick ones. hey just two quick ones Going back to the comments on the acquisition front, just digging in a little bit there, any curiosity in terms of markets, in terms of situations, are these distressed? going back to the comments on the acquisition front just digging in a little bit there any curiosity in terms of markets in terms of situations are these distressed Are these funds? are these funds Also, you may have mentioned the cap rate before, but if you could remind us what the cap rate and IR ranges are. also you may have mentioned the cap rate before but if you could remind us what the cap rate and ir ranges are Thanks. thanks

Speaker 8: Sure, Ron. Markets, look, there's opportunities out there in multiple markets. I think sellers, again, have been waiting for this time for the office capital markets to open up. We're seeing some high-quality assets really across our footprint, right? The cap rates, I'd tell you for a high-quality trophy core asset well leased with a decent wallet, it's plus or minus 7% or so. That varies by market a little bit, by the weighted average lease term, the credit, whether there's below or above market rent. There's just a lot of variables that go into it that may cause the cap rate to be a little bit higher or a little bit lower. IRRs are in the probably high single-digit to low double-digit type of range, again, depending on the market and the specific profile of the acquisition-specific deal. Sure, Ron. sure ron Markets, look, there's opportunities out there in multiple markets. markets look there's opportunities out there in multiple markets I think sellers, again, have been waiting for this time for the office capital markets to open up. i think sellers again have been waiting for this time for the office capital markets to open up We're seeing some high-quality assets really across our footprint, right? we're seeing some high-quality assets really across our footprint right The cap rates, I'd tell you for a high-quality trophy core asset well leased with a decent wallet, it's plus or minus 7% or so. the cap rates i'd tell you for a high-quality trophy core asset well leased with a decent wallet it's plus or minus 7% or so That varies by market a little bit, by the weighted average lease term, the credit, whether there's below or above market rent. that varies by market a little bit by the weighted average lease term the credit whether there's below or above market rent There's just a lot of variables that go into it that may cause the cap rate to be a little bit higher or a little bit lower. there's just a lot of variables that go into it that may cause the cap rate to be a little bit higher or a little bit lower IRRs are in the probably high single-digit to low double-digit type of range, again, depending on the market and the specific profile of the acquisition-specific deal. irrs are in the probably high single-digit to low double-digit type of range again depending on the market and the specific profile of the acquisition-specific deal

Speaker 10: Great. My second question, commentary about maybe the capital markets feeling a little bit better. Does this mean you guys are sort of closer to bringing Pittsburgh back online for a sale, potentially maybe the end of this year, even next year? How are you guys thinking about that market exit? Thanks. Great. great My second question, commentary about maybe the capital markets feeling a little bit better. my second question commentary about maybe the capital markets feeling a little bit better Does this mean you guys are sort of closer to bringing Pittsburgh back online for a sale, potentially maybe the end of this year, even next year? does this mean you guys are sort of closer to bringing pittsburgh back online for a sale potentially maybe the end of this year even next year How are you guys thinking about that market exit? how are you guys thinking about that market exit Thanks. thanks

Speaker 8: Yeah, certainly. I do think we're closer today than what we were three months ago, six months ago, two years ago. We're still waiting. We're having a lot of leasing success in Pittsburgh. We're going to be patient and bring it out at the right time. It still might be a little bit early, but we've got, if you look at our dispo guidance, it's another $150 million this year. We've got a number of buildings that are out in the market right now, and others that we're prepping to bring to market. We have a different profile. It's a lot like what we've sold the last couple of years or last several years. It's a mix of single-tenant, longer-term lease buildings together with some older, higher CapEx, lower growth assets as well. We've got a number of those out in the market that we're marketing in multiple markets. Yeah, certainly. yeah certainly I do think we're closer today than what we were three months ago, six months ago, two years ago. i do think we're closer today than what we were three months ago six months ago two years ago We're still waiting. we're still waiting We're having a lot of leasing success in Pittsburgh. we're having a lot of leasing success in pittsburgh We're going to be patient and bring it out at the right time. It still might be a little bit early, but we've got, if you look at our dispo guidance, it's another $150 million this year. we're going to be patient and bring it out at the right time. it still might be a little bit early but we've got if you look at our dispo guidance it's another $150 million this year We've got a number of buildings that are out in the market right now, and others that we're prepping to bring to market. we've got a number of buildings that are out in the market right now and others that we're prepping to bring to market We have a different profile. we have a different profile It's a lot like what we've sold the last couple of years or last several years. it's a lot like what we've sold the last couple of years or last several years It's a mix of single-tenant, longer-term lease buildings together with some older, higher CapEx, lower growth assets as well. it's a mix of single-tenant longer-term lease buildings together with some older higher capex lower growth assets as well We've got a number of those out in the market that we're marketing in multiple markets. we've got a number of those out in the market that we're marketing in multiple markets Pittsburgh would be in that mix at the right time. Pittsburgh would be in that mix at the right time. pittsburgh would be in that mix at the right time

Speaker 10: Great. That's it for me. Thank you. Great. great That's it for me. that's it for me Thank you. thank you

Speaker 7: Thank you for your question. Next question is from the line of Omotayo Okusanya with Deutsche Bank. Your line's now open. Thank you for your question. thank you for your question Next question is from the line of Omotayo Okusanya with Deutsche Bank. next question is from the line of omotayo okusanya with deutsche bank Your line's now open. your line's now open

Speaker 12: Hi, yes. Good morning. I just wanted to follow up on Ron's question. As you guys kind of take a look at different markets and what's happening with demand, supply fundamentals, as you kind of look at what's happening with capital markets, just wondering if there's any scenario where we could see you enter new markets or possibly also exit additional markets apart from Pittsburgh that's earmarked for exit. Hi, yes. hi yes Good morning. good morning I just wanted to follow up on Ron's question. i just wanted to follow up on ron's question As you guys kind of take a look at different markets and what's happening with demand, supply fundamentals, as you kind of look at what's happening with capital markets, just wondering if there's any scenario where we could see you enter new markets or possibly also exit additional markets apart from Pittsburgh that's earmarked for exit. as you guys kind of take a look at different markets and what's happening with demand supply fundamentals as you kind of look at what's happening with capital markets just wondering if there's any scenario where we could see you enter new markets or possibly also exit additional markets apart from pittsburgh that's earmarked for exit

Speaker 8: Yeah, this is Ted. I'll take that. Look, I think, as you know, we've entered two markets in the last six years. We went into Charlotte in 2019 and Dallas in 2021. I would, and then we've exited three markets during that same period. We're always looking at new markets. I'd tell you right now, we're sort of pleased with our footprint. We've announced, obviously, the exit out of Pittsburgh over time, but we're pleased with our market selection at this time. Yeah, this is Ted. yeah this is ted I'll take that. i'll take that Look, I think, as you know, we've entered two markets in the last six years. look i think as you know we've entered two markets in the last six years We went into Charlotte in 2019 and Dallas in 2021. we went into charlotte in 2019 and dallas in 2021 I would, and then we've exited three markets during that same period. i would and then we've exited three markets during that same period We're always looking at new markets. we're always looking at new markets I'd tell you right now, we're sort of pleased with our footprint. i'd tell you right now we're sort of pleased with our footprint We've announced, obviously, the exit out of Pittsburgh over time, but we're pleased with our market selection at this time. we've announced obviously the exit out of pittsburgh over time but we're pleased with our market selection at this time

Speaker 12: Okay. That's helpful. Also, following up on Vikram's last question, Brendan, I appreciate all the color in regards to how occupancy could kind of shape up over the next 18 months or so. Just kind of curious, within that, while there are no big kind of 100,000 sq ft move-outs that are kind of known, could you just talk a little bit about the next level below that, like the 50,000 sq ft-100,000 sq ft leases, and if there could be a couple of those that could kind of hinder occupancy growth? Okay. okay That's helpful. that's helpful Also, following up on Vikram's last question, Brendan, I appreciate all the color in regards to how occupancy could kind of shape up over the next 18 months or so. also following up on vikram's last question brendan i appreciate all the color in regards to how occupancy could kind of shape up over the next 18 months or so Just kind of curious, within that, while there are no big kind of 100,000 sq ft move-outs that are kind of known, could you just talk a little bit about the next level below that, like the 50,000 sq ft- 100,000 sq ft leases, and if there could be a couple of those that could kind of hinder occupancy growth? just kind of curious within that while there are no big kind of 100,000 sq ft move-outs that are kind of known could you just talk a little bit about the next level below that like the 50,000 sq ft- 100,000 sq ft leases and if there could be a couple of those that could kind of hinder occupancy growth

Speaker 8: Yeah, let me start. If Brian or Brendan want to jump in, look, demand we're seeing across our markets, clearly a trend we've seen the last couple of quarters is starting to see some larger users out there. I would tell you, our bread and butter is still that 5,000 sq ft-15,000 sq ft user. You know, we're going to pick off a floor or two here and there, but our bread and butter is still going to be that 5,000 sq ft-15,000 sq ft. You know, when you look, and we're seeing that in most of our markets, when you look at who's doing it, it continues to be professional service firms, the law firms, the banks, the accounting firms, engineering firms. Healthcare has been pretty good. That's continuing to be a good demand driver for us. Yeah, let me start. yeah let me start If Brian or Brendan want to jump in, look, demand we're seeing across our markets, clearly a trend we've seen the last couple of quarters is starting to see some larger users out there. if brian or brendan want to jump in look demand we're seeing across our markets clearly a trend we've seen the last couple of quarters is starting to see some larger users out there I would tell you, our bread and butter is still that 5,000 sq ft- 15,000 sq ft user. i would tell you our bread and butter is still that 5,000 sq ft- 15,000 sq ft user You know, we're going to pick off a floor or two here and there, but our bread and butter is still going to be that 5,000 sq ft- 15,000 sq ft. you know we're going to pick off a floor or two here and there but our bread and butter is still going to be that 5,000 sq ft- 15,000 sq ft You know, when you look, and we're seeing that in most of our markets, when you look at who's doing it, it continues to be professional service firms, the law firms, the banks, the accounting firms, engineering firms. you know when you look and we're seeing that in most of our markets when you look at who's doing it it continues to be professional service firms the law firms the banks the accounting firms engineering firms Healthcare has been pretty good. healthcare has been pretty good That's continuing to be a good demand driver for us. that's continuing to be a good demand driver for us The other thing that has been slow and steady the last several quarters we've talked about is our expansions, our net expansion activity. In the last four quarters, we've had 53 companies expand, 21 contract, for a net of over 200,000 sq ft of net absorption. A fourth demand driver is the in-migration that Brian talked about earlier. This quarter, we had eight companies that are new to our markets. All of them weren't relocations, but they're companies that are coming to our markets, adding offices. That was another 27,000 sq ft across four different markets. It's been pretty diversified, both larger tenants as well as just our bread and butter. The other thing that has been slow and steady the last several quarters we've talked about is our expansions, our net expansion activity. the other thing that has been slow and steady the last several quarters we've talked about is our expansions our net expansion activity In the last four quarters, we've had 53 companies expand, 21 contract, for a net of over 200,000 sq ft of net absorption. in the last four quarters we've had 53 companies expand 21 contract for a net of over 200,000 sq ft of net absorption A fourth demand driver is the in-migration that Brian talked about earlier. a fourth demand driver is the in-migration that brian talked about earlier This quarter, we had eight companies that are new to our markets. this quarter we had eight companies that are new to our markets All of them weren't relocations, but they're companies that are coming to our markets, adding offices. all of them weren't relocations but they're companies that are coming to our markets adding offices That was another 27,000 sq ft across four different markets. that was another 27,000 sq ft across four different markets It's been pretty diversified, both larger tenants as well as just our bread and butter. it's been pretty diversified both larger tenants as well as just our bread and butter

Speaker 5: Yeah, Tio, what I would just add to Ted's comments are just rather than kind of go space by space, getting into the weeds on things, there's always going to be customers that move out. There's always going to be customers that move in. I think, I forget who asked the question, but over the next 18 months or so, if we're in that kind of 45%-50% retention level of those remaining leases, that's 3.1 million sq ft that we've got between now and year-end, and year-end 2026. If we continue at 300,000 sq ft a quarter of new, that's going to replace, more than replace, what the likely kind of move-outs would be, to the positive by probably 200,000 sq ft-300,000 sq ft. Yeah, Tio, what I would just add to Ted's comments are just rather than kind of go space by space, getting into the weeds on things, there's always going to be customers that move out. yeah tio what i would just add to ted's comments are just rather than kind of go space by space getting into the weeds on things there's always going to be customers that move out There's always going to be customers that move in. there's always going to be customers that move in I think, I forget who asked the question, but over the next 18 months or so, if we're in that kind of 45% - 50% retention level of those remaining leases, that's 3.1 million sq ft that we've got between now and year-end, and year-end 2026. i think i forget who asked the question but over the next 18 months or so if we're in that kind of 45% - 50% retention level of those remaining leases that's 3.1 million sq ft that we've got between now and year-end and year-end 2026 If we continue at 300,000 sq ft a quarter of new, that's going to replace, more than replace, what the likely kind of move-outs would be, to the positive by probably 200,000 sq ft- 300,000 sq ft. if we continue at 300,000 sq ft a quarter of new that's going to replace more than replace what the likely kind of move-outs would be to the positive by probably 200,000 sq ft- 300,000 sq ft What I think is likely is you're going to see that least occupied spread narrow, and that's going to add more in terms of occupancy. That creates the environment to drive occupancy higher. I think that sets us up well. We've got to continue to lease space, and we feel confident about that given the pipeline that's out there. Certainly, there's a long way between now and the next six quarters. What I think is likely is you're going to see that least occupied spread narrow, and that's going to add more in terms of occupancy. what i think is likely is you're going to see that least occupied spread narrow and that's going to add more in terms of occupancy That creates the environment to drive occupancy higher. that creates the environment to drive occupancy higher I think that sets us up well. i think that sets us up well We've got to continue to lease space, and we feel confident about that given the pipeline that's out there. we've got to continue to lease space and we feel confident about that given the pipeline that's out there Certainly, there's a long way between now and the next six quarters. certainly there's a long way between now and the next six quarters

Speaker 12: Gotcha. Thank you. Gotcha. gotcha Thank you. thank you

Speaker 7: Thank you for your question. Next question is from the line of Young Ku with Wells Fargo. Your line's now open. Thank you for your question. thank you for your question Next question is from the line of Young Ku with Wells Fargo. next question is from the line of young ku with wells fargo Your line's now open. your line's now open

Speaker 9: Yes. Great. Thank you. Brendan, just wanted some clarification on the other income. Thank you for that detail on the $3 million payment from Florida. How should we think about that other income line item for the rest of the year? Are there similar types of opportunities in 2026? Yes. yes Great. great Thank you. thank you Brendan, just wanted some clarification on the other income. brendan just wanted some clarification on the other income Thank you for that detail on the $3 million payment from Florida. thank you for that detail on the $3 million payment from florida How should we think about that other income line item for the rest of the year? how should we think about that other income line item for the rest of the year Are there similar types of opportunities in 2026? are there similar types of opportunities in 2026

Speaker 5: Yeah, Young, that's a good question. Yeah, we've kind of been running at that, call it, you know, on a normalized basis, $1.5 million a quarter. And then obviously this quarter, I think you saw that number spike up to, you know, $4.5 million or a little more than that in the quarter, which was driven, as you point out, by the FDOT payment. I would expect that that other income line would be more consistent with that $1.5 million or so a quarter going forward. We tend to get some unusual items that happen, you know, once a year, kind of give or take, right? Last year, we had a large repayment on tax from Nashville. That's why if you look at the year-over-year comparison to Q2 2024, it's actually down in that line item. Yeah, Young, that's a good question. yeah young that's a good question Yeah, we've kind of been running at that, call it, you know, on a normalized basis, $1.5 million a quarter. yeah we've kind of been running at that call it you know on a normalized basis $1.5 million a quarter And then obviously this quarter, I think you saw that number spike up to, you know, $4.5 million or a little more than that in the quarter, which was driven, as you point out, by the FDOT payment. and then obviously this quarter i think you saw that number spike up to you know $4.5 million or a little more than that in the quarter which was driven as you point out by the fdot payment I would expect that that other income line would be more consistent with that $1.5 million or so a quarter going forward. i would expect that that other income line would be more consistent with that $1.5 million or so a quarter going forward We tend to get some unusual items that happen, you know, once a year, kind of give or take, right? we tend to get some unusual items that happen you know once a year kind of give or take right Last year, we had a large repayment on tax from Nashville. last year we had a large repayment on tax from nashville That's why if you look at the year-over-year comparison to Q2 2024, it's actually down in that line item. that's why if you look at the year-over-year comparison to q2 2024 it's actually down in that line item I would say that in all likelihood, there's probably something that happens sometime between now and, you know, over the next few quarters or happens next year, but it's always a little bit difficult to forecast, and we don't have visibility into that level yet. We'll kind of see where that stuff shakes out. Wouldn't be surprising to me if there's some, you know, one-timers or whatever like that for 2026. I think your question is good that there could be a little bit less of that next year than what we have this year. I would say that in all likelihood, there's probably something that happens sometime between now and, you know, over the next few quarters or happens next year, but it's always a little bit difficult to forecast, and we don't have visibility into that level yet. i would say that in all likelihood there's probably something that happens sometime between now and you know over the next few quarters or happens next year but it's always a little bit difficult to forecast and we don't have visibility into that level yet We'll kind of see where that stuff shakes out. we'll kind of see where that stuff shakes out Wouldn't be surprising to me if there's some, you know, one-timers or whatever like that for 2026. wouldn't be surprising to me if there's some you know one-timers or whatever like that for 2026 I think your question is good that there could be a little bit less of that next year than what we have this year. i think your question is good that there could be a little bit less of that next year than what we have this year

Speaker 9: Got it. Thank you, Brendan. Just one last from me. It looks like the year-end occupancy target might be a little bit lower than previously expected. Does that impact your same-store NOI outlook by any chance? Got it. got it Thank you, Brendan. thank you brendan Just one last from me. just one last from me It looks like the year-end occupancy target might be a little bit lower than previously expected. it looks like the year-end occupancy target might be a little bit lower than previously expected Does that impact your same-store NOI outlook by any chance? does that impact your same-store noi outlook by any chance

Speaker 5: Yeah, good question. Not really. I think the average occupancy we didn't change. We are probably a little bit higher in terms of average occupancy in the first half of the year than what we thought coming into the year. We're, because of a few of those leases that I mentioned that we took back some of the space earlier, we've got one customer that we moved from late in 2025 occupancy to early in 2026 occupancy. That year-end number is coming in a little bit lower than where we thought, but those are generally all for pretty good reasons. It didn't have a huge impact in terms of the same-store NOI outlook, even though it does have less occupancy on one day of the year at the end of the year. That's a timing issue more than anything else. Yeah, good question. yeah good question Not really. not really I think the average occupancy we didn't change. i think the average occupancy we didn't change We are probably a little bit higher in terms of average occupancy in the first half of the year than what we thought coming into the year. we are probably a little bit higher in terms of average occupancy in the first half of the year than what we thought coming into the year We're, because of a few of those leases that I mentioned that we took back some of the space earlier, we've got one customer that we moved from late in 2025 occupancy to early in 2026 occupancy. we're because of a few of those leases that i mentioned that we took back some of the space earlier we've got one customer that we moved from late in 2025 occupancy to early in 2026 occupancy That year-end number is coming in a little bit lower than where we thought, but those are generally all for pretty good reasons. that year-end number is coming in a little bit lower than where we thought but those are generally all for pretty good reasons It didn't have a huge impact in terms of the same-store NOI outlook, even though it does have less occupancy on one day of the year at the end of the year. it didn't have a huge impact in terms of the same-store noi outlook even though it does have less occupancy on one day of the year at the end of the year That's a timing issue more than anything else. that's a timing issue more than anything else

Speaker 9: Gotcha. Perfect. Thank you. Gotcha. gotcha Perfect. perfect Thank you. thank you

Speaker 5: Thank you. Thank you. thank you

Speaker 7: Thank you for your question. There are no additional questions waiting at this time, so I'll pass the call back to the management team for any closing remarks. Thank you for your question. thank you for your question There are no additional questions waiting at this time, so I'll pass the call back to the management team for any closing remarks. there are no additional questions waiting at this time so i'll pass the call back to the management team for any closing remarks

Speaker 8: Just want to thank everybody for joining the call today, and thank you for your interest in Highwoods Properties. We look forward to seeing everybody soon. Take care. Just want to thank everybody for joining the call today, and thank you for your interest in Highwoods Properties. just want to thank everybody for joining the call today and thank you for your interest in highwoods properties We look forward to seeing everybody soon. we look forward to seeing everybody soon Take care. take care

Speaker 7: That concludes the conference call. Thank you for your participation. You may now disconnect your line. That concludes the conference call. that concludes the conference call Thank you for your participation. You may now disconnect your line. thank you for your participation. you may now disconnect your line