CommonWealth's CEO Discusses Q1 2012 Results - Earnings Call Transcript

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CommonWealth REIT (NYSE:CWH) Q1 2012 Earnings Call May 3, 2012 1:00 PM ET


Tim Bonang - VP, IR

Adam Portnoy - President and Managing Trustee

John Popeo - CFO


Mitch Germain - JMP Securities

Dave Rodgers - RBC Capital Markets

John Guinee - Stifel


Ladies and Gentlemen good day and welcome to the CommonWealth REIT first quarter conference call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead, sir.

Tim Bonang

Thank you and good afternoon. Joining on today’s call are Adam Portnoy, President and Managing Trustee and John Popeo, Chief Financial Officer.

The agenda for today’s call includes a presentation by management followed by a question-and-answer session. I would also note that the recording and retransmission of today’s conference call is strictly prohibited without the prior written consent of CommonWealth.

Before we begin today’s call, I would like to read our Safe Harbor statement. Today’s conference call contains forward-looking statements within meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on CommonWealth’s present beliefs and expectations as of today, May 3rd, 2012.

The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today’s conference call other than through filings with the Securities and Exchange Commission or SEC regarding this reporting period.

In addition, this call may contain non-GAAP numbers including funds from operations or FFO, normalized FFO and cash available for distribution or CAD. A reconciliation of FFO, normalized FFO and CAD to net income is available in our supplemental package found in the Investor Relations section of the company’s website.

Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our Form 10-Q which we expect to file in a few days with the SEC and in our Q1 supplemental operating and financial data package found on our website at

Investors are cautioned not to place undue reliance upon any forward-looking statements.

And now, I would like to turn the call over to Adam Portnoy.

Adam Portnoy

Thank you, Tim. Good afternoon and thank you for joining us on today's call. I want to begin today's call by summarizing the recently completed initial public offering of our former wholly-owned subsidiary Select Income REIT or SIR. On March 12, SIR issued 9.2 million common shares as part of its IPO and CommonWealth used proceeds it received in connection with the IPO to repay debt. Today CommonWealth continues to own 22 million or 70.5% of SIR's common shares and it is expected that we will continue to own a majority of SIR's outstanding common shares for this foreseeable future.

SIR now owns substantially all of CommonWealth's commercial and industrial properties located in Oahu, Hawaii as well as 23 suburban office and industrial properties located throughout the US. As I mentioned on our last call SIR intends to primarily own and invest in net leased single tenant properties and CommonWealth will continue its efforts to reposition its portfolio into high-value CBD office properties.

Because of our retained interest in SIR exceeds 50% we continue to consolidate SIR's financial position and results in our consolidated financial statements. For the first quarter of 2012, we are reporting fully diluted normalized FFO of $0.90 per share compared to $0.85 per share during the same period last year. First quarter 2012 normalized FFO includes approximately $3 million or about $.03 per share of non-recurring items which John Popeo will discuss in more detail in a few moments.

Excluding this non-recurring items normalized FFO for the first quarter would have been about $0.87 per share and this increase in normalized FFO per share compared to the same period last year is primarily the result of increased occupancy and the growth in same-store NOI. You're definitely starting to see some positive signs in our consolidated operating metrics especially in our CBD office and industrial portfolios which represent a combined 66% of our consolidated NOI.

Suburban office continues to be our weakest operating segment and it currently represents about 34% of our NOI. As of March 31st, our consolidated occupancy rate was 84.8% which is 20 basis points higher than our 84.6% occupancy rate on December 31. Our occupancy rate for our wholly-owned properties which excludes results from SIR was 80.6% as of March 31.

During the quarter, we signed over 150 individual leases or 1.9 million ft.² And continuing the trend we started seeing in the second half of 2011, over half of our leasing activity was for new leases in second generation office space. Unfortunately the largest component of this new leases occurred in our suburban office portfolio which are often expensive leases for us to enter with low net effect difference.

Overall leasing activity this quarter resulted in an 80% decline in rents. Excluding leasing activities in our suburban office portfolio leases signed this quarter resulted in flat or no change in rents. Capital cost commitments associated with leasing activity this quarter was $19.39 per square foot or about $3.08 per lease year.

Importantly the amount of capital cost commitments per year declined about 13% sequentially from the last quarter. Also it is important to note that we have increased our disclosure this quarter by including free rent and tenant concessions in addition to tenant improvements and leasing costs and the calculation of leasing cost commitments for signed leases during the quarter.

We think this increased disclosure provides greater transparency regarding true leasing costs for investors. Our CBD office portfolio which represents our largest operating segment with only 47 properties with about 46% of our consolidated NOI continues to perform very well. Our occupancy in our CBD office portfolio increased 50 basis points from 88% to 88.5% during the quarter and continues to track above the national average occupancy for CBD office buildings as measured by most independent third parties. During the first quarter we signed leases for 257,000 square feet in our CBD office portfolio and around 70% renewals and 30% were new deals.

Our industrial and other properties portfolio also continued to perform well with strong performance from properties in Oahu, Hawaii and Australia. Occupancy in our industrial properties increased 60 basis points from 87% to 87.6% during the quarter. In the first quarter, we signed leases for 653,000 square feet in our industrial portfolio and about 40% were renewals and 60% were new deals.

On a consolidated same store basis ROI occupancy remained flat to 83.9% and NOI increased by 3.7%. This improvement was primarily driven by increases in occupancy and rental income from our CBD office and industrial portfolios coupled with operating expense savings across the entire portfolio due to the mild winter.

In April 2012, we declared a dividend of $0.50 per share which represents 55% of our first quarter normalized FFO. During the quarter, we spent $26.8 million on recurring capital expenditures which includes tenant improvements, leasing costs and recurring building improvements. We generated approximately $44.9 million of cash available for distribution or CAD during the first quarter, resulting in a rolling fourth quarter CAD payout ratio of about 104%.

Looking forward to the rest of 2012, we have 5 million square feet scheduled to expire, about 62% of this square feet is located in CBD office buildings and industrial properties, which we feel confident can be renewed or leased to new tenants at the same or higher rental rates.

Even though the majority of our Hawaii holdings are owned by SIR, we continue to own over 70% of this company and we continue to share and growth from rents in that market. The remaining 38% of our square feet schedule to expire in 2012 is located in suburban office buildings, which we think can be renewed or leased to new tenants but the cost to do so maybe high, based on the current market environment.

As most of you know, over the last few years we’ve been aggressively repositioning CommonWealth’s portfolio in the high value CBD office properties with the focus on top performing CBD assets in secondary markets and second tier to your CBD assets in gateway city markets.

We believe this repositioning into CBD office buildings has help CommonWealth’s financial results this quarter and we think it positions the company well for the future. Since now announcing year-end financial results on February 23, we have not entered into any new agreements to purchase properties. However, since then we have closed on the previously reported acquisition of a downtown office property located in Hartford, Connecticut with approximately 868,000 square feet per purchase price of $101.5 million.

This property is 98% leased to 20 tenants for weighted average lease term of 7.2 years. The [going in cap] rate was 9.6% and the purchase price was well below replacement cost at $117 per square foot. Also we continue to pursue the previously reported agreement to acquire CBD office property located in Austin, Texas with approximately 172,000 square feet for $49 million, including the assumption of approximately $29 million of mortgage debt. This property is 99% leased to nine tenants for weighted average lease term of 4.3 years. Of course this pending acquisition is subject to customary closing conditions and no assurance can be given to that will occur.

The company continues to actively market for sale several suburban office and industrial properties. We have not made any material sales as of today. Finally I want to point out that as of today we have unrestricted cash totaling $140 million and nothing outstanding on our $750 million revolving credit facility. This liquidity provides us with more than adequate financial flexibility to fund any capital requirements in the future. I will now turn the call over to John Popeo, our CFO.

John Popeo

Thank you, Adam. I want to begin by pointing out some disclosure changes this quarter related to the SIR IPO. As Adam mentioned earlier, our former wholly owned subsidiary SIR completed its IPO on March 12 and became a separate public company but because we retained an ownership interest in SIR of over 50%, we continue to consolidate SIR’s financial position and results in our consolidated financial statement.

Our consolidated balance sheet continues to include all of the assets and liabilities of SIR and all intercompany accounts are eliminated. In addition we now separately report on the non-controlling interest line, the portion of owner’s equity attributable to the 9.2 million new SIR common shares issued when served in public.

Our consolidated income statement includes all of SIR’s income and expenses. The portion of net income attributable to non-controlling interest is deducted just below the net income line. We continue to own 70.5% or 22 million SIR common shares. We provided wholly-owned and consolidated property summaries in occupancy information in the portfolio information section of supplemental. CWH’s FFO and CAD calculations only includes CWH’s proportionate share of SIR, FFO and CAD.

Now I will continue with the non-quarterly rate financial overview. Net income available for CommonWealth common shareholders for the first quarter of 2012 was $9.9 million compared to $37.8 million for the first quarter of 2011, reflecting gains recognized in the prior year. Rental income increased by 19.3% reflecting rental income from properties acquired since January 2011.

Property operating expenses increased by 15.1%, primarily reflecting property acquisitions offset by same store utility and [inaudible] phasings related to the relatively mild winter. Other expenses increased by 15.7% reflecting property acquisitions. Our current quarter EBITDA increased by 17.8%. Interest expense increased by 3.6% reflecting mortgage debt we assume with properties acquired over the past year. A percentage share of the gross net income and normalized FFO for the first quarter totaled $3 million and $2.7 million respectively.

We received over $4 million in GOV dividends during the first quarter of 2012. Income from discontinued operations in the prior year reflects operating results from properties sold in 2011. We recognized gains of $34.6 million on property sales during the prior year. The increase of preferred distribution reflects distributions on an $11 million of our 7.25% Series E preferred shares issued in June 2011.

Normalize diluted FFO available for CommonWealth REIT common shareholders was $0.90 per share for the first quarter of 2012 compared to $0.85 per share for the first quarter of 2011.

Year-over-year per share results primarily reflect property acquisitions net of sales and approximately $3 million or $0.03 per share of percentage rents and other income attributable to 2011 that we recognized during the first quarter of 2012, offset by the issuance of new preferred and common shares in 2011.

Excluding the $3 million of non-recurring items, normalized FFO for the first quarter of 2012 would have been about $0.87 per share. For run rate purposes a further adjustment would need to be made to reflect the acquisition we closed at the end of March and non-controlling interest deduction for the full quarter.

Turning to the balance sheet, on March 31, 2012 we held $194 million of unrestricted cash reflecting proceeds from the SIR IPO. Proceeds plus cash on hand were used to acquire properties, repay CommonWealth’s revolver balance and redeem $150.7 million of our 6.95% senior notes and $5 million of mortgage debt.

Rents receivable includes approximately $197 million of accumulated straight line rent accruals as of March 31st. Other assets include approximately $136 million of capitalized leasing and financing costs.

On March 31st, we had $784 million of floating rate debt including $227 million outstanding on service revolver; $762 million of mortgage debt and $2.1 billion of fixed rate senior unsecured notes outstanding.

The weighted average contractual interest rate on all of our debt was around 5% at the end of the quarter and the weighted average maturity was around four years.

Our senior unsecured notes are rated BAA2 by Moody’s and BBB minus by Standard & Poor’s. The un-depreciated book value of our unencumbered property pool totaled about $7.4 billion at the end of the quarter. Our secured debt represents a 10% total assets and our floating rate debt represents 21% of total debt.

At the end of the first quarter, our ratio of debt-to-book capitalization was 50%. Our EBITDA and fixed charge coverage ratios were 2.9 times and 2.2 times respectively. As of the end of the quarter, we were comfortably within the requirements of our public debt and revolver covenant.

In summary, despite a challenging market environment, we continue to make meaningful progress towards repositioning our portfolio to be more heavily weighted to high value CBD properties. Our strong balance sheet with $140 million of unrestricted cash and $750 million of availability on our revolving credit facility as of today position us to grow cash flow as the economy improves.

That concludes our prepared remarks. Operator, we are now ready to take questions.

Question-and-Answer Session


(Operator Instructions) Our first question today comes from the line of Mitch Germain with JMP Securities. Please go ahead.

Mitch Germain - JMP Securities

Just curious about your capital plan, you know it seems like there is no need I mean maybe I think you said that, maybe you can just kind of by your acquisition pipeline, I mean I am kind of curious about the fact that you guys don't have anything under contract here. Any real reason behind that, is it a dearth of product or is it just nothing really fits your underwriting criteria now?

Adam Portnoy

We talked about the acquisition pipeline specifically there, I think our criteria has just become quite narrow in our focus; in one word, we’re looking very specifically at CBD office properties and they have to hit a certain return for us, which at close to their historical cap rates you’ve seen us buy properties.

There is not a lot of that product on the market. There is some; we continue to evaluate those properties; I would expect we will continue and we may continue to do some more acquisitions this year, but I certainly can tell the acquisition pace of CommonWealth has slowed and that’s the combination of just there is less product to buy.

We have a narrow focus and I think we are just being extremely prudent and careful with our balance sheet. We do have capacity we believe to buy more, but we don’t have unlimited capacity.

Mitch Germain - JMP Securities

Adam, we’re hearing pretty positive commentary about the supply-demand imbalance in the investor markets; you guys took probably the worst performing 20 assets and tried to sell them why not look to trim your suburban exposure ability for you to gain more CBD exposure to meet the acquisitions and that’s not really materializing you right now; why not look at assets sales?

Adam Portnoy

Well one, we are looking asset sales and there we have several properties that are being ready for sales. But two, there is a very, there is a very different market out there for suburban office properties versus CBD office properties. There is not a high degree of demand for suburban properties the same way there is demand for CBD office properties.

So the supply-demand imbalance exists, but exists for certain segments of the market. I don’t believe that there are not a lot of buyers looking at suburban office properties. There are some, and we are considering selling some, but there is not a lot of competition out there for that product.

Mitch Germain - JMP Securities

And just to reference, the assets that are for sale now, are those the ones that were pulled off back in the fourth quarter?

Adam Portnoy

Some of those and then additional ones.

Mitch Germain - JMP Securities

And then the question on the capital plan, I know, it’s a little far off but you do have upwards of $2 million of unsecured debt maturing next question, any thoughts to maybe use some of your capital to continue buying back some debt here?

Adam Portnoy

We would look at buying some debt. It’s just that it doesn’t trade at prices that would make much sense for us to buyback. It’s all trading above far, especially the stuff that’s shorter end of the curve. So doesn’t make a lot of sense to buyback them today, but if it was available, let’s say below par, I think we would absolutely consider it. It’s just not available.

Mitch Germain - JMP Securities

And then last question on, not really guidance, but John, I missed your comments, did you say 87 is in true rate and then make the adjustments for any acquisition activity in the SIR, is that the way to look at?

John Popeo

That’s right, that’s right. So again, we acquired one property on March 31st so that have to be factored in as a positive. But as you say, you have to factor in full quarter’s worth of SIR transaction, because what you see coming through in the income statement after filling CAD is only 19 days worth of a deduction.

Mitch Germain - JMP Securities

And you haven’t received the dividend yet, right?

John Popeo

We have not and we will not until the third quarter.

Mitch Germain - JMP Securities

And will you be recording that dividend as cash and how?

John Popeo

Indirectly yes because will be reporting a proportionate share of cap from SIR.

Mitch Germain - JMP Securities

So you will continue to show the cash flow on the 70%?

John Popeo

Yes that’s correct

Mitch Germain - JMP Securities

SIR and on top that you'll showing the dividend?

John Popeo

No that would be a double count, so no it will just be our proportionate share.


And we do have a question from the line Dave Rodgers with RBC Capital Markets. please go ahead.

Dave Rodgers - RBC Capital Markets

Hey Adam you talked about most of our leaping being in the suburban markets or are weighed into suburban this quarter. You know may be give us a little bit more color on, is that a function of just greater availability for you in the suburbs, what type of activity are you seeing in your secondary CBDs in terms of leasing activity and specifically may be commenting around expansions versus contractions on some of those bigger leases that you have got on your newer CBD assets?

Adam Portnoy

There is more leasing sure Dave, there is more leasing activity in the suburban for a couple of reasons. One it's where our biggest amount of, largest amount of current vacancy exists. It's where we have a significant amount of role as well and so it's just doing the math. It's where we have the greatest amount of availability in the portfolio.

And it unfortunately happens to be where the toughest deals are getting done. We are seeing you know in certain CBD markets you know concessions are starting to back off we haven’t seen rental rates move yet, but we have certainly seen in places like for example Austin or Pittsburg or (inaudible) buildings we own in the Silicon valley and or even up in the Seattle, Washington Area. Concessions are clearly back. We are definitely seeing a back up in concessions which is good and we haven't seen a lot of rental rate movement yet.

But in the suburban markets the reason you are seeing an 8% drop in rental rates compared to previous rates is that's all being driven by the drop in what's going on in the suburban markets. It's just, the good news is there's not a lot of new supply, people aren't building a lot that's really good.

Unfortunately, the economy is growing but it's growing slowly and as everybody reads office users, there are a office users are reconfiguring space and not using as much space per employees that used to. And so all that's having an effect and most securely in the suburban office product.

But we are clearly I mean we've signed over 150 leases, we signed almost 2 million square feet, a biggest chunk of that was in suburban markets, I mean we are doing a lot of activity. There's a lot of volume going through our organization and we are just having a lot of showings. In terms of general direction, in terms of the leasing sentiment out there, I would say its modestly or slowly getting better in most markets but no, it's balancing on the bottom or slowly getting better, and that's what we are seeing.

Dave Rodgers - RBC Capital Markets

And then maybe a question for John, and John on TIs and leasing commissions as you go forward with a greater percent and it is almost half of your portfolio now. CBD office on a per foot or per foot per year basis should we expect to start to see those numbers go up in the coming years with more and more CBD expirations, is that something that's in the budget, we should think about.

John Popeo

I would say yes typically yeah definitely CBD build outs are definitely more expensive, but typically the leases at least in our portfolio are longer term. So when you look at it on a net effective basis you may end close to the same place.

As far as sort of gauging our one year lookout for payout ratio in CapEx which is of course the largest component. We’re looking at a pretty consistent CapEx assuming we hold occupancy flat between December 2011 and 2012. Of course if occupancy, if we fortunate enough to improve occupancy which is sort of a tough call as I sit here today to say with any degree of conviction. Of course CapEx would rise and the payout ratio would suffer, but that would be a good thing for long-term prospects for revenue growth.


(Operator Instructions). And we do have a question from the line of John Guinee from Stifel. Please go ahead.

John Guinee - Stifel

I had a run rate of about FFO of about $0.85 last year, you are guiding towards a start of $0.087 and I guess stepping up a little bit is that correct, John.

John Popeo

No, we’re not guiding towards 87. We’re just trying to bridge the gap between an unusually high FFO per share number this quarter pointing out the non-recurring items of $3 million bringing it down to 87 but there is a still some additional work that would need to be done to come down of a run rate. We just haven’t, we haven’t serve that up to you, but we would just like you to make sure you take into account the acquisition took place late in the, but especially taking into account the fact that there is only 19 days worth of deductions related to the SIR transaction. So clearly you need to grow as well as up which would reduce FFO per share.

John Guinee - Stifel

Okay. And then if I look at you guys borrowing out on your 750 million revolver, the end result is about 4.45 billion of debt, 800 million of preferred and equity capitalization of about 1.6 billion, which is essentially debt plus preferred, is up to 77% of your total enterprise value. Can you keep your rating when you do that and what’s your thought in terms of borrowing out on this revolver to acquire given the amount of leverage that you are increasing?

Adam Portnoy

Sure, I don’t think we could keep our rating if we did all that. So I don’t think we will do that. I mean, that’s why we have 140 million of cash right now sitting our balance sheet unrestricted and also I said earlier, I think we are being very prudent in our acquisition criteria.

I could see us buy one or two other buildings this year but I do not see us fully taking down the $750 million on the revolver and I think we could fund between using the cash of $140 million as well as asset sales and also keep in mind we do own shares in Gulf that could be a source of capital for the company as well. So I don’t think the scenario you are talking about is one that we would do, logistic, the revolver out at $750 million, fully drawn but I do think we could be making some few more, we could make one or two more acquisitions this year. From where I sit today of course that could change, but where I sit today, that’s the way I see it and I don’t see a big draw and the revolvers result of that.

John Guinee - Stifel

And then I guess this was maybe a question for John, I am not sure, if I look at page 25 wholly owned portfolio summary, is this excluding the SIR assets?

Adam Portnoy


John Guinee - Stifel

So essentially the end result is the suburban office portfolio is 21 million square feet, 80,000 square foot buildings on average fairly generic buildings and there it’s 76% occupied and then it looks like about 12 million of industrial and other 90,000 square foot buildings kind of puts them in the more flex than industrial category 76% occupied and was that sort of the intent when you spun out SIR?

Adam Portnoy

Well, there is no surprises in these numbers and when you say that was our intent, but remember we own 70% of SIR, and gets consolidated into our financial reports and we very cautiously decided that we do not want to sell more than 50% of the SIR to the public.

So the only reason we are showing these wholly owned numbers is because we thought people are going to ask us what this portfolio look like with out SIR. So included the space this as increased disclosure, but I won’t look at this page and say this is what I am in office, and I want to own 70% of SIR and gets the benefits from the growth in the rent, it looked likely to receive there from Hawaii portfolio, so when you say this was this our intent is certainly no surprises, I don't think anyone who is following the company closely and carefully would be surprised by these numbers.

John Guinee - Stifel

And then, the last question, the obvious question is you are balancing around $18 to $19 a share, high 10s on dividend, clearly when you are at that level people are either anticipating a diminution or decline in share value and/or a dividend adjustment.

And it seems to me that for stock price can't get back up into low to mid 20s. A dividend cut would be the prudent thing to do. In fact, if you cut the dividend down to $1.20, you could still have one of the highest dividends in the office and industrial REIT space. So what's your thought process on all that?

Adam Portnoy

I am glad you asked that John because it’s something that a lot of investors have asked us about and it’s a security of the dividend. Right now we acknowledge that it certainly appears that the market is expecting a dividend cut. We disclosed our CAD payout ratios of 104%. That is above 100% not much above 100%.

We think we can maintain this dividend for the foreseeable future, if the payout ratio were to balloon up, you know go well above 104% or well above 100% and be there for quite sometime. I think we have to seriously consider reducing the dividend, but right now there's no intention from management or the Board to do anything with the dividend.

Now that might change as circumstances change, but today, we have no intention of changing the dividend and I have to tell you at times its perplexing to us, because we look at our numbers and say we can afford the dividend and the dividend doesn't look like it should be a risk and you get the stock price seems to indicate that everybody else doesn't see that, they think that we are going to -- that there should be a dividend cut. Maybe they are anticipating something years from now or a long time from now, but I don't, it’s pretty, sometimes it’s as perplexing to us as to maybe you John, but that's our thoughts on it.

John Guinee - Stifel

Believe me, its not perplexing to me at all. It looks to me over the last five quarters that your equity raises or debt raises essentially equity is about 28%, $278 million, or for as about $275 million or 28% and the debt’s about $440 million. So over the last four or five quarters your incremental capital has been over 70% either preferred shares or debt.

And what you are doing is you are just levering up the company, while not really generating any increased FFO and then your CAD ratios, I think you mentioned was 104%, you are down at 85% occupancy, 88% occupancy in the wholly owned portfolio. So you've got to spend much more over the next two or three years to get yourself back over 90. So essentially what these assets are doing is just declining in value. At the end of the day, you are overpaying the dividend; it isn't there a time when this music stops?

Adam Portnoy

I don’t understand what your question is, but,

John Popeo

It might be worth noting first of all, on the capital spec John, whether it does have impact on the ratios you were just talking about I am not sure, but the preferred we issue was basically replacing preferred we redeemed about nine months earlier, just want to roll that out there.

Adam Portnoy

John, I mean we’ve talked about this analogy with you and others. I mean we’ve gone through a massive portfolio repositioning in this company. People can argue whether it was the right thing or wrong thing, but I feel pretty strongly that it was the right thing for his company.

And it has not been an easy repositioning. We’ve been trying and I think rather successfully to reorient the company towards more CBD, high quality CBD, processed properties; those properties are the properties that are showing same store growth and NOI, they are showing increases in occupancy, they are showing increased demand for leasing, they are the bright spot in the company and to be perfectly frank, I wish, we own more of it, and we are able to buy in the last few years.

The thing that’s dragging us down is the stuff that we -- is the legacy suburban properties and we’re not engaged in this repositioning, started this two three years ago, I think the results would be a lot worse today than what we are showing. I mean if we were an 80% suburban office REIT, it would be much tougher results we’ll be produce things than if we have close to 50% of our portfolio coming from CBD office properties.

So this was a very concerted, well telegraphed business plan that we’ve engaged in. It’s been, I here say if we had done things would be a lot worse, if we have. But that’s exactly what we’ve been doing over the last few years and I think it’s been the smart thing to do and the right thing to do for this company.


And at this time, it does appear there are no further questions from the phone lines. And I would like to turn the conference back over to Adam Portnoy. Please go ahead sir.

Adam Portnoy

Thank you all for joining us on our first quarter conference call. We look forward to seeing many of you at the JMP Securities Conference on the 14th of May and at the NAREIT Institutional Investor Conference in early June. Thank you.


And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using the AT&T Executive Teleconference Service. You may now disconnect.

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