Chambers Street Properties' (CSG) CEO Jack Cuneo on Q2 2014 Results - Earnings Call Transcript

Aug.10.14 | About: Chambers Street (CSG)

Start Time: 08:30

End Time: 09:05

Chambers Street Properties (NYSE:CSG)

Q2 2014 Earnings Conference Call

August 6, 2014 08:30 AM ET

Executives

Jack A. Cuneo - President and CEO

Martin A. Reid - EVP and CFO

Christopher B. Allen - EVP of Capital Markets and Finance

Kara Smith - ICR, LLC

Analysts

Mitch Germain - JMP Securities

Todd Stender - Wells Fargo Securities

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

Steve Manaker - Oppenheimer & Co.

Christopher Lucas - Capital One Securities, Inc.

Operator

Greetings and welcome to the Chambers Street Properties Second Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I’d now like to turn the conference over to your host Kara Smith with ICR. Please go ahead.

Kara Smith

Good morning. We’d like to thank you for joining us today for Chambers Street Properties second quarter 2014 financial results Webcast and conference call. In addition to the press release distributed earlier this morning, we’ve provided our second quarter 2014 supplemental information with additional detail regarding our financial results in the Investor Relations section on our Web site at www.chamberstreet.com.

On today’s call, management’s prepared remarks and answers to your questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include those related to revenue, operating income, financial guidance, as well as non-GAAP financial measures such as NOI, FFO, and core FFO.

As a reminder, forward-looking statements represent management’s current estimates. Chambers Street Properties assumes no obligation to update any forward-looking statements in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements contained in the Company’s filings with the SEC and the definitions and reconciliations of non-GAAP financial measures contained in the Company’s financial results press release and supplemental information, both available under the Investor Relations section on the Company’s Web site.

On this mornings conference call, we’re joined by Chambers Street Properties President and Chief Executive Officer, Jack Cuneo; Chief Financial Officer, Marty Reid; and EVP of Capital Markets and Finance, Chris Allen.

Jack and Marty will provide an overview of Chambers Street’s second quarter 2014 financial results. After which we will open-up the call to your questions. Now, I’ll turn the call over to Jack.

Jack A. Cuneo

Thank you and welcome to our second quarter 2014 earnings conference call. Let me begin by saying that we’re pleased with our results this quarter and our execution through the first half of the year.

Our leasing teams executed over 677,000 square feet of new and renewal leases. We completed an expansion of our Lille, France investment and we signed an expansion for our Colonial Parkway property, in Houston, Texas.

At the end of the quarter, we closed on the sale of our remaining retail asset Maskew Retail Park, in the U.K. and we completed the acquisition of 1 Rocket Road in Los Angeles.

Finally, we continue to enjoy the benefits of a sound balance sheet with ample flexibility to support our long-term growth strategies and our monthly dividend remains well supported by our cash flows. Marty will provide more details in our capital activity later in the call.

Turning to operations, let me begin with leasing. In the industrial sector, fundamentals remain strong and we continue to see solid demand in most of our markets from traditional industrial and logistics tenants as well as e-commerce tenants. Our new development has increased slightly. It’s well supported by continued demand as long as overall economic trends remain positive; we’d expect to see strong demand for our portfolio of modern well located industrial warehouse buildings.

In the office market, job growth has improved. However, the overall pace of tenant expansion remains modest as companies have started to use space more efficiently. New construction remains in check which is the case in virtually every market.

We are seeing demand from a variety of space users, including energy, pharmaceutical and healthcare tenants. Given our office portfolio was concentrated in strong markets, with a significant corporate presence, we believe that our well located Class A assets are well positioned to compete in today’s marketplace.

During the quarter, our team executed 10 leases for approximately 677,000 square feet of office and industrial space. This includes 206,000 square feet of renewals and 417,000 square feet of new leases for previous lease space. The annualized base rents on the 623,000 square feet represents a 9% average increase on a cash basis and a 22% average increase on a GAAP basis over the corresponding prior leases. This brings our total lease and volume for the first six months of the year to over 1.5 million square feet.

Let me give you a little bit greater detail on a few of these larger lease transactions. As we mentioned previously, during the second quarter we signed a new 316,000 square foot lease with a food products company at our Union Cross II property in Winston-Salem, North Carolina. We captured a strong positive spread on this lease and importantly we had no downtime between tenants.

We also signed a full building lease at our Orangeburg industrial property near Charleston, South Carolina for 101,000 square feet. Looking ahead, our near-term lease expirations remain modest. We have 1.2% of our total base rent expiring in the remainder of 2014 and only 2.9% in 2015.

Also during the quarter, we’re able to accommodate two tenants with building expansions. We signed an expansion and extension agreement with Norway based Det Norske Veritas, DNV, a global provider of risk management services. The 47,000 square foot expansion of this Houston property will bring the total building to 137,000 square feet and upon delivery in 2015 DNV’s lease overall to a new 10-year term for the entire property.

Also during the quarter, 126,000 square foot expansion was completed at our industrial asset in Lille, France bringing the property to nearly 1 million square feet. This property is leased on a long-term triple net basis to one of the largest e-commerce businesses in the world.

Our ability to grow our portfolio with expansion opportunities from our current tenants is a testament to the quality of our real estate and the strength of our in-house management team. By solving the space used for our tenants, we retain them in our buildings for an extended period of time.

Beyond these internal opportunities for growth, we continue our disciplined approach to acquiring U.S industrial assets. We are seeing a very healthy volume of acquisition opportunities. However, cap rates remain quite low, especially for the quality of assets that we’re [ph] [seating].

Looking ahead, we’re in various stages of due diligence on several properties and we will continue to consider opportunities that meet our quality and return thresholds. Rather than chase current pricing just to acquire properties.

I’m pleased to announce that in late July we closed on the acquisition of 1 Rocket Road in Los Angeles for approximately $47 million. 1 Rocket Road is an approximately 510,000 square foot industrial property. The property is fully leased on a net lease basis through January of 2023 to Space Exploration Technologies Corp or SpaceX, which designs, manufactures and launches advanced rockets and spacecraft.

On the other hand we’re taking advantage of aggressive pricing by continuing to sell non-core assets which would then provide us with capital for new investments. In July we completed the sale of Maskew Retail Park, our last retail asset in Peterborough, in the United Kingdom, for approximately $63 million. This sale -- the sale of this asset represents the completion of our exit from retail.

Moving ahead, we will continue to look for additional sales of non-core assets and other assets were we believe we’ve maximized value creation for our shareholders.

With that, I’ll turn the call over to Marty. Marty?

Martin A. Reid

Thank you, Jack. Good morning, everyone and thank you for joining us. This morning I’ll review our second quarter operating results, and then I’ll review our balance sheet, liquidity position and update you on our 2014 guidance.

This morning Chambers Street reported second quarter 2014 Core Funds from Operations of $40.5 million or $0.17 per diluted share compared to $39.4 million or $0.16 per diluted share for the same quarter in the prior year.

For the six months ended June 30, 2014 Core Funds from Operations was $80 million or $0.34 per diluted share compared to $78.9 million or $0.32 per diluted share from the same period in the prior year. As noted in our disclosures, we believe core FFO is the most relevant comparable measure as we add back non-recurring items.

Year-over-year increases in core FFO are primarily attributable to higher property net operating income resulting from property acquisitions we’ve completed since 2013 and were partially offset by higher interest expense from additional borrowings. In the second quarter of 2014, same-store NOI was essentially flat on a GAAP basis and increased by 3.7% on a cash basis compared to the same period in 2013.

Turning to our balance sheet, as of June 30, 2014 we had total debt outstanding of approximately $1.6 billion, including our pro rata share of unconsolidated entities. This debt had a weighted average interest rate of 3.9%, and weighted average term to maturity of 4.69 years.

Our net debt to enterprise value was approximately 43.5% and our net debt to annualized adjusted EBITDA was approximately 6.7 times. At this point we remain comfortable with our leverage metrics, which is well within our desired parameters. At June 30, 2014 we had just $44 million in debt maturities and scheduled amortization remaining in the year and our unencumbered asset base represents approximately 51% of our total portfolio at cost.

At June 30, 2014 we had $55.6 million of cash on hand and $170 million outstanding on our $850 million revolving line of credit, giving us plenty of capacity to pursue our strategic growth objectives.

Turning to guidance for 2014, this morning we reaffirmed guidance for core FFO per diluted share for the year ending December 31, 2014 with the range of $0.65 to $0.69. I will remind you that this guidance range assumes that G&A expense will be between $25.5 million and $27.5 million and that it does not take into account the potential impact from additional property acquisitions, dispositions or capital transactions, beyond those that have been previously announced.

Now, I’ll turn the call back to the operator to open-up for your questions.

Question-and-Answer Session

Operator

Thank you. At this time, we will be conduction a question-and-answer session. (Operator Instructions) Our first question today is coming from Mitch Germain from JMP Securities. Please proceed with your question.

Mitch Germain - JMP Securities

Good morning, guys.

Jack A. Cuneo

Good morning, Mitch.

Martin A. Reid

Hey, Mitch.

Mitch Germain - JMP Securities

Jack what is the ideal portfolio mix look like to you over time with regards to exposure to office versus industrial?

Jack A. Cuneo

I think right now I think we’re -- what we’re looking at is reducing the number of non-core assets in the portfolio which will probably be -- we’d focus on multi tenant as being non-core and eventually I think we’d probably want to see the on an NOI basis get to a 50-50 mix and then continue to emphasize industrial going forward.

Mitch Germain - JMP Securities

And then just remind me what is that multi tenant as a percentage of your portfolio today?

Jack A. Cuneo

I think it’s less than 8%.

Mitch Germain - JMP Securities

Great. And then Jack -- sorry Marty, what’s the plan, I know its not a lot of debt expiring over the next actually two years or so, but what’s the plan with regards to addressing those maturities?

Martin A. Reid

Well, Mitch, we’ve got nice ladder when we look at the debt maturities at the moment and most of its all fixed rate except for the line of credit. So I think its -- it will be a function of what’s in the pipeline and the disposition pace. Are you talking about debt specifically or just in general were we will continue to use the best means we have to finance growth and acquisition.

Mitch Germain - JMP Securities

So it’s a -- it can be a mix of either redeeming it or extending it, depending upon each one is kind of your plan at this moment right?

Martin A. Reid

Yes.

Mitch Germain - JMP Securities

Okay. And then, just with regards to the acquisition that was just announced, was that a marketed deal, is that sourced off market, maybe just color there?

Jack A. Cuneo

It was a deal that fell apart. And we were able to step in and move in fairly quickly before it was able to be remarketed. So it was -- it had been marketed, tied up and then we came in on an off market basis after we were contacted on it. So it was very nice, nice part you get something done.

Mitch Germain - JMP Securities

Great. That’s it for me. Thanks, guys.

Jack A. Cuneo

Bye, see you Mitch.

Operator

Thank you. Our next question today is coming from Todd Stender from Wells Fargo. Please proceed with your question.

Todd Stender - Wells Fargo Securities

Hi, morning guys.

Jack A. Cuneo

Hey, Todd.

Todd Stender - Wells Fargo Securities

Just looking at the sources and uses when it comes to the retail asset sale and then the Hawthorne, in California purchase. What was the net proceeds from the retail asset?

Jack A. Cuneo

It’s about $43 million.

Martin A. Reid

Yes.

Todd Stender - Wells Fargo Securities

Okay. And then was there any assumed debt on Hawthorne asset, Hawthorne California asset?

Martin A. Reid

Yes, and it was -- I think about maybe $20 million.

Todd Stender - Wells Fargo Securities

Okay. Thanks. And then, have a cap rates, have you guys disclosed that cap rate on the acquisition?

Martin A. Reid

Not yet, but certainly it have to be under the quarter. We haven’t, but it’s consistent with our earlier guidance Todd.

Todd Stender - Wells Fargo Securities

Okay. And Jack I think you mentioned you executed on 10 new or lease renewals, can you break that out with office and industrial for the quarter?

Jack A. Cuneo

The bulk of them were in industrial. Not -- I’d say probably 80% was probably industrial.

Todd Stender - Wells Fargo Securities

Okay. And then, do you have any feel for how leasing spreads are going to look for the remainder of the year?

Todd Stender - Wells Fargo Securities

Jack A. Cuneo

No. I really don’t. I mean, you -- we’re seeing good response. We are seeing -- demand has been really good on the industrial side. We are not -- we’re doing a lot of renewals and sometimes you do the best deal that you can that minimizes CapEx, commissions and other stuff like that. So it’s hard to predict exactly how things are going, but things are looking good.

Todd Stender - Wells Fargo Securities

Great. Thanks, guys.

Jack A. Cuneo

Thanks, Todd.

Operator

Thank you. Our next question today is coming from Ki Bin Kim from Suntrust. Please proceed with your question.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

Thank you. Couple of quick questions, looking at your leasing stat page and thank you for putting that in. Could you just talk a little bit about, if I look at the -- just the renewals on a total basis for your total portfolio on a cash basis it looks like it went down 5.5% roughly on a GAAP basis up 14%. I mean, to see a difference in these numbers are it’s fairly normal, but this seems a little bit wide. I was wondering could you give a little color on how these basis were structured that created some bigger variance?

Jack A. Cuneo

Well most of our leases have stated rent bumps. So the -- as the leases age you get to a point where your streamline adjustments gets smaller which we’ve seen recently.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

So is that all purely straight line the differences?

Jack A. Cuneo

Primarily.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

Okay. And similar question but for your new tenants, i.e. it seems like I think you’ll say it was mostly industrial, pretty -- very good lease spreads there. It’s hard to get a sense what the net effective is of those leases, the lease spreads because I see the $2.20 of CapEx you spent on the leases, but there is no detail on the call all those leases were. So, would just fairly comment as well, but I’m just curious how does that look like on a apples-to-apples basis, if you take into account the CapEx they did spend as long as they’re new, but it was previously leased in the passed right?

Jack A. Cuneo

Yes. So, I think in general looking at this quarter, there’s nothing extraordinary in the amount of tenant improvements or leasing commissions. And if anything I think year-to-date CapEx has been pretty light. So, it’s really going to depend on office renewals in terms of where CapEx goes for the remainder of the year and what it costs us to lease up space. And as you know with the single or largely single tenant portfolio it’s really granular on a building-by-building basis.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

And what’s the lease renewal percentage for office and industrial?

Jack A. Cuneo

It’s about two-thirds looking back over the year.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

Okay. And one last question for me, you said you’re comfortable in the 6.7 times debt to EBITDA leverage ratio. What is your range and if you want to do -- if you’re going to pursue further acquisitions down the line, would it be on a leverage neutral basis or would you be willing to take up that leverage given what your stock price is here?

Martin A. Reid

The guidance that we’ve given is that we want to remain at seven times or under for the net debt to EBITDA metric. Generally speaking when we talk about acquisitions we talk about maintaining leverage neutrality. We achieved a little inside joke that it’s, some people say [ph] [with expression]. So, we’ll probably remain leverage neutral as we proceed.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

Okay. And what does that mean if you take that up to seven, what does that mean in terms of how much can you buy?

Jack A. Cuneo

We have – its really, you’re really threading the needle at that point between dispositions and what's in the pipeline and what we might use the finances, but generally speaking if there’s no existing debt we’ll look to the line or cash on hand or proceeds from dispositions for the near term.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

Okay. That’s it for me. Thank you.

Jack A. Cuneo

Thank you.

Operator

Thank you. (Operator Instructions) Our next question today is coming from Daniel Donlan from Ladenburg Thalmann. Please proceed with your question.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

Thank you and good morning.

Martin A. Reid

Good morning, Dan.

Jack A. Cuneo

Good morning, Dan.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

Just going back to Ki Bin’s question and first off, thanks for additional disclosure as well, it’s much appreciated. So what on the renewals that you provided and even some of the new leases that you put in place, what was the average lease term for, in the renewals as well as the leases you have in place, the new leases?

Jack A. Cuneo

We haven’t disclosed it, Dan.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

Do you know what it is though or could we follow-up offline or?

Jack A. Cuneo

You could follow-up offline.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

Okay. I mean is it, well are we talking kind of like 5 years or closer to 10 years?

Jack A. Cuneo

It really depends on, again with the single tenant renewals, its property-by-property.

Martin A. Reid

Yes.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

Okay. And then as far as the same-store NOI growth it was, I think it was 3.7% on a cash basis and then slightly negative on a GAAP basis. Is the reason its up, was there some free rent in the prior quarter and so that’s kind of burning off, is that kind of what's going on or?

Martin A. Reid

Yes.

Jack A. Cuneo

Yes.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

Okay. And then as far as the multi-tenant exposure that you’re considering divesting, I just -- I have the luxury of having the assessment right in front of me. It looks like you have about 17% of our NOI exposure to multi-tenant. Is it safe to say that over time that will all go away or are there certain industrial multi-tenant facilities which you don’t have that much of relative to office that you might be willing to get rid of?

Jack A. Cuneo

No, the multi-tenant industrial is actually fine product. We don’t have any big CapEx issues or loosing issues with those. It’s primarily focused on multi-tenant office.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

Okay, perfect. And then where do you think, for whatever reason office multi-tenant can sometimes trade at lower cap rate, significantly lower cap rates than the single tenant. Would that be your expectation in terms of potential pricing over the next couple of years?

Jack A. Cuneo

Yes, I mean, we’re seeing actually pretty decent demand for the multi-tenant office.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

And where do you think -- or what cap rate would be happy with on some of the industrial -- some of the office stuff that you might be selling?

Jack A. Cuneo

It depends on the market; who are the tenants, how many tenants, how old is the building, all sorts of things factor in on that. So, it’s tough to generalize on that.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

Okay. And then, as far as the space X transaction, could we maybe dig in a little bit more on that and what drove you to the deal. I mean is the rent below market? Has the tenant put a lot of CapEx into that particular facility? Do you think that (indiscernible) can do no wrong, and he’s going to lease the property forever, I mean what's really driving that?

Jack A. Cuneo

Couple of things. First off, you’re at a location that’s, its an industrial building less than 10 minutes from the LA Airport at a price that’s very attractive on a per square foot basis versus anything that we’ve seen on the South Bay Market. It’s an interesting building. It’s build with steel and masonry. It’s not a typical tilt-up building. Therefore it’s got the ability to be multistoried. It’s got -- they have a huge, huge amount of money invested in the property, and it’s got good visibility, good access. You’re within sight of the 405 Freeway and it’s a terrific location and it’s an area -- it’s not an isolated building, its located with a very decent size cluster of other industrial properties. So we feel that even if space X were to vacate, we have a very attractive and useful asset there.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

Okay. And then just lastly for me, you’ve got a relatively benign at least expiration schedule between now and the end of ’15, but it starts to ramp up considerably in ’16 and ’17. Just kind of curious how we should think about as we get out to ’15 CapEx, and how that may trend as you potentially start to square away some of the expirations in 2016?

Jack A. Cuneo

Well, we’re already working on some of those renewals at this time. And depending upon the type of deal that we cut, we probably will see it increase in CapEx at that time.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

So, I mean is there any plan to be done with that percentage in ’16 by certain point in time in ’15? What type of timeframe are we looking at here?

Jack A. Cuneo

I don’t think we’ve a drop dead date on anything, I mean we’re plugging along with talking to tenants and showing them space and its, the ideal thing is to renew people in place rather than how to have a change in tenancy.

Daniel Donlan - Ladenburg Thalmann & Co., Inc.

Okay. Thank you.

Martin A. Reid

Thanks, Dan.

Jack A. Cuneo

See you, Dan.

Operator

Thank you. Our next question today is coming from Steve Manaker from Oppenheimer. Please proceed with your question.

Steve Manaker - Oppenheimer & Co.

Thanks, good morning.

Jack A. Cuneo

Hi, Steve.

Martin A. Reid

Good morning, Steve.

Steve Manaker - Oppenheimer & Co.

I just wanted to kind of follow-up on the occupancy or the lease percentage. It’s been dipping down for the consolidated portfolio since the fourth quarter. And I wanted to get a sense of, as you guys are thinking about some of the multi-tenant office. Is the plan to kind of lease that or try and lease that before you sell it, or is that in the market right now? Are you thinking about putting it in the market for sale?

Jack A. Cuneo

I think the way the markets are going right now, we’re actually seeing people pay for vacancy because of projecting a lot of growth. So, some of it maybe leased in advanced, some of it may just sell with vacancy in place.

Steve Manaker - Oppenheimer & Co.

Is there a thought that we could see more dispositions in the second half on the office side then and you can kind of accelerate the program?

Jack A. Cuneo

I think there is a possibility of that, but we’re not going to make any promises.

Steve Manaker - Oppenheimer & Co.

Okay. Thank you very much.

Jack A. Cuneo

Okay.

Operator

Thank you. Our next question today is coming from Chris Lucas from Capital One Securities. Please proceed with your question.

Christopher Lucas - Capital One Securities, Inc.

Good morning, guys. Just a more general question about product availability, obviously you’ve a very large footprint that you’re looking at, but just from the markets that are focused on, what product is more available today between the offices and industrial that fits your sort of underwriting criteria and where have those cap rates trended over the last six months?

Jack A. Cuneo

Over the last six months they have trended down particularly for a high quality credit type tenancies, they’ve gone to sub six, and what we’re seeing is even in the office space there’s a lot of -- suburban office is now being sort after by private equity folks, individual investors and the like. So, all in all the cap rates have gone down, but they -- I don’t know where they’re going to be a month from now, but they’re pretty low. And it does make acquiring deals a lot more difficult but there is a lot of product on the market. And we keep plugging away and keep bidding.

Christopher Lucas - Capital One Securities, Inc.

Perfect. Which product do you find more available right now in terms of just dating through your underwriting criteria, the industrial stuff or office?

Jack A. Cuneo

I’d say that we’re seeing more industrial products. There have been a number of really very large portfolios that have traded, and then there’s also a lot of one off deals.

Christopher Lucas - Capital One Securities, Inc.

Okay, great. Thanks a lot guys. I appreciate it.

Operator

Thank you. Our next question today is a follow-up from Ki Bin Kim from SunTrust. Please proceed with your question.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

Thank you. Just a couple of quick follow-up’s here. On the acquisition that happened in July, is that on a ground lease at all?

Jack A. Cuneo

No.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

Okay. And I just want to ask about 2016 lease expirations, and you said you’ve been working on a few deals. Any kind of sense of, can you provide any type of trends that you’re seeing or lease spreads, what are we seeing currently today on the stuff that you’re working on for the future?

Jack A. Cuneo

I really can't generalize about it.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

Okay.

Jack A. Cuneo

Not till the lease is signed.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

Okay. And have you guys done this -- have you guys [ph] [rotate] the -- and it’s probably not a simple thing to do, but the average what you think the mark-to-market on a rent basis is for your portfolio in place to where the market is?

Jack A. Cuneo

I’m sorry, could you just -- what's the mark-to-market on -- are in place portfolio?

Martin A. Reid

Yes, we’ve certainly calculated internally or estimated but we don’t disclose it.

Ki Bin Kim - Suntrust Robinson Humphrey Inc.

Okay, all right. Well that’s it for me. Thank you.

Martin A. Reid

Right.

Jack A. Cuneo

Thanks, Ki Bin.

Operator

Thank you. Our next question is a follow-up from Steve Manaker from Oppenheimer. Please proceed with your question.

Steve Manaker - Oppenheimer & Co.

Thanks. If you guys were to issue 10 year debt right now, where do you think it would price?

Martin A. Reid

Plus 175, plus 165.

Steve Manaker - Oppenheimer & Co.

So what would the all in number be?

Martin A. Reid

I didn’t check the tenure this morning, because we had such an early call. But we get -- we looked all the time at what, what's happening compatibly. And I think with our investment grade rating we have already been out and met with the institutional debt crowd and got a good reception. So, I think we could execute a nice 10 year deal if we had to use the proceeds or the need to do it.

Steve Manaker - Oppenheimer & Co.

So, all in you’ll probably be in the low fours, give or take a little bit?

Martin A. Reid

Yes.

Steve Manaker - Oppenheimer & Co.

And is there a thought about doing a $750 million offering, lets say give or take, to take out the term loan in the revolving credit?

Martin A. Reid

I think we can fairly say no. Not at the moment.

Jack A. Cuneo

No.

Steve Manaker - Oppenheimer & Co.

Thank you very much.

Martin A. Reid

Okay.

Operator

Thank you. We’ve reached the end of our question and answer session. I would like to turn the floor back over to Mr. Cuneo for any further or closing comments.

Jack A. Cuneo

Again thank you for joining us today for our second quarter earnings conference call. In summary we had a solid second quarter as we continue to drive growth through strong leasing and execution on new investment opportunities. As we move into the balance of 2014, we expect our high occupancy rate to continue and we have substantial capacity on our balance sheet to pursue potential investment opportunities. So again, thank you and we look forward to speaking to you again in the next quarter.

Operator

Thank you. That does conclude today's teleconference. You may disconnect your lines at time and have a wonderful day. We thank you for your participation too.

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