Highwoods Properties Inc (HIW) 2018 Q1 法說會逐字稿

Good morning, and welcome to the Highwoods Properties Conference Call. (Operator Instructions) As a reminder, this conference is being recorded, Wednesday, April 25, 2018. And it's now my great pleasure to turn this -- the conference over to Brendan Maiorana. Please go ahead, sir.

Thanks, and good morning. Joining me on the call this morning are Ed Fritsch, President and Chief Executive Officer; Ted Klinck, Chief Operating and Investment Officer; and Mark Mulhern, Chief Financial Officer. As is our custom, today's prepared remarks have been posted on the web. If you have not received yesterday's earnings release or supplemental, they're both available on the Investors section of our website at highwoods.com. On today's call, our review will include non-GAAP measures such as FFO, NOI and EBITDAre. Also 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, which are discussed at length in our press releases as well as our SEC filings. As you know, actual events and results can differ materially from these forward-looking statements. The company does not undertake a duty to update any forward-looking statements. I'll now turn the call to Ed.

Thanks, Brendan. Good morning, everyone and thank you for joining us. During our first quarter call in early February, we discussed the volatility in the financial markets including the drop in the RMZ index. Financial markets remain in flux with the U.S. 10-year yield hovering around 3% and REIT stocks down around 10% on average thus far in 2018. Most REITs, including office REITs, are now generally trading at discounts to NAV. In contrast to share price performance of REITs, the fundamentals of the economy and our business platform are healthy. The key factors underpinning the positive outlook of our business continued to apply. Namely, the jobs picture remains positive and our Southeastern footprint continues to outpace the national average. Markets continue to experience positive net absorption. Construction costs are keeping a bridle on speculative development and rents continue to rise.

Despite this year's decline in REIT equity prices, we remain confident in our ongoing ability to fund our development pipeline and other business initiatives. First, our very conservative debt metrics provide us with significant dry powder, while remaining well within our long-stated comfort zones. Second, we continue to expect to sell around $100 million annually of noncore assets. Third, our cash flow continued to strengthen, given the ongoing delivery and stabilization of our well pre-leased development pipeline. During the first quarter, we leased over 850,000 square feet of second generation office space, including 220,000 square feet of new leasing and 171,000 square feet of expansion leases. In addition to the solid volume, our leasing metrics were strong. We've posted robust GAAP rent growth of 19.7%, healthy cash rent growth of 4.6%, strong net effective rents of $15.84 per square foot and an average term of 6 years. The evidence of strong rent growth, working its way through our portfolio, can be observed in our same-property cash NOI that was up 2.9% year-over-year despite modestly lower average occupancy and a higher operating expenses. We are pleased to have delivered FFO of $0.85 per share during the quarter. Our first quarter results include $1.9 million or nearly $0.02 from the $4.8 million restoration fee in Raleigh we mentioned on last quarter's call, which Mark will discuss in detail. Turning to development. Our $440 million pipeline is 83% leased on a dollar-weighted basis. We're progressing as expected across our pipeline. Our 9 projects, including our 2 major build-to-suits, are tracking on time and on budget. The $96 million 224,000-square-foot U.S. headquarters for the Mars Pet Care recently tucked out and is projected to deliver in the summer of 2019. Our $65 million 219,000-square-foot, third building for MetLife's global technology campus is right on track and we're looking forward to delivering this project in 2Q of 2019. We are now 90% at our $107 million 299,000-square-foot Riverwood 200 project in Atlanta. While we still have more than a year before our targeted stabilization date, we have solid prospect activity that will enable us to achieve occupancy in the mid-90s. We're now 66% leased at 5,000 CentreGreen, our $41 million 167,000-square-foot property in Raleigh that we started 100% spec, and we have strong prospects that will bring us to over 90%. And the follow-up to our previously discussed negotiations with Asurion regarding a potential $252 million headquarters building in the Gulch district is CBD Nashville, we are working towards the execution of a mutually beneficial agreement by the middle of the year, and the process is tracking nicely. Beyond Asurion, we continue to take additional development opportunities, mostly on company-owned land, and we're comfortable with our outlook of $100 million to $350 million of 2018 development announcements.

During the quarter we closed on February 6 -- we disclosed on February 6 that we had acquired 2 development parcels totaling 9 acres in CBD Nashville using $50 million of 1031 exchange proceeds. Our overall [cohort] land inventory can support development of $1.9 billion of additional office. With regards to dispositions, we continue to have a well-defined pipeline of noncore assets at various stages of marketing. We are comfortable maintaining our disposition outlook for 2018 of $61 million to $136 million, including the pending $31 million sale of Highwoods Tower Two scheduled to close next week. Lastly, on the capital front, we continue to evaluate building acquisitions in BBD locations, but there aren't many high-quality assets that -- where owners are willing to sell, and those who are, pricing remains elevated on what we have underwritten. In summary, our business remains strong. We're continuing to see steady interest from customers, and we anticipate ending the year with occupancy around where we ended the first quarter, following a projected dip in the second and third quarters. As always, we're leveraging our brand and our synergistic platform, while keeping a keen focus on expense management. With a more fortified balance sheet and essentially no debt maturities until 2020, we are well positioned to fund our growth objectives. I'll now turn the call over to Ted.

Thanks, Ed, and good morning. As Ed noted, we remain upbeat about our outlook, given healthy fundamentals. Southeastern markets continue to benefit from a positive jobs and economic environment. Our markets have met or beaten the national average for annual employment growth, 27 consecutive quarters. These regions will continue to retain and attract highly qualified candidates, ranging from recent college grads to seasoned professionals, who are drawn to the diverse and dynamic career opportunities, high quality-of-life and low average cost of living. Employers benefit from access to this robust talent pool as well as business a friendly environment. Turning to the quarter, we leased 857,000 square feet of second gen office space with an average term of 6 years. We garnered net effective rent of $15.84 per square foot, 9% above our prior 5-quarter average. We signed 220,000 square feet of second gen office leases and 171,000 square feet of expansions.

New deal volume was roughly in line with our recent average, while the expansion activity was approximately double our typical volume. Our strong leasing activity makes us optimistic for the remainder of the year. Rent spreads were strong this quarter. GAAP rent spreads were positive 19.7%, well above the prior 5-quarter average of 14.7%. And we were able to post healthy cash rent spreads of positive 4.6%. In addition to our second gen leasing activity, we signed 74,000 square feet of first generation office leases since our Q4 call in February. Our development pipeline is now 83% pre-leased on a dollar-weighted basis.

Average in-place cash rents were 3.8% higher at quarter-end compared to a year ago, which is indicative of solid rent growth over the last several quarters. Healthy annual escalators on nearly all of our leases and strong rents have recently delivered development projects.

Our first quarter same-property cash NOI was plus 2.9% despite average occupancy being down 50 basis points, compared to Q1 2017 and operating expenses up around 3%. We've increased the bottom end of our year-end occupancy outlook 25 basis points to 91.5%, while maintaining the high end of 92.75%. We anticipate occupancy to decrease over the next couple of quarters to around 91% with an uptick at the end of the year to around 92%. The largest known move-out this year is Fidelity, who will give back 178,000 square feet in the Raleigh division of Weston submarket in the third quarter. As a reminder, Fidelity's natural lease expiration is the end of November, and we'll receive the remainder of their full rent through the end of the natural term in Q3. Our 1.2 million square foot in-service portfolio in Weston was 100% occupied at the end of the first quarter. Raleigh's job growth continues to fuel demand for a high-quality office space. Raleigh posted 2.0% office employment growth year-over-year, 60 basis points higher than the national average. We expect the positive trends to continue with announced hiring initiatives from Credit Suisse, MetLife and Ipreo among others. Per Avison Young, the overall market's Class A vacancy was 9.2%, 100 basis point improvement since December 31. Class A rents were up 3.5% year-over-year. There's 2.5 million square feet under construction, spread across 6 submarkets. We believe 1.1 million square feet is competitive to our BBD-located portfolio and is approximately 50% pre-leased. We continue to generate strong rents as evidenced by GAAP rent spreads of positive 22.2% on signed deals in Q1. Our in-service Raleigh portfolio is 94.3% occupied, up 180 basis points year-over-year. We're pleased to announce the recently signed deal for approximately 35,000 square feet at our 5,000 CentreGreen development. This deal brings the project to 66% leased. There's strong interest in the remainder of the space and we remain confident in our leased-up plans. Turning to Atlanta, market fundamentals remain healthy, fueled by Q1 '18 year-over-year job growth of 2.0%, sparking a Class A annual rent growth of 5.7% as reported by CBRE. Net absorption moderated this quarter to positive 130,000 square feet, compared to the recent average of around 250,000 square feet. This quarter's absorption was solely driven by Class A properties, indicating continued demand for high-quality product in Atlanta. We signed 217,000 square feet of second-gen leases in Atlanta with an average term of 8.3 years. Although TIs moved up, we continue to push rents as evidenced by the quarter's positive 20.5% GAAP rent spreads.

During the quarter, we signed 11 leases totaling 82,000 square feet in Buckhead. We remain very bullish on the Buckhead submarket in our portfolio, particularly given the quality and competitive -- competitively advantaged locations.

The FBI vacated 137,000 square feet at Century Center in the first quarter. As we discussed on the last call, we backfilled 28% of the vacancy. We continue to see steady activity on the remaining space.

Finally, as Ed mentioned, we're now 90% leased at Riverwood 200, and have prospects to bring the building to the mid-90s. In Nashville, the unemployment rate is 2.6%, reported by Cushman & Wakefield to be the lowest of any U.S. metro area with more than 1 million people. Nashville office employment growth year-over-year was 2.5% versus the national average of 1.4%.

As mentioned in the last call, approximately 2 million square feet delivered in Nashville throughout 2017. The market is responding well to the new product as overall vacancy held steady in Q1 at 8.5%, and Class A vacancy improved 20 basis points ending at 9.3%. Our Nashville portfolio occupancy was 95% at the end of Q1. We signed 141,000 square feet of second-gen leases at robust GAAP spreads of positive 31.5%.

Lastly, in Tampa, net absorption, as reported by JLL, was 247,000 square feet, the highest in the last 7 quarters. Overall, vacancy was 11.4%, down 60 basis points, compared to year-end, and Class A vacancy decreased 40 basis points to 8.3%. Tampa's absence of development, stapled with 2.5% year-over-year office employment growth and a dwindling supply of available quality office space, all contribute to a positive backdrop for rent growth. We are excited by the overall progress of Tampa and our portfolio, which was 94.2% occupied at the end of Q1.

In conclusion, positive fundamentals across our markets offer a healthy environment for our business. We anticipate demand for quality, well-located office space will continue. Mark?

Thanks, Ted. As Ed outlined, we delivered net income of $32.4 million or $0.31 per share and FFO of $90.7 million or $0.85 per share, a 7% increase year-over-year. Compared to the fourth quarter of 2017, the sequential drivers of the nearly $2 million FFO increase were higher NOI by approximately $4.5 million, driven by higher average rents, higher NOI from recently delivered development projects and a higher restoration fee from Fidelity that I'll describe in more detail shortly. These were partially offset by higher G&A by approximately $2 million. As you'll recall, this is the normal annual pattern for us, as we have increased expense from long-term equity grants in the first quarter of each year and modestly higher interest expense due to closing our $350 million bond offering in early March, 6 weeks ahead of the repayment of our $200 million bond maturity on April 16.

As noted in our release, effective with the first quarter, we are now reporting EBITDAre consistent with recent NAREIT guidance. With net debt-to-EBITDAre of 4.77 turns and a leverage of 36%, our balance sheet remains in excellent shape. Our strong leverage metrics put us towards the lower end of our stated comfort range of 4.5 to 5.5 net debt-to-EBITDAre and we have significant liquidity to fund our growth initiatives. As noted on Page 17 of our supplemental, we've already funded 64% of our expected investment of $440 million on our current development pipeline.

As I mentioned, we raised $350 million in a 10-year bond deal with an effective interest rate of 4.06% after factoring in a $7.2 million gain from a prior hedge of $150 million of the underlying treasury at 2.44%. The majority of the proceeds were used to pay down our revolving line of credit. We had 0 drawn on our $600 million line of credit at quarter-end. Subsequent to quarter-end, we paid off the $200 million bond, which had an effective interest rate of 7.5%. We were very pleased with the execution of this offering, which extends our maturity ladder at a favorable fixed rate. Our next meaningful maturity is not until June of 2020.

As Ed mentioned, we tightened our 2018 FFO outlook to $3.37 to $3.47 per share, a midpoint of $3.42 per share, a $0.01 increase to our previous midpoint. While we typically do not include the effect of any future acquisitions or dispositions, our FFO forecast does assume the previously announced planned sales of Highwoods Tower Two in Raleigh for $31 million closes May 1 and the proceeds are held in 1031 escrow. The proceeds include $1 million for an adjacent 2-acre land parcel resulting in $0.005 land sale gain.

Before we take your questions, a few other items to note. First, our same-property cash NOI growth is expected to moderate in the remainder of the year to -- due to lower average occupancy and the timing and seasonality of operating expenses. We expect occupancy will bottom out in the third quarter due to the impact of known vacancies, predominantly driven by Fidelity and then trend upward by year-end.

Second, for modeling purposes at the midpoint of our outlook, we expect FFO in the second and third quarters will be roughly comparable to the first quarter before anticipated improvement in the fourth quarter. Of note, we recognized $1.9 million of the Fidelity restoration fee in Q1, we'll recognize a comparable amount in Q2. In Q3, we will recognize 2 extra months of rent from Fidelity, which includes its payment of originally scheduled rent under its lease that would otherwise run through the end of November. These unusual items relating to Fidelity's departure, and after the third quarter, creating a clean run rate from 11,000 Weston in Q4 with no projected occupancy or rent.

And finally, as we've signaled for the past few years, our free cash flows continue to strengthen, with the delivery of our well pre-leased development pipeline and consistent performance of our same-store portfolio. Operator, we are now ready for your questions.

(Operator Instructions) And our first question comes from the line of Jamie Feldman with Bank of America Merrill Lynch.

I'm hoping you guys can focus a little more on the largest leases you have to backfill or the largest vacancies you have to backfill. Just give us an update, the same ones you've been talking about the last couple of quarters. And just when, if you got leasing done, when it would actually help FFO? Is it an '18 or a '19 story?

Jamie. So, it's Ed. I'll start off with a couple macro comments and then maybe Ted can give us some specifics on the more prominent backfills. So just -- we're encouraged on the activity that fundamentals continue to be very strong as exhibited by what we're able to publish for our first quarter, including the 220,000 square feet of new leases that we did and 171,000 square feet of expansion leases. And then also, the leasing that we did on our development pipeline, so of our 1.3-plus million square feet of office in our development pipeline, prior -- or as of our last call, about 325,000 square feet of that was available or spec component. And so we knocked out 74,000 square feet of that since our last call which knocks that back to about only 250,000 square feet of available space. So we -- if you take it to a 95% stabilized, we knocked out more than 25% of that since our last call. And then we did have good activity in Buckhead while a small -- only a small piece of it was specifically for Towers Watson or Morgan Stanley. As mentioned in our comments, we signed 11 deals in Buckhead for 82,000 square feet which was a meaningful percentage of our good activity in Atlanta for the quarter. And then Ted, if you'll just cover the more prominent ones.

Sure. Looking at our 2017 expirations of the 3 holes that we had, HCA, the 211,000 feet (sic) [square feet] in Nashville, we're now 51% relet in Nashville. That's up from 46% on the last call. One of the 2 buildings is substantially backfilled. That's our 3322 West End building. So the remaining is in Brentwood at Ramparts. That submarket is still strong. It's about 10% vacant. We're about 9% vacant. That includes our vacancy Ramparts. So still feel good about the market. The Highwoodtizing at Ramparts is now complete. We've had good, positive broker feedback and steady activity there but still have some work to do. In Buckhead, we had 2 spaces, 1 in One Alliance and 1 in Monarch Tower, totaling about 137,000 feet. Right now we're 4% relet. And just as a reminder, Three Alliance is now substantially leased and there's no new construction underway in Buckhead or -- and it's as Ed mentioned, we've had pretty good activity. It just hasn't been on this space in terms of getting deals signed up yet. And Three Alliance did pull forward a lot of 2019 expirations, which, I think, is one of the reasons why the slower activity, but the space shows well, excellent ingress egress, great quality space, and we're getting positive feedback. We're doing a lot of showings. So we're still optimistic on that. And then with -- third one is in Richmond FCI 163,000 feet. We're 77% relet there and excellent prospects for the balance of the space.

Okay. Do you have anything from Buckhead in your '18 guidance? Or from any of -- any additional leasing in any of the spaces in your '18 guidance?

Yes, really to answer that part of your question, Jamie, we -- most of this hits in 2019 across the board for this activity.

Jamie, I ought to probably jump in real quick on our other couple of FBI, they left earlier this -- in the first quarter. 137,000 feet and we're 28% relet. And we continue to have steady interest there as well. Highwoodtizing is well underway. The FBI, when they vacated, they've been in that space since 1992. And so there's a pretty big Highwoodtizing project we're well underway on. It's similar to what we did at 2800 Century Center a few years ago in which we backfilled that space in about 24 months.

Okay. And then I guess just taking a step back, I think the regional economies are starting to digest tax reform and lack of self-deductions. I mean, any change in the tone or the pace of conversations you're having with potential corporate relocations to your markets? In general, or based on tax reform?

None tied to that.

Okay. What about just in general? I mean how would you say, I mean, a lot of your markets are HQ2 markets, some in the top 20. Has that changed anything? Are you seeing any change in tone or pace? Or it's about the same?

I would say it's about the same. It really hasn't been there. I think the fundamentals reflect that things continue to be quite positive.

Your next question will come from the line of Emmanuel Korchman with Citi.

If we just think about asset sales, maybe just what's your appetite for selling some core properties? And then using those proceeds to further the development pipeline?

Well, I think from a balance sheet perspective, Manny, we feel very good about our ability to fund our development pipeline. Of the $440 million now, we're 2/3 percent already funded. We do have noncore dispositions. We expect to do in the $100 million plus or minus range of this year and we do have a continuing strengthening cash flow that we would also put towards that. So I think on a macro sense, we would be reticent to take core assets and put them to market to fund that given the strengths of the balance sheet, proceeds from dispositions and strengthening cash flow.

And then in terms of Amazon HQ2, how often has that topic come up in your office? And can you share updated thoughts there?

Every 15 minutes. It's -- you can't pick up a newspaper or a periodical or meet with somebody without it being a topic. I mean, it's like trying to guess who shot JR. It is just -- it's an everyday topic of keen interest, and there are pros and cons in there and people who speak both in their editorials on both sides of that. We're very pleased that 4 of our markets are in the top 20 finalists. We'll see how it falls out. Obviously, Vegas and other people have certain odds on certain markets, but I think that having 4 of the 20 speaks to the quality of the footprint.

Our next question comes from the line of Dave Rodgers with Baird.

Ted, I wanted to follow up on your comments about concessions being higher but you're being able to get higher face rents as well. So I guess what do you see in terms of total economics? Flat? Up slightly? Down slightly? And then maybe take that to the net step with Ed in terms of where -- are development return's improving as well and how do you see construction cost?

Sure. Just from a leasing economic perspective, I think it can be lumpy quarter-to-quarter. I think [this] quarter was a little bit higher than our prior quarters' experience, that is 2 leases. One was a little restack, one a renewal and one was a decent sized midlease. [That] year, either one of them, not both of them, but either one of them. Our metric has always been a -- go down below the 5-quarter average on a CapEx lease .

Dave, it's Ted. In terms of our leasing, it's really -- can be lumpy quarter-to-quarter. And I think, this quarter you saw it jump up a little bit, and that's really due to 2 leases. One was a total restack on a renewal. There was -- it required higher TI, and then one was a new deal, a decent-sized new deal that required a long-term lease that if you back either one of those out, not both of them but just either one of them, our 5 quarter -- our numbers this quarter would be below our 5-quarter average. So while it can be lumpy due to 1 or 2 leases, I think on average things have stayed relatively consistent for us.

And Dave, I'll take the second half of that. Just with regard to the gap between second- and first-gen rents, it's narrowed some because of the strengthening rent growth in second-gen space. It's modified a little bit by the unfortunate continued increase in the cost of new construction, but there still remains a material gap there where it is a deliberate decision for a user to go from second to first gen. I mean it's a meaningful decision to step up to the first gen. And fortunately, given the lack of significant amount of spec new development, that's a lot of what's driving our ability to consummate these build-to-suit projects.

Do you feel, Ed, that returns on the development are getting better because of the tighter market? And because of just the lack of space -- because of where construction cost going you can ask for a bigger spread on that?

Yes. I don't know that -- I don't think -- I would like to say yes to that, Dave, but I think that we've kind of stuck with the pigs get fat, hogs get slaughtered, we think that maintaining our ability to get a 8-plus-percent return on GAAP in the face of rising rates is a result of the increased cost of the capital and the materials, the construction of it is the proper way to continue to run the business. It's certainly very healthy. And what we've been able to achieve on our development pipeline over the past years and what we currently have underway and in staple to that, what we're optimistic about what we're chasing, we feel very good about where we are and remain disciplined on that.

(Operator Instructions) Next question is coming from the line of Blaine Heck with Wells Fargo.

Maybe for Ed or Ted to follow up on that last point, we've seen kind of a pretty big move in the 10 year thus far this year. Have you guys seen any evidence that the increased rate is having an effect on the investment sales market? And do you think that could affect pricing to an extent that you'll either have opportunities to buy or on the other side, difficult -- difficulty selling more?

Yes. I think it really would be very marginal. The bigger issue, Blaine, is the absence of quality trophy, institutional quality assets coming to market. And there continues to be a wall of capital that is pursuing the higher quality ones. And I think the transaction that occurred with Three Alliance is probably a very good petri dish for that. It's just not a lot of that type of product coming to market. And when it does, it seems like the pricing is extremely aggressive. So I think it's more of that, that's casting the -- or defining the acquisition market, as opposed to this move in interest rates.

Okay. That makes sense. And then when I look at some of your strongest markets from a rent growth and rent spread basis over the past several quarters, few come up consistently, Nashville, Raleigh, Tampa and Atlanta, you guys have development projects in each of those markets except for Tampa at this point. So I guess I'm wondering if it's just a matter of getting a pre-lease at one of your Tampa land sites to go ahead with development. Or is there something else maybe that could be keeping you guys cautious? If it's a matter of just pre-leasing, maybe you can talk about any prospects you might have there.

Yes. So you nailed it with option a to your -- in your answer to your question, it’s more of finding anchor customers. So we have 2 predominant places we can do this. One is Westshore at the development we call Independence Park. And so we have a building there and we have 3 pads where we can do others. So we have presented to folks on that, and in fact, we're optimistic that we would be able to do something there sooner than later but its comes down to capturing the appropriate scale of the anchor customer for that. And then the second is when we bought SunTrust Financial Centre in downtown Tampa, we also acquired the neighboring block. And on that block, we can build 0.5 million or so square-foot tower. We might modify that bigger or smaller depending on what we're able to capture in prospecting there. But certainly have concepts that are fairly well defined that enable us to be in the market to chase prospects. And just as a reminder, both Orlando and Tampa were late to come back when the recovery occurred. They were -- their hangover lasted, from the recession, lasted longer than other markets that we're in. And so their rent growth and vitality now are showing stronger, later in the recovery than the others. So we hope some of this development comes with that.

Our next question comes from the line of Jed Reagan with Green Street.

Can you give us any color on known or potential larger moveouts for 2019? Do you have any read on that yet?

Sure, Jed. We -- when we put out our most recent At-A-Glance, which is on our website, we listed on the back of Page 6 some there. So we basically -- anyone who's a -- any customer that's 100,000 square feet or more, we put on there. One of those is in a building that we'll sell next week. So that takes care of that. So that leaves us at 4, and we feel very good about 3 of the 4. It's still a little bit early, but we'll see how they play out. But no known moveout from -- of any customer that's 100,000 square feet or more in 2019 as of this point.

Okay. That's helpful. And then I missed some of the opening remarks but it sounds like you're seeing face rent growth in your markets, but also rising concessions. I'm just curious on if you kind of look at that on a net effective basis, do you feel like you're seeing growth across your markets at this point, and if so, maybe kind of order of magnitude, how much?

Hey, Jed, it's Ted. I think last quarter, we were up -- net effective rents are up 9% from last year. So we're continuing to see it. I mean we are pushing rents. You saw our GAAP and cash rent spreads this quarter which are really strong. We've generally been able to keep the concession packages, generally in line with our historical averages. So markets still feel good, still getting good activity, good job growth in our market, so not a lot of new construction. So we still feel good of the overall fundamentals.

And the 9%, I guess, how representative is that of your markets? I know in the past, you've talked about maybe 2% to 5% kind of market rent growth on your -- across your footprint. Is that still accurate?

Yes. No, I think it is. Again, a few of the markets are in the upper end of that. The Nashville and Tampa we are really pushing. Raleigh is still really strong. And then we got a few of our markets in the lower end but, I think, it hasn't really changed in the last several quarters.

Okay. That's helpful. And then maybe last one for Mark. It looks like you lowered share count guidance a bit for the year. Can you just give any -- a little color on that decision? And whether that means you might need to ramp up dispositions or tap-the-line for some additional proceeds potentially?

Sure, Jed, as you know, we've been active users of the ATM in the past and funded the development pipeline kind of on a leverage-neutral basis with ATM. With where the price is, we obviously haven't done anything in the ATM. We think we've got plenty of flexibility with the leverage metrics where they are. We've obviously got some, Ed referred to, we've got some dispositions planned for the year. So between dispositions, proceeds, free cash flow from the business, and then again, we've got plenty of firepower with respect to the metrics to be able to fund that development pipeline. So I think we're in good shape with respect to sources of capital and -- but that's the reason for the move on the share count not anticipating it will be in the ATM.

Okay. And I think I heard Ed say $100 million or so on -- I guess if I took that literally, that would get you to sort of the high end of your disposition range. Is that the right way to think about that?

It is.

Our next question comes from the line of John Guinee with Highwoods. (sic) [Stifel]

Ed, you mentioned who shot JR with the reference to Amazon. Not everybody on this call is as old as you and I. Can you actually give us the date that, that TV show was playing?

1980 maybe '81.

Yes. Most of the people on this call weren't alive then, okay? Remember that. Here's what I can't figure out is you're going to get some debt cost savings. Looks like your lease economic analysis is getting a little better. You've got almost $2 million for the next 2 -- next quarter coming in from the Fido restoration and then a little pop in extra rent from Fido in the third quarter. And you're implying that, that all equates to about an $0.85 FFO for quarters 2 and 3, but then maybe up a couple of pennies, $0.87, just maybe in the fourth quarter. What's the pop in the fourth quarter that gets you there?

John. It's Brendan. So yes. There's a decent amount of movement within line items, within the first 3 quarters. You're right. So we got the Fidelity restoration fee in the first quarter. We'll get a comparable amount in the second quarter. Really, what's likely to happen is you'll -- we'll have occupancy that will dip a little bit in the second and third quarters. So that G&A savings that we get, just the normal seasonal pattern that we'll get in second and third quarters relative to the first will probably be offset by the occupancy dip. And then as we build back into the fourth quarter, we expect occupancy to get higher, and then we would expect to get more NOI from some of the recently delivered development projects as we build into -- in the fourth quarter. So I think, you're right in terms of your trajectory of the quarters on a high level basis, and there's a few moving parts that are in there, but fourth quarter should be pretty clean. There's no fidelity impact in there with an improvement in occupancy.

There are no further questions on the phone line.

Right. Thank you, Carlos, for moderating, and everybody, thanks for dialing in. As always, if you have any follow-up questions, please don't hesitate to give us a call. Thank you.

Ladies and gentlemen, that concludes today's call. We thank you for your participation and ask you to please disconnect your lines.