Good day, and thank you for standing by. Welcome to Brandywine Realty Trust Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Instructions will be given at that time. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jerry Sweeney, President and CEO. Please go ahead.

Michelle, thank you very much. Good morning, everyone, and thank you all for participating in our third quarter 2024 earnings call. On today's call with me, as usual, are George Johnstone, our Executive Vice President of Operations; Dan Palazzo, our Senior Vice President and Chief Accounting Officer; and Tom Wirth, our Executive Vice President and Chief Financial Officer. Prior to beginning, certain information discussed on the call today may constitute forward-looking statements within the meaning of federal securities law. Although we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. For further information on factors that could impact our anticipated results, please reference our press release as well as our most recent annual and quarterly reports that we file with the SEC. Well, first and foremost, we hope that everyone is well, and with summer now behind us, we are looking forward to an ever-improving end of 2024. During our prepared comments today, we'll briefly review third-quarter results in our 2024 business plan. Tom will then briefly review our financial results for the quarter and outline the key assumptions driving our fourth-quarter 2024 guidance. After that, Dan, George, Tom, and I are available for any questions. Similar to last quarter, I want to start off by addressing the key themes that guide our business plan. Our focus remains on three key areas: liquidity, development lease-up, and portfolio stability. First, on liquidity, we're in excellent shape with no unsecured bond maturities for over three years. We anticipate maintaining minimal balances in our line of credit over the next several years to ensure that ample liquidity continues. Our forecast liquidity does include proceeds from our asset sale program. During the quarter, as you noted in our SIP, we sold a Class B portfolio located in Pennsylvania suburbs for a little more than $65 million. We have several other transactions in progress, and as such, we have raised our 2024 sales target to a midpoint of $150 million. I'll review more detail on that in a few moments. The majority of our operating joint ventures, which we spoke about earlier in the year, have been restructured. We have no operating joint venture debt maturities for quite some time as well. This combined activity has reduced our operating joint venture debt attribution by $159 million since the beginning of the year, and I'll touch on that in a few moments as well. Second, on development lease-up, which remains a top priority for the organization. The pipeline on each project continues to build. Tour volume and issued proposals increased during the quarter. At Schuylkill Yards, we remain in an advanced stage of negotiation with over 200,000 square feet of prospects, with continued advancement in the strongly growing pipeline. The residential component continues to perform on pro forma in terms of absorption and rents. The office component at our Uptown ATX pipeline numbers now stand at over 600,000 square feet, with tenant sizes ranging between 60,000 and 200,000 square feet. The Schuylkill Yards residential project, which we call Avira, has met our year-end target of being over 80% leased. We are focused on making more progress in the ensuing two months. At Uptown Residential, we opened in September and will be delivering finished units through December, and we're already about 15% leased. As I noted in the past, these projects remain top-of-market, are attractive to a broad range of our customer targets, and we remain confident of hitting our pro forma returns. We certainly recognize both the earnings drag and the balance sheet impact of carrying this non-revenue-producing capital and continue our aggressive marketing efforts on each project. To the upside, upon stabilization, these projects will generate about a 15.5% increase to our existing income stream, remaining a key growth driver for the company. We expect that Tom will touch on the interest capitalization periods expiring on two of these office projects. The interest treatment on residential deliveries and the expensing of our preferred returns in those development joint ventures, will lead to increased expenses attributed to this pipeline before stabilization. The final third leg of our tripod is portfolio stability, which again remains a top priority. The strong operating metrics we posted again this quarter reflect the underlying stability of our core portfolio. Austin continues to face near-term challenges, but the intermediate-term growth prospects for that market remain strong; activity levels have picked up, and our product quality will be a strong participant in that market's eventual recovery. Philadelphia, which has one of the lowest vacancy rates among large cities in the country, continues to perform very well for us. Our wholly-owned portfolio leasing level and occupancy levels are about 94%, reinforcing the strength of our product in Philadelphia. Looking ahead, we have only a 5% annual rollover through 2026, one of the lowest in the office sector. Our 2024 revenue plan has finished ahead of schedule. We have increased our spec revenue range to $26.3 million and raised our annual retention range. Our 2024 spec revenue target is up $1.8 million or 7.4% over our original 2024 business plan. Our mark-to-market capital ratios and same-store numbers have all performed at strong levels, as they have done for the last several quarters. With that said, the momentum we've built has led to our operating results performing in line with or above our original 2024 business plan. A few quarterly highlights: we posted second-quarter FFO of $0.23 per share. As I mentioned, our original spec revenue target of $26.3 million is up from $25 million to $26 million last quarter and is 100% executed. Our combined leasing activity for the quarter totaled 558,000 square feet. During the quarter, we executed 298,000 square feet of leases, including 125,000 square feet of new leases within our wholly-owned portfolio. Total leasing activity—wholly-owned leasing and new leasing—has all exceeded second-quarter levels. So, good signs of continued recovery in our various markets. Based on our efforts, as I touched on earlier in the year, we have eliminated $159 million of debt attribution from our joint ventures, significantly exceeding our targeted $100 million target for 2024. Consolidated debt is 94% fixed at a 6.2% rate. Our quarterly rate mark-to-market was 14.9% on a GAAP basis and 8.9% on a cash basis. Our new leasing mark-to-market was a strong 18% and 2.9% on both GAAP and cash basis, respectively. We ended the quarter right in line with our 2024 business plan expectations; the existing portfolio remains in solid shape, with forward rollover through 2025 further reduced to about 4.6%, and the 2026 average around 5.2%. More importantly, we do not have any tenant lease expiration greater than 1% of revenue through 2026. We're in very good shape from that standpoint. Along those lines, to give you more color on the market, we continue to see encouraging signs on the leasing front, evidenced by the stats I just mentioned, but also by these metrics. The increase in physical tours has been very positive. Third-quarter physical tours exceeded second-quarter tours by 7%, which also exceeded our trailing fourth-quarter average by 22%. Tour activity remains above pre-pandemic levels by 36%. On a wholly-owned basis, during the third quarter, 62% of all new leases were a result of this flight to quality. For 2024, flight to quality deals represented 60% of our new leasing activity. Executed renewal and expansion activity has enabled us to raise our retention target by 300 basis points, up from our original 51% to 53% range to now 62% to 63%. The total leasing pipeline through the company remains strong; the operating portfolio leasing pipeline stands at 2 million square feet and includes about 218,000 square feet in advanced stages of negotiations. The development project pipeline again remains strong, and 32% of our operating portfolio new deal pipeline consists of prospects looking to move up the quality curve. Regarding our leverage metrics, our third-quarter net debt to EBITDA ratio decreased to 7.5 times, benefitting from our third-quarter operating results and sales activity, partially offset by increased investment in our development projects. Our core EBITDA metric, which we monitor closely, ended the quarter at 6.6 times within our targeted range. Based on our operating results for the first three quarters of the year, we are adjusting and narrowing our 2024 FFO guidance to $0.89 to $0.92 per share. The change in our FFO guidance is based on a adjustment for our forecasted land sales, which we anticipated would contribute about $0.03 a share for 2024. Based on recent developments not coming to fruition, we now anticipate no further land gains in 2024. Looking at our liquidity and sales activity, our initial business plan projected $80 million to $100 million of sales activity occurring in Q4 with minimal dilution. During the quarter, we sold a non-core Class B portfolio in the Pennsylvania suburbs for a little more than $65 million. To facilitate that sale, we took back about $15.5 million of seller financing at an initial rate of 8.25% with subsequent rate increases over its term. In addition to that sale, we have a number of other sales that we believe will close during the fourth quarter. Therefore, as we noted in our supplemental package, we have increased our sales target to a midpoint of $150 million. None of the additional contemplated sales will require any seller financing. Furthermore, if these transactions close as currently anticipated, we expect $150 million to occur at a blended 8% cap rate. The properties in the sale pool include those in the Pennsylvania and Austin suburbs. Regarding our developments, our development pipeline remains strong. We are focused on getting some of the leases in negotiation across the finish line. Tour velocity continues to pick up, particularly at Uptown ATX and 3025 JFK. We currently have about $1 billion under active development, of which our wholly-owned development in Radnor, costing about $80 million, is 100% leased, fully funded, and the tenant is in the process of taking occupancy during the fourth quarter. Looking ahead, given the mixed-use nature of our master plan communities, we are positioned well for our development pipeline. The product mix includes approximately 27% life science, 42% residential, 22% office, and 9% supporting retail and entertainment hospitality. Any further development starts are conditioned purely upon us leasing up the existing pipeline, as well as overall market and capital conditions. Specifically regarding some of our projects, 3025, our residential office tower, has been fully delivered. On the commercial component, we are currently 23% leased with an active pipeline well over 200,000 square feet, including leases in negotiation. We continue to see steady traffic and leasing activity for Vera, our residential component. We currently have 278 leases executed for about 80% of the project, up from 237 leases or 73% during our last call just about three months ago. We're also seeing strong renewal rates for some of our existing tenants, where we are experiencing an excess of 60% renewal rate and an average increase in the high double digits. We have already met our year-end lease target of being between 80% and 85%, but we are continuing to push for more leasing activity in the ensuing months. For Uptown block A residential, which we call Solaris House, we did face some last-minute permitting delays, so we didn’t open up units for occupancy until late September. Currently, we have 52 leases executed and we are at 15.3% for this other project, which is up from about 6% during the last call. We are still projecting that, even with the delayed opening, the residential component will be between 20% and 25% leased by the end of this year. 3151 Market, our life science project, is scheduled for delivery in this quarter. We have a leasing pipeline there, including several leases under negotiation that we are working to finalize. Uptown ATX has a leasing pipeline that remains approximately more than double the space available, including a mix of prospects ranging from a low of 6,000 square feet to a high of about 200,000 square feet. We recently completed a floor of spec suites and are in the process of leasing those suites. Our next phase of the B+labs expansion on the 8th floor at Cira Centre is nearly complete, and we are in the final stages of negotiations with several tenants for these graduate lab opportunities. With that, let me turn the floor over to Tom, to review our financial results.

Thank you, Jerry, and good morning. Our third quarter net loss was $165.5 million or $0.96 per share. The third quarter FFO totaled $39.8 million or $0.23 per diluted share. Our third quarter net income results were impacted by several impairment charges totaling $161.4 million or $0.93 per share. Our third quarter FFO results were one penny per share below consensus estimates and a few general observations for the third quarter include: G&A totaled $12.6 million, which is $3.6 million above our second quarter forecast, primarily due to higher non-cash equity compensation amortization, attributed to a higher than forecast investing, which we expect to decrease in the fourth quarter. Interest expense was $1.2 million below our reforecast, primarily due to higher capitalized interest related to the delay in commencing our multi-family development in Austin, partially offset by higher projected borrowings on our unsecured line of credit. FFO contribution from our unconsolidated joint ventures was projected to be negative $2 million but ended up basically breakeven. The improvement was due to the timing on commencing operations for a multi-family project in Austin and some improvement in the operating portfolio. Our third quarter debt service and interest coverage ratios were 2.4 times, slightly above projection, with net debt to GAV of 47.3%. Our third core annualized core net debt to EBITDA was 6.6 times, which aligns with our 2024 range. Our annualized combined net debt to EBITDA was 7.5 times, also within our guidance range. Our leverage ratios improved based on higher cash EBITDA. Portfolio and joint venture changes: our wholly owned core portfolio reduced in the third quarter due to the sale of our campus in the PA suburbs. Our joint venture portfolio now includes a $4.1 million preferred investment for the recapitalization of our DK joint venture. We anticipate adding 155 King of Pressure Road to our core portfolio in the fourth quarter, as we expect the tenant to take occupancy during the quarter and the property is 100% leased. Financing activity, as Jerry highlighted earlier, has eliminated any material near-term maturity risk with no unsecured bonds maturing until November 2027. Our wholly owned debt is now 93.9% fixed with a weighted average maturity of 3.9 years. Looking closer at fourth-quarter FFO guidance, operating portfolio level operating income will total approximately $72.5 million and will be roughly $1.3 million below our third quarter, primarily due to reduced NOI related to our asset sales in the third quarter and projected sales in the fourth quarter. The FFO contribution from our unconsolidated joint ventures will total a negative $2.5 million, with the increased loss primarily due to 3025 JFK office being operational for more than 12 months, ending capitalization, and commencing operations of our multi-family project in Austin Texas. G&A for the fourth quarter will approximate $9 million due to lower equity compensation amortization. Total interest expense will increase to $33.5 million due primarily to lower capitalized interest, totaling about $3.2 million. The lower capitalized interest is partially due to joint venture and wholly-owned development projects becoming operational. Termination fee and other income should total roughly $6 million for the fourth quarter, which includes some incremental transaction income. Net management and leasing and development fees should be about $3 million. Land gains, previously projected to be $5 million for the year, is now anticipated to be zero. Interest and investment income will be $0.8 million, and our share count will approximate 176.5 million diluted shares. As Jerry outlined previously, we have lowered the midpoint of our guidance by $0.03 primarily due to the anticipated land gains totaling $5 million that will no longer be included in our business plan. While we plan to continue monetizing our non-core cash holdings, none will close in 2024. For run rate guidance, as our development projects transition to operating properties, we will lose the ability to capitalize certain costs that will now be included in future earnings. While we will provide further guidance with our 2025 business plan, we anticipate that certain fourth-quarter run rates will carry into 2025. Interest expense will decrease as development projects become operational, while future interest expense will align with our projected fourth-quarter run rate. FFO contribution from our joint ventures will be adjusted to reflect certain developments becoming operational and others increasing NOI from lease-up. Our JV joint venture contribution on a quarterly basis will be consistent with our projected fourth-quarter level. Our capital plan totals $109 million for the first nine months, with our 2024 CAD payout ratio at 95.5% and a full-year range remaining 90% to 95%. Intended uses for our capital in the 2024 fourth quarter include $35 million for development, $26 million for common dividends, $14 million for revenue maintenance, $9 million for revenue creation, and $25 million for contributions to our joint ventures primarily related to Commerce Square. Our primary sources of cash flow will be $28 million after interest payments, $85 million from land and other sales, and $12 million from construction loan proceeds. Based on the capital plan outlined above, cash on hand should increase by $16 million, and our line of credit is expected to be fully undrawn at the end of the year. Our projected cash balances at the end of the year have been positively impacted by incremental lease increases and sales activity, partially offset by our seller financing and planned additional contributions to Commerce Square. We also project our net debt to EBITDA ratio will range between 7.5 and 7.8 times, with our net debt to GAV approximating 47%. Our additional metric of core net debt to EBITDA will range between 6.5 and 6.8 times, excluding our joint ventures as our active development projects stabilize. We believe that our core leverage metric better reflects the leverage of our core portfolio, eliminating some of the higher-leveraged joint ventures and our unstabilized development and redevelopment projects. During 2025, our core net debt to EBITDA should begin to equal our consolidated net debt to EBITDA as our wholly-owned development projects reach stabilization. We anticipate our fixed charge and interest coverage ratios will approximate 2.2 times by the end of the year, slightly below our third-quarter results. I'll now turn the call back over to Jerry.

Hey, great. Thank you, Tom. So I think the key takeaways really are that the overall market dynamics in our sector continue to improve with a clear bifurcation of Class A versus Class B properties. Our operating portfolio remains in solid shape. We believe we've established a very solid foundation for continued improvement over the next several years, evidenced by the average annual rollover which is only 5.2% through 2026. The strong mark-to-market and manageable capital spend necessary to execute new leases enable us to grow net effective rents and we see stability and hopefully continued acceleration of overall leasing activity. Our baseline business plan continues to improve liquidity, enhance our market position, and keeps the operating portfolio in solid footing. There's a major focus in the company on leasing up our development projects. We are in a great position to generate earnings growth. As usual, we wish you and your families well. With that, we're delighted to open up the floor for questions. We do ask, in the interest of time, you limit yourself to one question and a follow-up. Michelle?

Yeah, thanks. Good morning, Jerry. I was just wondering if you could comment a little bit more on the demand, particularly in Austin. I'm curious about the 600,000 square feet that you've got kind of in the pipeline. Are those tenants that are already in the Austin market expanding, or are these new requirements? Just trying to get a feel for the likelihood of them executing as we've heard in other sectors there's some hesitancy to commit to new deals. So, trying to figure out if these are relocations, new commitments, and if they are in the market or coming into it.

Yes, Steve. Good morning. George, I can address that. As we're looking at the pipeline, the majority of the deals we're working through at Uptown are with tenants already in the market. They are significant expansions where Uptown can accommodate these expansion requirements. The overall market has been improving, albeit slowly. I mean, there are about 90 tenants and approximately three million square feet of prospects in the Austin market opportunity. Austin is reporting about 275 active prospects looking at new in-migration, about 22% of that has gone up quarter-over-quarter. But the pipeline primarily remains Austin-based at this point. George, do you have any additional color you want to share?

I think, in the overall Austin market pipeline, there probably are some out-of-city companies, but as Jerry mentioned, our Uptown portfolio is really focused on expanding tenants already in the market. We are extremely pleased with the level of activity. We have brokers and site selectors coming through regularly, looking for large requirements. We follow up with them, but their gestation cycle tends to be longer without a definitive occupancy date. Our focus remains on tenants that we know have leases coming up; we know they need expanded space and see an opportunity to convince them to move up the quality curve. So, the primary focus of our pipeline today is on definable requirements within the city of Austin.

Great. Thanks for that color. Maybe just a quick follow-up for you or Tom on the dispositions that were done and are planned. Can you provide a GAAP and cash cap rate on what you expect those deals to close at? I don't think I saw anything related to cap rates in the press release.

Yeah, I think, Steve, if we achieve the new sales target—which we're obviously confident we will since we established it—our blended cash and GAAP cap rate is expected to be right around 8%. You're welcome. Thank you.

Yeah, thanks. Good morning. Can we get back to Uptown ATX? You said the pipeline there ranges from 6,000 square feet to 200,000 square feet. There's been all this discussion around NVIDIA looking for over 300,000 square feet. Would something like that be considered in your pipeline, or is that not?

I think it's safe to say, Tony—good morning—that any tenant who has a whisper about needing office space in Austin, we're all over them. I don't want to get into specifics about any one deal versus another, but we have a very talented team of in-house leasing folks augmented by a strong external team. We track every potential transaction in that market, whether they're looking at the Southwest or Northwest CBD. We’ve been pleased with the level of tour activity at Uptown. We know we need to get it leased, especially with road improvements and the residential component completed, the project shows extremely well. We're on top of every prospect looking at space, even if they are not initially in our tours, we're circling back to engage. I don’t want to name specifics because there are several larger users evaluating options, but let's say we are actively pursuing all inquiries in the marketplace.

Okay. Got it. Just my only other question was regarding Cira Centre. It seems like you're adding another four on the lab space there. Can you remind us how much of the building is lab now and where the limitations are? I thought you had already hit that cap.

Yes, Tony, it's George. We delivered a full floor of graduate labs on the ninth floor. The building in total is 27 floors; the lower nine floors have been targeted for life science. The ninth floor is fully delivered, leased, and occupied. The eighth floor is 99% complete with build-out, and we have four different prospects with leases currently being negotiated. This leaves us with the seventh floor and a portion of the sixth floor as potential areas for either office expansion for life science tenants or additional graduate lab expansion based on pipeline needs.

Okay. Great. Thank you.

Thank you, Tony.

Great. Thanks. Just want to circle back to development pipeline leasing. Do you think you might have to ratchet up concessions to entice tenants to sign leases? What’s the concessionary environment broadly right now? Have those started to taper off, or are they still elevated?

I think it varies by market. In Philadelphia area on the development projects, we haven't seen concessions really increase. We have seen requests for higher tenant improvement dollars, but we can amortize that as part of the rental income stream. No material change has occurred there at all. Austin is competitive, and we see our competitors keeping face rates, annual bumps, and lease terms consistent, while we’re not experiencing significant increases in free rent. There is upward pressure mainly on the tenant improvement side. Most tenants want a higher level of allowance, and in many cases, we can achieve longer lease terms. However, in terms of upfront load, we are generally stable with only slight increases, particularly in Austin.

Thanks, Jerry. I appreciate the insights. And just on the disposition pipeline, is it fair to assume that properties in there are similar to the portfolio that you sold from this meeting? I know you mentioned there wouldn't be any seller financing options going forward, but was there a need for that seller financing due to a lack of debt capital available for the transaction?

Yes, that’s a great question. In summary, when we solicit investor inquiries regarding our sale program, we are only marketing non-core properties due to changes in market conditions or submarket asset limitations, etc. We believe it is crucial to improve our competitive position by divesting low-priority assets, even if it means settling for prices lower than expected. Our strategy includes evaluating the net present value of holding any asset in terms of downtime and expenses. We'll move forward with sales when the marketplace approaches our target range, even if pricing doesn’t match our prior expectations. In cases like the Pennsylvania suburbs deal, we’re at a time where we need to acknowledge the reality of the market, as other factors such as forward rollover and financing conditions play into our decisions. Selling assets like these makes sense for us financially. To facilitate the deal, seller financing was needed, but we have a quality buyer with a solid capital plan and a very secure investment for us.

Great. That’s it for me. Thank you for your time.

Thank you, Mike.

Great. Thank you. I cover apartment and office rates, and I receive questions from investors in both sectors about residential conversions, particularly regarding your two largest building vacancies on page 4. So your evaluation of the feasibility of a residential conversion has persisted for several quarters, and I’d like to understand more about what that process involves, the timetable, and the metrics you're considering to determine the viability of those conversions.

Yeah, Michael, that’s a great question. The two properties we're considering are in Wilmington, Delaware, and another complex in Northwest Austin. They each have distinct circumstances. We believe both can pass the scrutiny for conversion, but extensive upfront architectural design and a great deal of mechanical work is necessary to ensure that we can deliver a marketable product that achieves targeted rents. Currently, we are in the concluding stages of that process on both projects, requiring local authority approvals and community engagement efforts, which are underway. While we've evaluated several other opportunities and chosen not to proceed, there are national initiatives underway, including a bill in Congress that aims to provide accelerated tax credits for office to residential conversions. Similarly, discussions are taking place in Pennsylvania to pursue similar initiatives. I believe a notable volume of these conversions will necessarily require public subsidy and some element of affordability in the units delivered. While we've highlighted that we don’t view these two properties as viable office space going forward, we’re actively working toward potentially achieving residential conversion.

Okay. Got it. My second question, I’m thinking on the fly, as the stock seems to be down about 7% this morning. The only adjustment in your guidance that I can discern is regarding land sale gains; however, even with these changes, consensus seems to reflect the high end of revised guidance. Perhaps investors expected leasing activity to pick up; seller financing has raised some concerns. You stated that there wouldn’t be any more seller financing, so I wonder if you could provide some commentary on whether things have improved or worsened over the quarter. Do you perceive we're out of the woods? What’s your outlook on when occupancy will begin to trend positively?

Thank you for that question. At a macro level, the overall landscape is definitely improving. The quality thesis is gaining traction. National statistics show that roughly 100 million square feet of positive absorption has been less than 10% of the office stock, reinforcing that quality thesis. The occupancy spread between Class A and Class B properties is near historic highs at nearly 800 basis points, coupled with limited supply growth expected moving forward. Even while general demand remains muted, we believe that the best assets will see competitive positioning improve over time, which we believe will lead to significant upward rent pressure. We do believe we have hit the bottom in terms of the overall downturn. Our development pipeline and projects are crucial for us now as we’re focused on closing some additional leasing deals which will provide a clear runway for future FFO growth. We anticipate strong performance from the residential properties; it’s essential to negotiate leases successfully and leverage our operating portfolio's strengths. Those properties, when operational, will show a substantial cash boost to our FFO base. We aim for improved capitalizing of interest throughout our project transitions.

Yes. Thank you very much for that insight.

Thank you.

Yes, good morning. This is actually Tayo from Deutsche Bank. Thanks for taking the time. My first question is on joint ventures. Is there any additional work that needs to be done here? Are we nearing the point where they've all been recapitalized and restructured?

We're closing in on it—most of those have been resolved. We have two more that are in transition that we expect will be resolved by the end of the year, but we are in discussions with partners and lenders. We expect to have those two ventures fully finalized by the time 2024 ends.

Could you clarify which two those are? Is it just the debt that needs financing? What has to happen there?

Yes, I think one is a small portfolio down in D.C., which is in discussions with the lender at this time about whether that portfolio will be sold or restructured. The other property involves our partner on a potential sale of our interest.

Got you. Thank you. If I could indulge you for a moment, I'd also like to inquire about the retention rate in the quarter. Again, it was lower than what you've guided for the year, but you've also raised guidance for retention, so I’m curious about your confidence in fourth-quarter performance to push the overall retention rate for the year higher than initially expected?

Sure, this is George. The third-quarter retention was negatively impacted by that 100,000 square foot move-out here in Philadelphia, which was known and included in our full guidance range for the year. We are confident in meeting the new, increased retention target because the balance of our leasing plan for 2024 is now 100% complete. We know which tenants are leaving in the fourth quarter and have signed renewals. The reason we could substantially increase retention this year is that we have completed some additional tenant expansions and many tenants that we thought would leave ultimately chose to renew.

Thank you.

You're welcome. Thank you.

Good morning, guys. Thanks for taking the question. I wanted to dig a bit into the disposition guidance, considering you've gone through the marketing process throughout the year and gotten into contracts for the portfolios and assets that you referenced. How has the pricing turned out relative to your original expectations?

Our initial expectations when we launched the marketing process for these assets have remained on track. We were surprised on some upside for one, but most were within the range both we and the listing broker had anticipated, with no material changes.

And regarding the Commerce Square transaction, you increased your ownership there. As we look to the future of the company regarding your joint ventures in the development pipeline, as well as Commerce Square, do you have any intentions on increasing ownership in the development projects or Commerce Square?

In the Commerce Square deal, several years ago we acquired an investment in that project in a preferred position. We had written down the asset of about $270 million at that time due to reporting requirements. As we progress, considering cash sources and the cost of that preferred structure, we bought back a portion of that investment. When we did, it mandated an appraisal. The appraisal confirmed a significant difference in value compared to stabilized asset prices once leased up. This transaction was driven by our liquidity position and the appeal of the investment base. Regarding opportunities, structured deals on a preferred basis allow us to capture 88% to 90% of the upside as these properties reach stabilization. We see potential in bringing those assets onto our balance sheet.

That’s very helpful. Thanks, Jerry. I appreciate it.

Thanks, Dylan.

Yeah. Thanks, Jerry. I wanted to circle back on the apartments, specifically in Philly since that one has been open longer than Austin. You went from 73 to 80, and that target seemed to be in line with your plans; however, that 7% only translates to about 23 units, which is roughly eight per month. This seems like a slow pace for a lease-up asset. Is there something going on in Philly that’s causing you to intentionally hold back units? Is it a price point issue?

I’m looking at my notes; I thought it was closer to 13 or 14 per month. Nevertheless, the truth is that August was slower than we anticipated. We had... it’s been less than three months since our last call, so it was late July; now we are in October. We are fully committed to reaching that 80% target by the end of the year, as it is critical for us.

Thanks. That’s all I had.

Thank you.

Just a quick one. Along Dylan's questioning, you've projected an increase in guidance for dispositions, but at the same time have expressed caution on land sales. I’m curious why you seem to be more constructive on fee-simple asset sales while maintaining cautions on land transactions.

The brief answer is that land transactions are more challenging right now. There’s limited financing for these sales. With cap rate uncertainties across sectors—including multifamily, office, or industrial—valuations can become more tenuous. As we designed the 2024 business plan, we anticipated a couple of land sales to close based on where these contracts were. Unfortunately, some recent deals have fallen apart due to a lack of financing. Thank you all for participating in this earnings call. We look forward to updating you on our fourth-quarter and 2025 business plan after the first year. Thank you very much, and have a wonderful day.

Thank you for participating. You may now disconnect. Good day.