Earnings Call: Q2 2020

Jul 31, 2020

Quarterly report

Good morning, and welcome to the Cousins Properties Second Quarter Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Ms. Pamela Roper, General Counsel. Please go ahead. Thank you. Good morning, and welcome to Cousins Properties' 2nd quarter earnings conference call. With me today are Colin Connolly, our President and Chief Executive Officer Richard Hixson, our Executive Vice President of Operations and Greg Agzema, our Chief Financial Officer. The press release and supplemental package were distributed yesterday afternoon as well as furnished on Form 8 ks. In the supplemental package, the company has reconciled all non GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. If you did not receive a copy, these documents are available through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our website. Please be aware that certain matters discussed today may constitute forward looking statements within the meaning of federal securities laws, and actual results may differ materially from these statements due to a variety of risks and uncertainties and other factors, including the risk factors set forth in our annual report on Form 10 ks and our other SEC filings. In particular, there are significant risks and uncertainties related to the scope, severity and duration of the COVID-nineteen pandemic, along with the direct and indirect impact of the pandemic and related mitigation efforts, including governmental requirements and private sector responses, may have on our financial condition and operating results and those of our customers. The company does not undertake any duty to update any forward looking statements, whether as a result of new information, future events or otherwise. The full declaration regarding forward looking statements is available in the supplemental package posted yesterday and a detailed discussion of some potential risks, including those posed by COVID-nineteen, is contained in our filings with the SEC. With that, I'll turn the call over to Colin Connolly. Thank you, Pam, and good morning, everyone. At Cousins, we have always taken the approach that if we take care of our dedicated employees who deliver excellent service to our customers, our company will drive strong results for our shareholders. In this challenging environment, we have taken great care to ensure that we are staying true to our values and principles. For this, I am thankful and proud. In the markets, we have adjusted our operations to ensure the safety of our employees and customers as our properties all remain open. Across our portfolio, physical occupancy has remained at approximately 15% since early June. Based on our discussions with customers, I anticipate a modest increase after Labor Day. However, ongoing health concerns related to COVID-nineteen and childcare challenges resulting from remote schooling will likely create headwinds to physical occupancy throughout 2020. Despite the extraordinary environment, our team delivered solid financial results during the Q2. I will share a few of the highlights. We reported FFO of $0.66 a share. We collected 97% of total rents and 98% of office rents. We leased 303,000 square feet with a weighted average lease term of 7.6 years. 2nd generation cash rents grew by 20.6%. Simply stated, our financial performance highlights the quality of our markets, our portfolio, our customers and importantly our team. It will come as no surprise that many are continuing to speculate about the long term implications of COVID on the office sector. Work from home is undergoing a nationwide test and is proving serviceable thus far. We have spent considerable time discussing this with our customers. In fact, I recently asked the leadership of a Fortune 500 company with a growing Sunbelt footprint to share their perspective on the impact of COVID on their real estate strategy with the Board of Directors here at Cousins. I will summarize some of their findings. A heightened focus on highly amenitized buildings with outdoor space in urban settings, a prioritization of health and wellness, an increase in work flexibility for employees, a commitment to provide employees with dedicated personal space and reduction in overall density. As one of the company executives shared, the pandemic has not changed our plans. In fact, in many ways, it makes our space even more important. We've proven that remote work can be effective, but we've also learned that it is no substitute for being together for activities like collaboration, relationship building, mentorship and so on. The executive also added, while we've been able to maintain productivity during these challenging times, we're trading on the trust, relationships and understanding we built by being together. After a deep dive into their real estate strategy, this growing Fortune 500 company concluded that while the layout of the office would likely change post COVID, their overall space needs would not. Their study found that increased flexibility would be offset by an increase in personal and collaboration space. This was encouraging feedback. And while just one example, we have received similar thoughts from many other customers. Personally, I believe the teams are ultimately stronger together. The observations provided by this particular company point to other trends that we have been discussing even before the pandemic reached us. Migration to the Sunbelt, flight to quality and a growing emphasis on ESG. In many ways, the COVID pandemic has not created a new paradigm. It is simply accelerating trends already underway. Many years ago, we crafted a compelling and resilient strategic plan with the goal to position Cousins at the intersection of these trends. In short, we prioritized Trophy Sunbelt properties, a disciplined approach to capital allocation, a best in class balance sheet and leading local operating platforms. We have made great strides today. Let me highlight 100% of our portfolio is located in the best amenitized submarkets across the Sunbelt. 100% is Class A. Our portfolio is among the newest vintage in the office sector with an average building age of 2,002. Our average building size is just 347,000 square feet with the overwhelming majority having multiple elevator banks. 77% of the portfolio is near mass transit, while also enjoying an average parking ratio of 2.9 per 1,000. Net debt to EBITDA of only 4.4x and liquidity in excess of 1,000,000,000 dollars a $566,000,000 development pipeline that is 82% committed and projected to add approximately $66,000,000 of incremental NOI by year end 2022. Currently, there is a lot of discussion in the market regarding urban versus suburban and hub and spokes. At Cousins, we believe our portfolio has attributes that check the box for all of the above. In addition, the company has a fortress balance sheet and attractive embedded growth through our development projects. Nonetheless, we are not immune to the headwinds as a result of the COVID-nineteen pandemic and the associated economic recession. Physical distancing and quarantines treat all markets the same. During this period, leasing activity will likely be muted and parking income will be impacted. The duration and severity of this downturn will be determined by the public health needs, which are and should be everyone's top priority. Yet pandemics and recessions do end. And as companies are able to safely return to work, the economy can transition from surviving to once again thriving. However, this will take time. At Cousins, we have long been disciplined with our strategy to build the preeminent Sunbelt Office REIT. I believe that we are in the right markets with the right portfolio. Coupled with our strong balance sheet and an extremely talented team, we feel confident Cousins can weather this challenging environment. At the same time, dislocation in the markets could create opportunities for us. We are in a strong financial position to reinvest in our buildings, to take advantage of strategic land opportunities for future office and mixed use projects and to pursue compelling investment opportunities that can add value for shareholders. We will remain judicious and act at the appropriate time. Before turning the call over to Richard, I want to thank the Cousins team, which continues to work extraordinarily hard day after day in all of our markets. I appreciate your skills, your dedication and your resilience. I'm so proud to be part of Cousins. Richard? Thanks and good morning everyone. As Colin said, we are in the midst of a historically challenging economic environment. And I want to lead off by saying that our team and operating portfolio are performing exceptionally well during this difficult time. From the start of the pandemic, we have remained focused on the things that we can control and positively influence, such as our leasing strategy, rent collections, managing deferral requests, property operations, expense control, customer outreach and relationship building. Our team's professionalism and focus in these areas, combined with top quality assets in some of the best Sunbelt submarkets, led to solid second quarter results. As we all know, we felt the full impact of the ongoing pandemic for the entire second quarter, whereas we only saw a partial impact in the Q1. Given that, I am especially pleased to say that our team executed 303,000 square feet of leases in the Q2 with an average lease term of 7.6 years. That average lease term is squarely in line with our long term run rate. Further, 32% of our leasing activity this quarter was new and expansion leasing. I'm also pleased to report that rent growth remained exceptionally strong with 2nd generation net rents increasing 20.6% on a cash basis, a level not seen since 2015. This was driven primarily by continued excellent rent growth in Austin. Net effective rents for the quarter came in at $25.43 per square foot, even higher than in the Q1. We also ended the 2nd quarter at 92.5 percent leased, with in place gross rents posting another company record of $39.48 per square foot. Finally, our same property portfolio leased percentage came in at a solid 94.4 percent. We view these as fantastic results in light of current economic conditions. I described the market backdrop last quarter as one of distinct uncertainty and while it is no longer quite as acute, significant uncertainty remains. With new COVID-nineteen cases continuing at elevated levels, especially in the Sunbelt, leasing activity is considerably subdued and our pipeline of new leasing activity has been on the decline. Rest assured, we are approaching all new leasing opportunities aggressively and there are some out there, but we still expect most of our activity in the coming quarters will likely fall into the renewal category. You will recall that our 2nd quarter leasing activity did include the previously announced 74,000 square foot new lease with DLA Piper at Colorado Tower in Austin. As I mentioned last quarter, this global law firm will occupy space currently leased by Parsley Energy with planned phased commitments starting early next year. Our 2nd quarter activity also included significant long term renewals of a 112,000 square foot customer at The Domain in Austin and a 42,000 square foot customer at The Point in Tampa. Now for some more general leasing market observations. 1st, we still see leasing decisions being delayed more often than altogether. The fact is most corporate real estate decision makers are still in observation mode, evaluating their post COVID real estate strategy and trying to determine what that might mean for existing and future requirements. We expect this dynamic to continue at least through this year, but we are also hopeful that it will lead to some level of pent up demand when the recovery begins. 2nd, it is still too early to identify any reliable price discovery trends in the leasing markets. Transaction volume is simply too low and highly situational. However, it is worth noting that quoted or face rents have yet to experience much pressure, with most negotiations instead focusing on lower net effective rents through increased concessions. With that said, face rates will almost certainly be impacted negatively over time with the magnitude of the impact likely correlated with the ultimate duration of the pandemic. 3rd, while still at relatively benign levels compared to the past, we are seeing an uptick in sublease listings across some of our markets. This is an expected and reliable leading indicator of the health of the office leasing markets. In our view, the CBD of Austin seen the largest nominal amount of new sublease listings of any of our target submarkets. Given the amount of new construction set to deliver over the next couple of years in the Austin CBD, we are watching this submarket particularly closely. With that said, Austin was one of the first markets to emerge from the last downturn and we are confident that this will be the case once again. Austin is a highly appealing metro area that will continue to attract great talent and businesses fleeing from areas such as California, the Northwest and the Northeast. A prime example is Tesla's recent decision to build its newest auto assembly plant near Austin. While this is obviously not an office requirement, the overall economic impact of this plant will be very positive for the Austin market as a whole. On a similar note, we are also thrilled with Microsoft's recent decision to lease over 500,000 square feet in a new project in Midtown Atlanta, adding 1500 new technology jobs in our hometown. Like last quarter, I want to offer some insights into the condition of our current business activity beyond market conditions and leasing. First, I'll cover rent collections. In May, like many, we expressed concern about whether collections would become more challenging over time. I'm very pleased to say that collections have remained solid. 97% of our customers overall paid rent during the 2nd quarter and the collection rate among our traditional office customers was 98%. Further, 100% of our top 20 customers paid rent in the Q2. As of today, 98% of our customers overall have paid July rent charges. Please note that these numbers reflect the impact of rent deferral agreements completed to date. These numbers are very heartening and we continue to attribute them to high quality customers and great teamwork. Next, rent deferrals. As noted, last quarter, we received requests for rent relief from the majority of our retailer and flexible office provider population and from a much lower share of our traditional office customers. The team has done a fantastic job evaluating each request on its merits and negotiating relief where we deemed it appropriate. The total cash rent deferred to date stands at $7,500,000 or 1.1 percent of our annualized contractual gross rents. While the volume of requests for rent relief has declined significantly relative to April May, we do expect some deferral activity to continue until the pandemic has dissipated. This activity is inherently hard to predict, but we view the highest risk customer segments to be our retailers and flexible office providers. As a reminder, those two segments only represent 1.7% and 1.9% of our overall operating portfolio respectively. Finally, I would like to touch on property operations. Throughout this pandemic, all of our properties have remained open to customers with common sense adjustments to our security, access, visitor and cleaning protocols. Despite being open, the physical occupancy of our properties is currently only at about 15% on average, with usage of our parking facilities at similarly low levels. Greg will touch on the financial impact of this lower parking utilization in a minute. During the quarter, our operations team finalized, communicated and implemented a comprehensive plan for the anticipated return of our customers to the office. The team has done a fantastic job preparing for this process in difficult operating conditions and I could not be prouder of what they have accomplished. I can confidently state that we are ready to safely welcome our customers back to work as soon as they are ready. With that, I will now hand it off to Greg. Thanks, Richard, and good morning, everybody. I'll begin my remarks this morning by providing a brief overview of our quarterly financial results and activities, including some detail on our same property performance and receivables data, followed by a discussion of our balance sheet before closing my remarks with updated information on our outlook for the remainder of 2020. All things considered, 2nd quarter results were solid and they were in line with the information we provided in April. Looking specifically at our same property performance, cash net operating income during the Q2 declined 1.6% compared to last year. This was driven by a 4% decline in revenues and a 7.8% decline in expenses. As Richard discussed earlier, we've modified leases for certain customers to provide for temporary payment deferrals. Adjusting for the impact of these deferrals, cash net operating income declined 0.1% during the Q2. Beyond lease deferrals, the largest item driving our same property performance is the physical occupancy within our buildings, which remains significantly below pre pandemic levels. Fewer customers coming to the office mean fewer cars and as a result, same property parking income was down 30% compared to last year's Q2. This is comprised of a 12% decline in contractual parking and a 76% decline in transient parking. Adjusting for the impact of both rent deferrals and reduced parking income, same property cash NOI was up 3.7% during the Q2. For the balance of the year, we anticipate cash same property performance will likely stay negative, potentially troughing in the Q3. In addition to continued rent deferrals and reduced parking demand, we are seeing some opportunities to execute lease extensions with existing customers that could pull forward free rent, which would impact cash NOI. However, we believe these opportunities are positive long term real estate decisions. Before moving to external activities, I did want to touch on customer receivables. During the Q2, FFO was reduced by approximately $400,000 due to a combination of rent write offs and an increase in our allowance for uncollectible rents. The comparable number for the Q1 was approximately $500,000 These numbers are tied to specific customers and leases. No general COVID-nineteen reserve has been taken to date. To put these numbers in perspective, charges related to collectability averaged approximately $170,000 per quarter during 2019. Turning to external activities, we closed one acquisition during the second quarter. The purchase of a 15 50 space parking deck in Uptown Charlotte for $85,000,000 We also closed a 1 year extension of the existing construction loan on our Carolina Square property in North Carolina during the Q2. Not only did we extend the maturity of this loan, we also reduced the interest spread from 190 basis points to 125 basis points and eliminated our repayment guarantee. With this extension, we have no further debt maturities for the remainder of 2020. Looking at the balance sheet, we entered this period of volatility with exceptional financial strength among the very best of our office peers. Not only do we have low leverage, our liquidity position of over $1,000,000,000 at the end of the quarter represented over 15% of our total market cap at quarter end and is more than enough to fund the remaining $160,000,000 necessary to complete our current development pipeline. Looking forward, our 2020 outlook remains generally in line with the information we gave in our previous earnings call in April. Assumptions around the impact of COVID-nineteen on speculative leasing and rent deferrals remains within the ranges we provided. In addition to these items, there are a few updates outlined in our Q2 earnings release that I'd like to provide a little more color on. First, we currently anticipate the parking deck that we purchased in early May to generate net operating income of between $1,500,000 $2,000,000 during calendar year 2020. To be clear, this is a pro rata number and represents just under 8 months of our ownership. It's not an annualized number. In addition, this number is not a stabilized figure. It reflects our current belief that the physical occupancy of our buildings and the commensurate parking income will continue to be significantly impacted by the COVID-nineteen pandemic through the end of 2020. We anticipate the annual stabilized NOI on this parking deck to be between $4,500,000 $5,000,000 going forward. 2nd, we continue to take a hard look at our general and administrative expenses. Prior to COVID-nineteen, our G and A load was already exceptionally low, and we have taken steps to reduce it even further. Our current 2020 forecast assumes corporate G and A expenses, net of capitalized salaries of between $27,000,000 $29,000,000 On both an absolute basis and as a percentage of enterprise value, This range represents a very low cost to our shareholders. 3rd, when we provided information around parking revenues in April, our range was primarily driven by the duration of the pandemic's impact on our portfolio's physical occupancy. The low end of the range assumed we would start to see an improvement in occupancy beginning early in Q3, while the high end of the range assumed improvement wouldn't take place until year end. As we sit here at the end of July, at 15% physical occupancy, we clearly need to adjust low end of our range in this metric. Finally, we have now completed the lease amendment with Parsley Energy at Colorado Tower that we discussed in our last earnings call. Upon finalization of the accounting treatment, the amendment was deemed a lease modification rather than a termination. The total earnings impact of the amendment remains unchanged at $2,100,000 However, it's the timing of that impact that's now spread out over the remaining term of Parsley's retained space. Specifically, instead of recognizing $2,000,000 as a termination fee in 2020 and an additional termination fee of $100,000 in 2021, we'll recognize $300,000 as property level NOI in 2020 $1,800,000 as property NOI over the course of the remaining lease term through mid-twenty 25. When taken together, we anticipate these four changes will net each other out in our 2020 earnings. The positive impact of the parking deck purchase of approximately $1,700,000 if you use the midpoint of our guidance, combined with a reduction in G and A of $1,000,000 equals the negative earnings impact of accounting for the partially leased as a modification and the commensurate $1,700,000 reduction and the adjusted range in parking revenue of $1,000,000 again at the midpoint. With that, let me turn the call back over to the operator for your questions. We'll now begin the question and answer session. First question comes from Blaine Heck of Wells Fargo. Please go ahead. Great. Thanks. Good morning. Colin, can you just first talk about your markets? And I understand we're still in somewhat of a discovery phase with respect to both leasing and pricing. But can you give us any sense of your thoughts on which of your markets you expect to be most resilient both on the leasing side and the asset pricing sides and which, if any, might be showing some cracks at this point? Well, Blaine, it's good morning, first. I do think that it's still preliminary to really differentiate among our markets. And as I mentioned previously, the pandemic and the lockdown really does not differentiate among markets. We're appropriately so generally observing the health guidelines throughout our markets. And so I think overall activity is muted. That being said, as I look across our markets and think about a reopening of the country and a recovery and you look at the underlying industries that really drive our markets, I think that gives us a whole lot of optimism. Here in Atlanta, technology continues to be a big driver as it is in Austin and Tempe. I think we've got a lot of enthusiasm long term about Charlotte and you saw the recent announcement with Centene moving their corporate headquarters to Charlotte. And I think Tampa will continue to do well with the healthcare map, critical maps in that particular market. So I think as we look across all our markets, we've got a lot of long term confidence that there'll be some of the markets that will be first to recover and where we'll see once again sustained rent growth. And I think those underlying supply and demand factors of the leasing market will really help maintain and stabilize asset values. Okay, that's helpful. Second one for either you or for Richard. Can you just discuss some of the prospects for the upcoming move outs and backfilling some of that space, Bank of America, Blue Cross, Norfolk Southern and then closer to today, you've got Time Warner, I think, towards the end of the year. So just touch on each of those spaces, please? Sure, Blayne. Time Warner, actually, we were able to renew this past quarter. So that was approximately 100, plus 1,000 square foot exploration that we've gone ahead and renewed out at The Domain in Austin. So we were thrilled to get that done this past quarter. As you touched on, we do have 3 fairly sizable expirations and move outs within the portfolio here in Atlanta at the Anthem space in Buckhead, the Bank of America space in Charlotte and the Norfolk Southern space in Midtown. I think all three of those buildings as we've touched on in the past are really attractive value add opportunities that the company has. And going into the pandemic, we've had very good interest in all three of those. I would say a meaningful component of that activity is on pause as you would expect in the various lockdowns across those cities. So I do think the lease up of that space will take us longer. That being said, many of those prospects have not canceled their interest. It's on pause, but that will likely create some delay. But I think just stepping back is here at Cousins, when we look at those move outs, we put it in perspective of the overall company. And the total NOI associated with those 3 particular customers is less than $30,000,000 And when we compare that to the incremental NOI that's expected to come off of the development pipeline, again, the vast majority of that is our contractual obligations. That's upwards of $66,000,000 And so we do still continue to have a great deal of confidence as we look forward to 2021 2022 about the embedded growth within the company despite some of these move outs and really fantastic buildings and we still will have a terrific opportunity our team to backfill that space and create value. Great. That's helpful. One last one, maybe for Greg. We appreciate all the commentary and all the detail in the supplemental on same store. I wanted to ask about same store expenses as they declined pretty meaningfully year over year this quarter. Is all of that savings just due to lower utilization at your properties or are there other drivers that might be more sustainable? The vast majority of the same property expense decline that you saw this quarter was driven by lower physical occupancy. So items like utilities and cleaning and similar items were driving the vast majority of that. Okay, great. Thanks guys. Thanks, Blaine. Next question comes from Jamie Feldman, Bank of America Merrill Lynch. Please go ahead. So in your press release, you talked about potentially opportunistic buying. And I think in the call this morning, you also mentioned land, buildings. Can you just talk about more about what's in the pipeline, what we might see, where you want to do it and what types of assets? Well, Jamie, anything that we do will be consistent with the strategic plan that we set forward and we'll continue to focus on the best sub markets across the Sunbelt. And I think as we're kind of moving through this current cycle, we are starting to see some opportunities on the land side that I think could create opportunity for future development opportunities for office and mixed use projects. This will obviously the execution of those will obviously take longer term, but from our perspective now is an interesting time to look at land and we'll keep our discipline within our 3% or so target for land. On the building side, I think that's going to take a little bit longer for those specific opportunities to materialize as we just work through the system. I think obviously the environment over time could create strain and stress, particularly on private folks that have relied on leverage. But those will likely come later. We are starting to see some of the discussion that has piqued our interest and given us some visibility on what might come. But as I said, those will likely be in the coming months quarters. Okay. And as you think about picking up additional land, what are your thoughts on you had mentioned before hub and spoke, maybe satellite offices. Do you think it makes sense to get more land in more suburban locations across your markets or stick with the urban model? Yes, look, obviously, as I said in my remarks, there's been a lot of discussion on urban, suburban and hubs and spokes. And I think some of that narrative and discussion, I think makes sense in larger geographic metro areas like New York City and San Francisco. But as you look at our markets, Atlanta, Austin, Charlotte, again, I don't believe and we have not heard any differentiation from our customers and really what that building experience is, whether that's the elevator or the parking experience in a building in Buckhead or Midtown relative to the Northwest or Alpharetta type submarkets. And I think ultimately what we've heard from customers and I think the Microsoft lease validates that. There was another very large technology company that we understand has signed over 300,000 square foot lease in Midtown this past quarter. I think that continues to validate customers and is not knowledge economy are focused on highly amenitized markets that garner the type of talent they want to grow their businesses and we think that will continue post pandemic. Okay. And then we appreciate the commentary on the Fortune 500 company you had speak at your Board meeting. What were they saying about space per employee in terms of actual square foot per employee kind of pre pandemic and maybe post vaccine? Do you have any view on that or do you have any color on that? They were very clear it's going up. And I think it's going to come through a combination, as I said, of a commitment from them to continue to offer dedicated personal space. But they also, as they look at their collaboration space, think that that will need to will continue to be important, but will need to be grown to accommodate increased physical and social distancing even post pandemic. But even looking at things like the width of corridors was one that they mentioned. Again, just to continue to create more space in the office. And so that overall from their perspective and their individual company was going to lead to a greater space per square foot. Can you quantify like on a percentage basis or actual play? Yes, James, they didn't get it and still kind of early in the process, I think, for them to drill down and give a specific space per square foot. But I think one of the things that I found interesting as they talked about, again, as the remote working option and providing flexibility to their employees. Pre pandemic, they target that about a 10% number on any given day who would be in the office. And I think their view post pandemic that could potentially increase to 20% on any given day. But that being said, with commitment to dedicated space, more collaborative space, more open space, I think their view was that the increase in remote working would actually help them not to have to add space. Again, as that space per employee continues to grow. But they're saying each place still gets a dedicated desk even if they're home more often? Absolutely. It was a commitment they felt was important over the long term even post pandemic for their particular company. Okay. And can you say what sector they are in? We shared with them that we would provide confidentiality as they're continuing to kind of work through their real estate strategy. Again, some of what I'm sharing with you, they haven't necessarily been shared with their underlying employees, but a growing Fortune 500 company. Okay, great. Thank you. Sure. Our next question comes from Dave Rodgers of Baird. Please go ahead. Yes, good morning. Maybe Richard, I'll start with you. You did mention some sublease commentary in your prepared comments. But I was wondering if you could just dive a little bit deeper in terms of the competitiveness of that space, maybe the term and maybe just focus on a handful of the larger markets that you guys are in, but just getting a sense for where that's shaking out and how competitive that might be as you look to release some of your space? Sure. Yes, that's a great question. And like I alluded to in my remarks, the amount of sublease space today that we're seeing is actually pretty benign, but we are seeing that uptick trend. But just looking at all of our markets today, we're really at 2% or less of inventory in the Class A segment in virtually all of our markets, but for Austin. And that's at about 4% right now on the numbers that we're seeing. So the competitiveness of that space, it's across the board to be honest. But I think just stepping back, what we're seeing is that the recent subway space that's come online, especially in Austin, but in other markets too is really probably more space that companies that were in a high growth mode going into COVID, have kind of had to step back from those growth plans. And so there was space that they were really almost inventorying or expecting to fill over the near term and that's forced them to kind of walk that back. So the implication there would be that it's space that they do have decent term on. It's not just somebody trying to backfill a 2 year opportunity, which that would not be competitive to most of our space. So and then again, it is just generally the sublease space that we see coming back is being driven by technology, financial services, but we're seeing it across the board. It's also law firms, some energy, but in that tech component, it is interesting to see that from our view at least that most of the sublease space is coming from companies that are more VC backed, private, smaller, but they were in a high growth mode, not necessarily the big cap tech names that are publicly traded. Thanks for that color. And then maybe a follow-up then on that, Colin, that kind of dovetails into what I was going to ask and the questions about development and maybe specifically domain, but just thinking about development, with those big tech firms being the ones that are still committing tech component that you have out at domain. I mean, I guess as you sit here today and I realize there's no clear crystal ball, but I mean is that an area where you expect demand to increase for that single building user on Domain 9, etcetera? And how did the Time Warner lease, does that preclude you guys from kind of going forward with the redevelopment of Domain Point in the next couple of years? Yes. Look, I think the Domain is going to continue to do very well. And again, as you think about kind of coming out of of the pandemic, a submarket that it's proven to attract the fastest growing companies in the world. And I think that's obviously the location of the domain, but it's the mix of uses and the amenities, the walkable nature, The buildings are an attractive size for those type of companies. I think you'll see even more coming out of this. Some of those large cap technology companies wanting to control their entire building. And so the size of those buildings works well. The parking ratios work very well. And so we continue to be extraordinarily bullish about the long term prospects for The Domain. I think while we currently, we're presently still in, whether they're official or not, the lockdown, which again is appropriate for this point in time, I don't think you're going to see a lot of companies make long term strategic decisions that weren't already in the queue. And so that could create a pause. But again, I think some of the conversations we've had with companies that are interested, they're still checking in and making sure somebody is not getting in front of them for some of those opportunities. So that gives us a lot of confidence, those kind of incoming check-in calls. And I think we'll do well at The Domain. The Time Warner lease does not prohibit our long term redevelopment of Domain Point. The plans there have always revolved around taking down one of the existing parking garages and then expanding that over time with podium style buildings. And so that's still absolutely in play and part of our long term plans. All right. Thank you. Thanks, Dave. This concludes our question and answer session. I would like to turn the conference back over to Mr. Colin Connolly. Please go ahead. Well, thank you all for joining us on this last day of July. We appreciate your time and interest in Cousins. If you've got any follow-up questions, please do not hesitate to reach out to the team. If we don't speak to you before NAREIT, we'll look forward to catching up with many of you all at that time. Hope everybody has a great weekend. The conference is now concluded.