Highwoods Properties, Inc. (HIW) Q2 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Highwoods Properties Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Friday, July 27, 2012. I would now like to turn the conference over to Ms. Tabitha Zane. Please go ahead ma’am.

Thank you and good morning, everybody. On the call today are Ed Fritsch, President and Chief Executive Officer; Mike Harris, Chief Operating Officer and Terry Stevens, Chief Financial Officer. If anyone has not received a copy of yesterday’s press release or the supplemental, please visit our website at www.highwoods.com, or call 919-431-1529 and we will e-mail copies to you. Please note, in yesterday’s press release we have announced the planned dates for our third quarter financial releases and conference call. Also, following the conclusion of today’s conference call, we will post senior management’s formal remarks on the Investor Relations section of our website under the presentation section. Before we begin, I would like to remind you that this call will include forward-looking statements concerning the company’s operations and financial condition, including estimates and effects of asset disposition and acquisitions; the cost and timing of development projects; the terms and timings of anticipated financings, joint ventures, rollover rents, occupancy, revenue and expense trends, and so forth. Such statements are subjects to various risks and uncertainties. Actual results could materially differ from those currently anticipated due to a number of factors, including those identified at the bottom of yesterday’s release and those identified in the company’s 2011 Annual Report on Form 10-K and subsequent SEC reports. The company assumes no obligation to update or supplement forward looking statements that become untrue because of subsequent events. During this call we will also discuss non-GAAP financial measures such as FFO and NOI. Definitions of FFO and NOI and an explanation of management’s view of the usefulness and risks of FFO and NOI can be found toward the bottom of yesterday’s release and are also available on the investor relations section of the web at highwoods.com. I will now turn the call over to Ed Fritsch.

Good morning, everyone and thank you for joining us today. On our last call, we talked about how the U.S. economy had seemingly settled into a slow growth pattern, the so called 2% economy. Most U.S. economic factors such as GDP, treasury rates, job growth and inflation were plodding along at approximately 2%. Everything still seems to be plodding along at the same tepid pace, although some of those metrics now need a generous dose of rounding to get the 2%. There is still a lot of uncertainty ruining the U.S. in this 2% economy. In other words, what’s going to happen with government spending the elections, taxes, the debt ceiling, healthcare implementation and all that before mentioning the problems outside of our boarders? With the collective magnitude of these issues, it is difficult for anyone to predict what the ultimate impact will be on the now rounded 2% economy. As we’ve said, our focus at Highwoods is to continue to stick to the core aspects of our strategic plan, while employing tactics to capitalize on anticipated and real-time opportunities. Our second quarter financial results were solid. For the quarter, FFO was $0.70 per share excluding $0.01 and debt extinguishment and acquisition costs. On a year-over-year basis, FFO per share increased 11% and occupancy grew by 80 bps. The performance of our same property portfolio results a positive on a year-over-year basis with cash net operating income growing 1.8% and average occupancy increasing 150 bps. Given our sound performance thus far this year, we now expect 2012 FFO to be $2.66 to $2.74 per share. At the midpoint, this equates to a 4.7% year-over-year increase. Turning to our balance sheet, we have a stated strategy to grow our company on a leverage neutral basis over the long run. Last September, when we announced our $300 million investment in PPG Place and Riverwood 100, our leverage increased from 43.8% to 47.5%. Today, taking into account our ATM issuances, dispositions and acquisitions, our leverage is now 43.7% and we have zero drawn on our $475 million credit facility. And we’ve delivered on our commitment to return to our pre-acquisition leverage. To give some context to all this, on the ATM front, year-to-date, we’ve raised net proceeds of $101.3 million including 1.98 million shares for net proceeds of $65.9 million since our May 2012 call. On the disposition front, year-to-date we sold $148 million of non-core properties including $128 million announced this month in 2 separate transactions. Last week, we sold five office properties in Nashville’s airport submarket which has consistently been one of the markets weakest for $41 million garnering us a $6.8 million gain. We remain very bullish on Nashville’s core submarkets. Our remaining 2.6 million square feet Nashville are 96.1% leased and we’re developing a 100% 203,000 square foot office building on top of that. This week, we sold 3 non-core properties leased to the federal government for $86.5 million generating a $14 million gain. These assets were relative outliers for us. One was by far, our largest industrial warehouse in Atlanta, one is located in Downtown at a core market -- submarket for us and one was our only investment in the entire State of Mississippi. Before discussing recent buys, here is a brief update on Pittsburgh mark entry. At PPG Place, occupancy is now 83.6%, up from 81.2% at the time when we purchased a property and it’s projected to grow to 86.5% by year-end. Also, Andy Wisniewski recently joined us as our Pittsburgh Division Head. Andy has 24 years of commercial real estate experience in Pittsburgh and will oversee all aspects of that market for us. Andy came from CB Richard Ellis where he served as Executive Vice President. Andy in Highwoods are a terrific fit and we were thrilled to attract yet another skilled and highly respected real estate veteran to our team. So earlier this month, we announced the acquisition of 3 medical properties in Greensboro for a total investment of $29.8 million in an off market transaction very nicely sourced by Rick Dehnert, our Greensboro Division Head. Two of the 3 buildings have closed and the third will close upon obtaining letter of consent which is expected by the end of this quarter. These properties encompassing 149,000 square feet are strategically located across the street from the largest hospital in the metro area and are on average only 7 years old. As we’ve said previously, we continue to pursue development projects across our markets. However, built-to-suit decisions remain painfully protracted. There is still a wide cost delta to go from second gen to first gen but as larger blocks of institutional quality space are consumed, we are hopeful a number of prospects will eventually give us the green light. Mike will address operations in more detail. However, I want to note that occupancy at the end of the second quarter was 90.7%, a 50 BP sequential increase and an 80 BP increase from second quarter of last year. We do anticipate occupancy dropping in the third quarter largely as a result of our GSA sale and the 2 move outs discussed on previous calls. In closing my remarks, I applaud our dedicated team for all of their collective efforts from leasing, capital recycling, balance sheet stewardship and for their outstanding service to our customers. And I’ll turn the call over to Mike.

Thanks Ed, and good morning. We had a solid quarter with year-over-year occupancy increasing 80 bps to 90.7%. On the same property basis, our occupancy in our wholly-owned portfolio increased 170 bps to 91.1%. Occupancy in 6 of our divisions ended the quarter at 91% or higher. In the second quarter, we leased nearly 1 million square feet of second generation space, 65% of this activity was office and the average office term was 4.4 years. Our office occupancy continues to substantially outperform our markets by an average of 700 bps overall and 850 bps in our top 5 markets. In our view, this is due to our higher quality portfolio, concentration in the better submarkets, our solid balance sheet and the strength of our local teams. Average in place cash flow rates across our total portfolio rose 2% from a year ago. Cash rent growth from the 132 office leases assigned this quarter declined 6.3% while GAAP rents increased 2.6%. CapEx related office leasing was $12.94 per square foot in the second quarter, 5% lower than our 5 quarter average and 5% higher than last quarter. Turning to our markets, Atlanta’s occupancy increased 60 bps sequentially to 91.8% at June 30. Just as a reminder, Atlanta’s 3Q occupancy will be negatively impacted by the remainder of AT&T’s move out in this week sale of NARA and DHS. Our Atlanta leasing team is laser-focused on releasing the remaining AT&T space where we currently have 100,000 square feet of solid prospects. We will complete $3 million of aesthetic building improvements at 2800 Century Center by September further strengthening our leasing efforts. In Tampa, we’re pleased we have already released 59,000 square feet at Lake Point I, almost 20% of the space PWC will be vacating at Tampa Bay Park in May of 2013. The top priority for our Tampa leasing team is identifying and cultivating the prospects for the remainder 260,000 square feet, where we currently have sound prospects for 75,000 square feet. Working in our favor is a lack of new supply and in fact that there are only two available contiguous blocks of competitive space greater than 75,000 square feet in West Shore which is really saying something given West Shore has nearly double the size of any other Tampa submarket. Nashville remains impressively really strong. Our team leased 118,000 square feet in the second quarter, where there is 7.6% increase in GAAP rents. Occupancy in our Nashville portfolio held firm at 94.6% in the second quarter. With last week sale of our airport submarket assets, our national portfolio is now 96.1% occupied. Raleigh had a solid quarter inking nearly 150,000 square feet with an average term of 5.6 years and a 5.9% increase in GAAP rents. Occupancy also increased 150 bps from the first quarter with UNC moving to its new university own building, Raleigh’s third quarter occupancy will be impacted. Releasing this lab space is obviously is a high priority for us. Turning to Pittsburgh, occupancy at PPG Place increased this quarter and it has every quarter since we acquired at last September. At quarter end, there was 83.6% and is on track to end the year at 86.5%. Leasing momentum is strong in the prospect pool is deep. I too am glad to have Andy Wisniewski on board as our Pittsburgh Division Head. I worked very closely with him for almost a year. He is extremely knowledgeable about the market, very driven and certainly well respected in the Pittsburgh business community. Terry?

Thanks, Mike and good morning. We’ve reported $0.70 of FFO per share this quarter which excludes a debt extinguishment charge in property acquisition cost totaling $0.014. This was $0.07 better than the $0.63 reported for second quarter of 2011 which excludes the preferred stock redemption charge, debt extinguishment charge and property acquisition cost totaling $0.026. The $0.07 increase is primarily due to $0.12 in higher NOI contribution from acquisitions and development projects, $0.024 in higher same property GAAP NOI due mostly to 150 basis point higher average occupancy and higher term fees partly offset by higher repairs and maintenance in property insurance premiums and $0.013 in lower preferred dividends from the June 2011 redemption of our remaining Series B preferred stock. These positive changes were partly offset by $0.012 in higher G&A due to cost of living increases and higher short and long-term incentive comp, $0.008 from higher net interest expense as a result of debt incurred to finance acquisitions, developments and the preferred stock redemption partly offset by lower average interest rates. $0.019 from the impact of higher shares outstanding mainly shares sold under our ATM program. $0.011 to lower development fee income related to the Charlotte development project completed last summer and $0.006 in lost NOI from our dispositions. Sequentially, the $0.70 of FFO per share was the same as the first quarter of 2012, but with some fully offsetting effects namely $0.011 in higher NOI from the 70 basis point higher average occupancy partly offset by higher seasonal repairs and maintenance and property insurance premiums and $0.006 in lower G&A. These 2 were offset by $0.017 impact from the higher shares outstanding. Turning to the balance sheet as Ed discussed in some detail, we’re very pleased to have returned to our leverage to the levels we had prior to last September’s acquisitions. Debt plus preferred stock as a percent of gross assets today is 43.7% and debt to annualized EBITDA is 5.6 times. We currently have full availability on our $475 million revolving credit facility and only $39 million of debt maturing in the remainder of the year all in the fourth quarter. The weighted average interest rate on our outstanding debt is down 30 basis points from a year ago. We’re also pleased to have acquired the Church Street Medical office buildings on a leverage mutual basis. In our previous 2012 guidance, we projected $0.08 to $0.12 of dilution from plan deleveraging activities and transactions. Those are now complete and the full year 2012 impact is just under $0.11 per share. $0.015 of this dilution was incurred in the first half of 2012 and about $0.095 will come through in the second half. In our updated 2012 FFO guidance, we narrowed the range from $2.60 to $2.76 per share to the new range of $2.66 to $2.74 per share. This represents a $0.02 increase in the midpoint due mostly to higher than anticipated NOI and higher average occupancy. Given the dilution from our deleveraging activities and move outs, second half results will obviously would be somewhat lower than the first half. As it’s typical, we also expect to have meaningfully higher OpEx from seasonal utility costs and increased repairs and maintenance in the third quarter. As a remainder, our FFO guidance does not include any impact at potential acquisitions that may occur later in the year. Certainty underlying assumptions were also updated including slightly higher same property cash NOI growth and higher straight line rental income and slightly lower lease termination income, all of which reflect the impact of first half activity and updated projections for the full year. Operator, we are now ready for questions.

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

So I was hoping you could talk a little bit more about the markets where you did get some occupancy growth. I guess specifically Atlanta, definitely I think you discussed others, I knew Atlanta brokers were saying it was a pretty good quarter. So can you talk about what’s going on there and are we seeing a turn or it’s just kind of a one-time blip?

Hi, Jamie, this is Ed. I think it’s hard to say whether it’s a turn or not, certainly Atlanta has always benefited from a significant amount of first half absorption just under 2 million square feet mostly driven by technology and healthcare and mostly through expansions, growing businesses that are already seated there as oppose to in migration. We suspect that it will sustain and that will be the beneficiary of some of that, but I think it’s hard to predict given some of the uncertainty that continues to work out there more on the national economy basis.

Okay. And in some of your other markets where you had some good pickup in occupancy.

It’s been really bifurcated a pretty eclectic collection of growth with regard to the specific businesses that drive it that we’ve seen biopharma, we’ve seen biomed, pharmaceuticals technology, medical records, the insurance continues to grow, some financial services like BB&T, so it’s really been an eclectic across-the-board as opposed to anyone particular. I guess the biggest growth that we received was in Raleigh and that was driven by clinical research trials.

That’s had a nice pickup in Pittsburgh as well.

Good point. Yes, Pittsburgh, we’ve had yet another good pickup. And in the quarter there, at 83.6% off of an 81.2% acquisition and the pipeline there is also very encouraging as we suggest that we expect to end the year at 86.5% there.

Okay. And then, I mean, I know you're typically a pretty cautious guy. Do you, and your commentary during the call certainly was, but I mean is there a change in sentiment this quarter from your tenant base based on getting closer to the election and what’s going on in Europe and other macro factors or this is just kind of your personal view?

Well obviously, it’s through my filter and with the guidance of my dear friends gather around the table here, our - on our uncertainty-ometer, the uncertainty neither was pretty pegged in ‘09 and then we started to watch it solely but surely regress back lower throughout ‘10 and ‘11 but I think that there are some very major things that are lurking out there that people -- that weighs on peoples' or decision-makers' minds with regard to all the things that could happen come January 1, in around January 1. So I think it’s causing some pause, I don’t think it’s causing paralysis, but I think that the needle on the uncertain meter was regressing and I think now it’s held still or if not maybe going up a little bit.

And our next question comes from the line of Rob Stevenson with Macquarie.

Ed, just sitting here basically your 2012 disposition guidance, what's your thinking here going forward in the back half of the year or I mean are you contemplating, at least marketing more, if market conditions remain favorable and using that in place of ATM issuance et cetera?

Rob, I guess it depends on how much we do with regard to deployment on the acquisition side. We are at a balance sheet number that we’re very comfortable with and kudos to Terry and his team for getting us back to where we were pre-Pittsburgh and Riverwood 100. With regard to dispositions, we carefully monitor those one by one and we really like for them to come out of the oven at the right time trying to synchronize both the market demand, but also with the rent role is at a specific point in time. So we’re heavily focused on what we need to do from a rent role perspective, keeping in mind that the macro issues and when might be the right time to put them out. They continue to be very much strategic for us rather than financial will continue into consist we’ll look at the bottom 10%. Winston-Salem, Greenville continued to be big on the radar screen, but will they go out between now and the end of the year, probably not.

What’s the thought about potentially marketing additional assets that are leased long-term to the government for tech buyers and other sorts of guys that are needing to redeploy proceeds by year-end?

Yes, that’s a great question. So when we look at our GSA portfolio in the total amount that we’ve developed, it really falls into a couple of categories and we thought that those that we sold, as I mentioned in the script, were relative outliers for us. As we look at, what we still have it’s basically counted that or build a suits is basically concentrated in 2 locations, Tradeport in Atlanta, Century Center in Atlanta and then the third, sorry, the FBI building in Tampa. We see all those today as core assets for us, so given that there in park settings with the exception of the Tampa building which we feel is very well suited in a great location. We basically took those 3 buildings that we sold, we think we got an attractive cap rate and the way that we look at that from a global holistic perspective is, we traded those 3 for what we’re able to acquire in Pittsburgh and Riverwood.

Okay. And then, given the medical office acquisition, this -- in July, I mean, how much of the portfolio today is truly medical office or life science. And can you talk about what’s the typical valuation differential is in your core markets between medical office and life science, real estate versus just traditional straight office?

Yes, on the, what we would consider standard medical office, it’s less than 1% of our revenues, but when we look at some modified which would include beyond the traditional docs more in the dermatology and laser eye surgery and those sort of things we get up to another 1.5% to 2% of revenues. And then we have healthcare but its more back office in the way of operations like HCA and Healthways and Talecris and that’s in excess of 6% of our revenue. So depending upon how you define each of them, it’s somewhere between 8% and 9% of revenues that come from that industry as a whole and that’s not including the biomed, the biopharma.

And our next question comes from the line of Brendan Maiorana with Wells Fargo.

So Ed, it sounds like you’re a bit more cautious or you at least think there is a little bit more uncertainty out there. Are you guys have done a good job getting the balance sheet back to, I think where you wanted or maybe a little bit under-levered relative to your midpoint targets. Is now a good time for acquisitions? Has the market slowed down a little bit and do you think that there are opportunities that are out there where you can be opportunistic given the balance sheet is in good shape?

Yes, Brendan thanks for the comment on the balance sheet. With regard to acquisition pipeline targets, we think that pricing is somewhat stabilized. We did maintain our guidance for the year at $100 million to $300 million for 2012 and we’re right at $50 million now. So we’re signaling there clearly that we feel like there are opportunities to bring some more assets in the door between now and year-end. All of them are, in keeping with our strategy of being infill and proving their portfolio is somewhere between value add and a good return, but we remain very deliberate in our stewardship of those dollars that Terry has just gotten back in the door to put our balance sheet where it is, but I think that the guidance staying at $100 million to $300 million and us being $50 million, it clearly signals that.

Is - -should we take anything from your somewhat cautious comments on the overall environment that is value add less likely now given that it may be more challenging to leap up space?

Well, I wouldn’t rule it out. I never say never. We continued to evaluate each opportunity whether we identify off market or through a package to see what we feel like the upside is, certainly we did that within the Independence Park in Tampa and we just placed it in service so that was something that we bought empty and just placed in services quarter at 116,000 square feet, 100% leased. So I think we’ll look at them as they come. We also have to keep in mind that we created a little bit of our own value add with some of the vacancies that we'll incur this quarter and fortunately we have good prospecting on that, but I wouldn’t rule out anything along that continuum of something stabilized to something that has a reasonable value add that we can conservatively underwrite and be successful in acquiring.

Sure. And then on the, I don’t want to call it necessarily dispositions but non-core assets that are within the portfolio. We talked in the past about kind of stabilized occupancy levels and I think you guys kind of pegged in your portfolio at for that 92% to 93% level. As we think about the Nashville sale, at a mid 80s kind of occupancy level below the $100 a square foot price per pound, I -- forget exactly what the cap rate was, I think they can handle on it. How much of that is do you think are remaining in the portfolio? I think at least maybe a couple of quarters ago you put your B assets, B quality assets at around 25% of the portfolio. So is the Nashville sale representative of that? And as you seek to dispose of those assets, are they under occupied relative to the total? So if you sell those assets might some of the occupancy gain that you’ve got embedded within the portfolio go away as those get sold?

Wow, so first to Nashville, and then I’ll backup to the more global. So Nashville, yes, we find Nashville to be one of if not our best market right now and has been for a period of time and the leasing there has certainly been stout and insurance and healthcare have been terrific for that area. But the airport submarket has not been a submarket that we’ve been enamored with for some period of time and we’ve seen others get out of there too and we just thought it was the right time to get out and the fact that we were at 86% occupied. I don’t know how much more we could have pushed that in a weak submarket and I suspect if we had pushed it we may have been buying the occupancy and not getting the return on the proceed from the sale. So that’s just really cleaning up Nashville. To the more holistic question, yes we said we had about $350 million remaining in the portfolio of non-core sales. Takeout what we just sold and we’re down around $250 million or so. I think that we’ll always consistently look at the bottom 10% of our portfolio and that for those types of assets we are in the mid-80s in occupancy and we’ll hopefully sell them in the mid-8 cap range, somewhere in that general area, but it just depends building-by-building. We also have some JV assets that we’re looking at as we go and to reduce some complexity and so those are other assets that hit the disposition list, potential disposition list for us. I’m not saying JV categorically at all, but I’m saying that are certain one off JVs that may make sense for one partner or the other to own.

That’s helpful. So last question for Terry and if you guys thought that one was a mouthful, this one might be worse. But I -- so I’m trying to triangulate sort of between your current occupancy, what just moved out of the portfolio and what your year-end number is targeting at the midpoint of your guidance. And so it’s -- I think the UNC move out and the Atlanta move, the AT&T move out just happened on July 1, so that wasn’t in your numbers here. So it - and then if I kind of make some adjustments for what you bough and then what you sold, it looks like that’s about a push. So I’m gathering net of the AT&T move out and the UNC move out, it looks like you guys expect occupancy to move up somewhere around 100,000 or 150,000 square feet of net absorption. Is that correct? I’m just trying to understand the ins and outs of what’s going on in the back half of the year?

Hi, Brendan, let me take a run at that and then Terry can correct me. But I think that’s fair. Obviously there is some loan leasing and there is some spec leasing that’s drown in there. The -- as you mentioned, the GSA sale, obviously had a negative impact and then we sold well over 0.5 million square feet that was 100% occupied. With the AT&T and UNC, that adds another 80 bps or so of negative drag on the occupancy number. But we looked at what we thought would be our year end range and we did pull the high end by 0.5%, so we went from 81.5 to 91.5 to 89.5 to 91 even. But we - at this point in time based on July 27, I think it’s all the numbers are fair and we’ve obviously spent a significant amount of time talking with our leasing representatives out in the field to see what they see in a way the pipeline for the next 5.5 months.

And our next question comes from the line of Chris Caton with Morgan Stanley.

Ed, can you touch again on leasing you talked about increasing uncertainty. Is there -- can you talk a little bit about the pace of traffic that you’re seeing and is this changing how you think about lease economics or the tenant brokers thinking about like the tenant economics? Sorry, the lease economics.

Right. So Chris it’s hard -- it’s kind of like separating sand from salt. How much of it is these U.S. and global issues weighing on people’s minds, how much of it is because we typically see less leasing in the summer as people take vacations. How much of it is because we’re in the four-year cycle of significant national elections. I think it’s very difficult to bifurcate all that and see what their true cause is. We haven’t seen a dramatic shift in mindset. I just meant my opening comments as far as when we collectively sit around the table and have our strategic planning discussions, we see these items that are looming out there and when we meet with representatives, senators and congressmen, which we do and we hear that basically nothing is happening until after the election as far as legislature going through, you start to wonder if this isn’t having some impact on decision maker’s minds regardless of industry and regardless of where they fall from the right to the left coast. We think that based on the pipeline and based on the fact that we have 6 of our markets that are at 91% or better our portfolio occupied, that things are relatively positive. I mean we’re not crying the sky is falling, we’re just saying, hey be sure your seat belt's buckled because we’re not exactly how sure this landing is going to go given the circumstances. Now it could be a perfect landing and we just go right on through the fourth and first quarter of ‘12 and ‘13 but there are some factors out there that could cause some disruption with regard to the debt ceiling and tax structure and government spending and all of the issues that you probably know better than I.

Chris, this is Mike, to just to supplement that a little bit. The backlog and clearly the prospects is actually good, converting it from a prospect to a negotiation and to lease is still a protracted process, it just takes longer and that’s where I think the uncertainty comes in as our perspective customers start leaving its space. They sell them then want to see what’s going to happen in November before they’ll commit, others is just taking a long time because it’s a new capital spend form.

And I think that, Chris, that the buildings that we have for example that our team is working on in advance for Price Waterhouse vacating in the second quarter of 2013 for them to have already re-let 59,000 square feet of that nine months in advance and in fact Price Waterhouse who’s taken that space. For us to be able to have that 9 months in advance I think is a good indicator for that team to have sound prospects for another, say 50,000 to 75,000 square feet and for our guys in Atlanta to have strong prospects for say 100,000 or so square feet for 2800 I think that those speak to that there are some, there is certainly business to be done. All I was trying to say and I didn’t mean to back try to too much is that there are things on the near-term horizon that I suspect weigh on people’s minds where they were school teacher or you need 25,000 square feet in a Highwoods building.

And then just taking those themes and looking at asset sellers, do you think it with pricing now stabilized in the operating environment the way you described. Does that increase the likelihood that maybe you can source an off market opportunity like you’re trying to do or does it make it tougher?

I think it does. I think what Rick Dehnert did in Greensboro with sourcing those 3 medical buildings off market and the, when we look at our target prospect list, I think it certainly does.

[Operator Instructions] Our next question comes from the line of Joshua Attie with Citigroup.

Ed, the leasing volumes slowed in the second quarter and it looked to be more renewal driven than it was in the last few quarters. Is that reflective of kind of slowing activity in the portfolio and the uncertainty that you were just talking about or is that quarter-to-quarter volatility in a function of what spaces you had available to lease?

Yes, our view is very difficult and that’s kind of where I use that layman analogy of separating sand from salt. It’s very difficult to tell whether this move of let’s call it 300,000 square feet off from where were last quarter is that because we’re right in the gut of summer vacations and summers are typically slower or is it because people are becoming more concerned about where -- what the answers will be to all these open questions that hit us as a U.S. economy between early November and wherever you project a debt ceiling topic to come out which some people are saying that was mid-February. So what’s going to happen in those 3 months and what will be the impact on our economy and people’s appetite for growing, expanding, committing to renewals and hiring people. I just think it’s difficult to tell at this juncture, but it’s -- we think it -- there is some wisdom in being cognizant of those factors being out there.

And for Tampa, I know you gave some of these numbers, but can you just recap exactly where you stand in terms of how much of the building has been released and is PWC has committed to staying in the portion?

Sure. So it’s in two buildings that totaled 319,000 square feet, PWC’s lease expires and we get the space back April 1 of 2013. PWC has now signed a lease to take 59,000 square feet in Lake Point I which is the slightly older building. So we will retrofit that space for them and they will move back in. And then we have working right now approximately 75,000 square feet of what we call sound or viable prospects. So the building is, at this juncture 9 months in advance, is 19% re-let. I’m sorry, I’ve said April 1, I meant May 1. We get the space back in May 1.

And there seems to be no further questions at this time.

Okay. Well, again thanks to everyone for dialing in. As always, if you have any follow up questions please don’t hesitate to give us a holler. Thank you.

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.