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First Industrial Realty Trust, Inc. (NYSE:FR)

Q1 2012 Earnings Call

April 27, 2012 12:00 PM ET

Executives

Art Harmon – Senior Director, IR

Bruce Duncan – President and CEO

Scott Musil – CFO

Robert Walter – SVP, Capital Markets

Analysts

Craig Mailman – Keybanc Capital Markets

Ki Bin Kim – Macquarie Capital Markets

David Rodgers – RBC Capital Markets

John Stewart – Green Street Advisors

Dan Donlan

Operator

Good afternoon. My name is Cassandra, and I’d be your conference operator today. At this time, I’d like to welcome everyone to the First Industrial First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions).

Now, I’d like to turn the call over to Art Harmon, Senior Director of Investor Relations. You may begin.

Art Harmon

Thanks, Cassandra. Hello, everyone and welcome to our call. Before we discuss our first quarter 2012 results, let me remind everyone that the speakers on today’s call will make various remarks regarding future expectations, plans and prospects for First Industrial. These remarks constitute forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. First Industrial assumes no obligation to update or supplement these forward-looking statements. Such forward-looking statements involve important factors that could cause actual results to differ materially from those in forward-looking statements, including those risks discussed in First Industrial’s 10-K for the year ending December 31, 2011, filed with the SEC and subsequent 1934 Act reports.

Reconciliations from GAAP financial measures to non-GAAP financial measures are provided in our supplemental report available at firstindustrial.com under the Investor Relations tab. Since this call may be accessed via replay for a period of time, it is important to note that today’s call includes time-sensitive information that may be accurate only as of today’s date, April 27, 2012.

Our call will begin with remarks by Bruce Duncan, our President and CEO and our CFO Scott Musil after which we will open it up for your questions.

Also on the call today are Jojo Yap, our Chief Investment Officer; Chris Schneider, Senior Vice President of Operations; and Bob Walter, Senior Vice President of Capital Markets and Asset Management.

Now, let me turn the call over to Bruce.

Bruce Duncan

Thanks, Art. And thank you to everyone for joining us today. The First Industrial team is off to a good start in 2012. Our results for the first quarter reflected solid execution on leasing with occupancy of 87.4% at March 31st. As we telegraphed on our last call our occupancy dipped in the first quarter. Due to a typical seasonality plus the known impact of 700,000 square foot move out in Columbus.

With the benefit of continuing demand for industrial space and the efforts of our teammates across the regions, we leased 4.7 million square feet to help offset these factors keeping our decline for the quarter to just 50 basis points.

Compared to a year ago, our occupancy was up 270 basis points. Included in our leasing results for the quarter with the net occupancy gained of 171,000 square feet as a top 10 vacancies we summarize at investor day in November.

However, it is important to note that much of these leasing is short-term. So we still have work to do to realize approximately 220 basis points of occupancy opportunity from leasing the 1.5 million square feet of vacancy in this group. We also have work to do to lengthen the lease terms for some of these assets.

We remained focused on the internal growth opportunity from leasing up these and other vacancies towards our goal of 92% occupancy by yearend 2013.

We increased same-store NOI by 6.7% compared to a year ago. Because of our first quarter performance, we are raising our guidance range for same-store NOI growth to 2.5% to 4.5% for the year, up 50 basis points at both ends of the range.

Our rental rate change was negative 4.6% and was positive 1.2% on a GAAP basis, an improvement compared to last year. While it is good to see this progress in the quarter we aren’t declaring victory on this metric as our outlook for the year costs were continued roll down. Not much is changed in the market environment since we last spoke to you in late February.

We are seeing decent activity across most of our regions. Of note, we’re seeing solid interest in expansions from a number of smaller tenants particularly in Denver and Tampa. While there is increased (inaudible) potential new development projects, there is not much coming out of the ground expect in a few select markets.

Moving on to dispositions in the quarter, we sold three buildings totaling 676,000 square feet or roughly $20 million including two buildings in Portland, Tennessee outside of Nashville. Two of these sales were the users. The other two are an investor. Overall these assets were 70% occupied. We completed the sales at approximately 50% above our written down book basis.

Recall that our sales target for the year remained $75 million to $100 million. Based on our pipeline, we expect this pace to grow in the second quarter and then pick up in the back half of the year. Proceeds will be used for new investments or paying down higher cost debt depending on the relative opportunity.

On the balance sheet side we were pleased with the results of our tender offer as we were able to retire $87 million of senior notes, most of which were long dated with higher coupon. Scott will walk you through the details.

In addition, we raised approximately $18 million through our ATM during the quarter, selling approximately 1.5 million shares at an average gross price of $12.03. Our debt-to-EBITDA ratio was approximately 6.95 times at the end of the first quarter compared to 7.4 times at December 31. The primary driver of the decrease was an increase in NOI plus the positive impact from the issuance of equity.

So, we improve to the lower end of our original target leverage range of 6.5 times to 7.5 times EBITDA. We would like to continue to drive our leverage ratio down to around 6.5 times. We can do that by leasing up property and improving NOI to impact the denominator. We can also impact the numerator through capital market activity including equity.

As we have been, we will continue to be mindful to dilution, but we’re also mindful of leverage with the lessons of 2009 firmly implanted in our memory.

Regarding investments, you may remember that we announced, on our year-end call, the acquisition of our target 85% interest a 390,000 square foot distribution building in Central Pennsylvania leased to Navistar. Our total investment including our regional share is $21.8 million or $56 per square foot, which is an approximately 7.1% going in cap rate.

Now, let me update you on our 692,000 square foot First Inland Logistics Center development in the Inland Empire. We continued to have activity, but at this point we see leased up is more likely being in early 2013 event rather than a late 2012 event. We acquired in a joint (inaudible) during the first quarter, which will allow us to expand the site by 400,000 square feet to roughly 1.1 million square feet to accommodate a perspective tenant’s growth or future expected development.

On the investment front, I would like to note that the pricing levels in the market for acquisitions is currently quite aggressive. While we want to continue to enhance our portfolio and drive external growth through quality investments, we must achieve appropriate risk adjustment return. Looking at the bright side, the pricing we’re seeing has positive implications for our portfolio.

We’re using our platform to uncover potential new investments, but given the competitive market for leased assets in the lack of available supply of high quality buildings for sale in our target market. Our better opportunities in the near term may be weighted more towards development or redevelopment. As always, we look forward to keeping you up-to-date on our progress on all fronts.

With that let me turn it over to Scott. Scott?

Scott Musil

Thanks, Bruce. First, let me walk you through our results for the quarter. Funds from operations for 1Q 2012 were $0.25 per share compared to $0.21 per share in 1Q 2011.

Comparing 1Q 2012 to 1Q 2011, before one-time items such as losses from the other retirement of debt, restructuring costs and impairment of undepreciated real estate, funds from operations were $0.25 per share versus $0.23 per share in the year ago quarter. EPS for the quarter was a loss of $0.04 per share versus a loss of $0.12 per share in the year ago quarter.

Moving on to the portfolio; as Bruce discussed, our occupancy for our in-service portfolio was 87.4%, down 50 basis points from 87.9% last quarter, went up 270 basis points from 84.7% at March 31, 2011. In the first quarter, we commenced 4.7 million square feet of leases. Of these, 900,000 square feet were new, 2.2 million were renewals and 1.6 million were short-term.

Tenant retention by square footage was 59% reflecting the 700,000 square foot move-outs in Columbus. We expect retention to improve during the balance of the year in average 65% to 70% for the full year consistent with our long-term track record.

Same-store NOI on a cash basis excluding lease termination fees about 6.7%. 3.8 percentage points of the change was related to occupancy, rental rate change and lower rent concessions. 1.4% was due to this year’s – this winter’s favorable weather conditions that lowers no removable utility costs compared to the year ago quarter.

The remainder was from items such as restoration fees in real estate tax of fields. Including lease termination fees, same-store NOI was 6.4%. Rental rates were down 4.6% cash-on-cash. At a GAAP basis, rental rates were up 1.2%. We would expect cash rental rates to continue to be down in 2012 ranging from negative 5% and negative 10%.

Leasing costs were $2.49 per square foot for the quarter within our expected average for the year of $2.40 to $2.60 per square foot. Lease termination fees totaled $97,000 in the quarter.

Moving on to our capital market activities and capital position; we were pleased with the results of our tender offer. We were able to retire approximately $22.4 million of the 7.75% notes to 2032 or 64% of the outstanding amount, $55.5 million of the 7.6% notes due 2028 were 45% of the outstanding and $9 million of the 6.42% notes to 24K or 10% of the total. We retired the longer dated notes, our 2032s and 2028s and in average 7.4% yields of maturity.

Since we use the line of credits to refinance the tender, we will capture some interest savings for the balance of the year. As (inaudible) will discuss in guidance shortly, we expect to report a loss on retirement debt related to the tender offer in the second quarter. We currently have $168 million available on our credit facility compared to available capacity of $300 million at yearend 2011.

The change in capacity is primarily due to cash forwarded in the line of credit to payoff and retire the 2012 notes due in April and to fund tender bonds I just discussed. Our weighted average maturity of our unsecured notes and secured financings at 6.6 years with a weighted average interest rate of 6.7%. These figures exclude our credit facility. Our cash position today is approximately $16 million and our debt-to-EBITDA ratio with 6.95 times at the end of the quarter. There is one additional item I’d like update you on.

We have been in continuing discussions with the IRF related to the $40 million refund, we received in 2009 largely related for the tax liquidation of our former taxable REIT subsidiary. The IRS examination team, which is required by statue to review all refund claims in excess of $2 million on behalf of the Joint Committee of Taxation as indicated to us on a preliminary basis that it disagrees with some of the property valuations we obtained from a well recognized independent valuation expert. We are still in discussions with the IRS and we will keep you apprised on future disclosures.

Moving on to our guidance, our FFO guidance range is now $0.89 per share to $0.99 per share excluding the estimated $0.07 per share loss from retirement of debt related to the tender offer. Guidance for 2012, FFO is $0.96 per share to $1.06 per share. The $0.03 per share increase at the midpoint is primarily due to the expected interest savings resulting from the tender offer.

The key assumptions in our guidance are as follows: average occupancy of 87.5% to 89%. Same-store NOI on a cash basis is now projected to be positive 2.5% to positive 4.5% as Bruce discussed. G&A for the year in the range of $21.5 million to $22.5 million and JV FFO of approximately $0.8 million.

Please note that our guidance does not reflect the impacts of any debt issuances or repurchases prior to maturity, other than the tender bonds as discussed earlier, any additional property sales or investments during 2012, any NAREIT-compliant gains or impairment charges nor the potential issuance of equity.

With that, let me turn it back over to Bruce.

Bruce Duncan

Thanks, Scott. Before we open it up to questions, let me offer a few brief concluding comments. Our team continued to execute in all aspects of our business. And I thank all my colleagues of First Industrial for their contribution. We will keep pushing to drive internal growth from our vacancies, execute on sales to refine our portfolio and use our platform with disciplined external growth.

And finally, continued lease up of our portfolio is our cap to reinstating the dividend, which we know is important to manage shareholders. Management and other members of the FR team included. As we make progress on leasing during the year, we will continue to evaluate our position with our board.

So, now we’re happy to take your questions. As a courtesy for other callers, we ask you limit your questions to one, plus a follow-up, in order to give other participants a chance to get their questions answered. You’re more than welcome to get back into the queue. And so now, operator, may we please open it up for questions?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Craig Mailman.

Craig Mailman – Keybanc Capital Markets

Good afternoon guys. Bruce, your comments on the smaller tenants looking to take expansions base, are you seeing any noticeable trends in industries that’s happening in or is that just a pretty broad phenomenon across verticals?

Bruce Duncan

It’s pretty broad-based, I mean, we were encouraged by the activity in terms of the expansion. It’s not segregated to one type of tenant.

Craig Mailman – Keybanc Capital Markets

Okay and that were those types of tenants the biggest drivers behind the kind of the more solid occupancy this quarter or did you start or are you still seeing pretty good demand at the large and medium size range?

Scott Musil

I think you’ve seen as everyone (inaudible).

Bruce Duncan

Yeah, as far as the activities if you look at our first quarter activity, over half of the leasing that we did came from our tenants over 50,000 square feet under and like Bruce commented on, we will definitely see more request for expansion space from those tenants. So, we’re encouraged by that and what we’re seeing the activity there.

Craig Mailman – Keybanc Capital Markets

Okay. And then just one quick follow-up on the IRS investigation or enquiry, is the biggest risk there that you would just have to repay some of that refund or could there be additional funds or other issues associated with that?

Scott Musil

Well, Craig this is Scott Musil. We’re still in early discussions with them. We haven’t seen any data from the IRS that cause us to leave that our valuations that we did originally in September of 2009 were incorrect. So, as we have ongoing discussions with the IRS we’ll update you.

Craig Mailman – Keybanc Capital Markets

Great. Thank you.

Operator

Your next question comes from the line of Ki Bin Kim.

Ki Bin Kim – Macquarie Capital Markets

Thank you. Could you talk a little bit more about the leasing progress you’re seeing in the Inland Empire development? 2013 seems little bit further than I expected as given that you got a lot of foot traffic going through there from brokers and what not given as we if I want the few bulk distribution facilities in that market that are empty. So, are you looking for just may be the right tenant and you’re passing on current potential tenants just because of may be the rent is too low or are you looking for one user or to break it up. I was wondering if you could provide any color.

Bruce Duncan

Sure. Ki Bin, this is Bruce. I will say that we’d had opportunity. We have opportunity to sell (inaudible) at a good price but again it’s not consistent with our strategy of only operating good property long term. Secondly, I would say that we’ve had an opportunity to leases on a shorter term basis. I guess we don’t want to (inaudible). We’d be looking to lease on a longer term basis and we don’t want to break up. We also don’t want to break it up in terms of make it at most kind of healthy.

Ki Bin Kim – Macquarie Capital Markets

And does it have anything to do with maybe you want to develop adjacent land part of what you have purchase or is that a different separate issue?

Bruce Duncan

I think that gives us more flexibility to handle, because there is a need of respected tenant. In terms of some people that look at it – could need that space some people wouldn’t need it. So, I mean it all depends on who we land. We want to keep that flexibility to allow us to accommodate larger tenants should we need to be able to do that.

Ki Bin Kim – Macquarie Capital Markets

And just last quick one, what do you think the market our renters for that type of product in that market?

Bruce Duncan

Our guess is, you’re probably in a range of $0.33 and $0.35 per month.

Ki Bin Kim – Macquarie Capital Markets

Okay. Thank you.

Bruce Duncan

Thanks, Ki Bin.

Operator

Your next question comes from the line of Dave Rodgers.

David Rodgers – RBC Capital Markets

Hey Scott. On the IRS issue, is that a refund that you already received in cash and so in fact that there is a settlement out you’d have to pay out? And Bruce with regard to that issue, do we consider this to be another hurdle perhaps to get over before the board would consider reinstating the dividend?

Scott Musil

Yes. David, this is Scott Musil. We did receive the $40 million refund in December of 2009. So, that’s cash that we already have on our balance sheet.

Bruce Duncan

And as it relates to the second question Dave, again, we’re going through the process with the IRS. As long as quickly as we can. We’re not anticipating any issue with it, so, but hopefully we tend these results fairly quickly.

David Rodgers – RBC Capital Markets

And then I guess with regards to your comments about improving the quality of the portfolio investing capital, I think you’ve talked more and more I think in the last quarter too and particularly in this call about wanting to or may be desiring to do more development or re-development. Can you kind of put a band around that of kind of what you’re thinking today? Do you have a one, two, three your plan of how you could expand that with this beyond existing land or new land, are you comfortable putting more money into land these days as well? Just a band around I guess how you’re thinking of deploying that capital in the near term and more intermediate?

Bruce Duncan

I guess from my standpoint is that’s, we think there could be opportunity when we look at pricing for at least well-located assets in target markets, it’s very exhaustive. So, we could – do into development in those areas like you’ve seen at the First Inland Logistics. We also bought again the adjacent land right next with – that could have the 400,000 foot property. We have about $50 million of land on our balance sheet to – that we could develop. In terms of that, I mentioned on our previous call, probably the closest thing to development of project in Central Pennsylvania we have two of them. It’s that we’re going to the entitlement process now, but those could be ready to do something by the end of the year first quarter depending on the market.

But, so we think and we could go out and buy some land like we did at the first – next to First Inland, there were some other places, because we think that may be a better opportunity to get a better return than what we’re seeing in the marketplace.

Next question operator.

Operator

(Operator Instructions) The next question comes from the line of John Stewart.

John Stewart – Green Street Advisors

Thank you. Bruce, on the dividend I was under the impression that renewing a line of credit was kind of a hurdle that you were looking towards and just judging from your comments at the tail end of the remarks it sounds like you’re kind of looking further down the road before reinstituting a dividend, I would have thought maybe that was something that might be revisited at the annual meeting coming up, it doesn’t sound like that’s the case?

Bruce Duncan

Yeah, what we said to investigate last quarterly call, we said there were two hurdles that we had to get over; one was redoing the line of credit which we did in December of last year, the other was continued progress on leasing. If you look at the first quarter, we went down, not up in terms of our leasing. So, we need to make more progress on leasing before we reinstitute the dividend.

John Stewart – Green Street Advisors

Okay. On the IRS again, Scott do you have any – it sounds like the IRS has maybe identified some specific properties where there is some valuation disputes and if you try to kind of put parameters around those, I understand that we’re talking about a $40 million refund in total, what’s the – if you have to handicap, what’s the exposure?

Scott Musil

John, it’s Scott Musil, It’s really too early in the discussions to tell what’s would be outcome will be at this point of time. The information that we have seen doesn’t cause us to disagree with any of the conclusions that we have made on the valuation back in September of 2009. So, we’ll just have to keep you up-to-date as our meetings progressed with them.

John Stewart – Green Street Advisors

Are we talking about fraction of the properties in question or vast majority?

Scott Musil

John, the discussions were too early. It’s too early to tell at this point.

John Stewart – Green Street Advisors

Okay and since it – maybe it sounds like the queue is winding down, I’ll settle on one more. Bruce, it also sounded like you’d pushed out the expectation of Inland Empire project would be leased and I was just wondering what had changed during the quarter? Did it fall through or the market stopped than you expected?

Bruce Duncan

I think the market is doing just fine. I think if you’ve seen the absorption, you’ve had – some tenants who want to buy, they bought; some tenants renewed where they were, some people in terms of moved out there. It is the timing in terms of what they were thinking of maybe it’s a space to next year versus this year. So, it’s a combination, but there is decent absorption. We’re delighted with the project and we look forward to getting a lease.

Operator

Your next question comes from the line of Dan Donlan.

Dan Donlan

Yes, thank you. I guess first question for you Bruce or Jojo, there has been some industrial portfolios straight in the market I think the (inaudible) portfolio traded for 76 cap rate and then the Weingarten portfolio traded for about an 8% cap rate. I think both portfolios had properties in similar markets what you guys earned. We’re just curious your thoughts on the pricing there and how comparable you think some of those properties were to your current portfolio?

Bruce Duncan

We think our portfolio is better than both of those portfolios and that’s one of the reasons we didn’t look at it in terms of making investment in them.

Dan Donlan

Okay. And I guess on the development – the redevelopments, is the idea just to – is it demising current buildings or is it just having buildings like what’s the opportunity there in your view?

Bruce Duncan

Jo, do you want to answer that one?

Bruce Duncan

In terms of redevelopment opportunity, it’s not on our existing, (inaudible) buildings and re-doing.

Bruce Duncan

Exactly. There are markets right now where the rental rates have grown to the point that there are existing buildings in market where you can re-develop and then make more functional and then that would be a better risk-adjusted approach to invest money than buying just (inaudible) assets, that’s what we meant.

Dan Donlan

Okay, all right. Thank you very much.

Operator

We have a follow-up question from the line of Ki Bin Kim.

Ki Bin Kim – Macquarie Capital Markets

Thanks. One quick one, your JV FFO guidance remain the same even though you bought out 85% interest this quarter. Am I looking at that the right way or the two different things?

Bruce Duncan

Ki Bin, you’re correct. When you look back at the guidance that we gave in the fourth quarter call, we made the assumption that sale was happening within the guidance. So, we assume that we are going to take that property on the balance sheet and we assume that we won’t get any future income from that asset from a JV FFO point of view. So, our assumptions that we gave in the 4Q call what we’re giving now are the same that’s why they line up.

Ki Bin Kim – Macquarie Capital Markets

All right. Yeah, got it. And next question, your top 10 – about your top line exposure – a last one, but could you give some color on the trends and traffic or interest we’ve seen in those properties and also because I’ve noticed that may be a couple of that actually increased in vacancy?

Bruce Duncan

Rob, you want to take that.

Robert Walter

Sure. I think, Ki Bin, there as Bruce said in the remarks we’re seeing good activity across variety of property sizes in our portfolio in the top 10 would include that. We still got some work to do there both in terms of leasing up those properties and also in terms of leasing out some of the lease terms some of which are short-term in nature. So, unfortunately, it’s not a linear path.

Ki Bin Kim – Macquarie Capital Markets

I mean I guess if you had to describe today versus that may be half a year ago or more and how that improve, the number of foot traffic?

Bruce Duncan

I would say – largely been the same, maybe there’s been a little bit of improvement.

Ki Bin Kim – Macquarie Capital Markets

Okay. And if you could entertain me for a little bit, all of you guys (inaudible) in Atlanta. And then I given that you have some of your top ten vacancies are industrial market. I was wondering if you could comment on what you thought about the lease rate and if you think – and define any kind of follow-up you had on that deal.

Bruce Duncan

You want to ask Duke about that. We can only comment from our standpoint in Atlanta – we’re seeing decent activity in Atlanta for our space. It’s got a good space, again our challenge to get on lease.

Ki Bin Kim – Macquarie Capital Markets

Okay. All right, thanks.

Bruce Duncan

Thank you.

Operator

(Operator Instructions). Your next question comes from the line of Craig Mailman.

Craig Mailman – Keybanc Capital Markets

Hi, guys. Just two quick follow-ups. The decision to use the ATM this quarter, can you just talk about the decision there given you guys made good progress in deleveraging already with asset sales and as you pointed out the sales market is pretty good here, maybe is this something you’d look into opportunistically as the stock gets above 12 bucks or whatever color you may have?

Bruce Duncan

I would say that again our goal is to continue to see that with a portfolio we want to get down at the 6.5 times. If you look in the first quarter, we bought out our targeted net assets like $21.5 million, so this helps pay for that and we also tender. So we use our money. So, again, reminds what dilution will, but got to go with the execution.

Craig Mailman – Keybanc Capital Markets

Okay, very fair. If you guys have another small deal, you could easily just match fund basically is, okay. And then the second quick one on the Inland Empire development, are you guys still capitalizing that or maybe one with that burn off as you are?

Bruce Duncan

Are you talking about capitalizing costs?

Craig Mailman – Keybanc Capital Markets

Capitalizing interest, G&A whatever is associated with that?

Scott Musil

Sure, Craig it’s Scott Musil. At interest we will see is capitalizing and as of the end of the first quarter. So will not continue to capitalize interest on. I think the adjustment was little over $300,000 in the first quarter. On the overhead, we analyze what the dollar amount would be and it was immaterial. So we haven’t been capitalizing G&A on this development.

Craig Mailman – Keybanc Capital Markets

Great, thanks.

Operator

We have a follow-up question from the line of John Stewart.

John Stewart – Green Street Advisors

Thank you. Scott, sorry if I missed this in your comments but did you say how much the charge was going to be for the early retirement of debt?

Scott Musil

Even it’s going to be $0.07 per share.

John Stewart – Green Street Advisors

Okay. And have you – on the ATM have you been active in the second quarter? Or was that $18 million just for the first quarter or was that year-to-date?

Scott Musil

$18 million was for the first quarter John and we’re in blackout period right now. So we’re not able to use the ATM program until the blackout period expires.

John Stewart – Green Street Advisors

Got you. Okay, and one last one for Bruce. Just on, I know that you have had a strategy of really kind targeting user sales for some of your non-core properties but you’re also – given the aggressive pricing that you’re seeing on the assets that you want to buy. Can you comment on investor appetite for some of your health per sale bucket?

Bruce Duncan

I would say in terms of our focus continued to try and find the uses, but their interest is rare interest, but again what we’re trying to target is other one-off buyers. Again, we have been successful. The first quarter we sold $20 million that was about 50% of our rate down for basis. So, we are going to continue with our strategy.

John Stewart – Green Street Advisors

Okay. And just lastly on strategy, Bruce, have you had any conversations with the board about (inaudible)?

Bruce Duncan

We always have many conversations with the Board on many issues.

John Stewart – Green Street Advisors

Right. But is that a – and I am not necessarily referring to a sale of the company, but more just from a cooperate governance perspective. Is that something that’s on the table?

Bruce Duncan

One board member is saying that I’ll think bit over time, you’ll see a change now.

John Stewart – Green Street Advisors

Okay. Thank you.

Operator

Ladies and gentlemen, this come to the end of our Q&A session. I’d now like to turn the call over to Mr. Duncan.

Bruce Duncan

Thank you, operator. We appreciate your interest in the company. If you have any questions, please feel free to call our – Scott or I, and we appreciate it. Thank you.

Operator

Thank you for participating in today’s conference call. You may now disconnect.

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