Brendan Maiorana - SVP, Finance and IR Edward Fritsch - President and CEO Theodore Klinck - EVP, Chief Operating & Investment Officer Mark Mulhern - EVP & CFO.

Jamie Feldman - Bank of America/Merrill Lynch Emmanuel Korchman - Citigroup David Rodgers - Robert W. Baird & Co. Blaine Heck - Wells Fargo Jed Reagan - Green Street Advisors John Guinee - Stifel, Nicolaus & Company.

Good morning and welcome to the Highwoods Properties Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded, Wednesday, April 25, 2018.

And it is now my great pleasure to turn 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 EBITDA.

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 the 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..

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 non-core assets. Third, our cash flow continues 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 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 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% pre-leased on a dollar-weighted basis. We’re progressing as expected across our pipeline.

Our nine projects, including our two major build-to-suits, are tracking on-time and on-budget. The $96 million, 224,000 square foot U.S. headquarters for Mars Petcare recently topped 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 5000 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%.

As a follow up to our previously disclosed negotiations with Asurion regarding a potential $252 million headquarters building in the Gulch District in 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 chase 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, as we disclosed on February 6th, that we had acquired two development parcels totaling 9 acres in CBD Nashville using $50 million of 1031 exchange proceeds. Our overall core land inventories can support development of $1.9 billion of additional office.

With regards to dispositions, we continue to have a well-defined pipeline of non-core 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 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 will 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 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 below average cost of living.

Employers benefit from access to this robust talent pool as well as the business friendly environments. Turning to the quarter, we leased 857,000 square feet of second gen office space with an average term of six years. We garnered net effective rents of $15.84 per square foot, 9% above our prior five-quarter average.

We signed 220,000 square feet of new 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 five 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 at recently delivered development projects.

Our first quarter same property cash NOI growth 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’s 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 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%, a 100 basis point improvement since December 31st. Class A rents were up 3.5% year-over-year. There is 2.5 million square feet under construction spread across six 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 a recently signed deal for approximately 35,000 square feet at our 5000 CentreGreen development. This deal brings the project to 66% leased. There is strong interest in the remainder of the space and we remain confident in our lease-up plans.

Turning to Atlanta, market fundamentals remain healthy fueled by Q1 2018 year-over-year job growth of 2.0%, spurring 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, but 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 TI's 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 and our portfolio, particularly given its quality and competitively-advantaged location. The FBI vacated 137,000 square feet in Century Center in the first quarter. As we discussed on the last call, we’ve backfilled 28% of the vacancy and 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 and Wakefield to be the lowest of any U.S. metro area with more than 1 million people.

Nashville’s 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 seven 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 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. .

First, our same property cash NOI growth is expected to moderate in the remainder of the year 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 mid-point 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 and we’ll recognize a comparable amount in Q2.

In Q3, we will recognize two 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 end after the third quarter, creating a “clean” run-rate from 11000 Weston in Q4 with no projected occupancy or rent.

And finally, as we have signaled for the past few years, our free cash flows continues 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. Please go ahead..

Great, thank you and good morning. Appreciate all the color.

I am hoping you guys can focus a little more on the largest leases you have to back fill, the largest vacancies you have to back fill, just give us an update, the same ones you have been talking about the last couple quarters and just when if you got leasing done when it would actually help FFO, was it an 2018 or 2019 story?.

Hi, good morning Jamie, 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 are encouraged on the activity that fundamentals continued to be very strong as exhibited by what we're able to publish for 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 if our 1.3 plus million square feet of office in our development pipeline prior to 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 of available space. So we -- if you take it to 95% stabilize we knocked out more than 25% of that since our last call.

Then we did have good activity in Buckhead while small -- only a small piece of it was specifically for Towers Watson or Morgan Stanley. It was 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, the three holes that we had, HCA the 211,000 feet in Nashville. We're now 51% relet in Nashville that's up from 46% last call. One of the two buildings is substantially back filled that's our 3322 West End building. So the remaining is in Brentwood and Ramparts.

That sub market is still strong, it's about 10% vacant, we're about 9% vacant that includes our vacancy at Ramparts. So we still feel good about the market. Highwoodtizing Ramparts is now complete. We've had good positive broker feedback and steady activity there but still have some work to do.

In Buckhead with two spaces one in One Alliance and one 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 is no new construction underway in Buckhead.

And as Ed mentioned we have had pretty good activity 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 explorations 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 the third one is in Richmond FCI, 163,000 feet. We are 77% relet there and excellent prospects for the balance of the space..

Okay, do you have anything from Buckhead in your 2018 guidance or any additional leasing in any of these spaces in your 2018 guidance?.

Really to answer that part of your question Jamie, most of this hits in 2019 across the Board for this activity. .

Jamie I ought to probably jump in real quick on the other couple FBI, they left earlier this in the first quarter, 137,000 feet and we are 28% relet and we continue to have steady interests there as well. Highwoodtizing is well underway. The FBI when they vacated they'd been in that space since 1992 and so there's a pretty big Highwoodtizing project.

We are well underway on, it is similar to what we did at 2800 Century Center a few years ago in which we backfilled that space in about 24 months..

Okay, thank you and I guess just taking a step back, first I think the regional economies are starting to digest tax reform and lack of self deductions, 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 H2 [ph] markets on a 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..

Okay, alright, thank you. .

Thanks Jamie..

Our next question comes from the line of Emmanuel Korchman with Citi. Please proceed with your question. .

Good morning everyone.

If we just think about asset sales maybe just what's your appetite for selling some core properties and then using those proceeds for that development pipeline?.

Well I think from a balance sheet perspective we feel very good about our ability to fund our development pipeline. Of the $440 million now we're two thirds percent already funded.

We do have non-core dispositions we expect to do in the 100 million plus or minus range this year and we do have 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 strength of the balance sheet, proceeds from dispositions, and strengthening cash flow..

Thanks for that and then in terms of Amazon HQ2 how often does 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 and people will speak both in their editorials on both sides of that.

We're very pleased that four 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 four of the 20 speaks to the quality of the footprint..

Thanks Ed..

Sure, thanks Manny. .

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

Hey, good morning. Ted I wanted to follow-up on your comments about concessions being higher but you being able to get higher base 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 as a next step with Ed in terms of where -- our development returns improving as well and how do you see construction costs?.

Sure, just releasing economics [Technical Difficulty] one was a restack, some renewal [Technical Difficulty] either one of them that will go down below the box of our average CAPEX..

Dave, its Ted. In terms of our leasing it is really can be lumpy quarter-to-quarter and I think this quarter you saw jump up a little bit and it was really two leases.

One was a total restack on a renewal that required higher TI and then one was a new deal, decent size new deal that required a long-term lease that if you backed either one of those out not both of them but just either one of them or five quarter numbers this quarter would be below our five quarter average.

So while it can be lumpy due to one or two leases I think on average things have stayed near relatively consistent for us. .

And Dave I will 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 stack 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 just the lack of space, because of where construction costs are going you can ask for a bigger spread on that?.

You know 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 that, hogs get slaughtered.

We think that maintaining our ability to get at 8% plus 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 stable to that what we're optimistic about, what we're chasing we feel very good about where we are and remain disciplined on that..

That's helpful, thank you. .

Sure, thank you. .

[Operator Instructions]. Next question is coming from the line of Blaine Heck with Wells Fargo. Please proceed..

Thanks, good morning.

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 difficulty selling more?.

I think it will really 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 very good peachy [ph] dish for that.

There'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 that that's casting 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 rent growth and rent spread basis over the past several quarters do you come up consistently in 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 finding anchor customers so we have two predominate places we can do this, one is in West Shore and a development we call Independence Park. And so we have eight buildings there and we have three pads where we can do other.

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 it's comes down to capturing the appropriate scale of the anchor customer for that.

And then the second is when we bought Sun Trust Financial Center in Downtown Tampa we also acquired the neighboring block and on that block we can build half a million or so square foot tower. We might modify that bigger or smaller depending on what we're able to capture and 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. .

Great, that's helpful, thanks Ed..

Next question comes from the line Jed Reagan with Green Street. Please go ahead. .

Good morning guys.

Can you give us any color on known or potential move outs 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 six some there. So we basically -- anyone who's 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 leases at four and we feel very good about three of the four. It is still a little bit early but we will see how they play out. But no known move out from -- of any customer that's 100,000 square feet or more in 2019 as of this point. .

Okay, that's helpful. And I missed some of the opening remarks but sounds like you're seeing face rent growth in your markets but also rising concessions.

I'm just curious 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 just so maybe kind of order of magnitude how much?.

Yeah hi Jed, it is Ted. I think last quarter we were up, net effective rents were up 9% from last year. So we're continuing to see it. I mean we are pushing rents, we 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 market still feel good, still getting good activity, good job growth in our markets. So, not a lot of new construction so we still feel good about the overall fundamentals. .

And then 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 across your footprint, is that still accurate?.

Yes, no I think it is. Again few of the markets on the upper end of that, the Nashville, Tampa were 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, it is 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 a little color on that decision and whether that means you might need to ramp up dispositions or top some -- chop 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 development pipeline kind of on a leverage neutral basis with the 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 obviously got some referred to, we've got some dispositions planned for the year.

So between disposition of 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 the development pipeline. So I think we're in good shape with respect to sources of capital.

But that's the reason for the move on the share count and not anticipating that we will be in the ATM. .

Okay and I think I heard Ed say 100 million or so in dispose.

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. .

Yeah, okay, perfect. Thank you guys..

Our next question comes from the line of John Guinee with Highwood. Please go ahead. .

John Guinee with Highwoods, okay. .

We are hiring every analyst that we could..

Oh my God, Ed you mentioned who shot JR with a reference to Amazon. Not everybody on this call is as old as you and I, can you actually give us the date that, that T.V.

show was playing?.

1980 maybe 1981. .

Yeah, most of the people on this call weren’t alive then, okay, remember that. Here's what I can't figure out if you are 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 two -- next quarter coming in from the FIDO [ph] 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 two and three but then maybe up a couple pennies $0.87 just maybe in the fourth quarter, what's the pop in the fourth quarter that gets you there?.

Hey John, it's Brendan. So yeah there's a few ways to get… Thanks I will try to live up to that. There's a decent amount of movement within line items within the first three 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 will 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 will 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 the fourth quarter.

So, I think you're right in terms of your trajectory of the quarter, it is 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..

Great, thank you very much..

Thanks John..

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..