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Executives

Jeanne Leonard – Investor Relations

Bill Hankowsky – Chief Executive Officer

George Alburger – Chief Financial Officer

Mike Hagan – Chief Investment Officer

Rob Fenza – Chief Operating Officer

Analysts

Alex Goldfarb – Sandler O’Neill

Brendan Maiorana – Wells Fargo

Sloan Bohlen – Goldman Sachs

Ki Bin Kim – Macquarie

Josh Attie – Citigroup

Jordan Sadler – KeyBanc Capital

John Guinee – Stifel

John Stewart – Green Street Advisors

Ross Nussbaum – UBS

Steve Boyd – Cowen and Company

Vincent Chao – Deutsche

Dan Donlan – Janney Capital Markets

Liberty Property Trust (LRY) Q2 2011 Earnings Conference Call July 26, 2011 12:00 PM ET

Operator

Good afternoon. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Liberty Property Trust Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I would now like to introduce Jeanne Leonard. Please go ahead, Ms. Leonard.

Jeanne Leonard – Investor Relations

Thank you, Michelle. Thank you everyone for tuning in today. You will 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.

During the call, management will be referring to our quarterly supplemental information package. You can access this package as well as the corresponding press release on the Investor section of Liberty’s website at www.libertyproperty.com. In this package and in the press release, you will also find a reconciliation of non-GAAP financial measures we referenced 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 law. 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?

Bill Hankowsky – Chief Executive Officer

Thanks, Jeanne, and good afternoon everyone and welcome to our second quarter earnings call. Liberty had a very strong quarter across all components of our 2011 business plan. FFO for the quarter was $0.65 without a non-cash impairment it was $0.69. We leased 3.4 million square feet increasing occupancy to 89.5%, up 80 basis points. Occupancy increased across all of our property types, aided by a 67.5% renewal rate.

Last quarter, we revised our 2011 investment and capital plan. Year-to-date, we’ve sold $310 million in real estate. Our plan was to sell $300 million to $400 million this year, so halfway through the year we are already within the range of our expectations for the entire year. On the acquisition front, we have made investments of $100 million year-to-date and again our plan was to do $100 million to $200 million for the year, so again at mid year we are within our range for the entire year.

Mike will you give some details on all this activity in a moment. On the development front, we’ve started $96 million in developments and have firm plans to start another $180 million within the third and fourth quarters. Our plan for the year was to do $200 million to $300 million in development starts and that will easily be within the range for the year, and Rob will give you some details on that in a moment. All of this was achieved in a rough economic environment as we’ve seen with a recent employment numbers.

We’ve seen an uptick in prospect activity in the last two months, six to eight weeks that has us back kind of where we were in February-March this year, up from the downward activity we saw in April and May. So, we feel very good about where we are even in the face off this very slow sluggish recovery. We are on plan for (indiscernible) leasing. We are on plan for acquisitions, sales, and development. So, great quarter by Liberty and George would now walk us through some numbers.

George Alburger – Chief Financial Officer

Thank you, Bill. FFO for the second quarter 2011 was $0.65 per share. The operating results for the quarter include $1.6 million in lease termination fees which is in line with our guidance that lease termination fees would be in the $0.04 to $0.06 per share range for the year. Also included in FFO is a $4.2 million impairment charge, FFO does not include the $54 million in gains that were realized this quarter on property dispositions.

The gains resulted from the sale this quarter of 51 properties for $266 million. These sales which occurred halfway through the quarter were a big part of the revised capital plan for 2011 that we outlined last quarter.

During the quarter, we acquired two industrial properties for $41 million, one of the properties was 100% leased, the other is vacant that projected stabilized yield on this investment at 8%.

If we move into the core portfolio, during the quarter, we executed $3.1 million square feet of renewal and replacement leases. For these leases rents decreased by 6%, our guidance for the year is that rents would decrease by 7% to 12%.

For the same store group of properties operating income increased by 0.9% on a straight-line basis and increased by 2.8% on a cash basis for the second quarter of 2011 compared to the second quarter of 2010. Same store performance benefited from $1.5 million reduction in the reserve for bad debt. Excluding this item, same store performance was essentially flat on a straight-line basis and it increased by 1.5% on a cash basis.

On summary point, we had an excellent quarter. Occupancy up, rents albeit down, down less than the low end of our guidance, same store on a cash basis up, we covered our dividend, FFO without impairments would have been $0.69 per share, it was a good quarter. We hope to have a good third and fourth quarter but remember the second quarter included $1.5 million reduction for bad debts and the third and fourth quarter will have $3.5 million less NOI due to sales activity, $266 million in the second quarter, and $41 million from this Milwaukee sale which happened last week.

This increase in sales activity was projected in our earnings guidance, what was not projected was the $4 million impairment charge, but even with the impairment charge we’re comfortable with our 2011 earnings guidance of $2.50 to $2.65 per share.

And with that, I turn over to Mike.

Mike Hagan – Chief Investment Officer

Thanks, George. The second quarter was an active quarter for us as far as investment activity goes. We completed several sales we outlined few on our last call as well as several acquisitions. Let me start by giving you some details of our sales activity. During the quarter, we completed seven sales transactions totaling approximately $266 million, the two largest transactions for the portfolio sales and Lehigh valley in Richmond. These sales were driven by our strategy to decrease our presence in Suburban office. Lehigh valley sale contained 32 buildings totaling approximately 1.4 million square feet of office and high finished flex space. Properties were approximately 90% leased to closing and sold for $124 million.

Richmond sale contained 14 buildings totaling approximately 920,000 square feet of office and high finished flex space.

Properties were approximately 98% leased to closing and sold for $97 million. The average age of the properties sold in Richmond Only High Valley was 18 years. We also completed several sales to users during the quarter as well as the sale of 100% lease warehouse in Milwaukee. The total of these single asset sales was approximately $45 million bringing the quarter total to $266 million.

Subsequent to quarter end, we sold a four building office portfolio in Milwaukee, these buildings contained approximately 388,000 square feet and we are approximately 94% leased to closing. Property sold for $41 million. With the sales activity just described as well as it was accomplishment in the first quarter, our year-to-date sales total is approximately $310 million. The square footage sold year-to-date totals over 3.4 million square feet with over 2.7 million of that being office or high finished flex. The cap rate on all these sales completed today is approximately 9.3%.

In addition to the disposition activity in our wholly owned portfolio, we had three sales in our JVs. The JVs sold two buildings to users and in a third transactions sold five acres of land. As you recall on our last call, we revised our sales guidance to a volume of $300 million to $400 million at cap rates from 9% to 11%. We are well within our targeted ranges. Next let me update you on our exposition activity. During the second quarter, we completed two transactions totaling approximately $34 million. We acquired two buildings, the first a 179,000 square foot multi-tenant industrial building in Charlotte was 100% leased to closing and was purchased for approximately $10 million. The second is a 535,000 square foot warehouse in Lehigh Valley. This building was built in 2008 by a local investment group and was acquired empty. Subsequent to closing, Liberty executed two leases to bring the building to 100% occupancy with long-term leases. This building was purchased for approximately $24 million.

Subsequent to quarter end, we completed the purchase of two warehouses totaling 1.2 million square feet at the Centerpoint Intermodal in Chicago for approximately $54 million. These buildings were 36% leased at closing. These buildings are adjacent to the BNSF Railyard and offer the only remaining large parts of space in the part.

After closing, we expanded an existing tenant, an additional 212,000 square feet to bring the occupancy to 53%. Our year-to-date acquisitions totaled approximately $88 million with an expected investment of approximately $100 million. The expected stabilized in these acquisitions is approximately 7.4%. A quick look back at our year-to-date sales and acquisitions, we sold approximately 2.7 million square feet of office and high finished flex in the Lehigh Valley, Milwaukee, and Richmond and recycled that capital into approximately 2 million square feet of warehouses in Chicago, Lehigh Valley, and Charlotte.

Let me conclude with a few observations on the stating investment sales market. There is clearly more product in the market now than in the past few years. Given the pricing of some completed transactions, we believe there will also be more sellers and transaction volume will significantly be higher than 2010. We have evaluated over 50 million square feet of core industrial product since the beginning of the year. These properties are class A products and were leased. We have tried some of these transactions and seen these types of properties traded at 6 cap range in some markets.

With the availability of debt, not only from life companies but also from a working CMVS market and also more capital falling to real estate funds, there is no shortage of buyers. As per Liberty we are well within our target ranges for both acquisitions and dispositions. But as we have said in the past, these ranges are place markers for our guidance. We will continue to evaluate all opportunities on both acquisitions and dispositions. We will acquire where it’s consistent with our strategy and where we feel we can add value for our leasing property management and development skills. We will sell consistent with what we have been selling or where we have maximized the valuable asset.

With that I will turn it over to Rob.

Rob Fenza – Chief Operating Officer

Thank you, Mike, good afternoon. In the second quarter Liberty executed 203 leases totaling over 3.4 million square feet. We out-leased our competition leasing over four times our local market share and we renewed an excellent 67% of expiring leases. The result was an 80 basis point increase in occupancy. All property types benefited from increased occupancy, prospect activity continued to improve in most of our markets in spite of the impact of the seasonal slowdown. Industrial continues to lead the recovery and we are seeing encouraging activity in our core industrial markets.

Starting with the Lehigh Valley in Central Pennsylvania distribution corridor, we purchased a vacant 535,000 square feet distribution building. We close on this building on June 20. On June 21, we signed a leased occupied 338,000 square feet of space in the building and last week we signed a second lease for the remainder of the building. So the 0.5 million square foot building we purchased one month ago is now 100% leased.

With the sale of our office and high finished flex product in the Lehigh Valley, we are now singularly focused on industrial opportunities. This is a market with unique characteristics, dwindling supply, increasing rents, and less in competition. This has created the opportunity for us to move ahead of the curve. We anticipate starting development of more than 2 million square feet of distribution space in the Lehigh Valley of Central Pennsylvania.

Moving to Houston, this is a market, which continues to benefit from the oil and gas production and services industries. We are 93% leased in distribution space and 93.5% leased in multi-tenant industrial flex space. In the third quarter, we will begin construction on 200,000 square feet of industrial space to accommodate demand.

In Chicago where industrial activity is slowly improving we uncovered an unique opportunity to enter the desirable inland port market with the purchase of two state-of-the-art high-bay distribution buildings totaling 1.2 million square feet adjacent to the massive BNF intermodal – BNSF intermodal facility in Elwood, Illinois. One of the acquired properties is within a foreign trade zone and the other property is a certified as a US customs bonded warehouse. These properties were only 36% leased on repurchasing in early June, but we have already expanded one tenant by 212,000 square feet increasing overall occupancy to 53% and we have good prospect activity for the remainder of this vacancy.

During the second quarter, Liberty was also actively recycling our capital and executing our strategy to refocus our Carolina’s operation on industrial product along the I85 corridor with the acquisition of a distribution building in Charlotte. In June, we purchased a four leased 179,000 square foot distribution building and placed a purchase option on the adjacent land partial which is entitled and approved for the second warehouse.

Turning to office, we expect the suburban office markets to continue to improve very slow rate with downsizing consolidation and Lacosta job growth well in progress. We are pleased with the performance of our office portfolio during the quarter and expect occupancy to continue to creep up, urban markets continue to outpace suburban. In Philadelphia, there are unique opportunities to take advantage of decreased levels of development over the past several years and our tenant relationships. In the CBD and in the Navy Yard, we are working with several significant build-to-suits office prospects and we anticipate starting one of these projects in the third quarter.

We will continue to see steady improvement in conditions and prospects that’s so far, especially software. And although we are pleased with what we are seeing, ongoing turmoil in the housing sector continues to pose a threat to overall growth. Minneapolis remains active with few large blocks of space remaining and steadily improving market conditions. Our Minneapolis office portfolio is 97% leased and we see opportunities for both value-add acquisitions and development in the coming months.

Let me now summarize activity in our development pipeline. You are aware that our strategy is to grow and enhance the quality of our company by selling older suburban office products and reinvesting those dollars by acquiring and developing new industrial and metro office product. Year-to-date, we have commenced development on $96 million in new product and expect to begin construction in at least another $180 million of development during the third and fourth quarter. Of these projects about to begin 2.4 million square feet is industrial and 153,000 square feet is metro office. 25% of this investment is in build-to-suits with good prospected activity from the balance of the investment. We are very encouraged by the opportunities we are seeing in development.

And with that I’ll turn the call back over to Bill. Thank you.

Bill Hankowsky – Chief Executive Officer

Thanks, Rob and thanks Mike and George. As George said, even with the $0.04 impairment charge this quarter we comfortable reaffirming our guidance we give you last quarter of $2.50 to $2.65 a share. And while I am speaking about guidance, the one of the things I wanted to make folks aware of today is going to change our pattern this year from our prior pattern and in terms of when we provide guidance for 2012.

We will not be providing guidance on our third quarter call, which has been our historic pattern, and instead we are going to have a separate call in December, actually on December 13th, where we will be writing guidance for 2012. So we wanted to make people aware of that so you are not waiting anxiously 90 days from now for us to tell you about the next year, we’ll do that in December.

And with that, we’ll open it up to questions. Michelle?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Alex Goldfarb from Sandler O’Neill. Your line is open.

Alex Goldfarb – Sandler O’Neill

Yes. Hi, good morning or I should say good afternoon? Just curious, Bill, the demand – obviously you guys have had success selling suburban, which is good, but I think you had spoken about wanting to own more in-fill office. And it almost seams like the gap, the spread between suburban office and CBD or more in-fill office has probably widened meaningfully versus industrial, which seems a little bit easier to trade in and out of. Has that influenced, as you think about Liberty's percentage of industrial versus office, has the widening gap between suburban and CBD influenced how you allocate capital going forward?

Bill Hankowsky

It’s a good question. A couple of comments on it, I’m going to answer your question first a little bit of commentary. Number one is I think we all need to be careful when we talk about CBD, what markets are we talking about. So there is no question that Manhattan, Washington, San Francisco, maybe Boston you have got several markets, a few markets actually I think where there is very intense investor interest and therefore very low cap rates, aggressive pricing.

I’m not sure that’s the case that of Jacksonville or Tampa or – just to throw out of couple metros. So I think there is a big distinction between what I recall a handful of cities, CBDs, and most CBDs. And what we are interested in, you are right, we are interested in decreasing our percentage of investment capital and suburban office and increasing it in what we called metro office and industrial.

And you are right that right now we have been able to find some opportunity on the industrial side and we are going to take advantage of that as we continue to see those opportunities if we sort in metro office we take it, if we don’t see it from a pricing perspective we will wait. This is a long-term strategy so we have to look at metro office opportunities might started a number – number of square feet we have looked at inside that numbers from metro office but we didn’t find it meaningful work. And the other thing we are going to do is we think the opportunity in metro office right now is the development. So we’ve had an announcement about doing a building for Blacksville in Philadelphia. I think you may hear about a couple other buildings over the course of the next few quarters that would be built to suit metro office opportunities and I think that will give us a way to increase that percentage today. So we’ll allocate some capital to acquire industrial and we’ll allocate some capital to develop metro office.

Alex Goldfarb – Sandler O’Neill

Okay. And then to your comments on increased prospect activity, one of your industrial peers the other day pointed out that despite the economic headlines, the activity on the ground and their tenants are growing, they’re taking space, etcetera. Do you echo those comments or do you see some variability geography-wise or at different types of businesses where some -- are all of your tenants expanding or is it certain businesses?

Bill Hankowsky

Well, let me – I think there is two questions, let me separate those. So on the volume of activity, I think you might recall that couple of months ago we were little nervous that it sounded like summer was coming early that activity had declined in kind of the April, May timeframe. And there was no question as we all recall beginning the year, lots of optimism, some good economic numbers, second quarter economic numbers go down, activity seems to go down, we’re wondering what’s the trend. As both Rob and I indicated, what we’ve been seeing in the last 60 days is a pickup in activity from that slight depth to now where there is a stream of prospects probably back to where we were at February, March. So that feels good and it feels good particularly if we get it happening in what is supposed to be the slow summer. There is some geographic differentiation so it’s probably not as exciting in South Jersey as it might be in Minneapolis, maybe not as exciting in small customers in Orlando as it is in big industrial customers in Lehigh Valley, so some variation.

We are seeing some of that be organic i.e., our customers growing, I would say that’s on the industrial side and there are clearly new demand in the market on the industrial side and this is a situation that I think could market from where it was 12 to 18 months ago, so there are requirements that just worn out there at a scale in terms of number of scare feet just worn out there and depth in other words several at a time that wasn’t out there. I think on the office side, there is some organic growth, but we knew our guys were downsizing on the office side and folks were increasing, you end up roughly flat which I think is indicative of what you have seeing even with the national vacancy rate on the office side which is parted 16.2%, so that number is taking a long time to come down.

Alex Goldfarb – Sandler O’Neill

Okay. And then just finally, because you mentioned the Lehigh Valley, the news reports out of there of a potential million plus square foot box that you guys may do in the Bethlehem steel site, is that something would you consider as spec or you would only do that if you had an anchor tenant?

Bill Hankowsky

I am not going to comment on the transaction where we are having yet concentrated yet, so let’s not go to that. But let me talk about Lehigh Valley in terms of those two product types, we clearly would do a build-to-suits in Lehigh Valley and there could be people out there that might need that. That is the market today – Lehigh Valley by the way and I’ll take you all the way into Central Pennsylvania where if you go out today and look for 500,000 square foot space to deal with a requirement you may find none. We might find one that’s expiring six months from now basically big boxes phase are gone. We decided the building we acquired I think it’s totally indicative of the fact that we acquire it and within roughly a month it’s leased in two deals, 525,000 square foot building. So, there is a depth to that market in terms of interest at a scale of interest that we would be comfortable because it meets our two tests. Our portfolio was leased and the market is tight for that particular sizing of need and that sizing of need will be accommodated, build a million square footer we can do two or three of those kind of deals. So we would not be hesitant to do that if we thought it makes sense.

Alex Goldfarb – Sandler O’Neill

Thank you.

Bill Hankowsky

Thank you.

Operator

Your next question comes from Brendan Maiorana from Wells Fargo. Your line is open.

Brendan Maiorana – Wells Fargo

Thanks, good afternoon. Bill or Rob, what are the markets where I think you mentioned that you are moving rents up a little bit in industrial world, what are the markets where you are moving -- asking rents up over the past six months or so?

Bill Hankowsky

Yeah. I think again you are right to differentiate we are talking about market rent, where it is not expire so let’s just talk about the markets something like that 12 months ago or something, I think you’re now starting rents beginning with four. I think in Chicago, rents were in the low $2, now rents went to high $2, you might be breaking $3 on a particular deal. I think in Houston rents have moved up. I think it’s even in the Carolina as I think rents have moved up from where they were. Now, it’s not every deal and every space, so if you need 20,000 square feet in Chicago or 50, there might be 50 opportunities that might be a pretty rugged situation. But if you need 500,000 square feet in just in Aurora, you might only have a couple of options. So it will depend a little bit about the need into some market, but I think all of those markets I sighted we are seeing some movement on the industrial side, so the Carolina, Central Pennsylvania, Lehigh Valley, Houston, Chicago.

Brendan Maiorana – Wells Fargo

Okay. And so – and I think kind of the comments from the past couple calls and where you guys have been comfortable taking spec development risk, Houston and Lehigh Valley were cited. I mean out of the 2.4 million of square feet of industrial that's included in starts for the back half of the year, is any of that spec outside of those two markets, and if so what are the other markets where you'd be comfortable doing spec development today?

Bill Hankowsky

They are not outside of those markets. They are inclusive of those markets. So, you pay close attention and you are accurate. And I think in terms of where we restart another spec one, I’m not sure there is another market we put on the radar today. I think there are clearly markets where you might sort of building that was somewhat pre-leased. So maybe it take – somebody take a third of it or half of it maybe we do something because that would significantly change your carry. But there are I mean we bought industrial land in Minnesota. And I’m not telling you today we’re prepared to start a building but we did it because we think there might be opportunity to do that somewhere in the near-term. So we think it is getting tighter in some markets but right now the ones that are first in line throughout the Central Pennsylvania and Houston.

Brendan Maiorana – Wells Fargo

Okay. And can you give us a sense of like maybe what the next – now where you are comfortable today but maybe the next two or three things continue to accelerate?

Bill Hankowsky

As they emerge I’ll let you know.

Brendan Maiorana – Wells Fargo

Okay, all right. Fair enough. And then...

Bill Hankowsky

I don’t think it’s so clear right now that I’d want to be putting names out here.

Brendan Maiorana – Wells Fargo

Okay. And then just last one for George, then the dividend coverage was positive again this quarter I mean by a fair amount even if I kind of take the $0.03 off the clean number for the NOI loss that you guys are expecting in the back half of the year if concessions and maintenance CapEx remains kind of in line with where it is you still be at positive dividend coverage in the back half of the year as we look at it. I mean is that an expectation that we should expect because I think previously you guys have said you’d expect to be below profitable coverage in the back half of the ‘11 and get the positive coverage at some point in ‘12?

George Alburger

That’s right, Brendan. But I think we said we would expect to start covering in the back half of ‘12 and I think we said that the cash short fall that we would have to cover during that timeframe which was some portion of 2011 and the first half of ‘12 would be in the $30 million range kind of plus or minus. I still think would be negative for the later half 2011 and into the first half of 2012, but the magnitude of the number is a lot less than the $30 million, it’s probably $15 million to $20 million.

Brendan Maiorana – Wells Fargo

Okay. Is that improvement just because the CapEx levels are lower or just be otherwise better?

George Alburger

It’s a combination of both.

Brendan Maiorana – Wells Fargo

Okay, great. Thank you.

Operator

Next question comes from Sloan Bohlen from Goldman Sachs. Your line is open.

Sloan Bohlen – Goldman Sachs

Hi. Good afternoon, guys. Bill, maybe just question on capital allocation you talked about some development opportunity, maybe countering that versus what you guys are seeing on the acquisition side. One maybe you guys just give a little bit of color around when the acquisition you did on Lehigh Valley, was that a private investor that just can make the leasing work on their end or what types of deals are you guys seeing come to you?

Bill Hankowsky

Well, I’m going to let Mike comment a little bit on the Lehigh Valley but in a second. But I think in terms of what we see, I think here is the investment world if you make it pretty simple. If you have an asset well leased with term credit tenants, pick any property types, office, industrial, retail, whatever. Because the markings in CMBS markets will entertain providing funding for that, at interest rates that are very attractive and terms that are good, I mean they’re not – underwriting hasn’t deteriorated, but there – it’s acceptable. That narrow fairway attracts a stunning number of players of interest who want core product.

That’s probably not a fairway where we’re going to necessarily succeed because of that competitive environment where that pricing ends up from our perspective. So what’s works for Liberty is to be a little off that. So, it works to lease – buy 100% of the building, Lehigh Valley, by a significantly under-leased building Chicago, by a building 100% leased with a piece of deck next to it, North Carolina. So each of those scenarios create a situation where the core buyer probably because he can’t get the debt that he likes, isn’t playing as much and gives us somewhat better opportunity. So that’s kind of where we’re moving around and Mike you want to comment to how it was and sort of the history.

Mike Hagan

Sure. I think in this particular transaction I mean this was another building that was for sale in the market it clearly attracted us because of its vacancy. We went to the owner of the property and proffered an offer on it. To suggest that they may not have been willing to put additional TIs into the buildings to get at least I don’t have an definitive answer for you but that might have been one of the motivations. We are very comfortable setting environment property.

Sloan Bohlen – Goldman Sachs

Okay. And then maybe to kind of turn that question around, if you think about the 3 different areas of either capital allocation or capital proceeds in terms of sales development and then obviously what you can buy, is it fair to say, and I know you didn't change your ranges, but has the pricing tightened for what you could potentially sell? And to that end could we see you sell more as the year goes on?

Mike Hagan

Well, let me answer that this way. We are middle in the year takes a while for stuff to happen. So takes a lot to identify something you want to buy, takes a lot to identify something you want to sell, market it, get proposals, fix somebody, do contracts, et cetera. So I think when you look at the pipeline on the sales and then on the acquisition, I think we’re still comfortable with the ranges we’ve been giving you, I mean, we explained you today that with the low end of those ranges half way through the year, that’s good, very comfortable we are going to stay in those ranges and maybe we get to the higher end by the end of the year.

If other opportunities manifest themselves and might make this comment whether it’s on the buy side or the sell side that makes sense to us we make take advantage of it, but it may not actually – I am not sure it will not happen dramatically in the source – it may take till the end of the year for something that to happen, but we are – it is clearly a much more active market both sides and we are clearly paying very close attention for either kind of opportunity. To advance this strategy by selling suburban office, we do advance the strategy by buy an industrial. We can do either and we don’t have to match up, if one happens ahead of the other, that’s okay.

Sloan Bohlen – Goldman Sachs

Okay. And then maybe just to ask one specific on the pricing for suburban office have you noticed any discernible change in the pricing over, say, the last three or six months?

Rob Fenza

I would say, I think it gets back to more buyers being in the marketplace, but I think you have to get to an asset that has it’s more definition core that it’s very well leased and got little roll over. And I think if you had that you will see more trades in there and I think I can’t tell you definitively that pricing is getting better, but I would say as a result of that the expectations of the buyers and the seller have met the market.

Sloan Bohlen – Goldman Sachs

Okay, fair enough. Thank you, guys.

Operator

Your next question comes from Ki Bin Kim. Your line is open.

Ki Bin Kim – Macquarie

Subsequent activities in terms of cap rates of the couple buildings you’ve bought and sold?

Jeanne Leonard

I am sorry, can you repeat your question, we missed half of it.

Ki Bin Kim – Macquarie

Sorry. So, you guys had a couple transactions after the quarter end, bought two, sold four, did you give an update on the yields?

Bill Hankowsky

Incorporate them. Mike in the numbers you gave right?

Mike Hagan

That’s correct. We’re – we discussed where we worked for the year-to-date sales and acquisitions and which included things that were done in early part of the third quarter and those that’s for the sales it was a 9.3 cap rate and on the dispositions, excuse me, on the acquisitions, it was a 7.4 cap rate.

Ki Bin Kim – Macquarie

Okay. Also I was kind of curious it seems like you’ve bought under leased assets and very quickly were able to lease it up, could you just talk a little bit more about that process? Did you – kind of how you were able to achieve that?

Bill Hankowsky

Well, I think it’s actually a pretty straightforward answer, which is it’s very much attested into the Liberty model. So, you put a team of every people in a market and have your own folks, doing the leasing and property management and living in the neighborhood and then you know the market and you have long-term relationships with brokers. You have relationships with your own tenants and their needs, relationships in the business communities you’re in. And then you sit there and say well, I have a pretty strong sense that a couple of tenants 6, 8, 12 months from now are going to need space. You’re talking to be about, hey, so, that I next to me move because I’m going to need it. And you see deal flow and activity and then you said yourself hey there is a real opportunity, we could’ve knocked on the door this owner of the vacancy in Lehigh Valley anytime in the last four years.

But at this point, we said hey we see a deal flow that justifies making an investment and would allow us to lease it up in a relatively short order. You can’t obviously get the leases signed as we know you own it so you begin parallel processes of working on those prospect activity and working on getting an asset under contract and it happens. So I was – had a panel couple of months ago and somebody asked about how do you handle this kind of tougher economic environment everything, I said if you are asking yourself that question today you are asking a question too late, you have to had catch yourself positioned to do this going into a cycle not because of the cycle. So I think it’s just about the model and the fact that we see deal flow in-depth and it gives us a judgment the same judgment that we will motivated us to start inventory product because we will see deal flow in such a way that we think it make sense.

Ki Bin Kim – Macquarie

And it seems like just given the cap ratio you’re buying it at that the sellers are pricing in some vacancy up or leasing up the vacancy is that right? Is it giving a vacancy value, a decent amount of vacancy value?

Bill Hankowsky

It’s little bit a hard to talk about cap rates when you have public vacant building. So what we are giving you is our cap rates as we compute it based on what we things going to happen, where we think rents are going to land, carry, TIs total investment in the asset, okay, so that’s why Mike gave you two numbers, kind of what we pay for it and what our total investment will be because I think it’s safe not to say, one way to look out what we pay for it is per pound and these buildings are roughly coming in the 40s, mid 40s per pound or square foot which we find really attractive when you consider replacement cost and where the market is, we are going to – we anticipate it might take as while to listen in, we anticipated to present TI to put in there, we do some sooner, we are going to do better there. If we lease them sooner we’re going to do better with you guys, unless we’re going to do better. So, we’re giving you basically a pro forma cap rate when you require a vacant building.

Ki Bin Kim – Macquarie

Okay, that’s helpful. And just one more question on that under similar topic. When you look at not just statewide cap rates on what you bought and sold, but if you look at it on a longer term basis, what are the IRRs you’re projecting for – versus just something that you’re selling, like sort of for an office versus maybe more expensive industrial assets?

Rob Fenza

I think if you look at the rent roll downs on the office market what we’ve and try to pro forma that into where we think NOI is today. If you could figure out where you want those IRRs will be. Likewise, I think if you’re buying vacant buildings today and lease to get today’s rental rates that if you have fundamental belief over longer term those rentals go up, you will have a better IRR on that. And I think that’s really how we’re trying to look at, some of the things we’re disclosing of and some of the things we’re acquiring.

Ki Bin Kim – Macquarie

Okay. And I mean would it be safe to assume, like if you’re – lease like a 300 basis point spread now IRR does that sound reasonable, or is it greater?

Bill Hankowsky

I think another reason we have it here is because what is driving these, Argus runs and the IRR little boxes that people produce, is your expectation about market rents and exit cap rates. So, there is two big things to drive this. I mean we do all these analysis, we have IRRs. We got to go into deals. We’ve got price per pound. We’ve got lots of analysis, but I think in a world where you’ve got a sluggish recovery so you wonder where rents are going and we haven’t – we are now versus where the rents were going on some of the buildings we sold probably is different than the buyers expectations. That’s okay. That’s why different people have different theories of business to see where it is going to go. Those are earlier question about where we thought industrial rents were doing, I mean we think industrial rents are going to move, so we’re into office rent so that’s going to help. Where cap rate is going to be an interest rates but I think we are fairly comfortable, I would say very comfortable that we’re getting fair price for what we’re selling and it won’t be necessarily any better waiting, and that we will make money in each asset we are buying and developing. That’s fairly clear to us at this point.

Ki Bin Kim – Macquarie

Okay. And just one last question, any – have you seen anything from ProLogis in terms of them putting out any significant portfolios out there for sale?

Bill Hankowsky

That’s the number we are off.

Ki Bin Kim – Macquarie

Okay. Thank you very much.

Bill Hankowsky

Yeah.

Operator

Your next question comes from Josh Attie. Your line is open.

Josh Attie – Citigroup

Hi, it's Josh Attie and Michael Bilerman. Can you tell us what the cash rent spreads were in the quarter taking the 6% gap and converting to a number?

George Alburger

Yeah, this is George, that’d be 9.9.

Josh Attie – Citigroup

Thanks. And could you also – can you talk about the depth of your land bank in both Houston and Lehigh Valley that could be used for industrial development I guess beyond what's needed to support what you expect to start in the third quarter?

George Alburger

Yeah, let me – in Houston, I think we have maybe about 180, 200 acres in a variety – with everything with that. Mike thinks it’s 115 in Houston and in the Lehigh Valley if you – Central Pennsylvania, we have got about 150 acres one side, Mike, and then there are a couple of sites we are looking at, but of about 200 acres in the Lehigh Valley collectively in Central Pennsylvania and about below 100 and 115, 120 and used them.

Josh Attie – Citigroup

Thanks. And what kind of yields would you underwrite on the industrial developments that you plan to start?

Rob Fenza

Low single-digit, high double-digit.

Josh Attie – Citigroup

Okay, thanks a lot.

Rob Fenza

I mean high single-digit, low double-digit, I did it reverse. Sorry, thank you.

Bill Hankowsky

It’s all right.

Operator

Your next question comes from Jordan Sadler from KeyBanc Capital. Your line is open.

Jordan Sadler – KeyBanc Capital

Thanks. Good afternoon. Just following up on sort of the guidance it sounds like everything is running in line with expectations pretty much that you laid out last quarter. What's the offset versus the impairment you think, George?

George Alburger

I mean, we are still comfortable with the range. You understand that’s a $0.15 range that we have out there. I mean I think to some extent what’s the offset for the impairment, I mean same store has done better throughout the year and some of the sales happened a little bit later. I mean I think it’s great to look those said that we are halfway through the year and we have already hit the low end of the guidance, but to some extent those sales that happened in the quarter happened midway through the quarter, maybe we had them projected a little bit earlier in the quarter. So, basically holding the real estate a little longer than we originally anticipated.

Jordan Sadler – KeyBanc Capital

Okay.

George Alburger

And same-store being a little bit better.

Jordan Sadler – KeyBanc Capital

On the same store, because did you talk about the uptick, obviously, is there sort of a -- what's your expectation for occupancy by the end of the year at this point?

George Alburger

I think we are going to probably stick with what we originally laid out, which was that we originally thought occupancy overall would be flat to up about 2%, but we said most of that increase would be in the distribution piece and that would be up anywhere from 1% to 3%. And I think we’ll stick with that and when you look at the numbers so far year-to-date I think it’s kind of playing out that way.

Bill Hankowsky

That’s right.

Jordan Sadler – KeyBanc Capital

Okay and then just turning to the build-to-suits, or additional development that could start of $180 million, the expected yield on that stuff, is it still in the same range you guys previously laid out, or is it getting a little skinnier?

George Alburger

No, I think we are still looking high-single, low-double digits.

Jordan Sadler – KeyBanc Capital

Okay. And the metro office is that Navy Yard metro office or Philly CBD?

George Alburger

When we rate, one answer will give you the specifics, but it’s a Philadelphia metropolitan area build-to-suit.

Jordan Sadler – KeyBanc Capital

Okay. Thanks guys.

Bill Hankowsky

Thank you.

Operator

The next question comes from John Guinee from Stifel.

John Guinee – Stifel

Guys...

Operator

Your line is open.

John Guinee – Stifel

Hi, a couple quick ones, on your developments both in Lehigh Valley and Houston, your industrial developments, what's it going to cost you on a per pound basis?

Rob Fenza

In Lehigh, it should be in low to mid 50s per square foot and in Houston it will be just slightly higher because there are smaller buildings.

John Guinee – Stifel

Okay, and are you -- what land basis are you putting in?

Rob Fenza

Well, John that includes construction land carry TRS.

John Guinee – Stifel

Yes. And are you putting in your land at book or your land at market value?

Bill Hankowsky

We are putting – the land will be in their book.

George Alburger

Yeah.

John Guinee – Stifel

Okay, great. Thanks a lot.

Bill Hankowsky

Thank you.

Operator

Your next question comes from John Stewart from Green Street Advisors. Your line is open.

John Stewart – Green Street Advisors

Thank you. Rob, I think you had said that 25% of the development slated for the second half would potentially be built to suit. Does that mean that the balance would entirely on stack or do you expect some pre-leasing there?

Rob Fenza

Well, by the time we start the buildings it’s possible we could have some pre-leasing because we do have some identified demand that is giving us the impetus to get started on these buildings and Lehigh Valley the occupancies are still high that if one of our existing tenant needs space we would try to get them the way through the new building. So it’s possible we could have more of it, but we have nothing signed yet today. And we would be comfortable starting without, yes.

John Stewart – Green Street Advisors

Got it. And George, it was impairment during the quarter, did that relate to the Milwaukee office park??

Bill Hankowsky

Yes.

John Stewart – Green Street Advisors

Okay. And how about the bad debt reserve that was reversed during the quarter, was that specific to any particular tenant or was that just a general view in terms of proceeding along the economic recovery?

Rob Fenza

A little bit of both, but I’d say it’s more specific to a basket of tenants.

John Stewart – Green Street Advisors

Okay. And then lastly, Bill for you I notice that you didn’t give as much of your macro Okay. And then lastly, Bill, for you, I noticed that you didn't give as much of your macro outlook at the start and I'm not sure if you were just trying to be sensitive to keeping the call shorter or if the crystal ball is less visible than usual. But wanted to I guess in particular, the pickup that you referenced in the last 60 days, do you think that is surprising? And could you perhaps touch on some of the macro issues that we are seeing, you seem really unworried about either the debt ceiling or the European sovereign debt crisis?

Bill Hankowsky

I won’t say that John. I’m worried about many things. You are right a little bit. I just – we just decided for – since we had so much activity, we talk about our activity and so I kept the economic comments to the side. I’m happy to respond. I think sort of unfortunately we view the world exactly where we have viewed it now for a long time, back in October what we talked about 2011 we thought that it will be very difficult to give you unemployment rates to south to 9%, we thought that GDP would run between 2% to 3% and when the beginning of this year happened and that was – people feeling a little more buoyant, we were thinking well, maybe we are wrong and that be great because it all put these to the good but we were getting a lot excited and unfortunately I guess it was right enough to get excited. We continued to use the phraseology this is a long slow slug out and we believe that’s the case so and when we look at things like – what’s happening in the banking sector and Dodd Frank and there is 533 new regulations that have to get implemented on that front. And they have done 40 some to date, they have postponed 80% of their deadlines. So there is a lot of uncertainty in the financial sector. There is a lot of uncertainty in the pharmaceutical sector, healthcare generally, throw on top of that the inability of elected officials to make a decision on our financial policy debt and that limit. And phone in the case bumping the road on the euro, it’s rocky.

Having said all that, what we think we are seeing is that larger companies who have a capacity to say okay, it’s not great but the worse is behind us. There is a certain inherent stability for the 90% of Americans that have that want to have a job to have the job and we’re prepared to make a decision to sign a long-term lease for office space and build to suit basis because that’s a right thing for our company. We are prepared to sign a 500 ton square foot lease in a large warehouse because we want to implement our logistic solution, because that’s the right thing for our company.

So you kind of have this sense of – some businesses are prepared to be the size of make decision to perceive they tend to be the bigger players. We think the smaller customers still skittish but all of that happening in a not particularly robust environment. So and the nature of that and I see over and over again talking to customers is I would prefer to do business with a stable landlord, on the stable company I’ve gotten through this, you’ve gotten through this, you have gotten through this that feels pretty good let’s go do something and that’s the nature of how we find this built-to-suit and that’s the nature how we land some of these customers. So I wish the economy were better, but for Liberty this is an environment where we can do pretty well.

John Stewart – Green Street Advisors

Right. And you've been clear, obviously that you see industrial as much better than suburban office in particular and you're not here euphorically raising guidance, but on the other hand you are talking about starting $180 million of development in the second half, a lot of which is not pre-leased yet. So there does seem to be some confidence in terms of the ability to make those decisions?

Bill Hankowsky

We are making decisions with a tremendous amount of confidence and the confidence is in an earlier question that was something about how do you go about -- you bought a build under-leased in three days how does that happened, that same dynamic is what will lead us to make a decision to do inventory product i.e., we will see deal flow in the market and it’s very important all this real estate is not tangible. So I need 500,000 square feet and I have made a decision, I have to be in Lehigh Valley and I need a (indiscernible) and I go into market to find it, it doesn’t matter that the market 14% vacant. There is no product that meets the requirement I have. I need it and we think in a scenario where merchant building is clearly sidelined, at least sidelined, and it’s very difficult to get a construction loan. We think it’s to our competitive advantage to be first mover in some of these markets and take advantage of that requirement being on that in the market. We’re going to be very thoughtful and deliberative, but yep we’re comfortable doing it where we see it makes sense.

John Stewart – Green Street Advisors

Okay, thank you.

Bill Hankowsky

Thanks.

Operator

The next question comes from John Perry from Deutsche Bank. Your line is open. Mr. Perry, your line is open.

Bill Hankowsky

Okay. And to the next one?

Operator

Your next question comes from Ross Nussbaum from UBS. Your line is open.

Ross Nussbaum – UBS

Hi guys, good afternoon.

Bill Hankowsky

Hey Ross.

Ross Nussbaum – UBS

Bill, your tone has, I would say, meaningfully improved from five weeks ago at NAREIT where I thought you were, and I think you alluded to this on your opening remarks, somewhat cautious as to the business environment given what you had seen in April and May. Was June and thus far July just that much better that the tone has shifted?

Bill Hankowsky

Yep, no, you’re absolutely right to catch the shifting tone, you’re absolutely right. So, there had clearly been somewhat more activity in that timeframe. I don’t want to tell you it is not a stampede, it is not – it’s nowhere near 2006, 2007 or those are sweet memories. But it is back to where it was kind of in the first couple of months of the year. So, it feels somewhat better. And as I said a moment ago, when I’m particularly you put it against the growth, it feels okay. We’re going to take advantage of that and get some things going and get some space – buy some vacant stuff and get it filled and build them stuff. But we’re going to keep watching this closely. I mean I think it is justice, and we’re going to be balanced here. I think it is – there are enough variables that could upset the economy and upset people’s sentiment, one of them is happening now in Washington, we’ll see how that plays out. But if things kind of keep going, then we do think it’s a little bit better than it was 60 days ago, but it could derail and we are going to watch it closely, but yeah we feel a little bit better than we did that.

Ross Nussbaum – UBS

And what industries are you seeing the pick up in demand from specifically?

Bill Hankowsky

It is interesting. I am going to answer your question, but what I really think is the difference is it’s almost scale of industry versus kind of industry. So I really do think the bigger players whether you are a -- somebody in the healthcare space, so you may reach healthcare system, you may need payments, Medicare programs and things like that on behalf of states and local government, you are looking and saying, hey, there’s going to be new three plus million new people who have to get service there is going to be exchanges who is going to manage business, so I think I’m going to grow. You are a food products guy, you are somebody kind of interesting, you are in the Internet world. So bookstores are closed, but my sales are up and I need some place every time you push the button after you pulled your chord like where does that order go and it has to go some building to get service, so maybe those people. So it is retailers and some sort of suppliers, some Internet based companies, some people in the healthcare space, food are areas I think we are seeing activity, energy somebody here at the table interrupted me and good point. I think with energy just generally in the U.S. gas Marcellus shale, the stuff going on out there is picking up some activity.

Ross Nussbaum – UBS

Thank you.

Bill Hankowsky

Thanks.

Operator

The next question comes from Steve Boyd from Cowen and Company. Your line is open.

Steve Boyd – Cowen and Company

Great, thank you. Had a quick question on the metro build-to-suit activity. Was just wondering that could include work for an existing tenant and whether you might take back space like did you with Glaxo?

Bill Hankowsky

It might, but I can tell you that one opportunity we are working on is the total net new requirement and the other is a significant expansion of the existing tenant so there might be a little bit they leave behind that they will be growing.

Steve Boyd – Cowen and Company

Okay, great I appreciate that. And then in terms of the 7.4% stabilized yield for the acquisitions you guys have done year to date, was hoping you could compare that with where you think yields would have been had they been kind of a core property fully leased and also against your expectations that you underwrote going into it?

Bill Hankowsky

Are you asking if we lease these things with around and sell it or what I think we can sell it for?

Steve Boyd – Cowen and Company

Well, yeah I guess that would – it would imply that, wouldn’t it?

Bill Hankowsky

Yes.

Steve Boyd – Cowen and Company

Yes. No, I really was just asking, had it been fully lease when you bought it, if it was a core acquisition that you had?

Bill Hankowsky

It would have been – Mike said it – it would have been a six.

Steve Boyd – Cowen and Company

Okay.

Bill Hankowsky

6, 6.5 something like that. I think these are 100, 150 basis point spreads over what that profit say about. We are fine with it because we think if we bring our real estate skills to there, we’ve created values.

Steve Boyd – Cowen and Company

All right.

Bill Hankowsky

That’s why we are buying it.

Steve Boyd – Cowen and Company

Great. I appreciate that. I apologize for missing that. And just in terms of what you underwrote going in I mean it seems like you guys have been able to lease these things up probably faster than you might have conservatively underwritten, how has that changed the yield, if at all, versus your expectation?

George Alburger

This is George. The yield in the – I mean there are two types of yields here. I mean, one is in this package we have a gap yield and I think you have heard Michel hold forth before on how we are underwriting. I think he held forth a while ago on a particular building that we purchased that he underwrote two years worth a carry. Well, I think that’s great that we bake in two years worth of carry for making our investment decision but for purposes of the number you see in the supplemental package we are not capitalizing interest on empty building, so you don’t have any carry in there. You do have CapEx and TI in there but no carry.

Steve Boyd – Cowen and Company

Great, I appreciate. Thanks guys.

Operator

Your next question comes from Vincent Chao from Deutsche. Your line is open

Vincent Chao – Deutsche

Hi, everyone. Sorry for the mix up earlier there on the call. But I just had a question, I apologize if I missed it. But on the renewal spread this quarter, was quite a bit better than it’s been in the last few quarters, and I’m just wondering if you could provide some color on what was driving that and whether or not that 1.8% is sort of a sustainable level for the rest of the year?

Bill Hankowsky

I’m going to comment a little bit about just tenant behavior. I think what we are seeing we have been commenting – people ask about prospect activity and (indiscernible) and companies are willing to make decisions. I think that benefits us also in renewals.

Vincent Chao – Deutsche

Okay.

Bill Hankowsky

In other words, we have got customers who are in space, they are happy in this space maybe they would have done one or two year renewal because they thought there is a greater percentage of certainty and the rent that’s expiring that feels pretty good to the and they stay with it and it’s what provided to them and that’s where it’s going,

George Alburger

This is George. Let me just give you a little bit more color on that, if you – I mean historically you are going to see that the rent spreads on the renewals are tighter than the rate spreads on new leases and on this quarter, I said that the leases were at 6% which is down which is at below the low end of guidance. I mean to some extent that was influenced by the large proportion of renewal leases we had this quarter which was in the 67% range which was a good number for us.

Vincent Chao – Deutsche

Very good.

George Alburger

So, that kind of improved the weighted average a little bit in total, but I don’t think we are about to (indiscernible) was down only 1.8% but I don’t think we are here revising guidance on where we think rents are for the year.

Vincent Chao – Deutsche

Okay. No, I mean I understand that the mix is bringing down the average but it also looks like just the renewals themselves have also came in quite a bit tighter than they have so I just wanted to see if there was something to that. But, okay. And then last question, just on the renewal rate, which was up quite a bit versus the last couple quarters, you talked about sort of a pretty slow economic recovery that's taking place here, I mean is there anything to read into the increased in renewals as maybe some increased hesitancy or maybe concern on the part of tenants who may otherwise have been more willing to take a chance and move out?

Bill Hankowsky

I don’t think so and I do think it’s important to remember what this renewal rate is. It’s provided this renewal rate is same tenant in same space stays there, so if you shut down your operation and leave, we will consider that we lost you, even though we couldn’t capture it, we were in existence, so you went bankrupt and went out of business that would have been a loss in this metric because when you – so that I think it’s partially that business -- the people that are in business today have survived a very tough economic time and therefore are there and are – the renewals go somewhere there in with a very quality landlord that they’ve seen perform through a very tough cycle, invest in the real estate, I mean I could go on here about what we are doing about energy conservation and loan property taxes and everything we are doing to make it better for these tenants to be in a Liberty building and it works. It cumulatively works. We’ve been appealing property taxes for two years, we’ve been lowering energy prices – energy consumptions for three years so I just think we have -- the goal is to have one of the most efficient portfolios, tenant -- people are very conscious of total cost of occupancy, people who are there are in business because they’ve survived a very tough economic time and they are happy to renew with Liberty. So I think it’s just all of that coming together.

Vincent Chao – Deutsche

Okay, thanks.

Operator

And your final question comes from Dan Donlan with Janney Capital Markets. Your line is open.

Dan Donlan – Janney Capital Markets

Thank you. Just real quick and sorry if I missed this, but did you give how much of the $180 million that you're expecting to develop, or start developing on in the third and fourth quarter, how much of that do you think will close in 2012 and maybe even into 2013?

Bill Hankowsky

Closure in the sense, rent paying?

Dan Donlan – Janney Capital Markets

The close or just completed and/or rent paying.

Bill Hankowsky

That’s a good question. We think that we are at – it’s most of it would be late ‘12 into ‘13 because you are starting – to think about an office goes four quarters to five quarters to construct an industrial buildings three quarters to construct so for starting the third and fourth quarter it’s going to be mid-to-late ‘12 into ‘13.

Dan Donlan – Janney Capital Markets

Okay. And just lastly, just kind of curious what you think as far as distribution space, as we see more and more of sales go to these Internet retailers, how does that affect, you think, your distribution or the distribution needs of that particular tenant versus the big box versus Internet?

Bill Hankowsky

Well, I think that the Big Box space for the larger spaces, first of all I think some perspective it is relatively more recent phenomenon last decade or so that this space is really caught on. It’s very efficient. You have all kinds of people designing systems to make it be even more efficient tracking systems, robotic picking et cetera technology in the floors to move stuff around. So this space is the most efficient from a logistic perspective. It’s efficient whether you are a consumer products guy serving Best Buy and whatever your servicing, sending your product out or if you in fact retail yourself. But it’s also efficient, if you are in Internet sales company. I mean again it’s sort of interesting while we all sit at home at night and decide to make a purchase from catalog or make a purchase online and we go in and find it we push the button and send the card and make our sale. Where is that product stored such that it’s put in a box and such that if UPS serve that it gets it for you and you have it the next day. It is stored in the exact same kind of building we are talking about, a high bay logistic building that’s very efficient next to interstates, intermodal, airports, UPS hubs whatever their mode of distribution, so it actually booked this phenomenon, whether the battle was sort of between retailers and internet sales, large bay, very efficient buildings, service book.

Dan Donlan – Janney Capital Markets

Okay, thank you.

Bill Hankowsky

Thank you.

Operator

I have no further questions at this time. I turn the call over to the presenters for closing remarks.

Bill Hankowsky – Chief Executive Officer

Our closing remark is just to thank you everybody for being with us today, appreciate it, talk to you in another 90 days. Thanks.

Operator

This concludes today’s conference call. You may now disconnect.

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