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

Q3 2012 Earnings Call

October 25, 2012 11:00 AM ET

Executives

Art Harmon – Senior Director, IR

Bruce Duncan – President and CEO

Scott Musil – CFO

Bob Walter – SVP, Capital Markets and Asset Management

Jojo Yap – Chief Investment Officer

Chris Schneider – SVP, Operations and Chief Information Officer

Analysts

Craig Mailman – KeyBanc Capital Markets

Joseph Dazio – JP Morgan

John Stewart – Green Street Advisors

Michael Salinsky – RBC Capital Markets

Dan Donlan – Janney Capital Markets

Operator

Good morning. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to First Industrial’s Third Quarter Earnings 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) Thank you.

I would now like to turn the conference over to Art Harmon, Senior Director of Investor Relations. Please go ahead, sir.

Art Harmon

Thanks, Tiffany. Hello, everyone, and welcome to our call. Before we discuss our third 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 ‘34 Act reports. Reconciliations from GAAP financial measures to non-GAAP financial measures are provided in our supplemental report, which is available at firstindustrial.com under the Investor Relations tab.

Since this call may be accessed via replay for a period of time, it’s important to note that today’s call includes time-sensitive information that may be accurate only as of today’s date, October 25, 2012.

Our call will begin with remarks by Bruce Duncan, our President and CEO; and our CFO, Scott Musil. After which, we’ll 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.

With that, let me turn the call over to Bruce.

Bruce Duncan

Thanks, Art, and thank you to everyone for joining us today. Since we spoke to you on our last call, we’ve continue to execute on our strategic plan. In my remarks today, I’ll take some time to reflect on some of the strides we have made in strengthening our balance sheet and reshaping our portfolio.

Overall, we are pleased with our progress, and I would like to thank my teammates for their many contributions. We have more work to do, which is an opportunity for us and for our shareholders.

On the capital side, we completed $117 million equity offering in August. The proceeds from this offering will help fund our growth through the three developments and the building expansion we started in the third quarter.

It will also keep our leverage at the low end of our targeted range of 6.5 times debt-to-EBITDA. We also closed on the $100.6 million 10-year, 4.03% secured financing that we told you about on our last call. This financing effectively funds in advance the higher cost debt we plan to repay in the fourth quarter and throughout 2013 and provides additional proceeds for growth.

We would like to thank our banking and lending partners for their continued support in executing these transactions. On the portfolio side, we made significant progress on our sales of non-strategic assets, or as we like to call it improving our portfolio through addition by subtraction. We can pay the $56.5 million of sales during the quarter bringing our total for 2012 to $80.4 million.

The largest sale of the quarter was our Columbus, Ohio portfolio for $39 million. We also sold a land parcel in that market for $5.3 million. As we discussed on past calls, Columbus has been a difficult market for us. We expect rent growth for that market to be below average as the supply and demand fundamentals will remain challenging there for the foreseeable future.

As a group, these assets also significantly lagged our overall portfolio in terms of functionality. Our total sales proceeds for the portfolio and land combined exceeded our written down book value by about $6.6 million or about 18%. During the quarter, we sold seven additional buildings for $12.2 million or approximately 36% above our written down basis.

I would like to recap what we’ve accomplished in our portfolio improvement efforts since the fourth quarter of 2010 from both the sales and investment perspective. Since that time, we have sold 6.9 million square feet and four land parcels for a total of $175 million. The sales prices we have achieved exceeded our written down book value on these assets by 35%. The sales cap rate was 6.4% including land. Excluding land, the cap rate was 7.7%.

On the investment side, during the same timeframe, we completed and committed to a total of more than $200 million of new investments comprised of $52 million through two acquisitions totaling 1.1 million square feet, in Houston and Central Pennsylvania. $36 million through our 692,000 square foot First Inland Logistics Center development in Southern California that we leased during the quarter. And the $115 million we will invest through the developments and building expansion we talked about on our last call, namely First Bandini Logistics Center, a 489,000 square foot distribution center in LA County. First Chino Logistics Center, a 300,000 square foot building in the West Inland Empire. First Logistics Center at I-83, a 708,000 square foot distribution center in Central Pennsylvania. And the 156,000 square foot building expansion in Minneapolis.

We continue to look for additional investment and development opportunity that will deliver sustainable cash flow, meet our return criteria, and help in our mission to upgrade our portfolio.

While we are pleased with this progress, it is also important to note that the investment markets, particularly for the type of assets we are focused on, remains very competitive. We will maintain our discipline on pricing so our main avenue for growth and new investment may continue to be development and/or – and value-add acquisition opportunities using our platform.

Turning now to leasing, we finished the quarter with occupancy at 88.5%, up from 87.9% as of the second quarter and 86.6% a year ago. Sales accounted for 80 basis points of the gain quarter-over-quarter. So the rest of our portfolio was down 20 basis points.

When we spoke to you last time, we talked about the summer lull we were experiencing. For us, that lull continued throughout much of the quarter, so our average occupancy was less than we expected which will also impact our fourth quarter. Scott will walk you through the details.

Leasing activities picked up late in the third quarter and that continued in the fourth quarter across a range of tenants and industries although decision making remains measured. Activity doesn’t pay the bills, so our job is to convert this activity into signed leases.

For the quarter, we delivered good growth in same-store cash NOI, which was positive 4.3% excluding termination fees. We also made further headway on our top 10 vacancies from our Investor Day last November. As of the end of the third quarter, these properties represented 130 bases – 830 square feet of occupancy opportunity or 130 basis points on our current portfolio base compared to 325 basis points at Investor Day.

We still have short-term leases in place at some of these properties, so we can generate additional cash flow by stabilizing them with long-term leases. Leasing is at the heart of our plan to drive value from our existing buildings and our new developments. And our team is focused on those opportunities.

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 were $0.30 per share, compared to $0.22 per share in 3Q, 2011. Comparing 3Q, 2012 to 3Q, 2011

before one-time items such as NAREIT compliant land gains, losses from the early retirement of debt, an impairment of an undepreciated real estate, funds from operations were $0.27 per share versus $0.21 per share in the year ago quarter. EPS for the quarter was $0.04 versus a loss of $0.10 in the year-ago quarter.

Moving on to the portfolio, as Bruce discussed, our occupancy for our in-service portfolio was 88.5%, up 60 basis points from 87.9% last quarter and 190 basis points from 86.6% at September 30, 2011. In the third quarter, we commenced approximately 4.9 million square feet of leases. Of these 1.1 million square feet were new, 2.4 million were renewals, and 1.4 million were short-term. Tenant retention by square footage was 71% in line with our expected average retention for the year of 65% to 70%.

Same-store NOI on a cash basis, excluding termination fees was positive 4.3%. 4% was related to contractual increases in lower rent concessions. Lower bad debt expense year-over-year accounted for the balance. Same-store NOI including termination fees was also a positive 4.3%. Rental rates were down 3.9% cash on cash, but on a GAAP basis they were up 0.8%. Leasing costs were $2.01 per square foot for the quarter reflecting a high mix of renewals as the percentage of total leasing for which tenant improvement costs are typically lower.

Year-to-date, we averaged $2.23 per square foot and we expect the fourth quarter to come in higher as we expect more new leasing in the quarter. Lease termination fees totaled $113,000 in the quarter. I would like to point out that G&A of $4.8 million during the quarter was lower than our typical run rate implied by our G&A guidance. We expect fourth quarter G&A to be a little higher than our average run rate due to timing of expenses. So as you think about modeling, this would represent roughly a $0.01 per share shift from the third quarter to the fourth quarter.

Moving on to our capital market activities and capital position. Bruce discussed the 9.4 million share offering for $117 million of net proceeds in August and a $100.6 million secured debt financing. Capital market activities in the quarter also included the repurchase of $4.2 million of our 7.5% notes due 2017 at a yield to maturity of 5.35%.

Thinking about capital uses, we discussed on our last call, the $63 million of higher rate secured debt we plan to repay comprised of $13 million in the fourth quarter and the remaining balance next year with an average coupon of 7.5%.

In addition to these opportunities, we have approximately $217 million of currently outstanding secured debt that is either open to fixed prepayment or that matures between now and the end of the second quarter of 2016. This debt carries a current average interest rate of 6.4%, amortizes over 25 years, and represents a current debt yield in excess of 14.5%. We did not use our ATM during the quarter and have $107 million of capacity remaining.

Updating you on our debt-to-EBITDA ratio, we were at approximately 6.4 times at the end of the third quarter compared to 7.05 times at the end of the last quarter. The decrease primarily reflects the impact of the proceeds of the equity offering.

In calculating the ratio for 3Q, we also adjusted EBITDA to normalized G&A expense and to take into account the EBITDA dilution from our third quarter property sales. We also excluded the NAREIT compliant gain.

As we have noted, our goal for this ratio is to be approximately 6.5 times. So we are pleased to get below this level. All things being equal, you should expect to see this ratio to ramp back up as we fund our development investments and scale back down when we are successful leasing them.

I’d like to update you on a few additional balance sheet items. Our weighted average maturity of our unsecured notes and secured financings at 6.1 years with a weighted average interest rate of 6.5%. These figures exclude our credit facility. Our credit line balance today is just $47 million and our cash position today is approximately $22 million.

Moving on to our guidance. Our FFO guidance range is $0.89 per share to $0.95 per share. Excluding the estimated $0.07 loss per share from retirement of debt, $0.05 per share charge related to the IRS settlement discussed in our last call, and the $0.04 per share NAREIT FFO gained from our land sale, guidance for 2012 FFO is $0.97 to $1.03 per share.

At the midpoint compared to our second quarter earnings call, full-year guidance is lower by $0.03 per share due to $0.03 of dilution from the equity offering, $0.01 of dilution due to the third quarter property sales and $0.01 related to NOI due to timing of occupancy. This is offset by $0.02 of lower interest expense.

The key assumptions which have been adjusted from our prior call to reflect year-to-date results and our expectations for the remainder of the year are as follows; average end-of-quarter in-service occupancy of 88% to 88.5%; average quarterly same-store NOI on a cash basis of positive 4% to 6%, an increase of 0.75% at the midpoint; G&A for the year in the range of $22 million to $23 million; JV FFO of approximately $1 million. And I would also like to note that we capitalized $700,000 of interest in the third quarter and expect to capitalize another $800,000 in the fourth quarter related to our new development projects.

Please note that our guidance does not reflect the impact of any future debt issuances, the impact of any future debt repurchases or repayments other than the $13 million of mortgage debt we plan to pay off in 4Q. Any additional property sales or investments during the fourth quarter of 2012 other than the developments and expansion we discussed earlier, any future 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 just say that we’ve been working over the past few years to reposition our balance sheet and our portfolio and improve our cash flow. We are making good progress by new developments, which represent $115 million of quality investments, and we are out seeking additional opportunities that meet our criteria.

We’ve been reshaping our portfolio through our disciplined sales process. Our balance sheet is in good shape and we will continue to look for ways to further strengthen it and lower our capital cost. We can grow cash flow through leasing, both from our existing assets and our new developments. We view all of these levers as great opportunities for our company and for our shareholders. And as a team, we are focused on continuing to execute and enhance shareholder value.

Finally, becoming a dividend paying REIT remains a key goal for our company. We have reached a number of milestones to that end. But as we previously noted, more leasing is essential to recommending the reinstatement to our board.

Our team is comprised of many shareholders, who also look forward to a return of the dividend. So we are all focused on improving occupancy and cash flow. We’ll now be happy to take your questions.

As a courtesy to our other callers, we ask that you limit your question to one plus a follow up, in order to give other participants a chance to get their questions answered. You’re most welcome to get back into the queue.

And so now, operator, may we open it up for questions?

Question-and-Answer Session

Operator

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

Craig Mailman – KeyBanc Capital Markets

Good morning. Bruce, maybe we can just follow up on your last point on the dividend. Your thoughts on maybe what leasing threshold you would need to get to? And just Scott, maybe where cash flow net income is today and how much room you guys have left to delay the dividend at this point?

Bruce Duncan

You want to take that first?

Scott Musil

Sure.

Bruce Duncan

And I’ll give the second.

Scott Musil

Great. Craig, this is Scott Musil. On the taxable income in the preferred dividend where we stand, so for the nine months ended 2012, our preferred dividend covered our taxable results. As far as fourth quarter is concerned, it’s really going to be dependent upon which properties we sell during that quarter.

Bruce Duncan

And in terms of where we need to be for leasing, I don’t want to give a number, but we’ve got to make progress in terms of getting it leased up. We have a goal, try and hit 92% by the end of 2013, so we’ve got to be on our way there. So to me, we got to be up from where we are today. So – but we are focused on it. It’s a key focus of the company and I’ll be disappointed if we don’t get there soon.

Craig Mailman – KeyBanc Capital Markets

You will need to hit the 92% though, you can do it before?

Bruce Duncan

Yeah, right.

Craig Mailman – KeyBanc Capital Markets

Okay. And then just one quick follow-up on occupancy, sounds like leasing picked up sort of after the 2Q call there, can you just give us a sense of maybe where the spread is between leased and occupied? Or was it at the end of the quarter and maybe where it stands today?

Scott Musil

Yes, and on the leased and occupied, we really don’t give out that stat, so the spread is, it’s not very much, but we don’t give out that stat.

Craig Mailman – KeyBanc Capital Markets

Okay. But we should expect it to at least close the gap on sort of the backlog here in 4Q and maybe the timing was delayed a little bit.

Bruce Duncan

Right. The key is that we’ve not changed our guidance for year-end occupancy. So in terms of what, we anticipate picking it up and getting that – getting that up from where it is today.

Craig Mailman – KeyBanc Capital Markets

Great, thank you.

Bruce Duncan

Thanks.

Operator

Your next question comes from the line of Joseph Dazio of JP Morgan.

Joseph Dazio – JP Morgan

Hi, good morning guys. On the asset sales front, you’ve already, I guess met the $75 million to $100 million plan this year, and sorry if I missed some of this in the earlier commentary, but can you kind of outline, I think sort of what is left to be sold and I know that if you look at the cap rates on the 3Q sales it was high because of the Columbus portfolio, but can you maybe place a rough range on what you think the cap rates are on the product left to be sold as well?

Scott Musil

Sure. We have, in terms of the non-strategic portfolio, it’s approximately $175 million left and we anticipate over the next two years to dispose those assets. Probably the best frame of reference would be if you looked at what we’ve sold to date since like fourth quarter of 2010, we put this in place, the statistic I gave was that the – that portfolio which comprised both buildings and land yielded about 6.4% cap rate and if you took the land out of it, the buildings were about at 7.7% cap rate.

Joseph Dazio – JP Morgan

7.7% on what’s left or what the overall?

Scott Musil

On what we’ve sold to date. Yes. 7.7% was Q4, 2010 to 3Q, 2012. So that’s a rough barometer that you could use in order to forecast what the cap rates would be on a go-forward basis.

Joseph Dazio – JP Morgan

Got it. Okay, thank you.

Bruce Duncan

Thank you.

Operator

Your next question comes from the line of John Stewart of Green Street Advisors.

John Stewart – Green Street Advisors

Thank you. Bruce, on the secured debt that you mentioned is pre-payable, are there penalties associated with that and this is for how much?

Scott Musil

Bob, you want to handle –

Bob Walter

Yeah. On the – John, on the debt that we have to prepay, the 13 and the 50 next year they are the fixed – they are fixed prepayment penalties, which are generally two to three points on the outstanding loan balance.

John Stewart – Green Street Advisors

Okay. And then more broadly speaking, just reading between the lines, it seems like you plan to stick with a secured debt strategy, are we interpreting that correctly and what are your thoughts on pursuing the unsecured market?

Scott Musil

I think we probably done about all the secured debt we’re going to do – we might do, maybe $50 million more in the short term. But again, we want to go back to be an unsecured borrower and we have access both the unsecured and the secured market. So I think what you’ll see is over the next few years we’ll be taking out the secured debt and we won’t be replacing it.

John Stewart – Green Street Advisors

Got it. And then just lastly, how many square feet are in the non-core, non-strategic pool?

Bruce Duncan

It’s just under about 9 million.

John Stewart – Green Street Advisors

9 million. Okay, thank you.

Operator

(Operator Instructions) Your next question comes from the line of Michael Salinsky of RBC Capital Markets.

Michael Salinsky – RBC Capital Markets

Good morning, guys. Just to go back to the prior question, do you have a kind of a dollar amount the non-core portfolio represents? And also, one of your peers had mentioned they expected positive rent roll in 2013, just curious if you expect the same.

Bruce Duncan

All right. In terms of what we said, in terms of the amount of the assets in non-secured – non-strategic assets, it’s about $175 million, that’s at book value. That’s probably the number you should use, and we’ve been successful in the past and saw things were in excess of book value. But that’s the number. And the second question was?

Michael Salinsky – RBC Capital Markets

Rental rate spreads? So, what you think –

Bruce Duncan

Again, we think at some point next year, the lines cross and you go positive. But we’ll give more guidance on that when we do – when we give our guidance for 2013 on the fourth quarter call.

Michael Salinsky – RBC Capital Markets

Fair enough. Thanks, guys.

Bruce Duncan

Okay.

Scott Musil

Thanks, Mike.

Operator

Your next question comes from the line of Dan Donlan of Janney Capital Markets.

Dan Donlan – Janney Capital Markets

Yes, thank you. Real quick, just going back to the non-strategic pool, to ask in a one more different way, what percentage of your remaining NOI, post these sales, would you consider to be non-strategic?

Scott Musil

I would say it’s roughly about $22 million.

Dan Donlan – Janney Capital Markets

Of NOI?

Scott Musil

Yes.

Dan Donlan – Janney Capital Markets

Okay. All right. And then as far as exiting Columbus, is there any other markets that you guys are looking to fully get out of, or is that kind of or it is more or less market-by-market kind of some of your lesser quality or not as well located properties that you’re looking to divest?

Bruce Duncan

I would say if you look at the non-strategic pool, it’s sort of located throughout in terms of the different markets where we’re in for the most part, but it does not limit us from exiting that market.

Dan Donlan – Janney Capital Markets

Okay. And then just specific to Columbus, this is my last question. Was there anything that made that cap rate a little bit higher than or brought the cap rate into that kind of that 9% range? Was it order property, obviously it wasn’t – some of it was vacant. But could you maybe give a little bit more detail on that portfolio?

Bruce Duncan

Well, I would say that this has not been my – our favorite portfolio over the last three years. I think it has, in terms of functionality, it’s in the low end of our portfolio and it’s just we just wanted to get out.

Dan Donlan – Janney Capital Markets

Okay. So this is really the some of the worst stuff that you guys had you would imagine.

Bruce Duncan

This is not a market that we thought had a lot of future and we rather take the proceeds here and reinvest in higher growing markets.

Dan Donlan – Janney Capital Markets

Thank you. I agree. Thank you.

Operator

(Operator Instructions) There are no further – I do apologize. We do have a follow-up question from the line of Craig Mailman.

Craig Mailman – KeyBanc Capital Markets

Hey guys. Just one quick follow-up. You mentioned the acquisition markets obviously still competitive here and you rather go to the development route. Kind of what you’re feeling on starting the development, do we need to see the three that are currently under construction have significant amount of pre-leasing before you go somewhere else, and maybe what markets would you consider here to go through next?

Bruce Duncan

Craig, we’ve got $115 million under development right now that excludes the $36 million we’ve spent on First Inland Logistics, we leased this quarter. So, of that $115 million, I could easily see a development going up to the $200 million range on a run-rate basis. So if we find some good opportunities we could increase that amount from where it is today.

Craig Mailman – KeyBanc Capital Markets

Do you have it in the land bank now, or would you go out and buy land and then start it?

Bruce Duncan

We would do both. We have land in the land bank that we are looking at doing something in terms of starting development depending on some of it we want to get a tenant, some of them we might go spec, it all depends on how the market improves over the next three months to six months. In sum, we got out and buy like the states where we’re building right now, at three states we grow up, so be a combination.

Craig Mailman – KeyBanc Capital Markets

And a couple of your peers have been talking build-to-suit ramping, are you guys seeing that same interest?

Bruce Duncan

Yes, Jojo you want to talk about that? We are looking at a couple of build-to-suits, but –

Jojo Yap

Yes, absolutely. That’s one way we could continue to create value and monetize our land side as well. So we’ll continue to compete. And we’re out in the market and our land sites that we hold right now are up for build-to-suit as well. But one thing we are not doing is that we are not pursuing third party land site to pursue build-to-suit because the build-to-suit business is a very, very low margin business.

And I just want to add to what Bruce had mentioned in terms of additional development. I want to emphasize that all these three developments are all in different submarkets and are targeting all different tenants. So, they’re not overlapping each other. You’re looking at Central PA, West Inland Empire, and LA County, totally, totally different submarket. So I don’t want to leave you with impression that we’re building all in the same submarket.

Craig Mailman – KeyBanc Capital Markets

That’s fair. Thanks, guys.

Jojo Yap

Thank you.

Bruce Duncan

Thank you.

Operator

Your next question is a follow-up from the line of John Stewart.

John Stewart – Green Street Advisors

Thank you. Bruce, just wanted to follow up on that line of questioning and specifically $200 million of run rate development sounds like a pretty meaningful step up to me in terms of what you guys have been doing and just wanted to get your thoughts on the competitive landscape? And also you mentioned the land bank and then of course, went on to say, the recent deals here you’ve bought the land, just curious on where you think you would build on land that you own today?

Bruce Duncan

Well, we’ve got some two sites in Pennsylvania that could handle about 1.2 million square feet. We’ve got a site in Dallas, it could do about 600,000 square feet. We’ve got land in Nashville that could do like 1.2 million square feet. So we’ve got some land up in Stockton and that’s a little bit further off, but we have some good land that we will build on or we’ll sell and maximize value over the next three years to five years.

In terms of overall, again, our view on development is there is risk associated with it, that’s why when we did this to $114 million of new development, we went out and did an equity raise to fund that. And we think just to judge us on how we do in terms of building these projects and leasing them up, just as we did with First Inland Logistics.

John Stewart – Green Street Advisors

Sure.

Jojo Yap

Just to add then what Bruce said, where we’re going to maintain our discipline and we have to have a spread over the functional net lease cap rate, meaning we have to have 100 base points to 150 base points on our risk adjusted base on development.

John Stewart – Green Street Advisors

Okay. Thank you.

Bruce Duncan

Thanks, John.

Operator

(Operator Instructions) Your next question is a follow-up from the line of Dan Donlan.

Dan Donlan – Janney Capital Markets

Yes, thank you. Sorry if I missed this in the remarks, but can you maybe talk about what percentage of your leases you’re able to achieve, rent escalators on and kind of what the average escalator was on those leases and kind of where you see that trending forward?

Chris Schneider

Sure, Dan. This is Chris. On the leases that we commenced in 2012, we had annualized bump of about 3.8% and that’s on about 70% of the leases. So the entire portfolio is very similar on that.

Dan Donlan – Janney Capital Markets

Okay. And how is that trending, well, how did that trend this quarter and where do you see that trending over the next 12 months?

Chris Schneider

It was a little bit up this quarter. And then for the next 12 months, it’ll be similar. It might go down a little bit and we’re doing a little bit of less of the teaser rates or lower rates, the first year of the term. But it should continue pretty similar.

Dan Donlan – Janney Capital Markets

Okay. All right, thank you very much.

Bruce Duncan

Thank you.

Operator

Your next question is a follow-up from the line of Michael Salinsky.

Michael Salinsky – RBC Capital Markets

Yes. Given you had a land parcel sale during the quarter. Can you talk a little bit about the demand for land there and whether you expect to monetize some of the land bank here going forward?

Bruce Duncan

Well, I would say that we intend to monetize the land bank either by building on it or for selling the assets over time. I would say there is nothing imminent that were ready to announce in terms of the sale. But again, we have good land. We anticipate about $50 million doing at book value. We anticipate building on it if we can and if we find a better price in terms of assignment we consider that.

Michael Salinsky – RBC Capital Markets

Have you seen any incremental pickup in demand for land?

Bruce Duncan

Yes. You’re seeing more interest in terms of – from tenants in terms of time to look to build-to-suit on it.

Michael Salinsky – RBC Capital Markets

And has that translated to an increase in pricing or not yet?

Bruce Duncan

Well, it all depends on what base you’re talking about. If you’re talking about two years or three years ago, yes, absolutely. For land – again, land is the ultimate accordion. When there’s demand, prices go up fairly significantly and land relative to the building. So I think land prices are definitely up from where they were two years ago.

Michael Salinsky – RBC Capital Markets

Fair enough. Thanks, guys.

Bruce Duncan

Thank you.

Operator

There are no further questions at this time. I would like to turn the call back over to Mr. Bruce Duncan.

Bruce Duncan

Thank you, operator. And again, thank you all for joining us in the call. We look forward to answering your questions. If you have them, call Scott or myself, and we look forward to seeing you at NAREIT in a couple of weeks. So thank you very much.

Operator

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

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