Liberty Property Trust (LRY) Management Discusses Q2 2013 Results - Earnings Call Transcript

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Liberty Property Trust (LRY) Q2 2013 Earnings Call July 23, 2013 1:00 PM ET

Executives

Jeanne A. Leonard - Vice President of Corporate Communications & Investor Relations

William P. Hankowsky - Chairman, Chief Executive Officer and President

George J. Alburger - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Michael T. Hagan - Chief Investment Officer

Robert E. Fenza - Chief Operating Officer and Executive Vice President

Analysts

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division

Jordan Sadler - KeyBanc Capital Markets Inc., Research Division

Craig Mailman - KeyBanc Capital Markets Inc., Research Division

Joshua Attie - Citigroup Inc, Research Division

Brendan Maiorana - Wells Fargo Securities, LLC, Research Division

Brandon Cheatham

John Stewart - Green Street Advisors, Inc., Research Division

Paul E. Adornato - BMO Capital Markets U.S.

Michael Bilerman - Citigroup Inc, Research Division

Operator

Good afternoon, my name is Ian, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2013 Earnings Conference Call. [Operator Instructions] Jeanne Leonard, you may now begin your conference.

Jeanne A. Leonard

Thank you, Ian, and thank you, everyone, for tuning in today. You are going to hear prepared remarks from Chief Executive Officer, Bill Hankowsky; Chief Financial Officer, George Alburger; Chief Investment Officer, Mike Hagan; and Chief Operating Officer, Rob Fenza. Liberty issued a press release on our results this morning. You can access this in the corresponding supplemental information package in the Investors section of Liberty's website at www.libertyproperty.com.

In both documents, you will find a reconciliation of non-GAAP financial measures we reference today to GAAP measures. I will also remind you that some of the statements made during this call will include forward-looking statements within the meaning of the federal securities laws. Although Liberty believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be achieved.

As forward-looking statements, these statements involve risks, uncertainties and other factors that could cause actual results to differ materially from the expected results, risks that were detailed in the issued press release and from time to time in the company's filings with the Securities and Exchange Commission. The company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Bill, would you like to begin?

William P. Hankowsky

Thank you, Jeanne, and good afternoon, everyone. We are very excited about our performance in the second quarter. We executed across all of our disciplines and performed consistent with our plans for the year, which envisioned a continual pickup as the year progressed. We leased 7.1 million square feet in the second quarter, a company record. 5.2 million square feet was leased in the core portfolio, yielding a 20-basis point rise in occupancy to 92.8%.

Our renewal rate remained strong at 68%. And we saw overall net growth in the portfolio led by our industrial product. Development activity remained strong with 1.85 million square feet of leasing. We initiated 5 new industrial buildings bringing the pipeline to $411 million, which was 44% leased at quarter end, and today, is at 54% leased. Rob will provide some further details on this in a few minutes.

We acquired a metro-office building in Washington, D.C., and disposed of nearly 500,000 square feet of office in high-finish flex product. All of this activity continues our portfolio repositioning with increased industrial and metro-office and decreased suburban office product. We continue to maintain our strong capital position, with the redemption of $65 million of preferred units and the sale of 1.2 million shares via our ATM program.

So where do we see the economy and real estate markets at midyear? The economy continues to improve but at a fairly measured pace. GDP at south of 2% a quarter, 7.6% unemployment and job growth at around 200,000 per month are not the signs of a robust economy. However, there's consistent positive growth yielding an ever-improving real estate market.

Industrial demand is consistent and widespread, yielding a national vacancy rate of 12%, down 30 basis points for the quarter. Though development is increasing, it remains disciplined. We continue to see a healthy pipeline of potential development activity with a number of potential projects advancing forward during the quarter. Given the relative strength of the real estate markets at this point, we're encouraged by the possibilities a more robust economic recovery could provide.

So with that, let me turn it over to George and Mike and Rob for further details.

George J. Alburger

Thank you, Bill. FFO for the second quarter was $0.66 per share. The operating results for the quarter include $777,000 in lease termination fees. Our guidance for the year is that lease termination fees would be in the $0.04 to $0.06 per share range. During the quarter, we sold 6 buildings for $51 million, and we acquired a 291,000 square foot office building in Washington, D.C., for $134 million. Mike will provide some details on these transactions.

The acquisition costs for the quarter were $2.3 million, and these costs were expensed and included in general and administrative expenses. This quarter, as in every quarter, we have earnings from the sale of land to home builders in the U.K. Earnings this quarter from these sales, net of related tax were $2.2 million. This is a little higher than our quarterly average but is in line with the guidance we provided for the year.

During the quarter, we brought into service one development property with an investment of $28 million and we started development of 5 industrial properties, which have a projected investment of $139 million. As of June 30, our committed investment in development properties is $411 million and the projected yield in this investment is 8.3%.

For the core portfolio, we executed 5 million square feet of renewal and replacement leases. For these leases, rents increased by 1.1% on a straight-line basis and decreased by 3.5% on a cash basis.

For the same-store group of properties, operating income increased by 0.4% on a straight line basis and increased by 1.7% on a cash basis for the second quarter of 2013 compared to the second quarter of 2012.

On the capital front, we regained $65 million of preferred units, which have -- which had an average dividend of 6.75%. The origination costs of $1.2 million for these units were written off and included in FFO.

Finally, we raised $50 million in proceeds from the sale of 1.2 million common shares off our ATM program. One other thing I want to cover is the AstraZeneca announcement that it will be relocating its new global R&D center and its corporate headquarters to Cambridge Biomedical Campus in the U.K. The Cambridge Biomedical Campus is owned by joint venture in which Liberty has a 50% ownership interest. The joint venture, together with AstraZeneca is applying for detailed planning approval. This process could take 9 to 12 months. AstraZeneca will purchase the land and it will own the buildings that are to be developed. We will participate with them in developing the buildings. The development will run from 2014 to 2016, and we estimate that the contribution to Liberty's earnings for this transaction will be $0.04 to $0.06 per share.

And with that, I'll turn it over to Mike.

Michael T. Hagan

Thanks, George. Let me start out by reviewing our second quarter acquisition and disposition activity. On the acquisition side, we acquired one property during the quarter. The property, 2100 M Street is a 291,000 square foot office building located in Washington, D.C. The property is well located with strong amenities and 2 Metro stops within a short walking distance. At acquisition, the property was 77% occupied.

In addition to acquiring the property, we received additional development rights that will allow us to expand the building by an additional 105,000 square feet. The site by right could be expanded to a maximum of 415,000 square feet. The purchase price for the property was $133.5 million. We are very pleased to have acquired a well located property with both a short-term upside in that is -- it is under-leased and a long-term upside to redevelop.

With the completion of this acquisition, we now own, between the joint venture and Liberty, close to 900,000 square feet in Washington, D.C. Subsequent to quarter end, we acquired a 593,000 square foot warehouse in southwest Phoenix for approximately $28 million. The building is a recently completed, cross-back warehouse. This building gives us immediate distribution space available for lease and increases our industrial footprint in southwest Phoenix. The building provides us with a value-added opportunity through resale.

With these acquisitions, our year-to-date total is approximately $161 million. Our guidance for the year was $100 million to $200 million. On the disposition side, we sold 6 properties, totaling 498,000 square feet for $51.4 million. On a square footage basis, 71% of these sales were to users. The most significant sale this quarter was the sale of Three Franklin Plaza, which we discussed on our last call. Three Franklin was the prior headquarters of GlaxoSmithKline. Glaxo vacated the property on March 31 to move to their new headquarters at the Navy Yard. We sold the property to a user for $29 million. This brings our year-to-date sales to $126 million. Our guidance for the year is $150 million to $250 million.

Let me conclude with some observations on the state of the investment sales market. On the industrial side, there continues to be strong demand for core assets, and top-tier and secondary markets. Cap rates in these top-tier markets continue to trade in the 5.5 to 6.5 cap rate range, with secondary markets 50 to 75 basis points on top of that. On the suburban office side, while there's not enough properties trading to establish a strong market, the amount of property listed for sales increased.

With that, I'll turn it over to Rob.

Robert E. Fenza

Thank you, Mike. Good afternoon. The second quarter was a very strong quarter for Liberty. Our people leased nearly 7.1 million square feet of space in 179 separate transactions. Over 5 million square feet of leasing was accomplished in the core portfolio and nearly 2 million square feet was leased in the development pipeline. The largest single lease signed during Q2 was a 1.7 million square feet, $93 million state-of-the-art highbay warehouse build-to-suit for Procter & Gamble. This project is being built on land we owned in our land inventory, along the I-81 Corridor in Central Pennsylvania. Prospect activity continued to improve in Q2, industrials leading the way. Houston; Lehigh Valley; Central Pennsylvania; Chicago, South Florida; Phoenix; and the Carolinas saw good prospect activity in the second quarter. Interest among larger users remained strong, especially among companies focused on consumer products, building materials and food. In addition, we are seeing increasing activity from smaller industrial users that typically seek space in multi-tenant industrial buildings.

On the office side, activity remained about the same, except for the Philadelphia Metropolitan market, which is getting better overall. It's very good at the Navy Yard and is picking up noticeably in the Western suburbs.

Turning to more color on development, we are seeing good activity in the development pipeline. As we discussed on the last call, there are 2 large inventory warehouse developments in the Lehigh Valley, Central Pennsylvania region scheduled to come into service during the third quarter. Subsequent to quarter's end and not included in the 7.1 million square feet of leasing in Q2, we signed a 551,000 square foot lease in our 972,000 square foot inventory warehouse project in Carlisle, Pennsylvania. This lease will commence on August 15.

On the 1.2 million square foot warehouse in Bethlehem, PA, we remain in active discussions and are comfortable with the progress we are making. During the second quarter, we also began construction on 4 more inventory industrial buildings. As I mentioned on last quarter's call, we began construction of a 2-building, 244,000 square foot, multi-tenant industrial project near the BWI airport along the I-95 Corridor in Maryland. This market has seen solid improvement in both prospect activity and investor interest.

In South Florida, we began a 148,000 square foot multi-tenant industrial building at our new Miami International Tradeport project along the Florida Turnpike in the Medley submarket. When complete, this Liberty Park will contain 1.5 million square feet of Class A industrial product in one of the top industrial markets in the country. We also began a partially pre-leased 156,000 square foot multi-tenant industrial building at our Caliber Ridge Industrial Park, located directly across the highway from the multibillion-dollar BMW manufacturing facility in Greenville, South Carolina.

Leasing activity among manufacturers and their suppliers has been robust in this market. And our new industrial inventory project is well positioned to capture this activity. With these development starts, our value creation pipeline now stands at 16 projects containing 5.8 million square feet at an investment of $411 million. With subsequent leasing since quarter's end, the pipeline is now 54% leased.

And finally, on the build-to-suit front. Liberty is extremely well positioned to compete for build-to-suit opportunities. Right now, we have over 8 million square feet of active build-to-suit prospects, spread over 7 of our markets.

And with that, I will turn the call back to Bill. Thank You.

William P. Hankowsky

Thanks, Rob. And just to wrap it up, so based on our second quarter results, we are comfortable reaffirming our guidance for the year at $2.60 to $2.70 per share.

And with that, I'll open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we do already have a question ready from the line of Alexander Goldfarb at Sandler O'Neill.

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

Bill, just first, going to your bullish comments. Certainly you guys, it echoes what we heard at NAREIT, so sort of a two-part question in there. One is, how do you -- how should we think about your bullish comments and what we've seen from EastGroup versus some of the economists and recent economic data that says that 2Q may be a little softer? Is it just a geographic thing? Or is this the difference between sort of big, corporate or big trends versus what's -- big international trends versus what's happening locally in the market? And then second to that is, what you're finding as far as housing tenants coming back as far as demand?

William P. Hankowsky

Right, okay. I think in the first question, Alex, I think it's the distinction between economic activity and the variables that drive it, and real estate activity. So on the softness, and you're right, I mean, pretty much the consensus now, the second quarter won't make 2% on the GDP side, whenever that number comes out. So therefore, year-to-date we won't be -- will be less than 2%. But as I think we've kind of mentioned in our opening remarks, there is this kind of just persistent, positive, slow, we used to use the phrase -- I think last year was slow, slug, back. I think we've sort of dropped that because it doesn't feel quite the slug, but it is slow and persistent, but it's positive. It just keeps happening. So when you go out into the market, you see velocity has picked up, i.e. more people in the market looking for space, people are generally have a sense the economy is going somewhere. They wish it would get there faster, they wish it would be better. I think we've all talked in the past about how economic news creates volatility. We all get excited about Bernanke says one thing and there's a big run one way and then we get a good housing number and there's a big run the other way. That volatility, I think, is masking this just nice persistent drive forward. So we see that drive forward. We see it in terms of people in the market. We see it in terms of space needs. We see it in terms of people willing to make a capital decision to invest. So I'm ready -- you heard 3 interesting transactions, sort of across George, Mike and Rob. So you heard about AstraZeneca making a big decision in the U.K., you heard about buying an asset in D.C., you heard about P&G making a logistics decision. So these are -- these investments are happening and people are making decisions. Progress is happening. And so in the real estate space, that's all good and it's amplified by disciplined supply. So to some extent I kind of -- I wish it was a little bit better, but I don't wish it was a ton better because maybe things would get out of control. It's really nice in a wide environment where disciplined, thoughtful real estate people are making moves in response to fairly thoughtful businesses making moves. And that all feels pretty good, and that's what we're seeing, and it seems to have a pace and people are pulling the trigger on decisions and that's why we feel good. To the housing side, housing's getting better, yes. I think, again, in perspective, we're nowhere near even 2005, 2006 housing kind of numbers, right? I mean, of course, we're way away from where they were in '08 and '07, when it was getting a little bit out of control. So there's even more room there that could happen. But yes, I think that the smaller -- smaller by the way, 20,000, 30,000 square foot industrial user in a sweet spot multi-tenant product kind of customer is more in the market. This is a kind of hot and cold situation. So those markets that are more housing dependent in Phoenix, in Houston because they see population growth, are going to see this benefit more rapidly than markets that are more mature Northeast markets. So I think our multi-tenant product in the, I guess, the southern warmer climes are seeing this more than our multi-tenant product in the northern climes. But yes, it is beginning to come back.

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

Okay. And then just the second question is as far as the 10-year is backed up and probably too soon to tell from deals in the market because of how long it takes, but just in general, your view. Do you think that the backup will impact cap rates for -- especially as you dispose of more suburban office? I mean, were people just underwriting a 1.5% tenure or in your view, people were underwriting more of like a 2.5% or 3% tenure, in which case the 100 -- the 70-, 100-basis point backup really is likely to have not that big of an impact on the cap rates?

William P. Hankowsky

Right. I'm going to get to that question. But let me just -- I think what is driving fundamentally, the transactional real estate market is the need for equity to invest to get return. And what stimulated equity to invest to get return was availability of debt. So this thing really took off in '10, going into '11 as debt became available. So the fact that the debt might be a little more expensive today than yesterday is, yes, it has something to do with how people do their math, but what drives this is the thirst for yield in an investment. And as Mike said in his remarks, our sense at the moment is that the core investor hasn't particularly moved much at all in terms of what they'll pay and how they'll look at assets. Good assets in good markets. Industrial seems to be very much in favor at the moment across the board. So I don't -- I can't exactly answer what constant they were using, but I don't think we've seen much movement at all in terms of people changing their underwriting and their cap rates and pricing as a function of a little bit of a hiccup in the debt markets over the last 60 days. We don't see it.

Operator

And your next question comes from the line of John Guinee over at Stifel, Nicolaus.

John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division

Since development is the hot topic and industrial development is the hot topic. A couple of kind of more big picture questions. First, Bill or whomever, when P&G decided to concentrate on 1.7 million square feet in that particular location, what's the rest of the story? Is that expansion or are they closing a number of other facilities? And if so, how was the sausage made? How did that decision get made? And what facilities are being closed? And then the second is, if you look around the country on the industrial specifically, it appears to us as if it's either a all or nothing. And the whole development process is a little bit like locusts descending on a particular market where the market is off limits but then all of a sudden everybody thinks they can build a product and lease it. And do you see that happening? We tend to see that happening in some of the larger, more broader-based industrial markets.

William P. Hankowsky

Two good questions, John. Let's say -- so let's -- let me deal with P&G first. First, to be quite candid, I'm not sure we're really in a great position to comment on P&G's overall logistical formulation. I think what we can say vis-à-vis this transaction is, and I think it's very indicative of something we've talked about over the last year, 1.5 years, which is that large consumer product, retailer, food, various players have gone through a process of what is the most efficient way to move goods, to get them delivered to a place, hold them and disperse them. And they have come up with different scenarios. We all -- we hear about the Amazon move closer into metros because we're going to try to cut delivery time. That's their business model. For P&G, what they were looking for was to put many products under a single roof because they're a huge -- they have many products. So they decided that, that is efficient for them to then distribute those products to their customers. So it's kind of a B2B decision. And so that resulted in the -- their decision about what the configuration was and the size that yielded. A certain size of site you needed to make it happen. That size facility handles x number of stores, so that I have to be sort of positioned to get to these various stores in a roughly similar travel time, that leads to one of those classic draw a circle. You define the distribution network. You define the product that will solve it. You draw a circle around where it wants to be. And then you go find who can make that happen. And I love the outcome, which is we were the guys in the right place at the right time who could deliver every one of those characteristics. So that's sort of that story from our perspective, best we understand it. To your question about the all or nothing, the development sort of what's happening out there. I a little bit agree with you in the sense that what's beginning to happen, and it's okay, right? This kind of goes back, actually to the first question about sort of this nice slow progression is helping the real estate markets get healthier, and so what's happening is -- and we, I think you all follow us fairly closely, so 6 quarters ago or so, we kind of felt like we were early movers in Houston. Well, we're not early movers anymore. I mean, today, a number of players are building in Houston, there's about between 4 to 6 million square feet, depending on how you quite count it, of industrial product under construction. Some of it's ours, but that's more than it was, again, 1.5 years ago. So yes, it's become a place where people say, "Hey, there's something going on there, maybe I should be playing." That's going to happen. South Florida, there are several players playing. Part of this is the tightness of these markets, and they get -- industrial gets eaten up, kind of big bits, right? Big leases, big bites, so it gets tight. People start looking at it. But even with that, if you look at historically, when those markets were torrid, it wasn't 4 million or 5 million square feet. It would be 10 million, 15 million square feet going on at one time. So they still feel relatively disciplined, in control, but there is no question that there is more emerging industrial development happening across more markets with more players doing it in a kind of gradual way over time than there was 1.5 years ago. I mean, I don't feel it's at all out of control or out of -- disproportionate to the demand situation. It feels kind of right at the moment. That can always change, but it feels okay right now.

John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division

Great answer. Just drilling down a little bit on P&G. Can you look and see a corresponding 200,000 or 2 million square feet of space they're vacating and identify that for us? As they consolidate into this 1.7 million square feet?

William P. Hankowsky

I can say it for Liberty, they're not leaving any Liberty space to move into this building. So I -- they may be in other space, they may have used 3 PLs [ph] These guys operate lots of different ways. My sense, but it's my sense, I don't have a scientific answer, is this is a net plus. But I don't know the math.

Operator

And your next question comes from the line of Jordan Sadler.

Jordan Sadler - KeyBanc Capital Markets Inc., Research Division

Bill, can you talk a little bit about the premium available for spec development versus build-to-suits? We continue to see you guys build some spec inventory and it's not clear necessarily what the benefit is today on a risk-adjusted basis.

William P. Hankowsky

Well, I think, let me first take the build-to-suit world and divide that into 2 buckets. Just so I'd...

Jordan Sadler - KeyBanc Capital Markets Inc., Research Division

Yes. No, no, that'll be helpful.

William P. Hankowsky

I'm talking about it, I'm talking about which bucket am I talking about. So there's a build-to-suit world, that is the build-to-suit world of, "I have a requirement. I go grab 7 guys. I go run a very intense competition. I am interested in a rent constant. I may have even -- I being the customer -- have even maybe even tied up a site." This is all about somebody deliver me a good product at the lowest cost. That's one world. And that's still -- that can be a pretty tough -- that math can be tough. Because right away, somebody can look at a 10-year credit tenant deal and say, "I can sell that to an institutional player. And I'm unhappy to sit on that for -- once I get it done for 30 days and sell it." So that probably is a world where Liberty is not necessarily wants to play, going to play, or maybe even win. The other is a build-to-suit where because we've had, we're positioned in the market either in a land position and possible ahead of time, because of our experience, because of our relationship with a customer, where this is a more relationship-driven discussion about how to get to a place, it has to be fair and economical for the customer. But those can be returns that we find adequate for our capital. It's that latter bucket that I'm going to compare to the spec, okay, not the former bucket, so the latter bucket. So because sometimes people will say, "Well, Bill, why are you getting higher returns on build-to-suit than on this?" Well, partially it's just that these are relationship-driven, these are about the land, it's about where we're at. On the spec side, our spec analysis is something as follows. We're looking at markets and we've talked about this in the past sort of what these sort of 2 filters that we go through. So one is where do we stand in the market? We are filled. We're at 97%. We have no product. The market is active. There is demand. We find it, as a general business proposition, that's not a good place to be. We need product for our customers. So we are open to -- should we go buy something or build something? Chicago's been a place, for example, where the alternative has been to buy stuff. That has generally worked for us. We bought a couple of buildings that are going to get -- well, actually they got extended so there's -- now, I'm not going to get vacant until next year. But that was the way we were going to produce product on the shelf. In other markets, we've found that building is a more economical way to address this. And so South Florida, we're going to be able to build, is it $100 per square foot, and that building is worth 115 or the BWI Corridor where the numbers might be somewhat analogous. So we're -- we feel we're creating value almost the day it's -- the day it's built at least, that there is a real pop in value because we're able to make that happen. So we think that's a good risk-adjusted way to invest capital. Obviously, in situations where it takes longer to lease it and it doesn't quite, well, I mean, that's part of the risk, you're right about that. That's the added ingredient. But overall, this has worked out pretty well for us, this combination of relationship-driven build-to-suits and inventory product in markets where the markets are kind of underserved and where new product for us will be a more economical way to add product to the market.

Jordan Sadler - KeyBanc Capital Markets Inc., Research Division

Just as a follow-up. I mean, what are the prospects for the

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in central PA between Carlisle and Bethlehem, sort of for the back half of this year?

William P. Hankowsky

Yes. So given our history at the end of 2012, when we thought we had them done and they went sideways for 2 distinctly different reasons

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to call these. But in Carlisle, okay, we did a significant amount of that building, there's space left. There are prospects for that space. So I'm comfortable that will get leased. As Rob said in his remarks, I mean, initially it's in the supplemental, right? I mean, these are getting delevered this quarter being the third quarter. I don't think the rent is commencing for the rest of that space in the third quarter. We don't have one signed in Carlisle. In Bethlehem, what I can tell you is we are in discussions with folks. Those discussions have in a positive way progressed in a way that is comforting to us. We are not done. We have nothing to announce. But I think it is conceivable we might have something to announce before the end of the year. I'll leave it at that.

Craig Mailman - KeyBanc Capital Markets Inc., Research Division

It's Craig Mailman here with Jordan. Just a follow-up to that. I know last quarter, we talked about maybe a $0.02 drag from the vacancy if it all were to hit in the fourth quarter. Kind of, what are you guys expecting in guidance now and is that kind of offsetting any of the benefit from the preferred unit redemptions?

George J. Alburger

Craig, this is George. Let me answer that. And the impact of these buildings coming into service under tenanted, if you will, is twofold. One is the capitalized interest in carrying costs -- the interest in carrying cost that we were capitalizing in the second quarter and for part of the third quarter, we will no longer be able to capitalize for the balance of the third quarter and into the fourth quarter. And then furthermore, yes, our original guidance did bake in these properties coming into service consistent with where they were on the development pipeline schedule. So for the third quarter, that's kind of a negative impact, if you will, of about $1.6 million. And to answer your question, yes, that is baked into our earnings guidance for the full year, and Bill's confirming that earnings guidance for the full year.

Craig Mailman - KeyBanc Capital Markets Inc., Research Division

Okay, and then just 2 quick follow-ups. Was the lease on Carlisle, was that consistent with your expectations underwriting?

George J. Alburger

In terms of whether -- yes, the rents were.

William P. Hankowsky

Yes. The rents were, yes.

Operator

And your next question comes from the line of Josh Attie at Citi.

Joshua Attie - Citigroup Inc, Research Division

The rent spreads in the quarter of up 1% GAAP were much better than your guidance for the year of down 2% to 7%. Were there any large industrial deals that might have skewed the number? Or is the fundamental trend just better than you thought and could that continue?

George J. Alburger

This is George again. Of that 1 point -- what was it, 1.1% increase, that increase resides in industrial. It was a modest decrease in office. The increase does reside in industrial, but it was not driven by any unique one industrial transaction. It was pretty much across the board.

Joshua Attie - Citigroup Inc, Research Division

When you look at what's -- what you have rolling in the back half of the year, has the market gotten better to where you think that you'll trend better than guidance -- the initial guidance for the rest of the year?

William P. Hankowsky

I think -- this is Bill, Josh. Again, we're comfortable with guidance and reaffirming it where it is, and that's a summation of many ingredients that are moving in lots of different ways with the company. So looking at midyear, what we've done, and then 6 more months of what we think we're going to get done, that's what happens. I think, generally -- so let me pull a little bit away from Liberty guidance specific. Generally, industrial rents are moving up in the markets. So this tightness that I think we talked about maybe a question or 2 earlier here, is happening. That's a nice thing. And that is yielding some movement up in market rents and to the degree that's a little bit better than maybe we had thought back in December. Yes, right, December is when we give our guidance call. Yes, then maybe it feels a little better than we thought then. But I don't -- again, I go back to this persistent pace of progress versus -- I don't want anybody to think there's like spiking or something's galloping away. It's just nicely getting better.

Joshua Attie - Citigroup Inc, Research Division

Okay. And sort of a separate question. Would you consider a more aggressive taste of suburban office sales given that long-term treasury yields have started to move higher? And I fully recognize that you've been a very active recycler of capital over the last couple of years. I'm just interested in whether thought's being given to, I guess, a more aggressive strategy, both from the perspective of getting ahead of higher future rates potentially, and also that some of your peers have had good success by doing this.

William P. Hankowsky

I think the answer, Josh, is that we like to think we're pretty decent at being thoughtful, and constantly asking ourselves is there something we should be doing, something different to do or whatever. So Mike gave you a nice update on how much we bought and how much we've sold this year. We always say that those ranges are kind of -- they give you our best sense of what we think we might get accomplished. You can see we're running a little ahead of our pace on the acquisition side, so I wouldn't be surprised if we went through that number in our range and did a little better if opportunity shows up. And we also are very clear, I think, all the time that if there's an opportunity to move our strategy forward, whether it's by a larger acquisition or whether it's by larger disposition, we look at that and we evaluate that and we think about it. So all I can tell you is we're actively thinking about lots of things.

Operator

And your next question comes from the line of Brendan Maiorana at Wells Fargo.

Brendan Maiorana - Wells Fargo Securities, LLC, Research Division

George, I think I probably know the answer to this but I wanted to confirm. So the drop in the expected yield on the development pipeline this quarter is just a function of kind of what came out of the pipeline and what came in, as opposed to there were no changes in the underlying yield expectations for the property that remained in the pipeline from last quarter to this quarter?

George J. Alburger

Generally correct, Brendan. We do update the cost, and to the extent there is a lease that is signed, we put that actual lease in there rather than what the assumption was as to what the lease would be. But all of them are pretty -- all that activity is pretty much in line with how they were originally underwritten. So it's really what you said, it's the balance of the ins and the outs.

Brendan Maiorana - Wells Fargo Securities, LLC, Research Division

Okay, great. Bill or Rob, I think -- I wanted to think about occupancy a little bit. If I look at your overall occupancy on the wholly owned portfolio, it's 93%, which is a little bit higher than average but probably a rough average number for a Liberty portfolio midcycle. When I look at the office side, it seems like that's probably where there's the most opportunity to move up, and the areas where you've got kind of low occupancy is in your backyard in Southeastern Pennsylvania, which I think, Rob, you mentioned was getting better, and then also in Minnesota, too. So I'm wondering if you can provide, I mean, a longer-term outlook, maybe 12, 24 months of where you think you can get occupancy, maybe overall for the portfolio, and if there's opportunity within those 2 markets as well.

William P. Hankowsky

Okay. It's Bill. So let me try to address that a little bit. So and as you know, part of what happens in this portfolio too is we're buying stuff and selling stuff. So you get a little bit of occupancy movement up or down as a function sometimes of literally how the portfolio gets reconfigured quarter-over-quarter, so there's a tad of that going on here, Brendan. But overall, I would say, look, I think you're right, I think 93% is a nice number. Can you get to 94% or 95% overall portfolio? I think that would be a kind of probably pretty -- 95% is what feels like pretty good because you just got natural movement in and out, and so it's hard to get yourself much past that. The industrial side is kind of there, right? Maybe even a tad over that. So that feels pretty well leased. So that does leave the office side. And you've correctly identified some of the places where there's some opportunity. And it really resides in a couple of even distinct buckets within those markets. So one bucket in the Philadelphia metro market is the Western suburbs that Bob mentioned, which is Malvern, and there is a set of assets here that we've been looking at whether there would be a significant redevelopment opportunity. So we have actually, in the midst of evaluating that, and have to some extent, stopped leasing or not actively leasing, I think it's around -- it's not quite 300,000 square feet, but several hundred thousand square feet of real estate as we evaluate that. So -- and it is what it is, and we've made that decision. And we may end up deciding that we will, in fact, try to lease the stuff and redevelopment doesn't quite all work the way we think it is but we're evaluating that. But for the moment, it's a little bit of self-inflicted occupancy or vacancy, I guess, is the right word, that we put on ourselves. So I think we will make a decision about that, and that decision could involve let's lease them, could involve let's redevelop them. But all of that will transpire, time frame isn't too bad, 12 to 24 months over time, we're going to make a decision to do something about that. So I think it is not past the pale for us to increase our occupancy in the Malvern area as we execute on whatever path we select, and that could -- that would be one lift. There are 3 office buildings in Minneapolis that we took on at a fairly interesting acquisition price. Mike, $42 a square foot, something -- a little while back. It's taken us a little bit longer to deal with them than we thought, to be candid. But we think that our investment in it isn't a bad investment. To the degree we're able to get some movement on those, and I think 12 to 24 months is easily a time frame when something could happen, you will see a lift there. The net of that would be your conclusion, which would be that our office portfolio could move from 88%. Could you get it to 90%, 92%, kind of between 90% and 92%? That would be nice, that would be a lift, particularly given that those rents are multiples of industrial rents. So none of that is -- all of that is possible.

Brendan Maiorana - Wells Fargo Securities, LLC, Research Division

Okay, great. And then last question, Bill, I think you mentioned Chicago, you did some leasing. And I think you had a couple of the acquisitions from last year where there were the expected tenant move outs and it sounds like maybe that's not going to happen now, is that -- did I hear that correctly?

William P. Hankowsky

The only thing -- no, that's okay. The only thing that's happened in Chicago is they are ultimately going to move out. They both have homes to go to, but in each instance for slightly different reasons. One is a delay in their new home being finished, the other is that they just have a little bit more inventory to move before they get it all done. They have basically each extended a few months each to deal with that. So the something that we thought would occur in calendar -- late calendar '13 will now be early calendar '14.

Brendan Maiorana - Wells Fargo Securities, LLC, Research Division

Okay, so it just gives you a couple more months, but you...

William P. Hankowsky

Timing issue, that's it.

Operator

And your next question comes from the line of Brandon Cheatham at SunTrust.

Brandon Cheatham

Just real quick. It sounds like overall your markets are firming out quite nicely. Just could you shed some color on -- has that changed your pricing power and you think that's going to flow through to year end? And is product moving a lot faster than it used to? Is that changing your lease-up expectations for your development pipeline?

William P. Hankowsky

Okay. I think on the pricing side, let's think of it -- let's put again -- to talk about our portfolio given that we've got various product in our portfolio. I think on the industrial side, pricing is clearly getting to a place where landlords are seeing some pricing opportunity. So the markets have gotten firmer, are moving forward and that is yielding some capacity and you see industrial rents move up. So yes, that is happening. Again, not -- no spikes out there, no -- nothing that's getting toward all of a sudden but yes, it's getting better. On the office side, it's a little more muted. There's still -- depending on the situation, you're a 10,000 square-foot user in a big metropolitan area. You got 30 options, and probably not a lot of pricing power there that a landlord's seeing. But as markets firm up, and what happens in these markets is a very -- it literally is, pardon the analogy, sort of brick by brick. So there's -- you need 50, and there's only 3 50,000 square foot options. I'm -- as a landlord might say, "I'm not chasing that. I'm going to let the other guy take it because then I'll be only 1 of 2. And I'm going to stay with my price." And that's how firmness happens. Firmness happens as people make discrete decisions about I'm not chasing deals, I'm holding as the amount of inventory shrinks. So on the office side, in some submarkets with certain kinds of space, it is firming up. It is going to move. I mean office rents have come off where they were '09 and '10, for sure. But they are not -- again, they are moving at a slower pace than industrial rents as a percentage increase over time. So it's getting a little better, but I would say there's more power to an industrial landlord than there is -- pricing power than there is to an office landlord, just as a generic, across all our markets, general property type. In terms of product, I'm not quite sure I understood the question. Were you asking do we think we're going to produce -- go ahead.

Brandon Cheatham

Yes, for your lease-up periods, has that time line kind of shortened? I think [indiscernible] you were at about 54% for your leased and new development pipelines [indiscernible]

William P. Hankowsky

Yes. Just as a reference point, we're fairly consistent and disciplined about how we think about our development pipeline. Obviously, build-to-suits are leased going in. When we build inventory product, across the board, we build in a 1-year lease-up, a 12-month lease-up. So when you see the investment number on the sheet, that includes the carry for that 1-year period, as well as the TIs, et cetera, that are involved in, the full investment in the product. So to the degree it gets leased sooner, it will improve the yield because obviously, there was a cost we didn't incur. And we do that as a way to just -- we hope we will lease them sooner. They are often leased sooner than the 1-year lease-up. But whenever you see -- and Rob walked you through it, we added the 2 in BWI, we added the 1 in Miami this quarter in the sense of starts, those all have 12-month lease-ups in them, And we're not going to change that because we think the markets get better or worse. I mean, we just think that's a good way to be careful about being conservative and how much it might cost to make this happen. And it is conceivable they get done sooner as the markets get firmer, but it doesn't sort of change the way we'll approach it or our methodology.

Brandon Cheatham

Right. But have you seen kind of any change recently that's led you to believe that those will get done sooner?

William P. Hankowsky

All I can say is we are encouraged by the amount of activity there is in these markets and the amount of activity -- people that have asked us about these buildings. But we're kind of -- they're leased when they get leased. So there's not enough -- we haven't seen enough thoughts yet that make me say, "Oh yes, everything's going to be get leased in 6 months." I'm not -- we're not at that point in the cycle.

Brandon Cheatham

Okay. And then on the D.C. acquisition, you had a long-term yield of 6.2%. Was that unique to that particular acquisition? Is that kind of something that you're seeing in that particular market from a valuation point of view?

George J. Alburger

I think that it's a situation which there's a lease-up capability within that and once that building gets leased up, we'll hit that range of return that we said, 6.2%.

William P. Hankowsky

Right. And remember, this is a building that also has a redevelopment opportunity and we bought development rights. So short term, we're comfortable that that's an appropriate return to have this asset -- the asset, lease it where the market is but it also had the opportunity -- what was it, 105,000 square feet, Mike, of development rights we bought with it. It could go up to 415,000 square feet from 290,000.

Michael T. Hagan

291,000.

William P. Hankowsky

So this is both a short-term acceptable return in the D.C. kind of market and in the long-term fairly interesting investment opportunity.

Operator

And your next question comes from the line of John Stewart.

John Stewart - Green Street Advisors, Inc., Research Division

Bill, you've been pretty clear that you see supply as picking up, but disciplined. Does that hold true for Central PA, which seems to be a market that the locusts have discovered? And then on a related point, how do you think about the functionality of the 1.7 million square foot build-to-suit? What's the lease term? How do you think about releasing that, or is that a building that you expect to hold for 30 days after completion?

William P. Hankowsky

Well, I'm not -- we don't put our playbook out there, John. So let me just say that it's a long-term lease that you would find acceptable in terms of this customer, and it does give us the flexibility to think about is this something we want to hold long-term or not. We haven't made any decisions. We haven't even built it yet, but we will think about those things over time. You're right, it's a big building. But it's a -- as you know, we build buildings that we believe have functionality past their original user. So we'll think about this and more news to follow on that individual asset question. With regard to the locusts, et cetera, well, at the moment, and if you go -- if you sort of start up in the Lehigh Valley and kind of come down the corridor, we have the one building that's been in discussion in 1 or 2 questions here this afternoon. Let's just say that building gets taken care of sometime in the rest of '13. There's a couple of players, we might even be one of them, who will think about building the next inventory building of scale. But it's not as if -- I don't think you'll see 3 of them go up at once in Bethlehem. You might see something -- we could be the next guy. It could be -- there's a guy across the street. There's a guy on the other side of the street. So somebody will start a building. We have other land positions if you go further west, west from Bethlehem, in as we call it the Valley. So would we do something somewhere else? Maybe because we think it's another situation. But there's not a ton of inventory laying around. When you come down to Harrisburg, Carlisle, that corridor, I think there's 2 seriously sized buildings down there that are available in addition to the other half, or something -- less than half, 40% of our building. But people talk about starting, but it's not as if a lot of people start. So I think everybody is circling. So if the locusts are circling, I think that's right. I don't think a ton have landed. Would you say that's fair, Mike?

Michael T. Hagan

Yes.

William P. Hankowsky

Yes, I think that's kind of where we're at, at the moment in that market in terms of where it stands. But you're right, more people are looking. That's clear. But not more people have pulled the trigger.

John Stewart - Green Street Advisors, Inc., Research Division

Okay, and a clarification for Mike, if I may. Mike, I thought I understood you to say that you see more suburban office product hitting the transaction market. Is the implication that you think pricing will weaken?

Michael T. Hagan

John, I would tell you, I think there's more product listed out there. I can't tell you I've seen a lot more traded yet. And I also think that, as Bill commented earlier about the thirst for yield, a piece of what's driving people looking at it is the potential yield. And I think there's also potential in terms of lenders, where they weren't necessarily willing to lend on it at one point in time, now seem more willing to lend on it. So the point of this thing is that: a, I do think that a market will start to develop in the sort of office side.

John Stewart - Green Street Advisors, Inc., Research Division

I'm sorry, what was that last part?

Michael T. Hagan

I do think you'll see more of a market develop in terms of trades on the suburban office side.

John Stewart - Green Street Advisors, Inc., Research Division

Got it. Okay. And then lastly for George. The $0.04 to $0.06 from the AstraZeneca project, will that be ratable over 2014 to 2016, and what does that look like? Is it land sales or development fees?

George J. Alburger

The transaction isn't fully documented yet. I mean, the land take and size of it isn't yet fully documented. I know AstraZeneca put out that it's a GBP 330 million transaction, but the size of this transaction is it's presently at 750,000 square feet but it could bounce around a little bit for us, and also I'm not exactly sure -- we'll have to see how it is documented to see exactly what the bookkeeping is for how we reflect that $0.04 to $0.06, whether it comes in ratably or whether there's some element that comes in as a land sale gain, and another element that comes in as with respect to the development.

Operator

And your next question comes from the line of Tom Catherwaite [ph] from Cowen and Company.

Unknown Analyst

Bouncing back to the P&G development, does this use up all of the land that Liberty has for the site in Shippensburg, or is there additional space that you guys have?

William P. Hankowsky

We're -- at the moment, we're out of land. It's the entire site that we have.

Unknown Analyst

Okay, okay. And then reading the reports about the P&G development, there's been some mention in the press about Pennsylvania first grants. Any chance that these kind of grants are incentivizing build-to-suit development that could potentially harm or slow down leasing in Carlisle and Bethlehem?

William P. Hankowsky

No. I say that so dramatically, partially because, I mean -- not to go off topic, but I mean, that's my back -- I mean, I know a lot about this stuff. That these are at a scale that they are, what they're trying to do is at the margin, make you say, I'm going to be in Pennsylvania instead of Maryland, or I'm going to be in Virginia instead of Delaware, or something like that. So it's about location decisions. It's not really -- it's not making -- you're not going to say, "Oh someday, I'm going to do a build-to-suit because I can get a grant for it." You're in the build-to-suit. You've made a decision. You're out building your logistic solution. And now, you're looking at various alternatives and you say, "If this happens to touch 2 or 3 states, let me see if there's a competitive advantage one state versus another." And that's how these -- that's what they affect. They really don't affect -- they don't incentive -- there's not enough of an economic rationale here to incentivize somebody suddenly doing a build-to-suit.

Operator

And your next question comes from the line of John Guinee at Stifel, Nicolaus.

John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division

Maybe just a follow-up here, just a point of reference. Your 1.7 million square foot development's about 39 acres under 1 roof, which is about 1/3 the size of a typical golf course. So anyhow, my next question.

William P. Hankowsky

The site is 100 and -- what was the site, Mike, 188 acres?

Michael T. Hagan

Yes.

William P. Hankowsky

So you could get a nice 18 holes on it, John, if that is an alternative use.

John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division

It's too far away from the population centers for anybody to actually play golf there, but it's okay. Western Carlisle, I guess, is the location. Anyhow, it looks to me, if I look at your development pipe of about $411 million, $133 million on that wonderful acquisition in D.C., $65 million of preferred redemptions, a little over $600 million, you sold $50 million of assets and then had $50 million on the ATM. It seems to me like you're going to be -- you either have to go back to the equity markets in a more meaningful way than an ATM, or sell some assets in order to keep your leverage levels down. Which one are you going to do?

George J. Alburger

This is George, John. You don't really expect me to answer that, do you?

John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division

Well, it is 2:00, and nobody's listening anymore. So it's just us.

William P. Hankowsky

So it's just between us, right? And that's all right.

George J. Alburger

Yes, pretend it's just between us and nobody will know, I'll give you the answer. But you also know, John, that we've redeemed -- you gave us 2 capital sources. One, we could sell some real estate. We could -- we do have an ATM. I know you say, perhaps, it's not robust enough to handle the capital needs, but it's still available capital. And finally, you're correct, we did redeem $60-some million worth of preferreds this quarter. But when you look at it, we've redeemed over 200 and -- geez, I guess it was close to $285 million worth of preferreds over the last -- little more than 1.5 years, I guess. So we have an awful lot of preferred capacity, so that's another capital source available to us.

John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division

Okay, so you have 3 choices. Which one are you going to do then?

George J. Alburger

We're going -- whichever one is most efficient for us, the best one.

Operator

And your next question comes from the line of Paul Adornato.

Paul E. Adornato - BMO Capital Markets U.S.

Just a quick follow-up on AstraZeneca. How much space are they giving up in the U.S., and do you have any indirect exposure to any of that?

William P. Hankowsky

This is -- they're going to be locating 2 facilities at -- or Cambridge Biomedical Campus. One is a R&D facility that's located elsewhere in Cambridge, and then they're also moving their corporate headquarters from Central London to Cambridge. So as far as I know, I don't know what could be -- it's all European.

Michael T. Hagan

It's all European.

William P. Hankowsky

It's all European.

Michael T. Hagan

It's not American.

William P. Hankowsky

it's all European. It's Cambridge in the -- it's our activity, Cambridge in the U.K.

Paul E. Adornato - BMO Capital Markets U.S.

Okay, good. And just with respect to the value creation pipeline. I was wondering if you could help us understand some of the parameters with respect to the overall volume and the composition of the pipeline that is, if you're a little bit more bullish on industrial, would you increase the percentage of spec within the pipeline?

William P. Hankowsky

Paul, I think the way to think about is, and you're right, this is the right question to ask. Again, the pipeline consists of 2 component products: One are build-to-suits, where we are, to be blunt, reactive, right? So customers have needs, they come into the market, they talk to us, we react and that's the pipeline that Rob mentioned has about 8 million square feet of build-to-suit potential projects that we're talking to people about. And some, they won't do, we won't get them all, but that's that piece of the value add. So some subset of that will get added to this pipeline over time. The other proportion is inventory spec space, and that for us is very much driven by this dual filter. So do we have product in our markets to satisfy our customers? And to a degree, we don't. And this goes back to, again, an earlier question on the -- and the answer is, to your -- it's buried in your question, our industrial occupancy is like 95%, almost 96%. So generally, on the whole, we don't have a whole lot of product left. Therefore, I probably need product in order to satisfy customers. So yes, we would look more there. And the second criteria there will be the issue of where is that market. So we're not going to build into a soft market or a market that's overbuilt or whatever, or where we could buy and that's a better way to play it. So again, in this quarter, good example: We bought a vacant building in Phoenix, subsequent to quarter's end for, Mike, $46, $47 bucks?

Michael T. Hagan

Around that [indiscernible]

William P. Hankowsky

If I remember -- so we find that to be a better play than building a building in Phoenix right now. On the other hand, buying a building in the BWI Corridor is, one, probably very unbelievably expensive. So it's better for us to build there. So we're going to do -- both of those are possibilities. But you're right, what you're going to see is you're going to see some build-to-suits in this value pipeline, and you're going to see industrial inventory that we think's appropriate. And maybe we build a build -- in our office -- inventory of the Navy Yard. We've said that in the past. There might be 1 or 2 places office might make sense, but that's going to be very rare, so -- and again, we thought this pipeline -- I think, again, for the year, we thought we'd do about $300 million to $400 million starts -- $300 million to $400 million in starts, and we're clearly on that track. So nothing there has particularly changed either.

Operator

And your next question comes from the line of Josh Attie at Citi.

Michael Bilerman - Citigroup Inc, Research Division

It's Michael Bilerman. Bill, just a question. So Cali just announced the sale of the suburban product in Philly. Are you a buyer or a seller at those valuations?

William P. Hankowsky

Well, I think the Cali transaction stands on its own, Michael. So a very capable local player, Keystone, is a believer in the market, does a nice job on reuse. I have a lot of respect for those guys. They understand this market. They thought it made sense for them, great on the buy side. We all know that Mack-Cali is looking at diversifying their mix, so there's other things they're thinking about. And so they -- it was great on their side. We have been a seller here. I mean, we've sold about half our position in South Jersey over the last 1.5-ish years, kind of 2 years. We've also -- we've done some nice user sales in this market. We want to have less suburban office over time. So I think we would look at, in the Philly market would we -- at the same time, we're building a brand-new building for Vanguard out here. We might be a seller of some portion of our suburban product at any point in time. And I think Josh asked earlier, is our appetite different? We're just constantly thinking about this stuff, paying attention, evaluating and we'll decide accordingly. So all that is open to us.

Michael Bilerman - Citigroup Inc, Research Division

And does the cap rate, if you sort of dig through the numbers, let's call it north of 9, somewhere $135, $140 a foot. Does that seem appropriate for a suburban office in those markets?

William P. Hankowsky

Well, I think you got to be very specific, Michael. So by the way, when we have talked about selling suburban office that we didn't want in our inventory, I think, Michael, we've talked in ranges of 8 to 10. So does that price of the Cali is going to fall in there and feel like -- you also have to talk about age of product, where it is, submarket, et cetera and I'm not going to go through every one of the assets in that portfolio. But I think there's product in suburban Philadelphia that could sell for a 7 in terms of the credit of the tenant, term, submarket and there's stuff that could sell for a 9. It's, again, age, location, it could be higher than a 9. So I -- my gut and again, I think 2 thoughtful real estate people made a transaction that they think is pretty fair and kind of appropriate.

Michael Bilerman - Citigroup Inc, Research Division

And how much product do you have on the market today? And what is sort of disposition guidance relative to what you've completed year-to-date?

William P. Hankowsky

Well, our guidance for the year was that we'd sell $150 million to $250 million. Year-to-date, we've done $126 million. So kind of beginning to get to the lower end of the range halfway through the year. I go back to what we say all the time. So those ranges are our best shot in December, what we think we'll probably accomplish, all things being equal. And we affirmed guidance earlier at the beginning of the call, so that's our range. We are also open that if there's an opportunity to do something that advances our strategy and is bigger, we might consider it. So no one should ever get shocked by that. But that's our range right now, $150 million to $250 million, and we're comfortable leaving it there.

Michael Bilerman - Citigroup Inc, Research Division

I guess, where all these questions keep on coming is eventually you'll need the capital and raising equity, raising preferred, raising debt is a phone call whereas asset sales tend to take longer to do. And so I think we're all just trying to get our arms around whether you are contemplating, or whether you have more on the market to be able to fund that. And that's where -- listen, you've been tremendous at capital recycling over the years, so it's not a knock in any way. I think we're just all trying to get a better perspective of whether there's potentially more to come.

William P. Hankowsky

Yes, and Mike, I absolutely don't take it as a knock at all. I totally take it is a very thoughtful question. But I also -- and I think you know it suits me, too. On the one hand, we're stunningly transparent, and on the other hand, I never like to tell you what the playbook is until we're ready to execute and call the play. So we may be in the huddle thinking about plays to call, but we're not going to get you. We're not talking about what's listed and what's out there.

Operator

And there are no further questions.

William P. Hankowsky

Well, thanks, everybody. Appreciate your interest and focus, and hope you're having a great summer. We'll talk to you at the end of the third quarter.

Operator

This concludes today conference call. You may now disconnect.

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